<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

     For the quarterly period ended December 31, 2005

                                       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
                                              -----    -----

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. Large
accelerated filer       Accelerated filer       Non-accelerated filer   X
                  -----                   -----                       -----

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes       No   X
                                                -----    -----

     At January 31, 2006, 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>

                               UGI UTILITIES, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          PAGES
                                                                         -------
<S>                                                                      <C>
PART I FINANCIAL INFORMATION

   Item 1. Financial Statements

           Condensed Balance Sheets as of December 31, 2005,
              September 30, 2005 and December 31, 2004                         1

           Condensed Statements of Income for the three
              months ended December 31, 2005 and 2004                          2

           Condensed Statements of Cash Flows for the
              three months ended December 31, 2005 and 2004                    3

           Notes to Condensed Financial Statements                        4 - 11

   Item 2. Management's Discussion and Analysis of Financial
              Condition and Results of Operations                        12 - 16

   Item 3. Quantitative and Qualitative Disclosures About Market Risk    16 - 17

   Item 4. Controls and Procedures                                            18

PART II OTHER INFORMATION

   Item 1. Legal Proceedings                                                  19

   Item 6. Exhibits                                                           20

Signatures                                                                    21
</TABLE>


                                      -i-

<PAGE>

                               UGI UTILITIES, INC.

                            CONDENSED BALANCE SHEETS
                                   (unaudited)
                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                                           December 31,   September 30,   December 31,
                                                                               2005            2005           2004
                                                                           ------------   -------------   ------------
<S>                                                                        <C>            <C>             <C>
ASSETS
   Current assets:
      Cash and cash equivalents                                             $    2,514       $  2,686       $  1,608
      Accounts receivable (less allowances for doubtful accounts
         of $5,560, $4,562 and $3,395, respectively)                            89,253         48,597         65,014
      Accounts receivable - related parties                                      1,268          1,063          1,010
      Accrued utility revenues                                                  59,190         10,360         38,828
      Inventories                                                               81,023         71,584         55,367
      Deferred income taxes                                                      2,184         12,484          7,507
      Deferred fuel costs                                                        9,435             --             --
      Prepaid expenses and other current assets                                  3,457          9,563          1,481
                                                                            ----------       --------       --------
         Total current assets                                                  248,324        156,337        170,815
   Property, plant and equipment, at cost (less accumulated depreciation
      and amortization of $335,802, $330,329 and $317,975, respectively)       659,092        655,322        635,480
   Regulatory assets                                                            61,794         61,334         65,577
   Other assets                                                                 31,763         30,680         28,715
                                                                            ----------       --------       --------
      Total assets                                                          $1,000,973       $903,673       $900,587
                                                                            ==========       ========       ========
LIABILITIES AND STOCKHOLDER'S EQUITY
   Current liabilities:
      Current maturities of long-term debt                                  $       --       $ 50,000       $ 70,000
      Bank loans                                                               145,500         81,200         83,000
      Accounts payable                                                          95,304         38,430         67,397
      Accounts payable - related parties                                         3,520         14,371          5,670
      Deferred fuel refunds                                                         --         17,370          3,017
      Other current liabilities                                                 45,263         58,015         54,704
                                                                            ----------       --------       --------
         Total current liabilities                                             289,587        259,386        283,788
   Long-term debt                                                              237,000        187,030        167,121
   Deferred income taxes                                                       162,198        160,920        159,206
   Deferred investment tax credits                                               7,096          7,193          7,489
   Other noncurrent liabilities                                                 14,255         14,213         14,140
                                                                            ----------       --------       --------
         Total liabilities                                                     710,136        628,742        631,744
   Commitments and contingencies (note 5)
   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                                                80,622         80,622         79,773
      Retained earnings                                                        148,599        133,807        130,936
      Accumulated other comprehensive income (loss)                              1,357            243         (2,125)
                                                                            ----------       --------       --------
         Total common stockholder's equity                                     290,837        274,931        268,843
                                                                            ----------       --------       --------
      Total liabilities and stockholder's equity                            $1,000,973       $903,673       $900,587
                                                                            ==========       ========       ========
</TABLE>

See accompanying notes to condensed financial statements.


                                      -1-

<PAGE>

                               UGI UTILITIES, INC.

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

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                         December 31,
                                                     -------------------
                                                       2005       2004
                                                     --------   --------
<S>                                                  <C>        <C>
Revenues                                             $243,673   $183,481
                                                     --------   --------
Costs and expenses:
   Cost of sales - gas, fuel and purchased power      171,246    117,589
   Operating and administrative expenses               21,986     22,765
   Operating and administrative expenses - related
      parties                                             726      3,095
   Taxes other than income taxes                        3,262      3,188
   Depreciation and amortization                        6,188      5,800
   Other income, net                                   (1,961)    (1,825)
                                                     --------   --------
                                                      201,447    150,612
                                                     --------   --------
Operating income                                       42,226     32,869
Interest expense                                        5,636      4,526
                                                     --------   --------
Income before income taxes                             36,590     28,343
Income taxes                                           14,665     11,377
                                                     --------   --------
Net income                                           $ 21,925   $ 16,966
                                                     ========   ========
</TABLE>

See accompanying notes to condensed financial statements.


                                       -2-

<PAGE>

                               UGI UTILITIES, INC.

