<PAGE>   1


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the transition period from                 to
                               ---------------    ---------------

                         Commission File number 0-14183
                            ENERGY WEST INCORPORATED
             (Exact name of registrant as specified in its charter)

               Montana                              81-0141785
     (State or other jurisdiction of            (I.R.S. Employer
     incorporation or organization)             Identification No.)

                  1 First Avenue South, Great Falls, Mt. 59401
                   (Address of principal executive    (Zip Code)
                                    offices)
        Registrant's telephone number, including area code (406)-791-7500
                        Securities registered pursuant to
                            Section 12(b) of the Act:
           Title of each class      Name of Exchange on which registered
                  Common Stock - Par Value $.15     NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.45 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X].

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 20, 2000: Common Stock, $.15 Par Value - $17,410,759
The number of shares outstanding of the issuer's classes of common stock as of
September 20, 2000: Common Stock, $.15 Par Value - 2,476,105 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held
December 15, 2000 are incorporated by reference into Part III.



                                       1


<PAGE>   2


PART I
Item 1. - Business

         ENERGY WEST INCORPORATED ("the Company") is a regulated public utility,
with certain non-utility operations conducted through its subsidiaries. The
Company's regulated utility operations involve the distribution and sale of
natural gas to the public in the Great Falls, Montana and Cody, Wyoming areas
and sale of propane to the public through underground propane vapor systems in
the Payson, Arizona and Cascade, Montana areas. In addition, since 1995, the
Company has distributed natural gas through an underground system in West
Yellowstone, Montana that is supplied by liquefied natural gas ("LNG").

         The Company conducts certain non-utility operations through its three
wholly owned subsidiaries, Energy West Propane, Inc. ("EWP"), formerly Rocky
Mountain Fuels, Inc., Energy West Resources, Inc. ("EWR"), and Energy West
Development, Inc. ("EWD"), formerly Montana Sun. EWP is engaged in the
distribution of retail and wholesale bulk propane in Wyoming, South Dakota,
Nebraska, Colorado, Arizona and Montana and Wyoming. EWR is involved in the
marketing of gas and electricity and gas storage in Montana. EWD owns one real
estate property in Great Falls, Montana.

Utility Operations

         The Company's primary business is the distribution and sale of natural
gas and propane to residential, commercial and industrial customers. The utility
distribution operations consist of three divisions, Energy West - Montana,
including operations in Great Falls, Cascade and West Yellowstone, Montana;
Energy West - Wyoming, serving customers in and around the towns of Cody and
Meteetsee; and Energy West - Arizona, serving customers in and around the
communities of Payson and Strawberry. Generally, residential customers use
natural gas and propane for space heating and water heating, commercial
customers use natural gas and propane for space heating and cooking, and
industrial customers use natural gas as a fuel in industrial processing and
space heating. The Company's revenues from utility operations are generated
under tariffs regulated by the respective state utility commissions.

Energy West - Montana ("EWM") - Great Falls division

         The EWM - Great Falls division ("GF division") provides natural gas
service to Great Falls, Montana and much of suburban Great Falls within
approximately 11 miles of the city limits. The service area has a population
base of approximately 79,000. The Company has a franchise to distribute natural
gas within the city of Great Falls. The franchise was renewed for 50 years by
the City of Great Falls in 1971. As of June 30, 2000, the GF division provided
service to over 25,000 customers, including approximately 22,700 residential
customers and approximately 2,500 commercial customers. An oil refinery,
Malmstrom Air Force Base ("Malmstrom"). Approximately 124 of these customers
have selected the option to be served by third parties for the commodity portion
of their service; receiving from the Company only distribution service. The
revenues from these customers are reflected in this filing under the term
"transportation".

                                       2
<PAGE>   3


The following table shows the GF division's revenues by customer class for the
year ended June 30, 2000 and the past two fiscal years:

                                  Gas Revenues
                                 (in thousands)
<TABLE>
<CAPTION>
                                                        Years Ended June 30,
                                                        --------------------
                                               2000              1999              1998
                                               ----              ----              ----
<S>                                          <C>               <C>               <C>
Residential.................                 $ 9,701           $ 9,513           $ 9,162
Commercial..................                   4,848             5,412             5,521
Transportation..............                   2,090             1,750             1,457
                                            -----------       -----------       -----------

              Total.........                 $16,639           $16,675           $16,140
                                            ===========       ===========       ===========
</TABLE>

         The following table shows the volumes of natural gas, expressed in
millions of cubic feet ("MMcf") at 13.28 P.S.I.A., sold or transported by the GF
division for the year ended June 30, 2000 and the past two fiscal years:

                                   Gas Volumes
                                     (MMcf)

<TABLE>
<CAPTION>
                                                     Years Ended June 30,
                                                     --------------------
                                               2000              1999              1998
                                               ----              ----              ----
<S>                                         <C>               <C>               <C>
Residential.................                  2,039             2,179             2,206
Commercial..................                  1,019             1,233             1,329
                                            -----------       -----------       -----------

              Total Gas Sales.....            3,058             3,412             3,535
                                            ===========       ===========       ===========

Transportation                                1,632             1,431             1,282
                                            ===========       ===========       ===========
</TABLE>

         Malmstrom, a gas transportation customer is GF division's largest
customer, accounting for approximately 4% of the revenues of the division in
fiscal 2000. Malmstrom annually rebids its gas supply to gas marketing firms
licensed in the State of Montana. Malmstrom purchases gas for space heating and
water heating for buildings and residential housing, to supplement its
coal-fired central heating system. Malmstrom, which is located near Great Falls,
is an air force base with several wings of Minuteman III intercontinental
nuclear missiles. The base employed approximately 4,400 military personnel and
550 civilian personnel as of June 30, 2000.

         The GF division has 800 transport customers the largest one being an
oil refinery located in the city. The Company provides gas to this customer for
processing use in its refining business. In fiscal 2000, the refinery accounted
for less than 1% of the consolidated revenues of the Company. Historically, this
customer's gas load has remained relatively constant during the year because the
gas is used in the customer's business and is therefore not weather-sensitive.

         The GF division's gas distribution operations are subject to regulation
by the Montana Public Service Commission ("MPSC"). The MPSC regulates rates,
adequacy of service, accounting, issuance of securities and other matters.

         On March 24, 1998, the GF division filed with the MPSC, the utility's
plan ("Plan") to allow customers to choose a natural gas supplier other than the
utility. The Plan provides all its customers the option to purchase natural gas
supply from third party marketing firms, while the utility will continue to
offer delivery service and allow customers, who do not want to choose another
supplier, to remain full service customers of the division. The MPSC approved
the Plan in December 1998.

                                       3
<PAGE>   4


         Pursuant to the tariffs of Montana Power Company ("MPC") the Company is
permitted to utilize the MPC pipeline transmission system to transport supplies
for its core load. The Company also permits utilization of this "pipeline
capacity" by its customers who have chosen to obtain their supply of natural gas
from third parties. As to these "transportation" customers, the Company provides
distribution, balancing and transportation services. As part of a settlement of
an MPC filing with the MPSC, MPC and the Company entered into a ten year
agreement that froze the rate for transportation services at levels below the
rate applicable to other wholesale pipeline customers of MPC. The agreement also
provides that the Company will pay for storage services, for balancing, at rates
that are frozen for that same ten-year period.

         The GF division purchased most of its gas supply in fiscal years 1998
and 1999 from EWR, a subsidiary of Energy West, Inc. under a long-term contract
expiring in 2002. The MPSC ordered the GF division in December 1998, to
competitively bid a supplier for those customers not selecting an alternate
supplier. Therefore in fiscal 2000, the Great Falls division purchased 50% of
its required supply for its customers from Montana Power Trading and Marketing
and 50% from EWR. In July 2000, the fiscal 2001-supply contract awarded 33 1/3%
to Commercial Energy, 33 1/3% to Montana Power Trading and Marketing and 33 1/3%
to EWR.

         The GF division contracted for gas storage from MPC in MPC owned gas
storage areas and paid storage tariffs at rates approved by the MPSC through
October 1997. This storage was assigned to EWR when a five-year gas supply
contract was signed with EWR effective November 1, 1997. The division uses this
storage capacity to provide for seasonal peaking needs. In April 1999 EWR and
the GF division unwound the agreement, due to the MPSC December 1998 order,
which required the utility to bid the services contained in the Agreement. As
mentioned above, the service was subsequently awarded to EWR for a one-year
period.

         Also in December 1998, the MPSC granted an interim rate change, which
increased rates about 5.5% for the GF division, as part of the Company's annual
reconciliation of purchased gas costs. This increase did not result in any
increased margins to the Company. In August 1999, the MPSC issued a Final Order
authorizing increased rates for natural gas service by $559,000. This amount is
$159,000 less than requested. The GF division applied to the MPSC in the fall of
1999 in an effort to recover the balance.

         In October 1999, the Company applied for recovery of approximately
$2,960,000 in gas costs with the MPSC. This gas cost application is similar to
applications made annually as the mechanism the MPSC utilizes to permit recovery
of gas costs. The Montana Consumer Counsel (MCC) intervened in this application
and the MCC recommended a substantial decrease of $830,000 of gas costs, to be
amortized over a three-year period. At a work session of the Commission held
September 26, 2000 the Commission voted to approve full recovery of the amounts
requested by the Company.





                                       4


<PAGE>   5


Energy West - Wyoming ("EWW") division

         The EWW division provides natural gas service in Northwestern Wyoming
to the city of Cody and the towns of Meeteetse and Ralston and the surrounding
areas. The service area has a population base of approximately 12,000. The EWW
division has a certificate of public convenience and necessity granted by the
Wyoming Public Service Commission (the "WPSC") for transportation and
distribution covering the west side of the Big Horn Basin, which stretches
approximately 70 miles north and south and 40 miles east and west from Cody. As
of June 30, 2000, the EWW division provided service to approximately 5,700
customers, including 4,900 residential customers, 800 commercial customers and
one industrial customer.

         The following table shows the EWW division's revenues by customer class
for the year ended June 30, 2000 and the past two fiscal years:

                                  Gas Revenues
                                 (in thousands)

<TABLE>
<CAPTION>
                                                         Years Ended June 30,
                                               2000              1999              1998
                                               ----              ----              ----
<S>                                       <C>               <C>               <C>
Residential.................                 $2,334            $ 2,510           $ 2,576
Commercial..................                  1,927              2,004             2,206
Industrial..................                  1,852              2,000             1,999
Transportation..............                    304                304               304
                                          -----------       -----------       -----------

              Total.........                 $6,417            $ 6,818           $ 7,085
                                          ===========       ===========       ===========
</TABLE>

         The following table shows the volumes of natural gas, expressed in
millions of cubic feet ("MMcf") at 13.28 P.S.I.A., sold by the EWW division for
the year ended June 30, 2000 and the past two fiscal years:

                                   Gas Volumes
                                     (MMcf)
<TABLE>
<CAPTION>
                                                        Years Ended June 30,

                                             2000                1999              1998
                                             ----                ----              ----
<S>                                         <C>                 <C>              <C>
Residential.................                  461                 500              506
Commercial..................                  482                 496              540
Industrial..................                  625                 674              640
                                            ------              -------          -------

              Total Gas Sales.....          1,568               1,670            1,686
                                            ======              =======          =======

Transportation                                261                 320              354
                                            ======              =======          =======
</TABLE>

         The industrial sales in the EWW division are to Celotex, a manufacturer
of gypsum wallboard, under an annual contract. Sales to the customer are made
pursuant to a special industrial tariff, which fluctuates, with the cost of gas.
In fiscal 2000 this customer accounted for approximately 29% of the revenues of
the division and approximately 4% of the consolidated revenues of the Company.
The division's sales to Celotex, whose business is cyclical and dependent on the
level of national housing starts, decreased by approximately 7% over previous
year's volumes. No assurance can be given that Celotex will continue to be a
significant customer of the EWW division.


                                       5
<PAGE>   6


         The EWW division's primary transportation customer and primary supplier
of natural gas is the Company's marketing affiliate Energy West Resources, Inc.
under a three-year agreement entered into in May of 2000. In addition, the
division has a backup contract to purchase natural gas from Coastal Gas
Marketing, but has never purchased gas under this contract. The parameters of
the transportation tariff (currently between $.08 and $.30 per Mcf) are
established by the WPSC. Agreements between the Company and the customer are
negotiated periodically within the parameters.

         During fiscal 2000, the Company was a party to gas financial swap
agreements for its regulated operations in the EWW division. Under these
agreements, the Company is required to pay the counterparty (an entity making a
market in gas futures) a cash settlement equal to the excess of the stated index
price over an agreed upon fixed price for gas purchases. The Company receives
cash from the counterparty when the stated index price falls below the fixed
price. These swap agreements are made to minimize exposure to gas price
fluctuations. Any cash settlements or receipts are included in gas purchased.

         The division's revenues are generated under regulated tariffs that are
designed to recover a base cost of gas, administrative and operating expenses
and provide sufficient return to cover interest and profit. The division also
services customers under separate contract rates that were individually approved
by the WPSC. The division's tariffs include a purchased gas adjustment clause
which allows an adjustment of rates charged to customers in order to recover
changes in gas costs from base gas costs.

         The EWW division's last general rate order was effective in 1989. The
Company does not contemplate filing an application for a general rate increase
for the division in the foreseeable future.


Energy West - Arizona ("EWA") division

         The EWA division is involved in the regulated distribution of propane
in the Payson, Arizona area. The division was formed following the Company's
acquisition of Broken Bow Gas's underground propane vapor distribution system in
January 1993. The service area of the EWA division includes approximately 575
square miles and has a population base of approximately 30,000. As of June 30,
2000, the EWA division provided service to approximately 6,000 customers.

         The EWA division's operations are subject to regulation by the Arizona
Corporation Commission, which regulates rates, adequacy of service, issuance of
securities and other matters. The EWA division's properties include
approximately 100 miles of underground distribution pipeline and an office
building leased from a third party. The division purchases its propane supplies
from Energy West Propane-Arizona under terms reviewed periodically by the
Arizona Corporation Commission.

Non-Utility Operations

         The Company conducts its non-utility operations through its three
wholly owned subsidiaries: EWP, EWR and EWD. EWP is engaged in the bulk sale of
propane through its three divisions: Energy West Propane-Wyoming (formerly Wyo
L-P), which serves Northwestern Wyoming, Energy West Propane-Arizona (formerly
Petrogas of Arizona), which serves the Payson and Strawberry, Arizona area and
Energy West Propane-Montana (formerly Missouri River Propane), which sells bulk
propane in the Cascade County area, surrounding Great Falls, Montana. EWP also
markets wholesale propane through an operation whose d.b.a. is known as Rocky
Mountain Fuels Wholesale, which also markets propane to propane distributors in
Montana, Wyoming, Nebraska, South Dakota, Idaho, Washington and Colorado.


                                       6
<PAGE>   7


Energy West Propane

         EWP had approximately 2,720 customers as of June 30, 2000, of which the
EWP - Wyoming had approximately 680 customers, EWP - Arizona 1,700 customers and
EWP - Montana approximately 340 customers. EWP purchases propane from various
suppliers under short-term contracts and on the spot market, and sells propane
to residential and commercial customers, primarily for use in space heating and
cooking. EWP - Arizona also supplies propane to the EWA division, while EWP -
Montana supplies propane to EWM - Cascade division, for underground
propane-vapor systems serving the city of Cascade, Montana and surrounding
areas. For the twelve months ended June 30, 2000, EWP's revenues were
approximately $4,824,000 (excluding approximately $2,683,000 sales by Rocky
Mountain Fuels Wholesale to EWP - Wyoming, EWP - Arizona and EWP - Montana,
$1,638,000 sales by EWP - Arizona to the EWA division and approximately $109,000
sales by EWP - Montana to EWM - Cascade division), of which approximately
$2,287,000 was attributable retail sales by EWP - Wyoming, EWP - Arizona and EWP
- Montana. In addition, approximately $2,537,000 was attributable to the Rocky
Mountain Fuels Wholesale operation.

         On June 28, 1996, EWP Arizona sold real property, consisting of land
and office and warehouse building, for $525,000 in cash resulting in a gain of
$236,000. The gain is being amortized ratably into income over the initial
ten-year lease term. Concurrent with the sale, the Company is leasing the
property back for a period of ten years at an annual rental of $51,975. EWP
Arizona sub leases the property to the EWA division.

         On February 23, 1998, the Company sold four retail propane districts in
Wyoming, which was part of Wyo L-P (now Energy West Propane Wyoming), resulting
in a one-time pre tax capital gain of approximately $125,000.

         EWP faces competition from other propane distributors and suppliers of
the same fuels that compete with natural gas. Competition is based primarily on
price and there is a high degree of competition with other propane distributors
in each of the Company's service areas.

Energy West Resources

         The legislation and subsequent MPSC orders permitting open access on
the MPC gas transportation and electricity system in Montana have presented
opportunities for EWR to do business as a broker of natural gas and electricity,
using the MPC and other systems. EWR has concentrated its efforts on industrial
and large commercial customers, but began marketing gas and electricity to small
commercial and residential customers during this fiscal year. EWR has access to
an underground storage facility near Havre, Montana, which allows more
flexibility in the timing of its gas purchases. It has from time to time entered
into certain financial agreements to fix the price of its natural gas and
electricity. If the price obtained through such instruments is favorable or
unfavorable compared to subsequent market conditions, net earnings or losses can
result from such arrangements.

Energy West Development

         EWD owns a parcel of undeveloped land in Great Falls, Montana. A second
parcel of Commercial real estate property, owned by EWD for approximately 17
years and leased to a federal governmental agency, was sold on June 30, 2000, at
an after-tax capital gain of approximately $50,000.

         Additional information with respect to the non-utility operation of the
Company is set forth in Note 1 and 6 to the Company's consolidated financial
statements.


                                       7
<PAGE>   8


Capital Expenditures

         The Company generally conducts a continuing construction program and is
continuing expansion of its gas and propane pipeline systems, in all of its
utility service areas, as a result of growth and system maintenance and
enhancement. The Company also continues to experience growth in its retail
propane operations requiring capital expenditures to serve those customers. In
fiscal years 2000, 1999 and 1998, total capital expenditures for the Company
were approximately $4,649,000, $3,604,000 and $3,075,000 respectively.

