<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period 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 1-1398

                               UGI UTILITIES, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>

<S>                                                         <C>
          Pennsylvania                                          23-1174060
 (State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                             Identification No.)
</TABLE>

                               UGI UTILITIES, INC.
                         100 Kachel Boulevard, Suite 400
                    Green Hills Corporate Center, Reading, PA
                    (Address of principal executive offices)
                                      19607
                                   (Zip Code)
                                 (610) 796-3400
              (Registrant's telephone number, including area code)

         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 ___

         At July 31, 2000, there were 26,781,785 shares of UGI Utilities, Inc.
Common Stock, par value $2.25 per share, outstanding, all of which were held,
beneficially and of record, by UGI Corporation.
<PAGE>   2
                               UGI UTILITIES, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                    PAGES

                                                                                                    -----
<S>                                                                                                 <C>
Part I Financial Information

      Item 1.    Financial Statements

                 Condensed Consolidated Balance Sheets as of June 30, 2000,
                     September 30, 1999 and June 30, 1999                                              1

                 Condensed Consolidated Statements of Income for the three,
                     nine and twelve months ended June 30, 2000 and 1999                               2

                 Condensed Consolidated Statements of Cash Flows for the
                     nine and twelve months ended June 30, 2000 and 1999                               3

                 Notes to Condensed Consolidated Financial Statements                                4 - 10

      Item 2.    Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                                            11 - 18

      Item 3.  Quantitative and Qualitative Disclosures About Market Risk                             18

Part II Other Information

      Item 6.    Exhibits and Reports on Form 8-K                                                     19

      Signatures                                                                                      20
</TABLE>

                                       -i-
<PAGE>   3
                          PART I FINANCIAL INFORMATION

                               UGI UTILITIES, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                   (unaudited)

                             (Thousands of dollars)

<TABLE>
<CAPTION>

                                                                                    June 30,        September 30,        June 30,
                                                                                      2000              1999              1999
                                                                                      ----              ----              ----
<S>                                                                                 <C>             <C>                <C>
ASSETS
     Current assets:

          Cash and cash equivalents                                                  $  3,060         $ 11,063         $  1,432
          Accounts receivable (less allowance for doubtful accounts
               of $2,734, $1,716 and $1,852, respectively)                             34,148           21,887           32,717
          Accrued utility revenues                                                      7,040            6,867            5,773
          Inventories                                                                  22,197           28,103           21,376
          Deferred income taxes                                                         5,268            2,972            7,249
          Prepaid expenses and other current assets                                     4,139            6,283            7,047
                                                                                     --------         --------         --------
               Total current assets                                                    75,852           77,175           75,594

     Property, plant and equipment, at cost (less accumulated depreciation
          and amortization of $285,451, $270,003 and $267,365, respectively)          563,001          556,793          551,278

     Regulatory assets                                                                 56,576           61,082           59,449
     Other assets                                                                      18,464           17,483           17,782
                                                                                     --------         --------         --------
          Total assets                                                               $713,893         $712,533         $704,103
                                                                                     ========         ========         ========
LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     Current liabilities:
          Current maturities of long-term debt                                       $ 22,143         $  7,143         $  7,143
          Bank loans                                                                   61,900           87,400           59,600
          Accounts payable                                                             33,532           37,881           30,485
          Other current liabilities                                                    47,862           31,048           47,657
                                                                                     --------         --------         --------
               Total current liabilities                                              165,437          163,472          144,885

     Long-term debt                                                                   157,919          172,904          180,042
     Deferred income taxes                                                            114,940          112,284          111,034
     Other noncurrent liabilities                                                      23,399           24,313           25,786

     Commitments and contingencies

     Redeemable preferred stock                                                        20,000           20,000           20,000

     Common stockholder's equity:
          Common Stock, $2.25 par value (authorized - 40,000,000 shares;
               issued and outstanding - 26,781,785 shares)                             60,259           60,259           60,259
          Additional paid-in capital                                                   68,559           68,559           68,559
          Retained earnings                                                           103,380           90,742           93,538
                                                                                     --------         --------         --------
               Total common stockholder's equity                                      232,198          219,560          222,356
                                                                                     --------         --------         --------
          Total liabilities and stockholder's equity                                 $713,893         $712,533         $704,103
                                                                                     ========         ========         ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       -1-
<PAGE>   4
                               UGI UTILITIES, INC.

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)
                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                    Three Months Ended           Nine Months Ended         Twelve Months Ended
                                                         June 30,                    June 30,                   June 30,
                                                    ------------------          ------------------         --------------------
                                                    2000          1999          2000          1999         2000            1999
                                                    ----          ----          ----          ----         ----            ----
<S>                                              <C>           <C>           <C>           <C>           <C>           <C>
Revenues                                         $  77,554     $  77,338     $ 368,574     $ 357,800     $ 431,421     $ 417,944
                                                 ---------     ---------     ---------     ---------     ---------     ---------
Costs and expenses:
     Gas, fuel and purchased power                  35,907        33,816       185,822       176,601       214,442       202,965
     Operating and administrative expenses          21,826        22,381        62,628        63,593        85,775        87,073
     Operating and administrative expenses
          - related parties                            986         1,258         2,988         3,727         4,207         5,015
     Taxes other than income taxes                   2,913         4,879        14,280        21,058        18,454        25,277
     Depreciation and amortization                   5,794         5,800        17,202        17,189        23,019        22,824
     Other income, net                              (2,177)       (1,595)       (9,447)       (3,793)      (10,823)       (4,928)
                                                 ---------     ---------     ---------     ---------     ---------     ---------
                                                    65,249        66,539       273,473       278,375       335,074       338,226
                                                 ---------     ---------     ---------     ---------     ---------     ---------
Operating income                                    12,305        10,799        95,101        79,425        96,347        79,718
Interest expense                                     4,348         4,238        13,755        13,000        18,287        17,587
                                                 ---------     ---------     ---------     ---------     ---------     ---------
Income before income taxes                           7,957         6,561        81,346        66,425        78,060        62,131
Income taxes                                         3,085         2,485        31,538        25,149        30,660        23,403
                                                 ---------     ---------     ---------     ---------     ---------     ---------
Net income                                           4,872         4,076        49,808        41,276        47,400        38,728
Dividends on preferred stock                           388           388         1,163         1,163         1,550         1,551
                                                 ---------     ---------     ---------     ---------     ---------     ---------
Net income after dividends on preferred stock    $   4,484     $   3,688     $  48,645     $  40,113     $  45,850     $  37,177
                                                 =========     =========     =========     =========     =========     =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       -2-
<PAGE>   5
                               UGI UTILITIES, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                             (Thousands of dollars)

