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Utility Rate Regulation | 9 Months Ended
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Sep. 30, 2017
Regulated Operations [Abstract] |
Utility Rate Regulation | 6. Utility Rate Regulation (All Registrants) The following table provides information about the regulatory assets and liabilities of cost-based rate-regulated utility operations.
| PPL |  | PPL Electric
| September 30, 2017 |  | December 31, 2016 |  | September 30, 2017 |  | December 31, 2016
Current Regulatory Assets: |  |  |  |  |  |  |
Environmental cost recovery | $ | 4 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
Generation formula rate | 8 |  |  | 11 |  |  | — |  |  | — |
Transmission service charge | — |  |  | 7 |  |  | — |  |  | 7 |
Gas supply clause | 6 |  |  | 3 |  |  | — |  |  | — |
Smart meter rider | 12 |  |  | 6 |  |  | 12 |  |  | 6 |
Storm costs | 1 |  |  | 5 |  |  | 1 |  |  | 5 |
Other | 3 |  |  | 1 |  |  | 1 |  |  | 1 |
Total current regulatory assets (a) | $ | 34 |  |  | $ | 39 |  |  | $ | 14 |  |  | $ | 19 |
Noncurrent Regulatory Assets: |  |  |  |  |  |  |
Defined benefit plans | $ | 908 |  |  | $ | 947 |  |  | $ | 530 |  |  | $ | 549 |
Taxes recoverable through future rates | 347 |  |  | 340 |  |  | 347 |  |  | 340 |
Storm costs | 37 |  |  | 57 |  |  | — |  |  | 9 |
Unamortized loss on debt | 55 |  |  | 61 |  |  | 30 |  |  | 36 |
Interest rate swaps | 29 |  |  | 31 |  |  | — |  |  | — |
Terminated interest rate swaps | 93 |  |  | 98 |  |  | — |  |  | — |
Accumulated cost of removal of utility plant | 166 |  |  | 159 |  |  | 166 |  |  | 159 |
AROs | 224 |  |  | 211 |  |  | — |  |  | — |
Other | 10 |  |  | 14 |  |  | — |  |  | 1 |
Total noncurrent regulatory assets | $ | 1,869 |  |  | $ | 1,918 |  |  | $ | 1,073 |  |  | $ | 1,094 |
| PPL |  | PPL Electric
| September 30, 2017 |  | December 31, 2016 |  | September 30, 2017 |  | December 31, 2016
Current Regulatory Liabilities: |  |  |  |  |  |  |
Generation supply charge | $ | 29 |  |  | $ | 23 |  |  | $ | 29 |  |  | $ | 23 |
Transmission service charge | 6 |  |  | — |  |  | 6 |  |  | — |
Universal service rider | 19 |  |  | 14 |  |  | 19 |  |  | 14 |
Transmission formula rate | 4 |  |  | 15 |  |  | 4 |  |  | 15 |
Fuel adjustment clause | 11 |  |  | 11 |  |  | — |  |  | — |
Act 129 compliance rider | 7 |  |  | 17 |  |  | 7 |  |  | 17 |
Storm damage expense | 7 |  |  | 13 |  |  | 7 |  |  | 13 |
Other | 4 |  |  | 8 |  |  | — |  |  | 1 |
Total current regulatory liabilities | $ | 87 |  |  | $ | 101 |  |  | $ | 72 |  |  | $ | 83 |
Noncurrent Regulatory Liabilities: |  |  |  |  |  |  |
Accumulated cost of removal of utility plant | $ | 678 |  |  | $ | 700 |  |  | $ | — |  |  | $ | — |
Power purchase agreement - OVEC (b) | 69 |  |  | 75 |  |  | — |  |  | — |
Net deferred tax assets | 21 |  |  | 23 |  |  | — |  |  | — |
Defined benefit plans | 27 |  |  | 23 |  |  | — |  |  | — |
Terminated interest rate swaps | 74 |  |  | 78 |  |  | — |  |  | — |
Other | 4 |  |  | — |  |  | — |  |  | — |