Other Business Information

         The principal competition faced by the Company in its distribution of
natural gas is from other suppliers of competitive fuels, including electricity,
oil, propane and coal. The principal competition faced by the Company in its
distribution and sales of propane is from other propane distributors and
suppliers of the same energy sources that compete with natural gas and
electricity. Competition is based primarily on price and there is a high degree
of competition with other propane distributors in the service areas. The
principal considerations affecting a customer's selection of utility gas service
over completing energy sources include service, price, equipment costs,
reliability and ease of delivery. In addition, the type of equipment already
installed in businesses and residences significantly affects the customer's
choice of energy. However, where previously installed equipment is not an issue,
households in recent years have generally preferred the installation of gas
heat. The EWM - Great Falls division's statistics indicate that approximately
95% of the houses and businesses in the service area use natural gas for space
heating fuel, approximately 91% use gas for water heating and approximately 99%
of the new homes built on or near the EWM - Great Falls division's service mains
in recent years have selected natural gas as their energy source. The EWW
division believes that approximately 95% of the houses and businesses in the
service area use natural gas for space heating fuel, approximately 90% use gas
for water heating, and approximately 99% of the new homes built on or near the
division's service mains in recent years have selected gas as their energy
source. The EWA division believes that approximately 59% of the houses and
businesses adjacent to the division's distribution pipeline use the division's
propane for space heating or water heating. EWR's principal competition is from
other gas and electricity-marketing firms doing business in the State of
Montana. EWR presently has 446 customers for natural gas services and 1,387 for
electricity services. The GF division and MPC have filed plans with the MPSC, to
allow all of its customers to choose a natural gas supplier other than the
utility. Those plans have been approved by the MPSC. EWR believes that the
unbundling of natural gas service will provide future opportunity for gas
marketing operations. The unbundling of electric utility service, occurring in
phases on the MPC system, will provide future opportunity for electric marketing
operations.



                                       8
<PAGE>   9


         The Company had 131 employees as of June 30, 2000. Eight of these were
employed by EWR, nine by EWP; and the remaining 114 were employed by the
Company's Energy West utility operating divisions and the Company's corporate
staff (7 individuals). The Company's utility divisions include 16 employees
represented by two labor unions. Contracts with each of these unions are in
place until June 30, 2003. The Company believes that its relationship with its
employees is satisfactory.

         EWP conducts its wholesale propane operations in Montana, Wyoming,
Nebraska, South Dakota, Idaho, Washington and Colorado. It recently completed a
facility in Superior, Montana adjacent to a rail line. It ships propane from
storage facilities and refineries to the facility where it is remarketed to
retail distributors.

         The Company has management and employee incentive programs tied to
bottom-line performance of the corporation. Officers and management participate
in a pay-for-performance program based on achievement of earnings and Economic
Value Added (EVA) targets. The targets are set by the Compensation Committee of
the Board of Directors, based on the operating budget set by the Company.
Division personnel incentives are based on a combination of the division
earnings performance and on the corporate performance measures discussed above.
In addition, each individual incentive payout is contingent upon achievement of
Balance Goal Card Objectives or performance goals, set at the beginning of each
year. All officers and eligible employees participate in the Company's Employee
Stock Ownership Plan ("ESOP"), in which payout is based on pre-tax, pre-ESOP
earnings of the Company and approved by the Board each year.

         The Company has implemented a deferred compensation plan for directors,
which allows a director to defer directors' fees and incentive awards until such
time as the director ceases to be a director of the Company by retirement or
otherwise. The plan provides incentive compensation based on the total fees
earned by each Director for each year multiplied by the highest percentage
incentive award for that year to any employee under the Company's management
incentive compensation plan. Fees (either cash or stock) and incentive
compensation (stock only) can be received either currently, as they are earned,
or on a deferred basis. Elections to defer receipts are subject to timing
requirements.



                                       9
<PAGE>   10


PART I
Item 2. - Properties

         The Company owns all of its properties in Great Falls, including an
office building, a service and operating center, regulating stations and its
distribution system. In Wyoming, the Company owns its distribution system,
including 167 miles of transmission pipeline. Office and service buildings for
the EWW division are leased under long-term leases. EWP owns buildings, propane
tanks and related metering and regulating equipment for the Wyoming and Arizona
propane distribution operations. In Arizona, the Company owns mains, service
lines and five acres of land for its propane vapor distribution operation in
Payson, Arizona. Its office building is leased for a period ending in 2006 with
a provision for extension of the lease for two successive five (5) year periods.
Under the terms of the lease EWP has a right of first refusal to purchase the
property. In June 2000, EWD sold one of its two parcels of real estate property
in Great Falls.


                                       10
<PAGE>   11


Item 3. - Legal Proceedings

         From time to time the Company is involved in litigation relating to
claims arising from its operations in the normal course of business. The Company
contracts for liability insurance through a primary insurance carrier in the
amount of $1,000,000 and an excess carrier, in the amount of $30,000,000, in
order to indemnify itself from such claims. In its judgement, there is no legal
proceeding, which could result in a material adverse effect on the Company's
results of operations, financial position or liquidity. Significant legal
proceedings, most of which are covered under its liability insurance policies,
are described below.

         On February 6, 1998 a judgement was entered against the Company in the
Federal District Court for Wyoming in favor of Randy and Melissa Hynes. The
Company was found to be 55% responsible resulting in a liability of
approximately $2,900,000 for which the Company is indemnified under the policies
described above. The action arose out of a natural gas explosion involving a
four-plex apartment building in Cody, Wyoming. The Company appealed the
judgement to the United States Court of Appeals for the Tenth Circuit which
ruled in favor of the plaintiff and upheld the original decision of the Federal
District Court of Wyoming on May 2, 2000.

         Two lawsuits arising out of the same explosion as that in the "Hynes"
case but involving other plaintiffs have been recently settled. One lawsuit
filed by the building owner is still pending, and three additional actions have
been brought in state district court. The Company is indemnified under its
insurance policies for the defense of these claims and believes it will be
completely indemnified from any judgement on the remaining claim.

         On September 4, 1998, the Company received correspondence from the
Department of Justice that a claim was being considered by the United States of
America (U.S.) against Energy West, Incorporated. The correspondence indicated
that a complaint has been prepared by Jack Grynberg, acting as Relater on behalf
of the U.S., alleging that the Company had utilized improper measurement
procedures in the measurement of gas which was produced from wells owned by it,
by its subsidiaries, or from which the Company may have acted as operator. The
alleged improper measurement procedure purportedly understated the amount of
royalty revenue, which would have been paid to the U.S. The complaint is
substantially identical to the complaint being made against seventy-seven other
parties. The Company is alleged to have been responsible for the measurement of
over 150 wells during a five-year period. The Company has investigated this
allegation and believes it had measurement responsibility for four wells. The
quantity of production from those wells is small enough that the Company does
not expect its potential liability to be material from any adverse decision in
any action actually pursued by the U.S. or Mr. Grynberg. Furthermore, the
Company believes that the allegations made by Mr. Grynberg are not sustainable.
In the spring of 1999 the United States declined to intervene in the action. Mr.
Grynberg has served the Company with the Complaint and the matter is currently
the subject of preliminary motions in Federal Court. The Company intends to
vigorously contest the claims made in the Complaint. The costs to defend this
action are impossible to estimate at this time.

         In the fall of 1999, the Company was served with a complaint containing
a class action lawsuit. The named plaintiff in the matter is Quinque Operating
Company. This case is a companion case to the above referenced matter. The
distinction between the two is that the complaint in this action applies to the
measurement of gas wells located on private land. The defendants are
substantially the same as in the Grynberg case. The case was brought in Kansas
State, but a motion to remove this case to the same Federal Court hearing the
Grynberg matter was recently granted. The Company believes that its liability in
this matter is not likely to be material, since it is only aware of one well on
which the Company ever performed gas measurement responsibilities. The Company
also has jurisdictional defenses not available to it in the Grynberg litigation.
The Company is participating in its defense in collaboration with the other
defendants. The costs of defending this matter are impossible to approximate at
this time.



                                       11
<PAGE>   12


Item 4. - Submission of Matters to a Vote of Security Holders

             None

Executive Officers and Directors of the Company

The following table sets forth the names and ages of, and the positions and
offices within the Company presently held by, all directors and executive
officers of the Company:
<TABLE>
<CAPTION>
Name                                    Age                                                          Position
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                                             <C>
Larry D. Geske                           61                                             President and Director since
                                                                                        1978; appointed Chief
                                                                                        Executive Officer in 1979

Edward J. Bernica                        51                                             Executive Vice-President,
                                                                                        Chief Operating Officer and
                                                                                        Chief Financial Officer
                                                                                        since March 1999;
                                                                                        Vice-President and Chief
                                                                                        Financial Officer since
                                                                                        October 1994

William J. Quast                         61                                             Vice-President and Treasurer
                                                                                        and Assistant Secretary
                                                                                        since July 1, 2000,
                                                                                        Vice-President and Manager
                                                                                        of Montana Operations of
                                                                                        Energy  West, Inc and
                                                                                        Assistant Secretary since
                                                                                        July 1998

Tim A. Good                              55                                             Vice-President and
                                                                                        Manager of Energy West's
                                                                                        Natural Gas Utility business
                                                                                        units since July 1, 2000,
                                                                                        Vice-President and Manager
                                                                                        of the Energy West Wyoming
                                                                                        since 1988

Sheila M. Rice                           53                                             Vice-President of Marketing
                                                                                        and Communications for
                                                                                        Energy West, Inc. since July
                                                                                        1998; Vice-President and
                                                                                        Division Manager of the EWM
                                                                                        - Great Falls division since
                                                                                        April 1993
</TABLE>

                                       12

<PAGE>   13

<TABLE>
<CAPTION>
Name                                Age                                                          Position
-------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                                 <C>
John C. Allen                       49                                                  Vice-President of Human
                                                                                        Resources and General
                                                                                        Counsel and Secretary
                                                                                        since 1992; Corporate
                                                                                        Counsel and Secretary
                                                                                        since 1988.

Steven G. Powers                    52                                                  Assistant Vice-President and
                                                                                        Manager of Energy
                                                                                        Marketing/Wholesale
                                                                                        Supply/Transportation since
                                                                                        July 1, 2000, Assistant
                                                                                        Vice-President   and Manager
                                                                                        of Energy West Resources
                                                                                        since August 1997


Douglas R. Mann                     53                                                  Vice-President and Manager
                                                                                        of Energy West's Retail
                                                                                        Propane business units since
                                                                                        July 1, 2000, Vice-President
                                                                                        of Energy West, Incorporated
                                                                                        since February 1999, Broken
                                                                                        Bow Gas and Energy West
                                                                                        Propane - Arizona divisions
                                                                                        since 1995,
</TABLE>


                                       13
<PAGE>   14

<TABLE>
<CAPTION>
Name                                Age                                                          Position
-------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                                 <C>
George D. Ruff                      62                                                  Director since 1996

Thomas N. McGowen, Jr.              74                                                  Director since 1978

G. Montgomery Mitchell              72                                                  Director since 1984

Dean South                          57                                                  Director since 1996

David A. Flitner                    67                                                  Director since 1988

Richard J. Schulte                  60                                                  Director since 1997

Andrew Davidson                     33                                                  Director since 1999
</TABLE>

Larry D. Geske has been employed by the Company since 1975 and became President
and Director of the Company in 1978. In 1979, Mr. Geske was appointed to the
position of Chief Executive Officer. In addition, Mr. Geske is a past Director
of First Interstate Bank of Great Falls (parent Company is First Interstate Bank
Corporation) and was a Director of the Great Falls Capital Corporation and the
Great Falls Dodgers Baseball Club. He is also a Director of the American Gas
Association's Board. Mr. Geske, prior to service with the Company, was a Field
Engineer "A" with NIGAS in Aurora, Illinois and a Senior Consultant with Stone
and Webster Management Consultants, Inc. in New York.

The Company has employed Mr. Edward J. Bernica since October 1994. In November
1994, Mr. Bernica became Vice-President and Chief Financial Officer. He became
Executive Vice-President, Chief Operating Officer and Chief Financial Officer in
March 1999. Mr. Bernica, prior to service with the Company, was Director of
Finance at U. S. West in Englewood, Colorado and prior to that, was employed by
ENRON Corporation in Omaha, Nebraska as Director-Financial Analysis and Planning

William J. Quast has been Vice-President, Treasurer, Controller and Assistant
Secretary since 1988, Vice-President and Division Manager of the Montana
Operations since 1998 and on July 1, 2000 was appointed Vice-President,
Treasurer and Assistant Secretary. He has served as Vice-President, Secretary
and Treasurer since 1987 and as Assistant Vice-President, Secretary, Controller
and Assistant Treasurer since 1983. He has served as Secretary of the Company
since 1982 and as Assistant Treasurer of the Company since 1979. Mr. Quast,
prior to service with the Company, was an Accounting Manager for Wyton Oil and
Gas Company, a multi-state propane distributor headquartered in Denver,
Colorado, and was Treasurer for D. A. Davidson & Co. in Great Falls, Montana.

Tim A. Good has been Vice-President and Division Manager of Energy West Wyoming
since 1988 and on July 1, 2000 was appointed Vice-President and Manager of
Energy West's Natural Gas Utility business units. He served as General Manager
of Cody Gas Company, a Division of The Coastal Corporation for five years prior
to the acquisition of the Cody Gas Company by EWST in 1988.

Sheila M. Rice has been Vice-President and Division Manager of the EWM - Great
Falls division since April, 1993 and effective July 1, 1998, was appointed
Vice-President of Marketing and Communications. Prior to that, she was
Vice-President of Marketing and Consumer Services since 1988. She served as
Vice-President, Marketing and Consumer Relations from 1987 to 1988, Assistant
Vice-President for Marketing/Customer Relations from 1983 to 1987 and as
Consumer Service Representative/Conservation Specialist for the Company from
1979 to 1983.

John C. Allen has been Vice-President of Human Resources and General Counsel
since 1992 and previously served as Corporate Counsel and Secretary of the
Company since 1988. He served as Corporate Counsel and Assistant Secretary from
November 1986 until 1988 and as Corporate Attorney of the Company (March
1986-November 1986). From 1979 to 1986, Mr. Allen was employed as a staff
attorney with the Montana Consumer Counsel.




                                       14
<PAGE>   15




Steven G. Powers has been Assistant Vice-President and Manager of Energy West
Resources since August 1997. On July 1, 2000, he was appointed Assistant
Vice-President and Manager of Energy Marketing/Wholesale Supply/Transportation.

Douglas R. Mann has been Vice-President of EWP since February 1999 and Assistant
Vice-President of EWP since November 1997 and Manager of Broken Bow Gas and
Energy West Propane - Arizona divisions and Assistant Secretary, since 1995,
employed by Energy West, Inc. since April 1983. On July 1, 2000 he was appointed
Vice-President and Manager of Energy West's Retail Propane business units.

George D. Ruff has been a Director of the Company since 1996. Mr. Ruff retired
as Vice-President of Montana Operations for U.S. West, Inc. He held that
position from June 1983 until his retirement in 1997. He is a director of
Norwest Bank, the Montana Taxpayers Association and is a Director of the Montana
Chamber Foundation Board.

Thomas N. McGowen, Jr. has been a Director of the Company since 1978. Mr.
McGowen is a retired attorney and is past President and Chairman of the Board of
Pabst Brewing Company. Mr. McGowen is a Director of Federal Signal Corporation
and Ribi Immunochem Corporation.

G. Montgomery Mitchell has been a Director of the Company since 1984. Mr.
Mitchell was a Senior Vice-President and Director of Stone and Webster
Management Consultants, Inc. from August 1980 until his retirement in 1993. Mr.
Mitchell is a Director of Energy South, Inc. (formerly Mobile Gas Service
Corporation)(Alabama).

Dean South has been a Director of the Company since 1996. Mr. South currently
ranches north of Helena, Montana. Mr. South has been active in the management of
propane distribution companies for most of his career. In 1991, Mr. South
retired from the propane distribution industry having served as Vice President
of Western Operations for Heritage Propane Corporation from October of 1989
until his retirement in 1991. From 1986 until 1989 he served as President and
Chief Operating Officer of Louis Dreyfus Propane Corporation. From 1981 until
1986 he served as President of Northern Energy Company which subsequently merged
with Louis Dreyfus Propane. He was appointed in August, 1996 to fill the
unexpired term of Mr. Moylan as a Director for ENERGY WEST, Inc.

David A. Flitner has been a Director of the Company since 1988. Mr. Flitner is
owner of the Flitner Ranch and Hideout Adventures, Inc., a recreational
enterprise.

Richard J. Schulte has been a Director of the Company since 1997. He is a
principal in Schulte Associates LLC, a consulting firm providing management,
marketing, restructuring and planning services to energy related businesses. Mr.
Schulte was formerly President of International Approval Services, Inc.; and
Senior Vice President Laboratories for the American Gas Association. He is
vice-chairman of the Audit and Finance Committee for the American Society for
Testing and Materials (ASTM).

Andrew Davidson has been a Director of the Company since 1999. Mr. Davidson is
Vice-President and Portfolio Manager for Financial Aims Corporation and a
Financial Consultant for D. A. Davidson & Company. He has served in both
capacities since 1993.



                                       15
<PAGE>   16


PART II

Item 5. - Market for registrant's common equity and related stockholder matters

Common Stock Prices and Dividend Comparison - Fiscal 2000 and 1999
Shares of the Company's Class "A" Common Stock are traded in the
over-the-counter market on the NASDAQ (National Association of Securities
Dealers Automated Quotation) system-symbol: EWST. The over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not necessarily represent the actual transactions.

