PP&L RESOURCES INC, DEF 14A, 1999-03-12

PP&L RESOURCES INC
DEF 14A, 1999-03-12
ELECTRIC SERVICES

Previous: REPUBLIC BANCORP INC /KY/, DEF 14A, 1999-03-12

Next: UNIMARK GROUP INC, SC 13G, 1999-03-12

<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

PP&L Resources, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

-------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

-------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

-------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

-------------------------------------------------------------------------

(5) Total fee paid:

-------------------------------------------------------------------------

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

-------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

-------------------------------------------------------------------------

(3) Filing Party:

-------------------------------------------------------------------------

(4) Date Filed:

-------------------------------------------------------------------------
Notes:

<PAGE>

[Logo of PP&L]
PP&L Resources, Inc.

Notice of Annual Meeting
April 23, 1999

and

Proxy Statement
(including appended 1998 Financial Statements)
<PAGE>

Notice of Annual Meeting of Shareowners

The Annual Meeting of Shareowners of PP&L Resources, Inc. ("PP&L Resources"
or "the Company") will be held at Lehigh University's Stabler Arena, at the
Goodman Campus Complex located in Lower Saucon Township, outside Bethlehem,
Pennsylvania, on Friday, April 23, 1999, at 1:30 p.m., following the Annual
Meeting of Shareowners of PP&L, Inc. The Annual Meeting will be held for the
purposes stated below and more fully described in the accompanying Proxy
Statement, and to transact such other business as may properly come before the
Meeting or any adjournments thereof:

1. The election of three directors for a term of three years.

2. The ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 1999.

3. The approval of the Amended and Restated Incentive Compensation Plan.

4. The approval of the Short-Term Incentive Plan.

The Board of Directors is not aware of any other matters to be presented for
action at the Annual Meeting. If any other business should properly come
before the Meeting, it is the intention of the Board of Directors that the
persons named as proxies will vote in accordance with their best judgment.

After reading the Proxy Statement, please mark, sign, date and return your
Proxy as soon as possible, to assure your representation at the meeting. Only
Shareowners of record at the close of business on Friday, February 26, 1999,
will be entitled to vote at the Annual Meeting or any adjournments thereof. If
the Annual Meeting is interrupted or delayed for any reason, the Shareowners
attending the adjourned Meeting shall constitute a quorum and may act upon
such business as may properly come before the Meeting.

By Order of the Board of Directors.

/s/ Robert J. Grey

Robert J. Grey
Secretary

March 12, 1999
<PAGE>

Proxy Statement

The Company's principal executive offices are located at Two North Ninth
Street, Allentown, Pennsylvania 18101, telephone number (610) 774-5151. This
Proxy Statement and the accompanying Proxy, solicited on behalf of the Board
of Directors, were first released to Shareowners on or about March 12, 1999.

OUTSTANDING STOCK AND VOTING RIGHTS

The Board of Directors has established Friday, February 26, 1999, as the
record date for Shareowners entitled to vote at the Annual Meeting (the
"Record Date"). The transfer books of the Company will not be closed. The
Articles of PP&L Resources divide the Company's voting stock into two classes:
Common and Preferred. There were no shares of Preferred Stock outstanding on
the Record Date. A total of 157,694,133 shares of Common Stock was outstanding
on the Record Date. Each outstanding share of Common Stock entitles the holder
to one vote upon any business properly presented to the Annual Meeting.

As of February 15, 1999, the following are the only entities known by the
Company to own more than five percent of any class of stock entitled to vote
at the Annual Meeting.

<TABLE>
<CAPTION>
Number of
Name and Shares Percent of
Address of Beneficially Class
Title Beneficial Owner Owned or Series
------------ ------------------------------ ------------ ----------
<C> <S> <C> <C>
Common Stock J.P. Morgan & Co. Incorporated 12,848,318 8.1%
60 Wall Street
New York, NY 10260
</TABLE>

Execution of the Proxy will not affect a Shareowner's right to attend the
Annual Meeting and vote in person. Any Shareowner giving a Proxy has the right
to revoke it at any time before it is voted by giving notice in writing to the
Secretary. Shares represented by Proxy will be voted in accordance with the
instructions given. In the absence of instructions to the contrary, the Proxy
solicited hereby will be voted FOR the election of directors, FOR the
Ratification of the Appointment of Independent Accountants, FOR the approval
of the Amended and Restated Incentive Compensation Plan, and FOR the approval
of the Short-Term Incentive Plan. Abstentions and broker non-votes are not
counted as either "yes" or "no" votes.

Full and fractional shares held by the Company for each participant in the
Dividend Reinvestment Plan will be voted by PP&L, Inc. ("PP&L"), as the
registered owner of such shares, in the same manner as shares held of record
by that participant are voted. If a participant owns no shares of record, full
and fractional shares credited to that participant's account will be voted in
accordance with the participant's instructions on the Proxy. Shares held in
the Dividend Reinvestment Plan will not be voted if Proxies are not returned.

To preserve voter confidentiality, the Company voluntarily limits access to
Shareowner voting records to certain designated employees of PP&L. These
employees sign a confidentiality agreement which prohibits them from
disclosing the manner in which a Shareowner has voted to any employee of PP&L
Resources or its subsidiaries or to any other person (except to the Judges of
Election or the person in whose name the shares are registered), unless
otherwise required by law.

Regarding Proposal 1 (the election of directors), the nominees receiving the
highest number of votes, up to the number of directors to be elected, will be
elected. Authority to vote for any individual nominee can be withheld by
striking a line through that person's name in the list of nominees on the
accompanying Proxy. In order to be approved, each of Proposal 2 (the
Ratification of the Appointment of Independent Accountants), Proposal 3 (the
approval of the Amended and Restated Incentive Compensation Plan), and
Proposal 4 (the approval of the Short-Term Incentive Plan) must receive a
majority of the votes cast, in person or by proxy, by the Shareowners voting
as a single class.

PROPOSAL 1: ELECTION OF DIRECTORS

PP&L Resources has a classified Board of Directors, currently consisting of
nine directors divided into three classes. These classes consist of three
directors whose terms will expire at the 1999 Annual Meeting, three directors
whose terms will expire at the 2000 Annual Meeting, and three directors whose
terms will expire at the

1
<PAGE>

2001 Annual Meeting. Since the directors of the Company also serve as the
directors of PP&L, terms and length of service for the Company include PP&L
tenure.

The nominees this year are Frederick M. Bernthal, William J. Flood and Frank
A. Long. All of the nominees are currently serving as directors. Dr. Bernthal
was elected by the Board of Directors effective March 1, 1997, and Messrs.
Flood and Long were elected by the Shareowners at the 1996 Annual Meeting. If
elected by the Shareowners, the above nominees would serve until the 2002
Annual Meeting and until their successors shall be elected and qualified.
Following their election, there would be nine members of the Board of
Directors, consisting of three classes: three directors whose terms would
expire at the 2000 Annual Meeting, three directors whose terms would expire at
the 2001 Annual Meeting, and three directors whose terms would expire at the
2002 Annual Meeting.

The Board of Directors has no reason to believe that any of the nominees
will become unavailable for election, but, if any nominee should become
unavailable prior to the meeting, the accompanying Proxy will be voted for the
election of such other person as the Board of Directors may recommend in place
of that nominee.

The Board of Directors
recommends that Shareowners vote FOR Proposal 1

NOMINEES FOR DIRECTORS:

FREDERICK M. BERNTHAL, 56, is President of Universities
Research Association (URA), Washington, D.C., a position he has
held since 1994. URA is a consortium of 87 major research
universities, and is management and operations contractor on
behalf of the U.S. Department of Energy for the Fermi National
Accelerator Laboratory. Dr. Bernthal served from 1990 to 1994
as Deputy Director of the National Science Foundation, from
1988 to 1990 as Assistant Secretary of State for Oceans,
Environment and Science, and from 1983 to 1988 as a member of
the U.S. Nuclear Regulatory Commission. He received a B.S. in
chemistry from Valparaiso University, and a Ph.D. in nuclear
chemistry from the University of California at Berkeley. Dr.
Bernthal, a member of the Audit and Corporate Responsibility
Committee of PP&L Resources and the Nuclear Oversight Committee
of PP&L, has been a director since 1997.
[Photo of Bernthal]

WILLIAM J. FLOOD, 63, is Secretary-Treasurer of Highway
Equipment & Supply Co. (HESCO), Harrisburg, Pa., supplier of
heavy equipment for highway construction, industry and general
contractors. Mr. Flood received a B.A. from Dartmouth College
and joined HESCO in 1960. He is a director of HESCO, Penn State
Geisinger Health System, Hescorp, Inc. and PNC Bank (Northeast
PA). A member of the Audit and Corporate Responsibility
Commitee of PP&L Resources and the Nuclear Oversight Committee
of PP&L, Mr. Flood has been a director since 1990.

[Photo of Flood]

FRANK A. LONG, 58, is Executive Vice President of PP&L
Resources and Executive Vice President and Chief Operating
Officer of PP&L. Mr. Long received a B.S. in Electrical
Engineering from Northeastern University, and joined PP&L in
1963. Senior Vice President-System Power & Engineering from
1990 until 1993, he was named to his present PP&L position in
1993 and to his PP&L Resources position in February 1995. Mr.
Long is a member of the Pennsylvania Electric Association
Executive Committee, and a director of the Smart Discovery
Center and the Visiting Nurses Northeast. Mr. Long has been a
director since 1993.
[Photo of Long]

2
<PAGE>

DIRECTORS CONTINUING IN OFFICE:

E. ALLEN DEAVER, 63, retired in January 1998 as Executive Vice
President and a director of Armstrong World Industries, Inc.,
Lancaster, Pa., a manufacturer of interior furnishings and
specialty products. He graduated from the University of
Tennessee with a B.S. in Mechanical Engineering and joined
Armstrong in 1960. He is a director of the Internacional de
Ceramica S.A. (Mexico), Penn State Geisinger Health System and
Donsco, Inc. Mr. Deaver, chair of the Compensation and
Corporate Governance Committees of PP&L Resources and PP&L and
a member of the Executive and Finance Committees of PP&L
Resources and PP&L, has been a director since 1991; his term
ends in 2000.

[Photo of Deaver]

ELMER D. GATES, 69, is Vice Chairman of Fuller Company,
Bethlehem, Pa., a company involved in the design and
manufacture of plants, machinery and equipment used in the
cement, paper, power and processing industries. He has a B.S.
in Mechanical Engineering from Clarkson College. Mr. Gates is a
former director of Ambassador Bank, a director of SI Handling
Systems, Inc., a director of the Lehigh Valley Economic
Development Corporation and president of the Lehigh Valley
Partnership. Mr. Gates, chair of the Finance Committees of PP&L
Resources and PP&L and a member of the Compensation and
Corporate Governance and Executive Committees of PP&L Resources
and PP&L, has been a director since 1989; his term ends in
2000.

[Photo of Gates]

WILLIAM F. HECHT, 55, is Chairman, President and Chief
Executive Officer of both PP&L Resources and PP&L. Mr. Hecht
received a B.S. and M.S. in Electrical Engineering from Lehigh
University, and joined PP&L in 1964. He was elected President
and Chief Operating Officer in 1991 and was named to his
present PP&L position in 1993, and to his PP&L Resources
position in February 1995. Mr. Hecht is a director of a number
of civic and charitable organizations. He is chair of the
Executive Committees of PP&L Resources and PP&L and chair of
the Corporate Leadership Council, an internal committee
comprised of the senior officers of PP&L Resources. Mr. Hecht
has been a director since 1990; his term ends in 2001.
[Photo of Hecht]

STUART HEYDT, 59, is Chief Executive Officer of the Penn State
Geisinger Health System, a not-for-profit corporation involved
in health care and related services. Dr. Heydt, who specializes
in maxillofacial surgery, attended Dartmouth College and
received an M.D. from the University of Nebraska. He is past
president of the American College of Physician Executives and a
director of Bucknell University, Wilkes University and PNC Bank
(Northeast PA). He is chair of the Audit and Corporate
Responsibility Committee of PP&L Resources and a member of the
Compensation and Corporate Governance and Executive Committees
of PP&L Resources and PP&L. Dr. Heydt has been a director since
1991; his term ends in 2001.

[Photo of Heydt]

NORMAN ROBERTSON, 71, served as Senior Vice President and Chief
Economist of Mellon Bank N.A., Pittsburgh, Pa., until his
retirement in 1992. Mr. Robertson received a B.S. in Economics
from the University of London, England, and attended the London
School of Economics. Mr. Robertson is an independent economic
advisor to Smithfield Trust Company, a private investment
management firm. He is also an Adjunct Professor of Economics
at Carnegie Mellon University. Mr. Robertson, a member of the
Executive, Finance and Compensation and Corporate Governance
Committees of PP&L Resources and PP&L, has been a director
since 1969; his term ends in 2000.

[Photo of Robertson]

3
<PAGE>

MARILYN WARE, 55, is Chairman of American Water Works Company,
Inc. of Voorhees, New Jersey, a position she has held since
1988. American Water Works is the largest water utility holding
company in the country. In addition, she served as a director
of Penn Fuel Gas, Inc. from 1990 to 1998 and is a director of
CIGNA Corp. She attended American University and the University
of Pennsylvania. Ms. Ware has been a director since January
1998. She is a member of the Finance Committees of PP&L
Resources and PP&L and the Audit and Corporate Responsibility
Committee of PP&L Resources; her term ends in 2001.
[Photo of Ware]

FORMER DIRECTOR:

NANCE K. DICCIANI, Senior Vice President, Business Group
Executive and Director, European Region, Rohm and Haas Company,
Philadelphia, Pa., a specialty chemical company, resigned from
the Board effective December 31, 1998, due to her relocation to
an overseas position at Rohm and Haas Company. A director since
1994, Dr. Dicciani provided a business perspective which we
valued highly.
[Photo of Dicciani]

GENERAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS

Director Attendance at Board Meetings

The Board of Directors held twelve meetings during 1998. Each director
attended at least 75% of the meetings held by the Board and its Committees
during the year. The average attendance of directors at Board and Committee
meetings held during 1998 was 98%.

Compensation of Directors

Directors who are Company employees receive no separate compensation for
service on the Board of Directors or Committees of the Board of Directors.
Non-employee directors receive a retainer of $39,000 per year, of which a
minimum of $21,000 is allocated to a deferred stock account under the
Directors Deferred Compensation Plan ("DDCP"); a fee of $1,000 for attending
Board of Directors meetings, Committee meetings and other meetings at the
Company's request; and a fee of $150 for participating in meetings held by
telephone conference call. Only one attendance fee is paid when the Boards of
PP&L Resources and PP&L meet on the same day, and when "dual" committee
meetings are held on the same day. Also, only one retainer is paid for
services on the Boards of both the Company and PP&L.

Non-employee directors may elect to defer all or any part of the retainer
and fees, pursuant to the DDCP. Under this Plan, these directors can defer
compensation into a cash account or a deferred stock account. Payment of these
amounts and applicable interest or dividends can be deferred until after the
directors' retirement from the Board of Directors, at which time they can
receive these funds in one or more annual installments for a period of up to
ten years.

Under the terms of the DDCP, any increase in the annual retainer is
automatically allocated to each director's deferred stock account. As with the
DDCP benefits, this additional deferred stock together with applicable
dividends is available to the directors after retirement from the Board, at
which time they can receive this stock in one or more annual installments for
a period of up to ten years.

Certain Transactions Involving Directors or Executive Officers

The SEC requires disclosure of certain business transactions or
relationships between PP&L Resources, or its subsidiaries, and other
organizations with which any of PP&L Resources' directors or executive
officers is affiliated as an owner, partner, director, or executive officer.

4
<PAGE>

From time to time, when it has been appropriate and reasonable, the Company
and its subsidiaries have engaged in transactions with, or have used products
or services of, organizations with which the Company's directors or executive
officers are affiliated. It is expected that the Company will continue to do
so.

On August 21, 1998, PP&L Resources acquired Penn Fuel Gas, Inc., pursuant to
an Agreement and Plan of Merger, dated as of June 26, 1997. As a result of the
merger, Ms. Ware and certain family members and trusts of which Ms. Ware is
the beneficiary or trustee acquired an aggregate of 5,330,913 shares of Common
Stock of the Company.

During 1998, PP&L paid Highway Equipment & Supply Co. (HESCO) $246,270 for
certain equipment and materials. Mr. Flood is secretary-treasurer and a
principal owner of HESCO.

Stock Ownership

All directors and executive officers as a group own 3.14% of PP&L Resources'
Common Stock. As a result of the Company's merger with Penn Fuel Gas, Inc.
described above, Ms. Ware owns 3.02% of PP&L Resources' Common Stock. Each of
the other directors and executive officers own less than 1% of PP&L Resources'
Common Stock. The following table sets forth certain ownership of the
Company's stock as of January 1, 1999:

<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name Owned/1/
---- ------------
<S> <C>
F. M. Bernthal 3,962
R. G. Byram 19,145
E. A. Deaver 11,196
R. D. Fagan 13,135
W. J. Flood 8,151
E. D. Gates 16,883
R. J. Grey 8,707
W. F. Hecht 57,826
S. Heydt 7,894
F. A. Long 32,033
N. Robertson 6,982
M. Ware 4,758,589/2/
All 15 executive officers and directors as a group 4,955,815
</TABLE>
- -------
/1 /The number of shares beneficially owned includes: (i) shares directly
owned by certain relatives with whom directors or officers share voting or
investment power; (ii) shares held of record individually by a director or
officer or jointly with others or held in the name of a bank, broker or
nominee for such individual's account; (iii) shares in which certain
directors or officers maintain exclusive or shared investment or voting
power, whether or not the securities are held for their benefit; (iv) with
respect to executive officers, shares held for their benefit by the Trustee
under the Employee Stock Ownership Plan; (v) with respect to non-employee
directors, shares credited to their deferred stock account under the DDCP,
as follows: Dr. Bernthal, 3,762, Mr. Deaver, 8,111 shares, Mr. Gates, 8,440
shares, Dr. Heydt, 5,014 shares, Messrs. Flood and Robertson, 1,452 shares
each and Ms. Ware, 897 shares; and (vi) with respect to non-employee
directors, additional deferred stock credited to them in connection with
the termination of the Directors Retirement Plan in 1996, as follows: Mr.
Deaver, 1,705 shares, Mr. Flood, 2,024 shares, Mr. Gates, 2,701 shares, Dr.
Heydt, 1,272 shares, and Mr. Robertson, 3,700 shares. These directors do
not have voting or dispositive power over the shares credited to their
deferred stock accounts.
/2 /Includes 4,241,497 shares held by a family limited partnership with
respect to which Ms. Ware has voting and dispositive power; 58,319 shares
owned by trusts and a foundation with respect to which Ms. Ware has shared
voting and dispositive power; and 457,876 shares owned by Ms. Ware's
mother. Ms. Ware disclaims beneficial ownership of 4,114,881 of such
shares.

5
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

To the Company's knowledge, all filing requirements under Section 16(a) of
the Securities Exchange Act of 1934 applicable to the Company's directors and
executive officers during 1998 were complied with, except that one Form 4,
Statement of Changes in Beneficial Ownership, was inadvertently filed late by
Ms. Ware with respect to the acquisition of shares as a result of the
Company's merger with Penn Fuel Gas, Inc., as described above.

Board Committees

The Board of Directors has four standing committees--the Executive, Audit
and Corporate Responsibility, Compensation and Corporate Governance, and
Finance Committees. Each non-employee director usually serves on one or more
of these and PP&L's Board committees. (PP&L's committees include the
Executive, Compensation and Corporate Governance, Finance, and Nuclear
Oversight Committees.) The Audit and Corporate Responsibility, Compensation
and Corporate Governance, Finance and Nuclear Oversight Committees are
composed entirely of non-employee directors.

Executive Committee. The Executive Committee exercises during the periods
between Board meetings all of the powers of the Board of Directors, except
that the Executive Committee may not elect directors, change the membership of
or fill vacancies in the Executive Committee, fix the compensation of the
directors, change the Bylaws, or take any action restricted by the
Pennsylvania Business Corporation Law or the Bylaws (including actions
committed to another Board committee). The Executive Committee of the Company
met twice in 1998. The members of the Executive Committee for both the Company
and PP&L are Mr. Hecht (chair), Dr. Heydt and Messrs. Deaver, Gates and
Robertson.

Audit and Corporate Responsibility Committee. The principal functions of the
Audit and Corporate Responsibility Committee are to assist the Company's Board
of Directors in the oversight of executive management's responsibilities
related to the Company's internal control process. This internal control
process is designed to provide reasonable assurance regarding the achievement
of the Company's objectives in the areas of effectiveness and efficiency of
operations, reliability of financial reporting, and compliance with laws,
regulations and standards of integrity. In addition, the Committee reviews
various policies and practices of management related to the Company's
responsibilities to its investors, customers, employees, the environment and
the general public, and reviews the Company's response to actions,
investigations, sanctions or warnings by governmental and regulatory
authorities. This committee met three times in 1998. The members of the Audit
and Corporate Responsibility Committee are Dr. Heydt (chair), Dr. Bernthal,
Mr. Flood and Ms. Ware.

Compensation and Corporate Governance Committee. The principal functions of
the Compensation and Corporate Governance Committee are to review and evaluate
at least annually the performance of the chief executive officer and other
senior officers of the Company and its subsidiaries, and to set their
remuneration, including incentive awards; to review the fees paid to outside
directors for their services on the Board of Directors and its Committees; and
to review management's succession planning. For those individuals who are
senior officers of both the Company and PP&L, the Compensation and Corporate
Governance Committees of both companies act jointly to set remuneration for
services to both companies. Another principal Committee function is to develop
and review criteria for the qualifications of Board members, to establish and
administer programs for evaluating the performance of Board members and to
identify and recommend to the Board of Directors candidates for election to
the Board. This committee met five times in 1998. The members of the
Compensation and Corporate Governance Committee for both the Company and PP&L
are Mr. Deaver (chair), Messrs. Gates and Robertson and Dr. Heydt.

Nominees for directors may be proposed by Shareowners in accordance with the
procedures set forth in the Bylaws. Recommendations for the 2000 Annual
Meeting must be received by seventy-five days prior to the 2000 Annual
Meeting. Shareowners interested in recommending nominees for directors should
submit their recommendations in writing to the Chair of the Compensation and
Corporate Governance Committee, c/o Secretary, Two North Ninth Street,
Allentown, Pennsylvania 18101.

Finance Committee. The principal functions of the Finance Committee are to
approve specific Company financings and corporate financial policies, to
review the Company's annual capital and operating budgets, financing plans and
overall financial strategy, to declare dividends when the Board is not
regularly scheduled to meet or does not meet, and to review the activities of
the unregulated subsidiaries of the Company. The Finance Committee met eleven
times in 1998. The members of the Finance Committee for both the Company and
PP&L are Mr. Gates (chair), Messrs. Deaver and Robertson and Ms. Ware.

6
<PAGE>

Retirement Plans for Executive Officers

PP&L officers upon retirement are eligible for benefits under the PP&L
Retirement Plan and the Supplemental Executive Retirement Plan ("SERP"). The
following table shows the estimated annual retirement benefits for executive
officers payable under these Plans:

Estimated Annual Retirement Benefits
at Normal Retirement Age of 65
Officers Hired Before 1/1/98

<TABLE>
<CAPTION>
Five-Year
Average
Annual Years of Service
Compensation 15 Years 20 Years 25 Years 30 Years
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 250,000 84,774 118,524 131,024 143,524
300,000 105,024 145,524 160,524 175,524
350,000 125,274 172,524 190,024 207,524
400,000 145,524 199,524 219,524 239,524
450,000 165,774 226,524 249,024 271,524
500,000 186,024 253,524 278,524 303,524
550,000 206,274 280,524 308,024 335,524
600,000 226,524 307,524 337,524 367,524
650,000 246,774 334,524 367,024 399,524
700,000 267,024 361,524 396,524 431,524
750,000 287,274 388,524 426,024 463,524
800,000 307,524 415,524 455,524 495,524
850,000 327,774 459,000 485,024 527,524
900,000 348,024 469,524 514,524 559,524
950,000 368,274 496,524 544,024 591,524
1,000,000 405,000 540,000 590,000 640,000
1,050,000 425,250 567,000 619,500 672,000
</TABLE>

Benefits under both the Retirement Plan and the SERP benefit formulas are
based on length of service and the average compensation for the highest 60
consecutive months in the final 120 months of employment. For purposes of
calculating benefits under the Retirement Plan, the compensation used is base
salary less amounts deferred pursuant to the Officers Deferred Compensation
Plan. Base salary, including any amounts deferred, is listed in the Summary
Compensation Table which follows. (Of the officers listed in that Table, Mr.
Hecht deferred $52,000 of compensation for each of 1996, 1997 and 1998; Mr.
Long deferred $31,200 for each of 1996, 1997 and 1998; Mr. Fagan deferred
$20,800 for 1996, $54,000 for 1997 and $96,560 for 1998; and Mr. Grey deferred
$600 for 1996.) For purposes of calculating benefits under the SERP, the
compensation used is base salary, bonus and the value of any restricted stock
grant for the year in which earned, as listed in the Table, as well as
dividends paid on restricted stock.

Benefits payable under the Retirement Plan are subject to limits set forth
in the Internal Revenue Code and are not subject to any deduction for Social
Security benefits or other offset. They are computed on the basis of the life
annuity form of pension at the normal retirement age of 65. Benefits payable
under the SERP are computed on the same basis; are offset by Retirement Plan
benefits, the maximum Social Security benefit payable at 65, and in some
cases, by pensions received from prior employment; and are reduced for
retirement prior to age 60.

As of January 1, 1999, the years of credited service under the Retirement
Plan for Messrs. Hecht, Long, Byram and Grey were 28.8, 31.4, 22.3 and 3.7,
respectively. The years of credited service under the SERP for each of these
officers are three years less than under the Retirement Plan (except in the
case of Mr. Byram, who is entitled to nine months of additional credited
service under the SERP, and Mr. Grey, who is entitled to 15.4 years of
additional credited service).

For officers hired on or after January 1, 1998, benefits under the SERP are
based on a new formula, as follows: (i) restricted stock grants are not
included in compensation for purposes of calculating benefits under the SERP;
(ii) the percentage of pay provided as a retirement benefit is changed from
2.7% for the first 20 years of service plus 1.0% for the next 10 years, to
2.0% for the first 20 years and 1.5% for the next 10 years; and (iii) credit
for years of service will commence as of the employee's date of hire instead
of at age 30.

7
<PAGE>

The following table shows the estimated annual retirement benefits for
executive officers payable under the new SERP formula:

Estimated Annual Retirement Benefits
at Normal Retirement Age of 65
Officers Hired On or After 1/1/98

<TABLE>
<CAPTION>
Five-Year
Average
Annual Years of Service
Compensation 15 Years 20 Years 25 Years 30 Years
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 250,000 75,000 100,000 118,750 137,500
300,000 90,000 120,000 142,500 165,000
350,000 105,000 140,000 166,250 192,500
400,000 120,000 160,000 190,000 220,000
450,000 135,000 180,000 213,750 247,500
500,000 150,000 200,000 237,500 275,000
550,000 165,000 220,000 261,250 302,500
600,000 180,000 240,000 285,000 330,000
650,000 195,000 260,000 308,750 357,500
700,000 210,000 280,000 332,500 385,000
750,000 225,000 300,000 356,250 412,500
800,000 240,000 320,000 380,000 440,000
850,000 255,000 340,000 403,750 467,500
900,000 270,000 360,000 427,500 495,000
950,000 285,000 380,000 451,250 522,500
1,000,000 300,000 400,000 475,000 550,000
1,050,000 315,000 420,000 498,750 577,500
</TABLE>

For existing officers, effective January 1, 1998, benefits under the SERP
are calculated under the greater of the old formula or the new formula, except
that compensation for purposes of the old formula includes restricted stock
grants only to the extent earned through December 31, 2001 and will be frozen
as of December 31, 2001, and compensation for purposes of the new formula
includes restricted stock grants only to the extent earned through December
31, 1997.

As President of PP&L Global, Inc. ("PP&L Global"), Mr. Fagan is covered by
that company's Officers Retirement Plan. That plan provides a retirement
benefit, computed on the basis of the life annuity form of pension payable at
age 60, determined by multiplying Mr. Fagan's five-year annual average
compensation (which includes salary, including deferrals to the PP&L Global
Officers Deferred Compensation Plan, bonus, and restricted stock but excluding
any dividends paid on restricted stock) times 2% for each year of service
completed by age 60. This benefit is reduced for retirement prior to age 60
and, in some cases, by pensions received from prior employment. As of January
1, 1999, the years of credited service for Mr. Fagan for purposes of this
benefit were 23.8.

8
<PAGE>

SUMMARY COMPENSATION TABLE

The following table summarizes all compensation for the Chief Executive
Officer and the next four most highly compensated executives for the last
three fiscal years, for service for PP&L Resources and its subsidiaries.
Messrs. Hecht and Long also served as directors but received no separate
remuneration in that capacity.

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------------------------------------
Other Annual Restricted All Other
Name and Salary/1 Bonus/1 Compensation/2 Stock Award/3 Compensation/4
Principal Position Year / ($) / ($) / ($) / ($) / ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William F. Hecht 1998 644,604 267,998 0 193,320 6,001
Chairman, President and 1997 609,550 107,360 0 281,435 4,704
Chief Executive Officer 1996 531,194 138,600 0 138,920 4,418

Frank A. Long 1998 439,735 157,872 0 115,290 6,048
Executive Vice
President 1997 414,704 85,698 0 167,599 4,750
1996 367,555 82,688 14,424 82,800 4,462

Robert D. Fagan 1998 299,770 252,000/5/ 0 96,390/5/ 0
President--PP&L Global 1997 289,155 141,120/5/ 0 91,396/5/ 0
1996 240,848 150,675/5/ 0 82,340/5/ 0

Robert G. Byram 1998 279,847 81,200 10,770 62,910 5,185
Senior Vice President-- 1997 264,967 50,880 0 91,630 3,916
Generation and Chief 1996 246,944 48,195 0 48,300 3,673
Nuclear Officer--PP&L

Robert J. Grey 1998 279,674 81,200 0 62,910 3,907
Senior Vice President, 1997 249,900 48,000 0 86,488 2,682
General Counsel and 1996 231,878 44,415 0 44,620 2,250
Secretary
</TABLE>

/1/Salary and bonus data include deferred compensation.
/2/Includes longevity pay (which is compensation for vacation earned, but not
taken).
/3/The dollar value of restricted common stock awards was calculated by
multiplying the number of shares awarded by the closing price per share on
the date of the grant. As of December 31, 1998, the officers listed in this
table held the following number of shares of restricted common stock, with
the following values: Mr. Hecht--34,720 shares ($967,820); Mr. Long--20,310
shares ($566,141); Mr. Fagan--12,030 shares ($335,336); Mr. Byram--11,440
shares ($318,890); and Mr. Grey--8,090 shares ($225,509). These year-end
data do not include awards made in January 1999 for 1998 performance, or
awards which had originally been restricted and for which the restriction
periods have lapsed or been lifted. Dividends are paid currently on
restricted stock awards. All outstanding restricted stock awards have a
restriction period of three years.
/4/Includes Company contributions to the Officers' Deferred Savings Plan and
the ESOP accounts
/5/As discussed in the following Joint Report, one-third of Mr. Fagan's long-
term incentive award was paid in cash and two-thirds in restricted stock.

CHANGE IN CONTROL ARRANGEMENTS

Effective as of January 1, 1998, the Company entered into agreements with
each of the named executive officers, which agreements provide benefits to the
officers upon certain terminations of employment following a change in control
of the Company (as such term is defined in the agreements). The benefits
provided under these agreements replace any other severance benefits provided
to these officers by the Company, including any benefits under the Executive
Retirement Security Plan (which was terminated effective January 1, 1998) or
any prior severance agreement.

Each of the agreements continues in effect until December 31, 1999, and the
agreements generally are automatically extended for additional one-year
periods. Upon the occurrence of a change in control, the agreements will
expire no earlier than thirty-six months after the month in which the change
in control occurs. Each agreement provides that the officer will be entitled
to the severance benefits described below if the Company terminates the
officer's employment following a change in control for any reason other than
death, disability, retirement or "cause," or if the officer terminates
employment for "good reason" (as such terms are defined in the agreement).

9
<PAGE>

The benefits consist of a lump sum payment equal to three times the sum of
(a) the officer's base salary in effect immediately prior to date of
termination, or if higher, immediately prior to the first occurrence of an
event or circumstance constituting good reason, and (b) the highest annual
bonus in respect of the last three fiscal years ending immediately prior to
the fiscal year in which the change in control occurs, or if higher, the
fiscal year immediately prior to the fiscal year in which first occurs an
event or circumstance constituting good reason. (This bonus amount would
include the value of restricted stock awards for calendar years prior to
1998.) In addition, under the terms of each agreement, the Company would
provide the officer and dependents with continuation of welfare benefits
(reduced to the extent the officer receives comparable benefits), and would
pay the officer unpaid incentive compensation that has been allocated or
awarded, a lump sum payment having an actuarial present value equal to the
additional pension benefits the officer would have received had the officer
continued to be employed by the Company for an additional thirty-six months,
outplacement services for up to three years and a gross-up payment for any
excise tax imposed under the Internal Revenue Code. In addition, under the
agreements, the Company would provide post-retirement health care and life
insurance benefits to officers who would have become eligible for such
benefits within the thirty-six month period following the change in control.

In addition, in the event of a change in control or certain circumstances
that may lead to a change in control, the Compensation and Corporate
Governance Committee of the Board of Directors may change or eliminate the
restriction period applicable to any outstanding restricted stock awards under
the Incentive Compensation Plan.

JOINT REPORT OF THE COMPENSATION AND CORPORATE
GOVERNANCE COMMITTEES REGARDING EXECUTIVE COMPENSATION

GENERALLY

PP&L Resources, Inc. (the "Company") is the parent holding company of PP&L,
Inc., and PP&L, Inc. is its principal subsidiary. The members of the Company's
Compensation and Corporate Governance Committee--all independent outside
directors--and Board of Directors also serve in the same capacity for PP&L,
Inc. Certain senior officers of the Company are also senior officers of PP&L,
Inc. For those individuals, references below to the Committee and Board of
Directors refer to the Committee and Board of Directors of both the Company
and PP&L, Inc. and discussions of their compensation include compensation
earned for services to both the Company and PP&L, Inc.

