PPL Corporation
11/06/2026 | Press release | Distributed by Public on 11/06/2026 11:24
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Combined Management's Discussion and Analysis of Financial Condition and
Results of Operations
(All Registrants)
This "Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" is separately filed by PPL, PPL Electric, LG&E and KU. Information contained herein relating to any individual Registrant is filed by such Registrant solely on its own behalf, and no Registrant makes any representation as to information relating to any other Registrant. The specific Registrant to which disclosures are applicable is identified in parenthetical headings in italics above the applicable disclosure or within the applicable disclosure for each Registrant's related activities and disclosures. Within combined disclosures, amounts are disclosed for individual Registrants when significant.
The following should be read in conjunction with the Registrants' Condensed Consolidated Financial Statements and the accompanying Notes and with the Registrants' 2025 Form 10-K. Capitalized terms and abbreviations are defined in the glossary. Dollars are in millions, except per share data, unless otherwise noted.
"Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" includes the following information:
•"Overview" provides a description of each Registrant's business strategy and a discussion of important financial and operational developments.
•"Results of Operations" for all Registrants includes a "Statement of Income Analysis," which discusses significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2026 with the same periods in 2025. The PPL "Results of Operations" also includes "Segment Earnings," which provides a detailed analysis of earnings by reportable segment. These discussions include the non-GAAP financial measure "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure to the most comparable GAAP measure.
•"Financial Condition - Liquidity and Capital Resources" provides an analysis of the Registrants' liquidity positions and credit profiles. This section also includes a discussion of rating agency actions.
•"Financial Condition - Risk Management" provides an explanation of the Registrants' risk management programs relating to market and credit risk.
Overview
Introduction
(PPL)
PPL, headquartered in Allentown, Pennsylvania, is a utility holding company. PPL, through its regulated utility subsidiaries, delivers electricity to customers in Pennsylvania, Kentucky, Virginia and Rhode Island; delivers natural gas to customers in Kentucky and Rhode Island; and generates electricity from power plants in Kentucky.
PPL's principal subsidiaries are shown below (* denotes a Registrant).
| PPL Corporation* | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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PPL Capital Funding
Provides financing for the operations of PPL and certain subsidiaries
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PPL Electric*
Engages in the regulated transmission and distribution of electricity in Pennsylvania
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LKE
A holding company that owns regulated utility operations through its subsidiaries, LG&E and KU
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RIE
Engages in the regulated transmission, distribution and sale of electricity and regulated distribution and sale of natural gas in Rhode Island
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LG&E*
Engages in the regulated generation, transmission, distribution and sale of electricity and regulated distribution and sale of natural gas in Kentucky
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KU*
Engages in the regulated generation, transmission, distribution and sale of electricity, primarily in Kentucky
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Pennsylvania Regulated Segment |
Kentucky Regulated Segment |
Rhode Island Regulated Segment |
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In addition to PPL, the other Registrants included in this filing are as follows.
(PPL Electric)
PPL Electric, headquartered in Allentown, Pennsylvania, is a wholly-owned subsidiary of PPL and a regulated public utility that is an electricity transmission and distribution service provider in eastern and central Pennsylvania. PPL Electric is subject to regulation as a public utility by the PAPUC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act. PPL Electric delivers electricity in its Pennsylvania service area and provides electricity supply to retail customers in that area as a PLR under the Customer Choice Act. PPL Electric was organized in 1920 as Pennsylvania Power & Light Company.
(LG&E)
LG&E, headquartered in Louisville, Kentucky, is a wholly-owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity and distribution and sale of natural gas in Kentucky. LG&E is subject to regulation as a public utility by the KPSC, and certain of its transmission activities are subject to the jurisdiction of the FERC under the Federal Power Act.
(KU)
KU, headquartered in Lexington, Kentucky, is a wholly-owned subsidiary of LKE and a regulated utility engaged in the generation, transmission, distribution and sale of electricity in Kentucky and Virginia. KU is subject to regulation as a public utility by the KPSC and the VSCC, and certain of its transmission and wholesale power activities are subject to the jurisdiction of the FERC under the Federal Power Act. KU serves its Kentucky customers under the KU name and its Virginia customers under the Old Dominion Power name.
Segment Information (PPL)
PPL is organized into three reportable segments as depicted in the chart above: Kentucky Regulated, which primarily represents the results of LG&E and KU, Pennsylvania Regulated, which primarily represents the results of PPL Electric, and Rhode Island Regulated, which primarily represents the results of RIE. "Corporate and Other" consists primarily of corporate level financing costs, certain unallocated costs and certain non-recoverable costs incurred in conjunction with the acquisition of RIE.
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.
PPL's strategy, which is supported by the other Registrants and subsidiaries, is focused on creating the utilities of the future to drive greater value for our customers and shareowners. Key objectives in support of this strategy include:
•Strengthening the reliability and resilience of our electric and gas networks to improve service and protect against current and future weather and storms.
•Advancing a cleaner energy future affordably and reliably. This includes expanding and modernizing our generation with natural gas, renewables and battery storage, while supporting research and development of low-carbon solutions.
•Driving operational efficiencies to improve customer service and help keep energy affordable.
•Utilizing artificial intelligence and other advanced technologies to inform decision making, optimize asset planning and maintenance and better manage supply and demand on the grid.
•Empowering customers through expanded digital options and improved service.
•Engaging with key stakeholders to strengthen resource adequacy, power economic development, and support the growth and success of the regions we serve.
This strategy supports our mission to provide safe, affordable, reliable and sustainable energy to our customers and competitive, long-term returns to shareowners.
Financial and Operational Developments
Regulatory Requirements
(All Registrants)
The Registrants cannot predict the impact that future regulatory requirements may have on their financial condition or results of operations.
Rate Case Proceedings
Rhode Island 2025 (PPL)
On November 26, 2025, RIE filed a request with the RIPUC for an increase in electric and natural gas base distribution rates, and approval of certain regulatory and accounting treatments. In its application, RIE sought to implement a two-year rate plan. As submitted in the initial application, in the first year of the rate plan RIE's proposed base distribution rates for electric and gas service were designed to collect additional annual operating revenue of approximately $181 million ($66 million in electricity revenues and $115 million in gas revenues). In the second year of the rate plan, RIE's proposed base distribution rates for electric and gas combined were designed to collect the proposed base distribution rate increases for electric and gas in the first year of the rate plan and additional operating revenues of approximately $49 million ($17 million in electricity revenues and $32 million in gas revenues). The application was based on a historical test year of September 1, 2024 through August 31, 2025 and requested an authorized ROE of 10.75%. The amounts in the initial submission were evaluated after the Hold Harmless Commitment (as defined below) and potential bill credits were consolidated with the base distribution rate proceeding, as discussed below.
On August 21, 2026, the RIPUC approved oral motions in the proceeding. The RIPUC approved certain aspects of RIE's proposals and modified or rejected others. The RIPUC decisions authorized annual revenue increases of $44 million for electric and $94 million for gas, a return on equity of 9.275%, and a debt-to-equity ratio of 48% debt to 52% equity. The RIPUC did not approve a proposed second rate year.
The RIPUC decisions also addressed certain issues regarding the recovery and accounting treatment of certain expenses, directed RIE to propose new performance metrics for certain investments and directed RIE to file a new tariff for extra-large electric loads by December 31, 2026. The RIPUC also approved or accepted several settlement agreements with intervening parties.
In response to the motions, RIE submitted the required compliance filing on August 27, 2026. The approved rate changes were effective as of September 1, 2026. RIE has not received a final written order from the RIPUC as of the filing date of this Form 10-Q. RIE and all intervening parties have the right to appeal once the final written order is issued. RIE will evaluate the details of the written order and related matters, including potential next steps. PPL cannot predict the ultimate outcome of this matter.
Pennsylvania 2025 (PPL and PPL Electric)
On September 30, 2025, PPL Electric filed a request with the PAPUC for an increase in distribution base rates of approximately $356 million, more than $50 million of which is already included in customer bills through rate recovery mechanisms, and approval of certain regulatory and accounting treatments. The proposed increase in distribution base rates would have increased PPL Electric's total annual revenue by approximately 8.6%. The application was based on a fully projected future test year of July 1, 2026 through June 30, 2027 and requested an authorized ROE of 11.3%.
On March 5, 2026, PPL Electric reached a non-unanimous settlement in principle (the settlement) in its distribution rate case. On March 13, 2026, PPL Electric submitted a joint petition with the PAPUC reflecting the settlement to resolve all issues in PPL Electric's base rate proceeding.
The settlement proposed an annual electric base distribution revenue increase of approximately $275 million and does not stipulate a return on equity or capital structure. As part of the settlement, PPL Electric will not increase distribution base rates for two years from the effective date of the new rates. Additionally, the settlement:
•provides for DSIC eligible capital investment (and associated depreciation and tax effects) to be rolled into base rates, and for the DSIC to be reset to zero, capped at 5.0% of annual distribution revenues, upon implementation of new base rates.
•sets the expense from reportable storms recovered through base rates for the Storm Damage Expense Rider (SDER) at $32 million annually beginning July 1, 2026. To the extent eligible reportable storm expenses are above or below this level, over or under collections would be addressed through the SDER during the applicable recovery period.
•supports capitalization of Information Technology (IT) upgrades for planned system implementations and infrastructure costs for shared IT platforms. The total projected cost of these projects is expected to be $54 million, inclusive of AFUDC, through June 30, 2027.
•supports adoption of a new tariff schedule governing service to certain large load customers (including data centers). This new rate class would provide $11 million in support for PPL Electric's residential low-income program.
•provides for enhancements to Customer Assistance Program processes and customer notifications, an increase to the Low-Income Usage Reduction Program annual budget beginning January 1, 2027 of $1.5 million (to a total of $13.5 million) with a rollover mechanism for unspent amounts, and a waiver of reconnection fees for low-income customers beginning July 1, 2027.
The settlement also contains agreed positions regarding certain other tariff, rate, regulatory accounting and other issues raised in the proceedings, as well as recommending approval of all remaining matters as requested by PPL Electric's rate request.
On June 11, 2026, the PAPUC entered its order approving the settlement with a minor modification related to net metering eligibility. None of the parties to the settlement objected to the PAPUC's minor modification to the settlement terms and new rates became effective on July 1, 2026. On June 26, 2026, the Customer-Generator Coalition filed a Petition for Reconsideration of the June 11, 2026 PAPUC Order, and PPL Electric filed its Answer on July 6, 2026. The PAPUC entered an Order denying the Customer-Generator Coalition's Petition on August 27, 2026. One member of the Customer-Generator Coalition, Aspen Power Partners, LLC, filed a Petition for Review with the Pennsylvania Commonwealth Court on September 25, 2026, appealing the PAPUC's August 27, 2026 Order. Aspen Power Partners' appeal is limited to a net metering eligibility issue, and PPL Electric does not anticipate that the outcome of the Commonwealth Court appeal will have any effect on the rates approved by the PAPUC.
Kentucky 2025 (PPL, LG&E and KU)
On February 16, 2026, the KPSC issued orders approving portions of LG&E's and KU's October 2025 stipulation and recommendation, with modifications. See "Regulatory Matters - Kentucky Activities - Rate Case Proceedings" in Note 7 in PPL's, LG&E's and KU's 2025 Form 10-K for additional information on the filings made by LG&E and KU with the KPSC in 2025.
The KPSC orders provide for increases in annual electricity and gas revenues of $233 million ($59 million and $128 million in electricity revenues at LG&E and KU and $46 million in gas revenues at LG&E.) The orders included authorized returns on equity of 9.775% for base rate purposes and 9.675% for capital rate adjustment mechanisms.
The KPSC orders approved LG&E's and KU's requests for establishment of certain new rate adjustment mechanisms or tariffs, with modifications:
• a temporary Pilot Generation Recovery Adjustment Clause (PGR) to provide recovery of and return on investment of applicable costs of certain new generation and storage assets being built or anticipated to be built by LG&E and KU as authorized in the 2022 CPCN proceeding;
• the inclusion in the PGR of recovery of and return on investment of certain costs associated with a potential extension of the operating life of LG&E's Mill Creek Unit 2 beyond its original 2027 retirement date; and
• an Extremely High Load Factor Tariff for future applicable customers, such as data centers, which includes requirements such as long-term contracts, minimum revenue payments and collateral security structures that help protect the interests of LG&E, KU and of other ratepayers.
The PGR mechanism is similar to the Generation Cost Recovery Adjustment Clause proposed in the stipulation, but restructured by the KPSC to be a pilot adjustment mechanism with a term until the earlier of ten months following the submission of LG&E's and KU's next base rate proceeding or the effective date of new rates in such proceeding, with the expectation that the mechanism would be reviewed in such proceeding. The pilot mechanism will apply to the planned Mill Creek Unit 5, Brown Battery Energy Storage System, Mercer County Solar and Marion County Solar generation-related projects. The KPSC also included Mill Creek Unit 2's potential stay-open costs in the PGR in lieu of approving the stipulation's request for a stand-alone adjustment mechanism for such costs. Finally, the KPSC excluded from coverage under the PGR costs related to Mill Creek Unit 6 and Brown Unit 12 planned new generation assets due to their anticipated in-service dates falling outside of the estimated pilot mechanism's duration, but without prejudice to LG&E and KU seeking recovery of such costs in future proceedings.