<TABLE>
<CAPTION>
Price Range - Fiscal 2000                                     High                       Low
-------------------------                                     ----                       ---
<S>                                                          <C>                        <C>
First Quarter                                                 9.438                     7.000
Second Quarter                                                8.813                     8.000
Third Quarter                                                 8.563                     7.000
Fourth Quarter                                                8.250                     7.500
Year                                                          9.438                     7.000

<CAPTION>
Price Range - Fiscal 1999                                     High                       Low
-------------------------                                     ----                       ---
<S>                                                          <C>                        <C>
First Quarter                                                 9.375                     8.625
Second Quarter                                                9.75                      9.125
Third Quarter                                                10.625                     8.375
Fourth Quarter                                               10.00                      8.250
Year                                                         10.625                     8.250
</TABLE>






Dividends: The Board of Directors normally considers approving common stock
dividends for payments in March, June, September and January. Quarterly dividend
payments per common share for Fiscal Years 2000 and 1999 were:

<TABLE>
<CAPTION>
                                                              Fiscal 2000              Fiscal 1999
                                                              -----------              -----------
<S>                                                           <C>                      <C>
September                                                     $.1200                     $.1150
January                                                       $.1200                     $.1150
March                                                         $.1200                     $.1150
June                                                          $.1250                     $.1200
</TABLE>




                                       16
<PAGE>   17


Item 6. - Selected Financial Data

Selected Financial Data on a Consolidated Basis (2000-1996)

(dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                       2000           1999           1998          1997          1996
                                                   ------------- --------------- ------------- ------------- -------------
<S>                                                <C>           <C>             <C>           <C>           <C>
Operating results:
Operating revenue                                       $72,196         $53,815       $43,064       $38,215       $31,318
Operating expenses
     Gas and electric purchases                          58,788          39,687        28,757        24,675        18,724
     General and administrative                           7,373           8,018         7,697         7,498         6,924
     Maintenance                                            400             469           497           497           409
     Depreciation and amortization                        1,856           1,695         1,732         1,689         1,667
     Taxes other than income                                639             708           628           660           629
                                                   ------------- --------------- ------------- ------------- -------------

     Total operating expenses                            69,056          50,577        39,311        35,019        28,353
                                                   ------------- --------------- ------------- ------------- -------------

Operating income                                          3,140           3,238         3,753         3,196         2,965

Other income - net                                          581             819           142           325           215
                                                   ------------- --------------- ------------- ------------- -------------

Income before interest charges                            3,721           4,057         3,895         3,521         3,180

Total interest charges                                    1,674           1,493         1,583         1,525         1,243
                                                   ------------- --------------- ------------- ------------- -------------

Income before taxes                                       2,047           2,564         2,312         1,996         1,937
Income taxes                                                750             977           792           703           670
                                                   ------------- --------------- ------------- ------------- -------------

Net income                                               $1,297         $ 1,587       $ 1,520       $ 1,293       $ 1,267
                                                   ============= =============== ============= ============= =============

Earnings per common share                                   .53             .66           .64           .55           .55
Dividends per common share                                  .49             .47           .45           .43           .41
Weighted average common shares
Outstanding                                           2,456,555       2,418,910     2,390,814     2,356,624     2,298,734

At year end:
     Current assets                                     $16,287         $11,429       $12,326       $12,398        $9,092
     Total assets                                        51,547          44,201        43,335        42,885        37,495

     Current liabilities                                 14,841           7,230         6,745        15,317        11,088

     Total long-term obligations                         16,395          16,840        17,278         9,684        10,046
     Total stockholders' equity                          13,962          13,532        12,811        11,997        11,400
                                                   ------------- --------------- ------------- ------------- -------------

     Total capitalization                               $30,357         $30,372       $30,089       $21,681       $21,446
                                                   ============= =============== ============= ============= =============
</TABLE>





                                       17
<PAGE>   18


Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF CONSOLIDATED OPERATIONS

RESULTS OF CONSOLIDATED OPERATIONS

Fiscal 2000 Compared to Fiscal 1999

         Net Income The Company's net income for fiscal 2000 was $1,297,000
compared to $1,587,000 in fiscal 1999, a decrease of $290,000. Net income from
utility operations increased by $31,000 mainly due to reductions made in
operating expenses in response to 3% warmer weather in fiscal 2000. Energy West
Propane, Inc. ("EWP") had higher net income of $36,000, due to higher margins in
the wholesale propane operations, partially offset by a decrease in retail
propane margins, due to warmer weather. Energy West Resources, Inc. ("EWR"), the
Company's gas and electric marketing affiliate, had an earnings decrease of
$375,000 due to higher gas and electricity costs. Energy West Development, Inc.
("EWD"), the Company's real estate development affiliate, had higher net income
of $18,000, due to the sale of one of its real estate properties in June 2000
for an after-tax capital gain of approximately $50,000. This gain was partially
offset by lower operating revenues of $45,000, from a cash settlement received
in fiscal 1999, upon final dissolution of Gas Finco, a financing subsidiary of
the American Gas Association.

Revenue
         Operating revenues increased approximately 34%. Although weather was
warmer than last year in the Company's utility operations, which decreased
revenues by approximately 5%, the Company's propane wholesale revenue increased
by 43%, propane retail revenues increased by 39%, gas marketing revenues
increased by 33% and electric marketing revenues by 101%, due to customer growth
and significantly higher gas, propane and electricity market prices.

Gross Margin
         Gross margins (operating revenues less cost of gas and electric
trading) decreased approximately $720,000. Utility gross margins decreased
approximately $366,000, due to warmer weather in all three states served by the
utility operations. Energy marketing gross margins decreased approximately
$316,000, primarily due to unusually high electricity costs incurred in May and
June of 2000.

Operating Income
         Operating income decreased by approximately $98,000. Utility operations
increased by $265,000 and propane operations increased by $138,000. These were
offset by losses of $453,000 in Energy Marketing operations and a $51,000 loss
in EWD. The increased operating income from Utility operations resulted from
lower operating expenses of approximately $630,000, due to voluntary cut-backs
in non-essential operating and maintenance expenses in fiscal 2000, partially
offset by lower gross margins of $366,000, due to warmer weather than last
fiscal year. Propane operations operating income increased primarily from higher
gross margins of $64,000 from increased retail and wholesale sales and reduced
operating expenses of $74,000, due to lower incentives paid and increased
payroll costs capitalized to the newly constructed Superior, Montana propane
terminal. Energy Marketing operations had an operating loss, primarily due to
reduced margins of approximately $450,000, because of unusually high electric
purchase costs and approximately $137,000 higher operating expenses incurred as
start-up costs in the new electricity marketing operation. EWD operating income
decreased approximately $49,000, due to a cash settlement received in fiscal
1999, upon final dissolution of Gas Finco, a financing subsidiary of the
American Gas Association.



                                       18
<PAGE>   19


Other Expenses
         Operating expenses (excluding cost of gas and electric sales) decreased
approximately $622,000 or 6% in 2000, due to reduction of non-essential
discretionary expenses and reduced incentives.

         The result of the changes, as detailed above, was a decrease in
operating income from approximately $3,238,000 in 1999 to $3,140,000 in 2000.

         Interest expense increased by $181,000 or 12% from $1,493,000 in fiscal
1999 to $1,674,000 in fiscal 2000, due to higher short-term borrowing, as a
result of higher gas and propane inventories and higher unrecovered tracker gas
costs in Montana.

         Other income decreased approximately $238,000 from $819,000 in fiscal
1999 to $581,000 in fiscal 2000. The primary reasons for this decrease were
carrying costs on regulatory assets and gains recognized on derivative trading
higher in fiscal 1999 than gains recognized in fiscal 2000.



Fiscal 1999 Compared to Fiscal 1998

Net Income
         The Company's net income for fiscal 1999 was $1,587,000 compared to
$1,520,000 in fiscal 1998, an increase of $67,000. Net income from utility
operations increased by $130,000 due to higher gross margins, higher other
income and lower interest costs. Energy West Propane, Inc. ("EWP) had lower net
income of $90,000 due to a capital gain recognized, in fiscal 1998, from the
sale of four retail propane districts in Wyoming and from warmer weather in all
of its propane operating areas. Also, Energy West Resources, Inc. ("EWR"), the
Company's gas and electric marketing affiliate, had an earnings decrease of
$100,000 due to significantly higher natural gas prices in Canada and Montana.
This subsidiary achieved its first electric marketing sales in fiscal 1999
offsetting some of the decrease in gas marketing margins. In addition, this
subsidiary had a $390,000 gain from trading derivatives. Energy West
Development, Inc. ("EWD"), the Company's real estate development affiliate, had
higher net income of $170,000 because, in fiscal 1998, it recorded a loss from
its investment in American Gas Finance Company, LLC, a financing operation of
the American Gas Association, which discontinued operations. The Company also
lowered its interest costs by approximately $100,000 primarily from generating
more cash from operating activities.

Revenue
         Operating revenues increased approximately 24%. Although weather was
slightly warmer than last year in the Company's utility operations, revenues
were approximately the same as the prior year due to customer growth, in all
utility operations, and rate increases in certain Energy West Montana ("EWM")
operating entities. Revenues decreased approximately 5% in propane operations
due to the sale of the four retail propane districts in Wyoming in February of
fiscal 1998 and warmer weather than last year. Revenues from gas and electric
marketing activities increased approximately 90% of which, 51% is from
significantly higher volumes of natural gas sold and 39% is from the electric
sales.

Gross Margin
         Gross margins (operating revenues less cost of gas purchased and cost
of gas trading) decreased approximately $275,000 in 1999. Regulatory gross
margins increased approximately $445,000 even though degree-days were slightly
warmer than the previous year in all the Company's utility operations. The
increase in gross margin resulted from customer growth in all utility operations
and allowed rate increases in the West Yellowstone and Cascade districts of EWM.
Gross margins from propane operations decreased approximately $410,000 from the
sale of the propane properties in fiscal 1998 and warmer weather experienced in
all of its operating divisions in fiscal 1999. EWR had lower gross margins of
$390,000 of which, gas marketing decreased by $520,000 due to significantly
higher natural gas prices in Canada and Montana. This was partially offset by
electric gross margins totaling $115,000.



                                       19
<PAGE>   20


Operating Income
         Operating income decreased by approximately $510,000. Regulated
operations had an increase of $75,000, however propane operations had a decrease
of $200,000 and energy marketing had a decrease of $420,000. The increased
operating income from regulated operations resulted from higher gross margin of
$445,000 offset by higher operating expenses of $300,000 primarily due to
inflationary trends and additional staff added for safety operations of the
Company. Taxes other than income increased approximately $70,000, of which,
approximately $50,000 was due to an unfavorable settlement of a sales and use
tax audit related to the Company's Arizona operations. The decreased operating
income from propane operations was due to a $410,000 decrease in gross margins
offset by lower operating expenses of $200,000 both of which are related to the
sale of the properties in Wyoming. The decrease in operating income from the
Company's energy marketing activities was primarily due to the decrease in gross
margin.

Other Expenses
         Operating expenses (excluding cost of gas sales) increased
approximately $240,000 or 2% in 1999.

         The result of the changes, as detailed above, was a decrease in
operating income from $3,753,000 in 1998 to $3,240,000 in 1999. However,
interest expense decreased by $91,000 or 6% from $1,492,000 in fiscal 1999
compared to $1,583,000 in fiscal 1998. The decrease in interest expense was
primarily due to improvement in cash generated from operating activities. Other
income increased $698,000 from $209,000 in fiscal 1998 to $907,000 in fiscal
1999. The primary reasons for this increase were gains on derivative trading of
$390,000, an increase in carrying costs on regulatory assets of $100,000 and a
loss recognized in fiscal 1998 from the write-off of the investment in American
Gas Finance Company, LLC of approximately $248,000.


OPERATING RESULTS OF THE COMPANY'S UTILITY OPERATIONS

<TABLE>
<CAPTION>
                                                                Years Ended June 30
                                                       2000             1999             1998
                                                                     (In thousands)

<S>                                              <C>             <C>               <C>
Operating revenues                                     $ 27,579          $ 28,105        $ 27,825
Gas purchased                                            16,725            16,885          17,047
                                                 --------------- ----------------- ---------------
Gross Margin                                             10,854            11,220          10,778
Operating expenses                                        8,013             8,644           8,273
                                                 --------------- ----------------- ---------------
Operating Income                                          2,841             2,576           2,505
Interest charges (see note below)                         1,378             1,239           1,343
Other utility (income) - net                              (177)             (225)           (177)
Income taxes                                                581               534             439
                                                 --------------- ----------------- ---------------

Net utility income                                     $  1,059           $  1,028       $    900
                                                 =============== ================= ===============
</TABLE>

         [interest charges for utility and non-utility operations do not equal
total interest charges for the Company, due to eliminating entries between
entities.]



                                       20
<PAGE>   21


Fiscal 2000 Compared to Fiscal 1999

Revenues and Gross Margins

         Utility operating revenues in fiscal 2000 decreased to $27,579,000 from
approximately $28,105,000 in fiscal 1999 or 2%. Regulated gross margin, which is
defined as operating revenues less gas purchased, was approximately $10,854,000
for fiscal 2000 compared to approximately $11,220,000 in fiscal 1999.

         Overall revenues decreased by $526,000 primarily due to lower revenues
of approximately $40,000 in EWM's Great Falls and Cascade districts, lower
revenues of approximately $400,000 in EWW, lower revenues of approximately
$164,000 in EWA, all due to warmer weather than last fiscal year. These
decreases were partially offset by higher revenues in the West Yellowstone
district of EWM of approximately $78,000 due to customer growth.

         Utility gross margins decreased by approximately $366,000 or 3%, due to
significantly warmer weather from last year in all three states served by the
utility operations. The winter heating season was 4% warmer than one year ago in
EWM's Great Falls and Cascade districts, 3% warmer in EWM's West Yellowstone
district, 9% warmer in EWW and 16% warmer in EWA, than the same period one year
ago.

Operating Expenses
         Utility operating expenses, exclusive of the cost of gas purchased and
federal and state income taxes, were approximately $8,013,000 for fiscal 2000,
as compared to approximately $8,644,000 for fiscal 1999. The 7% decrease in the
period is due to reduction of non-essential discretionary expenses, higher
capitalized payroll and reduced incentives in the Company's utility operations.

Interest Charges
         Interest charges allocable to the Company's utility divisions were
approximately $1,378,000 in fiscal 2000, as compared to approximately $1,239,000
in fiscal 1999, primarily due to higher short-term borrowing, as a result of
higher gas inventories and higher unrecovered tracker gas costs in Montana.

Income Taxes
         State and federal income taxes of the Company's utility divisions were
approximately $581,000 in fiscal 2000, as compared to approximately $534,000 in
fiscal 1999 primarily due to an increase in pre-tax earnings of approximately
$78,000.



Fiscal 1999 Compared to Fiscal 1998

Revenues and Gross Margins

         Regulated revenues increased from $27,825,000 in fiscal 1998 to
$28,105,000 in fiscal 1999 or 1%. Gas purchases decreased from approximately
$17,047,000 in fiscal 1998 to $16,885,000 in fiscal 1999 or 1%. Regulated gross
margin, which is defined as operating revenues less gas purchased, was
approximately $11,220,000 for fiscal 1999 compared to approximately $10,778,000
in fiscal 1998.

         Overall revenues increased approximately $280,000 from fiscal 1998
primarily due to rate increases related to gas purchase adjustments and general
rate increases for EWM operating entities. The increased revenue for EWM was
partially offset by lower revenue for EWW and EWA due to warmer weather than one
year ago. Utility margins increased $442,000 or 4%, because of higher margins
from natural gas sales in EWM and slightly higher margins from propane vapor
sales in EWA due to a change in regulations related to propane purchase
adjustments. These increases were offset by lower margins from warmer weather in
EWW. Annual degree-days were 2% warmer in EWM, 8% warmer in EWW and 9% warmer in
EWA, than the same period one-year ago.



                                       21
<PAGE>   22


Operating Expenses
         Utility operating expenses, exclusive of the cost of gas purchased and
federal and state income taxes, were approximately $8,644,000 for fiscal 1999,
as compared to approximately $8,273,000 for fiscal 1998. The $370,000 or 4%
increase in the period is due to normal inflationary trends, additional staff
added for safety operations of the Company and higher vacation accruals. In
addition, taxes other than income, which are included in operating expenses
increased by about $50,000 from an unfavorable settlement of a sales and use tax
audit related to the Arizona operations.

Interest Charges
         Interest charges allocable to the Company's utility divisions were
approximately $1,239,000 in fiscal 1999, as compared to approximately $1,343,000
in fiscal 1998. The decrease in interest costs of $104,000 is primarily related
to higher cash generated from operating activities.

Income Taxes
         State and federal income taxes for the Company's utility operations was
approximately $534,000 in fiscal 1999, as compared to approximately $439,000 in
fiscal 1998 primarily due to an increase in pre-tax earnings of approximately
$250,000.



                                       22
<PAGE>   23




OPERATING RESULTS OF THE COMPANY'S PROPANE OPERATIONS

<TABLE>
<CAPTION>

                                                                            Years Ended June 30
                                                                2000               1999              1998
                                                                              (In thousands)
<S>                                                     <C>                <C>                <C>
ENERGY WEST PROPANE (EWP)
     Operating revenues                                            $4,824             $3,569           $ 3,757
     Cost of propane                                                2,884              1,693             1,525
                                                        ------------------ ------------------ -----------------
     Gross Margin                                                   1,940              1,876             2,232
     Operating expenses                                             1,388              1,462             1,664
                                                        ------------------ ------------------ -----------------
     Operating income                                                 552                414               568
     Other (income) expense - net                                    (70)              (178)             (204)
     Interest expense (see note below)                                147                168               198
     Income taxes                                                     167                152               208
                                                        ------------------ ------------------ -----------------
               Net income                                            $308              $ 272             $ 366
                                                        ================== ================== =================
</TABLE>

Fiscal 2000 Compared to Fiscal 1999

Revenues and Gross Margins
         Propane revenues increased approximately $1,255,000 or 35% from
$3,569,000 in fiscal 1999 to $4,824,000 in fiscal 2000. These increases occurred
primarily because higher wholesale revenues of 43% and retail revenues of 39%
due to customer growth and significantly higher propane prices. Gross margin
increased by approximately $64,000 primarily because of higher margins per
gallon of propane sold in our wholesale and retail operations, due to customer
growth, partially offset by volume variance related to weather.

Other Income
          Other income decreased by approximately $108,000 from fiscal 1999 to
fiscal 2000, primarily due to a one-time capital gain of approximately $95,000
from the sale of property in Wyoming in fiscal 1999.

Expenses for Operations, Interest and Income Taxes
         Operating expenses for propane operations decreased from approximately
$1,462,000 in fiscal 1999 to approximately $1,388,000 in fiscal 2000, a decrease
of $74,000. The decrease in operating expenses was primarily related to lower
incentives paid and increased capitalized payroll, to build the Superior,
Montana Wholesale Propane terminal. Interest charges allocable to the Company's
propane divisions were approximately $147,000 in fiscal 2000 compared to
approximately $168,000 in fiscal 1999. The lower interest costs was primarily
due to lower average capital employed in fiscal year 2000. State and federal
income taxes increased to approximately $167,000 for fiscal 2000 from $152,000
due to higher pre-tax income in the propane operations this year.


Fiscal 1999 Compared to Fiscal 1998

Revenues and Gross Margins
         Propane revenues decreased from $3,757,000 in fiscal 1998 to $3,569,000
in fiscal 1999. Propane purchases increased from $1,525,000 in fiscal 1998 to
$1,693,000 in fiscal 1999. Correspondingly, gross margin decreased by $356,000
from $2,232,000 in fiscal 1998 to $1,876,000 in fiscal 1999. The decrease in
revenue resulted primarily from the sale of retail propane properties, in
February of fiscal 1998. However, greater propane wholesale sales of $306,000
mitigated the reduction in retail sales, from that sale. The gas cost increase
and margin decrease were also directly attributable to the change in the mix of
retail to wholesale propane sales. The margin per gallon for wholesale gallons
sold are substantially less than margin per gallon for retail gallons sold.
Also, contributing to the decrease in gross margin was warmer weather than last
year throughout the Company's propane operations.