<TABLE>
<CAPTION>

                                                                          Nine Months Ended         Twelve Months Ended
                                                                              June 30,                  June 30,
                                                                         ------------------        --------------------
                                                                         2000          1999        2000           1999
                                                                         ----          ----        ----           ----
<S>                                                                    <C>          <C>          <C>          <C>
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
    Net income                                                         $ 49,808     $ 41,276     $ 47,400     $ 38,728
    Adjustments to reconcile net income to net cash provided
       by operating activities:
          Depreciation and amortization                                  17,202       17,189       23,019       22,824
          Deferred income taxes, net                                     (1,136)         148        4,508        4,494
          Other, net                                                      3,936        1,220        5,200        4,334
                                                                       --------     --------     --------     --------
                                                                         69,810       59,833       80,127       70,380
          Net change in:
             Accounts receivable and accrued utility revenues           (15,560)     (14,014)      (7,173)      (2,878)
             Inventories                                                  5,906        7,084         (821)        (942)
             Deferred fuel costs                                          7,882        6,870       (4,108)      (3,764)
             Accounts payable                                            (4,349)      (8,362)       3,047        1,536
             Other current assets and liabilities                        14,521        9,634        8,254        1,042
                                                                       --------     --------     --------     --------
          Net cash provided by operating activities                      78,210       61,045       79,326       65,374
                                                                       --------     --------     --------     --------
CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
    Expenditures for property, plant and equipment                      (23,230)     (25,014)     (34,600)     (38,208)
    Net proceeds (costs) of property, plant and equipment disposals        (313)        (357)        (697)         320
                                                                       --------     --------     --------     --------
       Net cash used by investing activities                            (23,543)     (25,371)     (35,297)     (37,888)
                                                                       --------     --------     --------     --------
CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
    Payment of dividends                                                (37,170)     (30,162)     (37,558)     (30,849)
    Repayment of long-term debt                                              --           --       (7,143)      (7,143)
    Bank loans increase (decrease)                                      (25,500)      (8,800)       2,300        8,900
                                                                       --------     --------     --------     --------
       Net cash used by financing activities                            (62,670)     (38,962)     (42,401)     (29,092)
                                                                       --------     --------     --------     --------
    Cash and cash equivalents increase (decrease)                      $ (8,003)    $ (3,288)    $  1,628     $ (1,606)
                                                                       ========     ========     ========     ========
CASH  AND  CASH  EQUIVALENTS:
    End of period                                                      $  3,060     $  1,432     $  3,060     $  1,432
    Beginning of period                                                  11,063        4,720        1,432        3,038
                                                                       --------     --------     --------     --------
       Increase (decrease)                                             $ (8,003)    $ (3,288)    $  1,628     $ (1,606)
                                                                       ========     ========     ========     ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       -3-
<PAGE>   6
                               UGI UTILITIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (unaudited)

                             (Thousands of dollars)

1.       BASIS OF PRESENTATION

         The accompanying condensed consolidated financial statements include
         the accounts of UGI Utilities, Inc. ("UGI Utilities") and its wholly
         owned subsidiaries (collectively, "the Company" or "we"). We eliminate
         all significant intercompany accounts and transactions when we
         consolidate. We have reclassified certain prior-period balances to
         conform with the current period presentation. UGI Utilities is a wholly
         owned subsidiary of UGI Corporation ("UGI") and operates a natural gas
         distribution utility ("Gas Utility") in parts of eastern and
         southeastern Pennsylvania and an electric utility generation and
         distribution operation ("Electric Utility") in northeastern
         Pennsylvania. Effective October 1, 1999, Electric Utility's interests
         in its electric generating facilities were transferred to UGI
         Utilities' wholly owned non-utility subsidiary UGI Development Company,
         ("UGID"). UGID has been granted "Exempt Wholesale Generator" status by
         the Federal Energy Regulatory Commission.

         The accompanying condensed consolidated financial statements are
         unaudited and have been prepared in accordance with the rules and
         regulations of the U.S. Securities and Exchange Commission. They
         include all adjustments which we consider necessary for a fair
         statement of the results for the interim periods presented. Such
         adjustments consisted only of normal recurring items unless otherwise
         disclosed. These financial statements should be read in conjunction
         with the financial statements and the related notes included in our
         Annual Report on Form 10-K for the year ended September 30, 1999
         ("Company's 1999 Annual Report"). Due to the seasonal nature of our
         businesses, the results of operations for interim periods are not
         necessarily indicative of the results to be expected for a full year.
         UGI Utilities' comprehensive income as determined under Statement of
         Financial Accounting Standards ("SFAS") No. 130 "Reporting
         Comprehensive Income" was the same as its net income for all periods
         presented.

