<PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2003

                                       OR

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

             For the transition period from __________ to __________

                          Commission file number 1-1398

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

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


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

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

           At April 30, 2003, there were 26,781,785 shares of UGI Utilities,
Inc. Common Stock, par value $2.25 per share, outstanding, all of which were
held, beneficially and of record, by UGI Corporation.
<PAGE>
                               UGI UTILITIES, INC.

                                TABLE OF CONTENTS

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

       Item 1.      Financial Statements

                    Condensed Consolidated Balance Sheets as of March 31, 2003,
                        September 30, 2002 and March 31, 2002                           1

                    Condensed Consolidated Statements of Income for the three
                        and six months ended March 31, 2003 and 2002                    2

                    Condensed Consolidated Statements of Cash Flows for the
                        six months ended March 31, 2003 and 2002                        3

                    Notes to Condensed Consolidated Financial Statements              4 - 7

       Item 2.      Management's Discussion and Analysis of Financial
                        Condition and Results of Operations                           8 - 13

       Item 3.      Quantitative and Qualitative Disclosures About Market Risk       13 - 14

       Item 4.      Controls and Procedures                                            14

PART II OTHER INFORMATION

       Item 6.      Exhibits and Reports on Form 8-K                                   15

       Signatures                                                                      16

       Certifications                                                                17 - 18
</TABLE>

                                      -i-
<PAGE>
                               UGI UTILITIES, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)
                             (Thousands of dollars)

<TABLE>
<CAPTION>
                                                                                  March 31,    September 30,    March 31,
                                                                                    2003           2002           2002
                                                                                  ---------      ---------      --------
ASSETS
     Current assets:
<S>                                                                               <C>          <C>              <C>
           Cash and cash equivalents                                              $   8,617      $   6,090      $  1,955
           Accounts receivable (less allowances for doubtful accounts
                 of $6,202, $1,972 and $3,887, respectively)                         99,847         38,554        65,329
           Accrued utility revenues                                                  21,721          8,069        19,695
           Inventories                                                                6,563         38,654        12,418
           Deferred income taxes                                                     18,074          2,610         8,843
           Deferred fuel costs                                                           --          4,304            --
           Income taxes recoverable                                                      --          6,892            --
           Prepaid expenses and other current assets                                  3,907          3,151         4,931
                                                                                  ---------      ---------      --------
                 Total current assets                                               158,729        108,324       113,171

     Property, plant and equipment, at cost (less accumulated depreciation
           and amortization of $299,273, $290,194 and $285,945, respectively)       598,395        593,141       582,986

     Regulatory assets                                                               59,212         57,685        55,227
     Other assets                                                                    40,574         38,973        36,358
                                                                                  ---------      ---------      --------
           Total assets                                                           $ 856,910      $ 798,123      $787,742
                                                                                  =========      =========      ========

LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     Current liabilities:
           Current maturities of long-term debt                                   $  50,000      $  76,000      $ 26,000
           Bank loans                                                                27,700         37,200        58,900
           Accounts payable                                                          51,079         57,499        39,152
           Accrued income taxes                                                      29,671             --        15,356
           Deferred fuel refunds                                                     31,369             --         8,975
           Other current liabilities                                                 37,034         45,518        31,115
                                                                                  ---------      ---------      --------
                 Total current liabilities                                          226,853        216,217       179,498

     Long-term debt                                                                 172,322        172,369       182,426
     Deferred income taxes                                                          138,169        131,483       124,699
     Deferred investment tax credits                                                  8,186          8,385         8,584
     Other noncurrent liabilities                                                    12,821         11,815        11,453

     Commitments and contingencies (note 3)

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

     Common stockholder's equity:
           Common Stock, $2.25 par value (authorized - 40,000,000 shares;
                 issued and outstanding - 26,781,785 shares)                         60,259         60,259        60,259
           Additional paid-in capital                                                73,057         73,057        72,792
           Retained earnings                                                        147,791        107,312       127,563
           Accumulated other comprehensive (loss) income                             (2,548)        (2,774)          468
                                                                                  ---------      ---------      --------
                 Total common stockholder's equity                                  278,559        237,854       261,082
                                                                                  ---------      ---------      --------
           Total liabilities and stockholders' equity                             $ 856,910      $ 798,123      $787,742
                                                                                  =========      =========      ========
</TABLE>


See accompanying notes to consolidated financial statements.