                                       23
<PAGE>   24


Other Income
          In fiscal 1999 and in fiscal 1998 EWP had capital gains from the sale
of operating entities or land and buildings. The decrease in other income in
fiscal 1999 compared to fiscal 1998 is directly related to these sales.
Specifically, there was a one-time capital gain of approximately $95,000 from
the sale of property in Wyoming in fiscal 1999. In fiscal 1998 approximately
$125,000 of EWP's other income was attributable to a one-time capital gain on
the sale of four district retail propane offices in Wyoming.
Expenses for Operations, Interest and Income Taxes

          Operating expenses for propane operations decreased from approximately
$1,664,000 in fiscal 1998 to approximately $1,462,000 in fiscal 1999 for a
decrease of $202,000. The decrease in operating expenses was primarily related
to the sale of the retail properties in fiscal 1998. Interest charges allocable
to the Company's propane divisions were approximately $168,000 in fiscal 1999
compared to approximately $198,000 in fiscal 1998. This decrease of $30,000 is
primarily related to lower investments in property, plant and equipment related
to the property sales in fiscal 1998 and fiscal 1999. State and federal income
taxes decreased approximately $56,000 from fiscal 1998 to fiscal 1999, primarily
due to lower pre-tax earnings in fiscal 1999.



OPERATING RESULTS OF THE COMPANY'S ENERGY MARKETING OPERATIONS

<TABLE>
<CAPTION>
                                                                          Years Ended June 30
                                                               2000               1999              1998
                                                                             (In thousands)
<S>                                                     <C>                <C>                <C>
ENERGY WEST RESOURCES (EWR)
     Gas & electric trading revenue                               $39,414            $21,643           $11,383
     Cost of gas & electric trading                                38,937             20,850            10,185
                                                        ------------------ ------------------ -----------------
     Gross Margin                                                     477                793             1,198
     Operating expenses                                               773                637               570
                                                        ------------------ ------------------ -----------------
     Operating income (loss)                                        (296)                156               628
     Other (income) - net                                           (243)              (413)              (10)
     Interest expense (see note below)                                122                 56                 6
     Income taxes (benefit)                                          (66)                247               234
                                                        ------------------ ------------------ -----------------
               Net income (loss)                                   $(109)              $ 266             $ 398
                                                        ================== ================== =================
</TABLE>

         [interest charges for each of the Company's operations do not equal
total interest charges for the Company, due to eliminating entries between
entities.]






                                       24
<PAGE>   25


Fiscal 2000 Compared to Fiscal 1999

Revenues and Gross Margins
         Gas and Electric trading revenues increased approximately $17,800,000
or 82% in fiscal 2000 to approximately $39,414,000 from $21,643,000 in fiscal
1999. Cost of gas and electric trading increased approximately $18,100,000 or
87% from $20,850,000 in fiscal 1999 to $38,937,000 in fiscal 2000. Consequently,
gross margin decreased by approximately $300,000 from fiscal 1999 to fiscal
2000. The increase in revenues was due to greater gas volumes and electricity
sold due to an increase in customers in fiscal 2000 compared to fiscal 1999,
while cost of gas and electric trading increased primarily from greater gas
volumes and electricity sold due to an increase in customers at significantly
higher gas and electricity market prices. Energy marketing gross margins
decreased due to contracts at market on the supply side and fixed contracts on
the sale side.

Expenses for Operations, Interest and Income Taxes
          Operating expenses related to energy marketing activities increased
from approximately $637,000 in fiscal 1999 to approximately $774,000 in fiscal
2000. This increase in operating expenses was related to staff expansion and
training costs required to serve the growth in marketing activity. The Company
had no retail energy marketing activities in fiscal 1999, because open-access
for residential and small commercial customers, in Montana, was not allowed
until the fall of 1999. Other income decreased approximately $168,000 in fiscal
2000 from approximately $411,000 in fiscal 1999 to $243,000 in fiscal 2000, and
is directly related to the difference in gains associated with derivative
trading between fiscal 2000 and fiscal 1999. Interest charges increased
approximately $66,000, due to increased working capital requirements in fiscal
2000. State and federal income taxes decreased in fiscal 2000 to approximately a
$66,000 benefit from $247,000 in tax expense in fiscal 1999, due to an increased
pre-tax loss of approximately $686,000.


Fiscal 1999 Compared to Fiscal 1998

Revenues and Gross Margins
         Gas marketing revenues increased from approximately $11,383,000 in
fiscal 1998 to $17,168,000 in fiscal 1999. Cost of gas increased from
$10,185,000 in fiscal 1998 to $16,490,000 in fiscal 1999. However, gross margin
decreased by $520,000 from $1,198,000 in fiscal 1998 to $678,000 in fiscal 1999.
The increase in revenue resulted primarily from greater gas volumes sold due to
higher market capture in fiscal 1999 compared to fiscal 1998. The higher cost of
gas occurred because of greater gas volumes sold and from significantly higher
prices, for gas purchases, in Canada and Montana. The higher cost of gas was the
most significant factor affecting the decrease in gross margin. The Company had
its first electric marketing sales in fiscal 1999. The revenues and cost of
electricity associated with these electric sales were approximately $4,475,000
and $4,360,000, respectively. The resulting margin from these sales was
$115,000.

Other Income
           Other income increased by approximately $351,000 in fiscal 1999 when
compared to fiscal 1998. This increase was directly related to mark-to-market
gains associated with gas trading derivative activities.

Expenses for Operations, Interest and Income Taxes
          Operating expenses related to energy marketing activities increased
from approximately $570,000 in fiscal 1998 to approximately $638,000 in fiscal
1999, an increase of $67,000. The increase in operating expenses is primarily
due to inflationary trends, staff expansion and training costs required to serve
the growth in marketing activity. Interest charges allocable to EWR increased by
approximately $50,000 from fiscal 1998 to fiscal 1999. This increase is related
to higher working capital required to finance gas inventory and an increase in
accounts receivable due to increased sales of gas and electricity. State and
federal income taxes increased approximately $10,000 from fiscal 1998 to fiscal
1999.




                                       25
<PAGE>   26


OPERATING RESULTS OF THE COMPANY'S OTHER OPERATIONS

<TABLE>
<CAPTION>
                                                                      Years Ended June 30
                                                            2000             1999          1998
                                                                       (In thousands)
<S>                                                    <C>           <C>              <C>
ENERGY WEST DEVELOPMENT (EWD)
     Operating revenues                                        $379            $ 499              $  98
     Cost of Goods Sold                                         243              259                  0
                                                       ------------- ---------------- ------------------
     Gross Margin                                               136              240                 98
     Operating expenses                                          93              148                 47
                                                       ------------- ---------------- ------------------
     Operating income                                            43               92                 51
     Other (income) expense - net                              (91)              (3)                284
     Interest expense (see note below)                           27               30                  0
     Income taxes (benefit)                                      68               44               (89)
                                                       ------------- ---------------- ------------------
     Net income (loss)                                          $39             $ 21           ($  144)
                                                       ============= ================ ==================
</TABLE>

         [interest charges for each of the Company's operations do not equal
total interest charges for the Company, due to eliminating entries between
entities.]

         The other operations of the Company are primarily related to EWD, the
Company's real estate development subsidiary. In fiscal 2000, EWD's net income
was approximately $39,000 as compared to $21,000 in fiscal 1999, primarily due
to the sale of one of its real estate properties in June 2000 for an after-tax
capital gain of approximately $50,000, partially offset by lower operating
revenues of $45,000, from a cash settlement received in fiscal 1999, upon final
dissolution of Gas Finco, a financing subsidiary of the American Gas
Association. In fiscal 1999, EWD's net income was approximately $21,000 as
compared to a net loss of ($144,000). The primary difference in net income is
due a to pre-tax cash settlement of $45,000 upon final dissolution of Gas Finco,
a financing subsidiary of the American Gas Association as compared to a pre-tax
write-off of $250,000 from the Company's investment in Gas Finco in fiscal year
1998. The primary activity for Energy West Development, Inc. during fiscal 2000
was a lease of commercial property in Great Falls, Montana. However appliance
sales operations, which the Company has been involved in for the last seven
years and had previously been reported as other income from regulated
operations, is now included with Energy West Development, Inc. The net income
associated with the appliance sales operations in fiscal 2000 is comparable to
the net income from that operation for the same period in fiscal 1999.

Liquidity and Capital Resources
         The Company's operating capital needs, as well as dividend payments and
capital expenditures are generally funded through cash flow from operating
activities, short-term borrowing and liquidation of temporary cash investments.
Historically, to the extent cash flow has not been sufficient to fund capital
expenditures, the Company has borrowed short-term. As the short-term debt
balance significantly exceeds working capital requirements, the Company has
issued long-term debt or equity securities to pay down short-term debt.

         The Company's short-term borrowing requirements vary according to the
seasonal nature of its sales and expense activity. The Company has greater need
for short-term borrowing during periods when internally generated funds are not
sufficient to cover all capital and operating requirements, including costs of
gas purchases and capital expenditures. In general, the Company's short-term
borrowing needs for purchases of gas inventory and capital expenditures are
greatest during the summer months and the Company's short-term borrowing needs
for financing of customer accounts receivable are greatest during the winter
months. Short-term borrowing utilized for construction or property acquisitions
generally has been on an interim basis and converted to long-term debt and
equity when it becomes economical and feasible to do so.

         At June 30, 2000, the Company had $22,000,000 in bank lines of credit,
of which $4,855,000 had been borrowed under the credit agreement at June 30,
2000. The short-term borrowings for fiscal 2000 had a daily weighted average
interest rate of 8.01%. The Company had outstanding letters of credit totaling
$4,027,000 related to electric and gas purchase contracts. These letters of
credit, when netted against the total bank lines of credit, result in a
reduction in borrowing capacity to $17,973,000.



                                       26
<PAGE>   27


CASH FLOW ANALYSIS

Fiscal 2000 Compared to Fiscal 1999

         The Company provided net cash from operating activities for fiscal 2000
of approximately $616,000 as compared to approximately $6,275,000 for fiscal
1999. This decrease in cash provided by operating activities of approximately
$5,660,000 was primarily due to greater working capital requirements of
approximately $5,820,000 offset by non-cash transactions of $162,000. The higher
working capital requirements were primarily due to an increase in gas inventory
of approximately $3,730,000, increased prepaid gas of approximately $198,000,
increased deferred income tax liability of $1,090,000, and an increase in
recoverable cost of gas purchases of approximately $950,000. Net income and
non-cash transactions affecting net income decreased cash provided by operations
by approximately $162,000. The most significant items affecting this decrease
were lower net income of $290,000 and greater gains from the sale of assets of
$24,000, partially offset by higher depreciation costs of $220,000 and greater
deferred income taxes of $256,000.

         Cash used in investing activities was approximately $4,130,000 in
fiscal 2000 compared to approximately $3,240,000 in fiscal 1999, an increase of
$890,000. This increase was primarily due to higher construction expenditures
for capital projects of approximately $1,030,000 and a net decrease in proceeds
from customer advances for construction and contributions in aid of construction
of approximately $130,000. These increases were offset by an increase in the
proceeds from the sale of assets of approximately $240,000 and lower loans to
customers, recorded as notes receivable of approximately $20,000.

         Cash provided by financing activities was approximately $3,400,000 in
fiscal 2000 compared to cash used in financing activities of approximately
$2,860,000, an increase of $6,260,000. The primary reasons for the increase are
lower principal payments on notes payable of approximately $6,290,000. These
increases are partially offset by higher repayments of long-term debt and higher
dividends paid.



                                       27
<PAGE>   28



Fiscal 1999 Compared to Fiscal 1998

         The Company provided net cash in operating activities for fiscal 1999
of approximately $6,275,000 as compared to net cash provided from operating
activities of approximately $4,960,000 for fiscal 1998. This increase in cash
provided by operating activities of $1,315,000 was primarily due to lower
working capital requirements of approximately $1,220,000. The decrease in
working capital requirements resulted primarily from lower natural gas inventory
somewhat offset by an increase in recoverable cost of gas purchases. The
required quantity for natural gas inventory is lower because of open access,
approved by the Montana Public Service Commission, for the Great Falls district
of EWM. Regulatory treatment of natural gas inventory pricing has the affect of
increasing recoverable cost of gas purchases, as inventory levels decline. The
lower inventory also impacts the increase in recoverable cost of gas purchases.
Other significant impacts on lower working capital were an increase in accounts
payable of approximately $750,000 offset by higher accounts receivable of
approximately $430,000 primarily due to greater natural gas revenues and the
Company's first electric sales by EWR.

         Net income and non-cash transactions affecting net income improved cash
generated from operations by approximately $100,000. The most significant items
affecting this increase were higher net income of $70,000, less gains from the
sale of assets of $90,000 and greater deferred income taxes of $225,000. These
increases were offset by the write-off of an investment in American Gas Finance
Co. of $250,000 in fiscal 1998.

         Cash used in investing activities was approximately $3,240,000 in
fiscal 1999 compared to approximately $1,590,000 in fiscal 1998, an increase of
$1,650,000. This increase was primarily due to higher construction expenditures
for capital projects of approximately $720,000, a decrease in the proceeds from
the sale of assets of approximately $950,000 and a net decrease in proceeds from
customer advances for construction and contributions in aid of construction of
approximately $180,000. These increases were offset by lower loans to customers,
recorded as notes receivable, of approximately $190,000.

         Cash used in financing activities was approximately $2,860,000 in
fiscal 1999 compared to approximately $3,460,000 in fiscal 1998, a decrease of
$600,000. The primary reasons for the decrease are lower principal payments on
notes payable of $8,490,000 mostly offset by proceeds, from a long-term debt
issuance in fiscal 1998 of approximately $7,540,000 resulting in a net decrease
of $940,000. These decreases are offset by higher dividends paid of
approximately $140,000 and lower sales of common stock through the Company's
Dividend Reinvestment Plan and the Company's Incentive Stock Option Plan of
approximately $160,000.

Capital Expenditures

         Capital expenditures of the Company are primarily for expansion and
improvement of its regulated utility properties. To a lesser extent, funds are
also expended to meet the equipment needs of the Company's operating
subsidiaries and to meet the Company's administrative needs. The Company's
capital expenditures were approximately $4.6 million in fiscal 2000, $3.7
million for fiscal 1999 and $3.0 million in fiscal 1998. During fiscal 2000,
approximately $3.7 million was expended for system expansion, construction and
maintenance of the natural gas and propane vapor systems for the regulated
utility operations. In addition, approximately $.9 million was expended for bulk
tanks, customer tanks and equipment for the propane operating entities. Capital
expenditures are expected to be approximately $3.5 million in fiscal 2001,
including approximately $2.4 million for continued system expansion,
construction and maintenance of the natural gas and propane vapor systems for
the regulated utility operations. In addition, approximately $.7 million is
expected to be expended for bulk tanks, customer tanks and equipment for the
propane operating entities with the balance of $.4 million to be expended for
energy marketing. The Company continues to evaluate opportunities to expand its
existing businesses from time to time.




                                       28
<PAGE>   29


         The major factors which will affect the Company's future results
include general and regional economic conditions, weather, customer retention
and growth, the ability to meet competitive pressures and to contain costs, the
adequacy and timeliness of rate relief, cost recovery and necessary regulatory
approvals, and continued access to capital markets. In addition, changes in the
competitive environment particularly related to the Company's propane and energy
marketing segments could have a significant impact on the performance of the
Company.

         The regulatory structure is in the process of transition. Legislative
and regulatory initiatives, at both the federal and state levels, are designed
to promote competition. The changes in the gas industry have allowed all
customers to negotiate their own gas purchases directly with producers or
brokers. To date, the changes in the gas industry have not had a negative impact
on earnings or cash flow of the Company's regulated segment.

         The accounts and rates of the Company's regulated segment is subject,
in certain respects, to the requirements of the Montana, Wyoming and Arizona
public utilities commissions. As a result, the Company's regulated segment
maintains its accounts in accordance with the requirements of those regulators.
The application of generally accepted accounting principles by the Company's
regulated segments differs in certain respects from application by the
non-regulated segment and other non-regulated businesses. The regulated segment
prepares its financial statements in accordance with Statement of Accounting
Standards No. 71, Accounting for the Effects of Certain Types of Regulation
("SFAS 71"). In general, SFAS 71 recognizes, that accounting for rate-regulated
enterprises should reflect the relationship of costs and revenues. As a result,
a regulated utility may defer recognition of cost (a regulatory asset) or
recognize an obligation (a regulatory liability) if it is probable that, through
the ratemaking process, there will be a corresponding increase or decrease in
revenues. Accordingly, the Company has deferred certain costs, which will be
amortized over various periods of time. The costs deferred are further described
in the Company's financial statements and the notes thereto. To the extent that
collection of such costs or payment of liabilities is no longer probable as a
result of changes in regulation and/or the Company's competitive position, the
associated regulatory asset or liability will be reversed with a charge or
credit to income. If the Company's regulated segment were to discontinue the
application of SFAS 71, the accounting impact would be an extraordinary,
non-cash charge to operations, that could be material to the financial position
and results of operation of the Company. However, the Company is unaware of any
circumstances or events in the foreseeable future that would cause it to
discontinue the application of SFAS 71.

SEC Ratio of Earnings to Fixed Charges

         For the twelve months ended June 30, 2000,1999 and 1998, the Company's
ratio of earnings to fixed charges was 2.09, 2.45 and 2.25 times, respectively.
Fixed charges include interest related to long-term debt, short-term borrowing,
certain lease obligations and other current liabilities.


Inflation

         Capital intensive businesses, such as the Company's regulated utility
operations, are significantly affected by long-term inflation. Neither
depreciation charges against earnings nor the ratemaking process reflect the
replacement cost of utility plant. However, based on past practices of
regulators, these businesses will be allowed to recover and earn on the actual
cost of their investment in the replacement or upgrade of plant. Although prices
for natural gas may fluctuate, earnings are not impacted because gas cost
tracking procedures semi-annually balance gas costs collected from customers
with the costs of supplying natural gas. The Company believes that the effects
of inflation, at currently anticipated levels, will not significantly affect
results of operations.



                                       29
<PAGE>   30



Accounting for Income Taxes

         Effective July 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
SFAS No. 109, Accounting for Income Taxes. The cumulative effect of adopting
Statement No. 109 created a regulatory asset and a regulatory liability for
regulated operations, representing the anticipated effects on regulated rates
charged to customers which will result from the adoption of Statement No. 109.
For the Year ended June 30, 2000, changes in certain assets and liabilities
resulted in a decrease in regulatory assets of $156,486 and a decrease in
regulatory liabilities of $13,160 for regulated entities, resulting in ending
balances of $485,073 and $109,481, respectively.