The KPSC orders also approved, approved with modifications, or denied in some cases, other requested accounting and rate matters relating to regulatory assets or liabilities, depreciation rates, and other areas.
The rate changes have a retroactive effective date as of January 1, 2026. LG&E and KU applied refunds to customer accounts for amounts billed in excess of the rates approved by the KPSC.
The KPSC orders did not approve the Sharing Mechanism Adjustment Clause that had been requested in the stipulation and made no modifications to the stay out offer by LG&E and KU to refrain from effective base rate increases prior to August 2028.
On March 11, 2026, LG&E and KU filed a request for rehearing on several issues contained in the orders from the KPSC along with a Notice of their Withdrawal from the stipulation. On March 27, 2026, the KPSC issued orders correcting tariff appendices, denying two intervenor rehearing requests, and reopening the dockets to consider LG&E's and KU's request for rehearing. Following two rounds of additional discovery and the filing of briefs by the parties, on June 20, 2026, the case was submitted for a decision on the record by the KPSC.
On August 14, 2026, the KPSC issued an order relating to LG&E's and KU's requests for rehearing of the KPSC's February 2026 orders granting certain increases in annual electricity and gas revenues and associated accounting and other matters. The KPSC order approved certain elements of the rehearing requests, including matters relating to incorporating regulatory assets and liabilities in rate base calculations and recovery therein, utilizing updated cost estimates in a potential recovery cap in the PGR mechanism, and allowing pre-2026 costs to be included in a regulatory asset relating to LG&E's stay-open costs regarding Mill Creek Unit 2.
The KPSC order denied other elements of the rehearing requests, including seeking reinstatement of certain other aspects of a prior October 2025 stipulation and recommendation of LG&E and KU and certain intervenors in the rate increase proceedings.
LG&E and KU estimate that the KPSC order represents increases of approximately $4 million in annual LG&E electricity and gas revenues and approximately $3 million in annual KU electricity revenues, above the increased amounts contained in the KPSC's February 2026 order. The revised rates are effective for services rendered on and after the date of the order.
Virginia 2026 (PPL and KU)
On April 30, 2026, KU filed a request with the VSCC for an increase in Virginia annual base electricity rates of approximately $19 million. KU's request is based on an authorized 10.95% ROE. On October 1, 2026, the VSCC's staff filed testimony recommending a revenue increase of approximately $12 million based on a 9.80% ROE. Subject to regulatory review and approval, new rates would become effective February 1, 2027. A public hearing is scheduled to commence on November 12, 2026. PPL and KU cannot predict the outcome of this matter.
(PPL, LG&E and KU)
Potential Legal Merger of LG&E and KU
Pursuant to prior orders of the KPSC, the LG&E and KU rate case application included an assessment of a potential legal merger of LG&E and KU and concluded a legal merger may be appropriate. On December 30, 2025, LG&E and KU filed a joint update in the rate case proceedings stating that they expected to file necessary applications for merger approval in mid-2026 with the KPSC. On March 31, 2026, LG&E and KU filed an application with the KPSC for approval of the merger and associated accounting, financing and rate mechanism matters. On April 17, 2026, LG&E and KU filed an application with the VSCC for approval of the merger and certain associated matters. On May 29, 2026, LG&E and KU filed a related application with the VSCC for approval of financing and affiliate transactions in connection with the proposed merger. On July 2, 2026, LG&E and KU reached a proposed settlement agreement with the majority of the intervenors in the KPSC proceeding and filed a stipulation and recommendation with the KPSC recommending approval of the merger by the KPSC and including certain LG&E and KU commitments regarding merged LG&E and KU rate transition plans and deferred regulatory asset and liability accounting and rate treatment regarding relevant merger costs and savings and depreciation changes. On July 9, 2026, LG&E and KU filed a Section 203 application with the FERC for approval of the merger.
On August 31, 2026, the VSCC issued an order authorizing the financing and affiliate transaction matters relating to the merger. On September 18, 2026, the FERC issued an order authorizing the merger. On September 23, 2026, the FCC consented to the merger transaction. On September 25, 2026, the KPSC issued an order authorizing the merger and related matters, with certain modifications to the proposed settlement agreement and associated accounting, financing and rate matters. On October 22, 2026, the VSCC issued an order authorizing the merger. The merger remains subject to approvals by internal boards and the sole shareholder of both companies, and the entry by LG&E and KU into the operative merger transactional agreements.
The proposed merger structure contemplates LG&E as the successor legal entity which would, by operation of law, retain and assume, respectively, all the assets, properties and rights, and liabilities, duties and obligations of LG&E and KU. The targeted effective date is January 1, 2027.
PPL, LG&E and KU cannot predict the outcome of this matter.
Environmental Considerations for Coal-Fired Generation
The businesses of LG&E and KU are subject to extensive federal, state and local environmental laws, rules and regulations, including those pertaining to CCRs, GHG, and ELGs. See Notes 6, 10 and 15 to the Financial Statements for a discussion of these significant environmental matters. These and other environmental requirements led PPL, LG&E and KU to retire approximately 1,500 MW of coal-fired generating plants in Kentucky since 2010. As part of the long-term generation planning process, LG&E and KU evaluate a range of factors including the impact of potential stricter environmental regulations, fuel price scenarios, the cost of replacement generation, continued operations and major maintenance costs and the risk of major equipment failures in determining when to retire generation assets.
As a result of environmental requirements and aging infrastructure, LG&E 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, was retired in 2024. Mill Creek Unit 2, with 297 MW of capacity, was approved to be retired in 2027, subject to certain conditions. On October 28, 2025, in LG&E and KU's 2025 CPCN proceeding, the KPSC declined to rule on a request to extend the operation of Mill Creek Unit 2. The KPSC indicated that a request for a new retirement approval proceeding may be required should LG&E elect to operate Mill Creek Unit 2 beyond its existing approved retirement date and seek to later retire the unit. See "Kentucky Activities - Rate Case Proceedings" in Note 6 to the Financial Statements for additional information.
FERC Transmission Rate Filing
In 2018, LG&E and KU applied to the FERC requesting elimination of certain on-going waivers and credits to a sub-set of transmission customers relating to the 1998 merger of LG&E's and KU's parent entities and the 2006 withdrawal of LG&E and KU from the Midcontinent Independent System Operator, Inc. (MISO), a regional transmission operator and energy market. The application sought termination of LG&E's and KU's commitment to provide certain Kentucky municipalities mitigation for certain horizontal market power concerns arising out of the 1998 LG&E and KU merger and 2006 MISO withdrawal. The amounts at issue are generally waivers or credits granted to a limited number of Kentucky municipalities for either certain LG&E and KU or MISO transmission charges incurred for transmission service received. In 2019, the FERC granted LG&E's and KU's request to remove the ongoing credits, conditioned upon the implementation by LG&E and KU of a transition mechanism for certain existing power supply arrangements, which was subsequently filed, modified, and approved by the FERC in 2020 and 2021. In 2020, LG&E and KU and other parties filed appeals with the U.S. Court of Appeals - D.C. Circuit (D.C. Circuit Court of Appeals) regarding the FERC's orders on the elimination of the mitigation and required transition mechanism. In August 2022, the D.C. Circuit Court of Appeals issued an order remanding the proceedings back to the FERC. On May 18, 2023, the FERC issued an order on remand reversing its 2019 decision and requiring LG&E and KU to refund credits previously withheld, including under such transition mechanism. LG&E and KU filed a petition for review of the FERC's May 18, 2023 order with the D.C. Circuit Court of Appeals and provided refunds in accordance with the FERC order on December 1, 2023. The FERC issued an order on LG&E's and KU's compliance filing on November 16, 2023, and LG&E and KU filed a petition for review of this November 16, 2023 order on February 14, 2024. The FERC issued the substantive order on rehearing on March 21, 2024, reaffirming its prior decision. On August 8, 2025, the D.C. Circuit Court of Appeals issued a procedural ruling vacating the FERC's prior orders and remanded the matter back to the FERC for further proceedings, which are underway. In May 2026, the FERC issued an order declaring the transition mechanism agreements effective, subject to refund, and set the proceedings for hearing suspended for settlement. LG&E and KU cannot predict the ultimate outcome of the proceedings or any other post decision process but do not expect the annual impact to have a material effect on their operations or financial condition. LG&E and KU currently receive recovery of certain waivers and credits primarily through existing base rate levels.
(PPL)
Joint Venture Agreement with Blackstone Infrastructure
PPL and affiliates of Blackstone Infrastructure Advisors L.L.C. (Blackstone Infrastructure) have formed a joint venture, Invitium Energy, LLC (Invitium), to build, own and operate new electricity generation stations to power data centers in Pennsylvania under long-term energy supply services agreements to address underlying resource adequacy and affordability concerns in Pennsylvania and the territory served by PJM Interconnection, L.L.C. more broadly. PPL owns 51% of Invitium and Blackstone Infrastructure owns 49%. Invitium is actively engaged with hyperscalers, landowners, natural gas pipeline companies and turbine manufacturers, and has secured multiple land parcels and placed deposits on future turbine purchases to enable the build of new generation. Construction of new generation stations is contingent on the execution of commercial agreements with data center developers, including hyperscalers.
Hold Harmless Commitment
As a condition of its approval of the acquisition of RIE in May 2022, the Rhode Island Division of Public Utilities and Carriers (the Division) required PPL to hold harmless Rhode Island customers from the impact of future rate increases resulting from changes in Accumulated Deferred Income Taxes as a result of the acquisition (the Hold Harmless Commitment). See "Regulatory Matters - Rhode Island Activities - Hold Harmless Implementation Agreement" in Note 7 in PPL's 2025 Form 10-K for additional information on the filings and other matters related to the Hold Harmless Commitment that occurred in 2025.
On April 16, 2026, RIE filed a motion with the RIPUC to reopen the previous docket concerning the Hold Harmless Commitment along with an updated tariff advice which reflected a methodology consistent with the previously proposed miscellaneous bill credits and two potential, alternative methods of allocating the bill credits among customers. On April 17, 2026, the RIPUC approved the motion and consolidated the tariff advice docket with the pending base distribution rate proceeding. The RIPUC held hearings on the RIE proposal on July 8, 2026.
On August 21, 2026, the RIPUC addressed RIE's proposal with respect to its Hold Harmless Commitment. The RIPUC denied RIE's hold harmless proposal as submitted but authorized an alternative that increases the amount to be provided to customers to approximately $175 million, of which $163 million will be delivered to customers as bill credits and $12 million through a reduction to the gas cost recovery rate adjustment mechanism balance. The Division confirmed that the alternative proposal would fully satisfy RIE's obligation under the Hold Harmless Commitment, and RIE voluntarily accepted the RIPUC's alternative proposal on August 25, 2026. The RIPUC approved the implementing tariff on September 24, 2026. The bill credits will be issued to RIE electric and gas customers from October 2026 through September 2027. RIE will record a reduction of revenue as the bill credits are issued. The reduction of the gas cost recovery rate adjustment mechanism balance was recorded in the third quarter of 2026.
FY 2027 Gas ISR Plan
On March 27, 2026, the RIPUC approved a capital budget of $161 million. In addition, the RIPUC approved an operation and maintenance expense budget of $17 million for curb-to-curb paving. On March 31, 2026, the RIPUC approved RIE's compliance filing for rates effective April 1, 2026.
FY 2027 Electric ISR Plan
On March 27, 2026, the RIPUC approved a capital budget of $141 million (including $18 million for Advanced Metering Functionality). In addition, the RIPUC approved an operation and maintenance expense budget of $14 million, primarily for vegetation management. On March 31, 2026, the RIPUC approved RIE's compliance filing for rates effective April 1, 2026.
Results of Operations
(PPL)
The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2026 with the same periods in 2025. The "Segment Earnings" discussion provides a review of results by reportable segment. These discussions include the non-GAAP financial measure "Earnings from Ongoing Operations" and provide an explanation of the non-GAAP financial measure and a reconciliation of the measure to the most comparable GAAP measure.
(PPL Electric, LG&E and KU)
A "Statement of Income Analysis" is presented separately for PPL Electric, LG&E and KU. The "Statement of Income Analysis" discussion below describes significant changes in principal line items on the Statements of Income, comparing the three and nine months ended September 30, 2026 with the same periods in 2025.
(All Registrants)
The results for interim periods can be disproportionately influenced by numerous factors and developments and by seasonal variations. As such, the results of operations for interim periods do not necessarily indicate results or trends for the year or future periods.