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

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                        December 31,
                                                                    -------------------
                                                                      2005       2004
                                                                    --------   --------
<S>                                                                 <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                       $ 21,925   $ 16,966
   Adjustments to reconcile net income to net cash used
      by operating activities:
         Depreciation and amortization                                 6,188      5,800
         Deferred income taxes, net                                   10,397        540
         Provision for uncollectible accounts                          2,771      1,914
         Other, net                                                   (1,827)     1,511
         Net change in:
            Accounts receivable and accrued utility revenues         (92,462)   (58,127)
            Inventories                                               (9,439)     9,810
            Deferred fuel costs                                      (26,805)    (4,845)
            Accounts payable                                          46,023     10,360
            Other current assets and liabilities                      (4,170)    12,974
                                                                    --------   --------
      Net cash used by operating activities                          (47,399)    (3,097)
                                                                    --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Expenditures for property, plant and equipment                     (9,713)    (9,656)
   Net costs of property, plant and equipment disposals                 (227)      (276)
                                                                    --------   --------
      Net cash used by investing activities                           (9,940)    (9,932)
                                                                    --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment of dividends                                               (7,133)    (7,484)
   Redemption of preferred shares subject to mandatory redemption         --    (20,000)
   Increase in bank loans with maturities of
      three months or less                                            64,300     22,100
   Repayment of debt                                                 (50,000)        --
   Issuance of debt                                                   50,000     20,000
                                                                    --------   --------
      Net cash provided by financing activities                       57,167     14,616
                                                                    --------   --------
   Cash and cash equivalents (decrease) increase                    $   (172)  $  1,587
                                                                    ========   ========
CASH AND CASH EQUIVALENTS:
   End of period                                                    $  2,514   $  1,608
   Beginning of period                                                 2,686         21
                                                                    --------   --------
      (Decrease) increase                                           $   (172)  $  1,587
                                                                    ========   ========
</TABLE>

See accompanying notes to condensed financial statements.


                                       -3-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

1.   BASIS OF PRESENTATION

     UGI Utilities, Inc. ("UGI Utilities"), a wholly owned subsidiary of UGI
     Corporation ("UGI"), owns and operates a natural gas distribution utility
     ("Gas Utility") in parts of eastern and southeastern Pennsylvania and an
     electricity distribution utility ("Electric Utility") in northeastern
     Pennsylvania. We refer to Gas Utility and Electric Utility collectively as
     "the Company" or "we." Gas Utility and Electric Utility are subject to
     regulation by the Pennsylvania Public Utility Commission ("PUC").

     The accompanying condensed financial statements are unaudited and have been
     prepared in accordance with the rules and regulations of the U.S.
     Securities and Exchange Commission ("SEC"). 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. The September 30, 2005
     condensed balance sheet data was derived from audited financial statements,
     but does not include all disclosures required by accounting principles
     generally accepted in the United States of America. 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, 2005 ("Company's 2005 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.

     COMPREHENSIVE INCOME. The following table presents the components of
     comprehensive income for the three months ended December 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                    Three Months Ended
                                       December 31,
                                    ------------------
                                       2005      2004
                                     -------   -------
<S>                                 <C>        <C>
Net income                           $21,925   $16,966
Other comprehensive income (loss)      1,114      (670)
                                     -------   -------
Comprehensive income                 $23,039   $16,296
                                     =======   =======
</TABLE>

     Other comprehensive income (loss) comprises changes in the fair value of
     interest rate protection and electricity price swap agreements qualifying
     as hedges, net of reclassifications to net income.

     STOCK-BASED COMPENSATION. Certain members of the Company's management may
     be granted stock options and other equity-based awards ("Units") of UGI
     Common Stock under UGI's equity compensation plans. Such awards typically
     vest ratably over a period of years (generally three years). There are
     certain change of control and retirement eligibility conditions that, if
     met, generally result in an acceleration of vesting. Stock options for UGI
     Common Stock generally can be exercised no later than ten years from the
     grant date, Effective October 1, 2005, the Company adopted Statement of
     Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
     "Share-Based Payment" ("SFAS 123R"). Prior to October 1, 2005, as
     permitted, we applied the provisions of Accounting Principles Board ("APB")
     Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in
     recording compensation expense for grants of stock, stock options and other
     equity instruments to


                                       -4-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

     employees. Under APB 25, the Company did not record any compensation
     expense for stock options, but provided the required pro forma disclosures
     as if we had determined compensation expense under the fair value method
     prescribed by the provisions of SFAS No. 123. Under SFAS 123R, all
     equity-based compensation cost is measured on the grant date or at period
     end based on the fair value of that award and is recognized in the income
     statement over the requisite service period.

     Under the modified prospective approach, effective October 1, 2005, we
     began recording compensation expense for awards that were not vested as of
     that date. We used the Black-Scholes option-pricing model to estimate the
     fair value of each option prior to adoption of SFAS 123R and continue to
     use this model. The adoption of SFAS 123R resulted in compensation expense
     associated with stock options of $43 ($25 after-tax) during the three
     months ended December 31, 2005. As of December 31, 2005, there was $287 of
     unrecognized compensation cost related to non-vested stock options that is
     expected to be recognized over a weighted average period of 1.9 years.
     Assuming no significant change in the level of future stock option grants
     to UGI Utilities' employees, we do not believe that compensation expense
     associated with stock options will have a material impact on our financial
     position, results of operations or cash flows.

     Both prior to and after the adoption of SFAS 123R, we measured and recorded
     compensation cost of Units awarded that can be settled in cash or at UGI's
     option in cash or shares of Common Stock, or a combination of both, based
     upon their fair value as of the end of each period. The fair value of Units
     are dependent upon UGI's stock price and its performance in comparison to a
     group of peer companies. The fair value of these awards is expensed over
     requisite service periods.

     We recorded total net pre-tax equity-based compensation (benefit) expense
     of ($621) and $761, during the three months ended December 31, 2005 and
     2004, respectively. The period ended December 31, 2005 reflects a net
     compensation benefit predominantly due to changes in stock prices. The
     following table illustrates the effects on net income as if we had applied
     the provisions of SFAS 123R to all stock-based compensation awards for the
     period prior to the adoption of SFAS 123R

<TABLE>
<S>                                                       <C>
For the Three Months Ended December 31, 2004
Net income, as reported                                   $16,966
Add: Stock-based employee compensation (benefit)
   expense included in reported net income, net
   of related tax effects                                     445
Deduct: Total stock-based employee compensation benefit
   (expense) determined under the fair value method
   for all awards, net of related tax effects                (490)
                                                          -------
Pro forma net income                                      $16,921
                                                          =======
</TABLE>

     The total net after-tax equity-based compensation benefit recorded during
     the three months ended December 31, 2005 was $364. As of December 31, 2005,
     there was a total of $510 of unrecognized compensation expense associated
     with 32,400 Unit awards that are expected to be recognized over a weighted
     average period of 1.7 years. At December 31, 2005, total liabilities of
     $1,340 associated with Unit awards are reflected in other current
     liabilities and other noncurrent liabilities in the Condensed Balance
     Sheet.