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. See Note 5 to
the Consolidated Financial Statements for additional information.

Postretirement Benefits Other than Pensions

         The Company adopted, effective July 1, 1993, SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This standard
requires that the projected future cost of providing postretirement benefits be
recognized as an expense as employees render service rather than when paid.
Effective for fiscal year 1994, the Company modified its plan for these benefits
and has elected to pay eligible retirees (post 65 years of age) $125 per month
in lieu of contracting for health and life insurance benefits. The amount of
this payment is fixed and will not increase with medical trends or inflation.
The Company's transition obligation at June 30, 2000 and 1999 was $254,960 and
$274,560, respectively, of which $215,000 in 2000 and $234,100 in 1999 is
related to the regulated utility operations. The transition obligation was
accrued as a deferred charge and will be amortized over 20 years. Substantially,
all of the transition obligation is for the future cost of benefits to active
employees.

         The Company's plan allows pre-65 retirees and their spouses to remain
on the same medical plan as active employees by contributing 125% of the current
COBRA rate to retain this coverage. The prior service obligation association
with the plan change at June 30, 2000 and 1999 was $198,220 and $216,120
respectively, of which $162,020 in 2000 and $178,520 in 1999 is related to
regulated utility operations. The prior service obligation was accrued as a
deferred charge and will be amortized over fifteen years.

         The incremental annual increases in consolidated expenses due to
adoption of SFAS No. 106 were $47,500, $115,120 and $121,600 in fiscal years
2000, 1999 and 1998, respectively. Included in these amounts were $35,800 in
2000, $95,600 in 1999 and $95,600 in 1998 relating to regulatory operations. The
MPSC allowed recovery of these costs beginning on November 4, 1997 for the
utility operation in Montana. Management believes it is probable that its
regulators in Wyoming will allow recovery of these costs based upon recent
industry rate decisions addressing this issue. The adoption of SFAS No. 106 did
not have a significant effect upon results of operations. See Note 4 to the
Consolidated Financial Statements for additional information.



                                       30
<PAGE>   31


ENVIRONMENTAL ISSUES

Refer to footnote 9 of the Company's Notes to Consolidated Financial Statements
located at item 8.

Year 2000

         The Y2K issue relates to the ability of systems, including hardware,
software and embedded technology, to properly interpret date information
relating to the Year 2000 and beyond that. Any of the Company's computer systems
and embedded microprocessors that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the Year 2000 (Y2K). This could
result in a system failure or miscalculations causing disruptions in operations.
Some possible affects include the inability to process transactions, send
billing statements to customers, or similar normal business activities.

         Total costs incurred for fiscal 2000, to address the Y2K issue, were
approximately $50,000. The total costs to address the Y2K issue, most of which
were internal labor costs incurred in prior fiscal years, were approximately
$125,000 and therefore did not have a material impact on the Company's current
financial position, liquidity or results of operations.

         The Company did not experience any Y2K rollover incidents and has not
experienced any other Y2K related incidents since the rollover. Although it is
impossible to predict if there will be any Y2K incidents in the future, the
Company's experience, to date, and its extensive preparations prior to the
rollover, results in the Company not expecting any significant Y2K incidents to
occur in the future.

Market Risk

         The Company's energy-related businesses are exposed to risks relating
to changes in certain commodity prices and counterparty performance. In order to
manage the various risks relating to these exposures, the Company utilizes
natural gas derivatives and has established risk management oversight for these
risks. The Company has implemented or is in the process of implementing
procedures to manage such risk and has established a comprehensive risk
management committee, overseen by the Audit Committee of the Company's Board of
Directors, to monitor compliance with the Company's risk management policies and
procedures.





                                       31
<PAGE>   32


         The Company protects itself against price fluctuations on natural gas
and electricity by limiting the aggregate level of net open positions, which are
exposed to market price changes and through the use of natural gas derivative
instruments for hedging purposes. The net open position is actively managed with
strict policies designed to limit the exposure to market risk and which require
at least weekly reporting to management of potential financial exposure. The
risk management committee has limited the types of financial instruments the
company may trade to those related to natural gas commodities. The quantitative
information related to derivative transactions is contained in footnote number
eleven to the condensed consolidated financial statements.

         Credit risk relates to the risk of loss that the Company would incur as
a result of non-performance by counterparties of their contractual obligations
under the various instruments with the Company. Credit risk may be concentrated
to the extent that one or more groups of counterparties have similar economic,
industry or other characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in market or other
conditions. In addition, credit risk includes not only the risk that a
counterparty may default due to circumstances relating directly to it, but also
the risk that a counterparty may default due to circumstances which relate to
other market participants which have a direct or indirect relationship with such
counterparty. The Company seeks to mitigate credit risk by evaluating the
financial strength of potential counterparties. However, despite mitigation
efforts, defaults by counterparties occur from time to time. To date, no such
default has occurred.



                                       32
<PAGE>   33



Supplementary Data (Unaudited)
Consolidated Quarterly Financial Data
(In thousands, except per share data)

<TABLE>
<CAPTION>
                                            FIRST          SECOND        THIRD         FOURTH
                                           QUARTER        QUARTER       QUARTER       QUARTER
<S>                                        <C>            <C>           <C>           <C>
FISCAL YEAR 2000
Revenues                                   $12,008        $19,709       $23,861       $16,618
Operating income (loss)                     ($881)         $1,201        $2,688           $32
Net income (loss)                           ($666)           $500        $1,441           $22
Net income (loss) per share                 ($.27)           $.20          $.59          $.01

FISCAL YEAR 1999
Revenues                                    $9,061        $17,115       $17,749        $9,536
Operating income (loss)                     $(893)         $1,315        $2,265          $553
Net income (loss)                           $(685)           $751        $1,290          $231
Net income (loss) per share                $(0.28)          $0.31         $0.53         $0.10
</TABLE>

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

         The foregoing Management's Discussion and Analysis and other portions
of this annual report contain various "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Sections
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events, including the
statement that the total cost of changes required to achieve a year 2000 date
conversion are not expected to have a material effect on the Company's financial
statements. In addition, statements containing expressions such as "believes,"
"anticipates," "plans" or "expects" used in the Company's periodic reports on
Forms 10-K and 10-Q filed with the SEC are intended to identify forward-looking
statements. The company cautions that these and similar statements included in
this report and in previously filed periodic reports including reports filed on
Forms 10-K and 10-Q are further qualified by important factors that could cause
actual results to differ materially from those in the forward looking statement.





                                       33
<PAGE>   34


Item 8. Financial Statements and Supplementary Data

Report of Independent Auditors


The Board of Directors

Energy West Incorporated

We have audited the accompanying consolidated balance sheets of Energy West
Incorporated and subsidiaries as of June 30, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended June 30, 2000. Our audits also included
the financial statement schedule listed in the index at item 14(a).  These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Energy West
Incorporated and subsidiaries at June 30, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 2000, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.

                                              Ernst & Young LLP

  Salt Lake City, Utah
  August 18, 2000


                                       34
<PAGE>   35
                    Energy West Incorporated and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                       JUNE 30
                                                                              2000                1999
<S>                                                                       <C>                 <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                 $112,174            $225,970
   Accounts receivable, less allowances for
     uncollectible accounts of  $87,999 ($84,538
     at June 30, 1999)                                                      7,729,841           6,033,820
   Natural gas and propane inventory                                        1,913,701           1,423,910
   Materials and supplies                                                     586,130             627,046
   Prepayments and other                                                      360,828             154,643
   Refundable income tax payments                                             871,155             122,202
   Recoverable costs of gas purchases                                       4,713,395           2,840,975
                                                                           ----------          ----------
Total current assets                                                       16,287,224          11,428,566

Notes receivable due after one year                                           162,385             188,446

Property, plant and equipment                                              54,801,395          50,913,383
Less accumulated depreciation and amortization                             22,997,262          21,541,657
                                                                           ----------          ----------
Net property, plant and equipment                                          31,804,133          29,371,726

Deferred charges:
   Net unamortized debt issue costs                                         1,021,274           1,112,081
   Regulatory assets for income taxes                                         485,073             641,559
   Unrecognized postretirement obligation                                     453,179             490,679
   Other regulated assets                                                   1,044,259             765,529
   Other assets                                                               289,403             202,385
                                                                           ----------          ----------
Total deferred charges                                                      3,293,188           3,212,233
                                                                           ----------          ----------



Total assets                                                              $51,546,930         $44,200,971
                                                                          ===========         ===========
</TABLE>


<PAGE>   36
<TABLE>
<CAPTION>
                                                                                      JUNE 30
                                                                              2000                1999
<S>                                                                       <C>                 <C>
CAPITALIZATION AND LIABILITIES
Current liabilities:
   Long-term debt due within one year                                        $445,000            $430,723
   Notes payable                                                            4,855,000               -
   Accounts payable--gas and electric purchases                             5,769,485           3,522,655
   Accounts payable--other                                                    599,992             679,288
   Payable to employee benefit plans                                          585,984             641,721
   Accrued vacation                                                           409,117             393,256
   Other current liabilities                                                  524,993             611,672
   Deferred income taxes--current                                           1,651,208             950,446
                                                                          -----------         -----------
Total current liabilities                                                  14,840,779           7,229,761

Other:
   Deferred income taxes                                                    3,699,199           3,565,085
   Deferred investment tax credits                                            418,593             439,655
   Contributions in aid of construction                                       993,910             938,572
   Customer Advances for Construction                                         658,748             658,867
   Accumulated postretirement obligation                                      232,905             647,214
   Regulatory liability for income taxes                                      109,481             122,641
   Deferred gain on sale-leaseback of assets                                  141,779             165,407
   Other                                                                       94,910              61,754
                                                                          -----------         -----------

Total other                                                                 6,349,525           6,599,195

Long-term debt (less amounts due within
   one year)                                                               16,395,000          16,840,000

Commitments and contingencies

Stockholders' equity:
   Preferred stock--$.15 par value:
     Authorized--1,500,000 shares;
     Outstanding--none
   Common stock--$.15 par value:
     Authorized--3,500,000 shares;
     Outstanding--2,475,435 shares (2,433,740 shares
       at June 30, 1999)                                                      371,321             365,065
   Capital in excess of par value                                           3,906,401           3,560,541
   Retained earnings                                                        9,683,904           9,606,409
                                                                          -----------         -----------
Total stockholders' equity                                                 13,961,626          13,532,015
                                                                          -----------         -----------
Total capitalization                                                       30,356,626          30,372,015
                                                                          -----------         -----------
Total capitalization and liabilities                                      $51,546,930         $44,200,971
                                                                          ===========         ===========
</TABLE>


See accompanying notes.


<PAGE>   37


                    Energy West Incorporated and Subsidiaries

                        Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                           YEAR ENDED JUNE 30
                                                               2000               1999                1998
<S>                                                        <C>                <C>                 <C>
Operating revenue:
   Utilities                                               $27,578,721        $28,105,077         $27,824,360
   Propane operations                                        4,824,258          3,568,594           3,757,742
   Gas & Electric trading                                   39,413,771         21,643,071          11,383,019
   Other                                                       379,042            498,609              98,500
                                                           -----------        -----------         -----------
Total operating revenue                                     72,195,792         53,815,351          43,063,621

Operating expenses:
   Gas purchased                                            19,608,510         18,577,797          18,571,808
   Gas & Electric trading                                   38,936,672         20,850,052          10,184,855
   Other Cost of Goods Sold                                    243,128            258,987             -
   Distribution, general and administrative                  7,372,942          8,018,224           7,696,928
   Maintenance                                                 399,579            469,021             496,545
   Depreciation and amortization                             1,856,453          1,694,895           1,732,394
   Taxes other than income                                     638,788            708,354             628,183
                                                           -----------        -----------         -----------
Total operating expenses                                    69,056,072         50,577,330          39,310,713
                                                           -----------        -----------         -----------
Operating income                                             3,139,720          3,238,021           3,752,908

Other income, net                                              580,697            818,609             142,574
                                                           -----------        -----------         -----------
Income before interest charges and
   income taxes                                              3,720,417          4,056,630           3,895,482

Interest charges:
   Long-term debt                                            1,242,380          1,258,810           1,216,190
   Short-term and other                                        431,523            233,747             367,073
                                                           -----------        -----------         -----------
Total interest charges                                       1,673,903          1,492,557           1,583,263
                                                           -----------        -----------         -----------

Income before income taxes                                   2,046,514          2,564,073           2,312,219
Provision for income taxes                                     749,823            976,760             792,129
                                                           -----------        -----------         -----------
Net income                                                  $1,296,691         $1,587,313          $1,520,090
                                                           ===========        ===========         ===========

Basic and diluted earnings per
    Common share                                             $.53                $.66                $.64
</TABLE>

See accompanying notes.


<PAGE>   38


                    Energy West Incorporated and Subsidiaries

                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                                    CAPITAL IN
                                                          COMMON     EXCESS OF      RETAINED
                                                           STOCK     PAR VALUE      EARNINGS       TOTAL
<S>                                                      <C>        <C>            <C>           <C>
Balance at June 30, 1997                                 $353,623   $2,932,962     $8,710,349    $11,996,934
  Exercise of stock options into 22,908 shares of
     common stock at $6.375 to $7.125 per share             3,436      157,948              -        161,384
  Sale of 8,095 shares of common stock at $8.84
     To $9.004 per share under the Company's
     Dividend reinvestment plan                             1,214       71,071              -         72,285
  Issuance of 11,639 shares of common stock to
     ESOP at estimated fair value of $8.645 per share       1,746       98,869              -        100,615
  Issuance of 3,078 shares of common stock at
     $8.395 per share under the Company's
     deferred board stock compensation plan                   462       25,378              -         25,840
  Net income for the year ended June 30, 1998                   -            -      1,520,090      1,520,090
  Dividends on common stock--$.445 per share                    -            -     (1,065,859)    (1,065,859)
                                                         ---------------------------------------------------
Balance at June 30, 1998                                  360,481    3,286,228      9,164,580     12,811,289

  Exercise of stock options into 100 shares of
     common stock at $9.00 per share                           15          885              -            900
  Sale of 15,011 shares of common stock at $8.625
     to $9.688 per share under the Company's
     dividend reinvestment plan                             2,253      132,533              -        134,786
  Issuance of 13,738 shares of common stock to
     ESOP at estimated fair value of $9.310 per share       2,061      125,840              -        127,901
  Issuance of 1,701 shares of common stock at
     $9.00 per share under the Company's deferred
     board stock compensation plan                            255       15,055              -         15,310
  Net income for the year ended June 30, 1999                   -            -      1,587,313      1,587,313
  Dividends on common stock--$.465 per share                    -            -     (1,145,484)    (1,145,484)
                                                         ---------------------------------------------------
Balance at June 30, 1999                                  365,065    3,560,541      9,606,409     13,532,015

  Sale of 24,499 shares of common stock at $7.930
     to $8.502 per share under the Company's
     dividend reinvestment plan                             3,677      194,779              -        198,456
  Issuance of 16,153 shares of common stock to
     ESOP at estimated fair value of $8.922 per share       2,423      141,695              -        144,118
  Issuance of 1,043 shares of common stock at
     $9.149 per share under the Company's
     Deferred Board stock compensation plan                   156        9,386              -          9,542
  Net income for the year ended June 30, 2000                   -            -      1,296,691      1,296,691
  Dividends on common stock--$.485 per share                    -            -     (1,219,196)    (1,219,196)
                                                         ---------------------------------------------------
Balance at June 30, 2000                                 $371,321   $3,906,401     $9,683,904    $13,961,626
                                                         ========   ==========     ==========    ===========

</TABLE>
See accompanying notes.


<PAGE>   39


                    Energy West Incorporated and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                             YEAR ENDED JUNE 30
                                                                2000                1999              1998
<S>                                                         <C>                  <C>               <C>
OPERATING ACTIVITIES
Net income                                                   $1,296,691          $1,587,313        $1,520,090
Adjustments to reconcile net income
   to net cash provided by (used in)
   operating activities:
     Depreciation and amortization                            2,169,618           1,948,408         1,984,005
     Write-off of investment in Gas Finco                             -                   -           250,000
     Gain on sale of assets                                   (145,289)           (121,416)         (211,465)
     Investment tax credit                                     (21,062)            (21,061)          (21,063)
     Deferred gain on sale of assets                           (23,628)            (23,628)          (23,628)
     Deferred income taxes                                      834,876             578,881           353,438
     Changes in operating assets and
       liabilities:
         Accounts receivable                                (1,696,021)         (1,529,585)       (1,101,707)
         Natural gas and propane
           inventory                                          (489,791)           3,246,023         1,122,584
         Accounts payable                                     2,167,534           1,615,928           864,460
         Recoverable costs of gas
           purchases                                        (1,872,420)           (914,226)         (253,464)
         Prepaid gas                                          (206,185)             (7,552)           371,413
         Other assets and liabilities                       (1,398,041)            (84,916)           104,707
                                                            -----------         -----------       -----------
Net cash provided by (used in) operating
   Activities                                                   616,282           6,274,169         4,959,370

INVESTING ACTIVITIES
Construction expenditures                                   (4,756,883)         (3,731,125)       (3,014,020)
Increase in notes receivable                                          -            (13,200)         (200,000)
Proceeds from sale of assets                                    541,988             298,378         1,247,601
Collection of long-term notes                                    26,061              16,946            10,345
Customer advances for construction                                (119)             144,804           347,374
Increase from contributions in aid of
  construction                                                   55,338              43,805            22,025
                                                            -----------         -----------       -----------
Net cash used in investing activities                       (4,133,615)         (3,240,392)       (1,586,675)
</TABLE>


<PAGE>   40




                    Energy West Incorporated and Subsidiaries

                Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>

                                                                       YEAR ENDED JUNE 30
                                                          2000                1999                1998
<S>                                                  <C>                 <C>                 <C>
FINANCING ACTIVITIES
Proceeds from long-term debt                                    -                   -           8,000,000
Debt issuance and reacquisition costs                           -                   -           (458,642)
Payment of long-term debt                               (430,723)           (413,033)           (361,959)
Proceeds from notes payable                            44,325,000          29,231,484          22,346,120
Repayment of notes payable                           (39,470,000)        (30,674,466)        (32,283,139)
Sale of common stock                                            -                 900             161,384
Dividends paid                                        (1,020,470)         (1,010,698)           (867,118)
                                                      -----------         -----------           ---------
Net cash provided by (used  in)
financing activities                                    3,403,537         (2,865,813)         (3,463,354)

Net increase (decrease) in cash and
   cash equivalents                                     (113,796)             167,964            (90,659)
Cash and cash equivalents at
   beginning of year                                      225,970              58,006             148,665
                                                          -------              ------             -------
Cash and cash equivalents at
   end of year                                           $112,174            $225,970             $58,006
                                                         ========            ========             =======

Supplemental disclosures of cash flow information:
     Cash paid for:
       Interest                                        $1,639,867          $1,444,943          $1,536,402
       Income taxes                                       460,000            (38,319)             862,000

Noncash financing activities:
   Dividend reinvestment and                              207,998             150,096              98,125
     compensation plan
   ESOP shares issued                                     144,118             127,901             100,615

</TABLE>

See accompanying notes.