During 1998, the Committee reviewed and evaluated the performance and
leadership of the Chief Executive Officer and the other senior officers who
are members of the Company's Corporate Leadership Council ("senior officers"),
which provides strategic direction for the Company and its subsidiaries. The
Committee established the compensation and benefit practices for these
individuals as senior officers of the Company and its subsidiaries, including
PP&L, Inc. and PP&L Global, Inc. (a subsidiary of the Company which invests in
and develops world-wide power projects) ("PP&L Global"). These officers
include: William F. Hecht, Chairman, President and Chief Executive Officer of
the Company; Frank A. Long, Executive Vice President of the Company; John R.
Biggar, Senior Vice President and Chief Financial Officer of the Company/1/;
Robert G. Byram, Senior Vice President--Generation and Chief Nuclear Officer
of PP&L, Inc.; Robert D. Fagan, President of PP&L Global; Robert J. Grey,
Senior Vice President, General Counsel and Secretary of the Company; and Terry
H. Hunt, Senior Vice President--Strategic Planning of the Company. Except for
Mr. Fagan, these individuals are also senior officers of PP&L, Inc./2/

For 1998, the Company had in place two major components of executive
compensation for the senior officers--base salary and incentive compensation.
Base salaries reflect the value of the various Company positions relative to
similar positions--both within the Company and in other companies--and
individual executive performance. Incentive compensation is based on corporate
performance./3/ For 1998, the incentive program had two separate components.
Under a short-term incentive plan, cash awards were made to the senior
officers based on the achievement of key corporate financial and operational
goals. Under a long-term incentive plan,
- -------
/1/Mr. Biggar became an executive officer of the Company and a member of the
Corporate Leadership Council effective as of January 28, 1998.
/2/Mr. Fagan has no position with PP&L, Inc., but is a member of the Corporate
Leadership Council and a "senior officer" of the Company by virtue of his
position as President of PP&L Global.
/3/Because of his position as President of PP&L Global, Mr. Fagan's incentive
compensation is based on separate goals established for that position.

10
<PAGE>

restricted Company stock was granted to the senior officers based on the
achievement of certain strategic goals designed to position the Company for
success in the new competitive environment. Incentive goals and performance
targets were developed by the Committee, and all awards were granted by the
Committee.

BASE SALARIES

In general, the Committee's objective is to provide salary levels that are
sufficiently competitive with comparable companies to enable the Company to
attract and retain high-quality executive talent. To meet this objective, the
Committee regularly reviews salary information for similar companies. In
addition, the Committee annually reviews the performance of each executive to
determine the appropriate level of base salary adjustment for that individual.

In December 1997, the Committee reviewed salary ranges for the senior
officers by comparing these salary levels with levels within the utility
industry generally, and, more specifically, with executive compensation levels
at 16 comparable utilities./4/ All of the comparison companies were included
in the EEI (Edison Electric Institute) Index of Investor-owned Electric
Utilities, which is displayed in the stock performance graph on page 14. The
16 utilities used for comparison purposes were selected based on their
similarity to PP&L, Inc. in terms of annual revenues, service area and other
measures of size.

After reviewing salary data for executive positions at comparable utilities,
the Committee reviewed the actual salaries and performance appraisals of each
of the senior officers. In the case of the Chief Executive Officer, the
Committee considered directors' individual appraisals of his performance in
determining his salary. The Committee then solicited input and recommendations
from the Chief Executive Officer regarding the performance and individual
salaries of the other senior officers.

Upon completion of this review, the Committee established the 1998 salaries
of the senior officers. As of January 1998, Mr. Hecht's total compensation was
about 24% less than the average total compensation of the chief executive
officers of the comparable companies. Also, the total compensation of the
senior officers as a group was approximately 15% less than the average paid to
their counterparts at these companies. Considering this information and
individual performance, the salary of each of the senior officers was
increased, effective as of January 1, 1998.

INCENTIVE AWARDS

In establishing the second component of executive compensation--incentive
awards--the Committee annually reviews the Company's performance in relation
to specific corporate financial, operational and strategic objectives. This
component of compensation is intended to relate executive compensation
directly to corporate performance and shareowner value. This program achieves
the Company's objective of placing a large portion of executive compensation
"at risk" by basing up to 40-50% of the senior officers' total compensation on
the achievement of key corporate goals. The incentive awards are made in the
form of cash and restricted Company stock.

Cash Awards

Cash awards are made available to officers for the achievement of specific,
independent goals established for each calendar year. For 1998, maximum annual
awards based on accountability level were established for each officer
according to the following table:

<TABLE>
<CAPTION>
Maximum Awards
(Percent of Base Salary)
------------------------
<S> <C>
Chief Executive Officer....................... 60%
Executive Vice President...................... 50%
Sr. Vice President............................ 40%
</TABLE>
- -------
/4/Mr. Fagan's salary was compared with those of similar subsidiary positions
in both regulated and non-regulated companies.

11
<PAGE>

Annual awards are determined by applying these target percentages to the
percentage of goal attainment. The performance goals for each year are
established by the Committee, and the Committee reviews actual results at each
year-end to determine the appropriate goal attainment percentage to apply to
the salary targets.

The following were the goal categories for 1998:

I. Financial--PP&L Resources, Inc.--based on the Company's net income and
total return on common stock and the financial performance of subsidiary
energy trading and marketing operations.

II. Operational--PP&L, Inc.--based on customer satisfaction indices, retail
marketing efforts, the performance of PP&L, Inc.'s power plants, cost
control, safety and environmental performance and affirmative action
results.

III. Operational--PP&L Global, Inc.--based on PP&L Global's net income.

The weightings for each of these general categories varied by the level of
the individual officers to reflect the different levels of influence they have
on attainment of the goals, as follows:

<TABLE>
<CAPTION>
Goal Category
-------------------------------------
Operational-- Operational--
Officer Level Financial PP&L PP&L Global
------------- --------- ------------- -------------
<S> <C> <C> <C>
Chief Executive Officer................... 45% 30% 25%
Executive Vice President.................. 35 45 20
Sr. Vice President........................ 30 55 15
</TABLE>

When the level of goal attainment in each of the above categories is
measured at the end of each year and the category weightings shown above are
multiplied by the annual award target for each position, each officer's cash
award is determined for the prior year's performance.

Restricted Stock Awards

Under the terms of the Company's Incentive Compensation Plan, restricted
Company stock also is made available to officers based on the achievement of
strategic objectives designed to position the Company to continue to provide
value to its shareowners. Goals for 1998 were related to success in the
Pennsylvania retail market, transactions which increase the Company's and PP&L
Global's domestic and international business presence, the outcome of PP&L,
Inc.'s restructuring proceeding and the financial initiatives related thereto,
and the establishment of a corporate risk management program. Annual awards
are based on the achievement of these strategic goals. The 1998 award targets
for individual officers varied by accountability level, as follows:

<TABLE>
<CAPTION>
Maximum Awards
(Percent of Base Salary)
------------------------
<S> <C>
Chief Executive Officer....................... 40%
Executive Vice President...................... 35%
Sr. Vice President............................ 30%
</TABLE>

Awards are made in the form of restricted stock equivalent to the dollar
value of the percentage applied to base pay in effect at the end of the year.
This stock award encourages increased stock ownership on the part of the
officers and aligns the interests of management and shareowners.

The Committee determines the applicable restriction period for the stock at
the time of grant, which, under the terms of the Incentive Compensation Plan,
must be at least three years and not more than ten years from the date of
grant. That is, the officer can be divested of this stock during the
restriction period if he or she terminates employment with the Company. The
Plan also provides that, upon retirement, death or disability of an officer,
the outstanding restricted stock awards made to that officer will be prorated.
In such cases, the Committee may provide the officer with the entire award
rather than the prorated portion.

In this way, grants of restricted stock serve as an incentive for senior
management to continue their employment with the Company and, therefore,
contribute to continuity in top management. In the past, the grants of
restricted stock made under the Incentive Compensation Plan have been
restricted for a period of three years.

12
<PAGE>

The 1998 incentive awards made to the five most highly compensated executive
officers are shown in the Summary Compensation Table. The Committee based the
awards for these officers solely on the corporate goals achieved. In January
1999, the Committee reviewed performance achieved during 1998 for the
financial and operational goals under the short-term incentive plan. During
1998, the Company achieved 45% of its financial goals, 80% of its operational
goals for PP&L, Inc. and 100% of its operational goals for PP&L Global. As a
result of the weighting system described above, the senior officers received
the following short-term incentive awards as a percent of base salary: Mr.
Hecht--41.6%; Mr. Long--35.9%; Mr. Biggar--28.7%, Mr. Byram--29.0%; and Mr.
Grey--29.0%. Mr. Fagan received a 1998 short-term incentive award of 67.5% of
base salary, based on separate goals related to PP&L Global's staffing and
organization, strategic planning and strategic acquisition efforts, budgetary
control and the establishment of certain financial capabilities, policies and
programs, and investment and commitments in international projects.

In January 1999, the Committee also reviewed the Company's performance on
the established strategic goals under the long-term incentive plan. During
1998, the Company achieved 78% of these strategic goals. Applying the maximum
targets set forth above, the senior officers received the following long-term
incentive awards as a percent of base salary: Mr. Hecht--31.2%; Mr. Long--
27.3%; Mr. Biggar--22.6%, Mr. Byram--23.4%; and Mr. Grey--23.4%. Mr. Fagan's
1998 long-term incentive award equal to 50.0% of his base salary ( 1/3 in cash
and 2/3 in restricted stock) was based on an established formula emphasizing
PP&L Global's committed equity investment and cash flow.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

In establishing Mr. Hecht's 1998 salary, the Committee reviewed the salaries
of the chief executive officers of the 16 comparison utilities referenced
above. In conducting this review, the Committee concluded that Mr. Hecht's
1997 salary was about at the average earned by incumbents in similar positions
at those utilities. As a result of this review and Mr. Hecht's performance,
the Committee set his 1998 salary at $645,000, effective January 1, 1998, in
order to maintain this relationship with market conditions.

Based on the Company's performance in 1998 on the specific corporate
financial and operational goals discussed above, Mr. Hecht received a cash
award equal to approximately 41.6% of his year-end salary. Based on the
Company's performance in 1998 on the strategic goals discussed above, Mr.
Hecht received a restricted stock award equal to approximately 31.2% of his
year-end salary.

TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
provides that publicly held corporations may not deduct in any taxation year
certain compensation in excess of $1,000,000 paid to the chief executive
officer and the next four most highly compensated executive officers. Section
162(m) did not apply to the Company's 1998 executive compensation. In this
regard, the Company is proposing that its shareowners at the 1999 Annual
Meeting approve (i) the amendment of the Incentive Compensation Plan to
effectuate its new stock option program and to enable the Company to make
stock option awards and other stock-based awards under that Plan that are
deductible under Section 162(m) and (ii) the adoption of a Short-Term
Incentive Plan under which cash awards to officers under the existing short-
term incentive program could be deductible under Section 162(m).

The Compensation and Corporate
Governance Committee
E. Allen Deaver, Chair
Elmer D. Gates
Stuart Heydt
Norman Robertson

13
<PAGE>

STOCK PERFORMANCE GRAPH

The following graph depicts the performance of the Company's common stock
over the past five years. For comparison purposes, two other indices are also
shown. The Standard & Poor's 500 Index provides some indication of the
performance of the overall stock market, and the EEI Index of Investor-owned
Electric Utilities reflects the performance of electric utility stocks
generally. The EEI Index is a comprehensive, widely recognized industry index
that includes approximately 89 investor-owned domestic electric utility
companies.

Comparison of 5-Year Cumulative Total Return
For PP&L Resources, Inc., S&P 500 Index, and
EEI Index of Investor-owned Electric Utilities*

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PP&L Resources, Inc.** 100.00 76.34 108.43 107.14 120.47 148.14
S&P 500 Index 100.00 101.32 139.40 171.40 228.59 293.91
EEI Index of Investor-
owned Electric
Utilities 100.00 88.43 115.86 117.25 149.33 170.07
</TABLE>
- -------
* Assumes investing $100 on 12/31/93 and reinvesting dividends in PP&L
Resources, Inc. common stock, S&P 500 Index, and EEI Index of Investor-
owned Electric Utilities.
** Effective April 27, 1995, all of the outstanding shares of common stock of
PP&L, Inc. became shares of common stock of PP&L Resources. Therefore,
through April 26, 1995, these data reflect the total return on the common
stock of PP&L, Inc.

14
<PAGE>

PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS

Upon the recommendation of the Audit and Corporate Responsibility Committee,
which is composed of directors who are not employees of the Company or its
affiliates, the Board of Directors of the Company appointed
PricewaterhouseCoopers LLP to serve as independent accountants for the year
ending December 31, 1999, for PP&L Resources and its subsidiaries.

Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting. They will have an opportunity to make a statement if they
want to do so, and they will also be available to respond to appropriate
questions.

The Board of Directors has determined that it would be desirable to request
an expression of opinion from the Shareowners on the appointment of
PricewaterhouseCoopers LLP. If the Shareowners do not ratify the selection of
PricewaterhouseCoopers LLP, the selection of independent accountants will be
reconsidered by the Board of Directors.

The Board of Directors
recommends that Shareowners vote FOR Proposal 2

PROPOSAL 3: APPROVAL OF AMENDED AND RESTATED INCENTIVE COMPENSATION PLAN

Shareowners will be asked to consider and, if deemed advisable, to approve
the PP&L Resources Amended and Restated Incentive Compensation Plan. The
Incentive Compensation Plan was originally adopted by shareowners at PP&L's
1987 Annual Meeting, and at that time was named the Pennsylvania Power & Light
Company Incentive Compensation Plan. The growth, development and financial
success of the Company depend upon attracting and retaining the best possible
management. PP&L Resources believes that the Incentive Compensation Plan
promotes the success of the Company by providing a method whereby officers and
other key employees of PP&L Resources and its subsidiaries may be awarded
additional remuneration for performance in meeting specific corporate
objectives in a way that increases their ownership interest in the Company and
encourages them to remain with the Company.

PP&L Resources proposes to amend the Incentive Compensation Plan to
effectuate its new stock option program by increasing the number of shares
authorized to be issued thereunder. The Company believes that such stock
options are an effective means to tie executive compensation directly to
increases in shareowner value. In addition, the proposed amendments are
required so that these stock option awards to any "covered employee" can be
excluded from the $1 million limit on deductible compensation under Section
162(m) of the Internal Revenue Code. (A "covered employee" is an executive
officer named in the "Summary Compensation Table" who is acting in such
capacity on the last day of the applicable tax year of the Company and its
subsidiaries.) If such stock option awards do not comply with the requirements
of Section 162(m), the Company would lose the benefit of a compensation
deduction to the extent that total compensation earned by an individual
executive officer, including compensation earned as a result of stock option
awards, exceeds $1 million in any one year.

Summary of the Plan

The following is a brief summary of the terms of the Amended and Restated
Incentive Compensation Plan (the "Amended and Restated Plan"). The summary
does not purport to be complete and is qualified in its entirety by the full
text of the Amended and Restated Plan set forth in Schedule A to this Proxy
Statement.

The purpose of the Amended and Restated Plan is to provide a method whereby
officers and other key employees of PP&L Resources and its subsidiaries may be
awarded additional remuneration in a manner which increases their ownership
interest, aligns their interest with that of shareowners and encourages them
to remain in the employ of PP&L Resources and its subsidiaries.

The types of awards that may be granted under the Amended and Restated Plan
are restricted stock awards, stock options awards and other stock-based
awards, including performance-based awards. Subject to a change

15
<PAGE>

in the Company's capital structure, the maximum number of shares of Common
Stock subject to awards (including restricted stock and stock options) shall
not exceed annually 2% of the outstanding Common Stock of PP&L Resources on
the first day of each calendar year commencing on January 1, 1999. The maximum
number of options awarded to any single eligible employee in any calendar year
shall not exceed 1.5 million shares; provided that any portion of such maximum
number of shares that has not been granted may be carried over and used in any
subsequent year. To the extent that an award is forfeited or the right of a
participant to whom it was granted terminates, any shares subject to the award
will again be available for awards under the Amended and Restated Plan. Shares
issued under the Amended and Restated Plan may be authorized and unissued
stock, treasury stock or stock purchased on the open market.

In accordance with the requirements of the New York Stock Exchange (the
"NYSE") for the listing of newly issued shares of Common Stock subject to
awards, the Committee will not grant awards under the Amended and Restated
Plan to the extent that the aggregate number of shares subject to awards
granted after approval of the Plan at PP&L Resources' 1999 Annual Meeting
would exceed 5% of the outstanding Common Stock of the Company on the date of
the Meeting, unless the issuance of the shares of Common Stock subject to any
such additional awards has been approved by the Shareowners of PP&L Resources
to the extent required by the rules of the NYSE.

Administration

The Amended and Restated Plan shall be administered by a committee of two or
more "outside directors" as defined under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), unless otherwise determined by
the Company's Board of Directors, who have been designated by the Board of
Directors to act as such a committee. This function currently is performed by
the Company's Compensation and Corporate Governance Committee (the
"Committee"). The Committee has the full power and authority to make awards to
eligible employees pursuant to the provisions of the Amended and Restated
Plan, to interpret the provisions of the Amended and Restated Plan, to
supervise the administration of the Amended and Restated Plan and to delegate
any of the foregoing responsibilities to any person, who, in its sole
discretion, it deems appropriate; provided that such delegation is consistent
with Section 162(m).

Eligibility

Officers and other key employees of PP&L Resources or its subsidiaries are
eligible employees under the Amended and Restated Plan. Subject to the
provisions of the Amended and Restated Plan, the Committee shall from time to
time select from the eligible employees those to whom awards shall be granted
and determine the amount of such award.

Restricted Stock Awards

Restricted stock is PP&L Resources' Common Stock issued in the name of the
participant that bears a restrictive legend prohibiting the sale, transfer,
pledge or hypothecation of such Common Stock until the expiration of the
restriction period. The restriction period is determined by the Committee at
the time each award is granted and will not be less than three years and not
more than ten years from the date of the grant; provided that in the event of
a change in control, the restriction period for previously granted awards
shall lapse.

Restricted stock is issued without the payment of consideration by the
participant. During the restriction period, the participant has the right to
vote the stock and receive dividends with respect to such stock.

Upon a participant's termination of employment prior to the end of the
restriction period due to death or disability, awards are prorated as if the
participant had maintained active employment until age 65. If a participant's
employment with PP&L Resources or its subsidiaries is terminated prior to the
end of the restriction period for any other reason, the award is forfeited. In
any instance where a payment is to be prorated, the Committee may choose, in
its sole discretion, to provide the participant (or the participant's estate)
with the entire award rather than the prorated portion.

Notwithstanding anything in the Amended and Restated Plan to the contrary,
in the event that prior to any award a participant violates any non-compete
agreements between the participant and PP&L Resources or a subsidiary company,
the award will be forfeited.

16
<PAGE>

A participant shall agree in writing to notify the Company within 30 days of
the date of grant whether such participant has made an election under Section
83(b) of the Code to report the value of the restricted stock as income on the
date of grant.

Stock Options

Options granted under the Amended and Restated Plan may be either incentive
stock options, as defined in Section 422A of the Code, or options which do not
so qualify ("non-qualified options"). One or more options may be granted to
eligible employees designated by the Committee in such amounts and subject to
such terms and conditions as the Committee may from time to time, in its sole
discretion, determine, but which are consistent with the terms of the Amended
and Restated Plan. The option price per share shall not be less than the fair
market value per share on the date of grant. The option exercise price may be
paid by (i) check, (ii) in other shares of Common Stock, (iii) by such other
mode of payment as the Committee may approve, including payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board, or (iv) in a combination of (i), (ii) and (iii).

A participant must remain within the employ of PP&L Resources or a
subsidiary for one year from the date of the grant of an option before such
option can be exercised; provided that if a change in control occurs prior to
the completion of one year of employment, such employment requirement shall no
longer be applicable. After completion of one year of service or following a
change in control, options granted under the Amended and Restated Plan shall
become exercisable in installments as provided by the Committee; provided that
such options may not be exercised beyond the day before the tenth anniversary
of the date of the grant of such award; and provided further that in the event
of a change in control, all portions of such options shall become immediately
exercisable. The Committee is authorized, in its sole discretion, to
accelerate the time at which all or any part of an option may be exercised.

At the time an option is granted, the Committee shall establish the option
term for such award. Such option term shall end on the earliest of: (i) the
violation by a participant of a non-compete agreement entered into by a
participant and PP&L Resources or a subsidiary company, (ii) the day before
the tenth anniversary of the date of grant for such award, or (iii) the
applicable period under the Amended and Restated Plan after a participant's
termination, retirement, death, disability or termination due to change in
control.

The grant of an option will not entitle the participant to any dividend,
voting or other rights of a shareowner unless and until the participant
receives Common Stock upon the exercise of the option.

Other Stock-Based Awards

Other stock-based awards include awards of Common Stock, awards of
restricted shares and awards valued in whole or in part by reference to the
fair market value of Common Stock. The Committee, in its sole discretion, may
grant other stock-based awards and shall determine the form, condition, term
and number of other stock-based awards.

Notwithstanding anything to the contrary in the Amended and Restated Plan,
certain other stock-based awards may be granted in a manner which is
deductible by the Company under Section 162(m) of the Code (a performance-
based award). A participant's performance-based award shall be determined
based on the achievement of written performance goals approved by the
Committee. Within 90 days after the start of a designated performance period,
or such lesser time as permitted by the Amended and Restated Plan, the
Committee will establish the objective performance goals for each participant.
The performance goals for awards will be based upon one or more of the
following criteria, which may be determined by reference to the performance of
PP&L Resources, a subsidiary, or a division or unit of PP&L Resources or a
subsidiary: (i) earnings before or after taxes (including earnings before
interest, taxes, depreciation and amortization); (ii) net income; (iii)
operating income; (iv) earnings per share; (v) book value per share; (vi)
return on stockholders' equity; (vii) expense management; (viii) return on
investment before or after the cost of capital; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or product; (xi)
maintenance or improvement of profit margins; (xii) stock price; (xiii) market
share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow; (xvii) working
capital; (xviii) changes in net assets (whether or not multiplied by a
constant percentage intended to represent the cost of capital); (xix) return
on assets; and (xx) independent industry ratings or assessments. The
performance goals may be calculated without regard to extraordinary items or
accounting changes.

The maximum amount of a performance-based award to any participant with
respect to a fiscal year of PP&L Resources shall be 1.5 million shares;
provided that any portion of such maximum number of shares that has not been
granted may be carried over and used in any subsequent year.

17
<PAGE>

Prior to the payment of any performance-based award, the Committee, or its
delegate, will certify that the applicable performance goals have been met.
Payment of an award to a participant will occur only after such certification
and will be made as determined by the Committee in its sole discretion after
the end of such performance period. The Committee may permit a participant to
defer payment of an award.

Miscellaneous

No benefit or right provided under the Amended and Restated Plan shall be
subject to alienation or assignment by a participant (or by any person
entitled to such benefit pursuant to the terms of the Amended and Restated
Plan) or subject to attachment or other legal process of whatever nature. No
award under the Amended and Restated Plan will be construed as giving any
employee a right to continued employment with PP&L Resources or its subsidiary
companies.

Amendment and Termination

The Committee may at any time alter, amend, suspend or terminate the Amended
and Restated Plan in whole or in part except that: (i) shareowner approval is
required if such action (a) increases the maximum number of shares of Common
Stock which may be issued under the Amended and Restated Plan, (b) materially
increases the benefits accruing to participants under the Amended and Restated
Plan, or (c) materially modifies the eligibility requirements for participants
in the Amended and Restated Plan; and (ii) the consent of the participant is
required if such action is not required by law or regulation and diminishes,
reduces or cancels an award previously granted to such participant.

Federal Income Tax Consequences

The federal income tax consequences of an award under the Amended and
Restated Plan will depend on the type of award that is granted.

Restricted Stock. At the time a restricted stock award is granted, a
participant may elect to be taxed at ordinary income tax rates in the year the
award is granted based on the fair market value of the Common Stock as of the
date of grant. If the election is not exercised within the time prescribed
under Section 83(b) of the Code, the participant will be taxed in the year the
restrictions expire based on the fair market value of the Common Stock as of
the date the restrictions expire. The Company is entitled to a corresponding
federal income tax deduction for the year in which the participant is taxed at
ordinary income tax rates. If the participant is taxed in the year the
restrictions expire, dividends paid to the participant during the restriction
period will be taxed as additional compensation and PP&L Resources will be
entitled to a corresponding deduction. If the participant is taxed in the year
in which the award is granted, dividends paid to the participant during the
restriction period with respect to the Common Stock will be treated as
dividend income and PP&L Resources will not be entitled to a corresponding
deduction.

Incentive Stock Options. If the minimum holding periods established by
Section 422A of the Code are met, a recipient of an incentive stock option
will not recognize taxable income at the time of the grant or upon the
exercise of the option, and the Company will not be entitled to an income tax
deduction. If such minimum holding periods are not satisfied, a participant
will be taxed as though he exercised a non-qualified option as discussed below
and PP&L Resources will be entitled to a corresponding income tax deduction.

Non-qualified Stock Options. The grant of a non-qualified option does not
result in taxable income to a recipient or a tax deduction for the Company.
Upon exercise of a non-qualified stock option, a recipient will recognize
ordinary income in an amount equal to the excess of the fair market value of
the Common Stock on the date of exercise of the option over the option price,
and PP&L Resources will be entitled to a corresponding income tax deduction.

Other Awards. Amounts received upon the grant of other awards are ordinarily
taxed at ordinary rates when received. However, if the other awards consist of
property subject to a substantial risk of forfeiture, the amounts generally
will not be taxed until the substantial risk of forfeiture lapses or until an
election is made under Section 83(b) of the Code. Under Section 162(m) of the
Code, PP&L Resources is generally allowed an income tax deduction equal to the
amount recognized as ordinary income.

18
<PAGE>

Compliance with Section 162(m). The Amended and Restated Plan should allow
certain incentive stock options, non-qualified stock options, stock
appreciation rights and performance-based awards granted under the Amended and
Restated Plan to be treated as qualified performance-based compensation under
Section 162(m) of the Code. However, the Committee may, from time-to-time,
award compensation that is not deductible under Section 162(m) of the Code.

Shareowner Approval

Approval of the Amended and Restated Plan requires the affirmative vote of
the holders of a majority of the Shares present, or represented by Proxy, and
entitled to vote at the Meeting.

The Committee has approved the Amended and Restated Plan and the Company's
Board of Directors recommends that shareowners vote for the approval of the
Amended and Restated Plan. Accordingly, the persons named in the enclosed
Proxy intend to vote at the Meeting for the approval of the Amended and
Restated Plan unless otherwise directed by the Shareowner appointing them. The
Amended and Restated Plan is effective as of January 1, 1999, subject to
Shareowner approval.

PROPOSAL 4: APPROVAL OF SHORT-TERM INCENTIVE PLAN

Shareowners will be asked to consider and, if deemed advisable, to approve
PP&L Resources' Short-Term Incentive Plan (the "Plan") for executive officers
of PP&L Resources and its subsidiaries. The Company currently has a short-term
incentive compensation program for executive officers, under which annual cash
awards are made by the Compensation and Corporate Governance Committee of the
Board of Directors based upon performance goals established by that Committee
each year. Shareowner approval of the Plan is required so that these cash
awards to any "covered employee" can be excluded from the $1 million limit on
deductible compensation under Section 162(m) of the Code. (A "covered
employee" is an executive officer named in the "Summary Compensation Table"
who is acting in such capacity on the last day of the applicable tax year of
the Company and its subsidiaries.) If Plan awards do not comply with the
requirements of Section 162(m), the Company would lose the benefit of a
compensation deduction to the extent that total compensation earned by an
individual executive officer, including compensation earned as a result of
such Plan awards, exceeds $1 million in any one year.

Summary of the Plan

The following is a brief summary of the terms of the Plan. The summary does
not purport to be complete and is qualified in its entirety by the full text
of the Plan set forth in Schedule B to this Proxy Statement.

The purpose of the Plan is to promote the interests of the Company and its
Shareowners by providing incentives in the form of periodic bonus awards
("Awards") to certain senior executive employees of PP&L Resources and its
subsidiaries, thereby motivating such executives to attain corporate
performance goals described below while preserving for the benefit of PP&L
Resources and its subsidiaries the associated U.S. federal income tax
deduction.

Administration

The Plan is administered by a committee of two or more "outside directors"
as defined under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), unless otherwise determined by the Company's Board of
Directors, who have been designated by the Board of Directors to act as such a
committee. This function currently is performed by PP&L Resources'
Compensation and Corporate Governance Committee (the "Committee"). The
Committee, or its delegate, will select senior executives, who are covered
employees or who the Company anticipates may be covered employees of PP&L
Resources and its subsidiaries (the "Participants"), to be granted Awards
under the Plan.

19
<PAGE>

Awards

A Participant's Award shall be determined based on the achievement of
written performance goals approved by the Committee. Within 90 days after the
start of a designated performance period, or such lesser time as permitted by
the Plan, the Committee will establish the objective performance goals for
each Participant. The performance goals for Awards will be based upon one or
more of the following criteria, which may be determined by reference to the
performance of PP&L Resources, a subsidiary, or a division or unit of PP&L
Resources or a subsidiary: (i) earnings before or after taxes (including
earnings before interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per share; (v) book value per
share; (vi) return on stockholders' equity; (vii) expense management; (viii)
return on investment before or after the cost of capital; (ix) improvements in
capital structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock price;
(xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow;
(xvii) working capital; (xviii) changes in net assets (whether or not
multiplied by a constant percentage intended to represent the cost of
capital); (xix) return on assets; and (xx) independent industry ratings or
assessments. The performance goals may be calculated without regard to
extraordinary items or accounting changes.

Prior to payment of any Award, the Committee, or its delegate, will certify
that the applicable performance goals have been met. In connection with such
certification, the Committee, or its delegate, may decide to pay amounts which
are less than the Award otherwise payable for achievement of the applicable
performance goals. The Committee may base the decision to reduce the Award on
any criteria it deems relevant. Payment of an Award to a Participant will
occur only after such certification and will be made as determined by the
Committee in its sole discretion after the end of such performance period. The
Committee may permit a Participant to defer payment of an Award.

Individual Limit

The maximum Award to any Participant with respect to any fiscal year shall
be $2 million.

Amendment and Termination

The Committee may at any time amend, suspend or terminate the Plan in whole
or in part. An amendment, suspension or termination of the Plan will not
adversely affect the rights or obligations under any Award granted to a
Participant before the amendment, suspension or termination of the Plan.

Miscellaneous

A Participant's rights and interest under the Plan generally may not be
assigned, transferred or encumbered, except in the event of a Participant's
death or as may be approved by the Committee. No Award under the Plan will be
construed as giving any employee a right to continued employment with PP&L
Resources or its subsidiaries.

Shareowner Approval

Approval of the Plan requires the affirmative vote of the holders of a
majority of the shares present, or represented by Proxy, and entitled to vote
at the Meeting.

The Committee has approved the Plan and the Company's Board of Directors
recommends that Shareowners vote for the approval of the Plan. Accordingly,
the persons named in the enclosed Proxy intend to vote at the meeting for the
approval of the Plan unless otherwise directed by the Shareowner appointing
them. The Plan is effective as of January 1, 1999, subject to Shareowner
approval.

MISCELLANEOUS

The Board of Directors is not aware of any other matters to be presented for
action at the Meeting. If any other matter requiring a vote of the Shareowners
should arise, it is intended that the persons named as proxies will vote in
accordance with their best judgment.

20
<PAGE>

METHOD AND EXPENSE OF SOLICITATION OF PROXIES

The cost of soliciting Proxies on behalf of the Board of Directors will be
paid by the Company. In addition to the solicitation by mail, a number of
regular employees may solicit Proxies in person or by telephone, telegraph or
facsimile. The Company has retained Innisfree M&A Incorporated to assist in
the solicitation of Proxies for the Annual Meeting. It is expected that the
remuneration to Innisfree for its services will not exceed $12,500. Brokers,
dealers, banks and their nominees who hold shares for the benefit of others
will be asked to send Proxy material to the beneficial owners of the shares,
and the Company will reimburse them for their expenses.

PROPOSALS FOR 2000 ANNUAL MEETING

To be included in the Proxy material for the 2000 Annual Meeting, any
proposal intended to be presented at that Meeting by a Shareowner must be
received by the Secretary no later than November 15, 1999. To be properly
brought before the Meeting, any proposal must be received by seventy-five days
prior to the 2000 Annual Meeting.

ANNUAL FINANCIAL STATEMENTS

The Company's annual financial statements and related management discussion
are appended to this document as Schedule C.

By Order of the Board of Directors.
Robert J. Grey
Secretary

March 12, 1999

21
<PAGE>

Schedule A

PP&L RESOURCES
INCENTIVE COMPENSATION PLAN

Section 1. Purpose.

The purpose of the PP&L Resources Incentive Compensation Plan (the "Plan")
is to provide a method whereby officers and other key employees of Resources,
PP&L, Inc., and other Affiliated Companies may be awarded additional
remuneration in a manner which increases their ownership interest, aligns
their interest with that of shareowners and encourages them to remain in the
employ of Resources or an Affiliated Company.

The Plan was originally adopted by PP&L, Inc., effective January 1, 1987,
and at that time was named the Pennsylvania Power & Light Company Incentive
Compensation Plan. Sponsorship of the Plan is now being assumed by PP&L
Resources, Inc. and the Plan is hereby renamed as the PP&L Resources Incentive
Compensation Plan.

Section 2. Definitions.

The following definitions are applicable to the Plan:

"Affiliated Company" or "Affiliated Companies" shall mean any parent or
subsidiaries of Resources (or companies under common control with Resources)
which are members of the same controlled group of corporations (within the
meaning of Section 1563(a) of the Code) as Resources.

"Award" means, individually or collectively, Options, Restricted Stock or
other Stock-Based Award granted hereunder.

"Board" means the Board of Directors of Resources.

