PbPdO₂, a ternary compound containing the lone pair active ion Pb²⁺ and the square planar d⁸Pd²⁺ ion, has attracted recent interest because of the suggestion that its electronic structure, calculated within density functional theory using either the local density or the generalized gradient approximation, displays zero-gap behavior. In light of the potential ease of doping magnetic ions in this structure, it has been suggested that the introduction of spin, in conjunction with zero band gap, can result in unusual magnetic ground states and unusual magnetotransport. It is known that most electronic structure calculations do not properly obtain a band gap even for the simple oxide PdO, and instead obtain a metal or a zero-gap semiconductor. Here we present density functional calculations employing a screened hybrid functional which correctly obtain a band gap for the electronic structure of PdO. When employed to calculate the electronic ground state of PbPdO₂, a band gap is again obtained, which is consistent with both the experimental data on this compound, as well as a consideration of valence states and of metal-oxygen connectivity in the crystal structure. We also present comparisons of the absolute positions (relative to the vacuum level) of the conduction band minima and the valence band maxima in α-PbO, PdO and PbPdO₂, which suggest ease of p-type doping in PbPdO₂, that has been observed even in nominally pure materials.