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 ENDING SEPTEMBER 30, 2000

                                       OR

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

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


         COMMISSION    REGISTRANT; STATE OF INCORPORATION;   I. R. S. EMPLOYER
         FILE NUMBER   ADDRESS; AND TELEPHONE NUMBER         IDENTIFICATION NO.
         -----------   ----------------------------------    -----------------

           1-6788      THE UNITED ILLUMINATING COMPANY          06-0571640
                       (a Connecticut Corporation)
                       157 Church Street
                       New Haven, Connecticut 06506
                       Telephone: (203) 499-2000

           1-15995     UIL HOLDINGS CORPORATION                 06-1541045
                       (a Connecticut Corporation)
                       157 Church Street
                       New Haven, Connecticut 06506
                       Telephone: (203) 499-2000

                                      NONE
        (Former name, former address and former fiscal year, if changed
         since last report.)


   Indicate  by check mark  whether the  registrants  (1) have 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
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days.

                                    YES  X    NO
                                        ---     ---

     The number of shares  outstanding of UIL Holdings  Corporation's only class
of common stock, as of September 30, 2000, was 14,321,177.

     The number of shares outstanding of The United Illuminating  Company's only
class of common stock, as of September 30, 2000 was 100.



                                     - 1 -
<PAGE>

                                      INDEX

                           PART I. FINANCIAL INFORMATION

                                                                         PAGE
                                                                        NUMBER
                                                                        ------

Item 1.  Financial Statements.                                             4

         UIL HOLDINGS CORPORATION
             Consolidated Statement of Income for the three and
               nine months ended September 30, 2000 and 1999.              4
             Consolidated Balance Sheet as of September 30, 2000
               and December 31, 1999.                                      5
             Consolidated Statement of Cash Flows for the three and
               nine months ended September 30, 2000 and 1999.              7

         THE UNITED ILLUMINATING COMPANY
             Statement of Income for the three and nine months ended
               September 30, 2000 and 1999.                                8
             Balance Sheet as of September 30, 2000 and December 31,
               1999.                                                       9
             Statement of Cash Flows for the three and nine months
               ended September 30, 2000 and 1999.                         11

         UIL HOLDINGS CORPORATION\THE UNITED ILLUMINATING COMPANY
             Notes to Financial Statements.                               12
               -   Statement of Accounting Policies                       12
               -   Capitalization                                         13
               -   Short-term Credit Arrangements                         14
               -   Income Taxes                                           15
               -   Supplementary Information                              17
               -   Commitments and Contingencies                          19
                   -  Capital Expenditure Program                         19
                   -  Nuclear Insurance Contingencies                     19
                   -  Other Commitments and Contingencies                 19
                      -  Connecticut Yankee                               19
                      -  Hydro-Quebec                                     20
                      -  Environmental Concerns                           20
                      -  Site Decontamination, Demolition and
                           Remediation Costs                              20
               -   Nuclear Fuel Disposal and Nuclear Plant
                     Decommissioning                                      21
               -   Segment Information                                    22

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.                                       23

         UIL HOLDINGS CORPORATION
               -   Major Influences on Financial Condition                23
               -   Capital Expenditure Program                            25
               -   Liquidity and Capital Resources                        25
               -   Subsidiary Operations                                  26
               -   Results of Operations                                  27
               -   Looking Forward                                        34

         THE UNITED ILLUMINATING COMPANY                                  37

Item 3.  Quantitative and Qualitative Disclosure About Market Risk.       37



                                     - 2 -
<PAGE>

                                      INDEX

                           PART II. OTHER INFORMATION

                                                                         PAGE
                                                                        NUMBER
                                                                        ------

Item 1.  Legal Proceedings.                                               38

Item 6.  Exhibits and Reports on Form 8-K.                                38

         SIGNATURES                                                       41



                                     - 3 -
<PAGE>
<TABLE>
                          PART I: FINANCIAL INFORMATION
                          ITEM I: FINANCIAL STATEMENTS
                            UIL HOLDINGS CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                      (THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<CAPTION>
                                                                           Three Months Ended             Nine Months Ended
                                                                              September 30,                 September 30,
                                                                           2000           1999           2000           1999
                                                                           ----           ----           ----           ----
<S>                                                                        <C>            <C>            <C>            <C>
OPERATING REVENUES (NOTE G)                                                $247,054       $220,527       $646,098       $577,608
                                                                       -------------  -------------   ------------  -------------
OPERATING EXPENSES
  Operation
     Fuel and energy                                                         74,164         51,433        214,503        123,815
     Capacity purchased                                                         683          8,428          3,587         26,168
     Other                                                                   78,458         57,774        196,971        158,125
  Maintenance                                                                 6,076          5,820         16,895         21,279
  Depreciation (Note G)                                                       8,397         13,352         24,567         48,464
  Amortization of regulatory assets                                          17,874         11,444         24,467         24,934
  Income taxes (Note F)                                                      18,357         25,773         47,574         55,549
  Other taxes (Note G)                                                       11,441         12,918         33,658         38,399
                                                                       -------------  -------------   ------------  -------------
       Total                                                                215,450        186,942        562,222        496,733
                                                                       -------------  -------------   ------------  -------------
OPERATING INCOME                                                             31,604         33,585         83,876         80,875
                                                                       -------------  -------------   ------------  -------------
OTHER INCOME AND (DEDUCTIONS)
  Allowance for equity funds used during construction                           138            347            564            614
  Other-net (Note G)                                                         (2,678)         1,043         (2,254)           903
  Non-operating income taxes (Note F)                                         1,731          1,017          2,983          2,057
                                                                       -------------  -------------   ------------  -------------
       Total                                                                   (809)         2,407          1,293          3,574
                                                                       -------------  -------------   ------------  -------------
INCOME BEFORE INTEREST CHARGES                                               30,795         35,992         85,169         84,449
                                                                       -------------  -------------   ------------  -------------
INTEREST CHARGES
  Interest on long-term debt                                                  9,540          9,829         28,659         32,219
  Interest on Seabrook obligation bonds owned by the company                 (1,618)        (1,711)        (4,853)        (5,133)
  Dividend requirement of mandatorily redeemable securities                   1,123          1,203          3,529          3,609
  Other interest (Note G)                                                     2,026          1,407          3,052          4,083
  Allowance for borrowed funds used during construction                        (554)          (327)        (1,296)        (1,098)
                                                                       -------------  -------------   ------------  -------------
                                                                             10,517         10,401         29,091         33,680
  Amortization of debt expense and redemption premiums                          571            594          1,710          1,885
                                                                       -------------  -------------   ------------  -------------
       Net Interest Charges                                                  11,088         10,995         30,801         35,565
                                                                       -------------  -------------   ------------  -------------


NET INCOME                                                                   19,707         24,997         54,368         48,884
Premium on preferred stock redemptions                                            -              -              -             53
Dividends on preferred stock                                                      -              -              -             66
                                                                       -------------  -------------   ------------  -------------
INCOME APPLICABLE TO COMMON STOCK                                           $19,707        $24,997        $54,368        $48,765
                                                                       =============  =============   ============  =============

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC                          14,070         14,056         14,072         14,049
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED                        14,112         14,058         14,087         14,051

EARNINGS PER SHARE OF COMMON STOCK - BASIC AND DILUTED                        $1.40          $1.78          $3.86          $3.47

CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK                             $0.72          $0.72          $2.16          $2.16
</TABLE>


                The accompanying Notes to Financial Statements
               are an integral part of the financial statements.



                                     - 4 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                     ASSETS
                             (Thousands of Dollars)

<CAPTION>
                                                  September 30,    December 31,
                                                      2000            1999*
                                                      ----            -----
                                                  (Unaudited)
<S>                                                  <C>             <C>
Utility Plant at Original Cost
  In service                                         $915,609        $1,007,065
  Less, accumulated provision for depreciation        443,286           532,409
                                                 -------------    --------------
                                                      472,323           474,656

Construction work in progress                          34,963            25,708
Nuclear fuel                                           23,395            21,101
                                                 -------------    --------------
     Net Utility Plant                                530,681           521,465
                                                 -------------    --------------


Other Property and Investments
   Investment in generation facility                   89,847            83,494
   Nuclear decommissioning trust fund assets           34,090            28,255
   Other                                               18,381            20,098
                                                 -------------    --------------
                                                      142,318           131,847
                                                 -------------    --------------


Current Assets
  Unrestricted cash and temporary cash investments      8,446            39,099
   Restricted cash                                     33,212            29,223
  Accounts receivable
   Customers, less allowance for doubtful
     accounts of $1,500 and $1,800                     60,434            56,057
   Other, less allowance for doubtful accounts
     of $698 and $508                                 119,698            53,612
  Accrued utility revenues                             23,375            25,019
  Fuel, materials and supplies, at average cost        10,657             9,259
  Prepayments                                           5,342             3,056
  Other                                                 9,353             4,801
                                                 -------------    --------------
     Total                                            270,517           220,126
                                                 -------------    --------------

Deferred Charges
  Goodwill                                             24,721             4,827
  Unamortized debt issuance expenses                    7,473             8,688
  Other                                                 1,622             1,272
                                                 -------------    --------------
     Total                                             33,816            14,787
                                                 -------------    --------------

Regulatory Assets (FUTURE AMOUNTS DUE FROM CUSTOMERS
                   THROUGH THE RATEMAKING PROCESS)
  Nuclear plant investments-above market              502,906           518,268
  Income taxes due principally to book-tax
    differences                                       146,744           166,965
  Long-term purchase power contracts-above market     132,347           144,406
  Connecticut Yankee                                   30,583            37,013
  Unamortized redemption costs                         22,574            22,314
  Unamortized cancelled nuclear projects                7,901             8,780
  Displaced worker protection costs                     4,021             5,746
  Uranium enrichment decommissioning cost                 990             1,040
  Other                                                30,318             5,453
                                                 -------------    --------------
     Total                                            878,384           909,985
                                                 -------------    --------------

                                                   $1,855,716        $1,798,210
                                                 =============    ==============
</TABLE>
*Derived from audited financial statements

                 The accompanying Notes to Financial Statements
                are an integral part of the financial statements.



                                     - 5 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                           CONSOLIDATED BALANCE SHEET

                         CAPITALIZATION AND LIABILITIES
                             (Thousands of Dollars)

<CAPTION>
                                                                 September 30,       December 31,
                                                                     2000               1999*
                                                                     ----               -----
                                                                 (Unaudited)
<S>                                                                  <C>                <C>
Capitalization (Note B)
  Common stock equity
    Common stock                                                      $291,342           $292,006
    Paid-in capital                                                      2,424              2,253
    Capital stock expense                                               (2,170)            (2,170)
    Unearned employee stock ownership plan equity                       (8,548)            (9,261)
    Retained earnings                                                  199,446            175,470
                                                                ---------------    ---------------
                                                                       482,494            458,298
  Company-obligated mandatorily redeemable securities of
   subsidiary holding solely parent company debentures                       -             50,000
  Long-term debt
    Long-term debt                                                     604,837            605,641
    Investment in Seabrook obligation bonds                            (82,635)           (87,413)
                                                                ---------------    ---------------
      Net long-term debt                                               522,202            518,228
                                                                ---------------    ---------------

          Total                                                      1,004,696          1,026,526
                                                                ---------------    ---------------

Noncurrent Liabilities
  Purchase power contract obligation                                   132,347            144,406
  Nuclear decommissioning obligation                                    34,090             28,255
  Connecticut Yankee contract obligation                                23,134             27,056
  Pensions accrued                                                       4,964             19,026
  Obligations under capital leases                                      15,830             16,131
  Other                                                                 10,833             10,394
                                                                ---------------    ---------------
          Total                                                        221,198            245,268
                                                                ---------------    ---------------

Current Liabilities
  Current portion of long-term debt                                        859             25,000
  Notes payable                                                         80,342             17,131
  Accounts payable                                                      34,325             49,069
  Accounts payable - APS customers                                      93,656             56,220
  Dividends payable                                                     10,127             10,125
  Taxes accrued                                                          9,369              2,570
  Interest accrued                                                      13,805              8,433
  Obligations under capital leases                                         398                375
  Other accrued liabilities                                             62,924             39,421
                                                                ---------------    ---------------
          Total                                                        305,805            208,344
                                                                ---------------    ---------------

Customers' Advances for Construction                                     1,872              1,867
                                                                ---------------    ---------------

Regulatory Liabilities (FUTURE AMOUNTS OWED TO CUSTOMERS
                        THROUGH THE RATEMAKING PROCESS)
  Accumulated deferred investment tax credits                           14,881             15,157
  Deferred gains on sale of property                                    15,901             15,901
  Customer refund                                                       21,693             18,381
  Other                                                                    503              2,543
                                                                ---------------    ---------------
          Total                                                         52,978             51,982
                                                                ---------------    ---------------

Deferred Income Taxes (FUTURE TAX LIABILITIES OWED
                       TO TAXING AUTHORITIES)                          269,167            264,223
Commitments and Contingencies (Note L)
                                                                ---------------    ---------------
                                                                    $1,855,716         $1,798,210
                                                                ===============    ===============
</TABLE>

*Derived from audited financial statements

                   The accompanying Notes to Financial Statements
                  are an integral part of the financial statements.


                                     - 6 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (THOUSANDS OF DOLLARS)
                                   (UNAUDITED)

<CAPTION>
                                                                Three Months Ended            Nine Months Ended
                                                                   September 30,                September 30,
                                                                2000          1999            2000          1999
                                                                ----          ----            ----          ----

<S>                                                              <C>           <C>             <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                     $19,707       $24,997         $54,368       $48,884
                                                            -------------  ------------    ------------  ------------
  Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                                26,999        21,200          60,625        62,918
     Deferred income taxes                                         1,416         3,023           7,042         6,838
     Deferred income taxes - generation asset sale                     -             -               -       (70,222)
     Deferred investment tax credits - net                          (103)         (190)           (276)         (571)
     Amortization of nuclear fuel                                  1,979         1,978           5,772         6,658
     Allowance for funds used during construction                   (693)         (674)         (1,860)       (1,712)
     CTA and SBC expense deferral                                 (7,888)            -         (32,904)            -
     Amortization of deferred return                                   -         3,146               -         9,439
     Changes in:
            Accounts receivable - net                            (45,817)      (22,178)        (70,463)      (11,643)
            Fuel, materials and supplies                            (975)          (42)         (1,398)          170
            Prepayments                                           (1,889)       (1,985)         (2,286)        1,777
            Accounts payable                                      32,673        16,015          22,692          (847)
            Interest accrued                                      (2,399)       (2,462)          5,372         3,951
            Taxes accrued                                         (3,119)        6,967           6,799        11,777
            Taxes accrued - generation asset sale                      -       (17,555)              -        17,556
            Other assets and liabilities                           2,404        15,933          (1,156)      (20,800)
                                                            -------------  ------------    ------------  ------------
     Total Adjustments                                             2,588        23,176          (2,041)       15,289
                                                            -------------  ------------    ------------  ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                         22,295        48,173          52,327        64,173
                                                            -------------  ------------    ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Common stock                                                     (347)          284             219           853
   Notes payable                                                  66,080        (5,550)         63,211       (43,758)
   Securities redeemed and retired:
     Preferred stock                                                   -             -               -        (4,299)
     Company-obligated mandatorily redeemable securities of
     subsidiary holding solely parent debentures                 (50,000)            -         (50,000)            -
     Long-term debt                                                    -             -         (25,750)     (211,202)
   Premium on preferred stock redemptions                              -             -               -           (53)
   Lease obligations                                                 (95)          (88)           (279)         (259)
   Dividends
     Preferred stock                                                   -             -               -          (116)
     Common stock                                                (10,135)      (10,114)        (30,390)      (30,329)
                                                            -------------  ------------    ------------  ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                5,503       (15,468)        (42,989)     (289,163)
                                                            -------------  ------------    ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in unregulated businesses                               -       (20,156)              -       (95,248)
    Net cash received from sale of generation assets                   -             -               -       270,590
    Plant expenditures, including nuclear fuel                   (18,085)       (9,770)        (40,780)      (26,296)
    Investment in debt securities                                      -             -           4,778         5,447
                                                            -------------  ------------    ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES                            (18,085)      (29,926)        (36,002)      154,493
                                                            -------------  ------------    ------------  ------------

CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD                                          9,713         2,779         (26,664)      (70,497)
BALANCE AT BEGINNING OF PERIOD                                    31,945        51,225          68,322       124,501
                                                            -------------  ------------    ------------  ------------
BALANCE AT END OF PERIOD                                          41,658        54,004          41,658        54,004
LESS: RESTRICTED CASH                                             33,212        35,999          33,212        35,999
                                                            -------------  ------------    ------------  ------------
BALANCE: UNRESTRICTED CASH                                        $8,446       $18,005          $8,446       $18,005
                                                            =============  ============    ============  ============

CASH PAID DURING THE PERIOD FOR:
   Interest (net of amount capitalized)                          $10,173        $9,919         $18,732       $24,402
                                                            =============  ============    ============  ============
   Income taxes                                                  $20,000       $33,900         $32,600       $91,850
                                                            =============  ============    ============  ============
</TABLE>

 Note:      Cash Flows  from  Operating  Activities  for the nine  months  ended
            September 30, 1999 were reduced by the current income tax effects of
            the generation asset sale in the amount of $52,666.

                   The accompanying Notes to Financial Statements
                  are an integral part of the financial statements.


                                     - 7 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                               STATEMENT OF INCOME
                      (THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<CAPTION>
                                                                           Three Months Ended             Nine Months Ended
                                                                              September 30,                 September 30,
                                                                           2000           1999           2000           1999
                                                                           ----           ----           ----           ----
<S>                                                                        <C>            <C>            <C>            <C>
OPERATING REVENUES (NOTE G)                                                $201,127       $199,071       $546,116       $532,271
                                                                       -------------  -------------   ------------  -------------
OPERATING EXPENSES
  Operation
     Fuel and energy                                                         74,164         51,433        214,503        123,815
     Capacity purchased                                                         683          8,428          3,587         26,168
     Other                                                                   36,338         36,651        104,478        112,328
  Maintenance                                                                 6,076          5,820         16,895         21,279
  Depreciation (Note G)                                                       7,263         12,375         21,508         45,732
  Amortization of regulatory assets                                          17,874         11,444         24,467         24,934
  Income taxes (Note F)                                                      19,153         25,910         48,051         57,286
  Other taxes (Note G)                                                       11,073         12,918         32,942         38,399
                                                                       -------------  -------------   ------------  -------------
       Total                                                                172,624        164,979        466,431        449,941
                                                                       -------------  -------------   ------------  -------------
OPERATING INCOME                                                             28,503         34,092         79,685         82,330
                                                                       -------------  -------------   ------------  -------------
OTHER INCOME AND (DEDUCTIONS)
  Allowance for equity funds used during construction                           138            347            564            614
  Other-net (Note G)                                                          1,536            773          2,750          2,071
  Non-operating income taxes (Note F)                                         1,719          1,017          2,970          2,057
                                                                       -------------  -------------   ------------  -------------
       Total                                                                  3,393          2,137          6,284          4,742
                                                                       -------------  -------------   ------------  -------------
INCOME BEFORE INTEREST CHARGES                                               31,896         36,229         85,969         87,072
                                                                       -------------  -------------   ------------  -------------
INTEREST CHARGES
  Interest on long-term debt                                                  9,540          9,829         28,659         32,219
  Interest on Seabrook obligation bonds owned by the company                 (1,618)        (1,711)        (4,853)        (5,133)
  Interest on debt of associated company                                      1,134          1,215          3,565          3,646
  Other interest (Note G)                                                     1,636          1,407          2,661          4,083
  Allowance for borrowed funds used during construction                        (554)          (327)        (1,296)        (1,098)
                                                                       -------------  -------------   ------------  -------------
                                                                             10,138         10,413         28,736         33,717
  Amortization of debt expense and redemption premiums                          571            594          1,710          1,885
                                                                       -------------  -------------   ------------  -------------
       Net Interest Charges                                                  10,709         11,007         30,446         35,602
                                                                       -------------  -------------   ------------  -------------


NET INCOME                                                                   21,187         25,222         55,523         51,470
Premium on preferred stock redemptions                                            -              -              -             53
Dividends on preferred stock                                                      -              -              -             66
                                                                       -------------  -------------   ------------  -------------
INCOME APPLICABLE TO COMMON STOCK                                           $21,187        $25,222        $55,523        $51,351
                                                                       =============  =============   ============  =============
</TABLE>



                 The accompanying Notes to Financial Statements
                are an integral part of the financial statements.



                                     - 8 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                                  BALANCE SHEET
                                     ASSETS
                             (Thousands of Dollars)

<CAPTION>
                                                     September 30,     December 31,
                                                         2000             1999*
                                                         ----             -----
                                                     (Unaudited)
<S>                                                   <C>               <C>
Utility Plant at Original Cost
  In service                                            $915,609        $1,007,065
  Less, accumulated provision for depreciation           448,147           537,270
                                                    -------------    --------------
                                                         467,462           469,795

Construction work in progress                             34,963            25,708
Nuclear fuel                                              23,395            21,101
                                                    -------------    --------------
     Net Utility Plant                                   525,820           516,604
                                                    -------------    --------------


Other Property and Investments
   Nuclear decommissioning trust fund assets              34,090            28,255
   Other                                                   7,409            39,237
                                                    -------------    --------------
                                                          41,499            67,492
                                                    -------------    --------------


Current Assets
  Unrestricted cash and temporary cash investments         3,121            34,969
   Restricted cash                                         3,281             2,339
  Accounts receivable
   Customers, less allowance for doubtful
     accounts of $1,500 and $1,800                        60,434            56,057
   Other                                                  92,705           124,722
  Accrued utility revenues                                23,375            25,019
  Fuel, materials and supplies, at average cost            9,408             9,126
  Prepayments                                              5,079             2,780
                                                    -------------    --------------
     Total                                               197,403           255,012
                                                    -------------    --------------

Deferred Charges
  Unamortized debt issuance expenses                       7,473             8,688
  Other                                                    1,120             1,163
                                                    -------------    --------------
     Total                                                 8,593             9,851
                                                    -------------    --------------

Regulatory Assets (FUTURE AMOUNTS DUE FROM CUSTOMERS
                   THROUGH THE RATEMAKING PROCESS)
  Nuclear plant investments-above market                 502,906           518,268
  Income taxes due principally to book-tax differences   146,744           166,965
  Long-term purchase power contracts-above market        132,347           144,406
  Connecticut Yankee                                      30,583            37,013
  Unamortized redemption costs                            22,574            22,314
  Unamortized cancelled nuclear projects                   7,901             8,780
  Displaced worker protection costs                        4,021             5,746
  Uranium enrichment decommissioning cost                    990             1,040
  Other                                                   30,318             5,453
                                                    -------------    --------------
     Total                                               878,384           909,985
                                                    -------------    --------------

                                                      $1,651,699        $1,758,944
                                                    =============    ==============
</TABLE>

*Derived from audited financial statements

            The accompanying Notes to Financial Statements
           are an integral part of the financial statements.


                                     - 9 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                                  BALANCE SHEET

                         CAPITALIZATION AND LIABILITIES
                             (Thousands of Dollars)

<CAPTION>
                                                                 September 30,       December 31,
                                                                      2000              1999*
                                                                      ----              -----
                                                                  (Unaudited)
<S>                                                                 <C>                <C>
Capitalization (Note B)
  Common stock equity
    Common stock                                                            $1           $292,006
    Paid-in capital                                                    253,119              2,253
    Capital stock expense                                                    -             (2,170)
    Unearned employee stock ownership plan equity                            -             (9,261)
    Retained earnings                                                  212,259            197,000
                                                                ---------------    ---------------
                                                                       465,379            479,828
  Long-term debt
    Long-term debt                                                     604,837            656,147
    Investment in Seabrook obligation bonds                            (82,635)           (87,413)
                                                                ---------------    ---------------
      Net long-term debt                                               522,202            568,734
                                                                ---------------    ---------------

          Total                                                        987,581          1,048,562
                                                                ---------------    ---------------

Noncurrent Liabilities
  Purchase power contract obligation                                   132,347            144,406
  Nuclear decommissioning obligation                                    34,090             28,255
  Connecticut Yankee contract obligation                                23,134             27,056
  Pensions accrued                                                       4,964             19,026
  Obligations under capital leases                                      15,830             16,131
  Other                                                                 10,833             10,394
                                                                ---------------    ---------------
          Total                                                        221,198            245,268
                                                                ---------------    ---------------

Current Liabilities
  Current portion of long-term debt                                        859             25,000
  Notes payable                                                              -             17,000
  Accounts payable                                                      36,225             51,935
  Dividends payable                                                     20,000             10,125
  Taxes accrued                                                          7,932              2,382
  Interest accrued                                                      13,773              8,433
  Obligations under capital leases                                         398                375
  Other accrued liabilities                                             35,426             26,592
                                                                ---------------    ---------------
          Total                                                        114,613            141,842
                                                                ---------------    ---------------

Customers' Advances for Construction                                     1,872              1,867
                                                                ---------------    ---------------

Regulatory Liabilities (FUTURE AMOUNTS OWED TO CUSTOMERS
                        THROUGH THE RATEMAKING PROCESS)
  Accumulated deferred investment tax credits                           14,881             15,157
  Deferred gains on sale of property                                    15,901             15,901
  Customer refund                                                       21,693             18,381
  Other                                                                  6,142              8,182
                                                                ---------------    ---------------
          Total                                                         58,617             57,621
                                                                ---------------    ---------------

Deferred Income Taxes  (FUTURE TAX LIABILITIES OWED
                        TO TAXING AUTHORITIES)                         267,818            263,784
Commitments and Contingencies (Note L)
                                                                ---------------    ---------------
                                                                    $1,651,699         $1,758,944
                                                                ===============    ===============
</TABLE>
*Derived from audited financial statements

               The accompanying Notes to Financial Statements
              are an integral part of the financial statements.



                                     - 10 -
<PAGE>
<TABLE>
                         THE UNITED ILLUMINATING COMPANY
                             STATEMENT OF CASH FLOWS
                             (THOUSANDS OF DOLLARS)
                                   (UNAUDITED)

                                                                 Three Months Ended         Nine Months Ended
                                                                    September 30,             September 30,
                                                                2000          1999          2000          1999
                                                                ----          ----          ----          ----

<S>                                                              <C>           <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                     $21,187       $25,222       $55,523       $51,471
                                                            -------------  ------------  ------------  ------------
  Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                                25,864        20,222        57,566        60,186
     Deferred income taxes                                         1,526         3,008         6,130         6,580
     Deferred income taxes - generation asset sale                     -             -             -       (70,222)
     Deferred investment tax credits - net                          (103)         (190)         (276)         (571)
     Amortization of nuclear fuel                                  1,979         1,978         5,772         6,658
     Allowance for funds used during construction                   (693)         (674)       (1,860)       (1,712)
     CTA and SBC expense deferral                                 (7,888)            -       (32,904)            -
     Amortization of deferred return                                   -         3,146             -         9,439
     Changes in:
            Accounts receivable - net                             40,155       (35,759)       27,640      (104,541)
            Fuel, materials and supplies                            (134)          135          (282)         (654)
            Prepayments                                           (1,812)       (2,084)       (2,299)        1,611
            Accounts payable                                        (248)       (2,475)      (15,710)      (21,060)
            Interest accrued                                      (2,431)       (2,462)        5,340         3,951
            Taxes accrued                                         (4,033)        7,067         5,550        13,718
            Taxes accrued - generation asset sale                      -       (17,555)            -        17,556
            Other assets and liabilities                          40,191        14,934        43,216       (27,663)
                                                            -------------  ------------  ------------  ------------
     Total Adjustments                                            92,373       (10,709)       97,883      (106,724)
                                                            -------------  ------------  ------------  ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                        113,560        14,513       153,406       (55,253)
                                                            -------------  ------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Common stock                                                  (30,273)          284       (29,707)          853
   Notes payable                                                  (6,500)       (3,000)      (17,000)      (37,000)
   Securities redeemed and retired:
     Preferred stock                                                   -             -             -        (4,299)
     Long-term debt                                              (50,506)            -       (76,256)     (211,202)
   Premium on preferred stock redemptions                              -             -             -           (53)
   Lease obligations                                                 (95)          (88)         (279)         (259)
   Dividends
     Preferred stock                                                   -             -             -          (116)
     Common stock                                                (10,135)      (10,114)      (30,390)      (30,329)
                                                            -------------  ------------  ------------  ------------
NET CASH USED IN FINANCING ACTIVITIES                            (97,509)      (12,918)     (153,632)     (282,405)
                                                            -------------  ------------  ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Net cash received from sale of generation assets                   -             -             -       270,590
    Plant expenditures, including nuclear fuel                   (13,769)       (6,964)      (35,458)      (19,854)
    Investment in debt securities                                      -             -         4,778         5,447
                                                            -------------  ------------  ------------  ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES              (13,769)       (6,964)      (30,680)      256,183
                                                            -------------  ------------  ------------  ------------

CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD                                          2,282        (5,369)      (30,906)      (81,475)
BALANCE AT BEGINNING OF PERIOD                                     4,120        21,478        37,308        97,584
                                                            -------------  ------------  ------------  ------------
BALANCE AT END OF PERIOD                                           6,402        16,109         6,402        16,109
LESS: RESTRICTED CASH                                              3,281         2,339         3,281         2,339
                                                            -------------  ------------  ------------  ------------
BALANCE: UNRESTRICTED CASH                                        $3,121       $13,770        $3,121       $13,770
                                                            =============  ============  ============  ============

CASH PAID DURING THE PERIOD FOR:
   Interest (net of amount capitalized)                           $9,818        $9,920       $18,377       $24,403
                                                            =============  ============  ============  ============
   Income taxes                                                  $20,000       $33,900       $32,600       $91,850
                                                            =============  ============  ============  ============
</TABLE>

 Note:      Cash Flows  from  Operating  Activities  for the nine  months  ended
            September 30, 1999 were reduced by the current income tax effects of
            the generation asset sale in the amount of $52,666.

                     The accompanying Notes to Financial Statements
                    are an integral part of the financial statements.


                                     - 11 -
<PAGE>


                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                          NOTES TO FINANCIAL STATEMENTS

HOLDING COMPANY FORMATION

     On July 20, 2000, UIL Holdings Corporation (UIL Holdings) became the parent
company of a holding  company system as a result of the corporate  restructuring
of  The  United   Illuminating   Company   (UI)  and  its  direct  and  indirect
non-regulated  subsidiaries.  UI has  become a  wholly-owned  subsidiary  of UIL
Holdings,  and each share of the common  stock of UI has been  converted  into a
share of  common  stock of UIL  Holdings.  All of UI's  interests  in all of its
direct and indirect  non-regulated  subsidiaries  have been  transferred  to UIL
Holdings  and,  to the  extent  new  businesses  are  subsequently  acquired  or
commenced, they will also be financed and owned by UIL Holdings.

BASIS OF PRESENTATION

     The consolidated  financial statements of UIL Holdings and its wholly-owned
direct  subsidiaries,  UI and United  Resources,  Inc. (URI), have been prepared
pursuant to the rules and regulations of the Securities and Exchange  Commission
(SEC). The Notes to Financial  Statements apply to both UIL Holdings and UI. UIL
Holdings Consolidated  Financial Statements include the accounts of UIL Holdings
and its  wholly-owned  subsidiaries,  UI and  URI.  UIL  Holdings  prior  period
consolidated  financial  statements  have been  prepared  from UI's prior period
consolidated financial statements, except that amounts have been reclassified to
reflect UIL Holdings structure. The statements reflect all adjustments that are,
in the opinion of  management,  necessary to a fair statement of the results for
the periods  presented.  All such adjustments are of a normal recurring  nature.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to the rules and regulations of the SEC.
UIL  Holdings  and UI believe  that the  disclosures  are  adequate  to make the
information presented not misleading.  The UIL Holdings'  consolidated financial
statements and UI financial  statements  should be read in conjunction  with the
consolidated  financial  statements  and the  notes  to  consolidated  financial
statements  included  in UI's  annual  report  on Form  10-K for the year  ended
December 31, 1999. Such notes are supplemented as follows:

(A)  STATEMENT OF ACCOUNTING POLICIES

NUCLEAR DECOMMISSIONING TRUSTS

     External  trust  funds  are   maintained  to  fund  the  estimated   future
decommissioning  costs  of the  nuclear  generating  units  in  which  UI has an
ownership interest.  These costs are accrued as a charge to depreciation expense
over the  estimated  service  lives of the units and are recovered in rates on a
current  basis.  UI paid $3 million  into the  decommissioning  trust  funds for
Seabrook  Unit 1 and  Millstone  Unit 3 in the first nine months of each of 2000
and 1999. At September 30, 2000,  UI's shares of the trust fund balances,  which
included  accumulated earnings on the funds, were $25.2 million and $8.8 million
for Seabrook Unit 1 and Millstone Unit 3, respectively.  These fund balances are
included in "Other  Property and  Investments"  and the accrued  decommissioning
obligation is included in "Noncurrent Liabilities" on UIL Holdings' Consolidated
Balance Sheet and UI's Balance Sheet.

COMPREHENSIVE INCOME

     Comprehensive  income for the nine months ended September 30, 2000 and 1999
is equal to net income as reported.

NEW ACCOUNTING STANDARDS

     The Financial  Accounting Standards Board Statement of Financial Accounting
Standards  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities" will become effective for UIL Holdings in the first quarter of 2001.
UI has a contract with a power  marketer  that  includes a  financially  settled
contract for  differences  related to certain call rights of the power  marketer
and put rights of UI with respect to UI's  entitlements  in Seabrook  Unit 1 and
Millstone  Unit 3. This contract  will  terminate at the earlier of December 31,
2003 or the date that UI sells its


                                     - 12 -
<PAGE>


                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

interests  in these  units.  Application  of the new  accounting  standard  will
require the  recognition  of UI's future  obligation  for financial  settlements
under this contract. However, since the costs of this contract are considered in
the Competitive  Transition  Assessment (CTA)  mechanism,  there is currently no
income statement effect. The adoption of this accounting statement will not have
any impact on UIL Holdings'  results of operations and is not expected to have a
material impact on UIL Holdings' financial condition.

 (B)  CAPITALIZATION

COMMON STOCK

     UIL Holdings had 14,321,177 shares of its common stock,  without par value,
outstanding  at September  30, 2000, of which  251,465  shares were  unallocated
shares held by The United Illuminating Company  401(k)/Employee  Stock Ownership
Plan (KSOP) and not recognized as outstanding for accounting purposes.

     UI has entered into an  arrangement  under which it loaned $11.5 million to
the KSOP.  The  trustee  for the KSOP used the  funds to  purchase  shares of UI
common stock in open market  transactions.  On July 20, 2000, effective with the
formation of the holding company structure,  unallocated shares held by the KSOP
were  converted  into shares of UIL Holdings  common  stock.  The shares will be
allocated to employees' KSOP accounts, as the loan is repaid, to cover a portion
of the required KSOP  contributions.  The loan will be repaid by the KSOP over a
twelve-year period, using employer contributions and UIL Holdings dividends paid
on the  unallocated  shares of the stock held by the KSOP.  As of September  30,
2000,  251,465  shares,  with a fair  market  value of $12.9  million,  had been
purchased by the KSOP and had not been  committed to be released or allocated to
KSOP participants.

     In 1990,  UI's  Board of  Directors  and the  shareowners  approved a stock
option plan for officers  and key  employees  of UI.  Options to purchase  3,500
shares of stock at an exercise price of $30 per share,  7,800 shares of stock at
an  exercise  price of  $39.5625  per  share,  and  5,000  shares of stock at an
exercise  price of $42.375 per share have been granted and remained  outstanding
at September  30, 2000. No options were  exercised  during the nine months ended
September  30,  2000.  Effective  with  the  formation  of the  holding  company
structure on July 20, 2000, all outstanding  options were converted into options
to purchase an equivalent number of shares of UIL Holdings common stock.

     On March 22, 1999, UI's Board of Directors approved a stock option plan for
directors,  officers and key employees of UI. The plan provides for the awarding
of options to purchase up to 650,000 shares of UI's common stock over periods of
from one to ten years  following  the dates when the  options are  granted.  The
exercise  price of each option cannot be less than the market value of the stock
on the date of the grant. On June 28, 1999, UI's shareowners  approved the plan.
Effective with the formation of the holding company  structure on July 20, 2000,
all  outstanding  options were  converted into options to purchase an equivalent
number of shares of UIL Holdings common stock.  Options to purchase 8,575 shares
of stock at an exercise price of $43.21875 were exercised during the nine months
ended September 30, 2000. Options and reload options to purchase 6,300 shares of
stock at an exercise  price of $43.50 per share,  132,000  shares of stock at an
exercise  price of $43.21875 per share,  186,900  shares of stock at an exercise
price of  $39.40625  per share,  2,170  shares of stock at an exercise  price of
$53.1250, 382 shares of stock at an exercise price of $52.6875,  1,000 shares of
stock at an exercise  price of  $50.3125  and 407 shares of stock at an exercise
price of $53.0625  have been granted and remained  outstanding  at September 30,
2000.

RETAINED EARNINGS RESTRICTION

     The indenture  under which UI has issued $200 million  principal  amount of
Notes places  limitations  on UI related to the payment of cash dividends on its
common  stock and the  purchase  or  redemption  of its common  stock.  Retained
earnings  in the amount of $132.9  million  were free from such  limitations  at
September 30, 2000.



                                     - 13 -
<PAGE>

                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

LONG-TERM DEBT

     On December  16, 1999,  UI borrowed  $25 million from the Business  Finance
Authority of the State of New Hampshire  (BFA),  representing  the proceeds from
the issuance by the BFA of $25 million principal amount of tax-exempt  Pollution
Control Refunding Revenue Bonds (PCRRBs).  UI is obligated,  under its borrowing
agreement  with the BFA, to pay to a trustee for the  PCRRBs'  bondholders  such
amounts as will be required to pay,  when due, the principal of and the premium,
if any,  and interest on the PCRRBs.  The PCRRBs will mature in 2029,  and their
interest  rate is fixed at 5.4% for the  three-year  period  ending  December 1,
2002.  At December  31,  1999,  these  proceeds  were held by a trustee and were
recognized  as cash and  long-term  debt on UI's Balance  Sheet.  On January 15,
2000, UI used the proceeds of this $25 million borrowing to redeem and repay $25
million of 8.0%, 1989 Series A, Pollution  Control Revenue Bonds, an outstanding
series  of  tax-exempt  bonds on which UI also  had a  payment  obligation  to a
trustee  for  the  bondholders.   Expenses  associated  with  this  transaction,
including   redemption   premiums   totaling  $750,000  and  other  expenses  of
approximately $417,000, were paid by UI.

     On August 9, 2000, UI initiated the redemption process for $50 million of 9
5/8% Preferred  Capital  Securities,  Series A, due 2025.  These securities were
issued  by  United  Capital  Funding  Partnership  L.  P.,  a  Delaware  limited
partnership,  in April 1995. The securities  were redeemed on September 25, 2000
at $25.00 per share,  plus accrued dividends to the redemption date of $0.160417
per share.

(E)  SHORT-TERM CREDIT ARRANGEMENTS

     On June 26,  2000,  UI entered into a Money  Market Loan  arrangement  with
Chase Manhattan Bank. On September 29, 2000, this arrangement was transferred to
UIL Holdings.  This is an uncommitted  short-term  borrowing  arrangement  under
which Chase  Manhattan  Bank may make loans  totaling up to $150  million to UIL
Holdings for fixed maturities from one day up to six months.  Chase  Securities,
Inc. acts as an agent and sells the loans to investors. The fixed interest rates
on the loans are determined based on conditions in the financial  markets at the
time of each loan. As of September 30, 2000, UIL Holdings had loans totaling $30
million outstanding under this arrangement.

     UI's $60  million  revolving  credit  agreement  with a group of banks  was
terminated on August 3, 2000. UI had no short-term borrowings  outstanding under
this facility at that time.

     On August 3, 2000, UIL Holdings  entered into a revolving  credit agreement
with the same group of banks.  The  borrowing  limit of this  facility  is $97.5
million.  The facility  permits UIL  Holdings to borrow  funds at a  fluctuating
interest  rate  determined  by the prime  lending  market in New York,  and also
permits UIL Holdings to borrow money for fixed periods of time  specified by UIL
Holdings at fixed interest rates  determined by the Eurodollar  interbank market
in London.  If a material adverse change in the business,  operations,  affairs,
assets or condition,  financial or  otherwise,  or prospects of UIL Holdings and
its subsidiaries,  on a consolidated  basis, should occur, the banks may decline
to lend additional money to UIL Holdings under this revolving credit  agreement,
although borrowings outstanding at the time of such an occurrence would not then
become due and payable.  As of September 30, 2000,  UIL Holdings had $50 million
in short-term borrowings outstanding under this facility.


                                     - 14 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

(F) INCOME TAXES

                                UIL HOLDINGS CORPORATION

<CAPTION>
                                                             Three Months Ended             Nine Months Ended
                                                                September 30,                  September 30,
                                                             2000           1999           2000           1999
                                                             ----           ----           ----           ----
                                                            (000's)        (000's)        (000's)        (000's)
<S>                                                          <C>            <C>            <C>            <C>
Income tax expense consists of:
Income tax provisions:
  Current
              Federal                                        $12,416        $17,404        $30,612        $93,197
              State                                            2,897          4,519          7,213         24,250
                                                         ------------   ------------   ------------   ------------
                 Total current                                15,313         21,923         37,825        117,447
                                                         ------------   ------------   ------------   ------------
  Deferred
              Federal                                          1,124          2,802          6,202        (48,842)
              State                                              292            221            840        (14,542)
                                                         ------------   ------------   ------------   ------------
                 Total deferred                                1,416          3,023          7,042        (63,384)
                                                         ------------   ------------   ------------   ------------

  Investment tax credits                                        (103)          (190)          (276)          (571)
                                                         ------------   ------------   ------------   ------------

     Total income tax expense                                $16,626        $24,756        $44,591        $53,492
                                                         ============   ============   ============   ============

Income tax components charged as follows:
  Operating expenses                                         $18,357        $25,773        $47,574        $55,549
  Other income and deductions - net                           (1,731)        (1,017)        (2,983)        (2,057)
                                                         ------------   ------------   ------------   ------------

     Total income tax expense                                $16,626        $24,756        $44,591        $53,492
                                                         ============   ============   ============   ============


The following table details the components
  of the deferred income taxes:
     Tax gain on sale of generation assets                       $ -            $ -            $ -      $ (70,222)
     Seabrook sale/leaseback transaction                         576            686         (3,419)        (3,478)
     Pension benefits                                          2,488            579          5,583          2,684
     Accelerated depreciation                                 (1,674)         1,251         (2,379)         3,751
     Tax depreciation on unrecoverable plant investment           22          1,186             68          3,560
     Unit overhaul and replacement power costs                  (454)          (240)        (1,363)         1,978
     Conservation and load management                            (27)          (410)           (80)        (2,155)
     Postretirement benefits                                    (100)          (265)          (284)          (963)
     Loss from disposition of property                             -              -         (1,420)             -
     Displaced worker protection costs                          (225)            43           (688)         2,258
     Bond redemption costs                                      (256)          (253)          (329)          (761)
     Cancelled nuclear project                                  (117)          (117)          (350)          (350)
     Restructuring costs                                      (1,398)             -          1,267              -
     SBC and CTA expense deferral                              3,145              -         13,120              -
     Other - net                                                (564)           563         (2,684)           314
                                                         ------------   ------------   ------------   ------------

Deferred income taxes - net                                   $1,416         $3,023         $7,042       ($63,384)
                                                         ============   ============   ============   ============
</TABLE>



                                     - 15 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

                          THE UNITED ILLUMINATING COMPANY

<CAPTION>
                                                          Three Months Ended             Nine Months Ended
                                                                September 30,                  September 30,
                                                           2000           1999           2000           1999
                                                           ----           ----           ----           ----
                                                           (000's)       (000's)         (000's)       (000's)
<S>                                                         <C>            <C>            <C>           <C>
Income tax expense consists of:
Income tax provisions:
  Current
              Federal                                       $13,003        $17,537        $31,824        $94,793
              State                                           3,008          4,538          7,403         24,649
                                                        ------------   ------------   ------------   ------------
                 Total current                               16,011         22,075         39,227        119,442
                                                        ------------   ------------   ------------   ------------
  Deferred
              Federal                                         1,213          2,790          5,461        (49,046)
              State                                             313            218            669        (14,596)
                                                        ------------   ------------   ------------   ------------
                 Total deferred                               1,526          3,008          6,130        (63,642)
                                                        ------------   ------------   ------------   ------------

  Investment tax credits                                       (103)          (190)          (276)          (571)
                                                        ------------   ------------   ------------   ------------

     Total income tax expense                               $17,434        $24,893        $45,081        $55,229
                                                        ============   ============   ============   ============

Income tax components charged as follows:
  Operating expenses                                        $19,153        $25,910        $48,051        $57,286
  Other income and deductions - net                          (1,719)        (1,017)        (2,970)        (2,057)
                                                        ------------   ------------   ------------   ------------

     Total income tax expense                               $17,434        $24,893        $45,081        $55,229
                                                        ============   ============   ============   ============


The following table details the components
 of the deferred income taxes:
     Tax gain on sale of generation assets                   $  -           $  -           $  -        $ (70,222)
     Seabrook sale/leaseback transaction                        576            686         (3,419)        (3,478)
     Pension benefits                                         2,488            579          5,583          2,684
     Accelerated depreciation                                (1,674)         1,251         (2,379)         3,751
     Tax depreciation on unrecoverable plant investment          22          1,186             68          3,560
     Unit overhaul and replacement power costs                 (454)          (240)        (1,363)         1,978
     Conservation and load management                           (27)          (410)           (80)        (2,155)
     Postretirement benefits                                   (100)          (265)          (284)          (963)
     Loss from disposition of property                            -              -         (1,420)             -
     Displaced worker protection costs                         (225)            43           (688)         2,258
     Bond redemption costs                                     (256)          (253)          (329)          (761)
     Cancelled nuclear project                                 (117)          (117)          (350)          (350)
     Restructuring costs                                     (1,398)             -          1,267              -
     SBC and CTA expense deferral                             3,145              -         13,120              -
     Other - net                                               (454)           548         (3,596)            56
                                                        ------------   ------------   ------------   ------------

Deferred income taxes - net                                  $1,526         $3,008         $6,130       ($63,642)
                                                        ============   ============   ============   ============
</TABLE>



                                     - 16 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

(G)  SUPPLEMENTARY INFORMATION

                           UIL HOLDINGS CORPORATION

<CAPTION>
                                                          Three Months Ended              Nine Months Ended
                                                             September 30,                  September 30,
                                                          2000           1999            2000           1999
                                                          ----           ----            ----           ----
                                                         (000's)       (000's)          (000's)       (000's)
<S>                                                      <C>            <C>             <C>            <C>
Operating Revenues
------------------
Utility
     Retail                                               $160,028       $191,056        $457,697       $498,985
     Wholesale                                              20,511          3,669          59,083         22,938
     Proceeds from Millstone Unit 3 settlement              14,960              -          14,960              -
     Other                                                   5,628          4,346          14,376         10,348
Non-regulated business unit revenues                        45,927         21,456          99,982         45,337
                                                      -------------  -------------   -------------  -------------

          Total Operating Revenues                        $247,054       $220,527        $646,098       $577,608
                                                      =============  =============   =============  =============

Utility Sales by Class (megawatt-hours)
--------------------------------------
    Retail
     Residential                                           535,409        604,600       1,543,702      1,581,672
     Commercial                                            657,897        663,457       1,808,518      1,808,369
     Industrial                                            298,806        323,782         870,002        885,041
     Other                                                  10,445         11,803          33,945         35,852
                                                      -------------  -------------   -------------  -------------
                                                         1,502,557      1,603,642       4,256,167      4,310,934
    Wholesale                                              663,649         62,040       1,932,945        920,623
                                                      -------------  -------------   -------------  -------------
          Total Sales by Class                           2,166,206      1,665,682       6,189,112      5,231,557
                                                      =============  =============   =============  =============

Depreciation
------------
    Plant in Service-regulated utility                      $6,256        $11,347         $18,506        $37,918
    Nonutility property-unregulated                          1,134            977           3,059          2,732
    Amortization of Conservation and
            Load Management Costs                                -            (50)              -          4,786
    Nuclear Decommissioning                                  1,007          1,078           3,002          3,028
                                                      -------------  -------------   -------------  -------------
                                                            $8,397        $13,352         $24,567        $48,464
                                                      =============  =============   =============  =============

Other Taxes
-----------
    Charged to:
     Operating:
        State gross earnings                                $6,480         $7,704         $18,035        $19,456
        Local real estate and personal property              3,612          4,062          11,310         14,737
        Payroll taxes                                        1,349          1,152           4,313          4,206
                                                      -------------  -------------   -------------  -------------
                                                            11,441         12,918          33,658         38,399
     Nonoperating and other accounts                           197            140             476            432
                                                      -------------  -------------   -------------  -------------
          Total Other Taxes                                $11,638        $13,058         $34,134        $38,831
                                                      =============  =============   =============  =============

Other Income and (Deductions) - net
-----------------------------------
     Interest income                                          $197           $294            $808         $1,423
     Equity earnings from Connecticut Yankee                   574            197             817            521
     Miscellaneous other income and (deductions) - net      (3,449)           552          (3,879)        (1,041)
                                                      -------------  -------------   -------------  -------------
          Total Other Income and (Deductions) - net        ($2,678)        $1,043         ($2,254)          $903
                                                      =============  =============   =============  =============

Other Interest Charges
----------------------
     Notes Payable                                            $702           $698          $1,217         $2,341
     Other                                                   1,324            709           1,835          1,742
                                                      -------------  -------------   -------------  -------------
          Total Other Interest Charges                      $2,026         $1,407          $3,052         $4,083
                                                      =============  =============   =============  =============
</TABLE>



                                     - 17 -
<PAGE>
<TABLE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

                        THE UNITED ILLUMINATING COMPANY


<CAPTION>
                                                            Three Months Ended              Nine Months Ended
                                                               September 30,                  September 30,
                                                            2000           1999            2000           1999
                                                            ----           ----            ----           ----
                                                           (000's)       (000's)          (000's)       (000's)
<S>                                                        <C>            <C>             <C>            <C>
Operating Revenues
------------------
     Retail                                                 $160,028       $191,056        $457,697       $498,985
     Wholesale                                                20,511          3,669          59,083         22,938
     Proceeds from Millstone Unit 3 settlement                14,960              -          14,960              -
     Other                                                     5,628          4,346          14,376         10,348
                                                        -------------  -------------   -------------  -------------
          Total Operating Revenues                          $201,127       $199,071        $546,116       $532,271
                                                        =============  =============   =============  =============

Sales by Class (megawatt-hours)
------------------------------
    Retail
     Residential                                             535,409        604,600       1,543,702      1,581,672
     Commercial                                              657,897        663,457       1,808,518      1,808,369
     Industrial                                              298,806        323,782         870,002        885,041
     Other                                                    10,445         11,803          33,945         35,852
                                                        -------------  -------------   -------------  -------------
                                                           1,502,557      1,603,642       4,256,167      4,310,934
    Wholesale                                                663,649         62,040       1,932,945        920,623
                                                        -------------  -------------   -------------  -------------
          Total Sales by Class                             2,166,206      1,665,682       6,189,112      5,231,557
                                                        =============  =============   =============  =============

Depreciation
------------
    Plant in Service-regulated utility                        $6,256        $11,347         $18,506        $37,918
    Amortization of Conservation and
            Load Management Costs                                  -            (50)              -          4,786
    Nuclear Decommissioning                                    1,007          1,078           3,002          3,028
                                                        -------------  -------------   -------------  -------------
                                                              $7,263        $12,375         $21,508        $45,732
                                                        =============  =============   =============  =============

Other Taxes
-----------
    Charged to:
     Operating:
        State gross earnings                                  $6,480         $7,704         $18,035        $19,456
        Local real estate and personal property                3,589          4,062          11,243         14,737
        Payroll taxes                                          1,004          1,152           3,664          4,206
                                                        -------------  -------------   -------------  -------------
                                                              11,073         12,918          32,942         38,399
     Nonoperating and other accounts                             197            140             476            432
                                                        -------------  -------------   -------------  -------------
          Total Other Taxes                                  $11,270        $13,058         $33,418        $38,831
                                                        =============  =============   =============  =============

Other Income and (Deductions) - net
-----------------------------------
     Interest income                                            $197           $294            $808         $1,423
     Equity earnings from Connecticut Yankee                     574            197             817            521
     Miscellaneous other income and (deductions) - net           765            282           1,125            127
                                                        -------------  -------------   -------------  -------------
          Total Other Income and (Deductions) - net           $1,536           $773          $2,750         $2,071
                                                        =============  =============   =============  =============

Other Interest Charges
----------------------
     Notes Payable                                              $636           $698          $1,151         $2,341
     Other                                                     1,000            709           1,510          1,742
                                                        -------------  -------------   -------------  -------------
          Total Other Interest Charges                        $1,636         $1,407          $2,661         $4,083
                                                        =============  =============   =============  =============
</TABLE>


                                     - 18 -
<PAGE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

(L)  COMMITMENTS AND CONTINGENCIES

CAPITAL EXPENDITURE PROGRAM

     UIL Holdings' continuing capital expenditure program is presently estimated
at $359 million,  excluding  UI's  allowance for funds used during  construction
(AFUDC), for 2000 through 2004.

NUCLEAR INSURANCE CONTINGENCIES

     The  Price-Anderson  Act, currently extended through August 1, 2002, limits
public liability  resulting from a single incident at a nuclear power plant. The
first $200 million of liability  coverage is provided by purchasing  the maximum
amount of commercially  available insurance.  Additional liability coverage will
be provided by an assessment of up to $83.9 million per incident, levied on each
of the  nuclear  units  licensed to operate in the United  States,  subject to a
maximum  assessment of $10 million per incident per nuclear unit in any year. In
addition,  if the sum of all public  liability  claims and legal costs resulting
from any nuclear  incident  exceeds the maximum amount of financial  protection,
each reactor operator can be assessed an additional 5% of $83.9 million, or $4.2
million. The maximum assessment is adjusted at least every five years to reflect
the  impact of  inflation.  With  respect to each of the two  operating  nuclear
generating  units in which UI has an  interest,  UI will be obligated to pay its
ownership  and/or leasehold share of any statutory  assessment  resulting from a
nuclear incident at any nuclear generating unit. Based on its interests in these
nuclear  generating  units,  UI estimates its maximum  liability  would be $17.8
million per incident.  However,  any assessment would be limited to $2.1 million
per incident per year.

     The  Nuclear   Regulatory   Commission   requires  each  operating  nuclear
generating  unit to obtain  property  insurance  coverage in a minimum amount of
$1.06  billion and to  establish a system of  prioritized  use of the  insurance
proceeds in the event of a nuclear incident.  The system requires that the first
$1.06 billion of insurance  proceeds be used to stabilize the nuclear reactor to
prevent  any  significant  risk  to  public  health  and  safety  and  then  for
decontamination and cleanup operations. Only following completion of these tasks
would the balance, if any, of the segregated insurance proceeds become available
to the unit's owners.  For each of the two operating nuclear generating units in
which UI has an interest,  UI is required to pay its ownership  and/or leasehold
share of the cost of purchasing such insurance. Although each of these units has
purchased $2.75 billion of property insurance coverage,  representing the limits
of coverage currently  available from conventional  nuclear insurance pools, the
cost of a nuclear  incident could exceed  available  insurance  proceeds.  Under
those circumstances,  the nuclear insurance pools that provide this coverage may
levy  assessments  against the insured owner companies if pool losses exceed the
accumulated  funds  available  to the pool.  The maximum  potential  assessments
against UI with  respect to losses  occurring  during  current  policy years are
approximately $3.0 million.

OTHER COMMITMENTS AND CONTINGENCIES

                               CONNECTICUT YANKEE

     On December  4, 1996,  the Board of  Directors  of the  Connecticut  Yankee
Atomic  Power  Company  (Connecticut  Yankee)  voted  unanimously  to retire the
Connecticut  Yankee nuclear plant (the Connecticut  Yankee Unit) from commercial
operation.  UI has a 9.5% stock ownership share in Connecticut Yankee. The power
purchase  contract  under which UI had  purchased  its 9.5%  entitlement  to the
Connecticut  Yankee Unit's power output  permits  Connecticut  Yankee to recover
9.5% of all of its costs from UI. In December of 1996,  Connecticut Yankee filed
decommissioning  cost estimates and  amendments to the power  contracts with its
owners with the Federal Energy Regulatory Commission (FERC). Based on regulatory
precedent,  this filing  requested  confirmation  that  Connecticut  Yankee will
continue to collect from its owners its  decommissioning  costs, the unrecovered
investment in the  Connecticut  Yankee Unit and other costs  associated with the
permanent shutdown of the Connecticut Yankee Unit. On April 7, 2000, Connecticut
Yankee reached a settlement agreement with the Connecticut  Department of Public
Utility  Control (DPUC) and the Connecticut  Office of Consumer  Counsel (two of
the  intervenors  in the FERC  proceeding).  This agreement was


                                     - 19 -
<PAGE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

submitted to the FERC,  which  approved it in all respects on July 26, 2000; and
it became effective on August 1, 2000. The agreement allows  Connecticut  Yankee
to earn a return on  equity  of 6% and  stipulates  a new  decommissioning  cost
estimate  for  the  Connecticut   Yankee  Unit  for  purposes  of  FERC-approved
decommissioning  cost  collections  by  Connecticut  Yankee  through  the  power
contracts with the unit's owners.

     UI's estimate of its remaining share of Connecticut Yankee costs, including
decommissioning,  less return of  investment  (approximately  $7.5  million) and
return on  investment  (approximately  $3.0  million) at September  30, 2000, is
approximately $23.1 million.  This estimate,  which is subject to ongoing review
and revision,  has been recorded as an obligation and a regulatory asset on UI's
Balance Sheet.

                                  HYDRO-QUEBEC

     UI is a participant  in the  Hydro-Quebec  transmission  intertie  facility
linking New England and Quebec,  Canada. Phase I of this facility,  which became
operational in 1986 and in which UI has a 5.45%  participating  share, has a 690
megawatt  equivalent  capacity  value;  and  Phase  II,  in which UI has a 5.45%
participating  share,  increased the  equivalent  capacity value of the intertie
from 690  megawatts to a maximum of 2000  megawatts in 1991.  UI is obligated to
furnish a guarantee for its  participating  share of the debt  financing for the
Phase II facility.  As of September 30, 2000, UI's guarantee  liability for this
debt was approximately $5.7 million.

                             ENVIRONMENTAL CONCERNS

     In complying  with  existing  environmental  statutes and  regulations  and
further developments in areas of environmental  concern,  including  legislation
and  studies  in the  fields of water  quality,  hazardous  waste  handling  and
disposal,  toxic  substances,  and electric and  magnetic  fields,  UI may incur
substantial  capital  expenditures  for equipment  modifications  and additions,
monitoring  equipment  and  recording  devices,  and  it  may  incur  additional
operating  expenses.   The  total  amount  of  these  expenditures  is  not  now
determinable.

             SITE DECONTAMINATION, DEMOLITION AND REMEDIATION COSTS

     UI has estimated that the total cost of decontaminating and demolishing its
Steel Point Station and completing  requisite  environmental  remediation of the
site will be approximately  $11.3 million,  of which  approximately $8.6 million
had been incurred as of September  30, 2000,  and that the value of the property
following  remediation will not exceed $6.0 million.  As a result of a 1992 DPUC
retail rate decision,  beginning January 1, 1993, UI has been recovering through
retail rates $1.075 million of the  remediation  costs per year. The remediation
costs,  property value and recovery from customers will be subject to true-up in
UI's next retail rate proceeding  based on actual  remediation  costs and actual
gain on UI's disposition of the property.

     UI has been remediating an area of PCB  contamination at a site,  bordering
the Mill River in New  Haven,  that  contains  transmission  facilities  and the
deactivated   English   Station   generation   facilities.   The  excavation  of
contaminated soils and post-remediation  monitoring is complete. In addition, UI
is currently  replacing the bulkhead that  surrounds  this site, at an estimated
cost of $13.5 million.  Of this amount,  $4.2 million  represents the portion of
the costs to protect UI's  transmission  facilities  and will be  capitalized as
plant in service.  The remaining  estimated cost of $9.3 million was expensed in
1999. UI has conveyed to an unaffiliated  entity,  Quinnipiac Energy,  LLC, (QE)
the entire  English  Station site,  reserving to UI permanent  easements for the
operation  of its  transmission  facilities  on the  site.  UI  has  funded  61%
(approximately $1.2 million) of the environmental remediation costs that will be
incurred by QE to bring the site into  compliance  with  applicable  Connecticut
minimum standards.

     UI closed on the sale of its Bridgeport Harbor Station and New Haven Harbor
Station  generating  plants in compliance with  Connecticut's  electric  utility
industry restructuring  legislation on April 16, 1999. Environmental assessments
performed  in  connection  with the  marketing  of these  plants  indicate  that
substantial  remediation  expenditures  will be  required  in order to bring the
plant sites into compliance with applicable  Connecticut minimum


                                     - 20 -
<PAGE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

standards.  The  purchaser of the plants has agreed to undertake and pay for the
major  portion  of  this  remediation.  However,  UI  will  be  responsible  for
remediation of the portions of the plant sites that have been retained by it.

(M)  NUCLEAR FUEL DISPOSAL AND NUCLEAR PLANT DECOMMISSIONING

     New   Hampshire   has   enacted  a  law   requiring   the   creation  of  a
government-managed  fund to finance the  decommissioning  of nuclear  generating
units  in  that  state.  The New  Hampshire  Nuclear  Decommissioning  Financing
Committee  (NDFC)  has  established  $565  million  (in  2000  dollars)  as  the
decommissioning  cost estimate for Seabrook Unit 1, of which UI's share would be
approximately  $99  million.  This  estimate  assumes  the  prompt  removal  and
dismantling  of the unit at the end of its estimated  36-year  energy  producing
life.  Monthly  decommissioning  payments  are being  made to the  state-managed
decommissioning  trust fund.  UI's share of the  decommissioning  payments  made
during the first nine months of 2000 was $2.5 million. UI's share of the fund at
September 30, 2000 was approximately $25.2 million.

     Connecticut has enacted a law requiring the operators of nuclear generating
units  to file  periodically  with  the  DPUC  their  plans  for  financing  the
decommissioning  of the units in that state.  The current  decommissioning  cost
estimate for Millstone Unit 3 is $619 million (in 2000  dollars),  of which UI's
share would be  approximately  $23  million.  This  estimate  assumes the prompt
removal and  dismantling of the unit at the end of its estimated  40-year energy
producing life. Monthly decommissioning payments, based on these cost estimates,
are being made to a  decommissioning  trust fund managed by Northeast  Utilities
(NU).  UI's share of the Millstone Unit 3  decommissioning  payments made during
the  first  nine  months  of 2000 was $0.5  million.  UI's  share of the fund at
September 30, 2000 was approximately $8.8 million.  The current  decommissioning
cost estimate for the Connecticut  Yankee Unit,  assuming the prompt removal and
dismantling  of the unit,  is $463  million,  of which UI's  share  would be $44
million.  Through  September  30,  2000,  $218  million  has been  expended  for
decommissioning.  The projected remaining  decommissioning cost is $245 million,
of which UI's share would be $23.2 million.  The decommissioning  trust fund for
the  Connecticut  Yankee  Unit is also  managed  by NU.  For  UI's  9.5%  equity
ownership  in  Connecticut  Yankee,  decommissioning  costs of $1.8 million were
funded by UI during the first nine months of 2000, and UI's share of the fund at
September 30, 2000 was $30.9 million.



                                     - 21 -
<PAGE>
                            UIL HOLDINGS CORPORATION
                         THE UNITED ILLUMINATING COMPANY

                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

(P)  SEGMENT INFORMATION

     UIL  Holdings  has one  reportable  operating  segment,  that of  regulated
generation,  distribution and sale of electricity.  The accounting policies used
for that  segment do not differ  from  those  used for  nonreportable  operating
segments.  Revenues from inter-segment transactions are not material, and all of
UIL Holdings' revenues are derived in the United States.

     The following  tables  reconcile  the total  assets,  revenue from external
customers and income (loss) before income taxes of the  reportable  segment with
the total amounts for UIL Holdings:

                                             SEPTEMBER 30,       DECEMBER 31,
                                                 2000                1999
                                                 ----                ----
                                                          (000's)
       Total Assets -UI                       $1,651,699          $1,758,944
       Other                                     204,017              39,266
                                                --------           ---------
       Total Assets - UIL Holdings            $1,855,716          $1,798,210
                                               =========           =========


<TABLE>
<CAPTION>
                                QUARTER ENDED SEPTEMBER 30, 2000             QUARTER ENDED SEPTEMBER 30, 1999
                                --------------------------------             --------------------------------
                                                        TOTAL                                        TOTAL
                                 UI        OTHER     UIL HOLDINGS            UI        OTHER      UIL HOLDINGS
                                 --        -----     ------------            --        ----       ------------
                                                                   (000's)
       <S>                     <C>         <C>          <C>                <C>         <C>           <C>
       Revenue from
       External Customers      $201,127    $45,927      $247,054           $199,071    $21,456       $220,527
       Income (Loss)
       Before Income Taxes      $38,621    $(2,288)      $36,333            $50,115      $(362)       $49,753
</TABLE>


<TABLE>
<CAPTION>
                                 YEAR TO DATE SEPTEMBER 30, 2000             YEAR TO DATE SEPTEMBER 30, 1999
                                 -------------------------------             -------------------------------
                                                        TOTAL                                        TOTAL
                                 UI        OTHER     UIL HOLDINGS            UI        OTHER      UIL HOLDINGS
                                 --        -----     ------------            --        ----       ------------
                                                                   (000's)
       <S>                     <C>         <C>          <C>                <C>          <C>          <C>
       Revenue from
       External Customers      $546,116    $99,982      $646,098           $532,271     $45,337      $577,608
       Income (Loss)
       Before Income Taxes     $100,604    $(1,645)      $98,959           $106,699     $(4,323)     $102,376
</TABLE>



                                     - 22 -
<PAGE>

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

                            UIL HOLDINGS CORPORATION

                     MAJOR INFLUENCES ON FINANCIAL CONDITION

     UIL  Holdings'  financial  condition  will  continue to be dependent on the
level of UI's utility retail sales and UI's ability to control expenses, as well
as  on  the  performance  of  the  non-regulated  businesses  of  UIL  Holdings'
subsidiaries.  The two primary  factors  that affect  utility  sales  volume are
economic conditions and weather.

     UIL Holdings' financial status and financing capability will continue to be
sensitive to many other factors, including conditions in the securities markets,
economic conditions,  interest rates, the level of UIL Holdings' income and cash
flow,  and  legislative  and  regulatory  developments,  including  the  cost of
compliance   with   increasingly   stringent   environmental   legislation   and
regulations.

     On December 31, 1996, the DPUC completed a financial and operational review
of UI and  ordered a  five-year  incentive  regulation  plan for the years  1997
through 2001 (the Rate Plan).  The Rate Plan  accelerated the  amortization  and
recovery of unspecified  assets during 1999-2001 if UI's common equity return on
regulated  utility  investment  exceeds 10.5% after recording the  amortization.
UI's authorized  return on regulated  utility common equity during the period is
11.5%.  Earnings above 11.5%, on an annual basis,  are to be utilized  one-third
for customer price reductions, one-third to increase amortization of assets, and
one-third retained as earnings.

     The Rate Plan  includes a provision  that it may be reopened  and  modified
upon the enactment of electric utility restructuring legislation in Connecticut.
On October 1, 1999, the DPUC issued a decision  establishing UI's standard offer
customer rates,  commencing January 1, 2000, at a level 10% below 1996 rates, as
directed by the  Restructuring  Act  described in detail below.  These  standard
offer  customer  rates are in effect for the period  2000-2001 and supersede the
rate  reductions  for this  period  that were  included  in the Rate  Plan.  The
decision also reduced the required  amount of accelerated  amortization  in 2000
and  2001.  Under  this  decision,  all  other  components  of the Rate Plan are
expected to remain in effect  through 2001. The  Connecticut  Office of Consumer
Counsel,  the statutory  representative of consumer  interests in public utility
matters,  has appealed the DPUC's  standard  offer  decision to the  Connecticut
Superior   Court,   challenging  the  DPUC's   determination   of  UI's  average
fully-bundled prices in 1996 rates from which a 10% reduction is required by the
Restructuring  Act. UI and the Connecticut  Attorney General are contesting this
court challenge of the DPUC's decision.  UI is unable to predict,  at this time,
the outcome of this Superior Court appeal.

     In April  1998,  Connecticut  enacted  Public Act 98-28 (the  Restructuring
Act),  a massive  and  complex  statute  designed  to  restructure  the  State's
regulated  electric  utility  industry.  As a result of the Act, the business of
generating  and  selling   electricity   directly  to  consumers  is  opened  to
competition.  These  business  activities  are  separated  from the  business of
delivering  electricity  to  consumers,  also  known  as  the  transmission  and
distribution  business.  The business of delivering electricity remains with the
incumbent  franchised  utility  companies  (including  UI), which continue to be
regulated by the DPUC as Distribution Companies.

      Under the Restructuring Act, effective July 1, 2000, all of UI's customers
are able to choose their power supply  providers.  On and after January 1, 2000,
UI is required to offer fully-bundled  "standard offer" electric service,  under
regulated  rates,  to all  customers  who do not choose  alternate  power supply
providers. Under current regulatory provisions,  UI's financial condition is not
affected  materially by whether  customers  choose  alternate  suppliers to UI's
standard  offer  electric  service.  The  standard  offer rates must include the
fully-bundled price of generation,  transmission and distribution  services, the
competitive  transition   assessment,   the  systems  benefits  charge  and  the
conservation  and renewable  energy charges.  The  fully-bundled  standard offer
rates must also be at least 10% below the average fully-bundled prices in 1996.

     On December 28, 1999, UI and Enron Power  Marketing,  Inc.  (EPMI)  entered
into a Wholesale Power Supply Agreement,  a PPA Entitlements  Transfer Agreement
and related  agreements  documenting  a four-year  standard  offer power  supply
arrangement  and  the  assumption  of  all of  UI's  long-term  purchased  power
agreements, effective January 1, 2000. Under these agreements, EPMI supplies the
generation  services needed by UI to meet its standard


                                     - 23 -
<PAGE>

offer obligations for the four-year  standard offer period at a fixed price. The
agreements with EPMI also include a financially settled contract for differences
related to certain call rights of EPMI and put rights of UI with respect to UI's
entitlements  in Seabrook Unit 1 and in Millstone  Unit 3, and UI's provision to
EPMI of certain  ancillary  products and services  associated with those nuclear
entitlements,  which provisions terminate at the earlier of December 31, 2003 or
the date that UI sells its nuclear  interests.  The  agreements  do not restrict
UI's right to sell to third  parties UI's  ownership  interests in those nuclear
generation units or the generated energy actually  attributable to its ownership
interests.

     Another major  component of the  Restructuring  Act is the  collection,  by
Distribution  Companies,  of a "competitive  transition  assessment," a "systems
benefits  charge," an "energy  conservation and load management  program charge"
and  a  "renewable  energy  investment   charge."  The  competitive   transition
assessment  represents  costs that have been reasonably  incurred by, or will be
incurred by, Distribution  Companies to meet their public service obligations as
electric  companies,  and that will likely not  otherwise  be  recoverable  in a
competitive  generation  and supply  market.  These costs  include  above-market
long-term  purchased power contract  obligations,  regulatory asset recovery and
above-market investments in power plants (so-called stranded costs). The systems
benefits   charge   represents   public   policy   costs,   such  as  generation
decommissioning  and displaced  worker  protection  costs.  Beginning in 2000, a
Distribution  Company must collect the competitive  transition  assessment,  the
systems benefits  charge,  the energy  conservation and load management  program
charge and the renewable energy investment charge from all Distribution  Company
customers.

     The Restructuring Act requires that UI must attempt to divest its ownership
interests in its  nuclear-fueled  power plants prior to 2004 in order to recover
any stranded costs associated with its power plants.  On October 1, 1998, in its
"unbundling plan" filing with the DPUC under the Restructuring Act, and in other
regulatory  dockets,  UI stated that it plans to divest its  nuclear  generation
ownership  interests  (17.5% of Seabrook  Unit 1 in New  Hampshire and 3.685% of
Millstone  Station Unit 3 in Connecticut) by the end of 2003, in accordance with
the  Restructuring  Act.  On April 19,  2000,  the DPUC  approved  UI's plan for
divesting  its ownership  interest in Millstone  Unit 3 by  participating  in an
auction process for all three of the generating units at Millstone Station to be
conducted by a  consultant  selected by the DPUC.  On April 26,  2000,  the DPUC
selected J. P. Morgan & Co. to conduct  this  auction,  which was  concluded  on
August 7,  2000 when the DPUC and J. P.  Morgan & Co.  announced  that  Dominion
Resources,  Inc. had agreed to purchase  Millstone  Units 1 and 2, and 93.47% of
Millstone  Unit 3 for $1.298  billion.  The  purchase  price  agreed to for UI's
ownership  interest in Unit 3, which is subject to adjustments for  expenditures
and eventualities prior to the date of closing on the sale, is approximately $31
million,  exclusive of nuclear fuel. UI's share of the proceeds from the sale of
the nuclear fuel inventory at the date of closing on the sale is estimated to be
approximately $2.5 million. It is currently estimated that requisite  regulatory
approvals will be received and the sale will be consummated on or about April 1,
2001. The divestiture process for Seabrook Unit 1 has not yet been determined.

      On March  24,  1999,  UI  applied  to the DPUC for a  calculation  of UI's
stranded  costs  that  will  be  recovered  by  it in  the  future  through  the
competitive  transition  assessment under the  Restructuring  Act. In a decision
dated August 4, 1999, the DPUC  determined that UI's stranded costs total $801.3
million,  consisting of $160.4 million of above-market long-term purchased power
contract  obligations,  $153.3 million of  generation-related  regulatory assets
(net of related tax and accounting offsets),  and $487.6 million of above-market
investments  in nuclear  generating  units  (net of $26.4  million of gains from
generation asset sales and other offsets related to generation assets). The DPUC
decision  provides  that these  stranded  cost  amounts are subject to true-ups,
adjustments and potential  additional  future offsets,  including the results of
UI's  divestiture  of its ownership  interests in Millstone  Unit 3 and Seabrook
Unit 1, in accordance with the Restructuring Act. UI has amortized less than the
expected  level of regulatory  assets related to stranded costs during the first
nine months of 2000, due to timing differences and higher than anticipated costs
associated  with providing  standard offer service to customers.  Since stranded
costs are intended to be trued-up annually,  UI continues to anticipate recovery
through the competitive transition assessment of these unamortized costs.



                                     - 24 -
<PAGE>

                           CAPITAL EXPENDITURE PROGRAM

     UIL Holdings' 2000-2004 estimated capital  expenditure  program,  excluding
UI's  allowance  for funds used during  construction,  is presently  budgeted as
follows:

<TABLE>
<CAPTION>
                                          2000         2001         2002        2003         2004         TOTAL
                                          ----         ----         ----        ----         ----         -----
                                                                         (000's)
<S>                                     <C>          <C>          <C>         <C>          <C>          <C>
UI
    Distribution and Transmission       $36,569      $60,496      $40,707     $30,735      $48,737      $217,244
    Nuclear Generation (1)                3,177        2,838           -           -            -          6,015
    Nuclear Fuel (1)                     10,986        6,498           -           -            -         17,484
                                         ------       ------       ------      ------       ------       -------
         Total UI                       $50,732      $69,832      $40,707     $30,735      $48,737      $240,743
                                         ------       ------       ------      ------       ------       -------

URI
    Xcelecom                            $53,667      $ 6,697      $ 7,337     $12,906      $ 6,677      $ 87,284
    American Payment Systems                835        3,313        2,015       2,415        2,415        10,993
    United Capital Investments            5,930       12,650        1,400          -            -         19,980
                                         ------       ------       ------      ------       ------       -------
         Total URI                      $60,432      $22,660      $10,752     $15,321      $ 9,092      $118,257
                                         ------       ------       ------      ------       ------       -------

Total UIL Holdings                     $111,164      $92,492      $51,459     $46,056      $57,829      $359,000
                                        =======       ======       ======      ======       ======       =======
</TABLE>

(1)  Assumes  that the sale of UI's  interest in  Millstone  Unit 3 and Seabrook
     Unit  1 will  be  completed  by  April  1,  2001  and  December  31,  2001,
     respectively.

                         LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 2000, UIL Holdings had $41.7 million of cash and temporary
cash investments,  a decrease of $26.7 million from the corresponding balance at
December 31, 1999. The  components of this  decrease,  which are detailed in the
Consolidated Statement of Cash Flows, are summarized as follows:

                                                                 (Millions)

       Balance, December 31, 1999                                  $68.3
                                                                    ----

       Net cash provided by operating activities                    52.3

       Net cash provided by (used in) financing activities:
       -   Financing activities, excluding dividend payments       (12.5)
       -   Dividend payments                                       (30.4)
       Investment in debt securities                                 4.8
       Cash invested in plant, including nuclear fuel              (40.8)
                                                                   ------

             Net Change in Cash                                    (26.6)
                                                                   ------

       Balance, September 30, 2000                                 $41.7
                                                                   =====




                                     - 25 -
<PAGE>


     UIL Holdings' capital requirements are presently projected as follows:

<TABLE>
<CAPTION>
                                                                 2000       2001       2002       2003       2004
                                                                 ----       ----       ----       ----       ----
                                                                                     (millions)
<S>                                                             <C>       <C>         <C>        <C>        <C>
Cash on Hand - Beginning of Year  (1)                           $39.1     $  -        $  -       $  -       $  -
Internally Generated Funds less Dividends  (2)                   81.0       85.0       93.0       85.0       81.0
                                                                -----       ----       ----       ----       ----
         Subtotal                                               120.1       85.0       93.0       85.0       81.0

Less:
Capital Expenditures  (2)
      UI                                                         50.7       69.8       40.7       30.7       48.7
      URI                                                        60.5       22.7       10.8       15.3        9.1
                                                                -----       ----       ----       ----       ----
         Total                                                  111.2       92.5       51.5       46.0       57.8

Cash Available to pay Debt Maturities and Redemptions             8.9       (7.5)      41.5       39.0       23.2

Less:
Maturities and Mandatory Redemptions                               -         -        100.0      100.0        -
Optional Redemptions                                             75.0        -          -          -          -
Repayment of Short-Term Borrowings                               17.0        -          -          -          -
                                                                -----      -----      -----      -----      -----

External Financing Requirements (Surplus)  (2)                  $83.1      $7.5       $58.5      $61.0     $(23.2)
                                                                 ====       ===        ====       ====       =====
</TABLE>

(1)  Excludes $2.3 million Seabrook Unit 1 operating deposit and restricted cash
     of American Payment Systems, Inc. of $26.9 million.
(2)  Internally  Generated  Funds  less  Dividends,   Capital  Expenditures  and
     External Financing Requirements are estimates based on current earnings and
     cash flow projections.  All of these estimates are subject to change due to
     future events and conditions that may be substantially different from those
     used in developing  the  projections.  No estimates are included  herein to
     reflect the potential proceeds from future nuclear asset sales.

     All  capital  requirements  that  exceed  available  cash  will  have to be
provided by external financing.  Although there is no commitment to provide such
financing from any source of funds,  other than a $97.5 million revolving credit
agreement with a group of banks, future external financing needs are expected to
be satisfied by the issuance of additional  short-term  and long-term  debt. The
continued  availability  of these methods of financing will be dependent on many
factors,  including  conditions in the securities markets,  economic conditions,
and future income and cash flow.

     See Item 1, "Notes to Financial  Statements,"  Note (E) for a discussion of
UIL Holdings' and UI's short-term credit arrangements.

                              SUBSIDIARY OPERATIONS

      On July 20, 2000,  the  corporate  restructuring  of UI and its direct and
indirect  non-regulated  subsidiaries  into  a  holding  company  structure  was
completed.  In the  holding  company  structure,  UI has  become a  wholly-owned
subsidiary of UIL Holdings,  and UI's interests in URI and all of its direct and
indirect non-regulated subsidiaries have been transferred to UIL Holdings.

      UI is a regulated operating electric public utility,  established in 1899,
that  delivers  electricity  and provides  energy-related  services to more than
314,000 customers in the greater New Haven, Connecticut, and greater Bridgeport,
Connecticut, areas.

     URI serves as the parent corporation for several non-regulated  businesses,
each of which is  incorporated  separately to participate  in business  ventures
that will provide  long-term rewards to UIL Holdings  shareowners.  URI has four
wholly-owned  subsidiaries.  American Payment  Systems,  Inc. manages a national
network of agents for the  processing  of bill  payments made by customers of UI
and other  companies.  Another  subsidiary of URI,  United Capital


                                     - 26 -
<PAGE>

Investments,  Inc., and its subsidiaries,  invest in business ventures.  A third
URI subsidiary, Xcelecom, Inc. (formerly known as Precision Power, Inc.) and its
subsidiaries,  provide  electrical and  voice-data-video  design,  construction,
systems integration and services to customers in New England and the neighboring
Mid-Atlantic region. URI's fourth subsidiary, United Bridgeport Energy, Inc., is
a passive investor in a merchant wholesale electric  generating facility located
in Bridgeport, Connecticut.

                              RESULTS OF OPERATIONS

GENERAL IMPACTS OF CREATION OF A HOLDING COMPANY ON FINANCIAL REPORTS
---------------------------------------------------------------------

     As a result of the formation of UIL Holdings  Corporation  noted above, all
subsidiary   results  are   consolidated.   For  example,   revenues   from  the
non-regulated  operating  companies  are reported as revenues,  instead of being
subordinated to UI and reported as "other net income." This change  particularly
relates to revenues,  operation and maintenance expense,  depreciation  expense,
interest charges,  other net income and income taxes.  Income from non-regulated
passive investments  continues to be reported in "other net income." All periods
reported  herein have been  reclassified  for  consolidated  reporting,  with no
impact on earnings.

GENERAL IMPACTS OF CONNECTICUT'S RESTRUCTURING ACT ON FINANCIAL REPORTS
-----------------------------------------------------------------------

     On April 16, 1999,  UI completed  the sale of its  operating  fossil-fueled
generating  plants that was required by Connecticut's  electric utility industry
restructuring legislation.  On October 1, 1999, the Department of Public Utility
Control  (DPUC) issued its decision  establishing  UI's standard  offer customer
rates,  commencing  January 1, 2000,  at a level 10% below 1996 rates  (about 6%
below 1999 rates), as directed by Connecticut's  Restructuring  Act. As a result
of these  two and  other  associated  events,  the  "geography"  of UI's  costs,
particularly  with respect to  comparisons  between the quarters of 2000 and the
quarters of 1999, and the quarterly  pattern of revenues and earnings  comparing
2000 to 1999 have changed. This particularly relates to regulated retail pricing
patterns,  wholesale  revenue and  expense,  other  operating  revenues,  retail
purchased  energy and fossil fuel expenses,  operation and maintenance  expense,
depreciation  and  property  taxes.  For  example,  increased  purchased  energy
expenses  in  2000  are  more  than  offset  by  portions  of the  decreases  in
miscellaneous operation and maintenance expense, depreciation and property taxes
due to the sale of generating plants. The results of these changes are explained
below,  and in the "Quarterly  Earnings Pattern for 2000" portion of the LOOKING
FORWARD section.

THIRD QUARTER OF 2000 VS. THIRD QUARTER OF 1999
-----------------------------------------------

     Earnings for the third quarter of 2000 reflect the pattern change mentioned
above.  Earnings  were  $19.7  million,  or $1.40 per share (on both a basic and
diluted basis),  down $5.3 million, or $.38 per share, from the third quarter of
1999.  Excluding a one-time item recorded in the third quarter of 2000, earnings
from  operations (on both a basic and diluted basis) were $16.7 million or $1.19
per share, down $8.3 million, or $.59 per share, from the third quarter of 1999.
The earnings  from  operations  contributed  by UI's  operations,  excluding the
Nuclear Division, were $1.04 per share in the third quarter of 2000. The Nuclear
Division  contributed  $.25 per share,  for a total UI contribution of $1.29 per
share,  compared to $1.80 per share in the third quarter of 1999.  URI lost $.10
per share in the third quarter of 2000,  compared to a loss of $.02 per share in
the third  quarter of 1999.  All  earnings  per share  numbers  are based on UIL
Holdings shares.

 The one-time item recorded in the third quarter of 2000 was:          EPS
---------------- ----------------------------------------------- --------------
2000 Quarter 3   Proceeds from the Millstone Unit 3 litigation
                 settlement(pre-sharing)                            $  .64
                 Sharing on Proceeds from the Millstone Unit 3
                 settlement                                           (.43)
                                                                      ----
                             Net                                    $  .21
---------------- ----------------------------------------------- --------------

     This one-time item recorded in the third quarter of 2000 as other operating
revenue  was a cash  receipt,  in the  amount of $14.9  million  before-tax,  in
settlement  of  litigation  over costs  associated  with an  extended  unplanned
shutdown of the Millstone Unit 3 nuclear generating unit.



                                     - 27 -
<PAGE>

UI Earnings from Operations
---------------------------

     Overall,  retail revenue decreased by $31.0 million in the third quarter of
2000 compared to the third quarter of 1999.

------------------------------------------------------------- -----------------
                                                                  Total From
                  Retail Revenues: $ millions                     Operations
------------------------------------------------------------- -----------------
 Revenue from:
------------------------------------------------------------- -----------------
   Estimate of operating Distribution Division component of
   "weather corrected" retail sales growth, up 2.6%                   1.7
------------------------------------------------------------- -----------------
   Estimate of operating Distribution Division component of
   weather effect on retail sales                                   (12.1)
------------------------------------------------------------- -----------------
   Estimate of operating Distribution Division component of
   price reduction                                                   (6.4)
------------------------------------------------------------- -----------------
   Sharing revenues from operations                                  (1.6)
------------------------------------------------------------- -----------------
   Other retail price reduction, mix of sales and other              (7.3)
------------------------------------------------------------- -----------------
         TOTAL RETAIL REVENUE FROM OPERATIONS                       (25.7)
------------------------------------------------------------- -----------------
   Sharing revenues from one-time item                               (5.3)
------------------------------------------------------------- -----------------
         TOTAL RETAIL REVENUE                                       (31.0)
------------------------------------------------------------- -----------------

     Retail  fuel and  energy  expense  increased  by $22  million  in the third
quarter  of  2000  compared  to  the  third  quarter  of  1999.  UI's  operating
fossil-fueled generation units were sold on April 16, 1999, and UI receives, and
will receive  through  2003,  its standard  offer service  requirements  through
purchased  power  agreements.  These costs are recovered  through the Generation
Service Charge (GSC) portion of unbundled rates.

     Wholesale  sales margin  increased by $16.3 million in the third quarter of
2000  compared to the third quarter of 1999.  Margin from the Nuclear  Division,
which was incorporated in retail rates in 1999, increased by $14.8 million. UI's
operating  nuclear  assets,  Seabrook Unit 1 and Millstone  Unit 3, supply power
solely to the wholesale market in 2000.  Overall,  the Nuclear Division produced
earnings  of $.25 per  share  in the  third  quarter  of  2000,  reflecting  the
wholesale  sales  margin  less  operations  and  maintenance  and  other  costs,
including taxes.  See the LOOKING FORWARD section for more details.  There was a
wholesale sales margin loss of $1.5 million from general wholesale activities in
the third quarter of 1999.

     Other operating  revenues increased by $1.3 million in the third quarter of
2000 compared to the third quarter of 1999.  Other  operating  revenues  include
transmission revenues from the New England Power Pool (NEPOOL),  which increased
by $0.9 million in the third  quarter of 2000  compared to the third  quarter of
1999, and were offset by an increase in transmission operation expense.

     UI's operating expenses for operations,  maintenance and purchased capacity
decreased  by $7.8  million in the third  quarter of 2000  compared to the third
quarter of 1999. The principal components of these expense changes include:



                                     - 28 -
<PAGE>

                                                                       $millions
---------------------------------------------------------------------- ---------
 Capacity expense:
---------------------------------------------------------------------- ---------
   Cogeneration  (see Note A)                                            (6.8)
---------------------------------------------------------------------- ---------
   Other purchases                                                       (0.9)
---------------------------------------------------------------------- ---------
         TOTAL CAPACITY EXPENSE                                          (7.7)
--------------------------------------------------------------------- ----------
   Operating Distribution Division O&M expense:
---------------------------------------------------------------------- ---------
   1999 fossil generation unit operating and maintenance costs           (0.2)
---------------------------------------------------------------------- ---------
   Pension and other employee benefit costs                              (2.5)
---------------------------------------------------------------------- ---------
   NEPOOL transmission expense                                            0.9
---------------------------------------------------------------------- ---------
   Other                                                                 (1.7)
---------------------------------------------------------------------- ---------
         TOTAL OPERATING DISTRIBUTION DIVISION                           (3.5)
---------------------------------------------------------------------- ---------
   Other unbundled components of O&M expense:
---------------------------------------------------------------------- ---------
   Nuclear Division (see Note B)                                         (1.0)
---------------------------------------------------------------------- ---------
   Conservation and Load Management and Renewable Energy (see Note B)     4.4
---------------------------------------------------------------------- ---------
         TOTAL OTHER COMPONENTS                                           3.4
---------------------------------------------------------------------- ---------
         TOTAL O&M EXPENSE                                               (7.8)
---------------------------------------------------------------------- ---------

               Note A: UI's wholesale purchased power agreements were assumed by
               Enron Power  Marketing,  Inc. as part of agreements  for Enron to
               supply  the  power  needed  by  UI to  meet  its  standard  offer
               obligations until the end of the four-year  standard offer period
               and the power needed to serve UI's special contract customers for
               the remaining  contract terms. UI has created a regulatory  asset
               and  liability to reflect this  transaction,  and the  regulatory
               asset is being  amortized as part of the  Competitive  Transition
               Assessment  (CTA). The amortization for the third quarter of 2000
               of  about  $6.7  million  is  included  in the  "Amortization  of
               regulatory assets" line of the income statement.

               Note B: Nuclear Division  operation and maintenance  expenses are
               incurred in the production of energy for the wholesale market and
               are reflected in the Nuclear  Division  results.  These  expenses
               decreased by $1.0 million in the third  quarter of 2000  compared
               to the third quarter of 1999.  Conservation  and load  management
               and renewable  energy costs are  pass-through  costs recovered in
               unbundled rates.

     Other taxes for UI decreased  by $1.8 million in the third  quarter of 2000
compared to the third quarter of 1999.  About $1.2 million of the decrease was a
Gross Earnings tax reduction  from lower retail sales.  The rest was primarily a
decrease in property taxes due principally to the generating plant sale in April
of 1999.

     Depreciation  expense for UI decreased by $5.1 million in the third quarter
of 2000 compared to the third  quarter of 1999.  All of this decrease was due to
the shifting of depreciation on nuclear plant stranded assets from  depreciation
expense to amortization of regulatory assets.

     Amortization  of regulatory  assets  increased by $6.4 million in the third
quarter of 2000  compared to the third quarter of 1999.  With three  exceptions,
these  costs,  as  recorded  in 2000,  are  associated  solely  with  either the
Competitive  Transition  Assessment  (CTA) or the Systems Benefits Charge (SBC).
The  exceptions  are  described  in the  following  paragraph.  The  CTA and SBC
amortization  components  in the third quarter of 2000 amounted to $13.6 million
(pre-tax) and were: nuclear assets (from  depreciation) $5.1 million,  purchased
power  contracts (in place of purchased  power expense) $6.7 million,  displaced
worker costs $0.6 million, and other $1.2 million.  However,  because the result
of these amortizations  produced returns on both the CTA and SBC below the 11.5%
return allowed, about $8.2 million (before-tax) of amortization was deferred for
the third quarter of 2000. The  elimination  (completed in 1999) of $3.1 million
(after-tax) of  amortization of Seabrook  Nuclear  Station  deferred return also
reduced  amortization expense in the third quarter of 2000 compared to the third
quarter of 1999.



                                     - 29 -
<PAGE>

     The exceptions noted in the previous paragraph are amortizations that apply
to the operating Distribution Division.  They include the amortization of Retail
Access assets,  $0.1 million  (pre-tax),  and  accelerated  amortizations  (both
scheduled and "sharing"  amortization).  On December 31, 1996,  the  Connecticut
Department  of  Public  Utility  Control  issued  an order  that  implemented  a
five-year  Rate Plan to reduce UI's  regulated  retail prices and accelerate the
recovery of certain "regulatory assets." According to the Rate Plan, under which
UI is currently operating,  "accelerated" amortization of past regulated utility
investments  is  scheduled  for  every  year  that the Rate  Plan is in  effect,
contingent  upon UI earning a 10.5% return on regulated  utility  common equity.
Beginning in 2000, these accelerated  amortizations are charged to the operating
Distribution Division, although they reduce CTA plant costs and rate base. About
$2.2 million  (after-tax) of accelerated  amortization  was charged in the third
quarter of 2000, compared to about $3.0 million (after-tax) in the third quarter
of  1999,  for  a  decrease  of  $0.8  million.   Additionally,   $10.1  million
(before-tax, $8.8 million after-tax) of sharing amortization was recorded in the
third quarter of 2000 compared to $5.0 million  (after-tax) that was recorded in
the third quarter of 1999.

     Interest  charges for UI,  including  "Dividend  requirement of mandatorily
redeemable  securities,"  continued  on a  downward  trend,  decreasing  by $1.4
million in the third  quarter of 2000,  compared  to the third  quarter of 1999.
This decrease was applied to the various unbundled components in 2000.

URI Earnings from Operations
----------------------------

         Overall, the consolidated  non-regulated businesses operating under the
parent, URI, after corporate  parent-allocated interest, lost approximately $1.5
million,  or $.10 per share,  in the third quarter  2000,  compared to losses of
about $0.2 million,  or $.02 per share, in the third quarter of 1999.  Operation
expenses  for the URI  businesses,  including  cost of goods  sold,  selling and
administrative  expenses,  increased  by $20.0  million in the third  quarter of
2000,  compared to the third quarter of 1999,  almost  entirely as the result of
companies  acquired  by  URI's  subsidiary  Xcelecom,  Inc.  (formerly  known as
Precision Power, Inc.). Depreciation expense for the URI businesses increased by
$0.2 million.

     Interest  charges for URI increased by $1.7 million in the third quarter of
2000,  compared  to the  third  quarter  of  1999.  The  results  of each of the
subsidiaries of URI for the third quarter of 2000, as presented  below,  reflect
the  allocation  of debt  costs from the  parent  based on a capital  structure,
including an equity component, and an interest rate deemed to be appropriate for
that type of business.

     American Payment Systems,  Inc. (APS) earned approximately $0.5 million, or
$.03 per share, in the third quarter of 2000,  about the same level it earned in
the third quarter of 1999.

     Xcelecom, Inc. earned approximately $0.6 million, or $.04 per share, in the
third quarter of 2000, compared to a loss of approximately $0.8 million, or $.06
per share,  in the third quarter of 1999. The improvement was the result of cost
reduction efforts and acquisitions.

     On May 11, 1999, URI's subsidiary  United  Bridgeport  Energy,  Inc. (UBE),
increased its 4% passive  investment  in Bridgeport  Energy LLC (BE) to 33 1/3%.
The second phase of BE's merchant  wholesale  electric  generating  project went
into  commercial  operation in July 1999,  adding 180  megawatts  of  generation
capacity for a total of 520 megawatts.  UBE lost approximately $1.6 million,  or
$.11 per share, in the third quarter of 2000, compared to earnings of about $0.4
million, or $.03 per share, in the third quarter of 1999. The third quarter 2000
loss was the result of mild weather that depressed energy sales prices, high gas
prices  that  further  reduced  margins,   and  a  contract  termination  charge
completing the  elimination  of a contractual  liability that will benefit UBE's
earnings in future periods.

     United  Capital  Investments,  Inc.  (UCI) lost $.01 per share in the third
quarter of 2000 compared to a break even in the third quarter of 1999.

     URI, the holding company for all non-regulated  businesses,  lost $0.05 per
share in the third quarter of 2000, compared to a loss of $.02 per share for the
third  quarter  of  1999.   Some   financial   leveraging,   and  strategic  and
administrative  costs for the  subsidiaries  of URI are  retained by the holding
company.



                                     - 30 -
<PAGE>

FIRST NINE MONTHS OF 2000 VS. FIRST NINE MONTHS OF 1999
-------------------------------------------------------

     Earnings for the first nine months of 2000 were $54.4 million, or $3.86 per
share (on both a basic and diluted basis),  up $5.6 million,  or $.39 per share,
from the first nine months of 1999.  Excluding  one-time  items recorded in both
periods,  earnings from  operations  (on both a basic and diluted basis) were up
$5.3  million,  or $.37 per  share,  from the first  nine  months  of 1999.  The
earnings from operations  contributed by UI's operations,  excluding the Nuclear
Division,  were $3.24 per share in the first nine  months of 2000.  The  Nuclear
Division  contributed  $.64 per share,  for a total UI contribution of $3.88 per
share,  compared to $3.61 per share in the first nine months of 1999.  URI, on a
consolidated  basis,  lost  $.08 per  share in the  first  nine  months of 2000,
compared  to a loss of $.18 per share in the  first  nine  months  of 1999.  All
earnings per share numbers are based on UIL Holdings shares.


 The one-time item recorded in the first nine months of 2000 was:       EPS
----------------- ------------------------------------------------ -------------
 2000 Quarter 2    Impairment loss on property in North Haven         $(.15)
----------------- ------------------------------------------------ -------------
 2000 Quarter 3    Proceeds from the Millstone Unit 3 litigation
                   settlement (pre-sharing)                           $ .64
                   Sharing on proceeds from the Millstone Unit 3
                   litigation settlement                              $(.43)
                                                                       ----
                         Net                                          $ .21
----------------- ------------------------------------------------ -------------



 The one-time item recorded in the first nine months of 1999 was:       EPS
----------------- ------------------------------------------------ -------------
 1999 Quarter 1    Purchased power expense refund                     $ .12
                   Sharing due to refund                              $(.08)
                                                                      -----
                            Net                                       $ .04
----------------- ------------------------------------------------ -------------

     The one-time item recorded in the third quarter of 2000 as other  operating
revenue  was a cash  receipt,  in the  amount of $14.9  million  before-tax,  in
settlement  of  litigation  over costs  associated  with an  extended  unplanned
shutdown of the Millstone Unit 3 nuclear generating unit.

     On June 14, 2000,  the  Connecticut  Department of Public  Utility  Control
approved a sale of property by UI to Souwestcon Properties, Inc., a wholly-owned
subsidiary  of URI.  The sale price of the property  was $1.2  million,  and the
property had a book value of $4.7 million.  As a result of the  transaction,  UI
recognized  an  impairment  loss of $3.5  million  (before-tax)  or $2.1 million
(after-tax) in June 2000.

UI Earnings from Operations
---------------------------

     Overall, retail revenue decreased by $41.3 million in the first nine months
of 2000, compared to the first nine months of 1999.

<TABLE>
<CAPTION>
------------------------------------------------------------ ------------ ---------- -------
                                                                From         From
                  Retail Revenues: $ millions                 Operations   One-time   Total
------------------------------------------------------------ ------------ ---------- -------
<S>                                                            <C>           <C>      <C>
Revenue from:
------------------------------------------------------------ ------------ ---------- -------
  Sharing: for 1999 one-time item                                 -           1.0      1.0
------------------------------------------------------------ ------------ ---------- -------
  Sharing: for 2000 one-time item                                            (5.3)    (5.3)
------------------------------------------------------------ ------------ ---------- -------
  Estimate of operating Distribution Division component of
  "real" retail sales growth, up 1.7%                            1.3           -       1.3
------------------------------------------------------------ ------------ ---------- -------
  Estimate of operating Distribution Division component of
  "leap year day" retail sales growth, up 0.3%                   0.6           -       0.6
------------------------------------------------------------ ------------ ---------- -------
  Estimate of operating Distribution Division component of
  weather effect on retail sales                               (12.4)          -     (12.4)
------------------------------------------------------------ ------------ ---------- -------
  Estimate of operating Distribution Division component of
  price reduction                                              (12.7)          -     (12.7)
------------------------------------------------------------ ------------ ---------- -------
  Sharing revenues from operations                              (1.6)                 (1.6)
------------------------------------------------------------ ------------ ---------- -------
  Other retail price reduction, mix of sales and other         (12.2)          -     (12.2)
------------------------------------------------------------ ------------ ---------- -------
         TOTAL RETAIL REVENUE                                  (37.0)        (4.3)   (41.3)
------------------------------------------------------------ ------------ ---------- -------
</TABLE>

                                     - 31 -
<PAGE>

     Retail fuel and energy expense increased by $95.8 million in the first nine
months  of 2000  compared  to the first  nine  months  of 1999.  UI's  operating
fossil-fueled generation units were sold on April 16, 1999, and UI receives, and
will receive  through  2003,  its standard  offer service  requirements  through
purchased  power  agreements.  These costs are recovered  through the Generation
Service Charge (GSC) portion of unbundled rates.

     Wholesale sales margin  increased by $43.9 million in the first nine months
of 2000  compared  to the first nine  months of 1999.  Margin  from the  Nuclear
Division,  which was  incorporated  in retail rates in 1999,  increased by $43.3
million.  UI's operating  nuclear assets,  Seabrook Unit 1 and Millstone Unit 3,
supply  power  solely to the  wholesale  market in 2000.  Overall,  the  Nuclear
Division  produced  earnings of $.64 per share in the first nine months of 2000,
reflecting the wholesale  sales margin less operations and maintenance and other
costs,  including taxes. See the LOOKING FORWARD section for more details. There
was margin loss of $0.6 million from general  wholesale  activities in the first
nine months of 1999.

     Other operating revenues increased by $4.0 million in the first nine months
of 2000  compared to the first nine  months of 1999.  Other  operating  revenues
include  transmission  revenues from the New England Power Pool (NEPOOL),  which
increased by $3.6 million in the first nine months of 2000 compared to the first
nine  months of 1999.  These were partly  offset by an increase in  transmission
operation expense of $2.9 million.

     UI's operating expenses for operations,  maintenance and purchased capacity
decreased  by $34.8  million in the first nine  months of 2000  compared  to the
first nine months of 1999.  The principal  components  of these expense  changes
include:

                                                                       $millions
---------------------------------------------------------------------- ---------
 Capacity expense:
---------------------------------------------------------------------- ---------
   Cogeneration  (see Note A)                                            (20.9)
---------------------------------------------------------------------- ---------
   Other purchases                                                        (1.7)
---------------------------------------------------------------------- ---------
               TOTAL CAPACITY EXPENSE                                    (22.6)
---------------------------------------------------------------------- ---------
   Operating Distribution Division O&M expense:
---------------------------------------------------------------------- ---------
   1999 fossil generation unit operating and maintenance costs            (7.2)
---------------------------------------------------------------------- ---------
   Pension and other employee benefit costs                               (7.5)
---------------------------------------------------------------------- ---------
   NEPOOL transmission expense                                             2.9
---------------------------------------------------------------------- ---------
   Other                                                                  (8.1)
---------------------------------------------------------------------- ---------
              TOTAL OPERATING DISTRIBUTION DIVISION                      (19.9)
---------------------------------------------------------------------- ---------
   Other unbundled components of O&M expense:
---------------------------------------------------------------------- ---------
   Nuclear Division (see Note B)                                          (5.1)
---------------------------------------------------------------------- ---------
   Conservation and Load Management, Renewable Energy and System
   Benefits (see Note B)                                                  12.8
---------------------------------------------------------------------- ---------
              TOTAL OTHER COMPONENTS                                       7.7
---------------------------------------------------------------------- ---------
              TOTAL O&M EXPENSE                                          (34.8)
---------------------------------------------------------------------- ---------

               Note A: UI's wholesale purchased power agreements were assumed by
               Enron Power  Marketing,  Inc. as part of agreements  for Enron to
               supply  the  power  needed  by  UI to  meet  its  standard  offer
               obligations until the end of the four-year  standard offer period
               and the power needed to serve UI's special contract customers for
               the remaining  contract terms. UI has created a regulatory  asset
               and  liability to reflect this  transaction,  and the  regulatory
               asset is being amortized as part of the CTA. The amortization for
               the first nine months of 2000 of about $20.0  million is included
               in the  "Amortization  of  regulatory  assets" line of the income
               statement.

               Note B: Nuclear Division  operation and maintenance  expenses are
               incurred in the production of energy for the wholesale market and
               are reflected in the Nuclear Division results. About $2.5 million
               of the reduction was due to the absence of


                                     - 32 -
<PAGE>

               refueling  outage costs incurred in the first six months of 1999.
               Conservation  and load management and renewable  energy costs are
               pass-through costs recovered in unbundled rates.

    Other taxes for UI  decreased  by $4.7  million in the first nine months of
2000,  compared  to the first nine  months of 1999.  About  $1.4  million of the
decrease was a Gross  Earnings tax  reduction  from lower  revenues.  About $4.0
million  of the  decrease  was  primarily  a  decrease  in  property  taxes  due
principally to the generating plant sale in April of 1999.

     Depreciation expense decreased by $23.9 million in the first nine months of
2000  compared  to the first nine  months of 1999.  About  $15.3  million of the
decrease  was due to the  shifting of  depreciation  on nuclear  plant  stranded
assets from  depreciation  expense to amortization of regulatory  assets.  About
$4.8  million of the  decrease  was due to the  completion  of  depreciation  of
conservation  assets in the first half of 1999, and another $2.8 million was due
to the generation asset sale in 1999. Other UI depreciation  expenses  decreased
by $1.3 million.

     Amortization  of regulatory  assets  decreased by $0.5 million in the first
nine  months of 2000  compared  to the first  nine  months of 1999.  With  three
exceptions,  these costs, as recorded in 2000, are associated solely with either
the CTA or the SBC. The exceptions are described in the following paragraph. The
CTA and SBC amortization components in the first nine months of 2000 amounted to
$38.8  million  (pre-tax) and were:  nuclear  assets (from  depreciation)  $15.4
million,  purchased  power contracts (in place of purchased power expense) $20.1
million,  displaced worker costs $1.9 million, and other $1.4 million.  However,
because the result of these  amortizations  produced returns on both the CTA and
SBC below the 11.5% return allowed,  $32.2 million  (before-tax) of amortization
was deferred for the first nine months of 2000.  The  elimination  (completed in
1999) of $9.4 million  (after-tax) of amortization  of Seabrook  Nuclear Station
deferred  return also reduced  amortization  expense in the first nine months of
2000 compared to the first nine months of 1999.

     The exceptions noted in the previous paragraph are amortizations that apply
to the operating Distribution Division.  They include the amortization of Retail
Access assets,  $1.0 million  (pre-tax),  and  accelerated  amortizations  (both
scheduled and "sharing"  amortization).  On December 31, 1996,  the  Connecticut
Department  of  Public  Utility  Control  issued  an order  that  implemented  a
five-year  Rate Plan to reduce UI's  regulated  retail prices and accelerate the
recovery of certain "regulatory assets." According to the Rate Plan, under which
UI is currently operating,  "accelerated" amortization of past regulated utility
investments  is  scheduled  for  every  year  that the Rate  Plan is in  effect,
contingent  upon UI earning a 10.5% return on regulated  utility  common equity.
Beginning in 2000, these accelerated  amortizations are charged to the operating
Distribution Division, although they reduce CTA plant costs and rate base. About
$6.7 million  (after-tax) of accelerated  amortization  was charged in the first
nine months of 2000,  compared to about $9.1 million  (after-tax) in 1999, for a
decrease of $2.4 million. Additionally,  $10.1 million (before-tax, $8.8 million
after-tax) of sharing amortization was recorded in the first nine months of 2000
compared to $5.5 million  (after-tax) that was recorded in the first nine months
of 1999.

     Interest  charges for UI,  including  "Dividend  requirement of mandatorily
redeemable  securities,"  continued  on a  downward  trend,  decreasing  by $8.6
million in the first nine  months of 2000,  compared to the first nine months of
1999.  Most of the  reduction  in  UI's  interest  charges  occurred  after  the
generation  asset sale,  which was completed on April 16, 1999. UI used proceeds
received from the sale of plant to pay off $205 million of debt. The decrease in
UI's interest charges was applied to the various unbundled components in 2000.

URI Earnings from Operations
----------------------------

     Overall,  the  consolidated  non-regulated  businesses  operating under the
parent, URI, after corporate  parent-allocated interest, lost approximately $1.1
million, or $.08 per share, in the first nine months of 2000, compared to losses
of about  $2.6  million,  or $.18 per share,  in the first nine  months of 1999.
Operation expenses for the URI businesses, including cost of goods sold, selling
and administrative expenses, increased by $46.7 million in the first nine months
of 2000,  compared  to the first nine  months of 1999,  almost  entirely  as the
result of  incorporating  acquired  companies.  Other taxes for URI increased by
$0.7 million, reflecting the expansion of these businesses. Depreciation expense
for the URI businesses increased by $0.3 million.



                                     - 33 -
<PAGE>

     Interest charges for URI increased by $5.4 million in the first nine months
of 2000,  compared to the first nine months of 1999.  The results of each of the
subsidiaries  of URI for the first  nine  months of 2000,  as  presented  below,
reflect  the  allocation  of debt  costs  from the  parent  based  on a  capital
structure,  including an equity  component,  and an interest rate,  deemed to be
appropriate for that type of business.

     APS earned approximately $1.8 million, or $.13 per share, in the first nine
months of 2000,  reflecting an increase of $1.0 million, or $.07 per share, over
the first nine months of 1999.

     Xcelecom, Inc. earned approximately $0.7 million, or $.05 per share, in the
first nine months of 2000,  compared to a loss of approximately $2.4 million, or
$.17 per share, in the first nine months of 1999. The improvement was the result
of cost reduction efforts and acquisitions.

     On May 11, 1999, URI's subsidiary  United  Bridgeport  Energy,  Inc. (UBE),
increased its 4% passive  investment  in Bridgeport  Energy LLC (BE) to 33 1/3%.
The second phase of BE's merchant  wholesale  electric  generating  project went
into  commercial  operation in July 1999,  adding 180  megawatts  of  generation
capacity for a total of 520 megawatts.  UBE lost approximately $2.7 million,  or
$.19 per share, in the first nine months of 2000,  compared to earnings of about
$0.8 million, or $.06 per share, in the first nine months of 1999. The 2000 loss
was the result of mild weather that  depressed  energy  sales  prices,  high gas
prices that further reduced margins,  an extended shutdown  throughout the first
half of the year, and a contract  termination  charge completing the elimination
of a contractual liability that will benefit UBE's earnings in future periods.

     UCI earned $.08 per share in the first nine  months of 2000,  compared to a
loss of $.05 per share in the first nine months of 1999.

     URI, the holding company for all non-regulated  businesses,  lost $0.15 per
share in the first nine months of 2000, compared to a loss of $.08 per share for
the first nine months of 1999.  Some  financial  leveraging,  and  strategic and
administrative  costs for the  subsidiaries  of URI are  retained by the holding
company.

                                 LOOKING FORWARD

(THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT
TO  UNCERTAINTIES  WITH  RESPECT TO  IMPORTANT  FACTORS  THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER  MATERIALLY FROM THOSE CURRENTLY  EXPECTED,  INCLUDING GENERAL
ECONOMIC CONDITIONS,  LEGISLATIVE AND REGULATORY CHANGES, DEMAND FOR ELECTRICITY
AND OTHER PRODUCTS AND SERVICES,  CHANGES IN ACCOUNTING PRINCIPLES,  POLICIES OR
GUIDELINES,  AND OTHER ECONOMIC,  COMPETITIVE,  GOVERNMENTAL  AND  TECHNOLOGICAL
FACTORS AFFECTING THE OPERATIONS,  MARKETS, PRODUCTS,  SERVICES AND PRICES OF UI
AND URI'S SUBSIDIARIES. READERS ARE CAUTIONED THAT UIL HOLDINGS REGARDS SPECIFIC
NUMBERS AS ONLY THE "MOST  LIKELY" TO OCCUR WITHIN A RANGE OF POSSIBLE  VALUES.)
ALL EARNINGS PER SHARE NUMBERS ARE BASED ON UIL HOLDINGS SHARES.

Five-year Rate Plan
-------------------

     On December 31, 1996, the Connecticut  Department of Public Utility Control
(DPUC)  issued an order (the Order)  that  implemented  a  five-year  regulatory
framework (Rate Plan) to reduce UI's regulated  retail prices and accelerate the
recovery of certain  "regulatory  assets," beginning with deferred  conservation
costs.  UI has operated under the terms of this Order since January 1, 1997. The
Order's schedule of price reductions and accelerated  amortizations was based on
a DPUC  pro-forma  financial  analysis  that  anticipated  UI  would  be able to
implement  such  changes  and earn an  allowed  annual  return on common  equity
invested in regulated utility assets of 11.5% over the period 1997 through 2001.
The Order  established  a set  formula  to share (see  "Sharing  Implementation"
below) any regulated  utility income that would produce a return above the 11.5%
level:  one-third to be applied to customer  price  reductions,  one-third to be
applied to additional  amortization  of regulatory  assets,  and one-third to be
retained by shareowners.  Regulated utility income for this purpose is inclusive
of earnings from operations and one-time items.



                                     - 34 -
<PAGE>

Sharing Implementation
----------------------

     "Sharing"  in any  particular  year  will  result  only if  UI's  regulated
operating Distribution Division exceeds its allowed return of 11.5% on regulated
utility common equity.  Regulated  utility  earnings will not likely ever exceed
the sharing  level  before the third  quarter of any year that  "sharing"  is in
effect.  Assuming the sharing level of earnings is exceeded in the third quarter
of any  particular  year,  then  earnings in the third  quarter that exceed that
level and all positive regulated utility earnings recorded in the fourth quarter
of that year will be subject to "sharing."

A look at 2000; continued growth of non-regulated operating businesses value
----------------------------------------------------------------------------

     On January 1, 2000, UI completed the restructuring  process required by the
Connecticut electric utility industry restructuring legislation enacted in 1998,
and  its  regulated  business  became  an  electricity  delivery  business.  All
customers are now seeing at least a 10% reduction in their  electric  rates from
1996 levels.

     The framework of the current Rate Plan,  including the "sharing" mechanism,
is expected to continue at least through 2001.  Regulatory decisions during 1999
did not alter UI's allowed return of 11.5% on regulated utility equity,  and did
not impinge on UI's ability to achieve that return.

     On July 24, 2000 and October 23, 2000, UIL Holdings estimated its year 2000
earnings would be in the range of $4.25-$4.35 per share. The October 23 estimate
contained a revised mix of UI and URI  earnings.  UIL  Holdings  maintains  this
estimate at this time.  This range  reflects  growth in earnings  per share from
operations of 16% to 19% over 1999 results of $3.67 per share.

     If UI were to earn 11.5% on regulated utility equity, including the Nuclear
Division,  that level of earnings would generate  $3.35-$3.45  per share for UIL
Holdings.  The operation of UI's nuclear  entitlements at the high  availability
rates  experienced  in the first nine  months of 2000 have  produced  additional
earnings, and are expected to produce additional earnings for the year, although
a seven-week refueling outage began on October 21, 2000 for the Seabrook nuclear
generating unit.

     It is expected  that sharing  will be reduced from the 1999 levels,  due to
mandates in the 1998 restructuring legislation.  UIL Holdings expects sharing to
contribute no more than  $.45-$.55  per share to earnings in 2000,  exclusive of
one-time items.

     UIL Holdings' non-regulated businesses,  under the parent URI, are expected
to impact  earnings  by  $.00-$(.10)  per share in 2000.  This  compares  to the
previous  estimate made on July 24, 2000 of $.25-$.30  per share.  The principal
reason  for the  drop in the  estimate  is the  third  quarter  results  of UBE,
including weak sales results due to mild weather conditions and high gas prices,
and to the contract termination charge taken in that quarter. Those results have
reduced  UBE's  earnings  estimate for the year to a loss of $.15-$.20 per share
from the previous estimate of a positive $.05 per share.

     APS is expected to  contribute  about  $.10-$.15  per share to UIL Holdings
earnings in 2000, consistent with the July 24, 2000 estimate.

     Xcelecom,  Inc. is expected to be profitable in the fourth quarter of 2000,
resulting in UIL Holdings earnings for the year of $.08-$.10 per share.

     UCI is expected to  contribute  about  $.08-$.10  per share to UIL Holdings
earnings  for  the  year.  URI,  the  holding  company  for  the   non-regulated
subsidiaries,  is  expected to lose  approximately  $.20 per share for the year,
reflecting  financial  leverage and ongoing strategic and  administrative  costs
associated  with UIL  Holdings'  efforts to continue  growing the  non-regulated
businesses.  As  stated  previously,  as  a  result  of  management's  continued
confidence in the  potential of the  non-regulated  businesses,  UIL Holdings is
evaluating further investments in this area.  Near-term losses could be incurred
due to these new  growth  initiatives,  if the  potential  for  future  benefits
warrants such losses.


                                     - 35 -
<PAGE>

Quarterly Earnings Pattern for 2000
-----------------------------------

     The quarterly  earnings pattern for 2000 will be somewhat smoother than the
earnings  pattern for 1999.  The  primary  reason is the new  regulated  utility
pricing  structure  set by the  Department  of Public  Utility  Control  (DPUC),
effective January 1, 2000, to implement standard offer customer rates at a level
10% below 1996 rates.

     Overall,  the  implementation  of the new rates will produce a retail price
reduction of about 6% compared to 1999 retail  revenues,  excluding  any further
reduction  resulting from earnings  sharing.  In 2000, all of the unbundled rate
components,  except for the component attributable to the operating Distribution
Division, reflect fixed pricing within each rate class. That is, the seasonality
previously associated with historical underlying costs of those rate components,
the  largest  of which  is the CTA for  recovery  of  stranded  costs,  has been
eliminated.  Only the  operating  Distribution  Company  component  maintains  a
seasonal pricing structure, and that component is expected to produce an average
price for the year of about 4.2 cents per kilowatthour.

     UI is allowed to earn an 11.5% return on the equity portions of CTA and the
SBC rate base (the latter is minimal).  For the most part, the regulatory assets
that are being recovered  through the CTA are being amortized on a straight-line
basis.  If CTA  revenues  do not  produce  the  allowed  return,  then  deferred
accounting is used to "true-up" to the allowed return.  This true-up adjusts for
sales volume fluctuations as well as pricing factors. A similar adjustment, on a
much less  significant  scale,  applies  to the SBC  component.  The  generation
service,  conservation and renewables charges are pass-through charges. The only
retail sales volume fluctuations that flow to net income are those that apply to
the operating  Distribution Division component of rates. Thus, a 1% sales volume
increase  will  produce  additional  sales margin of about $2.4 million in 2000,
whereas it produced additional sales margin of about $6.0 million in 1999.

     The other UI earnings  component that can vary significantly is the Nuclear
Division component. UI's operating nuclear assets, Seabrook Unit 1 and Millstone
Unit 3, are supplying  power solely to the wholesale  market  beginning in 2000.
Unit outages,  whether  scheduled or unscheduled,  will result in lowered sales,
and unscheduled outages could result in higher maintenance expenses.

     Actual 2000 results may vary depending on changes due to weather,  economic
conditions,  sales mix (the usage pattern of the Distribution  Division's retail
customers)  and  UIL  Holdings'  ability  to  control  expenses,  as well as the
performance of URI and other unanticipated events.

     UIL  Holdings'   current  overall  estimate  of  earnings  per  share  from
operations for 2000 is $4.25-$4.35 and the estimates of quarterly results are as
follows:

     Earnings per share from operations:
                                          Estimated                Actual
                       Quarter            2000 Range                1999
                       -------            ----------                ----
                          1               $1.20 (Actual)           $ .66
                          2               $1.41 (Actual)             .99
                          3               $1.19 (Actual)            1.78
                          4               $ .45 - $ .55              .24
                                                                    ----
                                                                   $3.67

A look at 2001; continued growth of non-regulated operating businesses value
----------------------------------------------------------------------------

     Currently,  UIL Holdings is estimating earnings for 2001 to be in the range
of  $4.05-$4.25  per  share.  UI is  expected  to  produce  earnings  in 2001 of
$3.75-$3.85  per  share.  Sharing  in the  regulated  utility  is not  currently
expected  to produce  any  significant  earnings  in 2001.  The  largest  single
influence on this  forecasted  downturn in UI's earnings from 2000 is additional
scheduled non-cash  amortization.  The non-regulated  businesses are expected to
produce earnings in 2001 of $.30-$.45 per share.  APS's  traditional  contracted
walk-in  payments  business should produce  earnings at or above the 2000 level,
but its  total  earnings  should  decrease  from the 2000  level by about 25% to
$.08-$.10 per share. This decrease is due to higher selling and other costs that
are expected to be incurred to  significantly  increase the number of agents and
introduce new products. Xcelecom's earnings are expected to be

                                     - 36 -
<PAGE>

$.40-$.50  per  share,  reflecting  a full  year's  impact  of the  acquisitions
completed in 2000.  Passive  investments,  including  UCI and UBE, are currently
expected  to break even in 2001,  but could  experience  substantial  variation,
depending on financial and energy market conditions.  URI's financial  leverage,
strategic and administrative costs are expected to offset some of these earnings
and should reduce total URI earnings by $.20-$.30 per share.

                         THE UNITED ILLUMINATING COMPANY

     The  United  Illuminating  Company  is a  wholly-owned  subsidiary  of  UIL
Holdings  Corporation  (UIL  Holdings).  Refer  to UIL  Holdings'  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  for
information relating to the following:

                           Major Influences on Financial Condition

                           Capital Expenditure Program

                           Liquidity and Capital Resources

                           Results of Operations

                           Looking Forward

This  discussion  should be read in conjunction  with UI's annual report on Form
10-K for the year ended December 31, 1999, UI's current report on Form 8-K filed
March 22,  2000,  UI's  quarterly  reports on Form 10-Q for the fiscal  quarters
ended March 31, 2000 and June 30, 2000,  UI's  current  report on Form 8-K filed
July 21, 2000, UIL Holdings' current report on Form 8-K filed July 21, 2000, and
the financial  statements and "Notes to Financial  Statements" in Item 1 of this
quarterly report on Form 10-Q.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     Each of UIL Holdings and UI believes  that it has no material  quantitative
or qualitative  exposure to market risk associated with activities in derivative
financial  instruments,  other  financial  instruments  or derivative  commodity
instruments.




                                     - 37 -
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     See UI's  Quarterly  Reports (Form 10-Q) for the quarterly  periods  ending
March 31, 2000 and June 30, 2000.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits.

<TABLE>
<CAPTION>
          Exhibit
         Table Item             Exhibit
          Number                Number                                     Description
         ----------             -------                                    -----------
          <S>                    <C>          <C>
           (3)                    3.1f        Copy of  Certificate  Amending  Certificate of  Incorporation  of The
                                              United Illuminating  Company,  dated July 21,  2000, amending Exhibit
                                              3.1a.*

           (3)                    3.3         Copy of Certificate of Incorporation of UIL Holdings Corporation,  as
                                              amended through July 20, 2000.

           (3)                    3.4         Copy of ByLaws of UIL Holdings Corporation, as amended through
                                              July 20, 2000.

          (10)                   10.21b+      Copy  of  First  Amendment,  made  as of the  close  of  business  on
                                              July 20,  2000,  to The United  Illuminating  Company  Phantom  Stock
                                              Option Agreement,  dated as of February 23,  1998, between The United
                                              Illuminating  Company and  Nathaniel  D.  Woodson,  amending  Exhibit
                                              10.21**.

          (10)                   10.23b+      Copy of First  Amendment  to The  United  Illuminating  Company  1990
                                              Stock Option Plan, as previously  amended  through  August 22,  1994,
                                              effective  immediately  prior to the close of  business  on  July 20,
                                              2000, amending Exhibit 10.23***.

          (10)                   10.23c+      Copy of Instrument  of  Assumption of Stock Option Plans,  made as of
                                 10.24a+      July 21,  2000,  between  UIL  Holdings  Corporation  and The  United
                                              Illuminating Company, with respect
                                              to Exhibits  10.23***,  10.23b and
                                              10.24****.

          (10)                   10.25c+      Copy  of  Second  Amendment  to  The  United   Illuminating   Company
                                              Non-Employee  Directors Common Stock and Deferred  Compensation Plan,
                                              as previously  amended and restated through  December 13,  1999, made
                                              as of the  close of  business  on  July 20,  2000,  amending  Exhibit
                                              10.25a#.

          (10)                   10.25d+      Copy of  Instrument  of Assignment  and  Assumption  of  Non-Employee
                                              Directors  Common Stock and Deferred  Compensation  Plan,  made as of
                                              July 21,  2000,  between  The  United  Illuminating  Company  and UIL
                                              Holdings Corporation,  with respect to Exhibits 10.25a#, 10.25b## and
                                              10.25c.

          (10)                   10.28+       Copy of Employment Agreement,  made as of June 12,  2000, between The
                                              United Illuminating Company and Gregory E. Sages.
</TABLE>



                                     - 38 -
<PAGE>

<TABLE>
<CAPTION>

          Exhibit
         Table Item             Exhibit
          Number                Number                                     Description
         ----------             -------                                    -----------
          <S>                    <C>          <C>                                                         <C>  <C>
          (10)                   10.29+       Copy of Employment Agreement,  made as of June 26,  2000, between The
                                              United Illuminating Company and Susan E. Allen.

          (10)                   10.30+       Copy of  Resolution  adopted by the Board of  Directors of The United
                                              Illuminating Company on June 26,  2000, and effective at the close of
                                              business  on  July 20,  2000,  amending  Section  7 of  each  of  the
                                              Employment  Agreement  Exhibits  10.12a###,   10.13a###,   10.14a###,
                                              10.15a###,   10.16a###,  10.17a###,  10.18###,  10.19a###,  10.20a**,
                                              10.28 and 10.29.

          (10)                   10.31+       Copy of UIL Holdings Corporation Change in Control Severance Plan.

          (10)                   10.32+       Copy of UIL Holdings  Corporation  Non-Employee  Directors  Change in
                                              Control Severance Plan.

          (21)                   21b          List  of  subsidiaries  of  UIL  Holdings  Corporation,   superseding
                                              Exhibit 21a####.

          (27)                   27           Financial Data Schedule.
</TABLE>

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

+    Management contract or compensatory plan or arrangement.
*    Filed with Annual Report (Form 10-K) of The United Illuminating Company for
     fiscal year ended December 31, 1995.
**   Filed with Quarterly Report (Form 10-Q) of The United Illuminating  Company
     for fiscal quarter ended March 31, 1998.
***  Filed with Annual Report (Form 10-K) of The United Illuminating Company for
     fiscal year ended December 31, 1996.
**** Filed with Quarterly Report (Form 10-Q) of The United Illuminating  Company
     for fiscal quarter ended March 31, 1999.
#    Filed  March 29,  1996,  with  proxy  material  for  Annual  Meeting of the
     Shareowners of The United Illuminating Company.
##   Filed with Annual Report (Form 10-K) of The United Illuminating Company for
     fiscal year ended December 31, 1999.
###  Filed with Quarterly Report (Form 10-Q) of The United Illuminating  Company
     for fiscal quarter ended September 30, 1997.
#### Filed with Quarterly Report (Form 10-Q) of The United Illuminating  Company
     and UIL Holdings Corporation for fiscal quarter ended June 30, 2000.


                                     - 39 -
<PAGE>

     (b) Reports on Form 8-K.

                              UIL HOLDINGS CORPORATION:

     Item                        Financial
   Reported                      Statements                      Date of Report
   --------                      ----------                      --------------
      5                            None                          July 20, 2000


                          THE UNITED ILLUMINATING COMPANY:

    Item                         Financial
   Reported                      Statements                      Date of Report
   --------                      ----------                      --------------
      5                            None                          July 20, 2000




                                     - 40 -
<PAGE>


                                   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.

                         THE UNITED ILLUMINATING COMPANY




Date   11/14/2000           Signature     /s/ Robert L. Fiscus
    ---------------                  -------------------------------------------
                                              Robert L. Fiscus
                                     Vice Chairman of the Board of Directors
                                          and Chief Financial Officer




                                     - 41 -
<PAGE>


                                   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.

                            UIL HOLDINGS CORPORATION




Date   11/14/2000              Signature     /s/ Robert L. Fiscus
    -----------------                   ----------------------------------------
                                                 Robert L. Fiscus
                                        Vice Chairman of the Board of Directors
                                             and Chief Financial Officer



                                     - 42 -