"Cause" for termination by Resources or an Affiliated Company of a
Participant's employment means (i) the willful and continued failure by
Participant to substantially perform Participant's duties with Resources or an
Affiliated Company (other than any such failure resulting from Participant's
incapacity due to physical or mental illness or, if applicable, any such
actual or anticipated failure after the issuance of any "Notice of Termination
for Good Reason" by the Participant pursuant to any severance agreement
between Participant and Resources or an Affiliated Company) after a written
demand for substantial performance is delivered to Participant by the Board,
which demand specifically identifies the manner in which the Board believes
that Participant has not substantially performed Participant's duties, or (ii)
the willful engaging by Participant in conduct which is demonstrably and
materially injurious to Resources or an Affiliated Company, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act
or failure to act, on Participant's part shall be deemed "willful" unless
done, or omitted to be done, by Participant not in good faith and without
reasonable belief that Participant's act, or failure to act, was in the best
interest of Resources or an Affiliated Company and (y) in the event of a
dispute concerning the application of this provision, no claim by Resources or
an Affiliated Company that Cause exists shall be given effect unless Resources
or the Affiliated Company establishes to the Board by clear and convincing
evidence that Cause exists.

If at the time of determination, a Participant is employed by an Affiliated
Company, for purposes of this definition, the board of directors of such
Affiliated Company shall be substituted for the Board.

"Change in Control" means the occurrence of any one of the following events:
(i) any change in the control of Resources of a nature that would be required
to be reported in response to Item 1(a) of Form 8-K under the Exchange Act;
(ii) during any period of not more than two consecutive years, individuals who
at the beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into an
agreement with Resources to effect a transaction described in clause (i),
(iii) or (iv) of this paragraph) whose election by the Board or nomination for
election by Resources' shareowners was approved or recommended by a vote of at
least two-thirds ( 2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved or recommended, cease for any reason to
constitute at least a majority thereof; (iii) any Person becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of

A-1
<PAGE>

Resources representing 20% or more of the combined voting power of Resources'
then outstanding securities entitled to vote generally in the election of
directors; (iv) the approval by the shareowners of Resources of any merger or
consolidation of Resources with any other corporation or a plan of complete
liquidation of Resources or the sale or other disposition of all or
substantially all of the assets of Resources to any other person or persons
unless, after giving effect thereto, (a) holders of Resources' then
outstanding securities entitled to vote generally in the election of directors
will own a majority of the outstanding stock entitled to vote generally in the
election of directors of the continuing, surviving or transferee corporation
or any parent (within the meaning of Rule 12b-2 under the Exchange Act)
thereof and (b) the incumbent members of the Board as constituted immediately
prior thereto shall constitute at least a majority of the directors of the
continuing, surviving or transferee corporation and any parent thereof; or (v)
the Board adopts a resolution to the effect that a "Change in Control" has
occurred or is anticipated to occur.

"Code" means the Internal Revenue Code of 1986, as may be amended from time
to time. Reference in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations promulgated thereunder.

"Committee" means two or more nonemployee directors, unless otherwise
determined by the Board, who have been designated by the Board to act as the
Committee and qualify as nonemployee directors under the Exchange Act and
outside directors under Section162(m) of the Code.

"Common Stock" means the common stock of Resources.

"Date of Grant" means the date on which the granting of an Award is
authorized by the Committee or such later date as may be specified by the
Committee in such authorization.

"Disability" or "Disabled" means the inability of the Participant to perform
each and every duty pertaining to the Participant's regular occupation by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than six months.

"Eligible Employee" means any person employed by Resources or an Affiliated
Company on a regularly scheduled basis during any portion of a period for
which an Award can be made and who satisfies all of the requirements of
Section 6.

"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time. Reference in this Plan to any section of the Exchange Act shall
be deemed to include any amendments or successor provisions to such section
and any rules promulgated thereunder.

"Fair Market Value" means the average of the high and low sale prices of the
Common Stock as reflected in the New York Stock Exchange Composite
Transactions on the date as of which Fair Market Value is being determined or,
if no Common Stock is traded on the date as of which Fair Market Value is
being determined, Fair Market Value shall be the average of the high and low
sale prices of the Common Stock as reflected in the New York Stock Exchange
Composite Transactions on the next preceding day on which the Common Stock was
traded.

"Good Reason" for termination of Participant's employment with Resources or
an Affiliated Company by such Participant means the occurrence (without
Participant's express written consent) after a Change in Control or after a
Potential Change in Control (treating all references to a "Change in Control"
in paragraphs (a) through (g), below, as including references to a "Potential
Change in Control" to the extent appropriate), of any one of the following
acts or failures to act, by Resources or an Affiliated Company:

(i) the assignment to Participant of any duties inconsistent with
Participant's status as an executive officer or key employee of Resources
or an Affiliated Company or a substantial adverse alteration in the nature
or status of Participant's responsibilities from those in effect
immediately prior to a Change in Control;

(ii) a reduction by Resources or an Affiliated Company of Participant's
annual base salary as in effect immediately prior to date the Change of
Control or Potential Change of Control occurs or as the same may be
increased from time to time, except that across-the-board decreases
uniformly affecting management, key employees and salaried employees of
Resources or an Affiliated Company, or the business unit in which
Participant is then employed shall not be treated as Good Reason;

A-2
<PAGE>

(iii) the relocation of Participant's principal work location to a
location more than 30 miles from such work location immediately prior to a
Change in Control, or Resources' or an Affiliated Company's requiring the
Participant to be based anywhere other than such principal place of
employment (or permitted relocation thereof) except for required travel on
Resources' or an Affiliated Company's business to an extent substantially
consistent with the Participant's present business travel obligations as in
effect immediately prior to the Change in Control;

(iv) the failure by Resources or an Affiliated Company to pay to
Participant any portion of Participant's current compensation or to pay to
Participant any portion of an installment of deferred compensation under
any deferred compensation program of Resources or an Affiliated Company,
within seven (7) days of the date such compensation is due, except for
across-the-board compensation deferrals uniformly affecting management, key
employees and salaried employees of Resources or an Affiliated Company, or
the business unit in which Participant is then employed;

(v) the failure by Resources or an Affiliated Company to continue in
effect any compensation or benefit plan in which Participant participates
immediately prior to a Change in Control which is material to Participant's
total compensation, or any substitute plans adopted prior to a Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by Resources or Affiliated Company to continue Participant's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount or timing
of payment of benefits provided and the level of Participant's
participation relative to other participants, as existed immediately prior
to the Change in Control;

(vi) the failure by Resources or an Affiliated Company to continue to
provide Participant with benefits substantially similar to those enjoyed by
Participant under any of Resources' or an Affiliated Company's pension,
retirement, savings, life insurance, medical, health and accident, or
disability plans in which Participant was participating immediately prior
to a Change in Control, except for across-the-board changes to any such
plans uniformly affecting all participants in such plans, the taking of any
action by Resources or an Affiliated Company which would directly or
indirectly materially reduce any of such benefits or deprive Participant of
any material fringe benefit enjoyed by Participant immediately prior to a
Change in Control, or the failure by Resources or an Affiliated Company to
provide Participant with the number of paid vacation days to which
Participant is entitled on the basis of years of service with Resources or
an Affiliated Company in accordance with Resources' or an Affiliated
Company's normal vacation policy in effect at the time of the Change in
Control; or

(vii) any purported termination of the Participant's employment which is
not effected in the manner required by any severance agreement between the
Participant and Resources or an Affiliated Company.

Participant's right to terminate his or her employment with Resources or an
Affiliated Company for Good Reason shall not be affected by Participant's
incapacity due to physical or mental illness. Participant's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder.

For purposes of any determination regarding the existence of Good Reason,
any claim by the Participant that Good Reason exists shall be presumed correct
unless Resources or an Affiliated Company establishes to the Board by clear
and convincing evidence that Good Reason does not exist. If at the time of any
such determination, the Participant is employed by an Affiliated Company, such
determination shall be made by the board of directors of such Affiliated
Company, rather than the Board.

"Incentive Stock Option" means an incentive stock option within the meaning
of Section 422 of the Code.

"Option" or "Stock Option" means either an Incentive Stock Option or a
nonqualified stock option granted under Section 8 with respect to Common
Stock.

"Other Stock-Based Award" means an award granted under Section 11.

"Participant" means an Eligible Employee who has been granted an Award under
the Plan.

"Performance-Based Award" means an Other Stock-Based Award granted under
Section 11.

A-3
<PAGE>

"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof; provided,
however, a Person shall not include (i) Resources or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of Resources or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the shareowners of Resources in
substantially the same proportions as their ownership of stock of Resources.

"Plan" means the PP&L Resources Incentive Compensation Plan, as amended and
restated.

"Potential Change in Control" means the occurrence of any one of the
conditions set forth in the following clauses: (i) Resources enters into an
agreement, the consummation of which would result in the occurrence of a
Change in Control; (ii) any Person publicly announces an intention to take or
to consider taking actions which if consummated would constitute a Change in
Control; (iii) any Person is or becomes the beneficial owner, directly or
indirectly, of securities of Resources representing 5% or more of the combined
voting power of Resources then outstanding securities entitled to vote
generally in the election of directors; or (iv) the Board adopts a resolution
to the effect that, for purposes of this Plan, a Potential Change in Control
has occurred.

"Resources" means PP&L Resources, Inc.

"Restricted Stock" means Common Stock awarded to a Participant under Section
7.

"Restriction Period" means that period of time determined by the Committee
pursuant to Section 7B that a Restricted Stock Award is subject to a
restriction on its transfer.

"Retirement" means

(i) for a Participant who is entitled to benefits under the PP&L
Retirement Plan, termination of employment with Resources and all of its
Affiliated Companies after satisfying the conditions for early retirement,
normal retirement or late retirement under such plan; or

(ii) for all other Participants, termination of employment with Resources
and all of its Affiliated Companies after (a) attaining age 65, or (b)
after attaining age 50, if the Committee, in its sole discretion determines
that such termination constitutes "Retirement" for purposes of this Plan.

"Termination" means a Participant's resignation or discharge from employment
with Resources and all of its Affiliated Companies for any reason other than
death, Disability or Retirement.

Section 3. Effective Date and Duration.

Upon the approval of the predecessor plan by the holders of a majority of
the shares of 4 1/2% Preferred Stock, Series Preferred Stock, Preference Stock
and Common Stock of PP&L, Inc. present (either in person or by proxy) at the
1987 Annual Meeting of shareowners, the predecessor plan became effective on
January 1, 1987. This Plan as amended and restated shall become effective as
of January 1, 1999 upon the approval of the Plan by the holders of a majority
of the shares of Resources /Common Stock present (either in person or by
proxy) at the 1999 Annual Meeting of Shareowners. Awards of Incentive Stock
Options may be made under the Plan for a period of ten years after January 1,
1999. This Plan shall continue in effect until all matters relating to the
payment of Awards and the administration of the Plan have been settled.

Section 4. Administration of the Plan.

The Plan shall be administered by the Committee. The Committee shall have
full power and authority to make Awards to Eligible Employees pursuant to the
provisions of the Plan, to interpret the provisions of the Plan and to
supervise the administration of the Plan and to delegate any of the foregoing
responsibilities to any Person, who, in its sole discretion, it deems
appropriate, provided such delegation is consistent with the requirements of
Section 162(m) of the Internal Revenue Code, if applicable.

All decisions made by the Committee pursuant to the provisions of the Plan
shall be final, conclusive and binding upon all parties affected thereby.

A-4
<PAGE>

Section 5. Grant of Awards and Limitation of Number of Shares Awarded.

The Committee may, from time to time, grant Awards to one or more Eligible
Employees, provided that: (i) subject to any adjustment pursuant to Section
10G and any limitation pursuant to Section 10H, the maximum number of shares
of Common Stock subject to Awards (including Incentive Stock Options) shall
not exceed annually 2% of the outstanding Common Stock of Resources on the
first day of each calendar year commencing on and after January 1, 1999; (ii)
the maximum number of Options awarded to any single Eligible Employee in any
calendar year shall not exceed 1.5 million shares; provided that any portion
of such maximum number of shares that has not been granted may be carried over
and used in any subsequent year; (iii) to the extent that an Award lapses or
is forfeited or the rights of the Participant to whom an Award was granted
terminate, any shares of Common Stock subject to such Award shall again be
available for the grant of an Award under the Plan; and (iv) shares delivered
under the Plan may be authorized and unissued Common Stock, Common Stock held
in the treasury of Resources or Common Stock purchased on the open market
(including private purchases) in accordance with applicable securities laws.

Section 6. Eligibility.

A. Covered Employees. Officers and other key employees of Resources or an
Affiliated Company (including officers or employees who are members of the
Board or the Board of Directors of Resources and/or any Affiliated Company,
but excluding directors who are not officers or employees).

B. Selection of Participants. Subject to the provisions of the Plan, the
Committee shall from time to time select from the Eligible Employees those to
whom Awards shall be granted and determine the amount of such Award. No
officer or employee of Resources or an Affiliated Company shall have any right
to be granted an Award under the Plan.

Section 7. Restricted Stock.

A. Grants of Restricted Stock. An Award of Restricted Stock shall be granted
in the form of shares of Common Stock, restricted as provided in this Section
7. The Restricted Stock shall be issued without the payment of consideration
by the Participant. The certificates for the Restricted Stock shall be issued
in the name of the Participant to whom the Award is made, shall be retained by
Resources on behalf of the Participant (together with a stock power endorsed
in blank) and shall bear a restrictive legend prohibiting the sale, transfer,
pledge or hypothecation of the Restricted Stock until the expiration of the
Restriction Period.

The Committee may also impose such other restrictions and conditions on the
Restricted Stock as it deems appropriate.

Upon the issuance to a Participant of Restricted Stock, the Participant
shall have the right to vote the Restricted Stock and receive cash dividends
distributable with respect to such Restricted Stock.

Upon completion of the Restriction Period, all restrictions on the Award
will expire and new certificates representing the Restricted Stock will be
issued without the restrictive legend described in this Section 7. As a
condition precedent to the receipt of these new certificates, the Participant
(or the Participant's designated beneficiary or personal representative) will
agree to make payment to Resources or an Affiliated Company of the amount of
any federal, state or local taxes, payable by the Participant, which are
required to be withheld by Resources or an Affiliated Company with respect to
the Award.

B. Restriction Period. At the time a Restricted Stock Award is granted, the
Committee shall establish a Restriction Period applicable to such Award which
shall be not less than three years and not more than ten years from the Date
of Grant, subject to the provisions of Section 7C. Each Restricted Stock Award
may have a different Restriction Period.

Notwithstanding the other provisions of this Section 7: (i) in the event of
a Change in Control, the Restriction Periods on all Restricted Stock Awards
previously granted shall lapse and; (ii) apart from a Change in Control, the
Committee is also authorized, in its sole discretion to accelerate the time at
which any or all of the restrictions on all or any part of a Restricted Stock
Award shall lapse or to remove any or all of such restrictions whenever the
Committee may decide that changes in tax or other laws or other circumstances
arising after the granting of a Restricted Stock Award make such action
appropriate; provided, however, that no acceleration or removal of

A-5
<PAGE>

restrictions pursuant to this clause (ii) shall result in payout of Common
Stock to the Participant less than six months after the Date of Grant, except
pursuant to Section 7C below upon the Termination, death, Disability or
Retirement of the Participant.

C. Forfeiture or Payout of Award. During the Restriction Period, Restricted
Stock Awards are subject to forfeiture or payout (i.e., removal of
restrictions) as indicated for each of the following events:

(a) Termination--In this event, the Restricted Stock Award will be
completely forfeited.

(b) Retirement--In this event, the Restricted Stock Award will be
completely forfeited.

(c) Disability--In this event, payout of the Restricted Stock Award will
be prorated as if the Participant had maintained active employment until
age 65.

(d) Death--In this event, payout of the Restricted Stock Award will be
prorated as if the Participant had maintained active employment until age
65.

In any instance where payout of a Restricted Stock Award is to be prorated,
the Committee may choose in its sole discretion to provide the Participant (or
the Participant's estate) with the entire Award rather than the prorated
portion thereof.

Notwithstanding anything in this Section 7C to the contrary, in the event
that prior to any payout of Common Stock a Participant described in paragraph
(c) violates any noncompete agreements between Participant and Resources or an
Affiliated Company, his Restricted Stock Award will be completely forfeited.

Any Restricted Stock which is forfeited hereunder will be transferred to
Resources.

D. Section 83(b) Election. As a condition of receiving Restricted Stock, a
Participant shall agree in writing to notify Resources within 30 days of the
Date of Grant whether or not the Participant has made an election under
Section 83(b) of the Code to report the value of the Restricted Stock as
income on the Date of Grant.

Section 8. Stock Options.

A. Grant of Option. One or more Options may be granted to any Eligible
Employee designated by the Committee in such amounts and subject to such terms
and conditions as the Committee may from time to time, in its sole discretion,
determine, but which are consistent with the terms of this Plan.

B. Notification of the Grant of an Option. Each Option granted under the
Plan shall be evidenced by a Notification of the Grant of an Option
("Notification"). The Notification shall contain such provisions as determined
by the Committee, which may include, without limitation, provisions to qualify
Incentive Stock Options as such under Section 422 of the Code; provided,
however, that each Notification must at a minimum include the following terms
and conditions: (i) that the Options are exercisable either in whole or in
part, with a partial exercise not affecting the exercisability of the balance
of the Option; (ii) every share of Common Stock purchased through the exercise
of an Option shall be paid for in full at the time of the exercise; (iii) each
Option shall cease to be exercisable, as to any share of Common Stock, upon
the first to occur of (a) the Participant's purchase of the Common Stock to
which the Option relates; or (b) the lapse of the Option; and (iv) unless
authorized by the Committee, Options shall not be transferable by the
Participant except by will or the laws of descent and distribution and shall
be exercisable during the Participant's lifetime only by the Participant or by
the Participant's guardian or legal representative.

C. Exercise of an Option. A Participant shall exercise an Option by
executing and delivering to Resources an "Election to Exercise an Option." The
Election to Exercise an Option shall be in such form and shall contain such
provisions consistent with the terms of this Plan and the Notification with
respect to such Option as are determined by the Committee. Notwithstanding the
foregoing, if the Committee determines that issuance of shares of Common Stock
should be delayed pending (A) registration under federal or state securities
laws, (B) the receipt of an opinion of counsel satisfactory to the Committee
that an appropriate exemption from such registration is available, (C) the
listing or inclusion of the shares of Common Stock on any securities exchange
or an automated quotation system or (D) the consent or approval of any
governmental regulatory body whose consent or approval is necessary in
connection with the issuance of such Common Stock, the Committee may defer
exercise of any Option granted hereunder until any of the events described in
this sentence has occurred.

A-6
<PAGE>

D. Option Price. The Option price per share of Common Stock shall be set
forth in the Notification, but shall not be less than 100% of the Fair Market
Value per share as of the Date of Grant.

E. Form of Payment. At the time of the exercise of the Option, the Option
price shall be payable in United States dollars by (i) check, (ii) in other
shares of Common Stock, (iii) by such other mode of payment as the Committee
may approve, including payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board, or (iv) in a
combination of forms (i), (ii) and (iii). When Common Stock is used in full or
partial payment of the Option price, it shall be valued at its Fair Market
Value on the date the Option is exercised.

F. Other Terms and Conditions. Provided the Option price is paid in full,
the Option shall be exercisable in whole or in part in such manner and during
such period, as shall be set forth in the Notification.

G. Right to Exercise. Each Participant must remain in the continuous employ
of Resources or an Affiliated Company for one year from the date the
Participant's Option is granted before the Participant can exercise any part
thereof. Notwithstanding the foregoing, if a Change in Control occurs prior to
the satisfaction of a Participant's one year of continuous employment
requirement, that requirement shall no longer be applicable. Following the
satisfaction of the one year of continuous employment requirement or following
a Change in Control, whichever is applicable, the Option will be exercisable
as follows:

(a) Each Option shall be exercisable in its entirety or in such
installments, which need not be equal, and upon such contingencies, as the
Committee shall determine in its discretion, provided that in no event
shall the right to exercise an Option extend beyond the day before the
tenth anniversary of the Date of Grant, and further provided that in the
event of a Change in Control, any portion of the Option that is not then
exercisable shall become immediately exercisable following the Change in
Control. The Committee is authorized, in its sole discretion, to accelerate
the time at which all or any part of an Option may be exercisable.

(b) The right to exercise a portion of the Option included in any
exercisable installment is cumulative; once such right has become
exercisable, it may be exercised in whole at any time or in part from time
to time until the expiration of the Option term, including without
limitation, any installment that becomes exercisable following a Change in
Control.

H. Term of Option. At the time an Option is granted, the Committee shall
establish an Option term applicable to such Award. Except as otherwise
provided in this Plan or in the Notification, the Option term for any Award
shall not end later than the earliest of the following:

(a) the date a Participant violates any non-compete agreement entered
into by the Participant and Resources or an Affiliated Company;

(b) the day before the tenth anniversary of the Date of Grant for such
Award; or

(1) Termination--The Option term with respect to all Awards to a
Participant who has a Termination shall end on the date of such
Termination; provided, however, that the Committee is authorized in its
sole discretion to extend the Option term for a period of not more than
90 days after the date of Termination.

(2) Retirement, Death or Disability--The Option term with respect to
all Awards to a Participant who has a Retirement, death or Disability
shall end 36 months after the date of such Retirement, death or
Disability.

(3) Change in Control--Notwithstanding anything in this Section 8H to
the contrary, the Option term with respect to all Awards to a
Participant whose employment terminates with Resources and all
Affiliated Companies following a Change in Control shall end 36 months
after the date Participant's employment terminates with Resources and
all Affiliated Companies following the Change in Control. A
Participant's employment shall be treated as having terminated following
a Change in Control only if:

(I) The Participant's employment terminates within 36 months after
the month in which a Change in Control occurs, unless such
termination of employment is (1) by Resources or an Affiliated
Company for Cause, or (2) by the Participant without Good Reason, or
(3) by reason of death, Disability or Retirement, or

A-7
<PAGE>

(II) The Participant's employment is terminated prior to a Change
in Control (whether or not a Change in Control ever occurs)

(A) by Resources or an Affiliated Company without Cause, at the
request or direction of a Person who has entered into an agreement
with Resources the consummation of which would constitute a Change
in Control, or

(B) at the Participant's initiative for Good Reason and the
circumstance or event which constitutes Good Reason occurs at the
direction of such Person, or

(III) the Participant's employment is terminated by Resources or an
Affiliated Company without Cause or by the Participant for Good
Reason, and such termination or the circumstance or event which
constitutes Good Reason is otherwise in connection with or in
anticipation of a Change in Control (whether or not a Change in
Control occurs).

For purposes of any determination regarding the applicability of paragraphs
(II) and (III), above, any position taken by the Participant shall be presumed
to be correct unless Resources or an Affiliated Company establishes to the
Board by clear and convincing evidence that such position is not correct.
Moreover, if at the time of any such determination, a Participant is employed
by an Affiliated Company, such determination shall be made by the board of
directors of such Affiliated Company, rather than the Board.

I. Rights as a Shareowner. A Participant or a transferee of a Participant
shall have no rights as a shareowner with respect to any shares of Common
Stock covered by an Option until the date of the issuance of a certificate for
such shares of Common Stock. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 10G.

J. Modification, Extension and Renewal of Options. Subject to the terms and
conditions and within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options granted under the Plan, or accept the
exchange of outstanding Options (to the extent not theretofore exercised) for
the granting of new Options in substitution therefor. Notwithstanding the
foregoing, no modification of an Option shall, without the consent of the
Participant, alter or adversely affect the rights or obligations of a
Participant under any Option previously granted under the Plan.

K. Early Disposition of Common Stock. If a Participant shall dispose of any
shares of Common Stock purchased pursuant to an Incentive Stock Option within
one year from the date the shares were acquired or within two years from the
Date of Grant of the Option under which such shares of Common Stock were
purchased, then, to provide Resources with the opportunity to claim the
benefit of any income tax deduction which may be available to it under the
circumstances, the Participant shall within ten days of such disposition
notify Resources of the dates of acquisition and disposition of such shares of
Common Stock, the number of shares so disposed and the consideration, if any,
received therefor.

L. Individual Dollar Limitations. In the case of an Incentive Stock Option,
the aggregate fair market value (determined at the time such Option is
granted) of the Common Stock with respect to which an Incentive Stock Option
is exercisable for the first time by an Eligible Employee during any calendar
year (whether under this Plan or another plan or arrangement of Resources or
an Affiliated Company) shall not exceed $100,000 (or such other limit as may
be in effect under the Code on the date of exercise).

M. No Obligation to Exercise Option. The granting of an Option shall impose
no obligation on the Participant to exercise such Option.

Section 9. Amendment of the Plan.

The Committee may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part, except: (i) no such action may be
taken without approval by the shareowners of Resources which materially
increases the benefits accruing to Participants pursuant to the Plan,
increases the number of shares of Common Stock which may be issued pursuant to
the Plan (except as provided in Section 10G) or materially modifies the
requirements as to eligibility for participation in the Plan; and (ii) no such
action may be taken without the consent of the Participant to whom any Award
shall previously have been granted, which adversely affects the rights of such
Participant concerning such Award, except as such termination or amendment of
the Plan is required by statute, or rules and regulations promulgated
thereunder.

A-8
<PAGE>

Section 10. Miscellaneous Provisions.

A. Nontransferability. No benefit or right provided under the Plan shall be
subject to alienation or assignment by a Participant (or by any person
entitled to such benefit pursuant to the terms of the Plan) or subject to
attachment or other legal process of whatever nature. Any attempted
alienation, assignment or attachment shall be void and of no effect. Payment
shall be made only to the Participant entitled to receive the same or to the
Participant's authorized legal representative. Deposit of any sum in any
financial institution to the credit of any Participant (or of a person
entitled to such sum pursuant to the terms of the Plan) shall constitute
payment to that Participant (or such person). Resources and all Affiliated
Companies will observe the terms of the Plan unless and until ordered to do
otherwise by a state or federal court. As a condition of participation, each
Participant agrees to hold Resources and all Affiliated Companies harmless
from any claim that arises out of Resources' or an Affiliated Company's
obeying any such order whether such order affects a judgment of such court or
is issued to enforce a judgment or order of another court.

B. No Employment Right. Neither this Plan nor any action taken hereunder
shall be construed as giving any right to be retained as an employee of
Resources or any Affiliated Company.

C. Tax Withholding. Whenever under the Plan Common Stock is to be delivered
pursuant to an Award, Resources may require as a condition of delivery that
Participant remit an amount sufficient to satisfy all federal, state and local
tax withholding requirements related thereto. In addition, Resources may
deduct from any salary or other payment due to such Participant, an amount
sufficient to satisfy all federal, state and local tax withholding
requirements related to the delivery of Common Stock under the Plan. Without
limiting the generality of the foregoing, Participant may elect to satisfy all
or part of the foregoing withholding requirements by delivery of unrestricted
shares of Common Stock owned by Participant for at least six months (or such
other period as Resources may determine), having a Fair Market Value
(determined as of the date of such delivery by Participant) equal to all or
part of the amounts to be so withheld. As a condition of accepting such
delivery, Resources may require Participant to furnish an opinion of counsel
acceptable to Resources to the effect that such delivery will not result in
Participant incurring any liability under Section 16(b) of the Exchange Act.
Alternatively, Resources may permit any such delivery to be made by
withholding shares of Common Stock from the shares otherwise issuable pursuant
to the Award giving rise to the tax withholding obligation (in which event the
shares shall be valued at their Fair Market Value on the date when the
withholding taxes are otherwise due).

D. Government and Other Regulations. The obligation of Resources to make
payment for any Awards shall be subject to all applicable laws, rules and
regulations, and to such approvals by any government agencies as the Committee
may determine in its sole discretion to be required.

E. Indemnification. Each person who is or at any time serves as a member of
the Board, the Committee or Resources' Board of Directors shall be indemnified
and held harmless by Resources against and from: (i) any loss, cost, liability
or expense that may be imposed upon or reasonably incurred by such person in
connection with or resulting from any claim, action, suit or proceeding to
which such person may be a party or in which such person may be involved by
reason of any action or failure to act under the Plan; and (ii) any and all
amounts paid by such person in satisfaction of judgment in any such action,
suit or proceeding relating to the Plan. Each person covered by this
indemnification shall give Resources an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend
it on such person's own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the bylaws of Resources, as a matter of law, or
otherwise, or any power that Resources may have to indemnify such person or
hold such person harmless.

F. Reliance on Reports. Each member of the Board, the Committee and
Resources' Board of Directors shall be fully justified in relying or acting in
good faith upon any report made by the independent public accountants of, or
counsel for, Resources and upon any other information furnished in connection
with the Plan. In no event shall any person who is or shall have been a member
of the Board, the Committee or Resources' Board of Directors be liable for any
determination made or other action taken or any failure to act in reliance
upon any such report or information or for any action taken, including without
limitation the furnishing of information, or failure to act, if in good faith.

G. Changes in Capital Structure. In the event of any change in the
outstanding shares of Common Stock by reason of any stock dividend or split,
recapitalization, combination or exchange of shares or other similar

A-9
<PAGE>

changes in the Common Stock, appropriate adjustments shall be made in the
shares of Restricted Stock theretofore awarded to the Participants, the shares
of Common Stock subject to outstanding and unexercised Options and the
aggregate number of shares of Common Stock which may be awarded pursuant to
the Plan. Such adjustments shall be conclusive and binding for all purposes.
Additional shares of Restricted Stock issued to a Participant as the result of
any such change shall bear the same restrictions as the shares of Common Stock
to which they relate.

H. New York Stock Exchange Requirements. In accordance with the requirements
of the New York Stock Exchange (the "NYSE") for the listing of newly issued
shares of Common Stock subject to Awards, the Committee may not grant Awards
under the Plan to the extent that the aggregate number of shares subject to
Awards granted after approval of the Plan at the 1999 Annual Meeting of
Shareowners of Resources would exceed 5% of the outstanding Common Stock of
Resources on the date of such Annual Meeting, unless the issuance of the
shares of Common Stock subject to any such additional Awards has been approved
by the shareowners of Resources to the extent required by the rules of the
NYSE.

I. Company Successors. In the event Resources becomes a party to a merger,
consolidation, sale of substantially all of its assets or any other corporate
reorganization in which Resources will not be the surviving corporation or in
which the holders of the Common Stock will receive securities of another
corporation, then such other corporation shall assume the rights and
obligations of Resources under this Plan.

J. Governing Law. All matters relating to the Plan or to Awards granted
hereunder shall be governed by the laws of the Commonwealth of Pennsylvania
without regard to its conflict of laws principles.

K. Relationship to Other Benefits. The value of Awards hereunder and
dividends paid on the Common Stock during the Restriction Period, will be
considered earnings for purposes of PP&L's Supplemental Executive Retirement
Plan to the extent provided for therein. Otherwise, Awards under the Plan
shall not be taken into account in determining any benefits under any pension,
retirement, profit sharing, disability or group insurance plan of Resources or
any Affiliated Company except as may be required by federal tax law and
regulation or to meet other applicable legal requirements.

L. Expenses. The expenses of administering the Plan shall be borne by
Resources and the Affiliated Companies whose Eligible Employees have been
granted Awards.

M. Titles and Headings. The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.

Section 11. Other Stock-Based Awards

(a) Generally. The Committee, in its sole discretion, may grant awards of
Common Stock, awards of restricted shares and awards that are valued in whole
or in part by reference to, or are otherwise based on the Fair Market Value
of, Common Stock ("Other Stock-Based Awards"). Such Other Stock-Based Awards
shall be in such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to receive one or
more shares of Common Stock (or the equivalent cash value of such Common
Stock) upon the completion of a specified period of service, the occurrence of
an event and/or the attainment of performance objectives. Other Stock-Based
Awards may be granted alone or in addition to any other Awards granted under
the Plan. Subject to the provisions of the Plan, the Committee shall determine
to whom and when Other Stock-Based Awards will be made; the amount of Common
Stock to be awarded under (or otherwise related to) such Other Stock-Based
Awards; whether such Other Stock-Based Awards shall be settled in cash, Common
Stock or a combination of cash and Common Stock; and all other terms and
conditions of such Awards (including, without limitation, the vesting
provisions thereof).

(b) Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Other Stock-Based Awards granted under this Section 11 may be
granted in a manner which is deductible by Resources under Section 162(m) of
the Code (or any successor section thereto) ("Performance-Based Awards"). A
Participant's Performance-Based Award shall be determined based on the
attainment of written performance goals approved by the Committee for a
performance period established by the Committee (i) while the outcome for that
performance period is substantially uncertain and (ii) no more than 90 days
after the commencement of

A-10
<PAGE>

the performance period to which the performance goal relates or, if less, the
number of days which is equal to 25 percent of the relevant performance
period. The performance goals, which must be objective, shall be based upon
one or more of the following criteria: (i) earnings before or after taxes
(including earnings before interest, taxes, depreciation and amortization);
(ii) net income; (iii) operating income; (iv) earnings per share; (v) book
value per share; (vi) return on stockholders' equity; (vii) expense
management; (viii) return on investment before or after the cost of capital;
(ix) improvements in capital structure; (x) profitability of an identifiable
business unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share; (xiv) revenues or sales; (xv) costs;
(xvi) cash flow; (xvii) working capital; (xviii) changes in net assets
(whether or not multiplied by a constant percentage intended to represent the
cost of capital); (xix) return on assets; and (xx) independent industry
ratings or assessments. The foregoing criteria may relate to Resources, one or
more of its subsidiaries or one or more of its divisions, units, minority
investments, partnerships, joint ventures, product lines or products or any
combination of the foregoing, and may be applied on an absolute basis and/or
be relative to one or more peer group companies or indices, or any combination
thereof, all as the Committee shall determine. In addition, to the degree
consistent with Section 162(m) of the Code (or any successor section thereto),
the performance goals may be calculated without regard to extraordinary items
or accounting changes. The maximum amount of a Performance-Based Award to any
Participant with respect to a fiscal year of Resources shall be 1.5 million
shares; provided that any portion of such maximum number of shares that has
not been granted may be carried over and used in any subsequent year. The
Committee shall determine whether, with respect to a performance period, the
applicable performance goals have been met with respect to a given Participant
and, if they have, to so certify and ascertain the amount of the applicable
Performance-Based Award. No Performance-Based Awards will be paid for such
performance period until such certification is made by the Committee. The
amount of the Performance-Based Award determined by the Committee for a
performance period shall be paid to the Participant at such time as determined
by the Committee in its sole discretion after the end of such performance
period; provided, however, that a Participant may, if and to the extent
permitted by the Committee and consistent with the provisions of Section
162(m) of the Code, elect to defer payment of a Performance-Based Award.

A-11
<PAGE>

Schedule B

PP&L RESOURCES, INC.
SHORT-TERM INCENTIVE PLAN

Section 1. Purpose.