PPL: Statement of Income Analysis and Segment Earnings
Statement of Income Analysis
Net income for the periods ended September 30 includes the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | $ | 2,497 | $ | 2,239 | $ | 258 | $ | 7,382 | $ | 6,768 | $ | 614 | |||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||||||||
| Operation | |||||||||||||||||||||||||||||||||||
| Fuel | 246 | 231 | 15 | 715 | 657 | 58 | |||||||||||||||||||||||||||||
| Energy purchases | 486 | 422 | 64 | 1,592 | 1,369 | 223 | |||||||||||||||||||||||||||||
| Other operation and maintenance | 617 | 586 | 31 | 1,768 | 1,798 | (30) | |||||||||||||||||||||||||||||
| Depreciation | 366 | 331 | 35 | 1,079 | 977 | 102 | |||||||||||||||||||||||||||||
| Taxes, other than income | 117 | 100 | 17 | 343 | 314 | 29 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 1,832 | 1,670 | 162 | 5,497 | 5,115 | 382 | |||||||||||||||||||||||||||||
| Operating Income | 665 | 569 | 96 | 1,885 | 1,653 | 232 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | 22 | 39 | (17) | 104 | 90 | 14 | |||||||||||||||||||||||||||||
| Interest Expense | 234 | 210 | 24 | 690 | 599 | 91 | |||||||||||||||||||||||||||||
| Income Before Income Taxes | 453 | 398 | 55 | 1,299 | 1,144 | 155 | |||||||||||||||||||||||||||||
| Income Taxes | 86 | 80 | 6 | 250 | 229 | 21 | |||||||||||||||||||||||||||||
| Net Income | $ | 367 | $ | 318 | $ | 49 | $ | 1,049 | $ | 915 | $ | 134 | |||||||||||||||||||||||
Operating Revenues
The increase (decrease) in operating revenues was due to:
| Three Months | Nine Months | ||||||||||
| PPL Electric distribution price (a) | $ | 61 | $ | 58 | |||||||
| PPL Electric distribution volumes (b) | 1 | 8 | |||||||||
| PPL Electric PLR (c) | 51 | 209 | |||||||||
| PPL Electric transmission formula rate (d) | 16 | 53 | |||||||||
| LG&E retail rates (e) | 22 | 76 | |||||||||
| LG&E volumes | 11 | 5 | |||||||||
| LG&E fuel and other energy purchases (f) | 7 | 51 | |||||||||
| LG&E RAR | 5 | 15 | |||||||||
| KU retail rates (e) | 32 | 96 | |||||||||
| KU volumes | 12 | 5 | |||||||||
| KU fuel and other energy purchases (g) | 11 | 39 | |||||||||
| RIE distribution price (h) | 9 | (31) | |||||||||
| RIE distribution volume | 13 | 21 | |||||||||
| RIE retail transmission (i) | (5) | (4) | |||||||||
| RIE retail energy (j) | 7 | (26) | |||||||||
| RIE transmission formula rate (k) | 4 | (1) | |||||||||
| RIE gas (l) | (2) | 21 | |||||||||
| Other | 3 | 19 | |||||||||
| Total | $ | 258 | $ | 614 | |||||||
(a)The increases were primarily due to new base distribution rates approved by the PAPUC effective July 1, 2026, partially offset by reconcilable cost recovery mechanisms.
(b)The increase for the nine months ended September 30, 2026 was primarily due to weather.
(c)The increases were primarily due to higher energy prices, higher volumes due to usage and weather and an increase in PLR customers.
(d)The increases were primarily due to returns on additional transmission capital investments and return of depreciation expense.
(e)The increases were due to new base rates approved by the KPSC effective January 1, 2026.
(f)The increase for the nine months ended September 30, 2026 was primarily due to higher recoveries of fuel expenses and energy purchases.
(g)The increases were primarily due to higher recoveries of fuel expenses.
(h)The increase for the three months ended September 30, 2026 was primarily due to reconcilable cost recovery mechanisms approved by the RIPUC. The decrease for the nine months ended September 30, 2026 was primarily due to reconcilable cost recovery mechanisms approved by the RIPUC.
(i)The decrease for the three months ended September 30, 2026 was primarily due to lower prices and lower customer volumes. The decrease for the nine months ended September 30, 2026 was primarily due to lower prices, partially offset by higher customer volumes.
(j)The increase for the three months ended September 30, 2026 was primarily due to higher prices, partially offset by lower volumes. The decrease for the nine months ended September 30, 2026 was primarily due to lower customer volumes and lower prices.
(k)The increase for the three months ended September 30, 2026 was primarily due to an increase in returns on additional transmission capital investments, partially offset by billing timing true ups for the transmission rate. The decrease for the nine months ended September 30, 2026 was primarily due to the ISO-NE transmission rates ROE reduction, partially offset by an increase in returns on additional transmission capital investments. See Note 6 to the Financial Statements for additional information about the ISO-NE transmission rates ROE reduction.
(l)The increase for the nine months ended September 30, 2026 was primarily due to higher prices and higher sales for resale.
Fuel
Fuel increased $15 million for the three months ended September 30, 2026 compared with 2025, primarily due to a $9 million increase in commodity costs and a $7 million increase in volumes.
Fuel increased $58 million for the nine months ended September 30, 2026 compared with 2025, primarily due to an increase in commodity costs.
Energy Purchases
The increase (decrease) in energy purchases was due to:
| Three Months | Nine Months | ||||||||||
| PPL Electric PLR prices | $ | 28 | $ | 140 | |||||||
| PPL Electric PLR volumes | 15 | 38 | |||||||||
| PPL Electric net metering | 5 | 12 | |||||||||
| LG&E volumes | - | (9) | |||||||||
| LG&E commodity costs | (2) | 37 | |||||||||
| RIE commodity costs | 2 | (26) | |||||||||
| RIE net metering | 8 | 8 | |||||||||
| RIE renewable energy certificates | - | 8 | |||||||||
| RIE volumes | 1 | 17 | |||||||||
| Other | 7 | (2) | |||||||||
| Total | $ | 64 | $ | 223 | |||||||
Other Operation and Maintenance
The increase (decrease) in other operation and maintenance was due to:
| Three Months | Nine Months | ||||||||||
| PPL Electric storm costs | $ | 11 | $ | 18 | |||||||
| PPL Electric bad debt expenses | 9 | 10 | |||||||||
| PPL Electric power restoration costs | - | 12 | |||||||||
| KU miscellaneous expenses (a) | 12 | 13 | |||||||||
| KU generation expenses | 6 | 16 | |||||||||
| RIE energy efficiency program expenses | 3 | (20) | |||||||||
| RIE miscellaneous expenses (b) | 7 | 9 | |||||||||
| RIE bad debt expenses | 11 | 9 | |||||||||
| RIE storm expenses | (18) | (40) | |||||||||
|
RIE pension alignment
|
6 | 16 | |||||||||
| IT costs (c) | (5) | (31) | |||||||||
| Transition costs associated with RIE | (18) | (52) | |||||||||
| Other | 7 | 10 | |||||||||
| Total | $ | 31 | $ | (30) | |||||||
(a)The increase for the three months ended September 30, 2026 was primarily due to higher distribution supervision and engineering expenses, distribution software maintenance, DSM costs, and vegetation management expenses. The increase for the nine months ended September 30, 2026 was primarily due to higher DSM costs, distribution maintenance and supervision costs, and vegetation management expenses.
(b)The increases were primarily due to customer service related expenses.
(c)The decreases were primarily due to costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems.
Other Income (Expense) - net
The increase (decrease) in other income (expense) was due to:
| Three Months | Nine Months | ||||||||||
|
Defined benefit plans - non-service credits (Note 9)
|
$ | (2) | $ | (5) | |||||||
| Interest income | (2) | 9 | |||||||||
| AFUDC - equity component | 8 | 24 | |||||||||
| Miscellaneous (a) | (21) | (14) | |||||||||
| Total | $ | (17) | $ | 14 | |||||||
(a)The decreases for the three and nine months ended September 30, 2026 were primarily due to a RIE transition services agreement settlement.
Depreciation
Depreciation increased $35 million for the three months ended September 30, 2026 compared with 2025, primarily due to an increase in PP&E additions, net of retirements.
Depreciation increased $102 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $77 million increase in PP&E additions, net of retirements, a $10 million increase due to higher depreciation rates effective March 1, 2026 at LG&E and a $14 million increase due to higher depreciation rates effective March 1, 2026 at KU.
Taxes, Other Than Income
Taxes, other than income increased $17 million for the three months ended September 30, 2026 compared with 2025, primarily due to a $10 million increase in property taxes and a $5 million increase in gross receipts tax.
Taxes, other than income increased $29 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $15 million increase in property taxes and a $15 million increase in gross receipts tax.
Interest Expense
The increase (decrease) in interest expense was due to:
| Three Months | Nine Months | ||||||||||
| Long-term debt (a) | $ | 35 | $ | 113 | |||||||
| Short-term debt | (7) | (14) | |||||||||
| Other | (4) | (8) | |||||||||
| Total | $ | 24 | $ | 91 | |||||||
(a)The increases were primarily due to increased borrowings.
Segment Earnings
PPL's Net Income (Loss) by reportable segment for the periods ended September 30 were as follows:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Kentucky Regulated | $ | 224 | $ | 185 | $ | 39 | $ | 625 | $ | 534 | $ | 91 | |||||||||||||||||||||||
| Pennsylvania Regulated | 191 | 159 | 32 | 507 | 482 | 25 | |||||||||||||||||||||||||||||
| Rhode Island Regulated | 2 | 27 | (25) | 48 | 80 | (32) | |||||||||||||||||||||||||||||
| Corporate and Other (a) | (50) | (53) | 3 | (131) | (181) | 50 | |||||||||||||||||||||||||||||
| Net Income (Loss) | $ | 367 | $ | 318 | $ | 49 | $ | 1,049 | $ | 915 | $ | 134 | |||||||||||||||||||||||
(a)Primarily represents financing and certain other costs incurred at the corporate level that have not been allocated or assigned to the segments, which are presented to reconcile segment information to PPL's consolidated results.
Earnings from Ongoing Operations
Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to net income, an indicator of operating performance determined in accordance with GAAP. PPL believes that Earnings from Ongoing Operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. In addition, PPL's management uses Earnings from Ongoing Operations in measuring achievement of certain corporate performance goals, including targets for certain executive incentive compensation. Other companies may use different measures to present financial performance.
Earnings from Ongoing Operations is adjusted for the impact of special items. Special items are presented in the financial tables on an after-tax basis with the related income taxes on special items separately disclosed. Income taxes on special items, when applicable, are calculated based on the statutory tax rate of the entity where the activity is recorded. Special items may include items such as:
• Gains and losses on sales of assets not in the ordinary course of business.
• Impairment charges.
• Significant workforce reduction and other restructuring effects.
• Acquisition and divestiture-related adjustments.
• Other charges or credits that are, in management's view, non-recurring or otherwise not reflective of the company's ongoing operations.
PPL's Earnings from Ongoing Operations by reportable segment for the periods ended September 30 were as follows:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Kentucky Regulated | $ | 224 | $ | 191 | $ | 33 | $ | 611 | $ | 548 | $ | 63 | |||||||||||||||||||||||
| Pennsylvania Regulated | 194 | 160 | 34 | 515 | 485 | 30 | |||||||||||||||||||||||||||||
| Rhode Island Regulated | 40 | 38 | 2 | 132 | 118 | 14 | |||||||||||||||||||||||||||||
| Corporate and Other | (47) | (34) | (13) | (122) | (112) | (10) | |||||||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 411 | $ | 355 | $ | 56 | $ | 1,136 | $ | 1,039 | $ | 97 | |||||||||||||||||||||||
See "Reconciliation of Earnings from Ongoing Operations" below for a reconciliation of this non-GAAP financial measure to Net Income.
Kentucky Regulated Segment
The Kentucky Regulated segment consists primarily of the regulated electricity generation, transmission and distribution operations conducted by LG&E and KU, as well as LG&E's regulated transmission, distribution and sale of natural gas.
Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | $ | 1,048 | $ | 944 | $ | 104 | $ | 3,144 | $ | 2,841 | $ | 303 | |||||||||||||||||||||||
| Fuel | 246 | 231 | 15 | 715 | 657 | 58 | |||||||||||||||||||||||||||||
| Energy purchases | 21 | 23 | (2) | 173 | 149 | 24 | |||||||||||||||||||||||||||||
| Other operation and maintenance | 215 | 201 | 14 | 622 | 601 | 21 | |||||||||||||||||||||||||||||
| Depreciation | 201 | 180 | 21 | 595 | 535 | 60 | |||||||||||||||||||||||||||||
| Taxes, other than income | 29 | 26 | 3 | 84 | 77 | 7 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 712 | 661 | 51 | 2,189 | 2,019 | 170 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | 17 | 17 | - | 41 | 35 | 6 | |||||||||||||||||||||||||||||
| Interest Expense | 72 | 68 | 4 | 215 | 191 | 24 | |||||||||||||||||||||||||||||
| Income Taxes | 57 | 47 | 10 | 156 | 132 | 24 | |||||||||||||||||||||||||||||
| Net Income | 224 | 185 | 39 | 625 | 534 | 91 | |||||||||||||||||||||||||||||
| Less: Special Items | - | (6) | 6 | 14 | (14) | 28 | |||||||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 224 | $ | 191 | $ | 33 | $ | 611 | $ | 548 | $ | 63 | |||||||||||||||||||||||
The following after-tax gains (losses), which management considers special items, impacted the Kentucky Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30:
| Income Statement Line Item | Three Months | Nine Months | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
|
IT transformation, net of tax of $2, ($5), $4 (a)
|
Other operation and maintenance | $ | - | $ | (5) | $ | 15 | $ | (11) | ||||||||||||||||||||
|
Office relocation and related costs, net of tax of $1, $1 (b)
|
Other operation and maintenance | - | (1) | - | (3) | ||||||||||||||||||||||||
|
Safety transformation, net of tax of $0 (c)
|
Other operation and maintenance | - | - | (1) | - | ||||||||||||||||||||||||
| Total Special Items | $ | - | $ | (6) | $ | 14 | $ | (14) | |||||||||||||||||||||
(a)Nine months ended September 30, 2026 is primarily related to the reclassification of 2025 costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems to a regulatory asset. See Note 6 to the Financial Statements for additional information.