     The following table illustrates the number of non-vested Unit awards:

<TABLE>
<CAPTION>
                                             Number of            Average Fair
                                             UGI Units          Value (per Unit)
                                             ---------          ----------------
<S>                                          <C>                <C>
Non-vested awards-September 30, 2005         43,650                $30.14
Vested                                      (11,250)
Non-vested awards-December 31, 2005          32,400                $22.52
</TABLE>


     RECLASSIFICATIONS. We have reclassified certain prior-year balances to
     conform to the current period presentation.


                                      -5-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

     USE OF ESTIMATES. We make estimates and assumptions when preparing
     financial statements in conformity with accounting principles generally
     accepted in the United States of America. These estimates and assumptions
     affect the reported amounts of assets and liabilities, revenues and
     expenses, as well as the disclosure of contingent assets and liabilities.
     Actual results could differ from these estimates.

2.   SEGMENT INFORMATION

     The Company has two reportable segments: (1) Gas Utility and (2) Electric
     Utility. 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 2005 Annual Report. We evaluate each segment's
     profitability principally based upon its income before income taxes. No
     single customer represents more than 10% of the total revenues of either
     Gas Utility or Electric Utility. There are no significant intersegment
     transactions. In addition, all of our reportable segments' revenues are
     derived from sources within the United States.

     Financial information by business segment follows:

     THREE MONTHS ENDED DECEMBER 31, 2005:

<TABLE>
<CAPTION>
                                                                Gas     Electric
                                                   Total      Utility    Utility
                                                ----------   --------   --------
<S>                                             <C>          <C>        <C>
Revenues                                        $  243,673   $219,799   $ 23,874
Cost of sales - gas, fuel and purchased power      171,246    159,920     11,326
Depreciation and amortization                        6,188      5,375        813
Operating income                                    42,226     35,690      6,536
Interest expense                                     5,636      5,109        527
Income before income taxes                          36,590     30,581      6,009
                                                ----------   --------   --------
Total assets at period end                       1,000,973    896,809    104,164
                                                ==========   ========   ========
</TABLE>

     THREE MONTHS ENDED DECEMBER 31, 2004:

<TABLE>
<CAPTION>
                                                              Gas     Electric
                                                  Total     Utility    Utility
                                                --------   --------   --------
<S>                                             <C>        <C>         <C>
Revenues                                        $183,481   $161,219    $22,262
Cost of sales - gas, fuel and purchased power    117,589    106,605     10,984
Depreciation and amortization                      5,800      5,054        746
Operating income                                  32,869     28,146      4,723
Interest expense                                   4,526      4,073        453
Income before income taxes                        28,343     24,073      4,270
                                                --------   --------    -------
Total assets at period end                       900,587    809,634     90,953
                                                ========   ========    =======
</TABLE>


                                       -6-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

3.   LONG-TERM DEBT

     In December 2005, UGI Utilities refinanced $50,000 of its maturing 7.14%
     Medium-Term Notes with proceeds from the issuance of $50,000 of 5.64%
     Medium-Term Notes due in December 2015. These Medium-Term Notes were issued
     pursuant to the Company's $125,000 shelf registration statement with the
     SEC.

4.   DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS

     We sponsor a defined benefit pension plan ("UGI Utilities Pension Plan")
     for employees of UGI, UGI Utilities and certain of UGI's other wholly owned
     subsidiaries. In addition, we provide postretirement health care benefits
     to certain retirees and postretirement life insurance benefits to nearly
     all active and retired employees.

     Net periodic pension expense and other postretirement benefit costs
     relating to UGI Utilities' employees include the following components:

<TABLE>
<CAPTION>
                                   Pension Benefits    Other Postretirement Benefits
                                  ------------------   -----------------------------
                                  Three Months Ended         Three Months Ended
                                     December 31,               December 31,
                                  ------------------   -----------------------------
                                     2005      2004             2005    2004
                                   -------   -------           -----   -----
<S>                               <C>        <C>       <C>             <C>
Service cost                       $ 1,310   $ 1,090           $  32   $  29
Interest cost                        3,222     2,998             204     368
Expected return on assets           (4,448)   (3,975)           (152)   (119)
Amortization of:
   Transition obligation                --        --              --     169
   Prior service cost (benefit)        196       155             (55)     --
   Actuarial loss                      427       308              48      81
                                   -------   -------           -----   -----
Net benefit cost                       707       576              77     528
Change in regulatory assets
   and liabilities                      --        --             698     247
                                   -------   -------           -----   -----
Net expense                        $   707   $   576           $ 775   $ 775
                                   =======   =======           =====   =====
</TABLE>

     UGI Utilities Pension Plan assets are held in trust and consist principally
     of equity and fixed income mutual funds. The Company does not believe it
     will be required to make any contributions to the UGI Utilities Pension
     Plan during the year ending September 30, 2006 for ERISA funding purposes.
     Pursuant to orders previously issued by the PUC, UGI Utilities has
     established a Voluntary Employees' Beneficiary Association ("VEBA") trust
     to fund and pay UGI Utilities' postretirement health care and life
     insurance benefits referred to above by depositing into the VEBA the annual
     amount of postretirement benefit costs determined under SFAS No. 106,
     "Employers' Accounting for Postretirement Benefits Other Than Pensions."
     The difference between the annual amount calculated and the amount included
     in UGI Utilities rates is deferred for future recovery from, or refund to,
     ratepayers. During the three months ended December 31, 2005, the Company
     contributed approximately $180 to the VEBA and expects to


                                       -7-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

     contribute a total of approximately $800 during the twelve months ending
     September 30, 2006.

     We also sponsor an unfunded and non-qualified supplemental executive
     retirement income plan. We recorded pre-tax expense for this plan of $96
     and $108 for the three months ended December 31, 2005 and 2004,
     respectively.

5.   COMMITMENTS AND CONTINGENCIES

     From the late 1800s through the mid-1900s, UGI Utilities and its former
     subsidiaries owned and operated a number of manufactured gas plants
     ("MGPs") prior to the general availability of natural gas. Some
     constituents of coal tars and other residues of the manufactured gas
     process are today considered hazardous substances under the Superfund Law
     and may be present on the sites of former MGPs. Between 1882 and 1953, UGI
     Utilities owned the stock of subsidiary gas companies in Pennsylvania and
     elsewhere and also operated the businesses of some gas companies under
     agreement. Pursuant to the requirements of the Public Utility Holding
     Company Act of 1935, UGI Utilities divested all of its utility operations
     other than those which now constitute Gas Utility and Electric Utility.