The purpose of the Short-Term Incentive Plan (the "Plan") is to advance the
interests of PP&L Resources, Inc. ("Resources"), and its shareholders by
providing incentives in the form of periodic bonus awards ("Awards") to
certain senior executive employees of Resources and its affiliates, thereby
motivating such executives to attain corporate performance goals articulated
under the Plan.

Section 2. Administration.

(a) The Plan shall be administered by two or more "outside directors" as
defined under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), unless otherwise determined by Resources' Board of Directors,
who have been designated by Resources' Board of Directors to act as the
committee (the "Committee").

(b) The Committee shall have the exclusive authority to select the senior
executives to be granted Awards under the Plan, to determine the size and
terms of the Award (subject to the limitations imposed on Awards in Section 4
below), to modify the terms of any Award that has been granted (except for any
modification that would increase the amount of the Award payable to an
executive), to determine the time when Awards will be made and the performance
period to which they relate, to establish performance objectives in respect of
such performance periods, and to certify that such performance objectives were
attained; provided, however, that any such action shall be consistent with the
applicable provisions of Section 162(m) of the Code. The Committee is
authorized to interpret the Plan, to establish, amend and rescind any rules
and regulations relating to the Plan, and to make any other determinations
that it deems necessary or desirable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent the Committee deems
necessary or desirable. Any decision of the Committee in the interpretation
and administration of the Plan, as described herein, shall be final,
conclusive and binding on all parties concerned.

Section 3. Participation.

Awards may be granted to senior executives of Resources and its affiliates
who are "covered employees", as defined in Section 162(m) of the Code, or who
the Committee anticipates may become covered employees. An Executive to whom
an Award is granted shall be a "Participant".

Section 4. Awards Under the Plan.

(a) A Participant's Award shall be determined based on the attainment of
written performance goals approved by the Committee for a performance period
which is established by the Committee (i) while the outcome for that
performance period is substantially uncertain and (ii) no more than 90 days
after the commencement of that performance period or, if less, the number of
days which is equal to 25 percent of that performance period. The performance
goals, which must be objective, shall be based upon one or more of the
following criteria: (i) earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net income; (iii)
operating income; (iv) earnings per share; (v) book value per share; (vi)
return on stockholders' equity; (vii) expense management; (viii) return on
investment before or after the cost of capital; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or product; (xi)
maintenance or improvement of profit margins; (xii) stock price; (xiii) market
share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow; (xvii) working
capital (xviii) changes in net assets (whether or not multiplied by a constant
percentage intended to represent the cost of capital); (xix) return on assets;
and (xx) independent industry ratings or assessments. The foregoing criteria
may relate to Resources, one or more of its affiliates or one or more of its
divisions or units, or any combination of the foregoing, and may be applied on
an absolute basis and/or be relative to one or more peer group companies or
other indices, or any combination thereof, all as the Committee shall
determine. In addition, to the degree consistent with Section 162(m) of the
Code, the performance goals may be calculated without regard to extraordinary
items or accounting changes. The maximum amount of an Award to any Participant
with respect to a fiscal year of Resources shall be $2.0 million.

B-1
<PAGE>

(b) The Committee shall determine whether the performance goals have been
met with respect to any affected Participant and, if they have, so certify and
ascertain the amount of the applicable Award. No Awards will be paid for that
performance period until such certification is made by the Committee. The
amount of the Award actually paid to any affected Participant may be less than
the amount determined by the applicable performance goal formula, at the
discretion of the Committee. The amount of the Award determined by the
Committee for a performance period shall be paid to the Participant at such
time as determined by the Committee in its sole discretion after the end of
such performance period; provided, however that a Participant may, if and to
the extent permitted by the Committee, elect to defer payment of an Award.

(c) The provisions of this Section 4 shall be administered and interpreted
in accordance with Section 162(m) of the Code to ensure the deductibility by
Resources or its affiliates of the payment of Awards.

Section 5. Amendment and Termination of the Plan.

(a) The Committee may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the
Committee may deem appropriate.

(b) No amendment, suspension or termination of the Plan shall, without the
Participant's consent, impair any of the rights or obligations under any Award
theretofore granted to a Participant under the Plan.

Section 6. Miscellaneous Provisions.

(a) Determinations made by the Committee under the Plan need not be uniform
and may be made selectively among eligible individuals under the Plan, whether
or not such eligible individuals are similarly situated. Neither the Plan nor
any action taken hereunder shall be construed as giving any right to be
retained as an employee of Resources or an affiliate.

(b) A Participant's rights and interest under the Plan may not be assigned
or transferred, hypothecated or encumbered in whole or in part either directly
or by operation of law or otherwise (except in the event of a Participant's
death or disability) including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner; provided,
however, that, subject to applicable law, any amounts payable to any
Participant hereunder are subject to reduction to satisfy any liabilities owed
to Resources or any of its affiliates by the Participant. Any attempted
assignment or transfer, hypothecation or encumbrance shall be void and of no
effect.

(c) Resources and its affiliates shall have the right to deduct from any
payment made under the Plan any federal, state, local or foreign income or
other taxes required by law to be withheld with respect to such payment.

(d) Each person who is or at any time serves as a member of the Committee or
Resources' Board of Directors shall be indemnified and held harmless by
Resources against and from: (i) any loss, cost, liability or expense that may
be imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may
be a party or in which such person may be involved by reason of any action or
failure to act under the Plan; and (ii) any and all amounts paid by such
person in satisfaction of judgment in any such action, suit or proceeding
relating to the Plan. Each person covered by this indemnification shall give
Resources an opportunity, at its own expense, to handle and defend the same
before such person undertakes to handle and defend it on such person's own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
the bylaws of Resources, as a matter of law, or otherwise, or any power that
Resources may have to indemnify such person or hold such person harmless.

(e) Each member of the Committee and Resources' Board of Directors shall be
fully justified in relying or acting in good faith upon any report made by the
independent public accountants of, or counsel for, Resources and upon any
other information furnished in connection with the Plan. In no event shall any
person who is or shall have been a member of the Committee or Resources' Board
of Directors be liable for any determination made or other action taken or any
failure to act in reliance upon any such report or information or for any
action taken, including without limitation the furnishing of information, or
failure to act, if in good faith.

B-2
<PAGE>

(f) All matters relating to the Plan or to Awards granted hereunder shall be
governed by the laws of the Commonwealth of Pennsylvania without regard to its
conflict of laws principles.

(g) The Plan shall be effective as of January 1, 1999. However, if the Plan
is not approved, prior to the payment of any Awards, by the affirmative vote
of holders of a majority of the shares of Resources present, or represented by
Proxy, and entitled to vote, the Plan and all Awards thereunder shall
terminate.

B-3
<PAGE>

Schedule C

PP&L Resources, Inc.
1998 Financial Statements
<PAGE>

Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
Glossary of Terms and Abbreviations...................................... C-1
Review of the Financial Condition and Results of Operations.............. C-4
Report of Independent Accountants........................................ C-21
Management's Report on Responsibility for Financial Statements........... C-22
Consolidated Statement of Income......................................... C-23
Consolidated Statement of Cash Flows..................................... C-24
Consolidated Balance Sheet............................................... C-25
Consolidated Statement of Shareowners' Common Equity..................... C-27
Consolidated Statement of Preferred Stock................................ C-28
Consolidated Statement of Company-Obligated Mandatorily Redeemable
Preferred Securities.................................................... C-29
Consolidated Statement of Long-Term Debt................................. C-30
Notes to Financial Statements............................................ C-31
Selected Financial and Operating Data.................................... C-51
Executive Officers of PP&L Resources, Inc................................ C-52
Shareowner and Investor Information...................................... C-53
Quarterly Financial Data................................................. C-55
</TABLE>
<PAGE>

Glossary of Terms and Abbreviations

AFUDC (Allowance for Funds Used During Construction)--the cost of equity and
debt funds used to finance construction projects that is capitalized as part
of construction cost.

Atlantic--Atlantic City Electric Company

BG&E--Baltimore Gas & Electric Company

CERCLA--Comprehensive Environmental Response, Compensation and Liability Act

Clean Air Act (Federal Clean Air Act Amendments of 1990)--legislation
enacted to address environmental issues including acid rain, ozone and toxic
air emissions.

CTC--competitive transition charge

Customer Choice Act--(Pennsylvania Electricity Generation Customer Choice
and Competition Act)--legislation enacted to restructure the state's electric
utility industry to create retail access to a competitive market for
generation of electricity

DelSur--Distributidora Electricidad del Sur S.A., an electric distribution
company in El Salvador

DEP--Pennsylvania Department of Environmental Protection

District Court--United States District Court for the Eastern District of
Pennsylvania

DOE--Department of Energy

DRIP (Dividend Reinvestment Plan)--program available to shareowners of PP&L
Resources' common stock and PP&L preferred stock to reinvest dividends in PP&L
Resources' common stock instead of receiving dividend checks.

EGS--electric generation supplier

EITF--Emerging Issues Task Force, an organization that aids the FASB in
identifying emerging issues that may require FASB action.

Emel--Empresas Emel, S.A., a Chilean electric distribution holding company

EMF--electric and magnetic fields

Energy Act (Energy Policy Act of 1992)--legislation passed by Congress to
promote competition in the electric energy market for bulk power.

Energy Marketing Center--organization within PP&L responsible for marketing
and trading wholesale energy

EPA--Environmental Protection Agency

ESOP--Employee Stock Ownership Plan

FASB (Financial Accounting Standards Board)--a rulemaking organization that
establishes financial accounting and reporting standards.

FGD--flue gas desulfurization equipment installed at coal-fired power plants
to reduce sulfur dioxide emissions.

FERC (Federal Energy Regulatory Commission)--federal agency that regulates
interstate transmission and sale of electricity and related matters.

GRT--Gross Receipts Tax

C-1
<PAGE>

H.T. Lyons--H.T. Lyons, Inc., a PP&L Resources unregulated subsidiary
specializing in mechanical contracting and engineering.

IBEW--International Brotherhood of Electrical Workers

ISO--Independent System Operator

ITC--intangible transition charge

JCP&L--Jersey Central Power & Light Company

Major utilities--Atlantic, BG&E and JCP&L

McCarl's--McCarl's Inc., a PP&L Resources unregulated subsidiary
specializing in mechanical contracting and engineering.

McClure--McClure Company, a PP&L Resources unregulated subsidiary
specializing in mechanical contracting and engineering.

MSHA--Mine Safety and Health Administration

NOx--nitrogen oxide

NPDES--National Pollutant Discharge Elimination System

NRC (Nuclear Regulatory Commission)--federal agency that regulates operation
of nuclear power facilities

NUG (Non-Utility Generator)--generating plants not owned by regulated
utilities. If the NUG meets certain criteria, its electrical output must be
purchased by public utilities as required by PURPA.

OCA--Pennsylvania Office of Consumer Advocate

OSM--United States Office of Surface Mining

Pa. CNI--Pennsylvania corporate net income tax

PCB (Polychlorinated Biphenyl)--additive to oil used in certain electrical
equipment up to the late-1970s. Now classified as a hazardous chemical.

PECO--PECO Energy Company

Penn Fuel Gas--Penn Fuel Gas, Inc., a PP&L Resources regulated subsidiary
specializing in natural gas distribution, transmission and storage services,
and the sale of propane.

PJM (PJM Interconnection, L.L.C.)--operates the electric transmission
network and electric energy market in the mid-Atlantic region of the U.S.

Plan--PP&L's non-contributory defined benefit pension plan.

PP&L--PP&L, Inc.

PP&L Capital Funding--PP&L Capital Funding, Inc., PP&L Resources' financing
subsidiary.

PP&L Capital Trust--a Delaware statutory business trust created to issue
Preferred Securities, whose common stock is held by PP&L.

PP&L Capital Trust II--a Delaware statutory business trust created to issue
Preferred Securities, whose common stock is held by PP&L.

PP&L EnergyPlus--Refers to PP&L, Inc. d/b/a PP&L EnergyPlus, and PP&L
EnergyPlus Co., a PP&L, Inc. unregulated subsidiary which is involved in
retail electric generating supply. During 1998, PP&L, Inc. d/b/a PP&L

C-2
<PAGE>

EnergyPlus provided retail electric generating supply in the Pennsylvania
retail pilot program. As a result of the PUC restructuring settlement, PP&L
EnergyPlus became a separate subsidiary of PP&L, Inc. in September 1998. As of
January 1999, PP&L EnergyPlus Co. is providing retail electric generating
supply to customers throughout Pennsylvania.

PP&L Global--PP&L Global, Inc., a PP&L Resources unregulated subsidiary
which invests in and develops world-wide power projects.

PP&L Resources--PP&L Resources, Inc., the parent holding company of PP&L,
PP&L Global and other subsidiaries.

PP&L Spectrum--PP&L Spectrum, Inc., a PP&L Resources unregulated subsidiary
which offers energy-related products and services.

PP&L's Mortgage--PP&L's Mortgage and Deed of Trust, dated October 1, 1945.

Preferred Securities--Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely company debentures (issued by
two Delaware statutory business trusts).

PUC (Pennsylvania Public Utility Commission)--state agency that regulates
certain ratemaking, services, accounting, and operations of Pennsylvania
utilities.

PUC Decision--final order issued by the PUC on September 27, 1995 pertaining
to PP&L's base rate case filed in December 1994.

PUC Final Order--Final order issued by the PUC on August 27, 1998, approving
the settlement of PP&L, Inc.'s restructuring proceeding.

PUHCA--Public Utility Holding Company Act of 1935

PURPA (Public Utility Regulatory Policies Act of 1978)--legislation passed
by Congress to encourage energy conservation, efficient use of resources, and
equitable rates.

RCRA--1976 Resource Conservation and Recovery Act

SBRCA--Special Base Rate Credit Adjustment

SEC--Securities and Exchange Commission

SER--Schuylkill Energy Resources, Inc.

SFAS (Statement of Financial Accounting Standards)--accounting and financial
reporting rules issued by the FASB.

SO/2/--Sulfur dioxide

STAS (State Tax Adjustment Surcharge)--rate adjustment mechanism to customer
bills for changes in certain state taxes.

Superfund--federal and state legislation that addresses remediation of
contaminated sites.

SWEB--South Western Electricity plc, a British regional electric utility
company.

U.K.--United Kingdom

VEBA (Voluntary Employee Benefit Association Trust)--trust accounts for
health and welfare plans for future payments to employees, retirees or their
beneficiaries.

VERP--Voluntary Early Retirement Program

Year 2000--a set of date-related problems that may be experienced by
software systems or applications.

C-3
<PAGE>

REVIEW OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PP&L RESOURCES,
INC.

PP&L Resources is a holding company with headquarters in Allentown, PA. Its
subsidiaries include PP&L, which provides electricity delivery service in
eastern and central Pennsylvania, sells retail electricity throughout
Pennsylvania and markets wholesale electricity in 28 states and Canada; PP&L
EnergyPlus (a subsidiary of PP&L), which sells competitively-priced energy and
energy services to newly deregulated markets; PP&L Global, an international
independent power company which invests in and develops worldwide power
projects; PP&L Spectrum, which markets energy-related services and products;
PP&L Capital Funding, which provides debt funding for PP&L Resources and its
subsidiaries other than PP&L; Penn Fuel Gas, which provides natural gas
distribution, transmission and storage services and sells propane; and H.T.
Lyons and McClure, which are mechanical contractor and engineering firms. In
February 1999, PP&L Resources acquired McCarl's Inc., another mechanical
contractor and engineering firm. Other subsidiaries may be formed by PP&L
Resources to take advantage of new business opportunities.

The financial condition and results of operations of PP&L and PP&L Global
are currently the principal factors affecting the financial condition and
results of operations of PP&L Resources. All fluctuations, unless specifically
noted, are primarily due to activities of PP&L and PP&L Global.

Terms and abbreviations appearing in the Review of the Financial Condition
and Results of Operations are explained in the glossary.

Forward-looking Information

Certain statements contained in this Form 10-K concerning expectations,
beliefs, plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements which are other than
statements of historical facts, are "forward-looking statements" within the
meaning of the federal securities laws. Although PP&L Resources and PP&L
believe that the expectations reflected in these statements are reasonable,
there can be no assurance that these expectations will prove to have been
correct. These forward-looking statements involve a number of risks and
uncertainties, and actual results may differ materially from the results
discussed in the forward-looking statements. The following are among the
factors that could cause actual results to differ materially from the forward-
looking statements: state and federal regulatory developments; new state or
federal legislation; national or regional economic conditions; market demand
and prices for energy and capacity; weather variations affecting customer
energy usage; competition in retail and wholesale power markets; the need for
and effect of any business or industry restructuring; PP&L Resources' and
PP&L's profitability and liquidity; new accounting requirements or new
applications of existing requirements; operating performance of plants and
other facilities; environmental conditions and requirements; system conditions
(including actual results in achieving Year 2000 compliance by PP&L Resources,
its subsidiaries and others) and operating costs; performance of new ventures;
political, regulatory or economic conditions in foreign countries where PP&L
Global makes investments; foreign exchange rates; and PP&L Resources' and
PP&L's commitments and liabilities. Any such forward-looking statements should
be considered in light of such important factors and in conjunction with PP&L
Resources' and PP&L's other documents on file with the SEC.

New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time to time, and it is
not possible for PP&L Resources or PP&L to predict all of such factors, or the
extent to which any such factor or combination of factors may cause actual
results to differ from those contained in any forward-looking statement. Any
forward-looking statement speaks only as of the date on which such statement
is made, and neither PP&L Resources nor PP&L undertakes any obligation to
update the information contained in such statement to reflect subsequent
developments or information.

Results of Operations

Earnings

Excluding the effects of weather and several one-time and other adjustments,
most of which are related to the transition to a competitive electricity
market in Pennsylvania, earnings per share were $2.07 in 1998, $2.03 in 1997
and $2.00 in 1996. Abnormal weather in 1998 adversely affected earnings by 20
cents per share, the largest such effect in more than a decade.

C-4
<PAGE>

On an as-reported basis, PP&L Resources lost $3.46 per share of common stock
in 1998, versus per share earnings of $1.80 in 1997 and $2.05 in 1996. The
following table highlights the major items that impacted earnings for each of
these years:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -----
<S> <C> <C> <C>
Earnings per share--excluding weather, one-time
adjustments and other impacts of restructuring......... $ 2.07 $ 2.03 $2.00
Weather variances on billed sales....................... (0.20) (0.03) 0.05
One-time adjustments:
PUC restructuring charge (See Note 4)................. (5.56)
FERC municipalities settlement (See Note 4)........... (0.19)
Windfall profits tax (See Note 10).................... (0.23)
SER settlement........................................ 0.11
U.K. tax rate reduction............................... 0.06 0.06
Penn Fuel Gas acquisition costs....................... 0.03 (0.03)
Other impacts of restructuring.......................... 0.22
------ ------ -----
Earnings per share--reported............................ $(3.46) $ 1.80 $2.05
====== ====== =====
</TABLE>

Earnings in 1998 were negatively impacted by $948 million of after-tax
charges related to the settlement of PP&L's restructuring case before the PUC
and another competition-related case before FERC. Several one-time adjustments
helped earnings, including a reduction in U.K. corporate income tax rates, a
change in the accounting treatment of Penn Fuel Gas acquisition costs and $30
million in proceeds from a settlement with SER regarding a contract dispute
over power purchase costs.

The PUC restructuring adjustments also provided a favorable impact of about
22 cents per share on third and fourth quarter earnings of 1998. These
adjustments included lower depreciation on impaired generation assets, reduced
accruals for taxes other than income and a regulatory adjustment to the
accounting for unbilled revenues. These favorable impacts were partially
offset by the direct expensing of costs of computer software identified as
impaired as part of the restructuring accounting adjustments.

After eliminating the effects of these adjustments, 1998 earnings improved
by four cents per share over 1997. This earnings improvement reflects higher
weather-normalized sales in all customer classes, particularly in the third
and fourth quarters of 1998. Weather-adjusted delivery sales to customers in
central and eastern Pennsylvania were 2.9% higher in 1998 than in 1997.
Earnings were also favorably affected by increased wholesale electricity
revenues.

These earnings improvements were partially offset by higher operating
expenses incurred in 1998 over 1997. This increase reflects higher costs
associated with computer information systems, and additional payroll,
consultant services and other expenses to meet the requirements of retail
competition. Increased firm transmission costs related to the Energy Marketing
Center activities and a higher provision for uncollectible customer accounts
also increased operating expenses.

Adjusted 1997 earnings were three cents per share higher than in 1996. This
earnings improvement was attributable to higher revenues from bulk power sales
and trading activity of the Energy Marketing Center, which helped offset the
impact of the phase-down of contractual sales to JCP&L. Earnings also
benefited from refinancing activities and, excluding one-time adjustments, the
on-going operations of PP&L Global.

The reduction in contractual bulk power sales to JCP&L and other major
utilities will continue to adversely impact earnings over the next few years.
However, the Energy Marketing Center will resell this returning electric
energy and capacity on the open market, along with its other energy trading
activities, in an effort to offset the loss in revenues from declining
contractual sales.

C-5
<PAGE>

Electric Energy Sales

Electricity sales for 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(Millions of kWh)
<S> <C> <C> <C>
Electricity delivered to retail customers by PP&L (a).... 32,137 31,964 32,307
Less: Electricity supplied during pilot by others........ 1,999 65
------ ------ ------
Electricity supplied to retail customers by PP&L......... 30,138 31,899 32,307
Electricity supplied to retail customers by PP&L
EnergyPlus during the pilot............................. 1,507
------ ------ ------
Total electricity supplied to retail customers (a)....... 31,645 31,899 32,307
Wholesale Energy Sales................................... 36,706 21,454 14,340
</TABLE>
- -------
(a) kWh for customers residing in PP&L's service territory who are receiving
energy from PP&L or PP&L EnergyPlus will be reflected in both of these
categories.

Under Pennsylvania's competition pilot program, customers were allowed to
choose the supplier of their electricity in 1998. Pilot customers continued to
have the utility that served their territory deliver electricity from the
supplier of choice. "Electricity delivered to retail customers by PP&L" is the
amount of electricity delivered by PP&L to customers in its service territory.
"Electricity supplied to retail customers by PP&L" represents the amount of
electricity supplied to PP&L service territory customers who did not
participate in the pilot program. "Electricity supplied to retail customers by
PP&L EnergyPlus" is electricity supplied to customers within and outside PP&L
service territory who participated in the pilot program and chose PP&L
EnergyPlus as their energy supplier.

Electricity delivered to retail customers increased by 173 million kWh, or
0.5%, from the comparable period in 1997. If normal weather had been
experienced in 1998 and 1997, deliveries would have increased by 2.9%. This
increase is attributable to strong third and fourth quarter deliveries to all
customer classes. Electricity delivered decreased by 343 million kWh, or 1.1%,
in 1997 from 1996. However, if normal weather had been experienced, deliveries
in 1997 would have increased by 0.2%.

Total electricity supplied to retail customers has decreased for the past
two years. This decrease was due to milder weather in both 1998 and 1997 as
compared to 1996, as well as the impact of the competition pilot program.

The increase in wholesale energy sales, which includes sales to other
utilities and energy marketers through contracts, spot market transactions or
power pool arrangements, was primarily the result of increased activity of the
Energy Marketing Center. See "Operating Revenues: Wholesale Energy Marketing
and Trading Activities" for more information.

PP&L Resources has established growth in its generation capability, along
with expansion of its energy marketing operations, as a key element of its
business strategy. In addition to the current generating assets of PP&L and
the announced acquisitions and developments of PP&L Global, PP&L Resources
plans to add another 7,500 mW of generation within the next five years.

Energy Marketing and Trading Activities

PP&L, through its Energy Marketing Center, purchases and sells electric
capacity and energy at the wholesale level under its FERC market-based tariff.
PP&L has entered into agreements to sell firm capacity or energy under its
market-based tariff to certain entities located inside and outside of the PJM
power pool. PP&L enters into these agreements to market available energy and
capacity from its generating assets and to profit from market price
fluctuations. If PP&L was unable to meet its obligations under these
agreements to sell firm capacity and energy, under certain circumstances it
would be required to pay damages equal to the difference between the market
price to acquire replacement capacity or energy and the contract price of the
undelivered capacity or energy. Depending on price volatility in the wholesale
energy markets, such damages could be material. Events that could affect
PP&L's ability to meet its firm capacity or energy obligations or cause
significant increases in the market price of replacement capacity and energy
include the occurrence of extreme weather conditions, unplanned generating
plant outages, transmission disruptions, non-performance by counterparties (or
their counterparties) with which it has power contracts and other factors
affecting the wholesale energy markets.

C-6
<PAGE>

Although PP&L attempts to mitigate these risks, there can be no assurance that
it will be able to fully meet its firm obligations, that it will not be
required to pay damages for failure to perform, or that it will not experience
counterparty non-performance in the future.

PP&L's efforts to mitigate risks associated with open contract positions
include maintaining generation capacity to deliver electricity to satisfy its
net firm sales contracts and purchasing firm transmission service. In
addition, the Energy Marketing Center adheres to the Company's risk management
policy and programs, including established credit policies in evaluating
counterparty credit risk. PP&L has not experienced any material losses due to
non-performance by counterparties to date.

During 1998, the Energy Marketing Center entered into commodity forward and
option contracts for the physical purchase and sale of energy; these
transactions were reflected in the financial statements under the accrual
method of accounting. As of January 1, 1999, PP&L adopted mark-to-market
accounting for energy contracts entered into for trading purposes, in
accordance with EITF 98-10, "Accounting for Contracts Involved in Energy
Trading and Risk Management Activities" and, as a result, recognized a $6.0
million after-tax credit to energy purchases. Under mark-to-market accounting,
gains and losses that result from changes in the market prices on contracts
entered into for trading purposes will be reflected in current earnings. For
purposes of EITF 98-10, energy trading activities refer to energy contracts
entered into with the objective of generating profits on or from exposure to
shifts or changes in market prices, and risk management activities refer to
energy contracts that are designated as and effective as hedges of non-trading
activities (i.e., marketing available capacity and energy and purchasing fuel
for consumption). PP&L will continue to use accrual accounting for energy
contracts that are hedges of non-trading activities until it adopts SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which it
expects will occur effective January 1, 2000. SFAS 133, which expands the
definition of a derivative to include most of PP&L's commodity contracts that
require physical delivery, requires that an entity recognize all derivatives
in the statement of financial position at fair value. The accounting for
changes in the fair value of a derivative will depend on the intended use of
the derivative and the resulting designation.

Market Risk Sensitive Instruments

Quantitative and Qualitative Disclosures About Market Risk

PP&L Resources actively manages the market risk inherent in its commodity,
debt, foreign currency and equity positions. The Board of Directors of PP&L
Resources has adopted a risk management policy to manage the risk exposures
related to energy prices, interest rates and foreign currency exchange rates.
The policy establishes a Risk Management Committee comprised of certain
executive officers which oversees the risk management function. Nonetheless,
adverse changes in commodity prices, interest rates, foreign currency exchange
rates and equity prices may result in losses in earnings, cash flows and/or
fair values.

The forward-looking information presented below provides only estimates of
what may occur in the future, assuming certain adverse market conditions, due
to reliance on model assumptions. As a result, actual future results may
differ materially from those presented. These disclosures are not precise
indicators of expected future losses, but only indicators of reasonably
possible losses.

Commodity Price Risk--Energy Marketing Center

PP&L's risk management program is designed to manage the risks associated
with market fluctuations in the price of electricity, natural gas, oil and
emission allowances. The Company's risk management policy and programs include
risk identification, risk limits management with measurement and controls for
real time risk monitoring. In 1998, PP&L entered into fixed-price forward and
option contracts that required physical delivery of the commodity. In 1999,
PP&L expects to continue to use such contracts as well as other contracts,
such as futures and options that could be settled either in cash or by
physical delivery of the underlying commodity; exchange-for-physical
transactions; over-the-counter contracts, such as swap agreements where
settlement is generally based on the difference between a fixed and index-
based price for the underlying commodity; and tolling, reverse tolling, or
other contractual arrangements.

PP&L enters into contracts to hedge the impact of market fluctuations on its
energy-related assets, liabilities, and other contractual arrangements. In
addition, as defined by EITF 98-10, PP&L enters into these contracts for
trading purposes to take advantage of market opportunities. PP&L may at times
create a net open position in its portfolio that could result in material
losses if prices do not move in the manner or direction anticipated.

C-7
<PAGE>

PP&L uses various methodologies to simulate forward price curves in the
energy markets to estimate the size and probability of changes in market value
resulting from commodity price movements. The methodologies require several
key assumptions, including selection of confidence levels, the holding period
of the commodity positions, and the depth and applicability to future periods
of historical commodity price information. As of December 31, 1998, PP&L
estimated that a 10% decline in market prices across all geographic areas and
time periods could have adversely changed the value of PP&L's trading
portfolio by approximately $16 million. For PP&L's non-trading portfolio, a
10% decline in market prices across all geographic areas and time periods
could have positively changed the value of PP&L's non-trading portfolio by $17
million; however, this would be offset by the decline in the value of the
underlying commodity, the electricity generated. In addition to commodity
price risk, PP&L's commodity positions are also subject to operational and
event risks including, among others, increases in load demand and forced
outages at generating plants.

Beginning in October 1998, the PJM ISO established capacity auctions to
increase price transparency and liquidity. PP&L expects to participate fully
in this capacity market and will apply its existing risk management policies
and procedures to its capacity transactions. In the future, capacity is
expected to evolve into an actively traded commodity, similar to electricity.

Commodity Price Risk--PP&L EnergyPlus

PP&L EnergyPlus was created in September 1998 as a retail marketing
subsidiary of PP&L. During 1998, PP&L EnergyPlus entered into various
arrangements, effective in 1999, with retail customers who elect to shop for
an energy provider. These contracts commit PP&L EnergyPlus to the sale of
electricity or natural gas without a specified firm volume. The longest sales
contract extends for three years. To hedge the price risk of these
transactions, PP&L EnergyPlus has entered into forward purchase contracts and
has the ability to supply the electricity through an option contract with the
Energy Marketing Center. Therefore, the potential for near-term losses
associated with PP&L EnergyPlus' commodity position is immaterial.

Interest Rate Risk

As a result of deregulation and the new competitive environment, PP&L is
exposed to increased interest rate risk. In addition, PP&L Resources has
issued debt to finance unregulated energy investments, which also increases
interest rate risk. PP&L Resources plans to manage its interest expense risk
by using financial derivative products to adjust the mix of fixed and floating
rate interest rates in its debt portfolio, adjust the duration of its debt
portfolio and lock in U.S. treasury rates in anticipation of future financing,
when appropriate. Risk limits were developed using value at risk methodology
and are designed to balance risk exposure to volatility in interest expense
and losses in the fair value of PP&L Resources' long-term fixed rate debt due
to changes in the absolute level of interest rates. As of December 31, 1998,
PP&L Resources had no financial derivative instruments outstanding.

PP&L Resources is also exposed to changes in earnings and cash flows as a
result of changes in interest rates for commercial paper and other short-term
debt. At December 31, 1998, PP&L Resources' potential annual maximum exposure
to increased interest expense due to an increase in interest rates over a 30-
day period, based on a confidence level of 97.5%, was estimated at $4.5
million. This amount has been determined by considering the impact of a
hypothetical increase in interest rates on the company's commercial paper and
other short-term debt balances as of December 31, 1998. Historically, there is
a 97.5% probability that interest rates for commercial paper and other short-
term debt will not increase more than 50 basis points over a 30-day period.

PP&L Resources is also exposed to changes in the fair value of its long-
term, fixed rate debt. At December 31, 1998, PP&L Resources estimated its
potential maximum exposure to a change in the fair value of its long-term
fixed rate debt through an adverse movement in interest rates over a one-day
period, based on a confidence level of 97.5%, at $22 million. Historically,
there is a 97.5% probability that fixed interest rates will not increase more
than 13 basis points over a one-day period.

Market events that are inconsistent with historical trends could cause
actual results to exceed estimated levels.

C-8
<PAGE>

Foreign Operations Risk

PP&L Global has investments in several international operations, most of
which are joint ventures. At December 31, 1998, PP&L Global had investments of
$671 million. These investments are primarily energy-related distribution
facilities. PP&L Global is exposed to foreign currency risk primarily through
investments in affiliates in Latin America and Europe.

PP&L Resources has adopted a foreign currency risk management program that
is designed to limit or hedge future cross-border cash flows for firm
transactions and commitments and to hedge economic exposures such as
anticipated dividends and projected asset sales or acquisitions when there is
a high degree of certainty that the exposure will be realized. As of December
31, 1998, PP&L Resources did not incur any significant foreign currency-based
financing.

As of December 31, 1998, PP&L Resources was party to two forward contracts
to hedge the foreign currency exchange risk associated with dividends declared
but not yet received. PP&L will exchange 16 million British pounds sterling
(BPS) for approximately $27 million on March 31, 1999, based on a contractual
exchange rate of $1.654/BPS. On January 22, 1999, PP&L Resources exchanged 359
million Chilean pesos (ChP) for $0.7 million, based on a contractual exchange
rate of $.00195/ChP. The fair value of these contracts at December 31, 1998,
was immaterial.

Nuclear Decommissioning Fund--Securities Price Risk

PP&L maintains trust funds, as required by the NRC, to fund certain costs of
decommissioning Susquehanna. As of December 31, 1998, these funds were
invested primarily in domestic equity securities and fixed rate, fixed income
securities and are reflected at fair value on the Consolidated Balance Sheet.
The mix of securities is designed to provide returns to be used to fund
Susquehanna's decommissioning and to compensate for inflationary increases in
decommissioning costs. However, the equity securities included in the trusts
are exposed to price fluctuation in equity markets, and the value of fixed
rate, fixed income securities are exposed to changes in interest rates. PP&L
actively monitors the investment performance and periodically reviews asset
allocation in accordance with PP&L's nuclear decommissioning trust policy
statement. A hypothetical 10% increase in interest rates and 10% decrease in
equity prices would result in a $13.7 million reduction in the fair value of
the trust assets.

PP&L's restructuring settlement agreement provides for the collection of
authorized nuclear decommissioning costs through the CTC. Additionally, PP&L
is permitted to seek recovery from customers of up to 96% of any increases in
these costs. Therefore, PP&L securities price risk is expected to remain
immaterial.