(b)Certain costs related to the relocation of corporate offices.
(c)Costs associated with an enterprise-wide safety transformation program.
The changes in the components of the Kentucky Regulated segment's results between these periods are due to the factors set forth below, which exclude the items that management considers special:
| Three Months | Nine Months | ||||||||||
| Operating Revenues | $ | 104 | $ | 303 | |||||||
| Fuel | (15) | (58) | |||||||||
| Energy purchases | 2 | (24) | |||||||||
| Other operation and maintenance | (22) | (59) | |||||||||
| Depreciation | (21) | (60) | |||||||||
| Taxes, other than income | (3) | (7) | |||||||||
| Other Income (Expense) - net | - | 6 | |||||||||
| Interest Expense | (4) | (24) | |||||||||
| Income Taxes | (8) | (14) | |||||||||
| Earnings from Ongoing Operations | 33 | 63 | |||||||||
| Special Items, after-tax | 6 | 28 | |||||||||
| Net Income | $ | 39 | $ | 91 | |||||||
•Higher operating revenues for the three month period primarily due to a $54 million increase in retail rates due to new base rates approved by the KPSC effective January 1, 2026, a $23 million increase in volumes, an $18 million increase in recoveries of fuel and other energy purchases and a $5 million increase in RAR recoveries.
•Higher operating revenues for the nine month period primarily due to a $172 million increase in retail rates due to new base rates approved by the KPSC effective January 1, 2026, a $90 million increase in recoveries of fuel and other energy purchases, a $15 million increase in RAR recoveries and a $10 million increase in volumes.
•Higher fuel expense for the three month period primarily due to a $9 million increase in commodity costs and a $7 million increase in volumes.
•Higher fuel expense for the nine month period primarily due to an increase in commodity costs.
•Higher energy purchases for the nine month period primarily due to a $38 million increase in commodity costs, partially offset by a $9 million decrease in volumes due to weather.
•Higher other operation and maintenance expense for the three month period primarily due to a $9 million increase in generation expenses, a $3 million increase in DSM costs, a $3 million increase in storm amortization expenses and a $7 million increase in other items that were not individually significant.
•Higher other operation and maintenance expense for the nine month period primarily due to a $28 million increase in generation expenses, a $7 million increase in storm amortization expenses, a $7 million increase in DSM costs, a $5 million increase in vegetation management expenses and a $12 million increase in other items that were not individually significant.
•Higher depreciation for the three month period primarily due to a $14 million increase in additions to PP&E, net of retirements and a $10 million increase in depreciation rates effective March 1, 2026.
•Higher depreciation for the nine month period primarily due to a $36 million increase in additions to PP&E, net of retirements and a $24 million increase in depreciation rates effective March 1, 2026.
•Higher interest expense for the nine month period primarily due to a $19 million increase in interest rates on long-term debt and a $16 million increase in long-term debt borrowings, partially offset by a $6 million decrease in short-term debt borrowings and a $6 million decrease in interest rates on AFUDC debt.
Pennsylvania Regulated Segment
The Pennsylvania Regulated segment includes the regulated electricity transmission and distribution operations of PPL Electric.
Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | $ | 918 | $ | 786 | $ | 132 | $ | 2,633 | $ | 2,298 | $ | 335 | |||||||||||||||||||||||
| Energy purchases | 274 | 224 | 50 | 818 | 622 | 196 | |||||||||||||||||||||||||||||
| Other operation and maintenance | 188 | 160 | 28 | 536 | 481 | 55 | |||||||||||||||||||||||||||||
| Depreciation | 112 | 105 | 7 | 330 | 307 | 23 | |||||||||||||||||||||||||||||
| Taxes, other than income | 42 | 38 | 4 | 126 | 111 | 15 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 616 | 527 | 89 | 1,810 | 1,521 | 289 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | 13 | 14 | (1) | 39 | 36 | 3 | |||||||||||||||||||||||||||||
| Interest Income from Affiliate | 5 | 2 | 3 | 7 | 4 | 3 | |||||||||||||||||||||||||||||
| Interest Expense | 73 | 67 | 6 | 213 | 189 | 24 | |||||||||||||||||||||||||||||
| Income Taxes | 56 | 49 | 7 | 149 | 146 | 3 | |||||||||||||||||||||||||||||
| Net Income | 191 | 159 | 32 | 507 | 482 | 25 | |||||||||||||||||||||||||||||
| Less: Special Items | (3) | (1) | (2) | (8) | (3) | (5) | |||||||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 194 | $ | 160 | $ | 34 | $ | 515 | $ | 485 | $ | 30 | |||||||||||||||||||||||
The following after-tax gains (losses), which management considers special items, impacted the Pennsylvania Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30:
| Income Statement Line Item | Three Months | Nine Months | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
|
IT transformation, net of tax of $1, $0, $3, $0 (a)
|
Other operation and maintenance | $ | (2) | $ | (1) | $ | (7) | $ | (1) | ||||||||||||||||||||
|
Office relocation and related costs, net of tax of $1 (b)
|
Other operation and maintenance | - | - | - | (2) | ||||||||||||||||||||||||
|
Safety transformation, net of tax of $0, $0 (c)
|
Other operation and maintenance | (1) | - | (1) | - | ||||||||||||||||||||||||
| Total Special Items | $ | (3) | $ | (1) | $ | (8) | $ | (3) | |||||||||||||||||||||
(a)Costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems.
(b)Certain costs related to the relocation of corporate offices.
(c)Costs associated with an enterprise-wide safety transformation program.
The changes in the components of the Pennsylvania Regulated segment's results between these periods are due to the factors set forth below, which exclude the items that management considers special:
| Three Months | Nine Months | ||||||||||
| Operating Revenues | $ | 132 | $ | 335 | |||||||
| Energy purchases | (50) | (196) | |||||||||
| Other operation and maintenance | (26) | (49) | |||||||||
| Depreciation | (7) | (23) | |||||||||
| Taxes, other than income | (4) | (15) | |||||||||
| Other Income (Expense) - net | (1) | 3 | |||||||||
| Interest Income from Affiliate | 3 | 3 | |||||||||
| Interest Expense | (6) | (24) | |||||||||
| Income Taxes | (7) | (4) | |||||||||
| Earnings from Ongoing Operations | 34 | 30 | |||||||||
| Special Items, after-tax | (2) | (5) | |||||||||
| Net Income | $ | 32 | $ | 25 | |||||||
•Higher operating revenues for the three month period primarily due to a $61 million increase in distribution pricing, a $51 million increase in PLR and a $16 million increase in transmission formula rate revenue.
•Higher operating revenues for the nine month period primarily due to a $209 million increase in PLR, a $58 million increase in distribution pricing, a $53 million increase in transmission formula rate revenue and an $8 million increase in distribution volumes.
•Higher energy purchases for the three month period primarily due to a $28 million increase in PLR prices, a $15 million increase in PLR volumes and a $5 million increase in net metering.
•Higher energy purchases for the nine month period primarily due to a $140 million increase in PLR prices, a $38 million increase in PLR volumes and a $12 million increase in net metering.
•Higher other operation and maintenance expense for the three month period primarily due to an $11 million increase in storm costs and a $9 million increase in bad debt expenses.
•Higher other operation and maintenance expense for the nine month period primarily due to an $18 million increase in storm costs, a $12 million increase in power restoration costs and a $10 million increase in bad debt expenses.
•Higher depreciation for the three and nine month periods primarily due to an increase in PP&E additions, net of retirements.
•Higher interest expense for the three and nine month periods primarily due to an increase in long-term debt borrowings.
Rhode Island Regulated Segment
The Rhode Island Regulated segment includes the regulated electricity transmission and distribution and natural gas distribution operations of RIE.
Net Income and Earnings from Ongoing Operations for the periods ended September 30 include the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | $ | 530 | $ | 509 | $ | 21 | $ | 1,605 | $ | 1,629 | $ | (24) | |||||||||||||||||||||||
| Energy purchases | 191 | 173 | 18 | 602 | 598 | 4 | |||||||||||||||||||||||||||||
| Other operation and maintenance | 209 | 196 | 13 | 594 | 610 | (16) | |||||||||||||||||||||||||||||
| Depreciation | 51 | 45 | 6 | 148 | 131 | 17 | |||||||||||||||||||||||||||||
| Taxes, other than income | 46 | 38 | 8 | 132 | 127 | 5 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 497 | 452 | 45 | 1,476 | 1,466 | 10 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | (10) | 2 | (12) | 8 | 5 | 3 | |||||||||||||||||||||||||||||
| Interest Income from Affiliate | 5 | - | 5 | 5 | 3 | 2 | |||||||||||||||||||||||||||||
| Interest Expense | 29 | 28 | 1 | 85 | 78 | 7 | |||||||||||||||||||||||||||||
| Interest Expense with Affiliate | - | - | - | 7 | - | 7 | |||||||||||||||||||||||||||||
| Income Taxes | (3) | 4 | (7) | 2 | 13 | (11) | |||||||||||||||||||||||||||||
| Net Income | 2 | 27 | (25) | 48 | 80 | (32) | |||||||||||||||||||||||||||||
| Less: Special Items | (38) | (11) | (27) | (84) | (38) | (46) | |||||||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 40 | $ | 38 | $ | 2 | $ | 132 | $ | 118 | $ | 14 | |||||||||||||||||||||||
The following after-tax gains (losses), which management considers special items, impacted the Rhode Island Regulated segment's results and are excluded from Earnings from Ongoing Operations during the periods ended September 30:
| Income Statement Line Item | Three Months | Nine Months | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
|
ISO-NE transmission rates ROE reduction, net of tax of $4 (a)
|
Operating Revenues | $ | - | $ | - | $ | (16) | $ | - | ||||||||||||||||||||
|
Meter system integration impacts, net of tax of $2 (b)
|
Operating Revenues | - | - | (9) | - | ||||||||||||||||||||||||
|
Post TSA adjustments, net of tax of $4 (c)
|
Operating Revenues | - | - | - | (14) | ||||||||||||||||||||||||
|
Hold harmless commitment, net of tax of $2, $2 (d)
|
Operating Revenues | (10) | - | (10) | - | ||||||||||||||||||||||||
|
Customer system integration impacts, net of tax of $1, $2, $5, $2 (e)
|
Other operation and maintenance | (5) | (9) | (18) | (9) | ||||||||||||||||||||||||
|
IT transformation, net of tax of $0, $0, $1, $1 (f)
|
Other operation and maintenance | (1) | (1) | (5) | (5) | ||||||||||||||||||||||||
|
Post TSA adjustments, net of tax of $1 (c)
|
Other operation and maintenance | - | - | - | (3) | ||||||||||||||||||||||||
|
Safety transformation, net of tax of $0, $0 (g)
|
Other operation and maintenance | (1) | - | (1) | - | ||||||||||||||||||||||||
|
Acquisition integration, net of tax of $4, $0, $4, ($2) (h)
|
Other Income (Expense) - net | (17) | (1) | (17) | 6 | ||||||||||||||||||||||||
|
Energy efficiency programs settlement, net of tax of $2 (i)
|
Other Income (Expense) - net | - | - | - | (6) | ||||||||||||||||||||||||
|
Post TSA adjustments, net of tax of $2 (c)
|
Other Income (Expense) - net | - | - | - | (6) | ||||||||||||||||||||||||
|
Rate case disallowances, net of tax of $1, $1 (j)
|
Other Income (Expense) - net | (4) | - | (4) | - | ||||||||||||||||||||||||
|
ISO-NE transmission rates ROE reduction, net of tax of $1 (a)
|
Interest Expense | - | - | (4) | - | ||||||||||||||||||||||||
|
Post TSA adjustments, net of tax of $0 (c)
|
Interest Expense | - | - | - | (1) | ||||||||||||||||||||||||
| Total Special Items | $ | (38) | $ | (11) | $ | (84) | $ | (38) | |||||||||||||||||||||
(a)Prior period impact of an ISO-NE transmission rate reduction. See Note 6 to the Financial Statements for additional information.
(b)Prior period impact related to a meter data system integration post transition services agreement.
(c)Adjustments related to account reconciliations and process alignment subsequent to the end of the transition services agreement associated with the acquisition of RIE.
(d)See Note 6 to the Financial Statements for additional information.
(e)Certain collection process costs incurred due to the timing and implementation of the customer system integration.
(f)Costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems.
(g)Costs associated with an enterprise-wide safety transformation program.
(h)Primarily includes a transition services agreement settlement.
(i)Costs associated with a settlement agreement regarding energy efficiency programs prior to PPL's acquisition of RIE.
(j)Certain costs disallowed by the RIPUC related to the 2025 Rhode Island rate case proceedings.