     UGI Utilities does not expect its costs for investigation and remediation
     of hazardous substances at Pennsylvania MGP sites to be material to its
     results of operations because Gas Utility is currently permitted to include
     in rates, through future base rate proceedings, prudently incurred
     remediation costs associated with such sites. UGI Utilities has been
     notified of several sites outside Pennsylvania on which private parties
     allege MGPs were formerly owned or operated by it or owned or operated by
     its former subsidiaries. Such parties are investigating the extent of
     environmental contamination or performing environmental remediation. UGI
     Utilities is currently litigating three claims against it relating to
     out-of-state sites. We accrue environmental investigation and cleanup costs
     when it is probable that a liability exists and the amount or range of
     amounts can be reasonably estimated.

     Management believes that under applicable law UGI Utilities should not be
     liable in those instances in which a former subsidiary owned or operated an
     MGP. There could be, however, significant future costs of an uncertain
     amount associated with environmental damage caused by MGPs outside
     Pennsylvania that UGI Utilities directly operated, or that were owned or
     operated by former subsidiaries of UGI Utilities, if a court were to
     conclude that (1) the subsidiary's separate corporate form should be
     disregarded or (2) UGI Utilities should be considered to have been an
     operator because of its conduct with respect to its subsidiary's MGP.

     In April 2003, Citizens Communications Company ("Citizens") served a
     complaint naming UGI Utilities as a third-party defendant in a civil action
     pending in United States District Court for the District of Maine. In that
     action, the plaintiff, City of Bangor, Maine ("City"), sued Citizens to
     recover environmental response costs associated with


                                       -8-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

     MGP wastes generated at a plant allegedly operated by Citizens'
     predecessors at a site on the Penobscot River. Citizens subsequently joined
     UGI Utilities and ten other third-party defendants alleging that the
     third-party defendants are responsible for an equitable share of costs
     Citizens may be required to pay to the City for cleaning up tar deposits in
     the Penobscot River. Citizens alleges that UGI Utilities and its
     predecessors owned and operated the plant from 1901 to 1928. Studies
     conducted by the City and Citizens suggest that it could cost up to $18,000
     to clean up the river. Citizens' third-party claims have been stayed
     pending a resolution of the City's suit against Citizens, which was tried
     in September 2005 and has not yet been decided. UGI Utilities believes that
     it has good defenses to the claim and is defending the suit.

     By letter dated July 29, 2003, Atlanta Gas Light Company ("AGL") served UGI
     Utilities with a complaint filed in the United States District Court for
     the Middle District of Florida in which AGL alleges that UGI Utilities is
     responsible for 20% of approximately $8,000 incurred by AGL in the
     investigation and remediation of a former MGP site in St. Augustine,
     Florida. UGI Utilities formerly owned stock of the St. Augustine Gas
     Company, the owner and operator of the MGP. In March 2005, the court
     granted UGI Utilities' motion for summary judgment dismissing AGL's
     complaint. AGL has appealed.

     AGL previously informed UGI Utilities that it was investigating
     contamination that appeared to be related to MGP operations at a site owned
     by AGL in Savannah, Georgia. A former subsidiary of UGI Utilities operated
     the MGP in the early 1900s. AGL has informed UGI Utilities that it has
     begun remediation of MGP wastes at the site and believes that the total
     cost of remediation could be as high as $55,000. AGL has not filed suit
     against UGI Utilities for a share of these costs. UGI Utilities believes
     that it will have good defenses to any action that may arise out of this
     site.

     On September 20, 2001, Consolidated Edison Company of New York ("ConEd")
     filed suit against UGI Utilities in the United States District Court for
     the Southern District of New York, seeking contribution from UGI Utilities
     for an allocated share of response costs associated with investigating and
     assessing gas plant related contamination at former MGP sites in
     Westchester County, New York. The complaint alleges that UGI Utilities
     "owned and operated" the MGPs prior to 1904. The complaint also seeks a
     declaration that UGI Utilities is responsible for an allocated percentage
     of future investigative and remedial costs at the sites. ConEd believes
     that the cost of remediation for all of the sites could exceed $70,000.

     The trial court granted UGI Utilities' motion for summary judgment and
     dismissed ConEd's complaint. The grant of summary judgment was entered
     April 1, 2004. ConEd appealed and on September 9, 2005 a panel of the
     Second Circuit Court of Appeals affirmed in part and reversed in part the
     decision of the trial court. The appellate panel affirmed the trial court's
     decision dismissing claims that UGI Utilities was liable under CERCLA as an
     operator of MGPs owned and operated by its former subsidiaries. The
     appellate panel reversed the trial court's decision that UGI Utilities was
     released from


                                       -9-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

     liability at three sites where UGI Utilities operated MGPs under lease. On
     October 7, 2005, UGI Utilities filed for reconsideration of the panel's
     order. On January 17, 2006, the Second Circuit denied UGI Utilities'
     request for reconsideration of the panel's order. UGI Utilities believes
     that any liability it may have for a share of the response costs at the
     three leased MGP sites will not have a material effect on its financial
     condition or results of operations.

     By letter dated June 24, 2004, KeySpan Energy ("KeySpan") informed UGI
     Utilities that KeySpan has spent $2,300 and expects to spend another
     $11,000 to clean up an MGP site it owns in Sag Harbor, New York. KeySpan
     believes that UGI Utilities is responsible for approximately 50% of these
     costs as a result of UGI Utilities' alleged direct ownership and operation
     of the plant from 1885 to 1902. UGI Utilities is in the process of
     reviewing the information provided by KeySpan and is investigating this
     claim.