Operating Revenues: Electric Operations

The increase (decrease) in revenues from electric operations was
attributable to the following:

<TABLE>
<CAPTION>
1998 vs 1997 1997 vs 1996
------------ ------------
(Millions of Dollars)
<S> <C> <C>
Retail Electric Revenues
Weather effect...................................... $(63) $(30)
Sales volume and sales mix effect................... 67 (1)
Unbilled revenues................................... 10 16
Pilot shopping credit above market price............ (14)
Other, net.......................................... 7 9
Energy revenues....................................... (29)
Other Electric Revenues............................... 6 4
---- ----
$ 13 $(31)
==== ====
</TABLE>

Operating revenues for electric operations increased by $13 million in 1998
over 1997. During the third quarter of 1998, PP&L recognized increased
revenues of $23 million due to the impact on unbilled revenue resulting from a
change in the regulatory treatment of energy costs. Excluding this benefit and
the effects of milder than normal weather experienced in 1998, revenues from
electric operations would have increased by $53 million.

This revenue increase can be attributed to strong retail electric sales in
the third and fourth quarters of 1998. Excluding the effects of weather,
electricity delivered to retail customers increased for all customer classes,
2.9% in total, in 1998 over 1997.

C-9
<PAGE>

Operating revenues decreased by $31 million in 1997 from 1996. Revenues from
service area sales in 1997 were slightly lower than 1996. The decrease was
attributable to mild weather in 1997 and a change in the regulatory treatment
of energy costs by the PUC. For 1997 and 1998 underrecovered energy costs (up
to a cap of $31.5 million annually) were not recorded as energy revenues, but
as regulatory credits, which offset "Other Operating Expenses."

Operating Revenues: Wholesale Energy Marketing and Trading Activities

The increase (decrease) in revenues from wholesale energy marketing and
trading activities was attributable to the following:

<TABLE>
<CAPTION>
1998 vs 1997 1997 vs 1996
------------ ------------
(Millions of Dollars)
<S> <C> <C>
Bilateral sales....................................... $496 $183
PJM................................................... 63 17
Cost-based contracts.................................. (45) (27)
Oil & gas sales....................................... 62
Other................................................. (3) (4)
---- ----
$573 $169
==== ====
</TABLE>

Revenues from wholesale energy marketing and trading activities increased by
$573 million in 1998 and $169 million in 1997 when compared to the prior
years. Revenues have continued to increase despite the phase-down of the
capacity and energy agreement with JCP&L and the end of the capacity and
energy agreement with Atlantic in March of 1998. This increase in revenues
reflects PP&L's continued emphasis on competing in wholesale markets. Energy
purchases have also increased to meet these increased sales. Refer to "Energy
Purchases" for more information.

During 1998, the national energy trading market experienced high prices and
increased volatility. PP&L is actively managing its portfolio to attempt to
capture the opportunities and limit its exposure to these volatile prices.
Refer to "Energy Marketing and Trading Activities" for more information.

PUC Restructuring Proceeding

Refer to Financial Note 3 to Financial Statements for information regarding
the PUC restructuring proceeding.

Cost of Electric Fuel

Electric fuel expense increased by $14 million in 1998 when compared to
1997. This reflects increased generation at the coal and oil/gas-fired
stations. These units, particularly Martins Creek, were needed as a result of
increased wholesale energy marketing and trading activities of the Energy
Marketing Center. This increase was partially offset by lower fuel prices for
all units, especially oil/gas-fired stations.

Fuel expense for 1997 increased by $18 million from 1996. This increase was
primarily due to PP&L's coal-fired units operating at higher output to support
increased wholesale electric market activity. The increase was slightly offset
by a decrease in the unit fuel prices for coal-fired and gas-fired generation.

Energy Purchases

Energy purchases increased by $556 million in 1998 when compared to 1997.
The increase was primarily due to greater quantities of energy purchased to
meet the increased wholesale energy marketing and trading activities of the
Energy Marketing Center, which includes increased purchases of natural gas and
capacity for resale. The related sales are included in wholesale energy sales.
The overall market price of purchased power has also been higher during 1998
compared to 1997 due to market volatility.

Energy purchases in 1997 increased by $152 million over 1996. This increase
was primarily due to increased marketing and trading activities of the Energy
Marketing Center. Higher overall market prices of power during 1997 compared
to 1996 contributed to the increase in purchased power costs.

Power Plant Operations

In an effort to reduce operating costs and position itself for the
competitive marketplace, PP&L in August 1998, announced the closing of its
Holtwood coal-fired generating station, effective May 1, 1999. The adjacent

C-10
<PAGE>

hydroelectric plant will continue to operate. PP&L also announced its
intention to sell its Sunbury coal-fired generating station in 1999.

Depreciation and Amortization

Depreciation and amortization expenses in 1998 decreased by $47 million from
1997. This decrease reflects the write-down of impaired generation-related
assets in connection with the restructuring adjustments recorded in June 1998.
See Note 4 to Financial Statements for additional information.

Depreciation and amortization expenses in 1997 increased by $10 million from
1996. This increase was primarily due to depreciation on plant additions and
amortization of newly implemented computer software.

Other Operation and Maintenance Expenses

Other operation and maintenance expenses increased by $90 million from 1997
to 1998. This increase reflects higher costs associated with computer
information systems, and additional payroll, consultant services and other
expenses to meet the requirements of retail competition. This increase also
reflects additional software expenses, increased firm transmission costs
related to the Energy Marketing Center activities and higher provisions for
uncollectible customer accounts. Operation and maintenance costs of Penn Fuel
Gas, which was acquired in 1998, also added to the increase.

These increases were partially offset by credits recorded in connection with
the competition pilot program. The PUC has authorized PP&L to seek future
recovery of the revenue lost in the pilot program. PP&L has established a
regulatory asset for the excess of the shopping credits provided to pilot
customers over the market price of this energy. These credits totaled $14
million in 1998, and were recorded as offsets to "Other Operating Expense."

Other operation and maintenance expenses in 1997 decreased by $25 million
from 1996. Excluding the effect of underrecovered energy costs, operation and
maintenance expenses increased by $7 million in 1997. These increases were
primarily due to costs associated with the pilot program, the PUC
restructuring filing and the FERC transmission access filing.

Prior to 1997, underrecovered energy costs were accrued as energy revenues.
In 1997 and 1998, these underrecovered costs were recorded as regulatory
credits (up to a PUC-mandated cap of $31.5 million), which are reflected in
the income statement as a reduction of "Other Operating Expense." This
reflects a change in the regulatory treatment of undercollected energy costs
by the PUC. See Note 1 to Financial Statements.

Other Income and (Deductions)

Other income of PP&L Resources increased by $94 million from 1997 to 1998.
This increase was primarily attributed to two one-time adjustments in 1998 and
1997. PP&L's earnings for 1998 reflect a $30 million, or 11 cents per share,
recovery from SER as a result of a settlement agreement. This settlement
agreement resolved disputes concerning the prices PP&L paid for power
purchased from SER since 1990. Conversely, 1997 earnings included a one-time
$37 million, or 23 cents per share, charge for the U.K. windfall profits tax
on privatized utilities which affected PP&L Global's SWEB investment. The tax
has been paid in full.

The accounting treatment of Penn Fuel Gas acquisition costs also contributed
to the change in other income from 1997 to 1998. The acquisition was
originally contemplated as a pooling of interests, and estimated transaction
costs of about $6 million were charged against earnings in the third quarter
of 1997. The transaction was ultimately recorded under purchase accounting,
and the transaction costs were capitalized as part of the investment. Third
quarter 1998 earnings were credited by $6 million due to this change.

Other income and deductions for 1997 decreased by $49 million from 1996.
This decrease was primarily due to the windfall profits tax, as well as the
initial expensing of Penn Fuel Gas acquisition costs.

Financing Costs

PP&L Resources reduced its long-term financing costs during the past few
years by retiring long-term debt with the proceeds from the sale of securities
at a lower cost and by repurchasing PP&L preferred stock. Interest

C-11
<PAGE>

on long-term debt and dividends on preferred stock decreased from $241 million
in 1995 to $228 million in 1998, for a total decrease of $13 million. Interest
on short-term debt, net of capitalized interest and AFUDC borrowed funds,
increased from $12 million in 1995 to $27 million in 1998. This increase
reflects PP&L Capital Funding's commercial paper program initiated in 1998.

Income Taxes

Income tax expense for 1998 increased by $22 million, or 9.3%, from 1997.
This was primarily due to an increase in pre-tax book income of $106 million.

Income tax expense for 1997 decreased by $17 million, or 6.7%, from 1996.
This was primarily due to a decrease in pre-tax book income of $54 million.

Financial Condition

Capital Expenditure Requirements

The schedule below shows PP&L's current capital expenditure projections for
the years 1999-2003 and actual spending for the year 1998.

PP&L's Capital Expenditure Requirements

<TABLE>
<CAPTION>
Projected
Actual ------------------------
1998 1999 2000 2001 2002 2003
------ ---- ---- ---- ---- ----
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Construction expenditures
Generating facilities......................... $ 91 $ 97 $117 $125 $104 $ 93
Transmission and distribution facilities...... 102 110 123 125 125 135
Environmental................................. 6 13 2 2 42 71
Other......................................... 44 26 19 19 18 17
---- ---- ---- ---- ---- ----
Total Construction Expenditures............. 243 246 261 271 289 316
Nuclear fuel owned and leased................... 55 47 63 65 67 68
Other leased property........................... 26 21 21 21 21 21
---- ---- ---- ---- ---- ----
Total Capital Expenditures.................. $324 $314 $345 $357 $377 $405
==== ==== ==== ==== ==== ====
</TABLE>

Construction expenditures include AFUDC and Capitalized Interest which are
expected to be less than $9.5 million in each of the years 1999-2003.

PP&L's capital expenditure projections for the years 1999-2003 total about
$1.8 billion. Capital expenditure plans are revised from time to time to
reflect changes in conditions.

PP&L Global Unregulated Investments

PP&L Global continues to pursue opportunities to develop and acquire
electric generation, transmission and distribution facilities in the United
States and abroad.

As of December 31, 1998, PP&L Global had investments of $671 million in
distribution, transmission and generation facilities in the U.K., Bolivia,
Peru, Argentina, Brazil, Spain, Portugal, Chile and El Salvador. PP&L Global's
major investments to date are SWEB, Emel and DelSur.

In 1998, PP&L Global acquired an additional 1,813,000 shares of Emel at a
cost of approximately $32 million, increasing its ownership interest to 37.5%.
In February 1998, PP&L Global and Emel acquired a 75% interest in DelSur, an
electric distribution company serving 193,000 customers in El Salvador, for
approximately $180 million. Under the purchase agreement, PP&L Global directly
acquired 37.5% of DelSur and Emel acquired the other 37.5%. Subsequently, PP&L
Global and Emel acquired an additional 925,000 shares at a cost of
approximately $10.3 million, increasing their ownership interest to 80.45%.
DelSur is one of five electricity distribution companies in El Salvador that
were privatized by the government. In June 1998, PP&L Global

C-12
<PAGE>

acquired an additional 26% interest in SWEB for $170 million, increasing its
equity interest to 51% and its voting interest to 49%.

In September 1998, PP&L Global announced an agreement to acquire most of
Bangor Hydro-Electric Company's generating assets and certain transmission
rights. PP&L Global will purchase 100 percent of Bangor Hydro's hydroelectric
assets and certain transmission rights, as well as its interest in an oil-
fired generation facility, for $89 million. The acquisition has been approved
by the Maine Public Utilities Commission, and remains subject to the approval
of the FERC as well as certain third-party consents, which are expected in
1999.

PP&L Global has signed definitive agreements with Montana Power Company,
Portland General Electric Company and Puget Sound Energy, Inc. to acquire 13
Montana power plants, with 2,614 mW of generating capacity, for a purchase
price of $1.586 billion. The acquisition is subject to several conditions,
including the receipt of required state and federal regulatory approvals and
third-party consents. In this regard, PacifiCorp, a co-owner of Colstrip Units
3 and 4, has a right of first refusal to purchase a portion of the assets of
these Units. PP&L Global expects to complete the acquisition by the end of
1999. About 65% of the acquisition cost is expected to be financed on a
project credit basis, non-recourse to PP&L Global and PP&L Resources. The
balance of the acquisition cost is expected to be financed through a
combination of debt and equity issued by PP&L Resources, or with funds that
PP&L Resources derives from PP&L's securitization of transition costs. The
agreements also provide for PP&L Global's acquisition of related transmission
assets for $182 million, subject to certain conditions, including federal
regulatory approval.

Acquisitions

In 1998, PP&L Resources acquired Penn Fuel Gas which, together with its
subsidiaries, specializes in natural gas distribution, transmission and
storage services and the sale of propane. The transaction was treated as a
purchase for accounting and financial reporting purposes. PP&L Resources
issued approximately 5.6 million shares of common stock, with a value of
approximately $135 million, to acquire all Penn Fuel Gas common and preferred
stock. Under the terms of the merger agreement, shareowners of Penn Fuel Gas
received 6.968 common shares of PP&L Resources for each common share of Penn
Fuel Gas that they owned and 0.682 common shares of PP&L Resources for each
preferred share of Penn Fuel Gas that they owned.

In 1998, PP&L Resources also acquired H.T. Lyons and McClure, mechanical
contractor and engineering firms, in cash transactions for amounts that were
not material. In February 1999, PP&L acquired McCarl's, another mechanical
contractor and engineering firm, in a cash transaction for an amount that was
not material.

Financing and Liquidity

PP&L Resources' net cash provided by operating activities decreased by $140
million in 1998 compared with 1997. This decrease was primarily due to the
decline in net income when adjusted for the impact of certain non-cash items.
Earnings in 1998 benefited from lower depreciation, higher equity earnings of
unconsolidated affiliates, regulatory credits and other non-cash transactions.
Net cash provided by operating activities decreased by $16 million from 1996
to 1997.

Net cash used in PP&L Resources' investing activities was $194 million
higher in 1998 than 1997. This increase was primarily due to PP&L Global's
increased investment in electric energy projects, including its additional
investment in SWEB. Net cash used in investing activities was $141 million
lower in 1997 compared with 1996. This decrease was primarily due to lower
construction expenditures by PP&L, liquidation of subsidiaries' long-term
investments to make funds available for other investing and financing
activities, and a reduction in the amount of equity funds invested by PP&L
Global.

Net cash used in PP&L Resources' financing activities was $530 million lower
in 1998 than 1997. This reflects a $487 million increase in short-term debt in
1998. This short-term financing helped to fund PP&L

C-13
<PAGE>

Resources' $419 million stock repurchase, and PP&L Global's additional
investments. Net cash used in financing activities in 1997 was $257 million
higher than in 1996. This was primarily due to PP&L Resources' purchase of
PP&L preferred stock at a cost of $380 million, and the retirement of $210
million of long-term debt. These outflows were partially offset by PP&L's
issuance of $250 million of preferred securities through PP&L Capital Trust
and PP&L Capital Trust II.

From 1996 through 1998, PP&L Resources issued $722 million of long-term
debt. For the same period, PP&L Resources issued $215 million of common stock.
Proceeds from these security sales were used, in part, to retire $650 million
of long-term debt to lower financing costs. During the years 1996-1998, PP&L
also incurred $234 million of obligations under capital leases (primarily
nuclear fuel).

PP&L Capital Funding provides debt funding for PP&L Resources and its
subsidiaries other than PP&L. In order to ensure liquidity, PP&L and PP&L
Capital Funding share a joint facility with a group of banks. This joint
facility is comprised of a 364-day revolving credit agreement and a five-year
revolving credit agreement. In March 1998, the existing 364-day revolving
credit agreement was increased from $150 million to $350 million. This
increase, when added to the $300 million five-year revolving credit agreement,
brought to $650 million the total amount of revolving credit available to PP&L
and PP&L Capital Funding under the joint agreement. In November 1998, PP&L,
PP&L Capital Funding, and PP&L Resources replaced the existing 364-day
facility with an amended and restated 364-day revolving credit arrangement
terminating in November 1999. The five-year revolving credit agreement expires
in 2002. Separately, in July 1998, PP&L Capital Funding entered into five
separate $80 million, 364-day credit facilities with five banks. PP&L
Resources guarantees all obligations of PP&L Capital Funding under the
foregoing facilities. As of December 31, 1998, no borrowings were outstanding
under any revolving credit arrangements.

Under the PUC restructuring order of August 27, 1998, PP&L is permitted to
issue transition bonds to securitize up to $2.85 billion of its stranded
costs. PP&L is planning to pursue such securitization later in 1999. The
proceeds will be used by PP&L to retire outstanding debt and to repurchase
common stock from PP&L Resources.

See Note 9 to Financial Statements for additional financing activities in
1998.

Financial Strategy

PP&L Resources has developed a financial strategy that is intended to
position PP&L Resources for the anticipated future competitive environment
after giving effect to the PUC's Final Order, the related restructuring charge
on PP&L's books and the collection of CTC revenues during the transition
period. In addition to the securitization referenced above, PP&L Resources'
financial strategy and goals include:

(a) a common stock dividend level based on a targeted payout ratio of
45%-55% designed to maintain PP&L Resources' future financing flexibility;

(b) maintenance of investment grade ratings on the senior debt securities
of PP&L Resources and PP&L; and

As the electric utility industry transitions to a competitive environment,
PP&L Resources anticipates the potential to achieve long-term returns on
shareowner capital that exceed the returns that have been historically
permitted in a fully regulated business environment. At the same time, PP&L
Resources' business risks are expected to increase, resulting in an increase
in the potential volatility in revenue and income streams. As such, PP&L
Resources believes that a dividend payout ratio that is significantly lower
than the 80%-90% payout ratio previously experienced by PP&L Resources and the
electric utility industry in general is required to better position PP&L
Resources to more effectively compete in the energy markets by increasing PP&L
Resources' future financing flexibility. Accordingly, effective October 1,
1998, PP&L Resources' quarterly common stock dividend was reduced to $0.25 per
share ($1.00 annualized rate) from the previous level of $0.4175 per share
($1.67 annualized rate). In addition to providing an increase in PP&L
Resources' future financing flexibility, this dividend action positions PP&L
Resources' common stock for potential increased growth in market value by
retaining a proportionately higher level of earnings in the business for
reinvestment.

A reduction in PP&L Resources' permanent capitalization, as well as a
temporary increase in leverage, was effected through a tender offer for 17
million shares of its common stock at $24.50 per share, which was financed

C-14
<PAGE>

by PP&L Resources through the use of short-term debt. During the transition
period PP&L Resources anticipates using internal cash flows to retire debt,
with a corresponding decrease in financial leverage. The short-term debt used
by PP&L Resources was made available through the issuance of commercial paper
by PP&L Capital Funding.

Dividends on common stock are declared at the discretion of the Boards of
Directors of PP&L Resources and PP&L. PP&L Resources and PP&L will continue to
consider the appropriateness of these dividend levels, taking into account the
respective financial positions, results of operations, conditions in the
industry and other factors which the respective Boards deem relevant.

Financial Indicators

The results of 1998, 1997 and 1996 were impacted by extraordinary items,
other one-time adjustments and weather. (See "Earnings" for more information.)
The following financial indicators for PP&L Resources reflect the elimination
of these impacts from earnings, and provide a better measure of the underlying
earnings performance of PP&L Resources and its subsidiaries.

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Earnings per share, as adjusted....................... $ 2.07 $ 2.03 $ 2.00
Return on average common equity....................... 12.23% 11.82% 12.03%
Ratio of pre-tax income to interest charges........... 3.55 3.55 3.52
Dividends declared per share.......................... $1.335 $ 1.67 $ 1.67
Book value per share.................................. $17.80 $16.88 $16.37
Ratio of market price per share to book value per
share................................................ 157% 142% 141%
</TABLE>

Environmental Matters

Air

The Clean Air Act deals, in part, with acid rain, attainment of federal
ambient ozone standards and toxic air emissions. PP&L has complied with the
1995 Phase I acid rain provisions by installing continuous emission monitors
on all units, burning lower sulfur coal and installing low NOx burners on most
units. To comply with the year 2000 Phase II acid rain provisions, PP&L plans
to purchase lower sulfur coal and use banked or purchased emission allowances
instead of installing FGD on its wholly owned units.

PP&L has met the 1995 ambient ozone requirements of the Clean Air Act by
reducing NOx emissions by nearly 50% through the use of low NOx burners.
Further seasonal (i.e., 5 month) NOx reductions to 55% and 75% of 1990 levels
for 1999 and 2003, respectively, are specified under the Northeast Ozone
Transport Region's Memorandum of Understanding. The DEP has finalized
regulations which require PP&L to reduce its ozone seasonal NOx by 57%
beginning in 1999. PP&L plans to comply with this reduction with operational
initiatives that rely, to a large extent, on the existing low NOx burners.

The EPA has finalized new national standards for ambient levels of ground-
level ozone and fine particulates. Based in part on the new ozone standard,
the EPA has finalized NOx emission limits for 22 states, including
Pennsylvania, which in effect require approximately an 80% reduction from the
1990 level in Pennsylvania by May 2003; the state is required by September
1999 to develop plans for implementing this reduction. Pursuant to Section 126
of the Clean Air Act, several Northeast states have petitioned the EPA to find
that major sources of NOx emissions, including PP&L's power plants, are
significantly contributing to non-attainment in those states. The EPA has
proposed to find such contribution and require emissions reductions at those
sources if the states in which those sources are located fail to develop plans
by September 1999 to implement the proposed 2003 limits. PP&L estimates that
compliance with these emissions reduction requirements could require
installation of NOx emissions removal systems on PP&L's three largest coal-
fired units, at a capital cost of approximately $35 million per unit. The new
particulates standard may require further reductions in SO/2/ and may expand
the planned seasonal NOx reductions to year round in the 2010-2012 timeframe.

C-15
<PAGE>

toxins from fossil fuel plants is necessary. The EPA is now seeking mercury
and chlorine sampling and other data from electric generating units, including
PP&L's. In addition, the EPA has announced a new enforcement initiative
against older coal-fired plants. Several of PP&L's coal-fired plants could
fall into this category. These EPA initiatives could result in compliance
costs for PP&L in amounts which are not now determinable but which could be
material.

Expenditures to meet the 2000 acid rain and 1999 NOx reduction requirements
are included in the table of projected construction expenditures in the
section entitled "Financial Condition--Capital Expenditure Requirements." PP&L
currently estimates that additional capital expenditures and operating costs
for environmental compliance under the Clean Air Act will be incurred beyond
2002 in amounts which are not now determinable but which could be material.

Water and Residual Waste

PP&L has installed dry fly ash handling systems at most of its power
stations, which reduces waste water discharge. In other cases, PP&L has
modified the existing facilities to allow continued operation of the ash
basins under a DEP permit. Any groundwater contamination caused by the basins
must also be addressed.

Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage piles
has been identified at several PP&L generating stations. Remedial work related
to oil leakage is substantially completed at two generating stations. At this
time, the only other remedial work being planned is to abate a localized
groundwater degradation problem associated with a waste disposal impoundment
at the Montour plant.

The final NPDES permit for the Montour plant contains stringent limits for
iron and chlorine discharges. Depending on the results of a toxic reduction
study, additional water treatment facilities or operational changes may be
needed at this plant.

Capital expenditures through the year 2003 to correct groundwater
degradation at fossil-fueled generating stations, and to address waste water
control at PP&L facilities are included in the table of construction
expenditures in the section entitled "Financial Condition--Capital Expenditure
Requirements." In this regard, PP&L currently estimates that $5.5 million of
additional capital expenditures may be required in the next four years to
close some of the ash basins and address other ash basin issues at various
generating plants. Additional capital expenditures could be required beyond
the year 2003 in amounts which are not now determinable but which could be
material. Actions taken to correct groundwater degradation, to comply with the
DEP's regulations and to address waste water control are also expected to
result in increased operating costs in amounts which are not now determinable
but which could be material.

Superfund and Other Remediation

In 1995, PP&L entered into a consent order with the DEP to address a number
of sites where PP&L may be liable for remediation of contamination. This may
include potential PCB contamination at certain PP&L substations and pole
sites; potential contamination at a number of coal gas manufacturing
facilities formerly owned and operated by PP&L; and oil or other contamination
which may exist at some of PP&L's former generating facilities. As of December
31, 1998, PP&L has completed work on slightly more than half of the sites
included in the consent order.

In 1996, Penn Fuel Gas entered into a similar consent order with the DEP to
address a number of its sites where Penn Fuel Gas may be liable for
remediation of contamination. The sites primarily include former coal gas
manufacturing facilities. Prior to PP&L Resources acquiring Penn Fuel Gas on
August 21, 1998, Penn Fuel Gas had obtained a "no further action"
determination from the DEP for two of the 20 sites covered by the order.

C-16
<PAGE>

as the EPA and the DEP, to seek compensation from the responsible parties for
the lost value of damaged natural resources. The EPA and the DEP may file such
compensation claims against the parties, including PP&L or Penn Fuel Gas, held
responsible for cleanup of such sites. Such natural resource damage claims
against PP&L or Penn Fuel Gas could result in material additional liabilities.

General

Due to the environmental issues discussed above or other environmental
matters, PP&L may be required to modify, replace or cease operating certain
facilities to comply with statutes, regulations and actions by regulatory
bodies or courts. In this regard, PP&L also may incur capital expenditures,
operating expenses and other costs in amounts which are not now determinable
but which could be material.

Increasing Competition

Background

The electric utility industry has experienced and will continue to
experience a significant increase in the level of competition in the energy
supply market. PP&L has publicly expressed its support for full customer
choice of electricity suppliers for all customer classes. PP&L is actively
involved in efforts at both the state and federal levels to encourage a smooth
transition to full competition.

Pennsylvania Activities

Reference is made to Note 3 to Financial Statements for a discussion of the
disposition of PP&L's restructuring plan under the Customer Choice Act.

In August 1997, the PUC issued an order modifying and approving PP&L's pilot
program under the applicable provisions of the Customer Choice Act and PUC
guidelines. Retail customers participating in the PP&L and other Pennsylvania
utilities' pilot programs began to receive power from their supplier of choice
in November 1997. Under its pilot program, approximately 60,000 PP&L
residential, commercial and industrial customers chose their electric
supplier. PP&L continued to provide all transmission and distribution,
customer service and back-up energy supply services to participating customers
in its service area.

Only those alternative suppliers licensed by the PUC and in compliance with
the state tax obligations set forth in the Customer Choice Act could
participate in the pilot programs. Approximately 87 suppliers obtained such
licenses to participate in the pilot programs.

Reference is also made to "PUC Restructuring Proceeding" for a discussion of
the settlement approved by the PUC which requires, among other things, that
PP&L transfer its retail electric marketing function to a separate, affiliated
corporation. In August 1998, PP&L formed a new subsidiary, PP&L EnergyPlus,
for this purpose. In September 1998, the PUC approved PP&L EnergyPlus'
application to act as a Pennsylvania EGS. This license permits PP&L EnergyPlus
to offer retail electric supply to participating customers in PP&L's service
territory and in the service territories of other Pennsylvania utilities. In
1999, PP&L EnergyPlus will offer such supply to industrial and commercial
customers throughout the state. At this time, PP&L EnergyPlus has determined
not to pursue residential customers in the competitive marketplace based on
economic considerations.

In September 1998, the PUC issued an Order which, in part, directed
Pennsylvania utilities which are members of PJM, including PP&L, to offer
their installed capacity at a price of $19.72 per kilowatt-year (Capacity
Order). PP&L brought an action in the District Court seeking an injunction
against the Capacity Order on the basis, among other things, that it attempted
to regulate matters within exclusive federal jurisdiction. In October 1998,
PP&L entered into a settlement agreement with the PUC under which (i) PP&L
will offer to sell capacity credits to EGS's licensed by the PUC at the
equivalent of $19.72 per kilowatt-year prior to June 1, 1999 (increasing to
$22.41 per kilowatt-year from June 1, 1999 through December 31, 1999) for
service to PP&L residential customers; (ii) all PP&L residential customers
will be permitted to select an EGS in January 1999; (iii) the PUC will
withdraw the Capacity Order as to PP&L; and (iv) PP&L will withdraw its
federal court action against the Capacity Order.

C-17
<PAGE>

Federal Activities

Reference is made to Note 4 to Financial Statements "Accounting for the
Effects of Certain Types of Regulation," for a discussion of PP&L's settlement
with 15 small utilities.

In June 1997, all of the PJM companies except PECO (the PJM Supporting
Companies) filed proposals with the FERC to amend the PJM tariff and
restructure the PJM pool. PECO filed a separate request with the FERC to amend
the PJM tariff. Furthermore, PECO and certain electric marketers submitted
significantly different proposals to restructure the PJM pool.

In November 1997, the FERC approved, with certain modifications, the PJM
Supporting Companies' proposals for transforming the PJM into an ISO. In
summary, the FERC order: (i) approved the PJM's open access transmission rates
based on geographic zones, but required PJM to file a single PJM system-wide
rate proposal by 2002; (ii) accepted the PJM Supporting Companies' methodology
to price transmission when the system is congested and to charge these
congestion costs to system users in addition to the open access transmission
rates, but ordered PJM to file an additional proposal to address concerns
raised over price certainty for buyers and sellers during periods of
congestion; (iii) determined that the ISO is to operate both the transmission
system and the power exchange which provides for the purchase and sale of spot
energy within the PJM market; and (iv) accepted the PJM Supporting Companies'
proposal regarding mandatory installed capacity obligations for all entities
serving firm retail and wholesale load within PJM, but rejected their proposal
for allocating the capacity benefits which result from PJM's ability to import
power from other regional power pools.

The PJM Supporting Companies and numerous other parties have filed requests
for amendment and/or rehearing of virtually every portion of the FERC's PJM
ISO order. PP&L also has filed its own request for amendment and/or rehearing.
The FERC has not yet taken action on these filings. PP&L's primary issue with
the FERC's order relates to a requirement that existing wholesale contracts
for sales service and transmission service be modified to have the new PJM
transmission tariff applied to service under these existing contracts and the
requirement that PP&L modify these contracts to ensure that customers are not
assessed multiple transmission charges. In an order issued in May 1998, the
FERC allowed PP&L to request an increase in the revenue requirement applicable
to transmission service over PP&L's transmission facilities to the extent that
PP&L has otherwise unrecovered transmission costs as a result of the contract
modifications. PP&L filed the proposed increase to its transmission revenue
requirement in July 1998. In October 1998, PP&L filed a settlement agreement
among the active parties in that proceeding, which was approved by the FERC in
December 1998.

In July 1997, the FERC accepted a new wholesale power tariff that permits
PP&L to sell capacity and energy at market-based rates, both inside and
outside the PJM area, subject to certain conditions. This tariff allows PP&L
to become more active in the wholesale market with utilities and other
entities, and removes pricing restrictions which in the past had limited PP&L
to charging at or below cost-based rates.

In July 1998, the FERC accepted amendments to PP&L's market-based rate
tariff that permit PP&L to sell, assign or transfer transmission rights and
associated ancillary services. In October 1998, the FERC accepted a proposed
amendment to PP&L's market-based rate tariff to permit PP&L to sell electric
energy and/or capacity to its affiliates under specified conditions.

In September 1998, PP&L filed its EGS Coordination Tariff with the FERC. The
EGS Coordination Tariff applies to entities licensed to serve retail
electricity customers under the Commonwealth of Pennsylvania's retail access
program. The purpose of the EGS Coordination Tariff is to permit PP&L to
provide EGS's with certain FERC-jurisdictional services which will facilitate
the ability of EGS's to meet their obligations under the PJM Open Access
Transmission Tariff and related agreements of the PJM. The FERC accepted the
EGS Coordination Tariff for filing in October 1998 but in a later order stated
that it would issue a decision holding that the EGS Coordination Tariff did
not need to be filed with the FERC. That decision has not yet been issued.

In September 1997, PP&L filed a request with the FERC to lower the
applicable PP&L revenue requirement currently set forth in the PJM open access
transmission tariff. The new revenue requirement results from PP&L's use of
the same test year and cost support data used in the PUC restructuring
proceeding. PP&L requested that the new revenue requirement take effect on
November 1, 1997. In February 1998, the FERC accepted the proposed rates,
subject to refund, and set the amount of the decrease in the revenue
requirement for hearing. In October 1998, PP&L filed a settlement agreement
among the active parties in that proceeding, which was accepted by the FERC in
December 1998.

C-18
<PAGE>

Reference is made to "Pennsylvania Activities" above for a discussion of
PP&L's new retail electric marketing subsidiary, PP&L EnergyPlus. PP&L
EnergyPlus filed an application with the FERC in September 1998 for authority
to sell electric energy and capacity at market-based rates, and for authority
to sell, assign or transfer transmission rights and associated ancillary
services. The FERC accepted PP&L EnergyPlus' application in December 1998.
Also, in September 1998, PP&L filed a notification of change in status with
the FERC to report PP&L's affiliation with PP&L EnergyPlus. Pursuant to FERC
requirements, PP&L has a filed code of conduct governing its relationship with
affiliates that engage in the sale and/or transmission of electric energy.

Year 2000

PP&L Resources and its subsidiaries utilize computer-based systems
throughout their businesses. In the year 2000, these systems will face a
potentially serious problem with recognizing calendar dates. Without
corrective action, the most reasonable worst case scenario regarding Year 2000
issues could result in computer shutdown or erroneous calculations causing
operational problems at the generating stations; diminished ability to
monitor, control and coordinate generation with the transmission and
distribution systems; and adverse impacts on the operation of various
monitoring and metering equipment utilized throughout PP&L. A Company-wide
Year 2000 coordination committee was formed to raise the awareness of the Year
2000 issue, share information and review the progress towards compliance. A
seven-step approach was developed to achieve Year 2000 compliance by assessing
and remediating the problem in application software, hardware, plant control
systems and devices containing embedded microprocessors. The seven steps in
the plan include awareness, inventory, assessment, remediation, testing,
implementation, and contingency planning. PP&L Resources has identified and
communicated with critical suppliers, such as fuel suppliers, in order to
obtain assurances that they are in compliance with Year 2000 issues. The
majority of the responses from these parties are favorable, with some
responses still being evaluated and followed-up as appropriate.

Delivery of electricity is dependent on the overall reliability of the
electric grid. PP&L is cooperating and coordinating with the North American
Electric Reliability Council and the PJM Interconnection regarding Year 2000
remediation efforts.

As of December 31, 1998, PP&L Resources estimates that approximately 75% of
mainframe applications that will remain in production have been determined as
being Year 2000 compliant. It is anticipated that all mission-critical systems
(i.e. mainframe, embedded technologies, and client server applications) will
be Year 2000 ready by July 1, 1999 and all systems ready by November 30, 1999.
Year 2000 compliant means computer systems or equipment with date-sensitive
chips will accurately process date and time data. Year 2000 ready means that
the computer systems or equipment with date-sensitive chips can be used on
January 1, 2000, and beyond, but are not fully year 2000 compliant.