Total noncurrent regulatory liabilities | $ | 873 |  |  | $ | 899 |  |  | $ | — |  |  | $ | — |
| LKE |  | LG&E |  | KU
| September 30, 2017 |  | December 31, 2016 |  | September 30, 2017 |  | December 31, 2016 |  | September 30, 2017 |  | December 31, 2016
Current Regulatory Assets: |  |  |  |  |  |  |  |  |  |  |
Environmental cost recovery | $ | 4 |  |  | $ | 6 |  |  | $ | 4 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
Generation formula rate | 8 |  |  | 11 |  |  | — |  |  | — |  |  | 8 |  |  | 11 |
Gas supply clause | 6 |  |  | 3 |  |  | 6 |  |  | 3 |  |  | — |  |  | — |
Other | 2 |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  | — |
Total current regulatory assets | $ | 20 |  |  | $ | 20 |  |  | $ | 11 |  |  | $ | 9 |  |  | $ | 9 |  |  | $ | 11 |
Noncurrent Regulatory Assets: |  |  |  |  |  |  |  |  |  |  |
Defined benefit plans | $ | 378 |  |  | $ | 398 |  |  | $ | 235 |  |  | $ | 246 |  |  | $ | 143 |  |  | $ | 152 |
Storm costs | 37 |  |  | 48 |  |  | 20 |  |  | 26 |  |  | 17 |  |  | 22 |
Unamortized loss on debt | 25 |  |  | 25 |  |  | 16 |  |  | 16 |  |  | 9 |  |  | 9 |
Interest rate swaps | 29 |  |  | 31 |  |  | 29 |  |  | 31 |  |  | — |  |  | — |
Terminated interest rate swaps | 93 |  |  | 98 |  |  | 54 |  |  | 57 |  |  | 39 |  |  | 41 |
AROs | 224 |  |  | 211 |  |  | 57 |  |  | 70 |  |  | 167 |  |  | 141 |
Plant retirement costs | 2 |  |  | 4 |  |  | — |  |  | — |  |  | 2 |  |  | 4 |
Other | 8 |  |  | 9 |  |  | 2 |  |  | 4 |  |  | 6 |  |  | 5 |
Total noncurrent regulatory assets | $ | 796 |  |  | $ | 824 |  |  | $ | 413 |  |  | $ | 450 |  |  | $ | 383 |  |  | $ | 374 |
| LKE |  | LG&E |  | KU
| September 30, 2017 |  | December 31, 2016 |  | September 30, 2017 |  | December 31, 2016 |  | September 30, 2017 |  | December 31, 2016
Current Regulatory Liabilities: |  |  |  |  |  |  |  |  |  |  |
Demand side management | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | 1 |
Fuel adjustment clause | 11 |  |  | 11 |  |  | 3 |  |  | 2 |  |  | 8 |  |  | 9 |
Other | 4 |  |  | 4 |  |  | 2 |  |  | 1 |  |  | 2 |  |  | 3 |
Total current regulatory liabilities | $ | 15 |  |  | $ | 18 |  |  | $ | 5 |  |  | $ | 5 |  |  | $ | 10 |  |  | $ | 13 |
Noncurrent Regulatory Liabilities: |  |  |  |  |  |  |  |  |  |  |
Accumulated cost of removal of utility plant | $ | 678 |  |  | $ | 700 |  |  | $ | 281 |  |  | $ | 305 |  |  | $ | 397 |  |  | $ | 395 |
Power purchase agreement - OVEC (b) | 69 |  |  | 75 |  |  | 48 |  |  | 52 |  |  | 21 |  |  | 23 |
Net deferred tax assets | 21 |  |  | 23 |  |  | 21 |  |  | 23 |  |  | — |  |  | — |
Defined benefit plans | 27 |  |  | 23 |  |  | — |  |  | — |  |  | 27 |  |  | 23 |
Terminated interest rate swaps | 74 |  |  | 78 |  |  | 37 |  |  | 39 |  |  | 37 |  |  | 39 |
Other | 4 |  |  | — |  |  | 1 |  |  | — |  |  | 3 |  |  | — |
Total noncurrent regulatory liabilities | $ | 873 |  |  | $ | 899 |  |  | $ | 388 |  |  | $ | 419 |  |  | $ | 485 |  |  | $ | 480 |
(a) | For PPL, these amounts are included in "Other current assets" on the Balance Sheets.