                                      -4-
<PAGE>   7
                               UGI UTILITIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (unaudited)

                             (Thousands of dollars)


2.       SEGMENT INFORMATION

         Based upon SFAS No. 131, "Disclosures about Segments of an Enterprise
         and Related Information" ("SFAS 131"), we have determined that the
         Company has two reportable segments: (1) Gas Utility and (2) Electric
         Utility. Although (1) Pennsylvania's Electricity Customer Choice Act
         unbundled prices for electric generation, transmission and distribution
         services and (2) on October 1, 1999 we transferred our electric
         generation assets to our non-utility subsidiary UGID, we currently
         manage and evaluate our electric generation, transmission and
         distribution operations on a combined basis. Accordingly, these
         electric operations have been combined for segment presentation
         purposes.

         The accounting policies of our two reportable segments are the same as
         those described in the Significant Accounting Policies note contained
         in the Company's 1999 Annual Report. We evaluate each segment's
         performance principally based upon its earnings before income taxes.

         No single customer represents more than 5% of the total revenues of
         either Gas Utility or Electric Utility. Financial information by
         business segment follows:

                                      -5-
<PAGE>   8
                               UGI UTILITIES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                   (unaudited)
                             (Thousands of dollars)

2.        SEGMENT INFORMATION  (continued)

          THREE MONTHS ENDED JUNE 30, 2000:

<TABLE>
<CAPTION>
                                                       Elimina-       Gas           Electric       All
                                            Total       tions       Utility         Utility       other
                                            -----       -----       -------         -------       -----
<S>                                      <C>           <C>         <C>             <C>            <C>
Segment revenues                         $  77,554       $ --      $  59,252       $  18,302       $ --

Segment profit:
      EBITDA                             $  18,099       $ --      $  14,334       $   3,765       $ --
      Depreciation and amortization         (5,794)        --         (4,873)           (921)        --
                                         ---------       ----      ---------       ---------       ----
      Operating income                      12,305         --          9,461           2,844         --
      Interest expense                      (4,348)        --         (3,790)           (558)        --
                                         ---------       ----      ---------       ---------       ----
      Income before income taxes         $   7,957       $ --      $   5,671       $   2,286       $ --
                                         =========       ====      =========       =========       ====
Segment assets  (at period end)          $ 713,893       $ --      $ 617,061       $  96,832       $ --
                                         =========       ====      =========       =========       ====
</TABLE>


          THREE MONTHS ENDED JUNE 30, 1999:

<TABLE>
<CAPTION>
                                                             Elimina-     Gas            Electric             All
                                               Total          tions      Utility         Utility             other
                                               -----          -----      -------         -------             -----
<S>                                          <C>             <C>        <C>             <C>             <C>
Segment revenues                             $  77,338         $-       $  60,392       $  16,946       $      --

Segment profit (loss):
      EBITDA                                 $  16,599         $-       $  11,314       $   5,296       $     (11)
      Depreciation and amortization             (5,800)        --          (4,768)         (1,032)             --
                                             ---------       ----       ---------       ---------       ---------
      Operating income (loss)                   10,799         --           6,546           4,264             (11)
      Interest expense                          (4,238)        --          (3,523)           (715)             --
                                             ---------       ----       ---------       ---------       ---------
      Income (loss) before income taxes      $   6,561         $-       $   3,023       $   3,549       $     (11)
                                             =========       ====       =========       =========       =========
Segment assets  (at period end)              $ 704,103       $(85)      $ 608,550       $  95,407       $     231
                                             =========       ====       =========       =========       =========
</TABLE>

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

         EBITDA (earnings before interest expense, income taxes, depreciation
         and amortization) should not be considered as an alternative to net
         income (as an indicator of operating performance) or as an alternative
         to cash flow (as a measure of liquidity or ability to service debt
         obligations) and is not a measure of performance or financial condition
         under generally accepted accounting principles.

                                      -6-
<PAGE>   9
                               UGI UTILITIES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                   (unaudited)
                             (Thousands of dollars)

2.        SEGMENT INFORMATION (continued)

          NINE MONTHS ENDED JUNE 30, 2000:

<TABLE>
<CAPTION>
                                                        Elimina-     Gas            Electric        All
                                          Total          tions      Utility         Utility        other
                                          -----          -----      -------         -------        -----
<S>                                      <C>            <C>        <C>             <C>             <C>
Segment revenues                         $ 368,574       $  --     $ 310,095       $  58,479       $  --

Segment profit:
      EBITDA                             $ 112,303       $  --     $  96,690       $  15,613       $  --
      Depreciation and amortization        (17,202)         --       (14,258)         (2,944)         --
                                         ---------       -----     ---------       ---------       -----
      Operating income                      95,101          --        82,432          12,669          --
      Interest expense                     (13,755)         --       (12,077)         (1,678)         --
                                         ---------       -----     ---------       ---------       -----
      Income before income taxes         $  81,346       $  --     $  70,355       $  10,991       $  --
                                         =========       =====     =========       =========       =====
Segment assets  (at period end)          $ 713,893       $  --     $ 617,061       $  96,832       $  --
                                         =========       =====     =========       =========       =====
</TABLE>


          NINE MONTHS ENDED JUNE 30, 1999:

<TABLE>
<CAPTION>
                                                              Elimina-         Gas            Electric           All
                                              Total            tions          Utility         Utility           other
                                              -----            -----          -------         -------           -----
<S>                                          <C>             <C>             <C>             <C>             <C>
Segment revenues                             $ 357,800       $      --       $ 302,593       $  55,207       $      --

Segment profit (loss):
      EBITDA                                 $  96,614       $      --       $  81,604       $  15,038       $     (28)
      Depreciation and amortization            (17,189)             --         (14,212)         (2,977)             --
                                             ---------       ---------       ---------       ---------       ---------
      Operating income (loss)                   79,425              --          67,392          12,061             (28)
      Interest expense                         (13,000)             --         (11,097)         (1,903)             --
                                             ---------       ---------       ---------       ---------       ---------
      Income (loss) before income taxes      $  66,425       $      --       $  56,295       $  10,158       $     (28)
                                             =========       =========       =========       =========       =========
Segment assets  (at period end)              $ 704,103       $     (85)      $ 608,550       $  95,407       $     231
                                             =========       =========       =========       =========       =========
</TABLE>

                                      - 7 -
<PAGE>   10
                               UGI UTILITIES, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                   (unaudited)
                             (Thousands of dollars)

2.        SEGMENT INFORMATION (continued)

          TWELVE MONTHS ENDED JUNE 30, 2000:

<TABLE>
<CAPTION>
                                                            Elimina-      Gas           Electric          All
                                              Total          tions      Utility         Utility          other
                                              -----          -----      -------         -------          -----
<S>                                          <C>            <C>        <C>             <C>             <C>
Segment revenues                             $ 431,421       $ --      $ 353,139       $  78,282       $      --

Segment profit (loss):
      EBITDA                                 $ 119,366       $ --      $ 102,050       $  17,355       $     (39)
      Depreciation and amortization            (23,019)        --        (19,042)         (3,977)             --
                                             ---------       ----      ---------       ---------       ---------
      Operating income (loss)                   96,347         --         83,008          13,378             (39)
      Interest expense                         (18,287)        --        (16,164)         (2,123)             --
                                             ---------       ----      ---------       ---------       ---------
      Income (loss) before income taxes      $  78,060       $ --      $  66,844       $  11,255       $     (39)
                                             =========       ====      =========       =========       =========
Segment assets  (at period end)              $ 713,893       $ --      $ 617,061       $  96,832       $      --
                                             =========       ====      =========       =========       =========
</TABLE>

          TWELVE MONTHS ENDED JUNE 30, 1999:

<TABLE>
<CAPTION>
                                                               Elimina-        Gas             Electric         All
                                              Total             tions         Utility          Utility         other
                                              -----             -----         -------          -------         -----
<S>                                          <C>             <C>             <C>             <C>             <C>
Segment revenues                             $ 417,944       $      --       $ 344,798       $  73,146       $      --

Segment profit (loss):
      EBITDA                                 $ 102,542       $      --       $  84,917       $  17,714       $     (89)
      Depreciation and amortization            (22,824)             --         (18,837)         (3,987)             --
                                             ---------       ---------       ---------       ---------       ---------
      Operating income (loss)                   79,718              --          66,080          13,727             (89)
      Interest expense                         (17,587)             --         (15,049)         (2,538)             --
                                             ---------       ---------       ---------       ---------       ---------
      Income (loss) before income taxes      $  62,131       $      --       $  51,031       $  11,189       $     (89)
                                             =========       =========       =========       =========       =========
Segment assets  (at period end)              $ 704,103       $     (85)      $ 608,550       $  95,407       $     231
                                             =========       =========       =========       =========       =========
</TABLE>

                                      - 8 -
<PAGE>   11
                               UGI UTILITIES, INC.

        Notes to Condensed Consolidated Financial Statements (continued)

                                   (unaudited)

                             (Thousands of dollars)

3.       Commitments and Contingencies

         The gas distribution business has been one of UGI Utilities' main
         businesses since it began in 1882. Prior to the construction of major
         natural gas pipelines in the 1950s, gas used for lighting and heating
         was produced at manufactured gas plants ("MGPs") from processes
         involving coal, coke or oil. Some constituents of coal tars produced
         from this process are today considered hazardous substances under the
         Superfund Law and may be located at these sites.

         Certain private parties have filed, or threatened to file, suit against
         UGI Utilities to recover costs of investigation or remediation of
         several MGP sites. In addition, we have identified environmental
         contamination at several of our properties and have voluntarily
         undertaken investigation and, as appropriate, remediation of these
         sites in cooperation with appropriate environmental agencies or private
         parties.

         At sites where a former subsidiary of UGI Utilities operated an MGP, we
         believe that UGI Utilities should not have significant liability
         because UGI Utilities generally is not legally liable for the
         obligations of its subsidiaries. Under certain circumstances, however,
         a court could find a parent company liable for environmental damage at
         sites owned by a subsidiary company when the parent company either (1)
         itself operated the facility causing the environmental damage or (2)
         otherwise so controlled the subsidiary that the subsidiary's separate
         corporate form should be disregarded. There could be, therefore,
         significant future costs of an uncertain amount associated with
         environmental damage caused by MGPs that UGI Utilities owned or
         directly operated, or that were owned or operated by former
         subsidiaries of UGI Utilities, if a court were to conclude that the
         subsidiary's separate corporate form should be disregarded. In many
         circumstances where UGI Utilities may be liable, we may not be able to
         reasonably quantify expenditures because of a number of factors. These
         factors include the various costs associated with potential remedial
         alternatives, the unknown number of other potentially responsible
         parties involved and their ability to contribute to the costs of
         investigation and remediation, and changing environmental laws and
         regulations.

