Oct. 30--PPL Corp. reported third quarter profits of $20 million, down 90 percent from the same period a year ago due largely to an accounting loss on hedging activity related to long-term energy contracts.

The company's earnings from continued operations in the quarter increased 16 percent to $195 million. But that was offset by one-time charges that chewed into profits.

To minimize risk, PPL locks in long-term contracts for the fuels it uses at its power plants and the power it buys and sells, similar to a homeowner who locks in heating fuel prices in advance of the winter.

The value of those contracts changes with market conditions, and the company reported a loss in the third quarter on its hedging activity due to fuel prices that are significantly lower now than when PPL entered the contracts.

Even though the contracts haven't been executed, companies have to assign a value to them to comply with federal regulations of publicly traded companies.

"At this point in the year, we are pleased with our financial performance Â... despite ongoing pressure on wholesale energy prices and customer demand due to the continuing weak economy and mild weather," said James Miller, PPL's chief executive officer. "Our relatively strong ongoing earnings results for the quarter reflect the continued benefits of cost-control actions we took early in the year."

The weak economy has taken a toll on the Allentown energy company. It reported a loss in the second quarter due to an unseasonably cool summer and declining electric demand from manufacturing plants and other large electric users.

The company in April announced plans to cut 200 jobs from its work force, with about half of the positions eliminated in the Lehigh Valley.

The cost-cutting helped the company strengthen its earnings in the third quarter, Miller said.

PPL expects strong earnings of $3.10 to $3.50 per share in 2010, due to higher margins on electric sales.

PPL's residential electric customers in Pennsylvania will see their bills climb 30 percent in 2010, when state-imposed rate caps expire.

Small businesses buying electricity from PPL will see their rates increase by 18.4 percent on Jan. 1, and midsize businesses will see rate hikes of about 36.1 percent, according to PPL.

Residential and commercial users can choose other retail electric providers to try to get lower prices.

There are several energy companies competing for commercial accounts in the PPL service area. But only one company, Dominion Energy in Virginia, has entered the residential market in the PPL service area.

PPL shares closed at $30.09 Thursday on the New York Stock Exchange, up about

2 percent for the day.

spencer.soper@mcall.com

610-820-6694

-----

To see more of The Morning Call, or to subscribe to the newspaper, go to http://www.mcall.com.

Copyright (c) 2009, The Morning Call, Allentown, Pa.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NYSE:PPL, OFEX:DOMP,

A service of YellowBrix, Inc.