The changes in the components of the Rhode Island Regulated segment's results between these periods are due to the factors set forth below, which exclude the items that management considers special:
| Three Months | Nine Months | ||||||||||
| Operating Revenues | $ | 35 | $ | 1 | |||||||
| Energy purchases | (18) | (4) | |||||||||
| Other operation and maintenance | (15) | 25 | |||||||||
| Depreciation | (6) | (17) | |||||||||
| Taxes, other than income | (8) | (5) | |||||||||
| Other Income (Expense) - net | 11 | 22 | |||||||||
| Interest Income from Affiliate | 5 | 2 | |||||||||
| Interest Expense | (2) | (3) | |||||||||
| Interest Expense with Affiliate | - | (7) | |||||||||
| Income Taxes | - | - | |||||||||
| Earnings from Ongoing Operations | 2 | 14 | |||||||||
| Special Items, after-tax | (27) | (46) | |||||||||
| Net Income | $ | (25) | $ | (32) | |||||||
•Higher operating revenues for the three month period primarily due to a $13 million increase in distribution volumes, a $10 million increase in gas prices, a $9 million increase in distribution prices, a $7 million increase in retail energy and a $4 million increase in transmission formula rate revenue, partially offset by a $5 million decrease in retail transmission and a $3 million decrease in other items that individually are not significant.
•Higher operating revenues for the nine month period primarily due to a $25 million increase in gas prices and sales for resale, a $21 million increase in distribution volumes and an $11 million increase in transmission formula rate revenue, partially offset by a $31 million decrease in distribution prices, a $15 million decrease in retail energy, a $4 million decrease in retail transmission and a $6 million decrease in other items that individually are not significant.
•Higher energy purchases for the three month period primarily due to an $8 million increase in net metering, a $2 million increase in commodity costs and a $7 million increase in other items that are not individually significant.
•Higher energy purchases for the nine month period primarily due to a $17 million increase in volumes, an $8 million increase in net metering and an $8 million increase in renewable energy certificate purchases, partially offset by a $26 million decrease in commodity costs and a $3 million decrease in other items that are not individually significant.
•Higher other operation and maintenance expense for the three month period primarily due to an $11 million increase in bad debt expenses, a $7 million increase in miscellaneous expenses, a $6 million increase due to a reclassification of the pension adjustment mechanism to align with PPL's accounting for other revenue related recovery items, a $3 million increase in energy efficiency expenses, a $3 million increase in distribution costs and a $3 million increase in vegetation management expenses, partially offset by an $18 million decrease in storm recovery funds.
•Lower other operation and maintenance expense for the nine month period primarily due to a $40 million decrease in storm recovery funds and a $20 million decrease in energy efficiency expenses, partially offset by a $16 million increase due to a reclassification of the pension adjustment mechanism to align with PPL's accounting for other revenue related recovery items, a $9 million increase in bad debt expenses and a $9 million increase in miscellaneous expenses.
•Higher depreciation for the three and nine month periods primarily due to an increase in PP&E additions, net of retirements.
•Higher taxes other than income for the three and nine month periods primarily due to an increase in property taxes.
•Higher other income (expense) for the three month period primarily due to a $7 million increase related to a litigation settlement and a $4 million increase due to a reclassification of the pension adjustment mechanism to align with PPL's accounting for other revenue related recovery items.
•Higher other income (expense) for the nine month period primarily due to a $12 million increase due to a reclassification of the pension adjustment mechanism to align with PPL's accounting for other revenue related recovery items, a $7 million increase related to a litigation settlement and a $5 million increase in other items that are not individually significant.
•Higher interest income from affiliate for the three month period primarily due to an increase in affiliate borrowings.
•Higher interest expense for the three and nine month periods primarily due to an increase in borrowings.
•Higher interest expense with affiliate for the nine month period primarily due to an increase in borrowings with affiliates.
Reconciliation of Earnings from Ongoing Operations
The following tables contain after-tax gains (losses), in total, which management considers special items, that are excluded from Earnings from Ongoing Operations and a reconciliation to PPL's "Net Income" for the periods ended September 30:
| 2026 Three Months | |||||||||||||||||||||||||||||
|
KY Regulated |
PA Regulated |
RI Regulated |
Corporate and Other |
Total | |||||||||||||||||||||||||
| Net Income (Loss) | $ | 224 | $ | 191 | $ | 2 | $ | (50) | $ | 367 | |||||||||||||||||||
| Less: Special Items (expense) benefit: | |||||||||||||||||||||||||||||
|
Acquisition integration, net of tax of $5 (a)
|
- | - | (17) | - | (17) | ||||||||||||||||||||||||
|
IT transformation, net of tax of $1, $0, $1 (b)
|
- | (2) | (1) | (3) | (6) | ||||||||||||||||||||||||
|
Customer system integration impacts, net of tax of $2 (c)
|
- | - | (5) | - | (5) | ||||||||||||||||||||||||
|
Safety transformation, net of tax of $0, $0 (d)
|
- | (1) | (1) | - | (2) | ||||||||||||||||||||||||
|
Hold harmless commitment, net of tax of $2 (e)
|
- | - | (10) | - | (10) | ||||||||||||||||||||||||
|
Rate case disallowances, net of tax of $1 (f)
|
- | - | (4) | - | (4) | ||||||||||||||||||||||||
| Total Special Items | - | (3) | (38) | (3) | (44) | ||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 224 | $ | 194 | $ | 40 | $ | (47) | $ | 411 | |||||||||||||||||||
(a)Primarily includes a transition services agreement settlement.
(b)Costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems.
(c)Certain collection process costs incurred due to the timing and implementation of the customer system integration.
(d)Costs associated with an enterprise-wide safety transformation program.
(e)See Note 6 to the Financial Statements for additional information.
(f)Certain costs disallowed by the RIPUC related to the 2025 Rhode Island rate case proceedings.
| 2025 Three Months | |||||||||||||||||||||||||||||
|
KY Regulated |
PA Regulated |
RI Regulated |
Corporate and Other |
Total | |||||||||||||||||||||||||
| Net Income (Loss) | $ | 185 | $ | 159 | $ | 27 | $ | (53) | $ | 318 | |||||||||||||||||||
| Less: Special Items (expense) benefit: | |||||||||||||||||||||||||||||
|
Acquisition integration, net of tax of $0, $4 (a)
|
- | - | (1) | (14) | (15) | ||||||||||||||||||||||||
|
IT transformation, net of tax of $2, $0, $0, $3 (b)
|
(5) | (1) | (1) | (5) | (12) | ||||||||||||||||||||||||
|
Office relocation and related costs, net of tax of $1 (c)
|
(1) | - | - | - | (1) | ||||||||||||||||||||||||
|
Customer system integration impacts, net of tax of $2 (d)
|
- | - | (9) | - | (9) | ||||||||||||||||||||||||
| Total Special Items | (6) | (1) | (11) | (19) | (37) | ||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 191 | $ | 160 | $ | 38 | $ | (34) | $ | 355 | |||||||||||||||||||
(a)Primarily includes integration and related costs associated with the acquisition of RIE.
(b)Costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems.
(c)Certain costs related to the relocation of corporate offices.
(d)Certain collection process costs incurred due to the timing and implementation of the customer system integration.
| 2026 Nine Months | |||||||||||||||||||||||||||||
|
KY Regulated |
PA Regulated |
RI Regulated |
Corporate and Other |
Total | |||||||||||||||||||||||||
| Net Income (Loss) | $ | 625 | $ | 507 | $ | 48 | $ | (131) | $ | 1,049 | |||||||||||||||||||
| Less: Special Items (expense) benefit: | |||||||||||||||||||||||||||||
|
Acquisition integration, net of tax of $5 (a)
|
- | - | (17) | - | (17) | ||||||||||||||||||||||||
|
IT transformation, net of tax of ($5), $3, $1, $2 (b)
|
15 | (7) | (5) | (9) | (6) | ||||||||||||||||||||||||
|
Customer system integration impacts, net of tax of $5 (c)
|
- | - | (18) | - | (18) | ||||||||||||||||||||||||
|
ISO-NE transmission rates ROE reduction, net of tax of $5 (d)
|
- | - | (20) | - | (20) | ||||||||||||||||||||||||
|
Meter system integration impacts, net of tax of $2 (e)
|
- | - | (9) | - | (9) | ||||||||||||||||||||||||
|
Safety transformation, net of tax of $0, $0, $0 (f)
|
(1) | (1) | (1) | - | (3) | ||||||||||||||||||||||||
|
Hold harmless commitment, net of tax of $2 (g)
|
- | - | (10) | - | (10) | ||||||||||||||||||||||||
|
Rate case disallowances, net of tax of $1 (h)
|
- | - | (4) | - | (4) | ||||||||||||||||||||||||
| Total Special Items | 14 | (8) | (84) | (9) | (87) | ||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 611 | $ | 515 | $ | 132 | $ | (122) | $ | 1,136 | |||||||||||||||||||
(a)Primarily includes a transition services agreement settlement.
(b)Costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems. Kentucky Regulated contains the reclassification of 2025 costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems to a regulatory asset. See Note 6 to the Financial Statements for additional information.
(c)Certain collection process costs incurred due to the timing and implementation of the customer system integration.
(d)Prior period impact of an ISO-NE transmission rate reduction. See Note 6 to the Financial Statements for additional information.
(e)Prior period impact of a meter data system integration post transition services agreement.
(f)Costs associated with an enterprise-wide safety transformation program.
(g)See Note 6 to the Financial Statements for additional information.
(h)Certain costs disallowed by the RIPUC related to the 2025 Rhode Island rate case proceedings.
| 2025 Nine Months | |||||||||||||||||||||||||||||
|
KY Regulated |
PA Regulated |
RI Regulated |
Corporate and Other |
Total | |||||||||||||||||||||||||
| Net Income (Loss) | $ | 534 | $ | 482 | $ | 80 | $ | (181) | $ | 915 | |||||||||||||||||||
| Less: Special Items (expense) benefit: | |||||||||||||||||||||||||||||
|
Talen litigation costs, net of tax of ($1) (a)
|
- | - | - | 3 | 3 | ||||||||||||||||||||||||
|
Acquisition integration, net of tax of ($2), $11 (b)
|
- | - | 6 | (41) | (35) | ||||||||||||||||||||||||
|
IT transformation, net of tax of $4, $0, $1, $8 (c)
|
(11) | (1) | (5) | (31) | (48) | ||||||||||||||||||||||||
|
Energy efficiency programs settlement, net of tax of $2 (d)
|
- | - | (6) | - | (6) | ||||||||||||||||||||||||
|
Office relocation and related costs, net of tax of $1, $1 (e)
|
(3) | (2) | - | - | (5) | ||||||||||||||||||||||||
|
Post TSA adjustments, net of tax of $7 (f)
|
- | - | (24) | - | (24) | ||||||||||||||||||||||||
|
Customer system integration impacts, net of tax of $2 (g)
|
- | - | (9) | - | (9) | ||||||||||||||||||||||||
| Total Special Items | (14) | (3) | (38) | (69) | (124) | ||||||||||||||||||||||||
| Earnings from Ongoing Operations | $ | 548 | $ | 485 | $ | 118 | $ | (112) | $ | 1,039 | |||||||||||||||||||
(a)PPL incurred legal expenses related to litigation associated with its former affiliate, Talen Montana, LLC and certain affiliated entities.
(b)Rhode Island Regulated primarily includes a transition services agreement settlement. Corporate and Other primarily includes integration and related costs associated with the acquisition of RIE.
(c)Costs associated with PPL's restructuring and rebuilding of its IT infrastructure, organization and systems.
(d)Costs associated with a settlement agreement regarding energy efficiency programs prior to PPL's acquisition of RIE.
(e)Certain costs related to the relocation of corporate offices.
(f)Adjustments related to account reconciliations and process alignment subsequent to the end of the transition services agreement associated with the acquisition of RIE.
(g)Certain collection process costs incurred due to the timing and implementation of the customer system integration.
PPL Electric: Statement of Income Analysis
Net income for the periods ended September 30 includes the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | $ | 918 | $ | 786 | $ | 132 | $ | 2,633 | $ | 2,298 | $ | 335 | |||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||||||||
| Operation | |||||||||||||||||||||||||||||||||||
| Energy purchases | 274 | 224 | 50 | 818 | 622 | 196 | |||||||||||||||||||||||||||||
| Other operation and maintenance | 188 | 160 | 28 | 536 | 481 | 55 | |||||||||||||||||||||||||||||
| Depreciation | 112 | 105 | 7 | 330 | 307 | 23 | |||||||||||||||||||||||||||||
| Taxes, other than income | 42 | 38 | 4 | 126 | 111 | 15 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 616 | 527 | 89 | 1,810 | 1,521 | 289 | |||||||||||||||||||||||||||||
| Operating Income | 302 | 259 | 43 | 823 | 777 | 46 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | 13 | 14 | (1) | 39 | 36 | 3 | |||||||||||||||||||||||||||||
| Interest Income from Affiliate | 5 | 2 | 3 | 7 | 4 | 3 | |||||||||||||||||||||||||||||
| Interest Expense | 73 | 67 | 6 | 213 | 189 | 24 | |||||||||||||||||||||||||||||
| Income Before Income Taxes | 247 | 208 | 39 | 656 | 628 | 28 | |||||||||||||||||||||||||||||
| Income Taxes | 56 | 49 | 7 | 149 | 146 | 3 | |||||||||||||||||||||||||||||
| Net Income | $ | 191 | $ | 159 | $ | 32 | $ | 507 | $ | 482 | $ | 25 | |||||||||||||||||||||||
Operating Revenues
The increase (decrease) in operating revenues was due to:
| Three Months | Nine Months | ||||||||||
| Distribution price (a) | $ | 61 | $ | 58 | |||||||
| Distribution volume (b) | 1 | 8 | |||||||||
| PLR (c) | 51 | 209 | |||||||||
| Transmission formula rate (d) | 16 | 53 | |||||||||
| Other | 3 | 7 | |||||||||
| Total | $ | 132 | $ | 335 | |||||||
(a)The increases were primarily due to new base distribution rates approved by the PAPUC effective July 1, 2026, partially offset by reconcilable cost recovery mechanisms.