         UGI Utilities has filed suit against more than fifty insurance
         companies alleging that the defendants breached contracts of insurance
         by failing to indemnify UGI Utilities for certain environmental costs.
         The suit seeks to recover more than $11,000 in costs incurred by UGI
         Utilities at various MGP sites. The parties have agreed to stay the
         litigation pending the voluntary exchange of documents and settlement
         negotiations. To date, UGI Utilities has entered into settlement
         agreements with several of the insurers and during the three months
         ended March 31, 2000 recorded pretax income of $2,400 which is net of
         amounts applied to site-specific environmental costs associated with
         Pennsylvania sites.

                                      -9-
<PAGE>   12
                               UGI UTILITIES, INC.

        Notes to Condensed Consolidated Financial Statements (continued)
                                   (unaudited)
                             (Thousands of dollars)

         In addition to these environmental matters, there are other pending
         claims and legal actions arising in the normal course of our
         businesses. We cannot predict with certainty the final results of
         environmental and other matters. However, it is reasonably possible
         that some of them could be resolved unfavorably to us. Management
         believes, after consultation with counsel, that damages or settlements,
         if any, recovered by the plaintiffs in such claims or actions will not
         have a material adverse effect on our financial position. However, such
         damages or settlements could be material to our operating results or
         cash flows in future periods depending on the nature and timing of
         future developments with respect to these matters and the amounts of
         future operating results and cash flows.

4.       Natural Gas Competition Act

         On June 22, 1999, Pennsylvania's Natural Gas Choice and Competition Act
         ("Gas Competition Act") was signed into law. The purpose of the Gas
         Competition Act is to provide all natural gas consumers in Pennsylvania
         with the ability to purchase their gas supplies from the supplier of
         their choice. Under the Gas Competition Act, local gas distribution
         companies ("LDCs") may continue to sell gas to customers, and such
         sales of gas, as well as distribution services provided by LDCs,
         continue to be subject to price regulation by the Pennsylvania Public
         Utility Commission ("PUC"). The Gas Competition Act, in conjunction
         with a companion bill, eliminated the gross receipts tax on sales of
         gas commencing January 1, 2000.

         Generally, LDCs will serve as the supplier of last resort for all
         residential and small commercial and industrial customers unless the
         PUC approves another supplier of last resort. LDCs are generally
         precluded from increasing rates for the recovery of costs, other than
         gas costs, until January 1, 2001. The Gas Competition Act requires
         energy marketers seeking to serve customers of LDCs to accept
         assignment of a portion of the LDC's interstate pipeline capacity and
         storage contracts at contract rates, thus avoiding the creation of
         stranded costs. After July 1, 2002, a natural gas supplier may petition
         the PUC to avoid such contract release or assignment. The PUC, however,
         may only grant the petition if certain findings are made and the LDC
         fully recovers the cost of contracts.

         On October 1, 1999, Gas Utility filed its restructuring plan with the
         PUC pursuant to the Gas Competition Act. On June 29, 2000, the PUC
         entered its order ("Gas Restructuring Order") in Gas Utility's
         restructuring plan approving such plan substantially as filed. The
         Company does not believe the Gas Competition Act and the Gas
         Restructuring Order will have a material adverse impact on its
         financial condition or results of operations.

                                      -10-
<PAGE>   13
                               UGI UTILITIES, INC.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS


                        ANALYSIS OF RESULTS OF OPERATIONS

The following analyses compare our results of operations for (1) the three
months ended June 30, 2000 ("2000 three-month period") with the three months
ended June 30, 1999 ("1999 three-month period"); (2) the nine months ended June
30, 2000 ("2000 nine-month period") with the nine months ended June 30, 1999
("1999 nine-month period"); and (3) the twelve months ended June 30, 2000 ("2000
twelve-month period") with the twelve months ended June 30, 1999 ("1999
twelve-month period"). Our results of operations should be read in conjunction
with the segment information included in Note 2 to the Condensed Consolidated
Financial Statements.

2000 THREE-MONTH PERIOD COMPARED WITH 1999 THREE-MONTH PERIOD

<TABLE>
<CAPTION>
                                                                                     Increase
Three Months Ended June 30,                                2000       1999          (Decrease)
---------------------------                                ----       ----          ----------
(Millions of dollars)
<S>                                                       <C>        <C>        <C>         <C>
GAS UTILITY:
          Revenues                                        $ 59.3     $ 60.4     $ (1.1)     (1.8)%
          Total margin (a)                                $ 31.7     $ 30.0     $  1.7       5.7%
          EBITDA (b)                                      $ 14.3     $ 11.3     $  3.0      26.5%
          Operating income                                $  9.5     $  6.5     $  3.0      46.1%
          Natural gas system throughput - bcf               15.4       14.7        0.7       4.8%
          Heating degree days - % warmer
             than normal                                     7.4       15.5         --        --

ELECTRIC UTILITY:
          Revenues                                        $ 18.3     $ 16.9     $  1.4       8.3%
          Total margin (a)                                $  9.2     $ 10.8     $ (1.6)    (14.8)%
          EBITDA (b)                                      $  3.8     $  5.3     $ (1.5)    (28.3)%
          Operating income                                $  2.8     $  4.3     $ (1.5)    (34.9)%
          Electric sales - gwh                             205.5      198.2        7.3       3.6
                                                          ------     ------     ------    ------
</TABLE>

         bcf - billions of cubic feet. gwh - millions of kilowatt hours.