     By letter dated August 5, 2004, Yankee Gas Services Company and Connecticut
     Light and Power Company, subsidiaries of Northeast Utilities (together, the
     "Northeast Companies"), demanded contribution from UGI Utilities for past
     and future remediation costs related to MGP operations on thirteen sites
     owned by the Northeast Companies in nine cities in the State of
     Connecticut. The Northeast Companies allege that UGI Utilities controlled
     operations of the plants from 1883 to 1941. According to the letter,
     investigation and remediation costs at the sites to date total
     approximately $10,000 and complete remediation costs for all sites could
     total $182,000. The Northeast Companies seek an unspecified fair and
     equitable allocation of these costs to UGI Utilities. UGI Utilities is in
     the process of reviewing the information provided by Northeast Companies
     and is investigating this claim.

     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 and result in losses in excess of recorded
     amounts. We are unable to estimate any possible losses in excess of
     recorded amounts. Although we currently believe, 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, 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.

6.   RELATED PARTY TRANSACTIONS

     UGI provides certain financial and administrative services to UGI
     Utilities. UGI bills UGI Utilities monthly for all direct and for an
     allocated share of indirect corporate expenses incurred or paid on behalf
     of UGI Utilities. These billed expenses are classified as operating and
     administrative expenses - related parties in the Condensed Statements of
     Income. In addition, UGI Utilities provides limited administrative services
     to UGI and


                                      -10-

<PAGE>

                               UGI UTILITIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

     certain of UGI's subsidiaries, principally payroll related services.
     Amounts billed to these entities by UGI Utilities for all periods presented
     were not material.

     Effective December 1, 2004, following a competitive bidding process, UGI
     Utilities entered into a Storage Contract Administration Agreement
     ("Storage Agreement") with Energy Services, Inc., a second-tier wholly
     owned subsidiary of UGI ("Energy Services"). The Storage Agreement was
     initially scheduled to expire on October 31, 2005, but effective November
     1, 2005, UGI Utilities and Energy Services agreed to extend the Storage
     Agreement through October 31, 2008. Under the Storage Agreement, Energy
     Services provides a firm natural gas delivery service to UGI Utilities. UGI
     Utilities has released certain gas transportation and storage contracts
     through October 31, 2008 and transferred associated gas storage inventories
     to Energy Services. UGI Utilities may recall such released transportation
     and storage contracts without penalty if recalled to meet operational
     requirements, and if not recalled, the releases will terminate at the end
     of the term of the Storage Agreement. In exchange for the ability to
     utilize these assets, Energy Services pays a monthly fee to UGI Utilities.
     During the three months ended December 31, 2005, UGI Utilities purchased
     natural gas storage inventories from Energy Services under the Storage
     Agreement totaling $10,297 and incurred associated pipeline transportation
     and storage capacity charges of $5,435.

     UGI Utilities reflects the historical cost of the gas storage inventories
     and any exchange receivable from Energy Services (representing amounts of
     natural gas inventories used but not yet replenished by Energy Services) on
     its balance sheet under the caption "Inventories." The carrying value of
     these gas storage inventories at December 31, 2005, comprising
     approximately 8.7 billion cubic feet of natural gas, was $72,358.

     UGI Utilities has a Gas Supply and Delivery Service Agreement with Energy
     Services pursuant to which Energy Services provides certain gas supply and
     related delivery services to Gas Utility during the peak heating-season
     months of November to March. In addition, from time to time, Gas Utility
     purchases natural gas or pipeline capacity from Energy Services. The
     aggregate amount of these transactions (exclusive of Storage Agreement
     transactions) during the three months ended December 31, 2005 and 2004,
     totaled $3,271 and $2,201, respectively.


                                      -11-

<PAGE>

                              UGI UTILITIES, INC.

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

                           FORWARD-LOOKING STATEMENTS

     Information contained in this Management's Discussion and Analysis of
     Financial Condition and Results of Operations and elsewhere in this
     Quarterly Report may contain forward-looking statements within the meaning
     of Section 27A of the Securities Act of 1933 and Section 21E of the
     Securities Exchange Act of 1934. Such statements use forward-looking words
     such as "believe," "plan," "anticipate," "continue," "estimate," "expect,"
     "may," "will," or other similar words. These statements discuss plans,
     strategies, events or developments that we expect or anticipate will or may
     occur in the future.

     A forward-looking statement may include a statement of the assumptions or
     bases underlying the forward-looking statement. We believe that we have
     chosen these assumptions or bases in good faith and that they are
     reasonable. However, we caution you that actual results almost always vary
     from assumed facts or bases, and the differences between actual results and
     assumed facts or bases can be material, depending on the circumstances.
     When considering forward-looking statements, you should keep in mind the
     following important factors which could affect our future results and could
     cause those results to differ materially from those expressed in our
     forward-looking statements: (1) adverse weather conditions resulting in
     reduced demand; (2) price volatility and availability of oil, electricity
     and natural gas and the capacity to transport them to market areas; (3)
     changes in laws and regulations, including safety, tax and accounting
     matters; (4) competitive pressures from the same and alternative energy
     sources; (5) liability for environmental claims; (6) customer conservation
     measures due to high energy prices and improvements in energy efficiency
     and technology resulting in reduced demand; (7) adverse labor relations;
     (8) large customer, counterparty or supplier defaults; (9) increased
     uncollectible accounts expense; (10) liability for personal injury and
     property damage arising from explosions and other catastrophic events,
     including acts of terrorism, resulting from operating hazards and risks
     incidental to generating and distributing electricity and transporting,
     storing and distributing natural gas, including liability in excess of
     insurance coverage; (11) political, regulatory and economic conditions in
     the United States; and (12) reduced access to capital markets and interest
     rate fluctuations.

     These factors are not necessarily all of the important factors that could
     cause actual results to differ materially from those expressed in any of
     our forward-looking statements. Other unknown or unpredictable factors
     could also have material adverse effects on future results. We undertake no
     obligation to update publicly any forward-looking statement whether as a
     result of new information or future events except as required by the
     federal securities laws.


                                      -12-

<PAGE>

                               UGI UTILITIES, INC.

                        ANALYSIS OF RESULTS OF OPERATIONS

The following analysis compares our results of operations for the three months
ended December 31, 2005 ("2005 three-month period") with the three months ended
December 31, 2004 ("2004 three-month period"). Our analysis of results of
operations should be read in conjunction with the segment information included
in Note 2 to the Condensed Financial Statements.