PP&L has basic contingency plans in place to address issues such as
blackouts on the electrical grid, cold starts of generating facilities and
disaster recovery procedures for the computing environment. PP&L recognizes
that additional contingency plans may be necessary and, as part of the seven-
step remediation process, continues to work on identifying and developing
additional contingency plans that may be needed.

In May 1998, the NRC issued a notification requirement under which nuclear
utilities are required to inform the NRC, in writing, that they are working to
solve the Year 2000 computer problem. In addition, nuclear utilities have
until July 1, 1999 to inform the NRC that their computers are Year 2000
compliant/ready or to submit a status report summarizing the on-going work.
PP&L filed its written response, detailing its Year 2000 compliance
activities, with the NRC in August 1998.

In July 1998, the PUC initiated a non-adversarial investigation to be
conducted by the Office of Administrative Law Judge "to accurately assess any
and all steps taken and proposed to be taken to resolve the Year 2000
compliance issue by all jurisdictional fixed utilities and mission-critical
service providers such as the PJM." The PUC required all jurisdictional
utilities to file a written response to a list of questions concerning Year
2000 compliance; and that, if mission-critical systems cannot be made Year
2000 compliant on or before March 31, 1999, to file a detailed contingency
plan by that date. PP&L filed its written response to these questions in
August 1998 and in November 1998 submitted testimony to the PUC that the
Company would have its mission-critical systems Year 2000 ready by July 1,
1999 and all systems ready by November 30, 1999.

C-19
<PAGE>

At this time, PP&L has achieved the following completion percentages on the
seven steps referenced above for Year 2000 compliance: awareness, 87%;
inventory, 97%; assessment, 87%; remediation, 70%; testing, 72%;
implementation, 56%; and additional contingency plans (beyond the basic plans
referenced above), 16%.

Based upon present assessments, PP&L Resources estimates that it will incur
approximately $15 million in Year 2000 remediation costs. Through December 31,
1998, PP&L Resources spent approximately $8 million in remediation costs,
which included assistance from outside consultants. These costs are being
funded through internally generated funds and are being expensed as incurred.

C-20
<PAGE>

Report of Independent Accountants

To the Shareowners and Board of Directors of PP&L Resources, Inc.

In our opinion, the accompanying consolidated balance sheet and consolidated
statements of preferred stock, of company-obligated mandatorily redeemable
preferred securities and of long-term debt and the related consolidated
statements of income, of cash flows and of shareowners' common equity present
fairly, in all material respects, the consolidated financial position of PP&L
Resources, Inc. and subsidiaries (the "Company") at December 31, 1998 and
1997, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 1, 1999

C-21
<PAGE>

PP&L RESOURCES, INC.
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of PP&L Resources, Inc. is responsible for the preparation,
integrity and objectivity of the consolidated financial statements and all
other sections of this annual report. The financial statements were prepared
in accordance with generally accepted accounting principles and the Uniform
System of Accounts prescribed by the Federal Energy Regulatory Commission. In
preparing the financial statements, management makes informed estimates and
judgments of the expected effects of events and transactions based upon
currently available facts and circumstances. Management believes that the
financial statements are free of material misstatement and present fairly the
financial position, results of operations and cash flows of PP&L Resources.

PP&L Resources' consolidated financial statements have been audited by
PricewaterhouseCoopers LLP (PricewaterhouseCoopers), independent certified
public accountants. PricewaterhouseCoopers' appointment as auditors was
previously ratified by the shareowners. Management has made available to
PricewaterhouseCoopers all PP&L Resources' financial records and related data,
as well as the minutes of shareowners' and directors' meetings. Management
believes that all representations made to PricewaterhouseCoopers during its
audit were valid and appropriate.

PP&L Resources maintains a system of internal control designed to provide
reasonable, but not absolute, assurance as to the integrity and reliability of
the financial statements, the protection of assets from unauthorized use or
disposition and the prevention and detection of fraudulent financial
reporting. The concept of reasonable assurance recognizes that the cost of a
system of internal control should not exceed the benefits derived and that
there are inherent limitations in the effectiveness of any system of internal
control.

Fundamental to the control system is the selection and training of qualified
personnel, an organizational structure that provides appropriate segregation
of duties, the utilization of written policies and procedures and the
continual monitoring of the system for compliance. In addition, PP&L Resources
maintains an internal auditing program to evaluate PP&L Resources' system of
internal control for adequacy, application and compliance. Management
considers the internal auditors' and PricewaterhouseCoopers' recommendations
concerning its system of internal control and has taken actions which are
believed to be cost-effective in the circumstances to respond appropriately to
these recommendations. Management believes that PP&L Resources' system of
internal control is adequate to accomplish the objectives discussed in this
report.

The Board of Directors, acting through its Audit and Corporate
Responsibility Committee, oversees management's responsibilities in the
preparation of the financial statements. In performing this function, the
Audit and Corporate Responsibility Committee, which is composed of four
independent directors, meets periodically with management, the internal
auditors and the independent certified public accountants to review the work
of each. The independent certified public accountants and the internal
auditors have free access to the Audit and Corporate Responsibility Committee
and to the Board of Directors, without management present, to discuss internal
accounting control, auditing and financial reporting matters.

Management also recognizes its responsibility for fostering a strong ethical
climate so that PP&L Resources' affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is
characterized and reflected in the business policies and guidelines of PP&L
Resources' operating subsidiaries. These policies and guidelines address: the
necessity of ensuring open communication within PP&L Resources; potential
conflicts of interest; proper procurement activities; compliance with all
applicable laws, including those relating to financial disclosure; and the
confidentiality of proprietary information.

/s/ William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer

/s/ John R. Biggar
John R. Biggar
Senior Vice President and Chief Financial Officer

C-22
<PAGE>

CONSOLIDATED STATEMENT OF INCOME
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars, except per share data)

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Operating Revenues
Electric operations............................... $ 2,410 $ 2,397 $ 2,428
Gas operations.................................... 35
Wholesale energy marketing and trading
activities....................................... 1,223 650 481
Energy related businesses (Note 1)................ 118 30 17
------- ------- -------
Total Operating Revenues.......................... 3,786 3,077 2,926
------- ------- -------
Operating Expenses
Operation
Cost of electric fuel............................. 480 466 448
Cost of natural gas and propane................... 13
Energy purchases.................................. 1,060 504 352
Other operating................................... 605 513 531
Maintenance......................................... 182 184 191
Depreciation and amortization (Note 1).............. 338 385 375
Taxes, other than income (Note 6)................... 188 204 203
Energy related businesses (Note 1).................. 93 21 16
------- ------- -------
Total Operating Expenses........................ 2,959 2,277 2,116
------- ------- -------
Operating Income.................................... 827 800 810
------- ------- -------
Other Income and (Deductions)....................... 66 (28) 21
------- ------- -------
Income Before Interest and Income Taxes............. 893 772 831
Interest Expense.................................. 230 215 220
------- ------- -------
Income Before Income Taxes and Extraordinary Items.. 663 557 611
Income Taxes (Note 6)............................. 259 237 254
------- ------- -------
Income Before Extraordinary Items................... 404 320 357
Extraordinary Items (net of $666 income taxes)
(Note 4)......................................... (948)
------- ------- -------
Income (Loss) Before Dividends on Preferred Stock... (544) 320 357
Preferred Stock Dividend Requirements............. 25 24 28
------- ------- -------
Net Income (Loss)................................... $ (569) $ 296 $ 329
======= ======= =======
Earnings Per Share of Common Stock
Basic and Diluted (a):
Income Before Extraordinary Items............... $ 2.29 $ 1.80 $ 2.05
Extraordinary Items (net of tax)................ (5.75)
------- ------- -------
Net Income (Loss)................................... $ (3.46) $ 1.80 $ 2.05
======= ======= =======
Dividends Declared per Share of Common Stock........ $ 1.335 $ 1.67 $ 1.67
(a) Based on average number of shares outstanding
(thousands)........................................ 164,651 164,550 161,060
</TABLE>

See accompanying Notes to Financial Statements.

C-23
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)

<TABLE>
<CAPTION>
1998 1997 1996
----- ---- -----
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) from continuing operations............... $(569) $296 $ 329
Extraordinary items (net of income taxes of $666).......... (948)
----- ---- -----
Net income before extraordinary items...................... 379 296 329
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization............................ 338 385 375
Amortization of property under capital leases............ 58 68 86
Equity in (earnings)/loss of unconsolidated affiliates... (49) 2 (13)
Regulatory debits and credits............................ (61) (36) (10)
Deferred income taxes and investment tax credits......... 12 18
Change in current assets and current liabilities
Fuel inventories....................................... (9) 11 (14)
Other.................................................. (33) (13) (35)
Other operating activities--net.......................... 2 46 75
----- ---- -----
Net cash provided by operating activities............ 637 777 793
----- ---- -----
Cash Flows From Investing Activities
Property, plant and equipment expenditures................. (304) (310) (360)
Proceeds from sale of nuclear fuel to trust................ 54 60 93
Purchases of available-for-sale securities................. (15) (72) (600)
Sales and maturities of available-for-sale securities...... 70 111 631
Investments in unconsolidated affiliates................... (306) (152) (201)
Purchases and sales of other financial investments--net.... 4 76
Other investing activities--net............................ 12 (4) 5
----- ---- -----
Net cash used in investing activities................ (485) (291) (432)
----- ---- -----
Cash Flows From Financing Activities
Issuance of long-term debt................................. 495 111 116
Issuance of common stock................................... 62 76 77
Purchase of treasury stock................................. (419)
Issuance of Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding solely
parent debentures......................................... 250
Retirement of long-term debt............................... (295) (210) (145)
Purchase of subsidiary's preferred stock (net of premium
and associated costs)..................................... (369)
Payments on capital lease obligations...................... (58) (68) (86)
Common and preferred dividends paid........................ (278) (298) (296)
Net increase(decrease) in short-term debt.................. 487 (9) 55
Other financing activities--net............................ (1) (20) (1)
----- ---- -----
Net cash used in financing activities................ (7) (537) (280)
----- ---- -----
Net Increase (Decrease) In Cash and Cash Equivalents....... 145 (51) 81
Cash and Cash Equivalents at Beginning of Period........... 50 101 20
----- ---- -----
Cash and Cash Equivalents at End of Period................. $ 195 $ 50 $ 101
===== ==== =====
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)..................... $ 237 $208 $ 213
Income taxes............................................. $ 248 $244 $ 286
</TABLE>

See accompanying Notes to Financial Statements.

C-24
<PAGE>

CONSOLIDATED BALANCE SHEET AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Assets
Property, Plant and Equipment
Electric utility plant in service--net (Note 1)
Transmission and distribution.................................... $2,179 $2,160
Generation....................................................... 1,601 4,022
General and intangible........................................... 223 232
------ ------
4,003 6,414
------ ------
Construction work in progress--at cost........................... 117 185
Nuclear fuel owned and leased--net............................... 162 167
------ ------
Electric utility plant--net.................................... 4,282 6,766
Gas and oil utility plant--net................................. 175 30
Other property--net.............................................. 23 24
------ ------
4,480 6,820
------ ------
Investments
Investment in unconsolidated affiliates at equity (Note 1)....... 688 377
Nuclear plant decommissioning trust fund (Notes 1 and 7)......... 206 163
Financial investments (Notes 1 and 8)............................ 1 52
Other (Note 8)................................................... 11 13
------ ------
906 605
------ ------
Current Assets
Cash and cash equivalents (Note 1)............................... 195 50
Accounts receivable (less reserve: 1998, $16; 1997, $16)
Utility customers.............................................. 173 190
Other.......................................................... 125 48
Unbilled revenues
Utility customers.............................................. 106 90
Other.......................................................... 66 37
Fuel, materials and supplies--at average cost.................... 207 200
Prepayments...................................................... 15 28
Other............................................................ 61 52
------ ------
948 695
------ ------
Regulatory Assets and Other Noncurrent Assets (Note 4)
Recoverable transition costs..................................... 2,819
Other............................................................ 454 1,365
------ ------
3,273 1,365
------ ------
$9,607 $9,485
====== ======
</TABLE>

See accompanying Notes to Financial Statements.

C-25
<PAGE>

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Liabilities
Capitalization
Common equity
Common stock............. $ 2 $ 2
Capital in excess of par
value................... 1,866 1,669
Treasury stock........... (419)
Earnings reinvested (Note
4)...................... 372 1,164
Capital stock expense and
other................... (31) (26)
------ ------
1,790 2,809
------ ------
Preferred stock
With sinking fund
requirements............ 47 47
Without sinking fund
requirements............ 50 50
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts holding
solely company
debentures................ 250 250
Long-term debt............. 2,983 2,585
------ ------
5,120 5,741
------ ------
Current Liabilities
Short-term debt (Note 9)... 636 135
Long-term debt due within
one year.................. 1 150
Capital lease obligations
due within one year....... 59 58
Above market NUG purchases
due within one year (Note
4)........................ 105
Accounts payable........... 197 140
Taxes and interest
accrued................... 95 102
Dividends payable.......... 46 76
Other...................... 128 108
------ ------
1,267 769
------ ------
Deferred Credits and Other
Noncurrent Liabilities
Deferred income taxes and
investment tax credits
(Note 6).................. 1,574 2,221
Above market NUG purchases
(Note 4).................. 775
Capital lease obligations.. 109 113
Other (Notes 1 and 7)......... 762 641
------ ------
3,220 2,975
------ ------
Commitments and Contingent
Liabilities (Note 14).....
------ ------
$9,607 $9,485
====== ======
</TABLE>

See accompanying Notes to Financial Statements.

C-26
<PAGE>

CONSOLIDATED STATEMENT OF SHAREOWNERS' COMMON EQUITY
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)

<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Common stock at beginning of year...... $ 2 $ 2 $ 2
Sale of common stock...................
----------- ----------- -----------
Common stock at end of year............ 2 2 2
----------- ----------- -----------
Capital in excess of par value at be-
ginning of year....................... 1,669 1,596 1,513
Common stock issued (b)................ 62 76 77
Common stock issued for purchase of
Penn Fuel Gas (see Note 11)........... 135
Other.................................. (3) 6
----------- ----------- -----------
Capital in excess of par value at end
of year............................... 1,866 1,669 1,596
----------- ----------- -----------
Treasury stock at beginning of year....
Purchase of treasury stock............. (419)
----------- ----------- -----------
Treasury stock at end of year.......... (419)
----------- ----------- -----------
Earnings reinvested at beginning of
year.................................. 1,164 1,143 1,083
Net income (loss)...................... (569) 296 329
Cash dividends declared on common
stock................................. (223) (275) (269)
----------- ----------- -----------
Earnings reinvested at end of year..... 372 1,164 1,143
----------- ----------- -----------
Capital stock expense and other at be-
ginning of year....................... (26) 4 (1)
Other.................................. (5) (30) 5
----------- ----------- -----------
Capital stock expense and other at end
of year............................... (31) (26) 4
----------- ----------- -----------
Total Shareowners' Common Equity....... $ 1,790 $ 2,809 $ 2,745
=========== =========== ===========
Common stock shares at beginning of
year (a).............................. 166,248,284 162,665,416 159,403,266
Common stock issued (b)................ 2,604,369 3,582,868 3,262,150
Common stock issued for purchase of
Penn Fuel Gas......................... 5,555,522
Common stock purchased................. (16,996,129)
----------- ----------- -----------
Common stock shares at end of year..... 157,412,046 166,248,284 162,665,416
----------- ----------- -----------
</TABLE>
- -------
(a) $.01 par value, 390,000,000 share authorized. Each share entitles the
holder to one vote on any question presented to any shareowners' meeting.
(b) Common stock issued through the ESOP and the DRIP.

See accompanying Notes to Financial Statements.

C-27
<PAGE>

CONSOLIDATED STATEMENT OF PREFERRED STOCK AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries (a)
(Millions of Dollars)

<TABLE>
<CAPTION>
Outstanding Shares
------------ Outstanding Shares
1998 1997(b) 1998(b) Authorized
---- ------- ----------- ----------
<S> <C> <C> <C> <C>
PP&L
Preferred Stock--$100 par, cumulative
4 1/2%.................................... $25 $25 530,189 629,936
Series.................................... 72 72 4,133,556 10,000,000
--- ---
$97 $97
=== ===
</TABLE>

Details of Preferred Stock(c)

<TABLE>
<CAPTION>
Sinking Fund
Provisions
------------------------
Optional
Outstanding Shares Redemption Shares to be
--------------- Outstanding Price Per Redeemed Redemption
1998(b) 1997(b) 1998(b) Share Annually(f) Period
------- ------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
With Sinking Fund
Requirements
Series Preferred
5.95%.................. $ 1 $ 1 300,000 (d) 10,000 April 2001
6.05%.................. 250,000 (d)
6.125%................. 31 31 1,150,000 (d) (e) 2003-2008
6.15%.................. 10 10 250,000 (d) 100,000 April 2003
6.33%.................. 5 5 1,000,000 (d) 50,000 July 2003
--- ---
$47 $47
=== ===
Without Sinking Fund
Requirements
4 1/2% Preferred....... $25 $25 530,189 $110.00
Series Preferred
3.35%.................. 2 2 41,783 103.50
4.40%.................. 11 11 228,773 102.00
4.60%.................. 3 3 63,000 103.00
6.75%.................. 9 9 850,000 (d)
--- ---
$50 $50
=== ===
</TABLE>

Increases(Decreases) in Preferred Stock

There were no issuances or redemptions of preferred stock in 1998, 1997 or
1996.
- -------
(a) Each share of PP&L's preferred stock entitles the holder to one vote on
any question presented to PP&L's shareowners' meetings. There were
10,000,000 shares of PP&L Resources' preferred stock and 5,000,000 shares
of PP&L's preference stock authorized; none were outstanding at December
31, 1998 and 1997.
(b) In 1997, and continuing in 1998, PP&L Resources acquired 79.11% ($369
million par value) of the outstanding preferred stock of PP&L in a tender
offer. At December 31, 1998, these shares have not been retired or
redeemed. The par value of PP&L preferred stock acquired by PP&L Resources
has been eliminated for purposes of providing consolidated financial
statements.
(c) The involuntary liquidation price of the preferred stock is $100 per
share. The optional voluntary liquidation price is the optional redemption
price per share in effect, except for the 4-1/2% Preferred Stock for which
such price is $100 per share (plus in each case any unpaid dividends).
(d) These series of preferred stock are not redeemable prior to the following
years: 5.95%, 2001; 6.05%, 2002; 6.125%, 6.15%, 6.33% and 6.75%, 2003.
(e) Shares to be redeemed annually on October 1 as follows: 2003-2007, 57,500;
2008, 22,500.
(f) After giving effect to the preferred stock tender offer.

See accompanying Notes to Financial Statements.

C-28
<PAGE>

CONSOLIDATED STATEMENT OF COMPANY-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries(a)
(Millions of Dollars)

<TABLE>
<CAPTION>
Outstanding Outstanding
----------- -----------
1998 1997 1998 Authorized Maturity(b)
----- ----- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Company-Obligated Mandatorily
Redeemable
Preferred Securities of
Subsidiary Trusts Holding
Solely Company Debentures--$25
per security
8.10%.......................... $ 150 $ 150 6,000,000 6,000,000 July 2002
8.20%.......................... 100 100 4,000,000 4,000,000 April 2002
----- -----
$ 250 $ 250
===== =====
</TABLE>
- -------
(a) In 1997 PP&L arranged for the issuance of a total of $250 million of
company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely company debentures by PP&L Capital Trust
and PP&L Capital Trust II, two Delaware statutory business trusts. These
preferred securities are supported by a corresponding amount of junior
subordinated deferrable interest debentures issued by PP&L to the trusts.
PP&L owns all of the common securities, representing the remaining
undivided beneficial ownership interest in the assets of the trusts. The
proceeds derived from the issuance of the Preferred Securities and the
common securities were used by PP&L Capital Trust and PP&L Capital Trust
II to acquire $103 million and $155 million principal amount of Junior
Subordinated Deferrable Interest Debentures, ("Subordinated Debentures")
respectively. PP&L has guaranteed all of the trusts' obligations under the
Preferred Securities. The proceeds of the sale of these preferred
securities were loaned by PP&L to PP&L Resources for the tender offer for
PP&L preferred stock.
(b) The preferred securities are subject to mandatory redemption, in whole or
in part, upon the repayment of the Subordinated Debentures at maturity or
their earlier redemption. At the option of PP&L, the Subordinated
Debentures are redeemable on and after the dates shown above in whole at
any time or in part from time to time. The amount of preferred securities
subject to such mandatory redemption will be equal to the amount of
related Subordinated Debentures maturing or being redeemed. The redemption
price is $25 per security plus an amount equal to accumulated and unpaid
distributions to the date of redemption.

See accompanying Notes to Financial Statements.

C-29
<PAGE>

CONSOLIDATED STATEMENT OF LONG-TERM DEBT AT DECEMBER 31,
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)

<TABLE>
<CAPTION>
Outstanding
-----------------
1998 1997 Maturity(b)
------ ------ -----------------
<S> <C> <C> <C>
First Mortgage Bonds(a)
5 1/2%.............................. $ 150 April 1, 1998
6%.................................. $ 125 125 June 1, 2000
7 3/4%.............................. 150 150 May 1, 2002
6 7/8%.............................. 100 100 February 1, 2003
6 1/8% to 6 7/8%.................... 625 (c) 425 2004-2008
7.70%............................... 200 200 2009-2013(d)
7 3/8%.............................. 100 100 2014-2018
6 3/4% to 9 3/8%.................... 815 815 2019-2023
7.30%............................... 150 150 2024-2028
First Mortgage Pollution Control
Bonds(a)
6.40% Series H...................... 90 90 November 1, 2021
5.50% Series I...................... 53 53 February 15, 2027
6.40% Series J...................... 116 116 September 1, 2029
6.15% Series K...................... 55 55 August 1, 2029
------ ------
2,579 2,529
Unsecured promissory notes............ 116
Pollution Control Revenue Bonds....... 9 9
------ ------
2,588 2,654
Unamortized (discount) and premium--
net.................................. (19) (21)
------ ------
2,569 2,633
Less amount due within one year....... 150
------ ------
Total PP&L long-term debt............. 2,569 2,483
------ ------
Additional PP&L Resources, Inc.
Medium Term Notes
5.75% to 6.84%...................... 397 (e) 102 2000-2007
Unsecured Promissory Notes............ 18
------ ------
415 102
Less amount due within one year....... 1
------ ------
Total PP&L Resources long-term debt... $2,983 $2,585
====== ======
</TABLE>
- -------
(a) Substantially all owned electric utility plant is subject to the lien of
PP&L's Mortgage.
(b) Aggregate long-term debt maturities through 2003 are (millions of
dollars): 2000, $235; 2001, $70; 2002, $150; 2003, $185. There are no
bonds outstanding that have sinking fund requirements.
(c) In May 1998, PP&L issued $200 million First Mortgage Bonds, 6 1/8% Reset
Put Securities Series due 2006. In connection with this issuance, PP&L
assigned to a third party the option to call the bonds from the holders on
May 1, 2001. These bonds will mature on May 1, 2006, but will be required
to be surrendered by the existing holders on May 1, 2001 either through
the exercise of the call option by the callholder or, if such option is
not exercised, through the automatic exercise of a mandatory put by the
trustee on behalf of the bondholders. If the call option is exercised, the
bonds will be remarketed and the interest rate will be reset for the
remainder of their term to the maturity date. If the call option is not
exercised, the mandatory put will be exercised and PP&L will be required
to repurchase the bonds at 100% of their principal amount on May 1, 2001.
Proceeds from the sale of the bonds were used by PP&L to retire $116
million of its unsecured term loans and to reduce its outstanding
commercial paper balances.
(d) Any registered owner of these bonds has the right to require PP&L to
redeem such owner's bonds on October 1, 1999 at a price of 100% of the
principal amount.
(e) In 1998, PP&L Capital Funding issued $295 million of medium-term notes
with maturities varying from two to seven years.

See accompanying Notes to Financial Statements.

C-30
<PAGE>

NOTES TO FINANCIAL STATEMENTS

Terms and abbreviations appearing in Notes to Financial Statements are
explained in the glossary.

1. Summary of Significant Accounting Policies

Business and Consolidation

As of December 31, 1998, PP&L Resources was the parent holding company of
PP&L, PP&L Global, PP&L Spectrum, PP&L Capital Funding, Penn Fuel Gas, H.T.
Lyons and McClure.

The financial condition and results of operations of PP&L and PP&L Global
are currently the principal factors affecting PP&L Resources' financial
condition and results of operations. PP&L provides electricity delivery
service in eastern and central Pennsylvania, sells retail electricity
throughout Pennsylvania, and markets wholesale electricity in 28 states and
Canada. PP&L Global is an international independent power company.

The consolidated financial statements include the accounts of PP&L Resources
and its direct and indirect subsidiaries. All significant intercompany
transactions have been eliminated.

Less than 50% owned affiliates are accounted for using the equity method.
These affiliates consist principally of PP&L's investment in Safe Harbor Water
Power Corporation and investments held by PP&L Global.

All direct and indirect affiliates of PP&L Resources report their results on
a current basis, except for PP&L Global. Effective in 1998, PP&L Global
records the results of its majority owned affiliates on a one-month lag. PP&L
Global records the results of affiliates in which it holds a minority interest
on a one-quarter lag. Recording these results on a lag basis allows PP&L
Global to close its books in a timely manner to coincide with the closing of
PP&L Resources' books.

Reclassification

Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform to the current presentation.

The most significant reclassifications have been made in the Consolidated
Statement of Income. This Statement has been modified to better reflect the
changing nature of the business from a regulated electric utility to a full-
service provider of retail and wholesale energy and related products and
services. The operating revenues and expenses of PP&L Global, PP&L Spectrum,
McClure, and H.T. Lyons are reflected as "Energy Related Businesses," as
components of "Operating Income." Previously, the results of non-regulated
affiliates were included in "Other Income and (Deductions)" in PP&L Resources'
Statement of Income. In addition, the revenues generated by PP&L's wholesale
energy and trading activities are now separately disclosed. Also, income taxes
are no longer reflected as "Operating Expense," which was the traditional
disclosure used by utilities. Lastly, nuclear decommissioning expense had
historically been classified as "Other operating" expense. These expenses have
been reclassified as depreciation expense.

On the Consolidated Balance Sheet, "Electric utility plant in service--net"
at December 31, 1997 has been reclassified to separately disclose generation
plant, which is no longer subject to the regulatory accounting provisions of
SFAS 71, "Accounting for the Effects of Certain Types of Regulation." See Note
4 for further information.

Management's Estimates

These financial statements have been prepared using information which
represents management's best estimates of existing conditions. Actual results
could differ from these estimates.

Significant estimates were required in recording the effect of the PUC
restructuring outcome. The impairment write-down of certain generation plant
was dependent on projections of future cash flows and capacity factors. Cash
flow projections and the resulting impact on the fair value determination of
these generating facilities are subject to future re-evaluation. In addition,
the liabilities recorded for above-market purchases from NUGs were based on
estimated generation by the NUG facilities and estimated future market prices
for this generation. Again, these recorded amounts are subject to revision if
the underlying estimates change.

C-31
<PAGE>

Accounting Records

The accounting records for PP&L are maintained in accordance with the
Uniform System of Accounts prescribed by the FERC and adopted by the PUC.

Regulation

Historically, PP&L accounted for its operations in accordance with the
provisions of SFAS 71, which requires rate-regulated entities to reflect the
effects of regulatory decisions in their financial statements. PP&L
discontinued application of SFAS 71 for the generation portion of its business
effective June 30, 1998.

Utility Plant

Additions to utility plant and replacement of units of property are
capitalized at cost. AFUDC is capitalized as part of the construction costs
for regulated projects. Effective June 30, 1998, the recording of AFUDC was
discontinued on generation-related construction projects, since these assets
are no longer subject to the provisions of SFAS 71. Instead, capitalized
interest is recorded on generation-related projects in accordance with SFAS
34, "Capitalizing Interest Costs."

The cost of units of depreciable property retired or replaced is charged to
accumulated depreciation. Expenditures for maintenance and repairs of property
and the cost of replacing items determined to be less than a unit of property
are charged to operating expense. The cost to retire depreciable units of
generation-related property is charged to operating expense while the cost to
retire depreciable units of regulated property is charged to accumulated
depreciation.

Following are the classes of Electric Utility Plant in Service, with
associated accumulated depreciation reserves, at December 31, 1998 and
December 31, 1997 (millions of dollars):

<TABLE>
<CAPTION>
Electric
Transmission General Utility
& & Plant in
Distribution Generation Intangible Service
------------ ---------- ---------- --------
<S> <C> <C> <C> <C>
December 31, 1998:
Original Cost..................... $ 3,395 $ 6,351 $ 383 $10,129
Accumulated Depreciation Reserve.. (1,216) (4,750) (160) (6,126)
------- ------- ----- -------
$ 2,179 $ 1,601 $ 223 $ 4,003
======= ======= ===== =======
December 31, 1997:
Original Cost..................... $ 3,309 $ 6,306 $ 369 $ 9,984
Accumulated Depreciation Reserve.. (1,149) (2,284) (137) (3,570)
------- ------- ----- -------
$ 2,160 $ 4,022 $ 232 $ 6,414
======= ======= ===== =======
</TABLE>

Generation plant is reflected at the lower of cost or market value at
December 31, 1998. As noted in the "Regulation" section of this note, PP&L
discontinued application of SFAS 71 for the generation portion of its business
effective June 30, 1998. In accordance with SFAS 101, "Regulated Enterprises--
Accounting for the Discontinuation of Application of FASB Statement No. 71,"
impairment tests were performed on the individual generating facilities. These
impairment tests used the provisions of SFAS 121, "Accounting For the
Impairment of Long-Lived Assets and For Long-Lived Assets to Be Disposed Of."
As a result, generation plant assets were written down by $2.357 billion in
June 1998.

The other classes of Electric Utility Plant in Service continue to be
subject to SFAS 71 and are carried at historical cost.

For financial statement purposes, depreciation is being provided over the
estimated useful lives of property using a straight-line method. Certain
property at the Susquehanna Station was depreciated at an annual rate of $173
million from October 1995 through December 1998, at which point this certain
property was fully depreciated. Provisions for depreciation, as a percent of
average depreciable property, approximated 3.7% in 1998, and 3.8% in 1997 and
1996.

C-32
<PAGE>

Nuclear Decommissioning and Fuel Disposal

An annual provision for PP&L's share of the future cost to decommission the
Susquehanna station, equal to the amount allowed for ratemaking purposes, is
charged to depreciation expense. Such amounts are invested in external trust
funds which can be used only for future decommissioning costs. See Note 7.

The DOE is responsible for the permanent storage and disposal of spent
nuclear fuel removed from nuclear reactors. PP&L pays the DOE a fee for future
disposal services and recovers such costs in customer rates. PP&L has joined
other utilities in a federal lawsuit to suspend payments to the DOE and to
place the fees in escrow unless that department begins accepting nuclear fuel
as agreed to in its contract with the utilities.

Financial Investments

Securities subject to the requirements of SFAS 115 "Accounting for Certain
Investments in Debt and Equity Securities" are carried at fair value,
determined at the balance sheet date. Net unrealized gains on available-for-
sale securities are included in common equity. Net unrealized gains and losses
on trading securities are included in income. Net unrealized gains and losses
on securities that are not available for unrestricted use due to regulatory or
legal reasons are reflected in the related asset and liability accounts.
Realized gains and losses on the sale of securities are recognized utilizing
the specific cost identification method.

Premium on Reacquired Long-Term Debt

In accordance with SFAS 71, PP&L deferred the premiums and expenses to
redeem long-term debt and amortized these costs over the life of the new debt.
If no new debt was issued to refinance the retired debt, these costs were
amortized over the remaining life of the retired debt. Effective June 30,
1998, losses on reacquired debt attributable to the generation portion of
PP&L's business are being expensed as incurred in accordance with SFAS 4,
"Reporting Gains and Losses from Extinguishment of Debt."

Accounting for Price Risk Management

PP&L engages in price risk management activities for both energy trading and
non-trading activities as defined by EITF 98-10, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities." During 1998, the
commodity instruments used were forward and option contracts that require
physical delivery of the commodity. These instruments were reflected in the
financial statements using the accrual method of accounting. As of January 1,
1999, PP&L adopted mark-to-market accounting for energy trading contracts, in
accordance with EITF 98-10, and gains and losses from changes in market prices
will be reflected in Energy Purchases on the Consolidated Statement of Income.

PP&L will continue to use accrual accounting for physical commodity
instruments that qualify as hedges of non-trading activities until it adopts
SFAS 133 "Accounting for Derivative Instruments and Hedging Activities" on
January 1, 2000. Commodity instruments that qualify as hedges manage exposure
to market fluctuations in the price of electricity and fuels needed to produce
electricity. In order to qualify as a hedge, the price movements in the
commodity derivatives must be highly correlated with the price movements of
the underlying hedged commodity. When a hedge relationship is terminated, the
gains accrued to date will be included in Energy Purchases when the underlying
hedged physical transaction closes; losses accrued will be recognized
immediately in Energy Purchases.

In 1999, PP&L expects to expand its use of commodity instruments to include
futures, swaps and financial options. These instruments, which will permit
cash settlement, will be recorded at fair value on the Consolidated Balance
Sheet. Gains and losses on instruments that qualify as hedges will be
recognized in income when the underlying hedged physical transaction closes
and will be included in Energy Purchases. Gains and losses related to these
transactions, to the extent they are not yet settled in cash, will be reported
as Current Assets or Liabilities, in the Consolidated Balance Sheet until
recognized in income, until PP&L adopts SFAS 133 on January 1, 2000. Gains and
losses on instruments considered trading activities will be recognized
currently in Energy Purchases.

PP&L Resources has utilized a written call option to manage the interest
rate on a portion of its outstanding debt. The premium received is being
amortized against interest expense over the expected life of the debt.

C-33
<PAGE>

PP&L Resources or its subsidiaries also enter into foreign currency exchange
contracts to hedge future cash flows for firm transactions and commitments and
to hedge economic exposures such as anticipated dividends and projected asset
sales or acquisitions when there is a high degree of certainty that the
exposure will be realized. Until PP&L Resources adopts SFAS 133, "Accounting
for Derivative Instruments and Hedging Activities" on January 1, 2000, market
gains and losses are recognized and accounted for in accordance with SFAS 52,
"Foreign Currency Translation."