(a)      Gas and Electric utilities' total margin represents total revenues less
         cost of sales and revenue-related taxes, i.e. gross receipts taxes. For
         financial statement purposes, revenue-related taxes are included in
         "taxes other than income taxes" on the condensed consolidated
         statements of income.

                                      -11-
<PAGE>   14

                               UGI UTILITIES, INC.


(b)      EBITDA (earnings before interest expense, income taxes, depreciation
         and amortization) should not be considered as an alternative to net
         income (as an indicator of operating performance) or as an alternative
         to cash flow (as a measure of liquidity or ability to service debt
         obligations) and is not a measure of performance or financial condition
         under generally accepted accounting principles.

GAS UTILITY. Weather in Gas utility's service territory during the 2000
three-month period was 7.4% warmer than normal but 9.6% colder than the
prior-year period. The increase in total system throughput principally resulted
from higher interruptible delivery service volumes and to a lesser extent higher
core market sales resulting from an increase in the number of customers and the
colder spring weather.

Gas Utility revenues declined $1.1 million in the 2000 three-month period as the
impact on revenues from the greater interruptible delivery service volumes and
higher core market sales was more than offset by (1) a $3.6 million decrease in
off-system sales revenue and (2) the elimination of gross receipts tax ("GRT")
revenue effective January 1, 2000 pursuant to the Gas Competition Act. Gas
Utility cost of sales was $27.5 million in the 2000 three-month period, a
decrease of $0.8 million, principally reflecting the lower off-system sales. Gas
Utility total margin increased $1.7 million reflecting (1) increased margin from
interruptible customers as a result of the higher interruptible throughput and a
greater spread between oil and natural gas prices and (2) increased core market
margin.

Gas Utility EBITDA and operating income each increased $3.0 million during the
2000 three-month period. The increase reflects (1) the previously mentioned $1.7
million increase in total margin and (2) a decrease in operating and
administrative expenses. Operating and administrative expenses, excluding
depreciation and amortization, declined $1.3 million in the 2000 three-month
period principally reflecting a decrease in distribution system maintenance
expenses.

ELECTRIC UTILITY. Electric Utility sales during the 2000 three-month period
increased slightly from the prior year. Revenues increased as a result of the
higher sales as well as higher transmission revenues from alternate electric
power suppliers. Electric Utility cost of sales was $8.3 million in the 2000
three-month period, an increase of $2.8 million from the prior-year period.
Electric Utility cost of sales in the current-year period includes costs
associated with the higher sales and transmission revenues. Cost of sales in the
prior-year period includes the benefit of $1.5 million from a power supply
agreement settlement.

Electric Utility's total margin decreased $1.6 million because the prior year
included the beneficial impact of the previously mentioned power supply
agreement settlement on 1999 three-month period results. The decline in EBITDA
and operating income in the 2000 three-month period principally reflects the
decrease in total margin.

                                      -12-
<PAGE>   15
                               UGI UTILITIES, INC.

2000 NINE-MONTH PERIOD COMPARED WITH 1999 NINE-MONTH PERIOD

<TABLE>
<CAPTION>
                                                                               Increase
Nine Months Ended June 30,                         2000       1999            (Decrease)
--------------------------                         ----       ----            ----------
(Millions of dollars)
<S>                                               <C>        <C>        <C>        <C>
GAS UTILITY:
          Revenues                                $310.1     $302.6     $  7.5       2.5%
          Total margin                            $145.0     $136.3     $  8.7       6.4%
          EBITDA                                  $ 96.7     $ 81.6     $ 15.1      18.5%
          Operating income                        $ 82.4     $ 67.4     $ 15.0      22.3%
          Natural gas system throughput - bcf       67.2       64.1        3.1       4.8%
          Heating degree days - % warmer
             than normal                            11.1       12.4         --        --

ELECTRIC UTILITY:
          Revenues                                $ 58.5     $ 55.2     $  3.3       6.0%
          Total margin                            $ 31.3     $ 30.7     $  0.6       2.0%
          EBITDA                                  $ 15.6     $ 15.0     $  0.6       4.0%
          Operating income                        $ 12.7     $ 12.1     $  0.6       5.0%
          Electric sales - gwh                     689.5      676.6       12.9       1.9%
                                                  ------     ------     ------     ------
</TABLE>

GAS UTILITY. Weather in Gas Utility's service territory in the 2000 nine-month
period was 11.1% warmer than normal compared to weather that was 12.4% warmer
than normal during the prior year period. More than eighty percent of the
increase in system throughput during the 2000 nine-month period resulted from
increased delivery service volumes to interruptible customers with the remainder
representing higher sales to core market customers.

The increase in Gas Utility's revenues during the 2000 nine-month period
principally resulted from (1) a $7.4 million increase in core market revenues,
reflecting higher sales and higher average purchased gas cost ("PGC") rates
partially offset by the impact of the elimination of GRT effective January 1,
2000, and (2) a $6.5 million increase in revenues from interruptible customers.
These increases in revenue were partially offset by lower off-system sales
revenues and lower firm delivery service revenues. Gas Utility cost of gas was
$161.1 million in the 2000 nine-month period compared with $154.4 million in the
prior-year period. The increase reflects higher average PGC rates and higher
core market sales partially offset by lower costs associated with the previously
mentioned decline in off-system sales.

Gas Utility total margin increased $8.7 million reflecting (1) a $4.4 million
increase in total interruptible retail and interruptible delivery service
margin; (2) a $3.2 million increase in core market margin; and (3) slightly
higher firm delivery service total margin.