2005 THREE-MONTH PERIOD COMPARED WITH 2004 THREE-MONTH PERIOD

<TABLE>
<CAPTION>
                                                           Increase
Three Months Ended December 31,      2005      2004       (Decrease)
-------------------------------     ------    ------    -------------
(Millions of dollars)
<S>                                 <C>       <C>       <C>     <C>
GAS UTILITY:
   Revenues                         $219.8    $161.2    $58.6   36.4%
   Total margin (a)                 $ 59.9    $ 54.6    $ 5.3    9.7%
   Operating income                 $ 35.7    $ 28.1    $ 7.6   27.0%
   Income before income taxes       $ 30.6    $ 24.1    $ 6.5   27.0%
   System throughput - bcf            22.9      23.0     (0.1)  (0.4)%
   Heating degree days - % warmer
       than normal (b)                (1.3)%    (4.9)%     --     --

ELECTRIC UTILITY:
   Revenues                         $ 23.9    $ 22.3    $ 1.6    7.2%
   Total margin (a)                 $ 11.2    $ 10.1    $ 1.1   10.9%
   Operating income                 $  6.5    $  4.7    $ 1.8   38.3%
   Income before income taxes       $  6.0    $  4.3    $ 1.7   39.5%
   Distribution sales - gwh          258.0     249.1      8.9    3.6%
</TABLE>

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

(a)  Gas Utility's total margin represents total revenues less cost of sales.
     Electric Utility's total margin represents total revenues less cost of
     sales and revenue-related taxes, i.e. Electric Utility gross receipts
     taxes, of $1.3 million and $1.2 million in the three-month periods ended
     December 31, 2005 and 2004, respectively. For financial statement purposes,
     revenue-related taxes are included in "taxes other than income taxes" on
     the Condensed Statements of Income.

(b)  Deviation from average heating degree days based upon weather data provided
     by the National Oceanic and Atmospheric Administration ("NOAA") for four
     airports located within Gas Utility's service territory.

GAS UTILITY. Weather in Gas Utility's service territory based upon heating
degree-days was 1.3% warmer than normal during the 2005 three-month period and
3.7% colder than in the prior-year three-month period. During the 2005
three-month period, the Company revised its method of calculating heating degree
day statistics to more accurately reflect temperatures across Gas Utility's
service territory by using a four location average. Previously we reported
degree day statistics using temperatures measured at one location in our service
territory. Heating degree day statistics for the 2004 three-month period have
been adjusted to reflect the revised method.


                                      -13-

<PAGE>

                               UGI UTILITIES, INC.

Notwithstanding the colder 2005 three-month period weather and year-over-year
growth in the number of our customers, total distribution system throughput
decreased slightly as a 0.8 bcf increase in sales to firm- residential,
commercial and industrial ("retail core-market") customers was more than offset
by lower volumes transported for firm and interruptible delivery service
customers.

During the 2005 three-month period, the Company adjusted its method of
estimating throughput and associated revenues for service provided through the
end of the month but not yet billed by more closely correlating such estimated
throughput to distribution system sendout data. The Company believes that the
new method of estimating unbilled throughput results in a more accurate
quarterly estimate of unbilled revenues and associated total margin. The change
in the method of estimating unbilled throughput resulted in a 0.6 bcf increase
in retail core-market volumes sold and associated increases in Gas Utility
revenues and total margin of $10.2 million and $1.9 million, respectively. Gas
Utility revenues increased $58.6 million during the 2005 three-month period
principally resulting from a $48.7 million increase in retail core-market
revenues, reflecting the effects of higher average purchased gas cost ("PGC")
rates and the higher volumes sold, and a $7.9 million increase in revenues from
low-margin off-system sales. Increases or decreases in retail core-market
customer revenues and cost of sales result principally from changes in retail
core-market volumes and the level of gas costs collected through the PGC
recovery mechanism. Under this recovery mechanism, Gas Utility records the cost
of gas associated with sales to retail core-market customers at amounts included
in PGC rates. The difference between actual gas costs and the amount included in
rates is deferred on the balance sheet as a regulatory asset or liability and
represents amounts to be collected from or refunded to customers in a future
period. As a result of the PGC recovery mechanism, increases or decreases in the
cost of gas associated with retail core-market customers have no direct effect
on retail core-market margin. Gas Utility's cost of gas was $159.9 million in
the 2005 three-month period compared to $106.6 million in the 2004 three-month
period reflecting the impact of the previously mentioned higher retail
core-market purchased gas costs, the higher retail core-market volumes, and
costs associated with the greater off-system sales.

Gas Utility total margin in the 2005 three-month period increased $5.3 million
reflecting increased retail core-market margin principally resulting from the
higher sales to retail core-market customers and higher average unit margins
from interruptible customers.

Gas Utility operating income increased to $35.7 million in the 2005 three-month
period from $28.1 million in the 2004 three-month period principally reflecting
the $5.3 million increase in total margin and a $2.5 million decrease in total
operating and administrative expenses partially offset by an increase in
depreciation expense reflecting year-over-year increases in plant and equipment.
Total operating and administrative expenses were lower than the prior-year
period predominately reflecting lower stock-based incentive compensation costs,
including such costs allocated by UGI, partially offset by increased
uncollectible accounts expense. The increase in Gas Utility income before income
taxes reflects the previously mentioned increase in operating


                                      -14-

<PAGE>

                               UGI UTILITIES, INC.

income partially offset by an increase in interest expense principally
attributable to higher short-term debt outstanding and higher short-term
interest rates.

ELECTRIC UTILITY. Electric Utility's 2005 three-month period kilowatt-hour sales
were 3.6% higher than in the prior-year period. Electric Utility revenues
increased $1.6 million in the 2005 three-month period largely reflecting a 4.5%
increase in its Provider of Last Resort ("POLR") electric generation rates
effective January 1, 2005 and the effects of the higher sales. Electric
Utility's cost of sales increased $0.3 million as a result of the increased
kilowatt-hour sales.