Capital Leases

Leased property of PP&L capitalized on the Consolidated Balance Sheet
consists solely of nuclear fuel. Future lease payments for nuclear fuel are
based on the quantity of electricity produced at the Susquehanna Station. The
maximum amount of nuclear fuel available for lease under current arrangements
is $200 million.

Revenues--Electric and Gas Operations

Electric and gas revenues are recorded based on the amounts of electricity
and gas delivered to retail customers through the end of each calendar month.
This includes amounts customers will be billed for electricity and gas
delivered from the time meters were last read to the end of the month.

During 1998, PP&L's STAS was zero. This mechanism can be used in the future
if needed. The SBRCA expired effective July 1, 1997. The ECR was terminated
effective January 1, 1997, and was rolled into base rates. In 1997 and 1998,
the PUC authorized PP&L to record undercollected energy costs as a regulatory
asset. This regulatory asset was recovered during the restructuring
proceeding. See Notes 3 and 4.

Income Taxes

PP&L Resources and its subsidiaries file a consolidated federal income tax
return.

The provision for PP&L's deferred income taxes for regulated assets is based
upon the ratemaking principles reflected in rates established by the PUC and
FERC. The difference in the provision for deferred income taxes for regulated
assets and the amount that otherwise would be recorded under generally
accepted accounting principles is deferred and included in taxes recoverable
through future rates on the Consolidated Balance Sheet. See Note 6.

Investment tax credits were deferred when utilized and are amortized over
the average lives of the related assets.

Pension Plan and Other Postretirement and Postemployment Benefits

PP&L and Penn Fuel Gas have noncontributory pension plans covering
substantially all employees. Subsidiary companies of PP&L formerly engaged in
coal mining have a noncontributory pension plan for substantially all non-
bargaining, full-time employees. Funding is based upon actuarially determined
computations that take into account the amount deductible for income tax
purposes and the minimum contribution required under the Employee Retirement
Income Security Act of 1974.

PP&L Global has a non-qualified retirement plan for its corporate officers.

For information on other postretirement and postemployment benefits, see
Note 12.

Cash Equivalents

All highly liquid debt instruments purchased with original maturities of
three months or less are considered to be cash equivalents.

Comprehensive Income

In 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income." This
statement required disclosure of "comprehensive income," defined as changes in
equity other than from transactions with shareowners. Comprehensive income
consists of net income, as well as holding gains and losses of certain assets
(such as available-for-sale securities), foreign currency translation
adjustments and pensions liability adjustments. The

C-34
<PAGE>

comprehensive income of PP&L Resources and PP&L was not materially different
from net income for the years ended December 31, 1998, 1997 and 1996.

Stock Repurchase Program

In September 1998, PP&L Resources purchased approximately 17 million shares
of its common stock in a self-tender offer. (Refer to Note 9.) These treasury
shares are reflected on the December 31, 1998 Consolidated Balance Sheet of
PP&L Resources as an offset to common equity under the cost method of
accounting. The cost of the treasury shares was $419 million ($24.50 per share
plus transaction costs). Management has no definitive plans for the future use
of these shares. These treasury shares are not considered outstanding in
calculating earnings per share on the Consolidated Statement of Income of PP&L
Resources for the year ended December 31, 1998.

2. Segment and Related Information

Effective December 31, 1998, PP&L Resources adopted SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information." PP&L Resources'
principal business segment is PP&L, which provides electricity delivery
service in eastern and central Pennsylvania, sells retail electricity
throughout Pennsylvania, and markets wholesale electricity in 28 states and
Canada. PP&L Resources' other reported business segment, PP&L Global, invests
in and develops worldwide power projects with the majority of its investments
and related revenues as of year-end 1998 located in the U.K., Chile, and El
Salvador. PP&L Global's revenue represents equity earnings in investments.
Other revenues in the years 1996 and 1997 represent unregulated energy
services. In 1998 other revenues represent gas distribution, and mechanical
contracting and engineering, in addition to unregulated energy services.
Financial data for the business segments are as follows (millions of dollars):

<TABLE>
<CAPTION>
Other
PP&L and Elimin- PP&L
PP&L Global ations Resources
------ ------ ----------- ---------
<S> <C> <C> <C> <C>
1998
Income statement data:
Operating revenues.................. $3,643 $47(b) $96 $3,786
Extraordinary items, net of taxes... (948)(a) (948)
Interest expense.................... 196 22 12 230
Depreciation and amortization....... 335 3 338
Income taxes........................ 273 (4) (10) 259
Net income (loss)................... (587) 15 3 (569)
Balance sheet data:
Cumulative net investment in
unconsolidated affiliates.......... 17 671(b) 688
Total assets........................ 8,838 757 12 9,607
Cash flow data:
Property, plant and equipment
expenditures....................... 297 7 304
Investments in unconsolidated
affiliates......................... 306 306
</TABLE>
- -------
(a) See Note 4 for a detailed explanation of Extraordinary Items.
(b) Operating revenues were 9.0% of average net investment.

C-35
<PAGE>

<TABLE>
<CAPTION>
Other
PP&L and Elimin- PP&L
PP&L Global ations Resources
------ ------ ----------- ---------
<S> <C> <C> <C> <C>
1997
Income statement data:
Operating revenues..................... $3,049 $32 (a) $ (4) $3,077
Interest expense....................... 207 8 215
Depreciation and amortization.......... 385 385
Windfall profits tax................... (37)(b) (37)
Income taxes........................... 247 (3) (7) 237
Net income (loss)...................... 308 (17) 5 296
Balance sheet data:
Cumulative net investment in
unconsolidated affiliates............. 17 360 (a) 377
Total assets........................... 9,472 397 (384)(c) 9,485
Cash flow data:
Property, plant and equipment
expenditures.......................... 310 310
Investments in unconsolidated
affiliates............................ 152 152
</TABLE>
- -------
(a) Operating revenues were 10.7% of average net investment.
(b) See Note 10 for a detailed explanation regarding the windfall profits tax
assessed on PP&L Global.
(c) Primarily represents a consolidating elimination entry for a loan from CEP,
a PP&L subsidiary, to PP&L Resources.

<TABLE>
<CAPTION>
Other
PP&L and Elimin- PP&L
PP&L Global ations Resources
------ ------ ----------- ---------
<S> <C> <C> <C> <C>
1996
Income statement data:
Operating revenues..................... $2,911 $11 (a) $ 4 $2,926
Interest expense....................... 214 6 220
Depreciation and amortization.......... 375 375
Income taxes........................... 255 (1) 254
Net income (loss)...................... 329 1 (1) 329
Cash flow data:
Property, plant and equipment
expenditures.......................... 360 360
Investments in unconsolidated affili-
ates.................................. 201 201
</TABLE>
- -------
(a) Operating revenues were 8.6% of average net investment.

C-36
<PAGE>

3. PUC Restructuring Proceeding

In August 1998, the PUC entered a Final Order approving a "Joint Petition
for Full Settlement of PP&L's Restructuring Plan and Related Court
Proceedings" (Joint Settlement Petition). The following are the major elements
of this settlement:

1. PP&L is permitted to recover $2.97 billion (on a net present value basis)
in transition costs over 11 years--i.e., from January 1, 1999 through December
31, 2009. PP&L is permitted a return of 10.86% on the unamortized balance of
these transition costs.

2. PP&L will reduce rates to all retail customers by 4% effective January 1,
1999 through December 31, 1999.

3. One-third of PP&L customers will be able to choose their electric
supplier on January 1, 1999, one-third on January 2, 1999, and the remainder
on January 2, 2000.

4. Beginning on January 1, 1999, PP&L will unbundle its retail electric
rates to reflect separate prices for the transmission and distribution
charges, the CTC (and, if applicable, the ITC), and a "shopping credit" for
customers choosing an alternate electric supplier. These shopping credits vary
among customer classes and will increase over the transition period to reflect
decreases in the CTC. The settlement provided for the following unbundled
rates over the transition period:

SCHEDULE OF SYSTEM AVERAGE RATES
CENTS/KWH

<TABLE>
<CAPTION>
Transmission Shopping Generation Total
Effective Date & Distribution CTC (a) Credit Rate Cap (b) Rate (c)
- -------------- -------------- ------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Jan. 1, 1999............. 1.74 1.57 3.81 5.38 7.12
Jan. 1, 2000............. 1.74 1.55 4.13 5.68 7.42
Jan. 1, 2001............. 1.74 1.52 4.16 5.68 7.42
Jan. 1, 2002............. 1.74 1.45 4.23 5.68 7.42
Jan. 1, 2003............. 1.74 1.41 4.27 5.68 7.42
Jan. 1, 2004............. 1.74 1.35 4.33 5.68 7.42
Jan. 1, 2005............. (d) 1.27 4.41 5.68 (d)
Jan. 1, 2006............. (d) 1.27 4.78 6.05 (d)
Jan. 1, 2007............. (d) 1.21 4.84 6.05 (d)
Jan. 1, 2008............. (d) 1.14 4.91 6.05 (d)
Jan. 1, 2009 (e)......... (d) 1.03 5.02 6.05 (d)
</TABLE>
- -------
(a) Average CTC rates are fixed, subject to reconciliation for actual CTC
collection. Reconciliation of the CTC will be reflected in a rider, which
will be a separate credit or a separate charge to the CTC (up to the
Generation Rate Cap which is the sum of the CTC and the Shopping Credit
contained in the tariff).
(b) The Generation Rate Cap equals the sum of the CTC and Shopping Credit. The
generation portion of bills for customers who continue to be supplied by
PP&L as the supplier of last resort will not, on average, exceed the
figures in this column.
(c) The bundled rate equals the sum of Transmission & Distribution plus
Generation Rate Cap. Customers who continue to be supplied by PP&L as the
provider of last resort will, on average, pay the total rate shown in the
last column. The 1999 rate represents a 4% reduction from the existing
rate cap of 7.42 cents/kWh.
(d) The cap on PP&L's transmission and distribution rates under the Customer
Choice Act is extended from June 30, 2001 through 2004.
(e) Effective until December 31, 2009.

C-37
<PAGE>

In addition, the settlement resulted in the following schedule for
amortization of the transition costs over the transition period:

ANNUAL STRANDED COST
AMORTIZATION AND RETURN (a)

<TABLE>
<CAPTION>
Revenue Excluding Gross Receipts Tax
--------------------------------------
Annual CTC Amorti-
Sales Cents/ Total Return zation
Year MWh kWh ($000) ($000) ($000)
- ---- ---------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1999.................. 33,108,701 1.57 $ 497,938 $ 310,396 $ 187,542
2000.................. 33,605,332 1.55 498,027 290,796 207,231
2001.................. 34,109,412 1.52 496,671 269,138 227,532
2002.................. 34,621,053 1.45 481,095 245,359 235,736
2003.................. 35,140,369 1.41 473,995 220,722 253,273
2004.................. 35,667,474 1.35 461,682 194,252 267,430
2005.................. 36,202,486 1.27 438,637 166,303 272,334
2006.................. 36,745,524 1.27 447,326 137,841 309,485
2007.................. 37,296,707 1.21 433,106 105,497 327,610
2008.................. 37,856,157 1.14 411,419 71,258 340,161
2009 (b).............. 38,424,000 1.03 377,373 35,708 341,665
</TABLE>
- -------
(a) Subject to reconciliation for actual CTC collections.
(b) Through December 31, 2009.

5. The cap on the generation component of rates is extended from December
31, 2005 until December 31, 2009. The cap on the transmission and
distribution component of rates is extended from June 30, 2001 until
December 31, 2004.

6. PP&L will recover its nuclear plant decommissioning costs through the
CTC. PP&L may seek an exception to the rate cap from customers for
increases in these decommissioning costs, but agrees not to recover more
than 96% of such increased amount.

7. PP&L is authorized to securitize up to $2.85 billion in transition and
related costs, and a PUC Qualified Rate Order authorizing this
securitization is included in the settlement. The settlement requires 75%
of the savings from securitization to be passed back to customers, while
25% would be retained by PP&L. The costs of issuing the transition bonds
and refinancing outstanding debt and equity will be reflected in the ITC
charged to all customers. As with the CTC, the ITC must terminate by the
end of the transition period; also, the ITC will offset the CTC on customer
bills.

8. On January 1, 2002, 20% of all PP&L's residential customers will be
assigned to a provider of last resort other than PP&L or an affiliate of
PP&L. These customers will be selected at random, and the supplier will be
selected on the basis of a PUC-approved bidding process.

9. Subject to a review by the PUC Bureau of Audits, effective on January
1, 1999, alternate electric generation suppliers can provide advanced
metering and billing service to PP&L's commercial and industrial customers.
Effective on January 1, 1999, such alternate suppliers can provide certain
advanced metering service to PP&L's residential customers. Effective on
January 1, 2000, PP&L's residential customers can choose their billing
service as well from such alternate suppliers.

10. PP&L will transfer its retail marketing function to a separate,
affiliated corporation by September 15, 1998.

11. PP&L is permitted, but not required, to transfer ownership and
operation of its generating facilities to a separate corporate entity at
book value.

12. PP&L will spend approximately $16 million annually on assistance and
energy conservation for low-income customers.

C-38
<PAGE>

Pursuant to the Joint Settlement Petition, PP&L transferred its retail
marketing function to a new subsidiary, PP&L EnergyPlus, on September 14,
1998. In September 1998, the PUC approved PP&L EnergyPlus's application to act
as a Pennsylvania electric generation supplier (EGS). This license permits
PP&L EnergyPlus to offer retail electric supply to participating customers in
PP&L's service territory and in the service territories of other Pennsylvania
utilities. In 1999, PP&L EnergyPlus will offer such supply to industrial and
commercial customers throughout the state. At this time, PP&L EnergyPlus has
determined not to pursue residential customers in the competitive marketplace
based on economic considerations.

4. Accounting for the Effects of Certain Types of Regulation

PP&L prepares its financial statements for its regulated operations in
accordance with SFAS 71, which requires rate-regulated companies to reflect
the effects of regulatory decisions in their financial statements. PP&L has
deferred certain costs pursuant to rate actions of the PUC and the FERC and is
recovering, or expects to recover, such costs in electric rates charged to
customers.

The EITF has addressed the appropriateness of the continued application of
SFAS 71 by entities in states that have enacted restructuring legislation
similar to Pennsylvania's Customer Choice Act. The EITF came to a consensus on
Issue No. 97-4, "Deregulation of the Pricing of Electricity--Issues Related to
the Application of FASB Statements 71 and 101," which concluded that an entity
should cease to apply SFAS 71 when a deregulation plan is in place and its
terms are known. For PP&L, with respect to the generation portion of its
business, this occurred effective June 30, 1998 based upon the outcome of the
PUC restructuring proceeding. PP&L has adopted SFAS 101 for the generation
side of its business. SFAS 101 requires a determination of impairment of plant
assets performed in accordance with SFAS 121, and the elimination of all
effects of rate regulation that have been recognized as assets and liabilities
under SFAS 71.

PP&L performed impairment tests of its electric generation assets on a plant
specific basis and determined that $2.388 billion of its generation plant was
impaired as of June 30, 1998. Impaired plant is the excess of the net plant
investment at June 30, 1998 over the present value of the net cash flows
during the remaining lives of the plants. Annual net cash flows were
determined by comparing estimated generation sustenance costs to estimated
regulated revenues for the remainder of 1998, market revenues for 1999 and
beyond, and revenues from bulk power contracts. The net cash flows were then
discounted to present value.

In addition to the impaired generation plant, PP&L estimated that there were
other stranded costs totaling $1.989 billion at June 30, 1998. This primarily
included generation-related regulatory assets and liabilities and an estimated
liability for above-market purchases under NUG contracts. The total estimated
impairment to these assets was $4.377 billion. The PUC's Final Order in the
restructuring proceeding, entered on August 27, 1998, permitted the recovery
of $2.819 billion through the CTC on a present value basis, excluding amounts
for nuclear decommissioning and consumer education, resulting in a net under-
recovery of $1.558 billion. PP&L recorded an extraordinary charge for this
under-recovery in June 1998.

Under FERC Order 888, 16 small utilities which had power supply agreements
with PP&L signed before July 11, 1994, requested and were provided with PP&L's
current estimate of its stranded costs applicable to these customers if they
were to terminate their agreements in 1999. Subject to certain conditions,
FERC-approved settlement agreements executed with 15 of these customers
provide for continued power supply by PP&L through January 2004. As a result
of these settlements, PP&L, in the second quarter of 1998, recorded an
extraordinary charge in the amount of $56 million.

The extraordinary items related to the PUC restructuring proceeding and the
FERC settlement are reflected on the Statement of Income, net of income taxes.

C-39
<PAGE>

Details of amounts written-off in June 1998 are as follows (millions of
dollars):

<TABLE>
<S> <C>
Impaired generation-related assets...................................... $2,388
Above-market NUG contracts.............................................. 854
Generation-related regulatory assets and other.......................... 1,135
------
Total................................................................... 4,377
Recoverable transition costs (a)........................................ (2,819)
------
Extraordinary item pre-tax--PUC......................................... 1,558
--FERC..................................................... 56
------
1,614
Tax effects............................................................. (666)
------
Extraordinary items..................................................... $ 948
======
</TABLE>
- -------
(a) Excluding recoveries for nuclear decommissioning and consumer education
expenditures.

PP&L believes that the electric transmission and distribution operations
continue to meet the requirements of SFAS 71 and that regulatory assets
associated with these operations will continue to be recovered through rates
from customers. At December 31, 1998, $311 million of regulatory assets, other
than the recoverable transition costs, remain on PP&L's books. These
regulatory assets will continue to be recovered through regulated transmission
and distribution rates over periods ranging from one to 31 years.

5. Sales to Other Electric Utilities

PP&L provided Atlantic with 125,000 kilowatts of capacity (summer rating)
and related energy from its wholly owned coal-fired stations. Sales to
Atlantic under that agreement expired in March 1998. PP&L provided JCP&L with
378,000 kilowatts of capacity and related energy from all of its generating
units during 1998. This amount will decline to 189,000 kilowatts in 1999. The
agreement with JCP&L will terminate on December 31, 1999. PP&L expects to be
able to resell the returning capacity and energy through its Energy Marketing
Center.

Under a separate agreement, PP&L is providing additional capacity and energy
to JCP&L. This capacity and energy increased from 150,000 kilowatts to 200,000
kilowatts in June 1998, and will increase to 300,000 kilowatts in June 1999
through the end of the agreement in May 2004. Prices for this capacity and
energy are market-based.

PP&L provides BG&E with 129,000 kilowatts, or 6.6%, of its share of capacity
and related energy from the Susquehanna station. Sales to BG&E will continue
through May 2001.

6. Income and Other Taxes

For 1998, 1997 and 1996, the corporate federal income tax rate was 35%, and
the Pa. CNI rate was 9.99%.

The tax effects of significant temporary differences comprising PP&L
Resources' net deferred income tax liability were as follows (millions of
dollars):

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Deferred tax assets
Deferred investment tax credits.............................. $ 59 $ 82
Non-utility generation contracts over market price &
buybacks.................................................... 389
Accrued pension costs........................................ 99 77
Contribution in aid of construction.......................... 22 19
Other........................................................ 163 47
Valuation allowance.......................................... (6) (6)
------ ------
726 219
------ ------
Deferred tax liabilities
Electric utility plant--net.................................. 719 1,755
Restructuring--CTC........................................... 1,169
Taxes recoverable through future rates....................... 100 377
Reacquired debt costs........................................ 13 43
Other........................................................ 80 44
------ ------
2,081 2,219
------ ------
Net deferred tax liability..................................... $1,355 $2,000
====== ======
</TABLE>

C-40
<PAGE>

Details of the components of income tax expense, a reconciliation of federal
income taxes derived from statutory tax rates applied to income from
continuing operations for accounting purposes, and details of taxes, other
than income are as follows (millions of dollars):

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income Tax Expense
Provision--Federal........................................... $183 $162 $189
State............................................. 64 57 65
---- ---- ----
247 219 254
---- ---- ----
Deferred--Federal............................................ 19 19 5
State.............................................. 3 9 5
---- ---- ----
22 28 10
---- ---- ----
Investment tax credit, net--Federal.......................... (10) (10) (10)
---- ---- ----
259 237 254
---- ---- ----
Total income tax Expense--Federal............................ 192 171 184
State.............................. 67 66 70
---- ---- ----
$259 $237 $254
==== ==== ====
Reconciliation of Income Tax Expense
Indicated federal income tax on pre-tax income before
extraordinary item at statutory tax rate-- 35%............ $232 $195 $213
Increase (decrease) due to:
State income taxes......................................... 43 40 44
Flow through of depreciation differences not previously
normalized................................................ 9 22 20
Amortization of investment tax credit...................... (10) (10) (10)
Research & experimentation income tax credits.............. (1) (1) (5)
Other...................................................... (14) (9) (8)
---- ---- ----
27 42 41
---- ---- ----
Total income tax expense................................. $259 $237 $254
---- ---- ----
Effective income tax rate................................ 39.1% 42.5% 41.6%
Taxes, Other Than Income
State gross receipts....................................... $105 $104 $105
State utility realty....................................... 41 46 44
State capital stock........................................ 18 34 34
Social security and other.................................. 24 20 20
---- ---- ----
$188 $204 $203
==== ==== ====
</TABLE>

7. Nuclear Decommissioning Costs

PP&L's most recent estimate of the cost to decommission the Susquehanna
station was completed in 1993 and was a site-specific study, based on
immediate dismantlement and decommissioning of each unit following final
shutdown. The study indicates that PP&L's 90% share of the total estimated
cost of decommissioning the Susquehanna station is approximately $724 million
in 1993 dollars. The estimated cost includes decommissioning the radiological
portions of the station and the cost of removal of nonradiological structures
and materials. The operating licenses for Units 1 and 2 expire in 2022 and
2024, respectively.

Decommissioning costs have been historically charged to operating expense
and have been based upon amounts included in customer rates. Beginning in
1998, decommissioning costs have been reclassified as a component of
depreciation expense. Decommissioning charges were $12 million in each of the
last three years. Beginning in January 1999, in accordance with the PUC's
Restructuring Decision, decommissioning costs will be recovered from customers
through the CTC over the 11 year life of the CTC rather than the remaining
life of Susquehanna. The recovery will include a return on unamortized
decommissioning costs.

C-41
<PAGE>

Amounts collected from customers for decommissioning, less applicable taxes,
are deposited in external trust funds for investment and can be used only for
future decommissioning costs. The market value of securities held and accrued
income in the trust funds at December 31, 1998 and 1997 aggregated
approximately $206 million and $163 million, respectively. The trust funds
experienced, on a fair market value basis, a $31 million net gain in 1998,
which includes net unrealized appreciation of $26 million, and a net gain in
1997 of $24 million, which includes net unrealized appreciation of $18
million. The trust fund activity is reflected in the nuclear plant
decommissioning trust fund and in other noncurrent liabilities on the
Consolidated Balance Sheet. Accrued nuclear decommissioning costs were $209
million and $166 million at December 31, 1998 and 1997, respectively.

The FASB issued an exposure draft on the accounting for liabilities related
to closure and removal of long-lived assets, including decommissioning of
nuclear power plants. As a result, current industry accounting practices for
decommissioning may change, including the possibility that the estimated cost
for decommissioning could be recorded as a liability at the present value of
the estimated future cash outflows that will be required to satisfy those
obligations. Due to the FASB's recognition that these issues intertwine with
other unresolved accounting issues, the FASB has not yet determined when it
will issue another exposure draft or a final statement.

8. Financial Instruments

As of December 31, 1998, PP&L Resources was party to two foreign exchange
contracts: to purchase approximately $27 million with 16 million British
pounds sterling (BPS) on March 31, 1999 and to purchase $0.7 million with 359
million Chilean pesos (ChP) on January 22, 1999.

The carrying amount shown on the Consolidated Balance Sheet and the
estimated fair value of PP&L Resources' financial instruments are as follows
(millions of dollars):

<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------ ------------------
<S> <C> <C> <C> <C>
Assets
Nuclear plant decommissioning trust
fund (a).............................. $ 206 $ 206 $ 163 $ 163
Financial investments (a).............. 1 1 58 62
Other investments...................... 11 11 13 13
Cash and cash equivalents.............. 195 195 50 50
Other financial instruments included in
other current assets.................. 5 5 3 3
Liabilities
Preferred stock with sinking fund
requirements (b)...................... 47 50 47 49
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
company debentures (b)................ 250 259 250 256
Long-term debt (b)..................... 2,984 3,176 2,735 2,895
Commercial paper and bank loans........ 636 636 135 135
</TABLE>
- -------
(a) The carrying value of these financial instruments generally is based on
established market prices and approximates fair value.
(b) The fair value generally is based on quoted market prices for the
securities where available and estimates based on current rates offered to
PP&L Resources where quoted market prices are not available.

9. Credit Arrangements & Financing Activities

PP&L issues commercial paper and, from time to time, borrows from banks to
provide short-term funds for PP&L's general corporate purposes. Bank
borrowings generally bear interest at rates negotiated at the time of the
borrowing. At December 31, 1998, PP&L had $80 million of commercial paper
outstanding.

PP&L Capital Funding, whose purpose is to provide debt funding for PP&L
Resources and its subsidiaries other than PP&L, established a commercial paper
program in March 1998. As with all PP&L Capital Funding debt, this commercial
paper is guaranteed by PP&L Resources. As of December 31, 1998, PP&L Capital
Funding had $553 million of commercial paper outstanding. Proceeds from the
commercial paper program were primarily used to fund PP&L Resources' common
stock tender offer and provide interim financing for PP&L Global's investment
activities.

C-42
<PAGE>

The weighted average interest rate on short-term borrowings was 6.1% and
6.6% at December 31, 1998 and 1997, respectively, for both PP&L Resources and
PP&L.

In order to ensure liquidity, PP&L and PP&L Capital Funding share a joint
facility with a group of banks. This joint facility is comprised of a 364-day
revolving credit agreement and a five-year revolving credit agreement. In
March 1998, the existing 364-day revolving credit agreement was increased from
$150 million to $350 million. This increase, when added to the $300 million
five-year revolving credit agreement, brought to $650 million the total amount
of revolving credit available to PP&L and PP&L Capital Funding under the joint
agreement. In November 1998, PP&L, PP&L Capital Funding and PP&L Resources
replaced the existing 364-day facility with an amended and restated 364-day
revolving credit agreement terminating in November 1999. The five-year
revolving credit agreement expires in 2002. Separately, in July 1998, PP&L
Capital Funding entered into five separate $80 million, 364-day credit
facilities with five banks. PP&L Resources guarantees all obligations of PP&L
Capital Funding under the foregoing facilities. As of December 31, 1998, no
borrowings were outstanding under any revolving credit agreements.

In April 1998, PP&L retired $150 million principal amount of First Mortgage
Bonds, 5 1/2% Series that matured at that time.

In May 1998, PP&L issued $200 million First Mortgage Bonds, 6 1/8% Reset Put
Securities Series due 2006. In connection with this issuance, PP&L assigned to
a third party the option to call the bonds from the holders on May 1, 2001.
These bonds will mature on May 1, 2006, but will be required to be surrendered
by the existing holders on May 1, 2001 either through the exercise of the call
option by the callholder or, if such option is not exercised, through the
automatic exercise of a mandatory put by the trustee on behalf of the
bondholders. If the call option is exercised, the bonds will be remarketed and
the interest rate will be reset for the remainder of their term to the
maturity date. If the call option is not exercised, the mandatory put will be
exercised and PP&L will be required to repurchase the bonds at 100% of their
principal amount on May 1, 2001. Proceeds from the sale of the bonds were used
by PP&L to retire $116 million of its unsecured term loans and to reduce its
outstanding commercial paper balances.

During 1998, PP&L Capital Funding issued a total of $295 million of medium-
term notes with maturities varying from two to seven years. The proceeds of
these notes were generally used to reduce commercial paper balances. As of
December 31, 1998, $397 million of medium-term notes were outstanding.

In September 1998, PP&L Resources purchased 17 million shares of its common
stock, or approximately 10% of the outstanding shares, from existing
shareowners at a price of $24.50 per share through a self tender process. PP&L
Resources has authorization from the Board of Directors to purchase another
three million shares on the open market or in negotiated transactions. PP&L
Resources has not repurchased any shares under this additional authorization.

In October 1998, Penn Fuel Gas retired $27 million of long-term debt. Of
this amount, $20 million of the retired notes had an interest rate of 7.51%,
and the remainder had an interest rate of 6.70%. These notes would have
required annual installment payments through 2014.

During 1998, PP&L Resources issued $56 million of common stock through the
DRIP and $6 million of common stock through the ESOP.

Effective with the dividend payable October 1, 1998 to owners of record on
September 10, 1998, PP&L Resources' quarterly Common Stock dividend was
reduced to $0.25 per share ($1.00 annualized rate) from the previous level of
$0.4175 per share ($1.67 annualized rate).

Declaration of dividends on common stock is made at the discretion of the
Board of Directors of PP&L Resources and PP&L. PP&L Resources and PP&L will
continue to consider the appropriateness of these dividend levels, taking into
account the respective financial positions, results of operations, conditions
in the industry and other factors which the respective Boards deem relevant.

PP&L leases its nuclear fuel from a trust. The maximum financing capacity of
the trust under existing credit arrangements is $200 million. As of December
31, 1998, the trust had issued $188 million of commercial paper to support
nuclear fuel purchases.

C-43
<PAGE>

PP&L Capital Funding registered $400 million of debt securities with the SEC
in early January 1999. It is expected these debt securities will be issued
from time to time as medium-term notes to provide long-term debt financing for
PP&L Resources and its subsidiaries other than PP&L.

Under the PUC restructuring order of August 27, 1998, PP&L is permitted to
issue transition bonds to securitize up to $2.85 billion of its stranded
costs. PP&L is planning to pursue such securitization later in 1999. The
proceeds are expected to be used by PP&L to retire outstanding debt and to
repurchase common stock from PP&L Resources.

10. Windfall Profits Tax--PP&L Global

In July 1997, the U.K. assessed a windfall profits tax on privatized
utilities. SWEB's windfall profits tax was approximately 90 million pounds
sterling, or about $148 million. Based on PP&L Global's 25% ownership interest
in SWEB at that time, PP&L Resources incurred a one-time charge against
earnings of $37 million, or 23 cents per share, in 1997. This charge is
included in "Other Income and Deductions." The tax was fully paid.

11. Acquisitions

In 1998 PP&L Resources acquired Penn Fuel Gas. The transaction was treated
as a purchase for accounting and financial reporting purposes. PP&L Resources
issued approximately 5.6 million shares of common stock with a value of
approximately $135 million, to acquire all Penn Fuel Gas common and preferred
stock. Under the terms of the merger agreement, shareowners of Penn Fuel Gas
received 6.968 common shares of PP&L Resources for each common share of Penn
Fuel Gas that they owned and 0.682 common shares of PP&L Resources for each
preferred share of Penn Fuel Gas that they owned.

In 1998, PP&L Resources also acquired H.T. Lyons and McClure, mechanical
contractor and engineering firms, in cash transactions for amounts that were
not material. In January 1999, PP&L Resources announced that it had reached an
agreement to acquire McCarl's, another mechanical contractor and engineering
firm, in a cash transaction for an amount that is not material. The closing of
the acquisition is expected to occur in February 1999.

PP&L Global has signed definitive agreements with Montana Power Company,
Portland General Electric Company and Puget Sound Energy, Inc. to acquire 13
Montana power plants, with 2,614 MW of generating capacity, for a purchase
price of $1.586 billion. The acquisition is subject to several conditions,
including the receipt of required state and federal regulatory approvals and
third-party consents. In this regard, PacifiCorp, a co-owner of Colstrip Units
3 and 4, has a right of first refusal to purchase a portion of the assets of
these units. PP&L Global expects to complete the acquisition by the end of
1999. About 65% of the acquisition cost is expected to be financed on a
project credit basis, non-recourse to PP&L Global and PP&L Resources. The
balance of the acquisition cost is expected to be financed through a
combination of debt and equity issued by PP&L Resources, or with funds that
PP&L Resources derives from PP&L's securitization of transition costs. The
agreements also provide for PP&L Global's acquisition of related transmission
assets for $182 million, subject to certain conditions, including federal
regulatory approval.

12. Pension Plan and Other Postretirement and Postemployment Benefits

Pension Plan

PP&L and Penn Fuel Gas have funded, noncontributory defined benefit pension
plans covering substantially all employees. Benefits are based upon a
participant's earnings and length of participation in the plans, subject to
meeting certain minimum requirements.

C-44
<PAGE>

PP&L and Penn Fuel Gas have unfunded, supplemental retirement plans for
certain management employees. Benefit payments pursuant to these supplemental
plans are made directly by PP&L and Penn Fuel Gas, respectively. PP&L and Penn
Fuel Gas recently terminated similar nonqualified retirement plans for the
benefit of their directors. At December 31, 1998, the projected benefit
obligation of these supplemental plans was approximately $29 million for PP&L
and Penn Fuel Gas. PP&L Global has established, effective December 1, 1994, a
non-qualified retirement plan for its corporate officers. The cost of the Plan
was not material in 1998.

The components of PP&L's net periodic pension cost for the three plans were
(millions of dollars):

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period............... $ 35 $ 32 $ 32
Interest cost................................................. 67 64 61
Expected return on plan assets................................ (86) (77) (71)
Net amortization and deferral................................. (13) (11) (7)
---- ---- ----
Net periodic pension cost..................................... $ 3 $ 8 $ 15
==== ==== ====
</TABLE>

The net periodic pension cost charged to operating expenses was $2 million
in 1998, $5 million in 1997 and $9 million in 1996. The balance was charged to
construction and other accounts. The funded status of PP&L's Plan at December
31 was (millions of dollars):

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Change in Plan Assets:
Fair value of plan assets at beginning of year.............. $1,396 $1,187
Actual return on plan assets................................ 240 254
Actual expense paid......................................... (3) (3)
Net benefits paid........................................... (42) (42)
------ ------
Fair value of plan at end of year........................... 1,591 1,396
------ ------
Change in Benefit Obligation
Net benefit obligation at beginning of year................. 962 887
Service cost................................................ 35 32
Interest cost............................................... 66 63
Plan amendments............................................. 66
Actuarial loss.............................................. 70 25
Special termination benefits................................ 9
Actual expense paid......................................... (3) (3)
Net benefits paid........................................... (42) (42)
------ ------
Net benefit obligation at end of year......................... 1,163 962
------ ------
Plan assets in excess of projected benefit obligation......... 428 434
Unrecognized transition assets (being amortized over 23
years)....................................................... (50) (54)
Unrecognized prior service cost............................... 115 52
Unrecognized net gain......................................... (707) (636)
------ ------
Accrued expense............................................... $ (214) $ (204)
====== ======
</TABLE>

The weighted average discount rate used in determining the actuarial present
value of projected benefit obligations was 6.25% and 6.75% on December 31,
1998 and 1997, respectively. The rate of increase in future compensation used
in determining the actuarial present value of projected benefit obligations
was 5.0% on December 31, 1998 and 1997. The assumed long-term rates of return
on assets used in determining pension cost in 1998 and 1997 was 8.0%. Plan
assets consist primarily of common stocks, government and corporate bonds and
temporary cash investments.