<PAGE>   41


                    Energy West Incorporated and Subsidiaries

                   Notes to Consolidated Financial Statements

                                  June 30, 2000


1. PRINCIPAL ACCOUNTING POLICIES

GENERAL
      Energy West Incorporated ("the Company") is a regulated public utility,
with certain non-utility operations conducted through its subsidiaries.  The
Company's regulated utility operations involve the distribution and sale of
natural gas to the public in the Great Falls, Montana and Cody, Wyoming areas
and sale of propane to the public through underground propane vapor systems in
the Payson, Arizona and Cascade, Montana areas.  In addition, since 1995, the
Company has distributed natural gas through an underground system in West
Yellowstone, Montana that is supplied by liquefied natural gas ("LNG").

      The Company conducts certain non-utility operations through its three
wholly owned subsidiaries, Energy West Propane, Inc. ("EWP"), formally Rocky
Mountain Fuels, Inc., Energy West Resources, Inc. ("EWR"), and Energy West
Development, Inc. ("EWD"), formerly Montana Sun.  EWP is engaged in the
distribution of retail and wholesale bulk propane in Wyoming, South Dakota,
Nebraska, Colorado, Arizona and Montana and Wyoming.  EWR is involved in the
marketing of gas and electricity and gas storage in Montana.  EWD owns one real
estate property in Great Falls, Montana.

CONSOLIDATED SUBSIDIARIES
      The consolidated financial statements include three wholly-owned,
nonregulated subsidiaries - Energy West Resources, Inc., Energy West Propane
(dba Rocky Mountain Fuels Inc), Energy West Development (formerly Montana Sun).
All significant intercompany accounts and transactions have been eliminated in
consolidation.
      Energy West Resources, Inc. ("EWR") is a gas and electricity marketing
operation. Its principal assets are capitalized storage field costs and
inventory. EWR primarily markets gas and electricity to industrial and
commercial customers (businesses using over 5,000 Mcf of natural gas annually),
but recently began marketing to small commercial and residential customers. EWR
began its electric marketing activities in January 1999.
      Energy West Propane ("EWP") is a bulk retail and wholesale liquid propane
sales operation. Its principal assets include bulk storage and customer tanks,
delivery trucks, and related equipment.
       Energy West Development ("EWD") operating activities consist of
commercial real estate development. Its significant assets consist of real
estate held for future sale.

USE OF ESTIMATES
      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.


<PAGE>   42


                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

NATURAL GAS AND PROPANE INVENTORY
      Natural gas inventory and propane inventory are stated at the lower of
weighted average cost or net realizable value except for Energy West Montana -
Great Falls, which is stated at the rate approved by the MPSC, which includes
transportation costs.

RECOVERABLE COSTS OF GAS PURCHASES
      Differences between the costs of gas approved by regulators in the
Company's rate structure and actual gas costs are accounted for as a current
asset or liability, as applicable. These differences are recovered or refunded,
as applicable, in future periods by adjustment of the Company's rates.

PROPERTY, PLANT AND EQUIPMENT
      Additions to property, plant and equipment are recorded at original cost
when placed in service. Depreciation and amortization are recorded on a
straight-line basis over estimated useful lives or the units-of-production
method, as applicable, at various rates averaging approximately 3.47%, 3.38% and
3.66% during the years ended June 30, 2000, 1999 and 1998, respectively.

GAS REVENUE AND COST RECOGNITION
      The Company's business activities include the buying and selling of
natural gas. The Company recognizes revenue and costs on gas transactions when
gas is delivered to the purchaser. Any gas not purchased by the consumer at the
end of each month is carried in inventory at cost.

GAS COMMODITY HEDGING
      The Company's energy-related businesses are exposed to risks relating to
changes in certain commodity prices and counter-party performance. In order to
manage the various risks relating to these exposures, the Company utilizes
natural gas derivatives and has established risk management oversight for these
risks. The Company has procedures to manage such risk and has established a
comprehensive risk management committee, overseen by the Audit Committee of the
Company's Board of Directors, to monitor compliance with the Company's risk
management policies and procedures.

<PAGE>   43
                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

      The Company protects itself against price fluctuations on natural gas by
limiting the aggregate level of net open positions exposed to market price
changes and through the use of natural gas derivative instruments for hedging
purposes. The net open position is actively managed with strict policies
designed to limit the exposure to market risk and which require at least weekly
reporting to management of potential financial exposure. The risk management
committee has limited the types of financial instruments the Company may trade
to those related to natural gas commodities. Financial instruments generally are
not held for speculative trading purposes. Gains and losses related to
derivative commodity instruments which qualify as hedges are recognized in the
consolidated statements of income when the underlying hedged physical
transaction closes (the deferral method) and are included in the same category
as the hedged item (natural gas purchased).

GAS AND ELECTRIC COMMODITY TRADING
      The Company may engage in natural gas and electricity commodity
derivatives designated for trading purposes and therefore experiences net open
positions in terms of price and volume and specified delivery point. The open
positions expose the Company to the risk that fluctuating market prices may
adversely impact its financial position or results of operations. However, the
net open position is actively managed with strict policies designed to limit the
exposure to market risk and which require weekly reporting to management of
potential financial exposure. Management has limited the types of derivative
instruments the company may trade to those related to natural gas and electric
commodities.
      The Company's trading activities are subject to mark-to-market accounting.
Under this method, changes in the market value of outstanding natural gas and
electric derivative instruments utilized for trading are recognized in income on
a current basis. They are included on the Consolidated Statements of Income in
operating revenues or expenses (cost of sales) as appropriate, and on the
Consolidated Balance Sheets as accounts receivable or payable. Because of
underlying price fluctuations, the mark-to-market totals may fluctuate
throughout the month.

DEBT ISSUANCE AND REACQUISITION COSTS
      Debt premium, discount and issuance expenses are amortized over the life
of each issue. Debt reacquisition costs for refinanced debt are amortized over
the remaining life of the debt.

<PAGE>   44
                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

CONSOLIDATED STATEMENTS OF CASH FLOWS
      For purposes of these statements, all highly liquid investments with
original maturities of three months or less are considered to be cash
equivalents.

FINANCIAL INSTRUMENTS

      All of the Company's financial instruments requiring fair value disclosure
were recognized in the consolidated balance sheets. Except for long-term debt,
their carrying values approximate the estimated fair values. Descriptions of the
methods and assumptions used to reach this conclusion are as follows:
        Cash and cash equivalents, temporary cash investments, accounts
        receivable, accounts payable, and payable to employee benefit plans:
        These financial instruments have short maturities, or are invested in
        financial instruments with short maturities.

        Notes receivable: These notes generally relate to energy conservation
        incentive programs, some of which bear favorable interest rates compared
        to market for similar risks. However, due to the relatively small
        balances of these notes, any differences between carrying value and fair
        value are immaterial.

        Notes payable: Represent lines of credit, with maturities of a year or
        less, bearing interest at current market rates.

      The fair value of the Company's long-term debt, based on quoted market
prices for the same or similar issues, is approximately 98% of the carrying
value.

Outstanding letters of credit totaled $4,027,000 at June 30, 2000 and $3,450,000
at June 30, 1999. The letters of credit guarantee the Company's performance to
third parties for gas purchases and gas transportation services.

EARNINGS PER SHARE
      Earnings per common share ("EPS") are computed based on the weighted
average number of common shares issued and outstanding and common stock
equivalents, if dilutive.
      Basic EPS is calculated by dividing net income by the weighted-average
shares outstanding during the period.



<PAGE>   45
                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Diluted EPS is calculated by dividing net income by the sum of the weighted-
average shares outstanding during the period and the additional dilutive shares
resulting from the outstanding stock options.
      For fiscal year ended June 30, 2000, 1999, and 1998 the calculations for
basic EPS and diluted EPS resulted in the same earnings per share. The weighted
average number of shares under the diluted method at each date were 2,456,555 in
2000, 2,418,910 in 1999, and 2,390,814 in 1998.

STOCK-BASED COMPENSATION
      The Company has elected to follow Accounting Principles Board Opinion
("APB") No. 25, Accounting for Stock Issued to Employees (the intrinsic value
method), for its stock options rather than the alternative fair value method
provided for by SFAS No. 123, Accounting for Stock-Based Compensation.
Accounting for stock options using APB No. 25 results in no compensation expense
to the Company because the exercise price for the stock options equals the
market price of the underlying stock on the date of the grant.

EFFECTS OF REGULATION
      The regulatory structure which has historically embraced the gas industry
has been in the process of transition. Legislative and regulatory initiatives,
at both the federal and state levels, are designed to promote competition and
will continue to impose additional pressure on the Company's ability to retain
customers and to maintain current rate levels. The changes in the gas industry
have allowed commercial and industrial customers to negotiate their own gas
purchases directly with producers or brokers. To date, the changes in the gas
industry have not had a negative impact on earnings or cash flows of the
Company's regulated segment.


<PAGE>   46


                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
      The accounts and rates of the Company's regulated segment are subject, in
certain respects, to the requirements of the Montana, Wyoming and Arizona public
utilities commissions. As a result, the Company's regulated segment maintains
its accounts in accordance with the requirements of those regulators. The
application of generally accepted accounting principles by the Company's
regulated segments differs in certain respects from application by the
nonregulated segment and other nonregulated businesses. The regulated segment
prepares its financial statements in accordance with Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation ("SFAS 71"). In general, SFAS 71 recognizes that accounting for
rate-regulated enterprises should reflect the relationship of costs and
revenues. As a result, a regulated utility may defer recognition of cost (a
regulatory asset) or recognize an obligation (a regulatory liability) if it is
probable that, through the rate-making process, there will be a corresponding
increase or decrease in revenues. Accordingly, the Company has deferred certain
costs, which will be amortized over various periods of time. The costs deferred
are further described in the Company's financial statements and the notes
thereto. To the extent that collection of such costs or payment of liabilities
is no longer probable as a result of changes in regulation and/or the Company's
competitive position, the associated regulatory asset or liability will be
reversed with a charge or credit to income. If the Company's regulated segment
were to discontinue the application of SFAS 71, the accounting impact would be
an extraordinary, noncash charge to operations that could be material to the
financial position and results of operations of the Company.
      However, the Company is unaware of any circumstances or events in the
foreseeable future that would cause it to discontinue the application of SFAS
71.
      All regulatory assets have been formally approved by the applicable
regulator, although other than environmental cleanup costs, no return on assets
is allowed by the regulators.
      The Company uses the lives for depreciation as defined by the regulators,
which approximate the economic lives for generally accepted accounting
principles.


<PAGE>   47
                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS
      Certain reclassifications have been made to the fiscal 1999 consolidated
financial statements to conform to the fiscal 2000 presentation.

NEW ACCOUNTING STANDARD
      The Company adopted the accounting provisions of Statement of Financial
Accounting Standards (SFAS) 133 - "Accounting for Derivative Instruments and
Hedging Activities" beginning in July 2000. The new accounting rules require
that the fair value of derivative and hedging instruments be measured and
recorded as either assets or liabilities on the balance sheet with a regular,
periodic mark-to-market adjustment. The effect of this new accounting standard
is not significant.

2. NOTES PAYABLE
      At June 30, 2000, the Company maintained two lines of credit totaling
$22,000,000. One line is for $11,000,000 with interest calculated the London
Interbank Offering Rate ("LIBOR") plus 2% or prime less 1/2 percent, expiring
January 5, 2001. The other is also for $11,000,000 with interest calculated at
LIBOR plus 2% or prime less .04 percent, expiring May 1, 2001. A total of
$4,855,000 and $1,442,982 had been borrowed under the line of credit agreements
at June 30, 2000 and 1998 respectively. No amount was outstanding at June 30,
1999. Borrowings on lines of credit, based upon daily loan balances, averaged
$5,045,943, $2,519,255 and $4,193,679 during the years ended June 30, 2000, 1999
and 1998, respectively. The maximum borrowings outstanding on these lines at any
month end were $10,855,000, $5,587,000 and $11,835,000 during these same
periods. The daily weighted average interest rate was 8.01%, 7.16% and 7.85% for
the years ended June 30, 2000, 1999 and 1998, respectively. Management expects
both lines of credit to be renewed for another year.






<PAGE>   48

                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



3. LONG-TERM DEBT OBLIGATIONS

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                          JUNE 30
                                                                                   2000               1999
                                                                                   ----               ----
<S>                                                                            <C>                <C>
          Series 1997 notes payable                                             $8,000,000         $8,000,000
          Series 1993 notes payable                                              7,460,000          7,635,000
          Industrial development revenue obligations:
           Series 1992A                                                                  -            185,000
           Series 1992B                                                          1,380,000          1,450,000
          Other                                                                          -                723
                                                                               -----------        -----------
          Total long-term obligations                                           16,840,000         17,270,723
          Less portion due within one year                                         445,000            430,723
                                                                               -----------        -----------
          Long-term obligations due after one year                             $16,395,000        $16,840,000
                                                                               ===========        ===========
</TABLE>



<PAGE>   49
                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




3. LONG-TERM DEBT OBLIGATIONS (CONTINUED)

SERIES 1997 NOTES PAYABLE
      On August 1, 1997, the Company issued $8,000,000 of Series 1997 unsecured
notes bearing interest at the rate of 7.5%, payable semiannually on June 1 and
December 1 of each year, commencing on December 1, 1997. All principal amount of
Notes then outstanding, plus accrued interest, will be due and payable on June
1, 2012. At the Company's option, beginning June 1, 2002, notes maturing
subsequent to 2002 may be redeemed prior to maturity, in whole or part, at 100%
of face value, plus accrued interest.

SERIES 1993 NOTES PAYABLE
      On June 24, 1993, the Company issued $7,800,000 of Series 1993 unsecured
notes bearing interest at rates ranging from 6.20% to 7.60%, payable
semiannually on June 1 and December 1 of each year, commencing on December 1,
1993. Maturity dates began in 1999 and extend to 2013. At the Company's option,
beginning June 1, 2003, notes maturing subsequent to 2003 may be redeemed prior
to maturity, in whole or part, at redemption prices declining from 104% to 100%
of face value, plus accrued interest.

INDUSTRIAL DEVELOPMENT REVENUE OBLIGATIONS
      On September 15, 1992, Cascade County, Montana (the "County") issued two
Industrial Development Revenue Obligations, the Series 1992A Bonds for
$1,700,000 and Series 1992B Bonds for $1,800,000. The Series 1992A and Series
1992B Bonds are unsecured; however, loan agreements are maintained with the
Company in the same amounts. Both the Series 1992A and Series 1992B Bonds
require annual principal payments on October 1 and semiannual interest payments
on April 1 and October 1 of each year beginning in 1993. The Series 1992A Bonds
matured on October 1999. The Series 1992B bonds have a final maturity in 2012
and bear interest at rates ranging from 3.35% to 6.50%.












<PAGE>   50
                    Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



AGGREGATE ANNUAL MATURITIES

<TABLE>
<CAPTION>
        FISCAL               SERIES                   IDR                    TOTAL
                                                  OBLIGATIONS

      YEAR ENDING            1997              SERIES         1993          LONG-TERM
        JUNE 30              NOTES             1992B          NOTES        OBLIGATIONS

<S>                          <C>              <C>             <C>          <C>
2001                         $        -       $   75,000      $  370,000    $   445,000
2002                                  -           75,000         390,000        465,000
2003                                  -           80,000         420,000        500,000
2004                                  -           85,000         445,000        530,000
2005                                  -           90,000         480,000        570,000
Thereafter                    8,000,000          975,000       5,355,000     14,330,000
                             ----------       ----------      ----------    -----------
                             $8,000,000       $1,380,000      $7,460,000    $16,840,000
Less current portion                  -           75,000         370,000        445,000
                             ----------       ----------      ----------    -----------
                             $8,000,000       $1,305,000      $7,090,000    $16,395,000
                             ==========       ==========      ==========    ===========

</TABLE>
<PAGE>   51
                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





3. LONG-TERM DEBT OBLIGATIONS (CONTINUED)
      The Company's long-term debt obligation agreements contain various
covenants including: limiting total dividends and distributions made in the
immediately preceding 60-month period to aggregate consolidated net income for
such period, restricting senior indebtedness, limiting asset sales, and
maintaining certain financial debt and interest ratios.

4. RETIREMENT PLANS
      The Company has a defined contribution pension plan (the "Plan") which
covers substantially all of the Company's employees. Under the Plan, the Company
contributes 10% of each participant's eligible compensation. Total contributions
to the plan for the years ended June 30, 2000, 1999, and 1998 were $491,068,
$497,015 and $405,441 respectively.
      The Company adopted, effective July 1, 1993, SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions. This standard
requires that the projected future cost of providing postretirement benefits be
recognized as an expense as employees render service rather than when paid.
Effective for fiscal year 1994, the Company modified its plan for these benefits
and has elected to pay eligible retirees (post-65 years of age) $125 per month
in lieu of contracting for health and life insurance benefits. The amount of
this payment is fixed and will not increase with medical trends or inflation.
The Company's transition obligation at June 30, 2000 and 1999 was $254,960 and
$274,560 respectively, of which $215,000 in 2000 and $234,100 in 1999 is related
to the regulated utility operations. The transition obligation was accrued as a
deferred charge and will be amortized over 20 years. Substantially, all of the
transition obligation is for the future cost of benefits to active employees.
      The Company's plan allows pre-65 retirees and their spouses to remain on
the same medical plan as active employees by contributing 125% of the current
COBRA rate to retain this coverage. The prior service obligation associated with
this plan change at June 30, 2000 and 1999 was $198,220 and $216,120
respectively, of which $162,020 in 2000 and $178,520 in 1999 is related to
regulated utility operations. The prior service obligation was accrued as a
deferred charge and will be amortized over fifteen years.



