<PAGE>
EXHIBIT K
DESCRIPTION OF LG&E ENERGY GROUP AFFILIATE TRANSACTIONS
The LG&E Energy Group companies will engage in a variety of affiliate
transactions for the provision of goods, services, and construction. Following
the Merger, the provision of goods, services and construction by the LG&E Energy
Group companies to other LG&E Energy Group companies will be carried out in
accordance with the requirements and provisions of Rules 87, 90, and 91, unless
otherwise authorized by the Commission by order or by rule.
Certain LG&E Energy Group companies have in place arrangements for the
provision of facilities, personnel and services to other LG&E Energy Group
companies, as described below. All such arrangements for the provision of goods,
services and construction are provided at cost as determined in accordance with
Rules 90 and 91. Certain of the goods, services and construction to be provided
by the providing company to the other LG&E Energy Group companies are provided
through contracts with third parties. Where practicable, the contracting LG&E
Energy Group companies will enter into assignments to LG&E Service of any such
existing contracts. In addition, the Applicants expect that upon the expiration
or renegotiation of the original contract for such goods, services and
construction, LG&E Services will enter into new contracts with such third
parties, in compliance with the requirements of Rules 87, 90 and 91. The
Applicants seek the necessary approval for the continued performance of these
arrangements through December 31, 2001 in order to allow an orderly transition
of such contracts and arrangements.
. Lease of or title to the major headquarters offices and certain-parking
facilities of the LG&E Energy Group in Louisville and Lexington, Kentucky,
are in the name of LG&E and KU, respectively. Pro-rata allocations of
third-party rent (if leased) or cost (if owned) are charged by LG&E and KU
to other LG&E Energy Group members based upon the square footage occupied
by the employees of an associate company as a percentage of the total
square footage. On a quarterly basis, a reconciliation is prepared to re-
allocate among the associate companies the costs of space used by employees
which perform services for more than one associate company, based upon
actual labor charges of such employees. Certain LG&E Energy Group companies
also lease
<PAGE>
parking facilities from third parties for use by various LG&E Energy Group
companies, including LG&E and KU, which make direct payments to such third
parties based upon actual usage of the relevant facilities. These
arrangements comply with the at cost requirements of Rules 90 and 91.
. LG&E Energy Group companies have formed joint project teams to address
certain issues of common interest to the group as a whole and pursuant to
which services are provided to various LG&E Energy Group companies,
including LG&E and KU. These teams have been formed for well-defined
projects where specialized assets or skills are necessary. Joint
contracting by the LG&E Energy Group companies (or, contracting by one LG&E
Energy Group company with a third party for the requirements for all LG&E
Energy Group companies) has been implemented in order to obtain preferred
pricing. Examples of such existing projects include (a) system-wide
installation of NOx pollution control equipment at both utility and
nonutility generation facilities, (b) system-wide installation of
combustion turbine generation equipment at both utility and nonutility
generation facilities and (c) system-wide installation of major computer
software, hardware or accounting practices. Costs of projects performed
specifically for an associate company are directly assignable to such
associate company. Additionally, labor costs, including direct labor costs
and overhead expense, for employees are directly charged to associate
companies to which services are provided. These arrangements are in
compliance with the at cost requirements of Rules 90 and 91.
. Certain LG&E Energy Group companies, including LG&E and KU, have entered
into software licenses, professional services contracts and consulting
arrangements with third parties pursuant to which assets, rights or
services are provided to other LG&E Energy Group companies, including LG&E
and KU. The costs are allocated by the contracting LG&E Energy Group
company to each other LG&E Energy Group company according to its
proportional use of the relevant asset, right or service or, in some cases,
pro-rata payments are directly billed and/or paid by each relevant LG&E
Energy Group company to the third party, in each case in accordance with
the at cost requirements of Rules 90 and 91. Third party costs are directly
allocated to the associate company receiving the applicable asset, right or
service. Costs of a general nature which are not directly assignable are
allocated to all associate companies
2
<PAGE>
benefiting from such asset, right or service based upon the percentage of
directly assignable costs allocated to each such associate company.
Pursuant to existing arrangements, certain employees of LG&E who are
members of IBEW Local 2100 provide specialized services, such as meter
calibration, safety glove testing, telecommunication services and meter reading,
to both LG&E and KU on a regular basis, and in some cases to other LG&E Energy
Group companies. Pro-rata allocations of the cost relating to these services are
charged to the receiving LG&E Energy Group companies, in accordance with the at
cost requirements of Rules 90 and 91. These employees are covered by certain
collective bargaining agreements under federal labor laws with their current
employer, which arrangements are not subject to assignment to a new employer,
including LG&E Services. Applicants request authority to continue such
arrangements. The costs of such arrangements will be billed to LG&E Services and
further allocated to the receiving LG&E Energy Group company in compliance with
Rules 87, 90 and 91.
In addition, LG&E and KU may provide to one another, and to other companies
in the Powergen System, including LG&E Services and other U.S. Non-Utility
Subsidiaries, services incidental to their utility businesses, including but not
limited to, power plant maintenance overhauls or new equipment installation,
power plant and storm outage emergency repairs, and services of personnel with
specialized expertise related to the operation of the utility. These services
will be provided in accordance with Rules 87, 90 and 91.
3