(b)The increase for the nine months ended September 30, 2026 was primarily due to weather.
(c)The increases were primarily due to higher energy prices, higher volumes due to usage and weather and an increase in PLR customers.
(d)The increases were primarily due to returns on additional transmission capital investments and return of depreciation expense.
Energy Purchases
Energy purchases increased $50 million for the three months ended September 30, 2026 compared with 2025, primarily due to a $28 million increase in PLR prices, a $15 million increase in PLR volumes and a $5 million increase in net metering.
Energy purchases increased $196 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $140 million increase in PLR prices, a $38 million increase in PLR volumes and a $12 million increase in net metering.
Other Operation and Maintenance
Other operation and maintenance increased $28 million for the three months ended September 30, 2026 compared with 2025, primarily due to an $11 million increase in storm costs and a $9 million increase in bad debt expenses.
Other operation and maintenance increased $55 million for the nine months ended September 30, 2026 compared with 2025, primarily due to an $18 million increase in storm costs, a $12 million increase in power restoration costs and a $10 million increase in bad debt expenses.
Depreciation
Depreciation increased $7 million and $23 million for the three and nine months ended September 30, 2026 compared with 2025, primarily due to an increase in PP&E additions, net of retirements.
Interest Expense
Interest expense increased $24 million for the nine months ended September 30, 2026 compared with 2025, primarily due to an increase in long-term debt borrowings.
LG&E: Statement of Income Analysis
Net income for the periods ended September 30 includes the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||||||||||||||
| Retail and wholesale | $ | 466 | $ | 420 | $ | 46 | $ | 1,450 | $ | 1,293 | $ | 157 | |||||||||||||||||||||||
| Electric revenue from affiliate | 4 | 7 | (3) | 15 | 17 | (2) | |||||||||||||||||||||||||||||
| Total Operating Revenues | 470 | 427 | 43 | 1,465 | 1,310 | 155 | |||||||||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||||||||
| Operation | |||||||||||||||||||||||||||||||||||
| Fuel | 96 | 97 | (1) | 263 | 254 | 9 | |||||||||||||||||||||||||||||
| Energy purchases | 16 | 17 | (1) | 155 | 128 | 27 | |||||||||||||||||||||||||||||
| Energy purchases from affiliate | 8 | 6 | 2 | 26 | 18 | 8 | |||||||||||||||||||||||||||||
| Other operation and maintenance | 92 | 91 | 1 | 272 | 271 | 1 | |||||||||||||||||||||||||||||
| Depreciation | 87 | 77 | 10 | 257 | 228 | 29 | |||||||||||||||||||||||||||||
| Taxes, other than income | 15 | 13 | 2 | 43 | 39 | 4 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 314 | 301 | 13 | 1,016 | 938 | 78 | |||||||||||||||||||||||||||||
| Operating Income | 156 | 126 | 30 | 449 | 372 | 77 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | 7 | 8 | (1) | 19 | 16 | 3 | |||||||||||||||||||||||||||||
| Interest Expense | 33 | 30 | 3 | 97 | 83 | 14 | |||||||||||||||||||||||||||||
| Income Before Income Taxes | 130 | 104 | 26 | 371 | 305 | 66 | |||||||||||||||||||||||||||||
| Income Taxes | 26 | 21 | 5 | 75 | 61 | 14 | |||||||||||||||||||||||||||||
| Net Income | $ | 104 | $ | 83 | $ | 21 | $ | 296 | $ | 244 | $ | 52 | |||||||||||||||||||||||
Operating Revenues
The increase (decrease) in operating revenues was due to:
| Three Months | Nine Months | ||||||||||
| Retail rates (a) | $ | 22 | $ | 76 | |||||||
| Fuel and other energy purchases (b) | 4 | 53 | |||||||||
| Volumes (c) | 11 | 5 | |||||||||
| RAR | 5 | 15 | |||||||||
| Other | 1 | 6 | |||||||||
| Total | $ | 43 | $ | 155 | |||||||
(a)The increases were due to new base rates approved by the KPSC effective January 1, 2026.
(b)The increase for the nine months ended September 30, 2026 was primarily due to higher recoveries of fuel expenses, energy purchases and energy purchases from affiliate.
(c)The increase for the three months ended September 30, 2026 was due to increased sales volumes.
Fuel
Fuel expense increased $9 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $21 million increase in commodity costs, partially offset by a $9 million decrease in volumes.
Energy Purchases
Energy purchases increased $27 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $37 million increase in commodity costs, partially offset by a $9 million decrease in volumes.
Depreciation
Depreciation increased $10 million for the three months ended September 30, 2026 compared with 2025, primarily due to a $6 million increase from PP&E additions, net of retirements and a $4 million increase due to higher depreciation rates effective March 1, 2026.
Depreciation increased $29 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $16 million increase from PP&E additions, net of retirements and a $10 million increase due to higher depreciation rates effective March 1, 2026.
KU: Statement of Income Analysis
Net income for the periods ended September 30 includes the following results:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | 2026 | 2025 | $ Change | ||||||||||||||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||||||||||||||
| Retail and wholesale | $ | 582 | $ | 524 | $ | 58 | $ | 1,694 | $ | 1,548 | $ | 146 | |||||||||||||||||||||||
| Electric revenue from affiliate | 8 | 6 | 2 | 26 | 18 | 8 | |||||||||||||||||||||||||||||
| Total Operating Revenues | 590 | 530 | 60 | 1,720 | 1,566 | 154 | |||||||||||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||||||||||||||
| Operation | |||||||||||||||||||||||||||||||||||
| Fuel | 151 | 135 | 16 | 452 | 404 | 48 | |||||||||||||||||||||||||||||
| Energy purchases | 5 | 6 | (1) | 18 | 20 | (2) | |||||||||||||||||||||||||||||
| Energy purchases from affiliate | 4 | 7 | (3) | 15 | 17 | (2) | |||||||||||||||||||||||||||||
| Other operation and maintenance | 118 | 101 | 17 | 327 | 303 | 24 | |||||||||||||||||||||||||||||
| Depreciation | 114 | 102 | 12 | 338 | 305 | 33 | |||||||||||||||||||||||||||||
| Taxes, other than income | 14 | 13 | 1 | 41 | 38 | 3 | |||||||||||||||||||||||||||||
| Total Operating Expenses | 406 | 364 | 42 | 1,191 | 1,087 | 104 | |||||||||||||||||||||||||||||
| Operating Income | 184 | 166 | 18 | 529 | 479 | 50 | |||||||||||||||||||||||||||||
| Other Income (Expense) - net | 10 | 9 | 1 | 23 | 19 | 4 | |||||||||||||||||||||||||||||
| Interest Expense | 41 | 38 | 3 | 121 | 108 | 13 | |||||||||||||||||||||||||||||
| Income Before Income Taxes | 153 | 137 | 16 | 431 | 390 | 41 | |||||||||||||||||||||||||||||
| Income Taxes | 31 | 28 | 3 | 86 | 78 | 8 | |||||||||||||||||||||||||||||
| Net Income | $ | 122 | $ | 109 | $ | 13 | $ | 345 | $ | 312 | $ | 33 | |||||||||||||||||||||||
Operating Revenues
The increase (decrease) in operating revenues was due to:
| Three Months | Nine Months | ||||||||||
| Retail rates (a) | $ | 32 | $ | 96 | |||||||
| Fuel and other energy purchases (b) | 13 | 47 | |||||||||
| Volumes (c) | 12 | 5 | |||||||||
| Other | 3 | 6 | |||||||||
| Total | $ | 60 | $ | 154 | |||||||
(a)The increases were due to new base rates approved by the KPSC effective January 1, 2026.
(b)The increases were primarily due to higher recoveries of fuel expenses.
(c)The increase for the three months ended September 30, 2026 was due to increased sales volumes.
Fuel
Fuel expense increased $16 million for the three months ended September 30, 2026 compared with 2025, primarily due to an $8 million increase in commodity costs and an $8 million increase in volumes.
Fuel expense increased $48 million for the nine months ended September 30, 2026 compared with 2025, primarily due to an increase in commodity costs.
Other Operation and Maintenance
Other operation and maintenance increased $17 million for the three months ended September 30, 2026 compared with 2025, primarily due to a $6 million increase in generation expenses, a $4 million increase in distribution expenses and a $7 million increase in other items that were not individually significant.
Other operation and maintenance increased $24 million for the nine months ended September 30, 2026 compared with 2025, primarily due to an increase in generation expenses.
Depreciation
Depreciation increased $12 million for the three months ended September 30, 2026 compared with 2025, primarily due to an $8 million increase from PP&E additions, net of retirements and a $6 million increase due to higher depreciation rates effective March 1, 2026.
Depreciation increased $33 million for the nine months ended September 30, 2026 compared with 2025, primarily due to a $20 million increase from PP&E additions, net of retirements and a $14 million increase due to higher depreciation rates effective March 1, 2026.
Financial Condition
The remainder of this Item 2 in this Form 10-Q is presented on a combined basis, providing information for each of the Registrants as applicable.
Liquidity and Capital Resources
(All Registrants)
The Registrants had the following at:
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 393 | $ | 9 | $ | 13 | $ | 23 | |||||||||||||||
| Short-term debt | 679 | - | 220 | 319 | |||||||||||||||||||
| Long-term debt due within one year | 358 | 108 | 190 | 60 | |||||||||||||||||||
| Notes payable to affiliates | - | - | 2 | - | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,071 | $ | 30 | $ | 162 | $ | 10 | |||||||||||||||
| Short-term debt | 456 | - | - | - | |||||||||||||||||||
| Long-term debt due within one year | 904 | - | 90 | 164 | |||||||||||||||||||
| Notes payable to affiliates | - | - | - | 36 | |||||||||||||||||||
(All Registrants)
Net cash provided by (used in) operating, investing and financing activities for the nine month periods ended September 30, and the changes between periods, were as follows:
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| 2026 | |||||||||||||||||||||||
| Operating activities | $ | 2,056 | $ | 663 | $ | 449 | $ | 582 | |||||||||||||||
| Investing activities | (3,616) | (1,298) | (713) | (793) | |||||||||||||||||||
| Financing activities | 870 | 614 | 109 | 218 | |||||||||||||||||||
| 2025 | |||||||||||||||||||||||
| Operating activities | $ | 2,081 | $ | 719 | $ | 538 | $ | 647 | |||||||||||||||
| Investing activities | (2,860) | (1,362) | (561) | (681) | |||||||||||||||||||
| Financing activities | 1,559 | 632 | 522 | 354 | |||||||||||||||||||
| Change - Cash Provided (Used) | |||||||||||||||||||||||
| Operating activities | $ | (25) | $ | (56) | $ | (89) | $ | (65) | |||||||||||||||
| Investing activities | (756) | 64 | (152) | (112) | |||||||||||||||||||
| Financing activities | (689) | (18) | (413) | (136) | |||||||||||||||||||
Operating Activities
The components of the change in cash provided by (used in) operating activities for the nine months ended September 30, 2026 compared with 2025 were as follows:
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| Change - Cash Provided (Used) | |||||||||||||||||||||||
| Net income | $ | 134 | $ | 25 | $ | 52 | $ | 33 | |||||||||||||||
| Non-cash components | 124 | 44 | 2 | 4 | |||||||||||||||||||
| Working capital | (187) | (104) | (139) | (97) | |||||||||||||||||||
| Other operating activities | (96) | (21) | (4) | (5) | |||||||||||||||||||
| Total | $ | (25) | $ | (56) | $ | (89) | $ | (65) | |||||||||||||||
A majority of the Registrants' operating cash flows are provided by their electric and natural gas utilities, which are significantly influenced by factors such as weather, regulatory mechanisms, economic conditions, changes in working capital and operating costs.
(PPL)
PPL's cash provided by operating activities in 2026 decreased $25 million compared with 2025.
•Net income increased $134 million between the periods and included an increase in non-cash components of $124 million. The increase in non-cash components was primarily due to an increase in depreciation.
•The $187 million decrease in cash from changes in working capital was primarily due to a decrease in current regulatory liabilities and taxes payable and an increase in fuel, materials and supplies, partially offset by a decrease in accounts receivable and unbilled revenues.
•The $96 million decrease in cash from other operating activities was primarily due to an increase in noncurrent regulatory assets and a decrease in noncurrent regulatory liabilities.
(PPL Electric)
PPL Electric's cash provided by operating activities in 2026 decreased $56 million compared with 2025.
•Net income increased $25 million between the periods and included an increase in non-cash components of $44 million. The increase in non-cash components was primarily due to an increase in depreciation and a decrease in defined benefit plans income.
•The $104 million decrease in cash from changes in working capital was primarily due to a decrease in accounts payable, taxes payable and current regulatory liabilities and an increase in current regulatory assets, partially offset by a decrease in unbilled revenues.
•The $21 million decrease in cash provided by other operating activities was driven primarily by an increase in noncurrent regulatory assets.
(LG&E)
LG&E's cash provided by operating activities in 2026 decreased $89 million compared with 2025.
•Net income increased $52 million between the periods.
•The $139 million decrease in cash from changes in working capital was primarily due to an increase in accounts receivable and fuel, materials and supplies and a decrease in accounts payable, taxes payable and accrued interest.
(KU)
KU's cash provided by operating activities in 2026 decreased $65 million compared with 2025.
•Net income increased $33 million between the periods.
•The $97 million decrease in cash from changes in working capital was primarily due to a decrease in taxes payable and accounts payable to affiliates and an increase in accounts receivable.
Investing Activities
(All Registrants)
The components of the change in cash provided by (used in) investing activities for the nine months ended September 30, 2026 compared with 2025 were as follows:
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| Change - Cash Provided (Used) | |||||||||||||||||||||||
| Expenditures for PP&E | $ | (662) | $ | (214) | $ | (188) | $ | (119) | |||||||||||||||
| Notes receivable from affiliates | - | 261 | 36 | - | |||||||||||||||||||
| Other investing activities | (94) | 17 | - | 7 | |||||||||||||||||||
| Total | $ | (756) | $ | 64 | $ | (152) | $ | (112) | |||||||||||||||
For PPL, the increase in expenditures for PP&E was due to an increase in project expenditures at PPL Electric, RIE, LG&E and KU. The increase in expenditures at PPL Electric was primarily due to increases in transmission and distribution projects. The increase in expenditures at LG&E was primarily due to the E.W. Brown battery storage project and Mill Creek Unit 5. The increase in expenditures at KU was primarily due to Mill Creek Unit 5.
For PPL Electric, the change in "Notes receivable from affiliates" is due to a decrease in lending to affiliates and additional payments received from affiliates. For LG&E, the change is due to additional payments received from an affiliate. See Note 11 to the Financial Statements for further discussion of intercompany borrowings.
Financing Activities
(All Registrants)
PPL regularly analyzes and evaluates its capital structure and may explore potential transactions, including debt or equity purchases and/or exchanges from time to time through redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions.
The components of the change in cash provided by (used in) financing activities for the nine months ended September 30, 2026 compared with 2025 were as follows:
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||
| Change - Cash Provided (Used) | |||||||||||||||||||||||
| Debt issuance/retirement, net | $ | (567) | $ | - | $ | (750) | $ | (718) | |||||||||||||||
| Dividends | (37) | (9) | (21) | (23) | |||||||||||||||||||
| Capital contributions/distributions, net | - | (9) | 60 | 101 | |||||||||||||||||||
| Change in short-term debt, net | (69) | - | 245 | 459 | |||||||||||||||||||
| Net increase (decrease) in notes payable with affiliate | - | - | 45 | 37 | |||||||||||||||||||
| Other financing activities | (16) | - | 8 | 8 | |||||||||||||||||||
| Total | $ | (689) | $ | (18) | $ | (413) | $ | (136) | |||||||||||||||
See Note 7 to the Financial Statements in this Form 10-Q for information on 2026 short-term and long-term debt activity, equity transactions and PPL dividends. See Note 8 to the Financial Statements in the Registrants' 2025 Form 10-K for information on 2025 activity.
Credit Facilities
The Registrants maintain credit facilities to enhance liquidity, provide credit support and provide a backstop to commercial paper programs. Amounts borrowed under these credit facilities are reflected in "Short-term debt" on the Balance Sheets. At September 30, 2026, the total committed borrowing capacity under credit facilities and the borrowings under these facilities were:
External
|
Committed Capacity |
Borrowed |
Letters of Credit and Commercial Paper Issued (a) |
Unused Capacity |
||||||||||||||||||||
| PPL Capital Funding Credit Facilities (b) | $ | 1,600 | $ | - | $ | 140 | $ | 1,460 | |||||||||||||||
| PPL Electric Credit Facility | 750 | - | 23 | 727 | |||||||||||||||||||
| LG&E Credit Facility | 600 | - | 220 | 380 | |||||||||||||||||||
| KU Credit Facility | 600 | - | 320 | 280 | |||||||||||||||||||
| Total Credit Facilities (c) | $ | 3,550 | $ | - | $ | 703 | $ | 2,847 | |||||||||||||||
(a)Commercial paper issued reflects the undiscounted face value of the issuance.
(b)Includes a $1.5 billion syndicated credit facility with a $250 million borrowing sublimit for RIE and a $1.25 billion sublimit for PPL Capital Funding. RIE's borrowing sublimit is adjustable, at the borrowers' option, from $0 to $600 million, with the remaining balance of the $1.5 billion available under the facility allocated to PPL Capital Funding. At September 30, 2026, PPL Capital Funding had $140 million of commercial paper outstanding and RIE had no commercial paper outstanding. RIE's obligations under the facility are not guaranteed by PPL.
(c)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 - 8%, PPL Electric - 7%, LG&E - 7% and KU - 7%.
See Note 7 to the Financial Statements for further discussion of the Registrants' credit facilities.
Intercompany (LG&E and KU)
|
Committed Capacity |
Borrowed | Commercial Paper Issued |
Unused Capacity |
||||||||||||||||||||
| LG&E Money Pool (a) | $ | 1,200 | $ | 2 | $ | 220 | $ | 978 | |||||||||||||||
| KU Money Pool (a) | 1,200 | - | 320 | 880 | |||||||||||||||||||
(a)LG&E and KU participate in an intercompany money pool agreement whereby LKE and/or KU make available to LG&E, and LKE and/or LG&E make available to KU funds up to the difference between LG&E's and KU's FERC borrowing limit and LG&E's and KU's commercial paper issued, at an interest rate based on the lower of a market index of commercial paper issues and two additional rate options based on SOFR.
See Note 11 to the Financial Statements for further discussion of intercompany credit facilities.
Commercial Paper (All Registrants)
The Registrants, and PPL Capital Funding and RIE, maintain commercial paper programs to provide an additional financing source to fund short-term liquidity needs, as necessary. Commercial paper issuances, included in "Short-term debt" on the Balance Sheets, are supported by the respective Registrant's credit facility, with PPL Capital Funding and RIE's issuances supported by PPL Capital Funding's syndicated credit facility. The following commercial paper programs were in place at September 30, 2026:
| Capacity |
Commercial Paper Issuances (a) |
Unused Capacity |
|||||||||||||||
| PPL Capital Funding (b) | $ | 1,600 | $ | 140 | $ | 1,460 | |||||||||||
| RIE (b) | 400 | - | 400 | ||||||||||||||
| PPL Electric | 750 | - | 750 | ||||||||||||||
| LG&E | 600 | 220 | 380 | ||||||||||||||
| KU | 600 | 320 | 280 | ||||||||||||||
| Total PPL | $ | 3,950 | $ | 680 | $ | 3,270 | |||||||||||
(a)Commercial paper issued reflects the undiscounted face value of the issuance.
(b)Issuances under the PPL Capital Funding and RIE commercial paper programs are supported by the PPL Capital Funding syndicated credit facility, which has a total capacity of $1.5 billion, currently with a $250 million borrowing sublimit for RIE and a $1.25 billion sublimit for PPL Capital Funding. PPL Capital Funding's Commercial paper program is also backed by a separate bilateral credit facility for $100 million.
Forecasted Uses of Cash
(All Registrants)
Capital Expenditures
The table below shows the Registrants' current capital expenditure projections for the years 2026 through 2028. Expenditures for the regulated utilities are expected to be recovered through rates, pending regulatory approval.
| Projected | |||||||||||||||||||||||
| Total | 2026 (a) | 2027 | 2028 | ||||||||||||||||||||
| PPL | |||||||||||||||||||||||
| Generating facilities | $ | 5,025 | $ | 1,000 | $ | 1,950 | $ | 2,075 | |||||||||||||||
| Electric distribution facilities | 5,475 | 1,850 | 1,900 | 1,725 | |||||||||||||||||||
| Gas distribution facilities | 1,200 | 375 | 400 | 425 | |||||||||||||||||||
| Transmission facilities | 5,900 | 1,675 | 1,900 | 2,325 | |||||||||||||||||||
| Other | 625 | 300 | 200 | 125 | |||||||||||||||||||
| Total Capital Expenditures | $ | 18,225 | $ | 5,200 | $ | 6,350 | $ | 6,675 | |||||||||||||||
| PPL Electric | |||||||||||||||||||||||
| Electric distribution facilities | $ | 3,025 | $ | 1,100 | $ | 1,025 | $ | 900 | |||||||||||||||
| Transmission facilities | 3,375 | 1,050 | 1,075 | 1,250 | |||||||||||||||||||
| Total Capital Expenditures | $ | 6,400 | $ | 2,150 | $ | 2,100 | $ | 2,150 | |||||||||||||||
| Projected | |||||||||||||||||||||||
| Total | 2026 (a) | 2027 | 2028 | ||||||||||||||||||||
| LG&E | |||||||||||||||||||||||
| Generating facilities | $ | 3,000 | $ | 550 | $ | 1,150 | $ | 1,300 | |||||||||||||||
| Electric distribution facilities | 700 | 200 | 275 | 225 | |||||||||||||||||||
| Gas distribution facilities | 450 | 125 | 150 | 175 | |||||||||||||||||||
| Transmission facilities | 575 | 125 | 225 | 225 | |||||||||||||||||||
| Other | 300 | 150 | 100 | 50 | |||||||||||||||||||
| Total Capital Expenditures | $ | 5,025 | $ | 1,150 | $ | 1,900 | $ | 1,975 | |||||||||||||||
| KU | |||||||||||||||||||||||
| Generating facilities | $ | 2,025 | $ | 450 | $ | 800 | $ | 775 | |||||||||||||||
| Electric distribution facilities | 975 | 275 | 350 | 350 | |||||||||||||||||||
| Transmission facilities | 1,325 | 300 | 450 | 575 | |||||||||||||||||||
| Other | 325 | 150 | 100 | 75 | |||||||||||||||||||
| Total Capital Expenditures | $ | 4,650 | $ | 1,175 | $ | 1,700 | $ | 1,775 | |||||||||||||||
(a)The 2026 total excludes amounts included in accounts payable as of September 30, 2026.
Capital expenditure plans are revised periodically to reflect changes in operational, market and regulatory conditions. The amounts in the table provided above have been updated from the amounts provided in PPL's 2025 Form 10-K to reflect PPL's preparation of its 2027 business and capital plans.
Long-term Debt and Equity Security Activities
(All Registrants)
See Note 7 to the Financial Statements for information regarding the Registrants' long-term debt and equity security activities.
Common Stock Dividends
In August 2026, PPL declared a quarterly common stock dividend, payable October 1, 2026, of 28.50 cents per share. Future dividends, declared at the discretion of the Board of Directors, will depend upon future earnings, cash flows, financial and legal requirements and other factors.
Rating Agency Actions
(All Registrants)
Moody's and S&P periodically review the credit ratings of the debt of the Registrants and their subsidiaries. Based on their respective independent reviews, the rating agencies may make certain ratings revisions or ratings affirmations.
A credit rating reflects an assessment by the rating agency of the creditworthiness associated with an issuer and particular securities that it issues. The credit ratings of the Registrants and their subsidiaries are based on information provided by the Registrants and other sources. The ratings of Moody's and S&P are not a recommendation to buy, sell or hold any securities of the Registrants or their subsidiaries. Such ratings may be subject to revisions or withdrawal by the agencies at any time and should be evaluated independently of each other and any other rating that may be assigned to the securities.
The credit ratings of the Registrants and their subsidiaries affect their liquidity, access to capital markets and cost of borrowing under their credit facilities. A downgrade in the Registrants' or their subsidiaries' credit ratings could result in higher borrowing costs and reduced access to capital markets. The Registrants and their subsidiaries have no credit rating triggers that would result in the reduction of access to capital markets or the acceleration of maturity dates of outstanding debt.
The rating agencies have taken the following actions related to the Registrants and their subsidiaries:
(PPL)
In May 2026, Moody's revised its outlook to negative for PPL, PPL Capital Funding and RIE.
Ratings Triggers
(PPL, LG&E and KU)
Various derivative and non-derivative contracts, including contracts for the sale and purchase of electricity and fuel, commodity transportation and storage, and interest rate instruments, contain provisions that require the posting of additional collateral or permit the counterparty to terminate the contract, if PPL's, LG&E's or KU's or their subsidiaries' credit rating, as applicable, were to fall below investment grade. See Note 14 to the Financial Statements for a discussion of "Credit Risk-Related Contingent Features," including a discussion of the potential additional collateral requirements for derivative contracts in a net liability position at September 30, 2026.
(All Registrants)
For additional information on the Registrants' liquidity and capital resources, see "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Registrants' 2025 Form 10-K.
Risk Management (All Registrants)
Market Risk
See Notes 13 and 14 to the Financial Statements for information about the Registrants' risk management objectives, valuation techniques and accounting designations.
The forward-looking information presented below provides estimates of what may occur in the future, assuming certain adverse market conditions and model assumptions. Actual future results may differ materially from those presented. These are not precise indicators of expected future losses, but are rather only indicators of possible losses under normal market conditions at a given confidence level.
Interest Rate Risk
PPL and its subsidiaries issue debt to finance their operations, which exposes them to interest rate risk. A variety of financial derivative instruments are utilized to adjust the mix of fixed and floating interest rates in their debt portfolios, adjust the duration of the debt portfolios and lock in benchmark interest rates in anticipation of future financing, when appropriate. Risk limits under PPL's risk management program are designed to balance risk exposure to volatility in interest expense and changes in the fair value of the debt portfolio due to changes in benchmark interest rates. In addition, the interest rate risk of certain subsidiaries is potentially mitigated as a result of the existing regulatory framework or the timing of rate cases.
The following interest rate hedges were outstanding at September 30, 2026:
|
Exposure Hedged |
Fair Value, Net - Asset (Liability) (a) |
Effect of a 10% Adverse Movement in Rates (b) |
Maturities Ranging Through |
||||||||||||||||||||
| PPL and LG&E | |||||||||||||||||||||||
| Economic hedges | |||||||||||||||||||||||
| Interest rate derivatives (c) | $ | 64 | $ | (1) | $ | (1) | 2033 | ||||||||||||||||
(a)Includes accrued interest, if applicable.
(b)Effects of adverse movements decrease assets or increase liabilities, as applicable, which could result in an asset becoming a liability. Sensitivities represent a 10% adverse movement in interest rates.
(c)Realized changes in the fair value of such economic hedges are recoverable through regulated rates and any subsequent changes in the fair value of these derivatives are included in regulatory assets or regulatory liabilities.
The Registrants are exposed to a potential increase in interest expense and to changes in the fair value of their debt portfolios. The estimated impact of a 10% adverse movement in interest rates on the fair value of debt at September 30, 2026 is shown below:
|
10% Adverse Movement in Rates on Fair Value of Debt |
|||||
| PPL | $ | 792 | |||
| PPL Electric | 315 | ||||
| LG&E | 133 | ||||
| KU | 175 | ||||
Commodity Price Risk
PPL is exposed to commodity price risk through its subsidiaries primarily from the purchases of electricity, natural gas and fuel but has cost recovery mechanisms to mitigate that risk. See Note 14 to the Financial Statements for further discussion of these risks.
Volumetric Risk
Volumetric risk is the risk related to the changes in volume of retail sales due to weather, economic conditions or other factors. PPL is exposed to volumetric risk through its subsidiaries as described below.
•PPL Electric, LG&E and KU are exposed to volumetric risk on retail sales, mainly due to weather and other economic conditions for which there is limited mitigation between rate cases.
•RIE is not materially exposed to volumetric risk. RIE's electric and gas distribution rates both have a revenue decoupling mechanism, which allows for annual adjustments to RIE's delivery rates.
Credit Risk
See Notes 13 and 14 to the Financial Statements in this Form 10-Q and "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Risk Management - Credit Risk" in the Registrants' 2025 Form 10-K for additional information.
Related Party Transactions (All Registrants)
The Registrants are not aware of any material ownership interests or operating responsibility by senior management in outside partnerships, including leasing transactions with variable interest entities, or other entities doing business with the Registrants. See Note 11 to the Financial Statements for additional information on related party transactions for PPL Electric, LG&E and KU.
Acquisitions, Developments and Divestitures (All Registrants)
The Registrants from time to time evaluate opportunities for potential acquisitions, divestitures and development projects. Development projects are reexamined based on market conditions and other factors to determine whether to proceed with, modify or terminate the projects. Any resulting transactions may impact future financial results. See Note 8 to the Financial Statements for additional information on acquisition, development, and divestiture activity.
Environmental Matters (All Registrants)
Extensive federal, state and local environmental laws and regulations are applicable to the Registrants' air emissions, water discharges and the management of hazardous and solid waste, as well as other aspects of the Registrants' businesses. The costs of compliance or alleged non-compliance cannot be predicted with certainty but could be significant. In addition, costs may increase significantly if the requirements or scope of environmental laws or regulations, or similar rules, are expanded or changed. Costs may take the form of increased capital expenditures or operating and maintenance expenses, monetary fines, penalties or other restrictions. Many of these environmental law considerations are also applicable to the operations of key suppliers, or customers, such as coal producers and industrial power users, and may impact the costs for their products or their demand for the Registrants' services. Increased capital and operating costs are expected to be subject to rate recovery. The Registrants can provide no assurances as to the ultimate outcome of future environmental or rate proceedings before regulatory authorities.
See "Environmental Matters" in Item 1. "Business" in the Registrants' 2025 Form 10-K for information about environmental laws and regulations affecting the Registrants' business. See "Legal Matters" in Note 10 to the Financial Statements for a discussion of the more significant environmental claims. See Note 15 to the Financial Statements for information related to the impacts of CCRs on AROs.
The information below represents an update to "Item 1. Business - Environmental Matters" in the Registrants' 2025 Form 10-K.
(PPL, LG&E and KU)
EPA Deregulatory Initiative
On March 12, 2025, the EPA announced a plan to reconsider 31 environmental rules including the Section 111 performance standards and emissions limits for greenhouse gases, the endangerment finding for greenhouse gases, the Good Neighbor Plan, the Mercury and Air Toxics Standards, revisions to the fine particulate matter standard, the ELGs, and the CCRs Rule. Supplementing previous Executive Orders directing various regulatory changes, on April 9, 2025, President Trump issued an Executive Order and Presidential Memorandum directing review of existing rules, repeal of unlawful rules, and initiation of a zero-based budgeting process by which certain rules would automatically expire unless extended. While the current Presidential administration may seek to implement some regulatory changes outside of the rulemaking process, changes to existing rules are generally expected to require formal rulemaking proceedings. Any final EPA actions repealing or revising current rules will likely result in legal challenges. PPL, LG&E, and KU are unable to predict future regulatory changes, if any, that may result from the EPA's deregulatory plan or the outcome of any associated legal challenges. PPL, LG&E, and KU are closely monitoring the ongoing EPA initiative and any related litigation for the impact to our business including planned capital expenditures to comply with the EPA rules.
Air
NAAQS
The Clean Air Act has a significant impact on the operation of fossil fuel generation plants. The Clean Air Act requires the EPA periodically to establish and review NAAQS for six pollutants including ozone (contributed to by nitrogen oxide emissions) and particulate matter, which are particularly relevant for fossil fuel generation plants. On February 2, 2024, the D.C. Circuit Court granted the EPA's motion for voluntary remand, without vacatur, of the ozone rule, which was under legal challenge. The EPA will complete a new review to incorporate new studies and updated analyses to determine the adequacy of the existing ozone standard. On March 6, 2024, the EPA finalized revisions to the particulate matter standard that lowers the primary standard for fine particulates. Several states and trade groups challenged the EPA's finalized revisions to the particulate matter standard in the D.C. Circuit Court. On June 26, 2026, the D.C. Circuit Court upheld the fine particulate standard and denied the EPA's motion to vacate the rule. On August 28, 2026, various states and industry groups filed a petition seeking U.S. Supreme Court review of the D.C. Circuit Court's ruling. Nonattainment designations for counties in which LG&E and KU generation is located, including Jefferson County, Kentucky, could potentially require additional particulate matter and nitrogen oxide reductions from sources including LG&E's Mill Creek Station, and more stringent requirements for new generation. 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 March 2023, the EPA released a final Federal Implementation Plan under the Good Neighbor provisions of the Clean Air Act providing for significant additional nitrogen oxide emission reductions for compliance with the revised 2015 ozone NAAQS. The reductions in Kentucky state-wide nitrogen oxide budgets were scheduled to commence in 2023, with the largest reductions planned for 2026. 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. In June 2024, the U.S. Supreme Court issued a stay of the Good Neighbor Plan while the D.C. Circuit Court considers legal challenges to the rule. On December 6, 2024, the U.S. Court of Appeals for the Sixth Circuit vacated and remanded the EPA's disapproval of Kentucky's state implementation plan for the ozone NAAQS. On January 31, 2026, the EPA published a proposed Phase I Good Neighbor Plan revisions providing for approval of certain state implementation plans including that of Kentucky and withdrawing several prior disapprovals and error corrections. PPL, LG&E, and KU are monitoring ongoing legal and regulatory developments.
PPL, LG&E, and KU are unable to predict the ultimate outcome of pending litigation or future emission reductions that may be required by future federal rules or state implementation actions. Compliance with the NAAQS, Cross-State Air Pollution Rule, 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.
Modification of Mercury and Air Toxics Standards
In 2012, the EPA issued the Mercury and Air Toxics Standards (MATS) rule requiring reductions in mercury and other hazardous air pollutants from fossil fuel-fired power plants. LG&E and KU installed significant controls to achieve compliance with MATS and other rules. On May 7, 2024, the EPA issued a final rule increasing the stringency of MATS and further reducing emissions of certain hazardous air pollutants to reflect perceived developments in control technologies. Legal challenges to the rule have been filed in the D.C. Circuit Court. PPL, LG&E, and KU have reviewed the final rule and do not expect significant operational changes or additional controls to be required. On February 24, 2026, the EPA published a final rule to repeal the 2024 MATS revisions except for the Particulate Matter Continuous Emission Monitoring System testing criteria.
Greenhouse Gas Standards
On May 9, 2024, the EPA issued a final rule under Section 111 of the Clean Air Act, which establishes performance standards and emissions limits aimed at reducing GHG emissions from certain new, existing, and modified fossil fuel-fired electric generating units (EGUs). In the final rule, the EPA announced it would set performance standards for existing natural gas-fired turbines in a future rule. The standards require phased implementation of carbon mitigation technologies including state-of-the-art efficiency requirements, carbon capture and sequestration, and natural gas co-firing. New natural gas EGUs would be immediately subject to the stricter efficiency standard. Legal challenges to the rule have been filed in the D.C. Circuit Court. PPL, LG&E, and KU are unable to predict the impact of new GHG reduction requirements until completion of a comprehensive review and resolution of related legal and regulatory proceedings. While the impact of new GHG reduction requirements on operations and financial results of operations could potentially be substantial, the cost of complying with such requirements is expected to be subject to rate recovery. On June 17, 2025, the EPA proposed in the Federal Register two options for repeal of the 2024 standard. In the first proposal, the EPA would determine that EGU emissions of greenhouse gases do not pose an endangerment to the health and welfare of the public and repeal the 2024 and 2015 standards for EGUs. Under an alternate proposal, the EPA would repeal the 2024 standards for existing coal, natural-gas and oil-fired steam generating units along with most standards for new combustion turbines. On July 29, 2025, the EPA proposed revocation of the 2009 endangerment finding which provides the basis for regulating GHG emissions. This proposal would leave in place efficiency standards for new combustion turbines. On February 12, 2026, the EPA issued a final reconsideration determination repealing the 2009 endangerment finding for GHG emissions from motor vehicles, which provided support for the regulation of GHG emissions. On September 17, 2026, the EPA published in the Federal Register a final rule entitled "Partial Repeal of the Carbon Pollution Standards for Fossil Fuel-Fired Electric Generating Units" that rescinds all carbon capture and sequestration (CCS) standards and other key provisions of the 2024 rule. On the same date, the EPA also published a supplemental notice of proposed regulations (SNPRM) entitled "Rescission of the Greenhouse Gas Findings for Fossil Fuel-Fired Power Plants and Repeal of Regulations for Power Plant Greenhouse Gas Emissions Under Clean Air Act Section 111" that addresses the broader question of statutory authority and proposes to eliminate all remaining GHG requirements. PPL, LG&E, and KU are unable to determine the exact impact on operations until resolution of pending regulatory actions and litigation.
New Accounting Guidance (All Registrants)
There has been no new accounting guidance adopted in 2026. See Note 17 to the Financial Statements for discussion of significant accounting guidance pending adoption as of September 30, 2026.
Application of Critical Accounting Policies (All Registrants)
Financial condition and results of operations are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. The following table summarizes the accounting policies by Registrant that are particularly important to an understanding of the reported financial condition or results of operations and require management to make estimates or other judgments of matters that are inherently uncertain. See "Item 7. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2025 Form 10-K for a discussion of each critical accounting policy.
| PPL | PPL Electric | LG&E | KU | ||||||||||||||||||||||||||||||||
| Defined Benefits | x | x | x | x | |||||||||||||||||||||||||||||||
| Income Taxes | x | x | x | x | |||||||||||||||||||||||||||||||
| Regulatory Assets and Liabilities | x | x | x | x | |||||||||||||||||||||||||||||||
| Price Risk Management | x | ||||||||||||||||||||||||||||||||||
| Goodwill Impairment | x | x | x | ||||||||||||||||||||||||||||||||
| AROs | x | x | |||||||||||||||||||||||||||||||||
| Revenue Recognition - Unbilled Revenue | x | x | x | ||||||||||||||||||||||||||||||||
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