<PAGE>   52

                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




4. RETIREMENT PLANS (CONTINUED)
      The incremental annual increases in consolidated expenses due to adoption
of SFAS No. 106 were $47,500, $115,120 and $121,600 in fiscal years 2000, 1999
and 1998, respectively. Included in these amounts were $35,800 in 2000, $95,600
in 1999 and $95,600 in 1998 relating to regulatory operations. The MPSC allowed
recovery of these costs beginning on November 4, 1997 for the utility operations
in Montana. Management believes it is probable that its regulators in Wyoming
will allow recovery of these costs based upon recent industry rate decisions
addressing this issue. The plan assets are held in a VEBA trust fund into which
all the company's contributions are made. The trust primarily invests in money
market funds.

The following table presents the amounts recognized at June 30, 2000 and 1999 in
the consolidated financial statements.

<TABLE>
<CAPTION>

Years Ended June 30                                                2000                 1999
                                                                   ----                 ----

<S>                                                           <C>                   <C>
Service Costs                                                           $ 33,800            $ 37,900
Interest Costs                                                            47,900              50,980
Expected return on plan assets                                           (28,000)            (10,060)
Amortization of transition obligation                                     19,600              19,040
Amortization of unrecognized prior service costs                          17,900              17,256
Actuarial gain                                                           (43,700)                  -
                                                              --------------------------------------
Postretirement benefit expense                                            47,500             115,116

Weighted-Average assumptions as of June 30,
 Discount rate                                                              7.75%                7.0%
Long term return on plan assets                                              9.0%                9.0%
Health care inflation rate                                                   7.0%                9.0%
                                                                  Grading to 5.5%     Grading to 5.5%

Change in benefit obligation
Projected benefit obligation
   Projected benefit obligation at July 1                               $949,845            $933,813
   Service costs                                                          33,800              37,900
   Interest costs                                                         47,900              50,980
   Actuarial gain                                                       (331,045)            (10,023)
   Benefits paid                                                         (13,600)            (62,825)
                                                                        --------            --------
Projected benefit obligation at June 30                                 $686,900            $949,845

Change in plan assets
   Fair value of plan assets at July 1                                   325,768             285,113
     Actual return on plan assets                                         20,227              12,280
     Contributions to the plan                                           121,600              91,200
     Benefits paid                                                       (13,600)            (62,825)
                                                                        --------            --------
   Fair value of plan assets at June 30                                  453,995             325,768
                                                                        --------            --------
Projected benefit obligation in excess of plan                           232,905             624,077
assets
Unrecognized net gain                                                    340,200             (23,137)
                                                                        --------            --------
Accrued postretirement benefit liability
recorded in other liabilities                                           $573,105            $647,214
                                                                        ========            ========

</TABLE>



<PAGE>   53


                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





5. INCOME TAX EXPENSE
      Effective July 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, Accounting for Income Taxes. The cumulative effect of
adopting Statement No. 109 created a regulatory asset and a regulatory liability
for regulated operations, representing the anticipated effects on regulated
rates charged to customers which will result from the adoption of Statement No.
109. For the year ended June 30, 2000, changes in certain assets and liabilities
resulted in a decrease in regulatory assets of $156,486 and a decrease in
regulatory liabilities of $13,160 for regulated entities, resulting in ending
balances of $485,073 and $109,481 respectively.
      Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.


<PAGE>   54


                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)






5. INCOME TAX EXPENSE (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities as
of June 30, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                     2000                1999
                                                                     ----                ----

<S>                                                                  <C>                 <C>
Deferred tax assets:
   Allowance for doubtful accounts                                    $   29,389          $   28,274
   Unamortized investment tax credit                                     109,702             122,862
   Contributions in aid of construction                                  184,262             164,955
   Other nondeductible accruals                                          240,032             221,949
   Deferred gain on sale of assets                                        56,627              66,064
   Other                                                                  21,588              60,224
                                                                      ----------          ----------
Total deferred tax assets                                                641,600             664,328


Deferred tax liabilities:
   Customer refunds payable                                            1,816,757           1,128,838
   Property, plant and equipment                                       3,829,193           3,715,188
   Unamortized debt issue costs                                          144,866             159,058
   Unamortized deferred rate case costs                                  101,085              84,550
   Covenant not to compete                                                72,071              76,313
   Other                                                                  28,035              15,912
                                                                      ----------          ----------
Total deferred tax liabilities                                         5,992,007           5,179,859
                                                                      ----------          ----------
Net deferred tax liabilities                                          $5,350,407          $4,515,531
                                                                      ==========          ==========
</TABLE>


<PAGE>   55


                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)






5. INCOME TAX EXPENSE (CONTINUED)

Income tax expense consists of the following:

<TABLE>
<CAPTION>

YEAR ENDED JUNE 30
                                                         2000                     1999             1998
                                                         ----                     ----             ----
Current income taxes:
<S>                                                     <C>                <C>              <C>
   Federal                                              ($   205,632)      $   159,487      $   704,914
   State                                                     (27,989)          105,807           27,487
                                                         -----------       -----------      -----------
                                                            (233,621)          265,294          732,401
Total current income taxes

Deferred income taxes (benefits):
   Tax depreciation in excess of book                        267,543           235,141          285,124
   Book amortization in excess of tax                        (18,434)          (18,434)         (18,434)
   Recoverable cost of gas purchases                         687,795           363,763          111,393
   Regulatory surcharges                                      86,314           246,445          (93,149)

   Deferred gain (loss) on sale of assets                      1,201             9,284         (215,552)
   Contributions in aid of construction                      (19,307)          (15,862)          55,237
   Deferred rate case costs                                   16,535           (29,563)           4,553
   Bad debt reserves                                          (1,179)            5,370           23,726

   Other                                                      43,249            27,035           (5,377)
                                                         -----------       -----------      -----------
Total deferred income taxes                                1,063,717           823,179          147,521


Investment tax credit, net                                   (21,062)          (21,062)         (21,062)
                                                         -----------       -----------      -----------
Total income taxes                                       $   809,034       $ 1,067,411      $   858,860
                                                         ===========       ===========      ===========


Income taxes - operations                                $   749,823       $   976,760      $   792,129
Income taxes - other income                                   59,211            90,651           66,731
                                                         -----------       -----------      -----------
Total income taxes                                       $   809,034       $ 1,067,411      $   858,860
                                                         ===========       ===========      ===========
</TABLE>


<PAGE>   56


                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





5. INCOME TAX EXPENSE (CONTINUED)

Income tax expense from operations differs from the amount computed by applying
the federal statutory rate to pre-tax income for the following reasons:

<TABLE>
<CAPTION>
                                                            2000             1999             1998
                                                            ----             ----             ----


<S>                                                       <C>              <C>             <C>
Tax expense at statutory rate - 34%                        $   724,856      $   902,606     $   812,798
State income tax, net of federal tax benefit                    53,529          149,331          55,138
Amortization of deferred investment tax
   credits                                                     (21,062)         (21,062)        (21,062)
Other                                                           51,711           36,536          11,986
                                                           -----------      -----------     -----------
Total income taxes                                         $   809,034      $ 1,067,411     $   858,860
                                                           ===========      ===========     ===========
</TABLE>


6. SEGMENTS OF OPERATIONS
      Summarized financial information for the Company's regulated utilities,
propane operations, EWR and other (before intercompany eliminations between
segments primarily consisting of gas sales from nonregulated to regulated
entities, intercompany accounts receivable, accounts payable, equity, and
subsidiary investment) is as follows:





<PAGE>   57

6. SEGMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30                                2000
                                                REGULATED     PROPANE
                                                UTILITIES    OPERATIONS       EWR          OTHER     ELIMINATIONS   CONSOLIDATED
                                               ---------------------------------------------------------------------------------
<S>                                            <C>           <C>          <C>             <C>        <C>            <C>
OPERATING REVENUE

REGULATED UTILITIES                            $27,578,721   $        -   $          -    $      -   $         -    $27,578,721
PROPANE OPERATIONS                                       -    6,570,982              -           -    (1,746,724)     4,824,258
EWR                                                      -            -     41,623,968           -    (2,210,197)    39,413,771
OTHER                                                    -            -              -     379,042             -        379,042
                                               ---------------------------------------------------------------------------------
TOTAL OPERATING REVENUE                         27,578,721    6,570,982     41,623,968     379,042    (3,956,921)    72,195,792
                                               ---------------------------------------------------------------------------------

GAS PURCHASED                                   16,725,249    4,629,985              -           -    (1,746,724)    19,608,510
COST OF GOODS SOLD                                       -            -              -     243,128             -        243,128
EWR COST OF TRADING                                      -            -     41,146,869           -    (2,210,197)    38,936,672
DISTRIBUTION, GENERAL & ADMIN                    5,553,292    1,029,242        720,753      69,655             -      7,372,942
MAINTENANCE                                        348,685       50,894              -           -             -        399,579
DEPRECIATION                                     1,589,574      239,634         19,756       7,489             -      1,856,453
TAXES OTHER THAN INCOME                            520,418       69,640         33,113      15,617             -        638,788
                                               ---------------------------------------------------------------------------------
OPERATING EXPENSES                              24,737,218    6,019,395     41,920,491     335,889    (3,956,921)    69,056,072
                                               ---------------------------------------------------------------------------------
OPERATING INCOME                               $ 2,841,503   $  551,587   $(   296,523)   $ 43,153             -    $ 3,139,720
                                               =================================================================================
</TABLE>
<TABLE>
<CAPTION>

                                                   1999
                                                REGULATED     PROPANE
                                                UTILITIES    OPERATIONS       EWR          OTHER       ELIMINATIONS   CONSOLIDATED
                                               -----------------------------------------------------------------------------------
<S>                                            <C>           <C>          <C>           <C>            <C>            <C>
OPERATING REVENUE

REGULATED UTILITIES                            $28,105,983   $        -   $         -   $         -    $(       906)   $28,105,077
PROPANE OPERATIONS                                       -    7,832,247             -             -      (4,263,653)     3,568,594
EWR                                                      -            -    25,012,590             -      (3,369,519)    21,643,071
OTHER                                                    -            -             -       498,609               -        498,609
                                               -----------------------------------------------------------------------------------
TOTAL OPERATING REVENUE                         28,105,983    7,832,247    25,012,590       498,609      (7,634,078)    53,815,351
                                               -----------------------------------------------------------------------------------

GAS PURCHASED                                   16,885,480    5,956,876             -             -      (4,264,559)    18,577,797
COST OF GOODS SOLD                                       -            -             -       258,987               -        258,987
EWR COST OF TRADING                                      -            -    24,219,571                    (3,369,519)    20,850,052
DISTRIBUTION, GENERAL & ADMIN                    6,197,407    1,102,717       596,505       121,595               -      8,018,224
MAINTENANCE                                        396,057       72,964             -             -               -        469,021
DEPRECIATION                                     1,450,434      210,058        19,756        14,647               -      1,694,895
TAXES OTHER THAN INCOME                            599,615       76,039        21,900        10,800               -        708,354
                                               -----------------------------------------------------------------------------------
OPERATING EXPENSES                              25,528,993    7,418,654    24,857,732       406,029      (7,634,078)    50,577,330
                                               -----------------------------------------------------------------------------------
OPERATING INCOME                               $ 2,576,990   $  413,593   $   154,858   $    92,580               -    $ 3,238,021
                                               ===================================================================================
</TABLE>
<TABLE>
<CAPTION>

                                                   1998
                                                REGULATED     PROPANE
                                                UTILITIES    OPERATIONS       EWR          OTHER        ELIMINATIONS   CONSOLIDATED
                                               ------------------------------------------------------------------------------------
<S>                                            <C>           <C>           <C>           <C>            <C>            <C>
OPERATING REVENUE

REGULATED UTILITIES                            $27,824,360   $         -   $         -   $         -    $          -    $27,824,360
PROPANE OPERATIONS                                       -     8,642,464             -             -      (4,884,722)     3,757,742
EWR                                                      -             -    14,488,326             -      (3,105,307)    11,383,019
OTHER                                                    -             -             -        98,500               -         98,500
                                               ------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE                         27,824,360     8,642,464    14,488,326        98,500      (7,990,029)    43,063,621
                                               ------------------------------------------------------------------------------------

GAS PURCHASED                                   17,046,612     6,404,939             -             -      (4,879,743)    18,571,808
COST OF GOODS SOLD                                       -             -             -             -               -              -
EWR COST OF TRADING                                      -             -    13,289,205             -      (3,104,350)    10,184,855
DISTRIBUTION, GENERAL & ADMIN                    5,910,077     1,226,697       538,438        21,716               -      7,696,928
MAINTENANCE                                        397,512        99,033             -             -               -        496,545
DEPRECIATION                                     1,435,936       270,191        17,893        14,310          (5,936)     1,732,394
TAXES OTHER THAN INCOME                            529,671        73,806        13,906        10,800               -        628,183
                                               ------------------------------------------------------------------------------------
OPERATING EXPENSES                              25,319,808     8,074,666    13,859,442        46,826      (7,990,029)    39,310,713
                                               ------------------------------------------------------------------------------------
OPERATING INCOME                               $ 2,504,552   $   567,798   $   628,884   $    51,674               -    $ 3,752,908
                                               ====================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30                                   2000
                                                    REGULATED     PROPANE
                                                    UTILITIES    OPERATIONS       EWR          OTHER      ELIMINATIONS     CONSOL.
                                                   ---------------------------------------------------------------------------------
<S>                                                <C>           <C>          <C>            <C>          <C>            <C>
Capital expenditures                               $ 3,703,472   $  984,903   $    68,508    $       -    $         -    $ 4,756,883
                                                   =================================================================================

PROPERTY, PLANT AND EQUIPMENT, NET                  28,238,369    3,341,938       154,606            -              -     31,734,913
REAL ESTATE HELD FOR INVESTMENT                              -            -             -       69,220              -         69,220
                                                   ---------------------------------------------------------------------------------
TOTAL P&E                                           28,238,369    3,341,938       154,606       69,220              -     31,804,133

CURRENT ASSETS                                       8,453,708    2,012,760     7,983,113      897,362     (3,059,719)    16,287,224
OTHER ASSETS                                         4,115,375       46,262       338,952       26,984     (1,072,000)     3,455,573
                                                   ---------------------------------------------------------------------------------

TOTAL ASSETS                                       $40,807,452   $5,400,960   $ 8,476,671    $ 993,566    ($4,131,719)   $51,546,930
                                                   =================================================================================

EQUITY                                             $ 9,969,693   $1,771,147   $ 2,335,499    $ 957,287    ($1,072,000)   $13,961,626
LONG-TERM DEBT                                      14,663,317    1,350,876        95,419      285,388              -     16,395,000
CURRENT LIABILITIES                                 10,149,685    1,021,247     6,219,315      510,251     (3,059,719)    14,840,779
DEFERRED INCOME TAXES                                3,266,236      412,022        20,941            -              -      3,699,199
OTHER LIABILITIES                                    2,758,521      845,668      (194,503)    (759,360)             -      2,650,326
                                                   ---------------------------------------------------------------------------------

TOTAL CAPITALIZATION AND LIABILITIES               $40,807,452   $5,400,960   $ 8,476,671    $ 993,566    ($4,131,719)   $51,546,930
                                                   =================================================================================

</TABLE>
<TABLE>
<CAPTION>
                                                       1999
                                                    REGULATED     PROPANE
                                                    UTILITIES    OPERATIONS       EWR          OTHER      ELIMINATIONS     CONSOL.
                                                   ---------------------------------------------------------------------------------
<S>                                                <C>           <C>          <C>            <C>          <C>            <C>
Capital expenditures                               $ 3,012,735   $  688,932   $     2,482    $  26,976    $         -    $ 3,731,125
                                                   =================================================================================

PROPERTY, PLANT AND EQUIPMENT, NET                  26,200,361    2,599,628       105,854            -              -     28,905,843
REAL ESTATE HELD FOR INVESTMENT                              -            -             -      465,883              -        465,883
                                                   ---------------------------------------------------------------------------------
TOTAL P&E                                           26,200,361    2,599,628       105,854      465,883              -     29,371,726

CURRENT ASSETS                                       6,581,740    1,467,551     4,648,930       18,498     (1,288,153)    11,428,566
OTHER ASSETS                                         4,196,419       51,763       224,497            -     (1,072,000)     3,400,679
                                                   ---------------------------------------------------------------------------------

TOTAL ASSETS                                       $36,978,520   $4,118,942   $ 4,979,281    $ 484,381    ($2,360,153)   $44,200,971
                                                   =================================================================================

EQUITY                                             $ 9,767,171   $1,463,217   $ 2,445,044    $ 927,679    ($1,071,096)   $13,532,015
LONG-TERM DEBT                                      15,108,317    1,350,876        95,419      285,388              -     16,840,000
CURRENT LIABILITIES                                  4,348,582      755,054     3,434,203      (19,021)    (1,289,057)     7,229,761
DEFERRED INCOME TAXES                                3,253,552      323,284        21,611      (33,362)             -      3,565,085
OTHER LIABILITIES                                    4,500,898      226,511    (1,016,996)    (676,303)             -      3,034,110
                                                   ---------------------------------------------------------------------------------

TOTAL CAPITALIZATION AND LIABILITIES               $36,978,520   $4,118,942   $ 4,979,281    $ 484,381    ($2,360,153)   $44,200,971
                                                   =================================================================================
</TABLE>
<PAGE>   58
                   Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7. STOCK OPTIONS AND OWNERSHIP PLANS

STOCK OPTIONS
      The Company has an Incentive Stock Option Plan which provides for options
to purchase up to 100,000 shares of the Company's common stock by certain key
employees. The option price may not be less than 100% of the common stock fair
market value on the date of grant (110% of the fair market value if the employee
owns more than 10% of the Company's outstanding common stock). These options may
not have a term exceeding five years.
      Since the Company has elected to use APB No. 25, pro forma information
regarding net income and earnings per share is required by SFAS No. 123 as if
the Company had accounted for its stock options under the fair value method of
that statement.
      In the fiscal year ended June 30, 2000, no options were granted.
      For the fiscal year ended June 30, 1999, 42,820 options were granted. For
purposes of pro forma disclosures, the Company's pro forma net income was
$1,537,110 or $.64 earnings per share. The fair value for these options was
estimated at the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:

<TABLE>
<S>                                                                                              <C>
Risk-free interest rate--length of exercise period                                                 6.3%
Dividend yields                                                                                    5.2%
Volatility factors of the expected market price of
   the Company's common stock                                                                      .164
Weighted-average expected life of the employee
   stock options                                                                                 5 Year

The weighted-average fair value of options granted                                                $1.13
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. In
management's opinion, because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models do not necessarily provide a reliable single measure of the fair
value of the Company's stock options.