PP&L's subsidiaries formerly engaged in coal mining have a noncontributory
defined benefit pension plan covering substantially all non-bargaining unit,
full-time employees, which is fully funded and in a separate account managed
by an insurance company. This plan was amended to freeze benefit accruals and
benefit increases effective June 1996. In addition, the companies are liable
under federal and state laws to pay black lung benefits to claimants and
dependents with respect to approved claims, and are members of a trust which
was established to facilitate payment of such liabilities. Such costs were not
material in 1998, 1997 and 1996.

C-45
<PAGE>

Postretirement Benefits Other Than Pensions

Substantially all employees of PP&L and its subsidiaries will become
eligible for certain health care and life insurance benefits upon retirement.
PP&L sponsors four health and welfare benefit plans that cover substantially
all management and bargaining unit employees upon retirement. One plan
provides for retiree health care benefits to certain management employees,
another plan provides retiree health care benefits to bargaining unit
employees, a third plan provides retiree life insurance benefits to certain
management employees up to a specified amount and a fourth plan provides
retiree life insurance benefits to bargaining unit employees.

Dollar limits have been established for the amount PP&L will contribute
annually toward the cost of retiree health care for employees retiring after
March 1993.

The PUC Decision in 1995 permitted recovery of the PUC-jurisdictional amount
of retiree health care costs resulting from the adoption of SFAS 106. The PUC
Decision permitted PP&L to recover, over a period of about 17 years, the
amount of SFAS 106 costs deferred. In June 1998, the generation-related
portion of these costs were written off as part of the PUC restructuring
proceeding and the FERC settlement with 16 small utilities.

In December 1993, PP&L established a separate VEBA for each of the four
health and welfare benefit plans for retirees. After making initial
contributions, additional funding of the trusts was deferred pending
resolution of PP&L's ability to recover the costs of the plans in rates.
Continued funding of these trusts was subject to the resolution of the OCA
appeal of the PUC Decision. In 1997, the Pennsylvania Supreme Court ruled that
the Commonwealth Court's decision to uphold the PUC Decision was final. In
1998, PP&L contributed an additional $25 million to these VEBAs.

The following table sets forth the plans' combined funded status reconciled
with the amount shown on PP&L's Consolidated Balance Sheet as of December 31
(millions of dollars):

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Change in Benefit Obligation:
Net benefit obligation at beginning of year..................... $237 $249
Service cost.................................................. 4 4
Interest cost................................................. 16 17
Plan amendments............................................... 10
Actuarial (gain) loss......................................... 42 (22)
Net benefits paid............................................. (13) (11)
---- ----
Net benefit obligation at end of year............................. 296 237
---- ----
Change in Plan Assets:
Fair value of plan assets at beginning of year.................. 64 31
Actual return on plan assets.................................... 13 2
Employer contributions.......................................... 37 42
Net benefits paid............................................... (13) (11)
---- ----
Fair value of plan assets at end of year.......................... 101 64
---- ----
Accumulated postretirement benefit obligation in excess of plan
assets........................................................... 195 173
Unrecognized prior service costs.................................. (14) (4)
Unrecognized net loss............................................. (44) (11)
Unrecognized transition obligation (being amortized over 20
years)........................................................... (122) (131)
---- ----
Accrued postretirement benefit cost............................... $ 15 $ 27
==== ====
</TABLE>

The net periodic postretirement benefit cost included the following
components (millions of dollars):

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits attributed to service during the
period...................................................... $ 4 $ 4 $ 4
Interest cost on accumulated postretirement benefit
obligation.................................................. 16 17 15
Actual return on plan assets................................. (4) (2) (1)
Net amortization and deferral................................ 9 10 9
--- --- ---
Net periodic postretirement benefit cost..................... $25 $29 $27
=== === ===
</TABLE>

C-46
<PAGE>

Retiree health and benefits costs charged to operating expenses were
approximately $19 million in 1998, $23 million in 1997, and $20 million in
1996. Costs in excess of the amount charged to expense were charged to
construction and other accounts.

For measurement purposes, a 7.75% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999; the rate was
assumed to decrease gradually to 6% by 2006 and remain at that level
thereafter. Increasing the assumed health care cost trend rates by 1% in each
year would increase the accumulated postretirement benefit obligation as of
December 31, 1998, by about $13 million and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for the
year then ended by about $1 million.

In determining the accumulated postretirement benefit obligation, the
weighted average discount rate used was 6.25% and 6.75% on December 31, 1998
and 1997, respectively. The trusts that are holding the plan assets, except
for retiree health care benefits to certain management employees, are tax-
exempt. The expected long-term rate of return on plan assets for the tax-
exempt trusts was 6.35% and 6.5% on December 31, 1998 and 1997, respectively.

PP&L and its subsidiaries formerly engaged in coal mining accrued an
additional liability for the cost of health care of retired miners previously
employed by them. The liability, based on the present value of future
benefits, was estimated at $50 million and $51 million as of December 1998 and
1997, respectively. In December 1997, PP&L contributed $25 million to a VEBA
to partially fund these health care costs. There were no funding contributions
made in 1998.

Postemployment Benefits

PP&L provides health and life insurance benefits to disabled employees and
income benefits to eligible spouses of deceased employees. Postemployment
benefits charged to operating expenses were not material.

13. Jointly Owned Facilities

At December 31, 1998, PP&L or its subsidiary owned undivided interests in
the following facilities (millions of dollars):

<TABLE>
<CAPTION>
Generating Stations Merrill
------------------------------ Creek
Susquehanna Keystone Conemaugh Reservoir
----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Ownership interest.................... 90.00% 12.34% 11.39% 8.37%
Electric utility plant in service..... $4,085 $68 $103
Other property........................ $22
Accumulated depreciation.............. 3,388 39 45 10
Construction work in progress......... 53 1
</TABLE>

Each participant in these facilities provides its own financing. PP&L
receives a portion of the total output of the generating stations equal to its
percentage ownership. PP&L's share of fuel and other operating costs
associated with the stations is reflected on the PP&L Consolidated Statement
of Income. The Merrill Creek Reservoir provides water during periods of low
river flow to replace water from the Delaware River used by PP&L and other
utilities in the production of electricity.

14. Commitments and Contingent Liabilities

Construction Expenditures

PP&L's construction expenditures for the period 1999-2003 are estimated to
aggregate $1.8 billion, including AFUDC and capitalized interest. For
discussion pertaining to construction expenditures, see Review of Financial
Condition and Results of Operations under the caption "Financial Condition--
Capital Expenditure Requirements."

Nuclear Insurance

PP&L is a member of certain insurance programs which provide coverage for
property damage to members' nuclear generating stations. Facilities at the
Susquehanna station are insured against property damage losses

C-47
<PAGE>

up to $2.75 billion under these programs. PP&L is also a member of an
insurance program which provides insurance coverage for the cost of
replacement power during prolonged outages of nuclear units caused by certain
specified conditions. Under the property and replacement power insurance
programs, PP&L could be assessed retroactive premiums in the event of the
insurers' adverse loss experience. At December 31, 1998, the maximum amount
PP&L could be assessed under these programs was about $25 million.

PP&L's public liability for claims resulting from a nuclear incident at the
Susquehanna station is limited to about $9.7 billion under provisions of The
Price Anderson Amendments Act of 1988. PP&L is protected against this
liability by a combination of commercial insurance and an industry assessment
program. In the event of a nuclear incident at any of the reactors covered by
The Price Anderson Amendments Act of 1988, PP&L could be assessed up to $168
million per incident, payable at a rate of $20 million per year, plus an
additional 5% surcharge, if applicable.

Environmental Matters

Air

Under the Clean Air Act, the EPA has been studying the health effects of
hazardous air emissions from power plants and other sources, in order to
determine whether those emissions should be regulated. Recently, the EPA
released a technical report of its findings to date. The EPA concluded that
mercury is the power plant air toxic of greatest concern, but that more
evaluation is needed before it can determine whether regulation of air toxics
from fossil fuel plants is necessary. EPA is now seeking mercury and chlorine
sampling and other data from electric generating units including PP&L's. In
addition, the EPA has announced a new enforcement initiative against older
coal-fired plants. Several of PP&L's coal-fired plants could fall into this
category. These EPA initiatives could result in compliance costs for PP&L in
amounts which are not now determinable but which could be material.

Expenditures to meet the 2000 acid rain and 1999 NOx reduction requirements
are included in the table of projected construction expenditures in the
section entitled "Financial Condition--Capital Expenditure Requirements" in
the Review of the Financial Condition and Results of Operations. PP&L
currently estimates that additional capital expenditures and operating costs
for environmental compliance under the Clean Air Act will be incurred beyond
2002 in amounts which are not now determinable but which could be material.

C-48
<PAGE>

Water and Residual Waste

Capital expenditures through the year 2003 to correct groundwater
degradation at fossil-fueled generating stations, and to address waste water
control at PP&L facilities are included in the table of construction
expenditures in the section entitled "Financial Condition--Capital Expenditure
Requirements" in the Review of the Financial Condition and Results of
Operations. In this regard, PP&L currently estimates that $5.5 million of
additional capital expenditures may be required in the next four years to
close some of the ash basins and address other ash basin issues at various
generating plants. Additional capital expenditures could be required beyond
the year 2003 in amounts which are not now determinable but which could be
material. Actions taken to correct groundwater degradation, to comply with the
DEP's regulations and to address waste water control are also expected to
result in increased operating costs in amounts which are not now determinable
but which could be material.

Superfund and Other Remediation

At December 31, 1998, PP&L had accrued approximately $6 million and Penn
Fuel Gas had accrued $15 million, representing the respective amounts PP&L and
Penn Fuel Gas can reasonably estimate they will have to spend to remediate
sites involving the removal of hazardous or toxic substances, including those
covered by each company's consent orders mentioned above. Future cleanup or
remediation work at sites currently under review, or at sites not currently
identified, may result in material additional operating costs for PP&L or Penn
Fuel Gas, which neither company can estimate at this time. In addition,
certain federal and state statutes, including Superfund and the Pennsylvania
Hazardous Sites Cleanup Act, empower certain governmental agencies, such as
the EPA and the DEP, to seek compensation from the responsible parties for the
lost value of damaged natural resources. The EPA and the DEP may file such
compensation claims against the parties, including PP&L or Penn Fuel Gas, held
responsible for cleanup of such sites. Such natural resource damage claims
against PP&L or Penn Fuel Gas could result in material additional liabilities.

General

C-49
<PAGE>

Loan Guarantees of Affiliated Companies

At December 31, 1998, PP&L provided a guarantee in the amount of $12 million
in support of one of its subsidiaries.

PP&L Resources also provides certain guarantees for its subsidiaries.
Specifically, PP&L Resources guarantees all of the debt of PP&L Capital
Funding. As of December 31, 1998, PP&L Resources guaranteed $397 million of
medium-term notes and $552 million of commercial paper issued by PP&L Capital
Funding. PP&L Resources also provided $13 million of loan guarantees to a PP&L
Global subsidiary in the fourth quarter of 1998. Also in the fourth quarter,
PP&L Resources guaranteed $19 million of notes of North Penn Gas Co., a
subsidiary of Penn Fuel Gas. Additionally, PP&L Resources has guaranteed
certain obligations of PP&L EnergyPlus for up to $31 million under power
purchase and sales agreements.

Source of Labor Supply

As of December 31, 1998, PP&L Resources and its subsidiaries had
approximately 7,600 employees, including 6,344 full-time PP&L employees.
Approximately 65 percent of PP&L's full-time employees are represented by the
IBEW. PP&L reached a new labor agreement with the IBEW in 1998. This agreement
expires in May 2002.

15. New Accounting Standards

In February 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which is effective for fiscal
years beginning after December 15, 1997. The adoption of this statement did
not have a material impact on the financial statements of PP&L Resources or
PP&L.

In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS 133 also expanded the definition of a
derivative to include most commodity contracts that require physical delivery.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. PP&L Resources
and its subsidiaries intend to adopt this statement as of January 1, 2000. The
impact of the adoption of this statement on the net income of PP&L Resources
and PP&L is not yet determinable but may be material.

In November 1998, the EITF reached a consensus on EITF Issue 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities." For purposes of Issue 98-10, energy trading activities refer to
energy contracts entered into with the objective of generating profits on or
from exposure to shifts or changes in market prices, and risk management
activities refer to energy contracts that are designated as, and effective as,
hedges of nontrading activities. Effective January 1, 1999, EITF Issue 98-10
requires that companies "mark to market" (that is, record the fair value of
the contracts on the balance sheet, with gains and losses reflected in
earnings) energy contracts that constitute energy trading activities. Energy
contracts that are hedges of nontrading activities should continue to be
accounted for in accordance with a company's existing hedge accounting
policies. PP&L Resources and PP&L will continue, until the adoption of SFAS
133, to use accrual accounting for contracts that are hedges of nontrading
activities. PP&L Resources and PP&L adopted EITF 98-10 on January 1, 1999 and
expect to recognize an after-tax credit to income of approximately $6.0
million as an offset to energy purchases.

C-50
<PAGE>

SELECTED FINANCIAL AND OPERATING DATA
PP&L Resources, Inc.

<TABLE>
<CAPTION>
1998 (a) 1997 (a) 1996 1995 (a) 1994 (a)
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Items--millions
Operating revenues............... $ 3,786 $ 3,077 $ 2,926 $ 2,752 $ 2,725
Operating income (g)............. 827 800 810 836 719
Net Income (Loss)................ (569) 296 329 323 216(e)
Balance Sheet Items -- millions
(b)
Property, plant and equipment,
net............................. 4,480 6,820 6,960 6,970 7,195
Recoverable transition costs..... 2,819
Total assets..................... 9,607 9,485 9,670 9,492 9,372
Long-term debt................... 2,984 2,735 2,832 2,859 2,941
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trusts holding
solely company debentures....... 250 250
Preferred stock
With sinking fund
requirements.................. 47 47 295 295 295
Without sinking fund
requirements.................. 50 50 171 171 171
Common equity.................... 1,790 2,809 2,745 2,597 2,454
Short-term debt.................. 636 135 144 89 74
Total capital provided by
investors....................... 5,757 6,026 6,187 6,011 5,936
Capital lease obligations........ 168 171 247 220 225
Financial Ratios
Return on average common equity--
% (f)........................... 13.39 10.60 12.30 12.81 8.73
Embedded cost rates (b)
Long-term debt--%.............. 7.40 7.88 7.89 7.95 8.07
Preferred stock--%............. 5.87 5.85 6.09 6.09 6.07
Preferred securities (pre-
tax)--%....................... 8.43 8.43
Times interest earned before
income taxes (f)................ 3.69 3.39 3.55 3.56 2.73
Ratio of earnings to fixed
charges--total enterprise basis
(c)............................. 3.48 3.22 3.45 3.47 2.70
Ratio of earnings to fixed
charges and dividends on
preferred stock--total
enterprise basis (c)............ 3.12 2.85 2.90 2.91 2.27
Common Stock Data
Number of shares outstanding--
thousands
Year-end....................... 157,412 166,248 162,665 159,403 155,482
Average........................ 164,651 164,550 161,060 157,649 153,458
Number of shareowners (b)........ 100,458 117,293 123,290 128,075 132,632
Earnings (loss) per share--
reported........................ ($3.46) $ 1.80 $ 2.05 $ 2.05 $ 1.41
Earnings (loss) per share
excluding extraordinary items
(f)............................. $ 2.29 $ 1.80 $ 2.05 $ 2.05 $ 1.41
Dividends declared per share..... $ 1.335 $ 1.67 $ 1.67 $ 1.67 $ 1.67
Book value per share (b)......... $ 11.37 $ 16.90 $ 16.87 $ 16.29 $ 15.79
Market price per share (b)....... $27.875 $23.938 $ 23 $ 25 $ 19
Dividend payout rate--% (f)...... 58 93 82 82 119
Dividend yield--% (d)............ 4.79 6.98 7.26 6.68 8.79
Price earnings ratio (f)......... 12.17 13.30 11.22 12.20 13.48
</TABLE>
- -------
(a) Earnings for 1998, 1997, 1995 and 1994 were affected by several one-time
adjustments. Results for 1998 also include the impact of extraordinary
items. These adjustments affected net income and certain items under
Financial Ratios and Common Stock Data. See Financial Notes 4, 10 and 11.
(b) At year-end.
(c) Computed using earnings and fixed charges of PP&L Resources and its
subsidiaries. Fixed charges consist of interest on short- and long-term
debt, other interest charges, interest on capital lease obligations and
the estimated interest component of other rentals. (Extraordinary items
excluded from 1998 calculations.)
(d) Based on year-end market prices.
(e) Results for 1994 restated to reflect formation of the holding company.
(f) Results for 1998 based on earnings per share excluding extraordinary
items.
(g) Operating income of 1997 and earlier years restated to conform to the
current presentation.

Note: See Results of Operations--"Financial Indicators" for selected ratios
for 1996, 1997 and 1998 based on fully-adjusted earnings.

C-51
<PAGE>

EXECUTIVE OFFICERS OF PP&L RESOURCES, INC.

Officers of PP&L Resources are elected annually by the Board of Directors to
serve at the pleasure of the Board. There are no family relationships among
any of the executive officers, or any arrangement or understanding between any
executive officer and any other person pursuant to which the officer was
selected.

There have been no events under any bankruptcy act, no criminal proceedings
and no judgments or injunctions material to the evaluation of the ability and
integrity of any executive officer during the past five years.

Listed below are the executive officers of PP&L Resources as of December 31,
1998:

<TABLE>
<CAPTION>
Effective Date of
Election to
Name Age Position Present Position
---- --- -------- -----------------
<C> <C> <S> <C>
William F. Hecht.. 55 Chairman, President and Chief February 24, 1995
Executive Officer
Frank A. Long..... 58 Executive Vice President February 24, 1995
Robert G. Byram*.. 53 Senior Vice President--Generation April 1, 1997
and Chief Nuclear Officer--PP&L
John R. Biggar.... 54 Senior Vice President and Chief November 1, 1998
Financial Officer
Robert D. Fagan*.. 53 President--PP&L Global, Inc. December 20, 1995
Robert J. Grey.... 48 Senior Vice President, General March 1, 1996
Counsel and Secretary
Terry H. Hunt..... 50 Senior Vice President--Strategic October 1, 1998
Planning
Joseph J. McCabe.. 48 Vice President and Controller August 1, 1995
</TABLE>
- -------
* Mr. Byram and Mr. Fagan have been designated executive officers of PP&L
Resources by virtue of their respective positions at PP&L Resources
subsidiaries.

Each of the above officers, with the exception of Messrs. Fagan, Grey, Hunt
and McCabe, has been employed by PP&L for more than five years as of December
31, 1998. Mr. Fagan joined PP&L Global in November 1994. Prior to that time,
he was Vice President and General Manager at Mission Energy Company. Mr.
McCabe joined PP&L in May 1994 and was previously a partner of Deloitte &
Touche LLP. Mr. Grey joined PP&L in March 1995. He had been General Counsel of
Long Island Lighting Company since 1992. Mr. Hunt joined PP&L in October 1998.
He also is the President and CEO of Penn Fuel Gas and its subsidiaries.

Prior to their election to the positions shown above, the following
executive officers held other positions within PP&L since January 1, 1994: Mr.
Byram was Senior Vice President--Nuclear; Mr. Biggar was Vice President--
Finance, Vice President--Finance and Treasurer and Senior Vice President--
Financial; Mr. Grey was Vice President, General Counsel and Secretary; and Mr.
McCabe was Controller.

C-52
<PAGE>

SHAREOWNER AND INVESTOR INFORMATION

Annual Meetings: The annual meeting of shareowners is held each year on the
fourth Friday of April. The 1999 annual meeting will be held on Friday, April
23, 1999, at Lehigh University's Stabler Arena, at the Goodman Campus Complex
located in Lower Saucon Township, outside Bethlehem, PA.

Proxy Material: A proxy statement and notice of PP&L Resources' annual
meeting are mailed to all shareowners of record as of February 26, 1999.

Dividends: The 1999 dates for consideration of the declaration of dividends
on PP&L Resources common stock and PP&L preferred stock by the board of
directors or its finance committee are February 26, May 28, August 27 and
November 19. Subject to the declaration, such dividends are paid on the first
day of April, July, October and January. Dividend checks are mailed in advance
of those dates with the intention that they arrive as close as possible to the
payment dates. The 1999 record dates for dividends are expected to be the 10th
day of March, June, September and December.

Direct Deposit of Dividends: Shareowners may choose to have their dividend
checks deposited directly into their checking or savings account. Quarterly
dividend payments are electronically credited on the dividend date, or the
first business day thereafter.

Dividend Reinvestment Plan: Shareowners may choose to have dividends on
their PP&L Resources common stock or PP&L preferred stock reinvested in PP&L
Resources common stock instead of receiving the dividend by check.

Certificate Safekeeping: Shareowners participating in the Dividend
Reinvestment Plan may choose to have their common stock certificates forwarded
to PP&L for safekeeping.

Lost Dividend or Interest Checks: Dividend or interest checks lost by
investors, or those that may be lost in the mail, will be replaced if the
check has not been located by the 10th business day following the payment
date.

Transfer of Stock or Bonds: Stock or bonds may be transferred from one name
to another or to a new account in the name of another person. Please contact
Investor Services regarding transfer instructions.

Bondholder Information: Much of the information and many of the procedures
detailed here for shareowners also apply to bondholders. Questions related to
bondholder accounts should be directed to Investor Services.

Lost Stock or Bond Certificates: Please contact Investor Services for an
explanation of the procedure to replace lost stock or bond certificates.

PP&L Resources Summary Annual Report: Published and mailed in mid-March to
all shareowners of record.

Shareowner News: An easy-to-read newsletter containing current items of
interest to shareowners--published and mailed at the beginning of each
quarter.

Periodic Mailings: Letters regarding new investor programs, special items of
interest, or other pertinent information are mailed on a non-scheduled basis
as necessary.

Duplicate Mailings: The summary annual report and other investor
publications are mailed to each investor account. If you have more than one
account, or if there is more than one investor in your household, you may
contact Investor Services to request that only one publication be delivered to
your address. Please provide account numbers for all duplicate mailings.

Shareowner Information Line: Shareowners can get detailed corporate and
financial information 24 hours a day using the Shareowner Information Line.
They can hear timely recorded messages about earnings, dividends and other
company news releases; request information by fax; and request printed
materials in the mail.

C-53
<PAGE>

The toll-free Shareowner Information Line is 1-800-345-3085.

Other PP&L Resources publications, such as the annual and quarterly reports
to the Securities and Exchange Commission (Forms 10-K and 10-Q) will be mailed
upon request.

Another part of this service is an enhanced Internet home page
(www.pplresources.com). Shareowners can access PP&L Resources' Securities and
Exchange Commission filings, stock quotes and historical performance. Visitors
to our website can provide their E-mail address and indicate their desire to
receive future earnings or news releases automatically.

Investor Services: For any questions you have or additional information you
require about PP&L Resources and its subsidiaries, please call the Shareowner
Information Line, or write to:

George I. Kline
Manager-Investor Services
PP&L Resources, Inc.
Two North Ninth Street
Allentown, PA 18101

Internet Access: For updated information throughout the year, check out our
home page at http://www.pplresources.com. You may also contact Investor
Services via E-mail at [email protected].

Listed Securities: Fiscal Agents:
New York Stock Exchange Stock Transfer Agents and
PP&L Resources, Inc.: Registrars
Common Stock (Code: PPL) Norwest Bank Minnesota, N.A.
Shareowner Services
PP&L, Inc.: 161 North Concord Exchange
4-1/2% Preferred Stock South St. Paul, MN 55075
(Code: PPLPRB)
4.40% Series Preferred Stock PP&L, Inc.
(Code: PPLPRA) Investor Services Department

PP&L Capital Trust: Dividend Disbursing Office and
(Code: PPLPRA) Dividend Reinvestment Plan Agent
8.20% Preferred Securities PP&L, Inc.
(Code: PPLPRC) Investor Services Department

PP&L Capital Trust II: Mortgage Bond Trustee
8.10% Preferred Securities Bankers Trust Co.
(Code: PPLPRD) Attn: Security Transfer Unit
P.O. Box 291569
Philadelphia Stock Exchange Nashville, TN 37229
PP&L Resources, Inc.:
Common Stock Bond Interest Paying Agent
PP&L, Inc.
PP&L, Inc. Investor Services Department
4-1/2% Preferred Stock
3.35% Series Preferred Stock
4.40% Series Preferred Stock
4.60% Series Preferred Stock

C-54
<PAGE>

QUARTERLY FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars, except per share data)

<TABLE>
<CAPTION>
For the Quarters Ended (a)
-----------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- --------
<S> <C> <C> <C> <C>
1998
Operating revenues......................... $ 880 $ 838 $ 1,166 $ 902
Operating income........................... 236 148 262 181
Net income before extraordinary items...... 101 54 136 88
Net income................................. 101 (894) 136 88
Earnings per common share (b).............. 0.60 (5.34) 0.81 0.56
Dividends declared per common share (c).... 0.4175 0.4175 0.25 0.25
Price per common share
High..................................... 24 1/4 24 3/8 26 3/8 28 15/16
Low...................................... 21 11/16 20 7/8 22 24 15/16
1997
Operating revenues......................... $ 795 $ 693 $ 792 $ 797
Operating income........................... 264 166 201 169
Net income before extraordinary items...... 117 65 42 72
Net income................................. 117 65 42 72
Earnings per common share (b).............. 0.72 0.39 0.25 0.44
Dividends declared per common share (c).... 0.4175 0.4175 0.4175 0.4175
Price per common share
High..................................... 24 20 7/8 23 1/16 24 1/4
Low...................................... 20 19 19 7/16 20
</TABLE>
- -------
(a) PP&L's electric utility business is seasonal in nature with peak sales
periods generally occurring in the winter months. In addition earnings in
several quarters were affected by several one-time adjustments.
Accordingly, comparisons among quarters of a year may not be indicative of
overall trends and changes in operations. In addition, PP&L Resources'
second quarter results of 1998 include an after-tax charge of $948
million. See Note 4.
(b) The sum of the quarterly amounts may not equal annual earnings per share
due to changes in the number of common shares outstanding during the year
or rounding.
(c) PP&L Resources has paid quarterly cash dividends on its common stock in
every year since 1946. The dividends paid per share in 1997 were $1.67 and
in 1998 were $1.50. The most recent regular quarterly dividend paid by
PP&L Resources was 25 cents per share (equivalent to $1.00 per annum) paid
January 1, 1999. Future dividends will be dependent upon future earnings,
financial requirements and other factors.

C-55
<PAGE>

For any questions you may have or additional information you may require
about your account, change in stock ownership, dividend payments and the
reinvestment of dividends, please call the Shareowner Information Line, or
write to:

George Kline, Manager
Investor Services Department
PP&L, Inc.
Two North Ninth Street, Allentown, PA 18101

Shareowner Information Line: 800-345-3085

---------------

PP&L and PP&L Resources file a joint Form 10-K Report and Form 10-Q Report
with the Securities and Exchange Commission. The Form 10-K Report for 1998 and
the Form 10-Q Report for the quarter ending March 31, 1999 are available
without charge by writing to the Investor Services Department at the address
printed above, or by calling the toll-free number.

Whether you plan to attend the meeting or not, please mark, date, sign and
mail the accompanying Proxy as soon as possible. An envelope, which requires
no postage if mailed in the United States, is included for your convenience.

---------------

For the latest information on PP&L Resources, visit
our location on the Internet at
http://www.pplresources.com
<PAGE>

Admission Ticket [PP&L LOGO APPEARS HERE]
PP&L Resources, Inc. Annual Meeting of Shareowners
1:30 p.m., April 23, 1999
Lehigh University's Stabler Arena
Bethlehem, Pennsylvania

Shareowner's mailing info here March 12, 1999

Dear Shareowner:

It is a pleasure to invite you to attend the 1999 Annual Meeting of
Shareowners, which will be held at 1:30 p.m. on Friday, April 23, 1999, at
Lehigh University's Stabler Arena, at the Goodman Campus Complex, located in
Lower Saucon Township outside Bethlehem, following the Annual Meeting of
Shareowners of PP&L, Inc.

Detailed information as to the business to be transacted at the meeting
is contained in the accompanying Notice of Annual Meeting and Proxy Statement.
We will conclude the formal portion of the meeting with a discussion of the
company's operations and a question-and-answer period will follow.

We hope you will be able to attend in person. If you plan to attend the
meeting, please detach and return your Proxy now and bring this admission ticket
with you to the meeting. If you are unable to attend the meeting but have any
questions or comments on the company's operations, we would like to hear from
you.

Your vote is important. Whether you own one share or many, please mark,
sign, date and return your proxy as soon as possible so that you will be
represented at the meeting in accordance with your wishes.

Sincerely yours,

/s/William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer

- --------------------------------------------------------------------------------
40-char scan line

PROXY [PP&L LOGO
APPEARS HERE]

Please date and sign your name(s) (Name and Account Info Here)
exactly as shown at right, and
indicate your vote on the reverse
side. Make sure the return address
on this card shows in the window of
the return envelope. Retain the top
portion of this page as your admission
ticket for the Annual Meeting.
[_] Check here if the information
shown above has changed.

IMPORTANT: When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title
as such. In the case of JOINT HOLDERS,
PROXY VOTE all should sign.
PP&L RESOURCES, INC.
2 N 9TH STREET ____________________ Date _____________
ALLENTOWN PA 18101-9971
____________________ Date _____________

Sequence No.

<PAGE>

[MAP OF Annual Meeting location]

Indicate your vote by placing an (X) in the appropriate box, using black or dark
blue ink. Please date and sign your name(s) on reverse side.

- --------------------------------------------------------------------------------
Proxy Solicited on Behalf of the Board of Directors for Annual Meeting of
Shareowners, April 23, 1999

William F. Hecht, Frank A. Long and Norman Robertson, and each of them, are
hereby appointed proxies, with the power of substitution, to vote the shares of
the undersigned, as directed on the reverse side of this proxy, at the Annual
Meeting of Shareowners of PP&L Resources, Inc. to be held on April 23, 1999, and
any adjournments thereof, and in their discretion to vote and act upon any
other matters as may properly come before said meeting and any adjournments
thereof.

Shares represented by all properly executed proxies will be voted at the Annual
Meeting in the manner specified. If properly executed and returned, and no
specification is made, votes will be cast "FOR" all items on the proxy.

1. ELECTION OF DIRECTORS:

(1) Frederick M. Bernthal (2) William J. Flood (3) Frank A. Long

For All For All Withhold
Except (*) For All

[_] [_] [_]

(*) To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list above and mark an (X) in the "For All
Except" box.

For Against Abstain

2. PROPOSAL 2: Appointment [_] [_] [_]
of independent accountants

2. PROPOSAL 3: Approval of [_] [_] [_]
Amendments to Incentive
Compensation Plan

2. PROPOSAL 4: Approval of [_] [_] [_]
Short-Term Incentive Plan

<PAGE>
Please mark [X]
your votes as
indicated in
this example

1. ELECTION OF DIRECTORS:
(1) Frederick M. Bernthal (2) William J. Flood (3) Frank A. Long

For All Withhold
For All Except (*) For All
[_] [_] [_]

(*) To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list above and mark an (X) in the "For all
Except" box.
For Against Abstain
2. PROPOSAL 2: Appointment [_] [_] [_]
of independent accountants

3. PROPOSAL 3: Approval of [_] [_] [_]
Amendments to Incentive
Compensation Plan

4. PROPOSAL 4: Approval of [_] [_] [_]
Short-Term Incentive Plan

IMPORTANT: When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. In the case of JOINT HOLDERS,
all should sign.

Please date and sign your name(s) exactly as shown
and mail promptly in the enclosed envelope.

Signature(s)___________________ Signature(s)____________________ Date___________

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE

PP&L Resources, Inc.
- ----------------------------------------------------------------
Two North Ninth Street . Allentown, PA 18101-1179 . 610/774-5151

March 12, 1999

Dear Shareowner:

It is a pleasure to invite you to attend the 1999 Annual Meeting of
Shareowners, which will be held at 1:30 p.m. on Friday, April 23, 1999, at
Lehigh University's Stabler Arena, at the Goodman Campus Complex, located in
Lower Saucon Township, outside Bethlehem, following the Annual Meeting of
Shareowners of PP&L, Inc.

Detailed information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy Statement. We
will conclude the formal portion of the meeting with a discussion of the
company's operations and a question-and-answer period will follow.

Your vote is important. Whether you own one share or many, please mark,
sign, date and return your ballot as soon as possible so that you will be
represented at the meeting in accordance with your wishes.

Sincerely yours,

/s/ William F. Hecht
William F. Hecht
Chairman, President and Chief Executive
Officer
<PAGE>
PP&L
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
CONFIDENTIAL BALLOT

This is a ballot for voting your shares of PP&L Resources, Inc. Common Stock
held in the PP&L ESOP. Please complete the ballot and return it in the envelope
provided. Mellon Bank, N.A., as Trustee of the plan, will vote shares held in
your ESOP Account as directed on the ballot at the Annual Meeting of
Shareholders of PP&L Resources to be held on April 23, 1999.

If you do not return your ballot, or return it unsigned, the Plan provides that
the Trustee will vote your shares in the same percentage as shares held by
participants for which the Trustee has received timely voting instructions.

Please review the information carefully and indicate how you wish your shares to
be voted at the annual meeting. Mark, sign, date and use the return envelope
for mailing your ballot to Mellon Bank's agent for tabulation. Timely receipt
of your instructions on a signed ballot form is extremely important. Please
return your signed ballot form by April 16, 1999.

This ballot must be received by the close of business on April 16, 1999 in order
for your vote to be counted.

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE