<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 March 31, 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 April 30, 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 March 31, 2000,
                  September 30, 1999 and March 31, 1999                               1

              Condensed Consolidated Statements of Income for the three,
                  six and twelve months ended March 31, 2000 and 1999                 2

              Condensed Consolidated Statements of Cash Flows for the
                  six and twelve months ended March 31, 2000 and 1999                 3

              Notes to Condensed Consolidated Financial Statements                  4-9

      Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                              10-17


      Item 3. Quantitative and Qualitative Disclosures About Market Risk          17-18


PART II OTHER INFORMATION

      Item 1. Legal Proceedings                                                      18

      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>
                                                                                   March 31,    September 30,    March 31,
                                                                                     2000           1999           1999
                                                                                   ---------    -------------    ---------
<S>                                                                                <C>          <C>              <C>
ASSETS
     Current assets:
          Cash and cash equivalents                                                $  3,838       $ 11,063       $  4,221
          Accounts receivable (less allowances for doubtful accounts
               of $2,776, $1,716 and $2,034, respectively)                           58,441         21,887         59,660
          Accrued utility revenues                                                   16,240          6,867         14,386
          Inventories                                                                 9,126         28,103         10,554
          Deferred income taxes                                                       8,725          2,972          9,281
          Prepaid expenses and other current assets                                   4,913          6,283         10,642
                                                                                   --------       --------       --------
               Total current assets                                                 101,283         77,175        108,744

     Property, plant and equipment, at cost (less accumulated depreciation
          and amortization of $280,570, $270,003 and $263,041, respectively)        560,284        556,793        548,770

     Regulatory assets                                                               56,986         61,082         59,906
     Other assets                                                                    18,229         17,483         16,958
                                                                                   --------       --------       --------
          Total assets                                                             $736,782       $712,533       $734,378
                                                                                  =========      =========      =========
LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     Current liabilities:
          Current maturities of long-term debt                                     $  7,143       $  7,143       $  7,143
          Bank loans                                                                 71,200         87,400         72,800
          Accounts payable                                                           25,321         37,881         32,004
          Other current liabilities                                                  66,720         31,048         61,872
                                                                                   --------       --------       --------
               Total current liabilities                                            170,384        163,472        173,819

     Long-term debt                                                                 172,914        172,904        180,037
     Deferred income taxes                                                          113,585        112,284        109,211
     Other noncurrent liabilities                                                    24,182         24,313         27,645

     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                                                         106,899         90,742         94,848
                                                                                   --------       --------       --------
               Total common stockholder's equity                                    235,717        219,560        223,666
                                                                                   --------       --------       --------
          Total liabilities and stockholder's equity                               $736,782       $712,533       $734,378
                                                                                   ========       ========       ========
</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          Six Months Ended          Twelve Months Ended
                                                            March 31,                  March 31,                  March 31,
                                                    -----------------------    -----------------------    -----------------------
                                                       2000          1999         2000          1999         2000          1999
                                                    ---------     ---------    ---------     ---------    ---------     ---------
<S>                                                 <C>           <C>          <C>           <C>          <C>           <C>
Revenues                                            $ 169,864     $ 167,692    $ 291,020     $ 280,462    $ 431,205     $ 414,948
                                                    ---------     ---------    ---------     ---------    ---------     ---------
Costs and expenses:
     Gas, fuel and purchased power                     92,482        87,449      149,915       142,785      212,351       204,258
     Operating and administrative expenses             20,529        21,400       40,802        41,212       86,330        86,334
     Operating and administrative expenses
          - related parties                             1,441         1,297        2,002         2,469        4,479         4,917
     Taxes other than income taxes                      4,170         9,537       11,367        16,179       20,420        25,316
     Depreciation and amortization                      5,661         5,912       11,408        11,389       23,025        22,571
     Other income, net                                 (3,393)       (1,077)      (7,270)       (2,198)     (10,241)       (5,185)
                                                    ---------     ---------    ---------     ---------    ---------     ---------
                                                      120,890       124,518      208,224       211,836      336,364       338,211
                                                    ---------     ---------    ---------     ---------    ---------     ---------

Operating income                                       48,974        43,174       82,796        68,626       94,841        76,737
Interest expense                                        4,661         4,324        9,407         8,762       18,177        17,639
                                                    ---------     ---------    ---------     ---------    ---------     ---------
Income before income taxes                             44,313        38,850       73,389        59,864       76,664        59,098
Income taxes                                           17,195        14,683       28,453        22,664       30,060        22,554
                                                    ---------     ---------    ---------     ---------    ---------     ---------
Net income                                             27,118        24,167       44,936        37,200       46,604        36,544
Dividends on preferred stock                              387           387          775           775        1,550         1,553
                                                    ---------     ---------    ---------     ---------    ---------     ---------
Net income after dividends on preferred stock       $  26,731     $  23,780    $  44,161     $  36,425    $  45,054     $  34,991
                                                    =========     =========    =========     =========    =========     =========
</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>
                                                                               Six Months Ended            Twelve Months Ended
                                                                                  March 31,                     March 31,
                                                                          ---------------------------  ----------------------------
                                                                            2000            1999            2000            1999
                                                                          --------        --------        --------        --------
<S>                                                                       <C>             <C>             <C>             <C>
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
    Net income                                                            $ 44,936        $ 37,200        $ 46,604        $ 36,544
    Adjustments to reconcile net income to net cash provided
       by operating activities:
          Depreciation and amortization                                     11,408          11,389          23,025          22,571
          Deferred income taxes, net                                        (5,449)         (3,677)          4,020           4,573
          Other, net                                                         3,472           1,061           5,288           4,357
                                                                          --------        --------        --------        --------
                                                                            54,367          45,973          78,937          68,045
          Net change in:
             Accounts receivable and accrued utility revenues              (48,374)        (49,012)         (5,382)         (4,172)
             Inventories                                                    18,977          17,906           1,428          (1,341)
             Deferred fuel costs                                            15,564          12,250          (1,806)         (4,643)
             Accounts payable                                              (11,658)         (6,843)         (5,781)          6,457
             Other current assets and liabilities                           24,019          15,815          11,571           1,722
                                                                          --------        --------        --------        --------
          Net cash provided by operating activities                         52,895          36,089          78,967          66,068
                                                                          --------        --------        --------        --------

CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
    Expenditures for property, plant and equipment                         (14,963)        (16,042)        (35,305)        (37,646)
    Net proceeds (costs) of property, plant and equipment disposals           (177)           (171)           (747)            305
                                                                          --------        --------        --------        --------
       Net cash used by investing activities                               (15,140)        (16,213)        (36,052)        (37,341)
                                                                          --------        --------        --------        --------

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
    Payment of dividends                                                   (28,780)        (24,775)        (34,555)        (35,851)
    Repayment of long-term debt                                                 --              --          (7,143)         (7,143)
    Bank loans increase (decrease)                                         (16,200)          4,400          (1,600)         29,900
    Redemption of Series Preferred Stock                                        --              --              --         (15,507)
                                                                          --------        --------        --------        --------
       Net cash used by financing activities                               (44,980)        (20,375)        (43,298)        (28,601)
                                                                          --------        --------        --------        --------

    Cash and cash equivalents increase (decrease)                         $ (7,225)       $   (499)       $   (383)       $    126
                                                                          ========        ========        ========        ========

CASH  AND  CASH  EQUIVALENTS:
    End of period                                                         $  3,838        $  4,221        $  3,838        $  4,221
    Beginning of period                                                     11,063           4,720           4,221           4,095
                                                                          --------        --------        --------        --------
       Increase (decrease)                                                $ (7,225)       $   (499)       $   (383)       $    126
                                                                          ========        ========        ========        ========
</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 (continued)
                                   (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 MARCH 31, 2000:

<TABLE>
<CAPTION>
                                                                            Gas            Electric           All
                                         Total         Eliminations       Utility           Utility          other
                                       -----------------------------------------------------------------------------
<S>                                    <C>             <C>               <C>              <C>              <C>
Segment revenues                       $ 169,864        $      --        $ 148,867        $  20,997        $      --

Segment profit:
   EBITDA                              $  54,635        $      --        $  49,647        $   4,988        $      --
   Depreciation and amortization          (5,661)              --           (4,538)          (1,123)              --
                                       -----------------------------------------------------------------------------
   Operating income                       48,974               --           45,109            3,865               --
   Interest expense                       (4,661)              --           (4,079)            (582)              --
                                       -----------------------------------------------------------------------------
   Income before income taxes          $  44,313        $      --        $  41,030        $   3,283        $      --
                                       =============================================================================
Segment assets  (at period end)        $ 736,782        $      --        $ 637,850        $  98,932        $      --
                                       =============================================================================
</TABLE>



      THREE MONTHS ENDED MARCH 31, 1999:


<TABLE>
<CAPTION>
                                                                            Gas            Electric          All
                                          Total        Eliminations       Utility          Utility          other
                                       -----------------------------------------------------------------------------
<S>                                    <C>             <C>               <C>              <C>              <C>
Segment revenues                       $ 167,692        $      --        $ 147,623        $  20,069        $      --

Segment profit (loss):
   EBITDA                              $  49,086        $      --        $  44,045        $   5,049        $      (8)
   Depreciation and amortization          (5,912)              --           (4,777)          (1,135)              --
                                       -----------------------------------------------------------------------------
   Operating income (loss)                43,174               --           39,268            3,914               (8)
   Interest expense                       (4,324)              --           (3,730)            (594)              --
                                       -----------------------------------------------------------------------------
   Income (loss) before income taxes   $  38,850        $      --        $  35,538        $   3,320        $      (8)
                                       =============================================================================

Segment assets  (at period end)        $ 734,378        $    (101)       $ 636,335        $  97,881        $     263
                                       =============================================================================
</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)

      SIX MONTHS ENDED MARCH 31, 2000:

<TABLE>
<CAPTION>
                                                                           Gas            Electric        All
                                                Total    Eliminations    Utility          Utility        other
                                             -----------------------------------------------------------------
<S>                                          <C>         <C>            <C>              <C>              <C>
      Segment revenues                       $ 291,020      $  --       $ 250,843        $  40,177      $  --

      Segment profit:
         EBITDA                              $  94,204      $  --       $  82,356        $  11,848      $  --
         Depreciation and amortization         (11,408)     $  --          (9,385)          (2,023)        --
                                             -----------------------------------------------------------------
         Operating income                       82,796         --          72,971            9,825         --
         Interest expense                       (9,407)        --          (8,287)          (1,120)        --
                                             -----------------------------------------------------------------
         Income before income taxes          $  73,389      $  --       $  64,684        $   8,705      $  --
                                             ================================================================

      Segment assets  (at period end)        $ 736,782      $  --       $ 637,850        $  98,932      $  --
                                             ================================================================
</TABLE>



      SIX MONTHS ENDED MARCH 31, 1999:

<TABLE>
<CAPTION>
                                                                           Gas            Electric       All
                                               Total     Eliminations    Utility          Utility        other
                                             -----------------------------------------------------------------
<S>                                          <C>         <C>            <C>              <C>            <C>
      Segment revenues                       $ 280,462      $  --       $ 242,201        $  38,261      $ --

      Segment profit (loss):
         EBITDA                              $  80,015      $  --       $  70,290        $   9,742      $(17)
         Depreciation and amortization         (11,389)        --          (9,444)          (1,945)       --
                                             -----------------------------------------------------------------
         Operating income (loss)                68,626         --          60,846            7,797       (17)
         Interest expense                       (8,762)        --          (7,574)          (1,188)       --
                                             -----------------------------------------------------------------
         Income (loss) before income taxes   $  59,864      $  --       $  53,272        $   6,609      $(17)
                                             ================================================================

      Segment assets  (at period end)        $ 734,378      $(101)      $ 636,335        $  97,881      $263
                                             ================================================================
</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 MARCH 31, 2000:


<TABLE>
<CAPTION>
                                                                                          Gas             Electric          All
                                                        Total            Eliminations    Utility           Utility          other
                                                -----------------------------------------------------------------------------------
<S>                                                   <C>                <C>            <C>               <C>              <C>
      Segment revenues                                $ 431,205           $    -        $ 354,279          $ 76,926            $ -

      Segment profit (loss):
         EBITDA                                       $ 117,866           $    -        $  99,030          $ 18,886          $ (50)
         Depreciation and amortization                  (23,025)               -          (18,937)           (4,088)             -
                                                -----------------------------------------------------------------------------------
         Operating income (loss)                         94,841                -           80,093            14,798            (50)
         Interest expense                               (18,177)               -          (15,897)           (2,280)             -
                                                -----------------------------------------------------------------------------------
         Income (loss) before income taxes            $  76,664           $    -        $  64,196          $ 12,518          $ (50)
                                                ===================================================================================

      Segment assets  (at period end)                 $ 736,782           $    -        $ 637,850          $ 98,932          $   -
                                                ===================================================================================
</TABLE>



      TWELVE MONTHS ENDED MARCH 31, 1999:

<TABLE>
<CAPTION>
                                                                                           Gas             Electric          All
                                                        Total            Eliminations    Utility           Utility          other
                                                -----------------------------------------------------------------------------------
<S>                                                   <C>                <C>            <C>               <C>              <C>
      Segment revenues                                $ 414,948           $    -        $ 342,298          $ 72,650          $   -

      Segment profit (loss):
         EBITDA                                       $  99,308           $    -        $  84,220          $ 15,186          $ (98)
         Depreciation and amortization                  (22,571)               -          (18,618)           (3,953)             -
                                                -----------------------------------------------------------------------------------
         Operating income (loss)                         76,737                -           65,602            11,233            (98)
         Interest expense                               (17,639)               -          (15,279)           (2,360)             -
                                                -----------------------------------------------------------------------------------
         Income (loss) before income taxes            $  59,098           $    -        $  50,323          $  8,873          $ (98)
                                                ===================================================================================

      Segment assets  (at period end)                 $ 734,378           $ (101)       $ 636,335          $ 97,881          $ 263
                                                ===================================================================================
</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.





                                      -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 March 31, 2000 ("2000 three-month period") with the three months
ended March 31, 1999 ("1999 three-month period"); (2) the six months ended March
31, 2000 ("2000 six-month period") with the six months ended March 31, 1999
("1999 six-month period"); and (3) the twelve months ended March 31, 2000 ("2000
twelve-month period") with the twelve months ended March 31, 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>
----------------------------------------------------------------------------------------------------------
Three Months Ended March 31,                                2000         1999              Increase
----------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S>                                                       <C>          <C>              <C>          <C>
GAS UTILITY:
     Revenues                                             $  148.9     $  147.6         $  1.3        0.9%
     Total margin (a)                                     $   65.4     $   63.2         $  2.2        3.5%
     EBITDA (b)                                           $   49.6     $   44.0         $  5.6       12.7%
     Operating income                                     $   45.1     $   39.3         $  5.8       14.8%
     Natural gas system throughput - bcf                      29.8         29.1            0.7        2.4%
     Heating degree days - % warmer
        than normal                                           11.1          8.4            -             -

ELECTRIC UTILITY:
     Revenues                                             $   21.0     $   20.1         $  0.9        4.5%
     Total margin (a)                                     $   11.2     $   10.2         $  1.0        9.8%
     EBITDA (b)                                           $    5.0     $    5.0         $  -            -%
     Operating income                                     $    3.9     $    3.9         $  -            -%
     Electric sales - gwh                                    258.4        255.2            3.2        1.3%
----------------------------------------------------------------------------------------------------------
</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.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


(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 11.1% warmer than normal and 2.0% warmer 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.

Gas Utility revenues were virtually unchanged in the 2000 three-month period as
the impact on revenues from higher core market sales, higher average purchased
gas costs, and greater interruptible delivery service volumes was offset by the
elimination of gross receipts tax revenue effective January 1, 2000 pursuant to
the Gas Competition Act. Gas Utility cost of sales was $83.6 million in the 2000
three-month period, an increase of $5.1 million, principally reflecting higher
average purchased gas costs and slightly higher core market sales. Gas Utility
total margin increased $2.2 million principally 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 increased $5.6 million and $5.8 million,
respectively, during the 2000 three-month period. The increase reflects (1) the
previously mentioned $2.2 million increase in total margin; (2) higher other
income; and (3) a decrease in net operating and administrative expenses. Other
income in the 2000 three-month period includes income from the refund of
revenue-related tax overpayments made in prior years and greater income from a
construction project and other activities. Operating and administrative
expenses, excluding depreciation and amortization, declined $1.4 million in the
2000 three-month period principally reflecting modest increases in distribution
system, uncollectible accounts and environmental matters expenses which were
more than offset by income of $2.4 million from an insurance settlement.

ELECTRIC UTILITY. Electric Utility sales during the 2000 three-month period
increased slightly on weather that was generally comparable to the prior year.
Revenues increased as a result of the higher sales as well as higher
transmission revenues from alternate electric power suppliers selling
electricity to some of our customers pursuant to the Electricity Customer Choice
Act. Notwithstanding the higher sales, Electric Utility cost of sales was $8.9
million, a decrease of $0.1 million, reflecting slightly lower average power
costs.

Electric Utility's total margin increased $1.0 million reflecting the impact of
the lower average power costs and the slightly higher sales. EBITDA and
operating income were unchanged from the prior year as the higher margin was
offset by higher utility realty taxes.





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

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


2000 SIX-MONTH PERIOD COMPARED WITH 1999 SIX-MONTH PERIOD

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Six Months Ended March 31,                                   2000             1999              Increase
--------------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S>                                                         <C>            <C>            <C>            <C>
GAS UTILITY:
     Revenues                                               $250.8         $   242.2      $    8.6        3.6%
     Total margin                                           $113.2         $   106.4      $    6.8        6.4%
     EBITDA                                                 $ 82.4         $    70.3      $   12.1       17.2%
     Operating income                                       $ 73.0         $    60.8      $   12.2       20.1%
     Natural gas system throughput - bcf                      51.8              49.4           2.4        4.9%
     Heating degree days - % warmer
        than normal                                           11.6              12.0           -          -

ELECTRIC UTILITY:
     Revenues                                               $ 40.2         $    38.3      $    1.9        5.0%
     Total margin                                           $ 22.2         $    20.0      $    2.2       11.0%
     EBITDA                                                 $ 11.8         $     9.7      $    2.1       21.6%
     Operating income                                       $  9.8         $     7.8      $    2.0       25.6%
     Electric sales - gwh                                    483.9             478.4           5.5        1.1%
--------------------------------------------------------------------------------------------------------------
</TABLE>


GAS UTILITY. Weather in Gas Utility's service territory in the 2000 six-month
period was 11.6% warmer than normal but comparable to weather during the prior
year period. Approximately seventy-five percent of the increase in system
throughput reflects increased delivery service volumes to interruptible
customers with the remainder representing higher sales to core market customers
reflecting an increase in the number of core market customers.

The increase in Gas Utility's revenues during the 2000 six-month period
principally resulted from (1) a $6.0 million increase in core market revenues
reflecting higher sales and higher average purchased gas costs partially offset
by the impact of the elimination of gross receipts tax effective January 1, 2000
and (2) a $4.7 million increase in revenues from interruptible customers. These
increases in revenue were partially offset by lower off-system sales and lower
firm delivery service revenues. Gas Utility cost of gas was $133.6 million in
the 2000 six-month period compared with $126.1 million in the prior-year period.
The increase reflects higher average purchased gas cost 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 $6.8 million reflecting (1) an increase in
total interruptible retail and interruptible delivery service margin; (2)
increased core market margin; and (3) slightly higher firm delivery service
total margin.





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

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


Gas Utility EBITDA and operating income increased $12.1 million and $12.2
million, respectively, during the 2000 six-month period as a result of (1) the
higher total margin; (2) a $3.7 million increase in other income; and (3) a
slight decrease in net operating expenses. Other income in the 2000 six-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 $1.5
million reflecting higher distribution system, environmental matters, and
customer accounts expenses 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 six-month period increased 1.1
percent on weather that was only 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 decreased to $16.4 million
in the 2000 six-month period from $16.7 million in the prior year reflecting
lower average purchased power costs.

Electric Utility operations total margin increased $2.2 million reflecting the
impact of (1) lower power costs and (2) higher sales. EBITDA and operating
income also increased reflecting higher total margin and a $1.4 million increase
in other income reduced by higher operating expenses, principally higher utility
realty taxes.






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

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)



2000 TWELVE-MONTH PERIOD COMPARED WITH 1999 TWELVE-MONTH PERIOD

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Twelve Months Ended March 31,                                 2000            1999              Increase
--------------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S>                                                         <C>            <C>            <C>            <C>
GAS UTILITY:
     Revenues                                               $354.3         $   342.3      $   12.0        3.5%
     Total margin                                           $167.4         $   158.7      $    8.7        5.5%
     EBITDA                                                 $ 99.0         $    84.2      $   14.8       17.6%
     Operating income                                       $ 80.1         $    65.6      $   14.5       22.1%
     Natural gas system throughput - bcf                      78.5              75.8           2.7        3.6%
     Heating degree days - % warmer
        than normal                                           12.4              13.8           -          -

ELECTRIC UTILITY:
     Revenues                                               $ 76.9         $    72.7      $    4.2        5.8%
     Total margin                                           $ 40.9         $    35.7      $    5.2       14.6%
     EBITDA                                                 $ 18.9         $    15.2      $    3.7       24.3%
     Operating income                                       $ 14.8         $    11.2      $    3.6       32.1%
     Electric sales - gwh                                    905.9             889.9          16.0        1.8%
--------------------------------------------------------------------------------------------------------------
</TABLE>


GAS UTILITY. Weather in Gas Utility's service territory during the 2000
twelve-month period was 12.4% 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 a $5.1 million increase in core market revenues (due primarily to
higher core market volumes), greater interruptible delivery service revenues,
and slightly higher revenues from off-system sales. Gas Utility cost of sales
was $179.4 million in the 2000 twelve-month period compared with $170.5 million
in the 1999 twelve-month period reflecting higher average purchased gas cost
rates and the higher core market and off-system sales.

Gas Utility total margin increased $8.7 million reflecting (1) increased margin
from interruptible customers from 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 and a $4.7 million
increase in other income. 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.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


ELECTRIC UTILITY. Total kilowatt-hour sales were higher in the 2000 twelve-month
period reflecting greater air-conditioning related sales during the warmer than
normal summer of 1999 and an increase in the number of customers. Electric
Utility revenues increased $4.2 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 decreased $0.9 million,
notwithstanding the increase in sales, reflecting (1) lower average purchased
power costs and (2) the benefit of a power supply agreement settlement.

Electric Utility's total margin increased $5.2 million as a result of (1) lower
average purchased power costs, (2) the power supply agreement settlement, and
(3) the higher 2000 twelve-month period sales. EBITDA and operating income
increased $3.7 million and $3.6 million, respectively, reflecting the increase
in total margin and higher other income partially offset by greater (1) utility
realty taxes, (2) power generation maintenance costs, and (3) customer service
and information expenses.






                                      -16-
<PAGE>   19
                               UGI UTILITIES, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


                        FINANCIAL CONDITION AND LIQUIDITY

CAPITAL STRUCTURE

The Company's debt outstanding at March 31, 2000 totaled $251.3 million compared
with $267.4 million at September 30, 1999. Included in these amounts are bank
loans of $71.2 million and $87.4 million, respectively. Under our revolving
credit agreements, we may borrow up to $117 million.

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 six months ended March 31, 2000 are not necessarily indicative of cash flows
to be expected for a full year.

OPERATING ACTIVITIES. Cash provided by operating activities was $52.9 million
during the six months ended March 31, 2000 compared with $36.1 million in the
prior-year period. Changes in operating working capital in the 2000 six-month
period required $1.5 million of operating cash flow compared to $9.9 million
required in the prior year. Cash generated by operating activities before
changes in operating working capital totaled $54.4 million, $8.4 million higher
than in the prior year, reflecting the greater operating results.

INVESTING ACTIVITIES. We spent $15.0 million for property, plant and equipment
in the six months ended March 31, 2000 compared with $16.0 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 six-month periods includes dividends on preferred stock of $0.8
million. During the 2000 six-month period, UGI Utilities paid $28.0 million of
dividends to its parent company, UGI, compared with $24.0 million in the
prior-year period. Net repayments under UGI Utilities' revolving credit
agreements totaled $16.2 million in the 2000 six-month period compared with net
borrowings of $4.4 million in the 1999 six-month period.

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





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

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


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 the distribution businesses' 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.

                            PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         1. UGI Utilities, Inc. v. Insurance Co. of North America, et. al. On
February 11, 1999, UGI Utilities, Inc. filed suit in the Court of Common Pleas
of Montgomery County, Pennsylvania against more than fifty insurance companies,
including Associated Electric & Gas Insurance Services, Limited (AEGIS). The
complaint alleges 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 million in costs incurred by UGI Utilities at various
manufactured gas plant sites.

         The parties have agreed to stay the litigation through July 2000
pending the voluntary exchange of documents and settlement negotiations. To
date, UGI Utilities has settled with three defendants, including AEGIS.





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


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      List of Exhibits:

                  3.       Amendment to Articles of Incorporation changing
                           registered address.

                  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 March 31, 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.



<TABLE>
<S>                                       <C>
                                          UGI Utilities, Inc.
                                              (Registrant)








Date:  May 12, 2000                       By: J.C. BARNEY
                                             -----------------------------------
                                          J. C. Barney, Senior Vice President -
                                          Finance
                                          (Principal Financial Officer)
</TABLE>









                                      -20-


<PAGE>   23
                              UGI UTILITIES, INC.

                                 EXHIBIT INDEX


 3.   Amendment to Articles of Incorporation changing registered address

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