<PAGE>   59
                   Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7. STOCK OPTIONS AND OWNERSHIP PLANS (CONTINUED)

      A summary of the activity under the plans is as follows:

<TABLE>
<CAPTION>
                                                                                                Weighted
                                                                                                 Average
                                                                            Number of           Exercise
                                                                              Shares              Price
                                                                        ------------------ -------------------
<S>                                                                     <C>                <C>
          Fiscal 1998
          Outstanding at July 1, 1997                                              89,428              $7.533
          Granted                                                                       -                   -
          Exercised                                                               (22,908)             $7.045
          Expired                                                                 (37,920)             $7.172
                                                                                 --------
          Outstanding at June 30, 1998                                             28,600              $8.402
                                                                                 --------

          At June 30, 1998
          Exercisable                                                              28,600
          Available for grant                                                      42,820

          Fiscal 1999
          Outstanding at July 1, 1999                                              28,600              $8.402
          Granted                                                                  42,820              $9.096
          Exercised                                                                  (100)             $9.000
          Expired                                                                  (3,600)             $7.375
                                                                                 --------
          Outstanding at June 30, 1999                                             67,720              $8.894
                                                                                 --------

          At June 30, 1999
          Exercisable                                                              67,720
          Available for grant                                                       3,600

          Fiscal 2000
          Outstanding at July 1, 1999                                              67,720              $8.894
          Granted                                                                       -                   -
          Exercised                                                                     -                   -
          Expired                                                                    5000              $9.125
                                                                                 --------


          Outstanding at June 30, 2000                                             62,720              $8.972
                                                                                 --------


          At June 30, 2000
          Exercisable                                                              62,720
          Available for grant                                                           -
</TABLE>
<PAGE>   60
                   Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



7. STOCK OPTIONS AND OWNERSHIP PLANS (CONTINUED)

EMPLOYEE STOCK OWNERSHIP PLAN
      The Company has an Employee Stock Ownership Plan ("ESOP") which covers
most of the Company's employees. The unleveraged ESOP receives cash
contributions from the Company each year as determined by the Board of Directors
and buys shares of the Company's common stock from either the Company or the
open market at the current price per share. The ESOP has no allocated shares,
committed-to-be-released shares or suspense shares at the balance sheet dates.
In addition, there are no unearned shares and there is no repurchase obligation.
The Company has contributed and recognized as expense $103,886, $144,118 and
$127,901 for the years ended June 30, 2000, 1999 and 1998, respectively. During
the years ended June 30, 2000, 1999 and 1998, the ESOP acquired 16,153 shares at
$8.92 per share, 13,738 shares at $9.31 per share, 11,639 shares at $8.65 per
share, respectively.

8. LEASES
      The Company leases a building in Cody, Wyoming. The lease expires on June
30, 2005. Future minimum rental payments will be approximately $79,200 per year
from fiscal 2000 through fiscal 2005, for total future minimum lease payments of
$396,000. Rental expenses related to this lease were $80,739, $80,631 and
$74,438 in fiscal years 2000, 1999 and 1998, respectively.
      The Company leases certain property consisting of land, offices and office
buildings for a period of ten years at an annual rent of $51,975. The initial
ten-year term of the lease is extended for two successive five-year periods
unless the Company provides at least six months notice prior to the end of
either the initial term or the first successive five-year term.
      The Company does not have an option to repurchase the real property.
However, should the lessor have a bona fide third-party offer, the Company has
the right of refusal to buy the land and buildings under the same terms and
conditions.
      The future minimum lease payments under the terms of the related lease
agreement required the payment of $51,975 per year from fiscal 2000 through
fiscal 2006, for future minimum lease payments of $311,850.




<PAGE>   61

                   ENERGY WEST INCORPORATED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



9. COMMITMENTS AND CONTINGENCIES

COMMITMENTS
      The Company has entered into long-term, take or pay natural gas supply
contracts which expire at varying times through 2002. The contracts generally
require the Company to purchase specified minimum volumes of natural gas at a
fixed price which is subject to renegotiation every two years. Current prices
per Mcf for these average approximately $2.10. Based on current prices, the
minimum take or pay obligation at June 30, 2000 for each of the next two years
and in total is as follows:

<TABLE>
<CAPTION>
                                     FISCAL YEAR
<S>                                                    <C>
                                           2001        $1,379,700
                                           2002           461,160
                                           Total       $1,840,860
</TABLE>

Natural gas purchases under these contracts for the years ended June 30, 2000,
1999 and 1998 approximated $1,182,000, $2,042,000 and $1,630,000, respectively.


<PAGE>   62
                   Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

ENVIRONMENTAL CONTINGENCY
      The Company owns property on which it operated a manufactured gas plant
from 1909 to 1928. The site is currently used as a service center where certain
equipment and materials are stored. The coal gasification process utilized in
the plant resulted in the production of certain by-products which have been
classified by the federal government and the State of Montana as hazardous to
the environment. Several years ago the Company initiated an assessment of the
site to determine if remediation of the site was required. That assessment
resulted in a submission to the Montana Department of Environmental Quality
("MDEQ"), formerly known as the Montana Department of Health and Environmental
Science ("MDHES"), in 1994. The Company has worked with the MDEQ since that time
to obtain the data that would lead to a remediation action acceptable to the
MDEQ. In the summer of 1999, the Company received final approval from the MDEQ
for its plan for remediation of soil contaminants. To date, all contaminated
soil has been removed, and an asphalt cap has been placed over the site. The
Company and its consultants continue their work with the MDEQ relating to the
remediation plan for water contaminants.
      At June 30, 2000, the costs incurred in evaluating and beginning
remediation have totaled approximately $1,800,000. On May 30, 1995, the Company
received an order from the Montana Public Service Commission allowing for
recovery of the costs associated with evaluation and remediation of the site
through a surcharge on customer bills. As of June 30, 2000, that recovery
mechanism had generated approximately $903,000. The Company expects to recover
the full amount expended through the surcharge. The Commission's decision calls
for ongoing review by the Commission of any costs incurred. The Company will
submit an application for review by the Commission when the remediation plan is
approved by the MDEQ for water contaminants.

10. REGULATORY MATTERS
      In October 1999, the Company applied for recovery of approximately
$2,960,000 in gas costs with the Montana Public Service Commission (MPSC). This
gas cost application is similar to applications made annually as the mechanism
the MPSC utilizes to permit recovery of gas costs. The Montana Consumer Counsel
(MCC) intervened in this application, and a hearing on this matter was held on
May 31, 2000. A work session was held on September 26, and the MPSC ruled in
favor of the Company.




<PAGE>   63
                   Energy West Incorporated and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

11. FINANCIAL INSTRUMENTS & Risk Management

      Gas Trading Derivatives

      In July 1998 the Company signed a basis swap agreement between the NYMEX
and AECO price indexes. The contract period for the 5,000 MMBTU per day begins
November 1, 1999 and ends October 31, 2000. The swap compares the index price of
natural gas quoted on the NYMEX gas exchange with the AECO gas exchange on a
daily basis. The original basis differential was at $.62 per MMBTU. The Company
settled this basis differential at $.38 resulting in a gain of $390,000 which is
included in other income in 1999. The company has designated this basis swap as
a trading commodity derivative.
      In May 1999 the Company signed a basis swap agreement between the NYMEX
and AECO price indexes. The contract period for 4,000 MMBTU per day began June
1, 1999 and ended October 31, 1999. The swap compared the index price of natural
gas quoted on the NYMEX gas exchange with the AECO gas exchange on a daily
basis. The original basis differential was at $.38 per MMBTU. The Company
designated this swap as a trading commodity derivative. The Company settled the
June 1999 portion of the swap at a gain of $13,000 and settled the remaining
portion, a basis differential, at $.36 for an additional gain of $7,500.
      The Company entered into two swap agreements with a market maker which
requires the market maker to pay a fixed price to the Company and for the
Company to pay the AECO index price for the contracted volumes. The Company
entered into two reciprocal agreements with a counter party whereby the counter
party pays the AECO index price to the Company and the Company pays the AECO
fixed price to the counter party. The first agreement was from June 1, 1999 to
October 31, 1999 for 2,500 MMBTU per day at a fixed price of $1.925. The second
agreement is from November 1, 1999 to October 31, 2001, for 1,200 MMBTU per day
at a fixed price of $2.06. The reciprocal agreements have offsetting terms,
resulting in no gain or loss. The AECO index price at June 30, 2000 was $3.26.
In the event the counter party fails to perform under its obligation, and the
AECO index price exceeds the fixed prices of these swaps, the Company would be
liable to the market maker. The Company's contingent liability based on the June
30, 2000 AECO index price is $700,000.
      In March 2000 the Company signed a basis swap agreement between the NYMEX
and AECO price indexes. The contract period for the 5,000 MMBTU per day began
April 1, 2000 and ends October 31, 2000. The swap compares the index price of
natural gas quoted on the NYMEX gas exchange with the AECO gas exchange index.
The original basis differential was at $.26 per MMBTU. The Company settled the
April basis differential at $.32 resulting in a $9,000 gain and the May basis
differential at $.38 resulting in a gain of $19,000. The June to October basis
differentials were settled in May at $.28 and resulted in a gain of $15,000. The
Company designated this basis swap as a trading commodity derivative.
      In May 2000 the Company signed a basis swap agreement between the NYMEX
and AECO price indexes. The contract period for the 5,000 MMBTU per day began
June 1, 2000 and ends October 31, 2000. The swap compares the index price of
natural gas quoted on the NYMEX gas exchange with the AECO gas exchange index.
The original basis differential was $.37 per MMBTU. The Company settled the June
basis differential at $.98 resulting in a loss of $91,000. The July to October
basis differentials were settled at $.34 and resulted in a gain of $19,000. The
Company designated this basis swap as a trading commodity derivative.
      In June 2000 the Company entered into a fixed for floating swap agreement
with a market maker which required the Company to pay a fixed price of $3.765
per MMBTU in return for gas quoted on the AECO gas exchange. The contract period
for the 10,000 MMBTU per day begins November 1, 2000 and ends March 31, 2001.
The Company settled the swap for a fixed sales price to the market maker of
$3.865 per MMBTU which resulted in a gain of $151,000. The Company has
designated this swap as a trading commodity derivative.
      The Company entered into a basis swap agreement between the NYMEX and AECO
price indexes. The contract period for the 5,000 MMBTU per day begins November
1, 2000 and ends October 31, 2003. The swap compares the index price of natural
gas quoted on the NYMEX gas exchange with the AECO gas exchange index. The
original basis differential is at $.27 per MMBTU. At June 30, 2000 the basis
differential was $.272 resulting in a mark-to-market gain of $8,000 which the
Company recorded in other income. The Company designated this swap as a trading
commodity derivative.
      The Company entered into a fixed for floating swap agreement which
requires the Company to pay a fixed price of $4.09 per MMBTU in return for gas
quoted on the AECO gas exchange. The contract period for the 10,000 MMBTU per
day begins November 1, 2000 and ends March 31, 2001. At June 30, 2000 the winter
block AECO index was $4.11 which resulted in a mark-to-market gain of $30,000
which the Company recorded in other income. The Company designated this swap as
a trading commodity derivative.





<PAGE>   64


Item 9. - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not Applicable





                                       66
<PAGE>   65


PART III

Item 10. - Directors and Executive Officer of the Registrant

Information concerning the directors and executive officers is included in Part
I, on pages 12 through 15. The information contained under the heading "Election
of Directors" in the Proxy Statement is incorporated herein by reference in
response to this item.

Item 11. - Executive Compensation

The information contained under heading "Executive Compensation" in the Proxy
Statement is incorporated herein by reference in response to this item.

Item 12. - Security Ownership of Certain Beneficial Owners and Management

The information contained under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference in response to this item.

Item 13. - Certain Relationships and Related Transactions

The information contained under the heading "Certain Transactions" in the Proxy
Statement is incorporated herein by reference in response to this item.


                                       67
<PAGE>   66


PART IV
Item 14. - Exhibits, Financial Statement Schedules and Reports on Form 8K

(a)      1.  Financial Statements included in Part II, Item 8:
                Report of Independent Auditors
                Consolidated Balance Sheets
                Consolidated Statements of Income
                Consolidated Statements of Stockholders' Equity
                Consolidated Statements of Cash Flows
                Notes to Consolidated Financial Statements
         2.     Financial Statement Schedules included in Item 14 (d):
                Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

         3.  Exhibits (See Exhibit Index on Page E-1)

(b) We filed the following reports on Form 8-K:

                  Date                                     Subject
                  ------------------------------------------------
                  March 3, 2000                            Item 5.  Other Events

                  Item 5.   OTHER EVENTS

                  Energy West Incorporated (the "Company") has a pending
                  application with the Montana Public Service Commission (the
                  "MPSC") seeking recovery of approximately $2,960,000 in gas
                  costs. The Montana Consumer Counsel has intervened in this
                  application and as of February 17, 2000, has provided the
                  Company and the MPSC with testimony recommending cost
                  disallowances totaling $686,113 over a period of three years.
                  A hearing on the application is scheduled for May 3, 2000.

                  Item 7.   FINANCIAL STATEMENTS AND EXHIBITS

(c) EXHIBITS. The following exhibits are filed herewith:

                  99.1 Press Release dated March 1, 2000.

(d) SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS

                                ENERGY WEST INC.

                                  JUNE 30, 2000

<TABLE>
<CAPTION>
                                            Balance At        Charged           Write-Offs       Balance
                                            Beginning         to Costs          Net of           at End of
Description                                 of Period         & Expenses        Recoveries       Period
---------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>               <C>              <C>
ALLOWANCE FOR
UNCOLLECTIBLE ACCOUNTS

Year Ended June 30, 1998                    $ 167,824         $  69,651         ($138,714)       $  98,761

Year Ended June 30, 1999                    $  98,761         $  62,160         ($ 76,383)       $  84,538

Year Ended June 30, 2000                    $  84,538         $ 104,132         ($100,671)       $  87,999
</TABLE>


                                       68
<PAGE>   67


SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

ENERGY WEST INCORPORATED

/S/  Larry D. Geske                       /s/  Edward J. Bernica
Larry D. Geske, President and             Edward J. Bernica, Executive Vice-
Chief Executive Officer                   President, Chief Operating Officer and
and Chairman of the Board                 Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

/s/  Larry D. Geske                                   09/27/00
Larry D. Geske                                        Date
President and Chief Executive
Officer and Acting Chairman of the Board

/s/ Andrew Davidson                                   09/27/00
Andrew Davidson                      Director         Date

/s/ Thomas N. McGowen, Jr.                            09/27/00
Thomas N. McGowen, Jr.               Director         Date

/s/ G. Montgomery Mitchell                            09/27/00
G. Montgomery Mitchell               Director         Date

/s/ George D. Ruff                                    09/27/00
George D. Ruff                       Director         Date

/s/ David A. Flitner                                  09/27/00
David A. Flitner                     Director         Date

/s/ Dean South                                        09/27/00
Dean South                           Director         Date

/s/ Richard J. Schulte                                09/27/00
Richard J. Schulte                   Director         Date







                                       69
<PAGE>   68
EXHIBIT INDEX


EXHIBITS

3.1      Restated Articles of Incorporation of the Company, as amended to
         date(previously filed).

3.2      Bylaws of the Company, as amended to date (previously filed).

4.1      Form of Indenture (including form of Note) relating to the Company's
         Series 1993 Notes(incorporated by reference to Exhibit 4.1 to the
         Company's Registration Statement on Form S-2, File No. 33-62680).

4.2      Loan Agreement, dated as of September 1, 1992, relating to the
         Company's Series 1992A and Series 1992B Industrial Development Revenue
         Bonds (incorporated by reference to Exhibit 4.2 to the Company's
         Registration Statement on Form S-2, File No.33-62680).

10.1     Credit Agreement dated as of January 18, 1995, by and between the
         Company and Norwest Bank Great Falls, National Association (previously
         filed).

10.2     Amendment dated April 17, 1996 to Credit Agreement dated as of January
         18, 1995, by and between the Company and Norwest Bank Montana, National
         Association (previously filed).

10.3     Amendment dated November 7, 1996 to Credit Agreement dated as of
         January 18, 1995, the Company and Norwest Bank Montana, National
         Association (previously filed).

10.4     Promissory Note dated November 7, 1996, issued to Norwest Bank Montana,
         National Association (previously filed).

10.5     Credit Agreement dated as of February 12, 1997, by and between the
         Company and First Bank Montana, National Association (previously
         filed).

10.6     Delivered Gas Purchase Contract dated February 23, 1997, as amended by
         that Letter Amendment Amending Gas Purchase Contract dated March 9,
         1982; that Amendment to Delivered Gas Purchase Contract applicable as
         of March 20, 1986; that Letter Agreement dated December 18, 1986; that
         Letter Agreement dated April 12, 1988; that Letter Agreement dated
         April 28, 1992; that Letter Agreement dated March 14, 1996; that Letter
         Agreement dated April 15, 1996; a second Letter Agreement dated April
         15, 1996; that Letter dated February 18, 1997; and that Letter dated
         April 1, 1997, transmitting a Notice of Assignment effective February
         26, 1993 (previously filed).

                                       E-1

<PAGE>   69


10.7     Delivered Gas Purchase Contract dated December 1, 1985, as amended by
         that Letter Agreement dated July 1, 1986; that Letter Agreement dated
         November 19, 1987; that Letter Agreement dated December 1, 1988; that
         Letter Agreement dated July 30, 1992; that Assignment Conveyance and
         Bill of Sale effective as of January 1, 1993; that Letter Agreement
         dated March 8,1993; that Letter Agreement dated October 21, 1993; that
         Letter Agreement dated October 18, 1994; that Letter Agreement dated
         January 30,1995; that Letter Agreement dated August 30, 1995; that
         Letter Agreement dated October 3, 1995; that Letter Agreement dated
         October 31, 1995; that Letter Agreement dated December 21, 1995; that
         Letter Agreement dated April 25, 1996; that Letter Agreement dated
         January 29, 1997; and that Letter dated April 11, 1997 (previously
         filed).


10.8     Natural Gas Sale and Purchase Agreement dated July 20, 1992 between
         Shell Canada Limited and the Company, as amended by that Letter
         Agreement dated August 23, 1993; that Amending Agreement effective as
         of November 1,1994; and that Schedule A Incorporated Into and Forming a
         Part of That Natural Gas Sale and Purchase Agreement, effective as of
         November 1,1996 (previously filed).

10.9     Employee Stock Ownership Plan Trust Agreement (incorporated by
         reference to Exhibit 10.2 to Registrant's Registration Statement on
         Form S-1, File No. 33-1672).

10.10    1992 Stock Option Plan (previously filed).

10.11    Form of Incentive Stock Option under the 1992 Stock Option Plan
         (previously filed).

10.12    Management Incentive Plan (previously filed).

21.1     Subsidiaries of the Company (filed herewith).

23.1     Consent of Independent Auditors (filed herewith).

27.1     Financial Data Schedule (filed herewith).

                                       E-2