Gas Utility EBITDA and operating income increased $15.1 million and $15.0
million, respectively, during the 2000 nine-month period as a result of (1) the
higher total margin; (2) a

                                      -13-
<PAGE>   16
                              UGI UTILITIES, INC.

$3.7 million increase in other income; and (3) a decrease in net operating
expenses. Other income in the 2000 nine-month period includes (1) income from
the refund of revenue-related tax overpayments made in prior years (including
associated interest); (2) interest income from purchased gas cost
undercollections; and (3) higher income from a construction project and other
activities. Gas Utility's net operating expenses declined $2.8 million
reflecting higher costs associated with environmental matters and customer
accounts more than offset by (1) $2.4 million in income from an insurance
settlement and (2) $0.9 million from adjustments to incentive compensation
accruals recorded in the three months ended December 31, 1999.

ELECTRIC UTILITY. Electric sales for the 2000 nine-month period increased 1.9%
on weather that was slightly colder than in the prior year. Revenues increased
as a result of the higher sales as well as an increase in transmission revenues
from alternate electric power suppliers selling electricity to some of our
customers. Cost of sales increased to $24.7 million in the 2000 nine-month
period from $22.2 million in the prior year reflecting the higher sales and
higher costs associated with the greater transmission revenues.

Electric Utility operations total margin increased $0.6 million principally
reflecting the impact of the higher sales. EBITDA and operating income also
increased reflecting higher total margin and a $2.0 million increase in other
income. These increases were partially offset by higher utility realty taxes and
greater power production maintenance expenses.

                                      -14-
<PAGE>   17
                               UGI UTILITIES, INC.

2000 TWELVE MONTH PERIOD COMPARED WITH 1999 TWELVE-MONTH PERIOD

<TABLE>
<CAPTION>
                                                                                      Increase
Twelve Months Ended June 30,                               2000        1999          (Decrease)
-----------------------------                              ----        ----          ----------
(Millions of dollars)
<S>                                                        <C>        <C>        <C>       <C>
GAS UTILITY:
          Revenues                                         $353.1     $344.8     $  8.3        2.4%
          Total margin                                     $169.2     $159.8     $  9.4        5.9%
          EBITDA                                           $102.1     $ 84.9     $ 17.2       20.3%
          Operating income                                 $ 83.0     $ 66.1     $ 16.9       25.6%
          Natural gas system throughput - bcf                79.3       76.0        3.3        4.3%
          Heating degree days - % warmer
             than normal                                     11.6       12.9         --         --

ELECTRIC UTILITY:
          Revenues                                         $ 78.3     $ 73.1     $  5.2        7.1%
          Total margin                                     $ 39.3     $ 39.0     $  0.3        0.8%
          EBITDA                                           $ 17.4     $ 17.7     $ (0.3)      (1.7)%
          Operating income                                 $ 13.4     $ 13.7     $ (0.3)      (2.2)%
          Electric sales - gwh                              913.3      890.4       22.9        2.6%
                                                           ------     ------     ------     ------
</TABLE>

GAS UTILITY. Weather in Gas Utility's service territory during the 2000
twelve-month period was 11.6% warmer than normal but 2.1% colder than the prior
year. Total system throughput increased as a result of the colder weather and an
increase in total customers.

The increase in Gas Utility's revenues during the 2000 twelve-month period
resulted from (1) a $5.8 million increase in core market revenues (reflecting
higher core market volumes and PGC rates less the elimination of GRT revenue
effective January 1, 2000) and (2) a $7.5 million increase in interruptible
delivery service revenues. Partially offsetting these revenue increases were
lower firm delivery service revenues and lower revenues from off-system sales.
Gas Utility cost of sales was $178.6 million in the 2000 twelve-month period
compared with $171.9 million in the 1999 twelve-month period reflecting higher
average purchased gas cost rates and the higher core market sales.

Gas Utility total margin increased $9.4 million reflecting (1) a $5.3 million
increase in margin from interruptible customers as a result of higher volumes
transported and higher average margins, (2) increased core market margin, and
(3) a slight increase in firm delivery service margin.

Gas Utility EBITDA and operating income were higher in the 2000 twelve-month
period principally as a result of the greater total margin, a $4.2 million
increase in other income and slightly lower operating expenses. Other income in
the 2000 twelve-month period includes (1) income from the refund of
revenue-related tax overpayments made in prior years (including associated
interest), (2) greater income from a construction project and other activities,
and (3) interest income from purchased gas cost undercollections.

                                      -15-
<PAGE>   18
                               UGI UTILITIES, INC.

ELECTRIC UTILITY. Total kilowatt-hour sales were higher in the 2000 twelve-month
period reflecting greater air-conditioning related sales during the fourth
quarter of fiscal 1999 and an increase in the number of customers. Electric
Utility revenues increased $5.2 million as a result of the increased sales and
higher transmission revenues associated with alternate suppliers serving
customers on our distribution system. Cost of sales increased $4.7 million
reflecting the increase in total sales and costs associated with the higher
transmission revenues.

Electric Utility's total margin increased $0.3 million principally as a result
of the higher 2000 twelve-month period sales. EBITDA and operating income each
decreased $0.3 million, notwithstanding the increase in total margin and higher
other income, reflecting greater (1) utility realty taxes, (2) power generation
maintenance costs, and (3) customer service and information expenses.

                                      -16-
<PAGE>   19


                              UGI UTILITIES, INC.