(b) | This liability was recorded as an offset to an intangible asset that was recorded at fair value upon the acquisition of LKE by PPL.
Regulatory Matters Kentucky Activities (PPL, LKE, LG&E and KU) Rate Case Proceedings In November 2016, LG&E and KU filed requests with the KPSC for increases in annual base electricity and gas rates. LG&E's and KU's applications included requests for CPCNs for implementing an Advanced Metering System program and a Distribution Automation program. On April 19, 2017 and May 1, 2017, LG&E and KU, along with all intervening parties to the proceeding, filed with the KPSC, stipulation and recommendation agreements (stipulations) resolving all issues with the parties. Among other things, the proposed stipulations provided for increases in annual revenue requirements associated with KU base electricity rates of $55 million, LG&E base electricity rates of $59 million and LG&E base gas rates of $8 million, reflecting a return on equity of 9.75%, the withdrawal of LG&E's and KU's request for a CPCN for the Advanced Metering System and other changes to the revenue requirements, which dealt primarily with the timing of cost recovery, including depreciation rates. On June 22, 2017, the KPSC issued orders approving, with certain modifications, the proposed stipulations filed in April and May 2017. On June 29, 2017, the KPSC issued further orders correcting certain revenue requirement and rate calculations and making other technical corrections to the June 22, 2017 orders. The combined KPSC orders modified the stipulations to provide for increases in annual revenue requirements associated with KU base electricity rates of $52 million, LG&E base electricity rates of $57 million and LG&E base gas rates of $7 million, and incorporate an authorized return on equity of 9.7%. Consistent with the stipulations, the orders approved LG&E's and KU's request for implementing a Distribution Automation program and withdrawal of a request for a CPCN for the Advanced Metering System program. The orders also approved new depreciation rates for LG&E and KU that will result in higher depreciation of approximately $15 million ($4 million for LG&E and $11 million for KU) in 2017, exclusive of net additions to PP&E. The orders result in a base electricity rate increase of 3.2% at KU and base electricity and gas rate increases of 5.2% and 2.1% at LG&E. The new base rates and all elements of the orders became effective July 1, 2017. On June 23, 2017, the KPSC also issued orders establishing an authorized return on equity of 9.7% for all of LG&E's and KU's existing approved ECR plans and projects, replacing the prior authorized return on equity levels of 9.8% for CCR projects and 10% for all other ECR approved projects, effective with bills issued in August 2017. The impact of the new authorized return for ECR projects is not expected to be significant in 2017. Gas Franchise (LKE and LG&E) LG&E’s gas franchise agreement for the Louisville/Jefferson County service area expired in March 2016. In August 2016, LG&E and Louisville/Jefferson County entered into a revised franchise agreement with a 5-year term (with renewal options). The franchise fee may be modified at Louisville/Jefferson County's election upon 60 days' notice. However, any franchise fee is capped at 3% of gross receipts for natural gas service within the franchise area. The agreement further provides that if the KPSC determines that the franchise fee should be recovered from LG&E's customers, the franchise fee will revert to zero. In August 2016, LG&E filed an application in a KPSC proceeding to review and rule upon the recoverability of the franchise fee. In August 2016, Louisville/Jefferson County submitted a motion to dismiss the proceeding filed by LG&E and, in November 2016, filed an amended complaint against LG&E relating to these issues. LG&E submitted KPSC filings to respond to, request dismissal of and consolidate certain claims or aspects of the proceedings. In January 2017, the KPSC issued an order denying Louisville/Jefferson County's motion to dismiss, consolidating the matter with LG&E's filed application and establishing a procedural schedule for the case. On September 28, 2017, oral arguments were heard by the KPSC and a final order is expected in 2017. Until the KPSC issues a final order in this proceeding, LG&E cannot predict the ultimate outcome of this matter but does not anticipate that it will have a material effect on its financial condition or results of operation. LG&E continues to provide gas service to customers in this franchise area at existing rates, but without collecting or remitting a franchise fee.

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