Electric Utility total margin in the 2005 three-month period increased $1.1
million compared to the 2004 three-month period principally reflecting the
increase in POLR electric generation rates and the effect of the higher sales.
During the 2005 three-month period, the Company adjusted its method of
estimating sales and associated revenues for electricity consumed but not yet
billed to its customers. The change in the method of estimating unbilled sales
resulted in a 5 gwh increase in distribution system sales and associated
increases in Electric Utility revenues and total margin of $0.4 million.

Operating income increased in the 2005 three-month period reflecting the
increase in total margin and a decrease in operating and administrative expenses
that reflects, in part, lower stock-based incentive compensation costs. The
increase in income before income taxes principally reflects the higher operating
income reduced by higher interest expense on short-term debt.

                        FINANCIAL CONDITION AND LIQUIDITY

FINANCIAL CONDITION

The Company's total debt outstanding at December 31, 2005 totaled $382.5 million
(including $145.5 million in bank loans) compared with $318.2 million (including
$81.2 million in bank loans) at September 30, 2005. In December 2005, we
refinanced $50 million of maturing 7.14% Medium-Term Notes with proceeds from
the issuance of $50 million of 5.64% Medium-Term Notes due 2015.

The Company has revolving credit commitments under which it may borrow up to
$110 million. These agreements expire in June 2007 through June 2008. From time
to time, UGI Utilities enters into short-term borrowings under uncommitted
arrangements with major banks in order to meet liquidity needs during the
peak-heating season. At December 31, 2005, UGI Utilities had two $35 million
borrowings outstanding under these uncommitted arrangements and $75.5 million in
borrowings outstanding under the revolving credit agreements. Short-term
borrowings, including borrowings under revolving credit agreements, are
classified as bank loans on the Condensed Balance Sheets. UGI Utilities also has
a shelf registration statement with the Securities and Exchange Commission under
which it may issue up to an additional $75 million of Medium-Term Notes or other
debt securities. During the three months ended December 31, 2005 and 2004, peak
bank loan borrowings totaled $155.1 million and $89.7


                                      -15-

<PAGE>

                               UGI UTILITIES, INC.

million, respectively. Average daily bank loan borrowings were $101.6 million
and $63.6 million during the three months ended December 31, 2005 and 2004,
respectively. The increase in bank loan borrowings during the 2005 three-month
period reflects, in large part, borrowings to fund increased working capital
resulting principally from higher natural gas prices.

CASH FLOWS

OPERATING ACTIVITIES. Due to the seasonal nature of UGI Utilities' gas business,
cash flows from operating activities are generally strongest during the second
and third fiscal quarters when customers pay bills for gas and electricity
consumed during the peak heating-season months. Conversely, operating cash flows
are generally at their lowest levels during the first and fourth fiscal quarters
when the Company's investment in working capital, principally accounts
receivable and inventories, is generally greatest. UGI Utilities uses short-term
borrowings, primarily its revolving credit agreements, to manage these seasonal
cash flow needs. Cash used by operating activities was $47.4 million during the
three months ended December 31, 2005 compared with $3.1 million during the
prior-year three-month period. Cash flow from operating activities before
changes in operating working capital was $39.5 million in the 2005 three-month
period compared to $26.7 million in the prior-year three-month period
reflecting, in large part, higher operating results and higher non-cash deferred
income tax expense. Changes in operating working capital used $86.9 million of
operating cash flow during the 2005 three-month period compared with $29.8
million used during the prior-year three-month period reflecting, in large part,
the effects of the higher gas costs on accounts receivable and inventories and
higher net undercollections of deferred fuel costs.

INVESTING ACTIVITIES. Cash used by investing activities was $9.9 million in both
the 2005 and 2004 three-month periods. Expenditures for property, plant and
equipment in the 2005 three-month period were comparable with the prior-year
period.

FINANCING ACTIVITIES. Cash used by financing activities was $57.2 million in the
2005 three-month period compared with $14.6 million in the prior-year period.
Financing activity cash flows are primarily the result of issuances and
repayments of long-term debt, net short-term borrowings including borrowings
under revolving credit agreements, dividends on common shares and capital
contributions from UGI. During the 2005 and 2004 three-month periods, we paid
dividends of $7.1 million and $7.5 million, respectively, to UGI. During the
2005 three-month period, we had net short-term borrowings of $64.3 million
compared to net borrowings of $22.1 million in the prior-year period. As
previously mentioned, in December 2005, we refinanced $50 million of our
maturing 7.14% Medium-Term Notes through the issuance of $50 million of 5.64%
Medium-Term Notes due 2015.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Gas Utility's tariffs contain clauses that permit recovery of substantially all
of the prudently incurred costs of natural gas it sells to its customers. The
recovery clauses provide for periodic


                                      -16-

<PAGE>

                               UGI UTILITIES, INC.

adjustments for the difference between the total amounts actually collected from
customers through PGC rates and the recoverable costs incurred. Because of this
ratemaking mechanism, there is limited commodity price risk associated with our
Gas Utility operations. Gas Utility uses exchange-traded natural gas call option
contracts to reduce volatility in the cost of gas it purchases for its retail
core-market customers. The cost of these call option contracts, net of any
associated gains, is included in Gas Utility's PGC recovery mechanism

Electric Utility purchases its power needs from electricity suppliers under
fixed-price energy and capacity contracts and, to a much lesser extent, on the
spot market. Prices for electricity can be volatile especially during periods of
high demand or tight supply. In accordance with POLR settlements approved by the
PUC, Electric Utility may increase its POLR rates up to certain limits through
December 31, 2006. In accordance with these settlements, Electric Utility
increased its POLR generation rates for all metered customers by a total 7.5% of
its total rates in effect on December 31, 2004 (an increase of 4.5% effective
January 1, 2005 and an additional increase of 3% effective January 1, 2006).
Currently, Electric Utility's fixed-price power and capacity contracts with
electricity suppliers mitigate a substantial portion of its commodity price risk
associated with POLR service rate limits in effect through December 31, 2006.
With respect to its existing fixed-price power and capacity contracts, should
any of the counterparties fail to provide electric power or capacity under the
terms of such contracts, any increases in the cost of replacement power or
capacity could negatively impact Electric Utility results. In order to reduce
the risk associated with non-performance, Electric Utility has diversified its
purchases across several suppliers and entered into bilateral collateral
arrangements with certain of them. At December 31, 2005, Electric Utility held
$5.9 million in collateral deposits which are reflected in other current
liabilities on the Condensed Balance Sheet. Electric Utility has and may enter
into electric price swap agreements to reduce the volatility in the cost of a
portion of its anticipated electricity requirements.