                       FINANCIAL CONDITION AND LIQUIDITY

FINANCIAL CONDITION

The Company's debt outstanding at June 30, 2000 totaled $242.0 million compared
with $267.4 million at September 30, 1999. Included in these amounts are bank
loans of $61.9 million and $87.4 million, respectively. Under our revolving
credit agreements, we may borrow up to $97 million. In addition, UGI Utilities
can issue up to an additional $52 million of debt under its Medium Term Note
program.

On October 1, 1999, Gas Utility filed its restructuring plan with the PUC
pursuant to the Gas Competition Act. On June 29, 2000, the PUC entered its order
("Gas Restructuring Order") in Gas Utility's restructuring plan approving such
plan substantially as filed. The Company does not believe the Gas Competition
Act and the Gas Restructuring Order will have a material adverse impact on its
financial condition or results of operations (see Note 4).

CASH FLOWS

The Company's cash flows from operating activities are seasonal and are
generally greatest during the second and third fiscal quarters when customers
pay bills incurred during the heating season and are generally lowest during the
first and fourth fiscal quarters. Accordingly, cash flows from operations for
the nine months ended June 30, 2000 are not necessarily indicative of cash flows
to be expected for a full year.

OPERATING ACTIVITIES. Cash provided by operating activities was $78.2 million
during the nine months ended June 30, 2000 compared with $61.0 million in the
prior-year period. Changes in operating working capital in the 2000 nine-month
period provided $8.4 million of operating cash flow compared to $1.2 million
provided in the prior year. Cash generated by operating activities before
changes in operating working capital totaled $69.8 million, $10.0 million higher
than in the prior year, reflecting the greater operating results.

INVESTING ACTIVITIES. We spent $23.2 million for property, plant and equipment
in the nine months ended June 30, 2000 compared with $25.0 million in the
prior-year period. The decrease principally reflects lower information services
capital expenditures.

FINANCING ACTIVITIES. Cash flows from financing activities in each of the 2000
and 1999 nine-month periods includes dividends on preferred stock of $1.2
million. During the 2000 nine-month period, UGI Utilities paid $36.0 million of
dividends to its parent company, UGI, compared with $29.0 million in the
prior-year period. Net repayments under UGI Utilities' revolving credit
agreements totaled $25.5 million in the 2000 nine-month period compared with
$8.8 million in the 1999 nine-month period.


                                      -17-
<PAGE>   20
                              UGI UTILITIES, INC.

ADOPTION OF NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133, as amended by SFAS No. 137, is
required to be adopted by the Company for the first quarter of fiscal 2001. The
Company is currently assessing its impact on the Company's financial position
and results of operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in prices for natural gas and
electricity it purchases, and from changes in interest rates. Although Gas
Utility is subject to changes in the price of natural gas, the current
regulatory framework allows Gas Utility to recover prudently incurred gas costs
from its customers. In addition, Pennsylvania's Natural Gas Choice and
Competition Act permits local distribution companies to recover prudently
incurred costs of gas sold to customers. Because of this ratemaking mechanism,
there is limited commodity price risk associated with our Gas Utility
operations.

The Company's Electric Utility operations include the regulated sale of
electricity through its distribution business and the production of electricity
through its electric generation business unit. Currently our electric generation
operations produces electricity exclusively for our distribution business,
generating approximately 50% of its electricity needs. Electric Utility
purchases the remainder of its electric power needs under power supply
arrangements of varying length terms with other producers and, to a lesser
extent, on the spot market. Spot market prices for electricity and, to a lesser
extent, monthly market-based contracts can be volatile, especially during
periods of high demand. In accordance with Electric Utility's Restructuring
Order, the transmission and distribution components of Electric Utility's rates
are "capped" through July 1, 2001. In addition, Electric Utility's generation
rate cap is expected to extend through December 31, 2002. Accordingly, Electric
Utility does not currently have the ability to pass on increases in its power
costs through rate increases to its customers.

We have interest rate exposure associated with borrowings under our revolving
credit agreements. These agreements provide for interest rates on borrowings
which are indexed to short-term market interest rates. Based upon the average
level of borrowings outstanding under these agreements during the most recent
fiscal year ended September 30, 1999, an increase in short-term interest rates
of 100 basis points (1%) would have increased annual interest expense by
approximately $0.6 million.


                                      -18-
<PAGE>   21
                              UGI UTILITIES, INC.

                            PART II OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      List of Exhibits:

                  10       2000 UGI Corporation Stock Incentive Plan is
                           incorporated by reference to Exhibit 10.1 to the UGI
                           Corporation Form 10-Q for the Quarter ended June 30,
                           2000

                  12.1     Computation of ratio of earnings to fixed charges

                  12.2     Computation of ratio of earnings to combined fixed
                           charges and preferred stock dividends

                  27       Financial Data Schedule

         (b)      The Company did not file any Current Reports on Form 8-K
                  during the fiscal quarter ended June 30, 2000.


                                      -19-
<PAGE>   22

                                   SIGNATURES



         Pursuant to the requirements 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.



                                        UGI Utilities, Inc.
                                        (Registrant)








Date:  August 11, 2000                  By:  /s/ J. C. Barney
----------------------                  --------------------------------------
                                        J. C. Barney, Senior Vice President -
                                        Finance
                                        (Principal Financial Officer)


                                      -20-
<PAGE>   23
                               UGI UTILITIES, INC.

                                  EXHIBIT INDEX


                  12.1     Computation of ratio of earnings to fixed charges

                  12.2     Computation of ratio of earnings to combined fixed
                           charges and preferred stock dividends

                  27       Financial Data Schedule