Our variable-rate debt includes short-term borrowings, including borrowings
under our revolving credit agreements. These agreements provide for interest
rates on borrowings that are indexed to short-term market interest rates. Our
long-term debt is typically issued at fixed rates of interest based upon market
rates for debt having similar terms and credit ratings. As these long-term debt
issues mature, we expect to refinance such debt with new debt having an interest
rate that is more or less than the refinanced debt. In order to reduce interest
rate risk associated with near-term issuances of fixed-rate debt, we may enter
into interest rate protection agreements.

The fair values of our unsettled market risk sensitive derivative instruments
reflect the estimated amount that we would expect to receive or pay to terminate
the contract based upon quoted market prices of comparable contracts at December
31, 2005. At December 31, 2005, the fair value of our electricity price swap was
a gain of $7.5 million. An adverse change in electricity prices of ten percent
would result in a $1.5 million decrease in the fair value of the swap. At
December 31, 2005, the fair value of our unsettled interest rate protection
agreements, which have been designated and qualify as cash flow hedges, was a
gain of $0.2 million. An adverse change in interest rates on ten-year U.S.
treasury notes of ten percent would result in a $0.4 million decrease in the
fair value of these interest rate protection agreements.


                                      -17-

<PAGE>

                               UGI UTILITIES, INC.

ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

     The Company's management, with the participation of the Company's Chief
     Executive Officer and Chief Financial Officer, evaluated the effectiveness
     of the Company's disclosure controls and procedures as of the end of the
     period covered by this report. Based on that evaluation, the Chief
     Executive Officer and Chief Financial Officer concluded that the Company's
     disclosure controls and procedures as of the end of the period covered by
     this report were designed and functioning effectively to provide reasonable
     assurance that the information required to be disclosed by the Company in
     reports filed under the Securities Exchange Act of 1934, as amended, is (i)
     recorded, processed, summarized and reported within the time periods
     specified in the Securities and Exchange Commission's rules and forms, and
     (ii) accumulated and communicated to our management, including the Chief
     Executive Officer and Chief Financial Officer, as appropriate to allow
     timely decisions regarding disclosure..

(b)  Change in Internal Control over Financial Reporting

     No change in the Company's internal control over financial reporting
     occurred during the Company's most recent fiscal quarter that has
     materially affected, or is reasonably likely to materially affect, the
     Company's internal control over financial reporting.


                                      -18-

<PAGE>

                               UGI UTILITIES, INC.

                            PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On September 20, 2001, Consolidated Edison Company of New York ("ConEd") filed
suit against UGI Utilities in the United States District Court for the Southern
District of New York, seeking contribution from UGI Utilities for an allocated
share of response costs associated with investigating and assessing gas plant
related contamination at former MGP sites in Westchester County, New York. The
complaint alleges that UGI Utilities "owned and operated" the MGPs prior to
1904. The complaint also seeks a declaration that UGI Utilities is responsible
for an allocated percentage of future investigative and remedial costs at the
sites. ConEd believes that the cost of remediation for all of the sites could
exceed $70 million.

The trial court granted UGI Utilities' motion for summary judgment and dismissed
ConEd's complaint. The grant of summary judgment was entered April 1, 2004.
ConEd appealed and on September 9, 2005 a panel of the Second Circuit Court of
Appeals affirmed in part and reversed in part the decision of the trial court.
The appellate panel affirmed the trial court's decision dismissing claims that
UGI Utilities was liable under CERCLA as an operator of MGPs owned and operated
by its former subsidiaries. The appellate panel reversed the trial court's
decision that Utilities was released from liability at three sites where UGI
Utilities operated MGPs under lease. On October 7, 2005, UGI Utilities filed for
reconsideration of the panel's order. On January 17, 2006, the Second Circuit
Court of Appeals denied UGI Utilities' request for reconsideration of the
panel's order. UGI Utilities believes that any liability it may have for a share
of the response costs at the three leased MGP sites will not have a material
effect on its financial condition or results of operations.


                                      -19-

<PAGE>

                               UGI UTILITIES, INC.

ITEM 6. EXHIBITS

The exhibits filed as part of this report are as follows (exhibits incorporated
by reference are set forth with the name of the registrant, the type of report
and registration number or last date of the period for which it was filed, and
the exhibit number in such filing):

          12.1 Computation of ratio of earnings to fixed charges.

          31.1 Certification by the Chief Executive Officer relating to the
               Registrant's Report on Form 10-Q for the quarter ended December
               31, 2005, pursuant to Section 302 of the Sarbanes-Oxley Act of
               2002.

          31.2 Certification by the Chief Financial Officer relating to the
               Registrant's Report on Form 10-Q for the quarter ended December
               31, 2005, pursuant to Section 302 of the Sarbanes-Oxley Act of
               2002.

          32   Certification by the Chief Executive Officer and the Chief
               Financial Officer relating to the Registrant's Report on Form
               10-Q for the quarter ended December 31, 2005, pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.


                                      -20-

<PAGE>

                               UGI UTILITIES, INC.

                                   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: February 9, 2006                  By: /s/ John C. Barney
                                            ------------------------------------
                                            John C. Barney
                                            Senior Vice President - Finance
                                            (Principal Financial Officer)


                                      -21-

<PAGE>

                               UGI UTILITIES, INC.

                                  EXHIBIT INDEX

12.1 Computation of ratio of earnings to fixed charges.

31.1 Certification by the Chief Executive Officer relating to the Registrant's
     Report on Form 10-Q for the quarter ended December 31, 2005, pursuant to
     Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification by the Chief Financial Officer relating to the Registrant's
     Report on Form 10-Q for the quarter ended December 31, 2005, pursuant to
     Section 302 of the Sarbanes-Oxley Act of 2002.

32   Certification by the Chief Executive Officer and the Chief Financial
     Officer relating to the Registrant's Report on Form 10-Q for the quarter
     ended December 31, 2005, pursuant to Section 906 of the Sarbanes-Oxley Act
     of 2002.