                                      -1-
<PAGE>
                               UGI UTILITIES, INC.

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

<TABLE>
<CAPTION>

                                                                    Three Months Ended             Six Months Ended
                                                                         March 31,                      March 31,
                                                                  ------------------------      ------------------------
                                                                     2003          2002           2003            2002
                                                                  ---------      ---------      ---------      ---------
<S>                                                               <C>            <C>            <C>            <C>
Revenues                                                          $ 269,296      $ 179,945      $ 437,647      $ 321,426
                                                                  ---------      ---------      ---------      ---------
Costs and expenses:
      Gas, fuel and purchased power                                 173,167        109,151        273,611        196,258
      Operating and administrative expenses                          25,074         21,437         45,882         41,674
      Operating and administrative expenses - related parties         3,080          1,668          4,970          3,018
      Taxes other than income taxes                                   3,430          3,242          6,368          5,828
      Depreciation and amortization                                   5,340          5,834         10,654         11,644
      Other income, net                                              (4,244)        (2,706)        (6,117)        (5,924)
                                                                  ---------      ---------      ---------      ---------
                                                                    205,847        138,626        335,368        252,498
                                                                  ---------      ---------      ---------      ---------

Operating income                                                     63,449         41,319        102,279         68,928
Interest expense                                                      4,141          4,228          8,476          8,491
                                                                  ---------      ---------      ---------      ---------
Income before income taxes                                           59,308         37,091         93,803         60,437
Income taxes                                                         23,909         14,542         37,690         23,843
                                                                  ---------      ---------      ---------      ---------
Net income                                                           35,399         22,549         56,113         36,594
Dividends on preferred stock                                            387            387            775            775
                                                                  ---------      ---------      ---------      ---------
Net income after dividends on preferred stock                     $  35,012      $  22,162      $  55,338      $  35,819
                                                                  =========      =========      =========      =========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      -2-
<PAGE>
                               UGI UTILITIES, INC.

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

<TABLE>
<CAPTION>
                                                                       Six Months Ended
                                                                           March 31,
                                                                    ----------------------
                                                                      2003          2002
                                                                    --------      --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>           <C>
     Net income                                                     $ 56,113      $ 36,594
     Adjustments to reconcile net income to net cash provided
        by operating activities:
            Depreciation and amortization                             10,654        11,644
            Deferred income taxes, net                               (10,328)       (1,206)
            Other, net                                                 3,733         3,596
            Net change in:
               Accounts receivable and accrued utility revenues      (80,756)      (38,805)
               Inventories                                            32,091        35,656
               Deferred fuel costs                                    35,673         6,222
               Accounts payable                                       (6,420)      (28,304)
               Other current assets and liabilities                   28,672        (4,914)
                                                                    --------      --------
        Net cash provided by operating activities                     69,432        20,483
                                                                    --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Expenditures for property, plant and equipment                  (15,452)      (14,615)
     Net costs of property, plant and equipment disposals               (319)         (986)
                                                                    --------      --------
        Net cash used by investing activities                        (15,771)      (15,601)
                                                                    --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of dividends                                            (15,634)      (11,738)
     Repayment of long-term debt                                     (26,000)           --
     Bank loans (decrease) increase                                   (9,500)        1,100
                                                                    --------      --------
        Net cash used by financing activities                        (51,134)      (10,638)
                                                                    --------      --------

     Cash and cash equivalents increase (decrease)                  $  2,527      $ (5,756)
                                                                    ========      ========

CASH AND CASH EQUIVALENTS:
     End of period                                                  $  8,617      $  1,955
     Beginning of period                                               6,090         7,711
                                                                    --------      --------
        Increase (decrease)                                         $  2,527      $ (5,756)
                                                                    ========      ========
</TABLE>


See accompanying notes to consolidated financial statements.

                                      -3-
<PAGE>
                               UGI UTILITIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)
                             (Thousands of dollars)

1.         BASIS OF PRESENTATION

           The accompanying condensed consolidated financial statements include
           the accounts of UGI Utilities, Inc. ("UGI Utilities") and its wholly
           owned subsidiaries (collectively, "the Company" or "we"). UGI
           Utilities, Inc. ("UGI Utilities"), a wholly owned subsidiary of UGI
           Corporation ("UGI"), owns and operates a natural gas distribution
           utility ("Gas Utility") in parts of eastern and southeastern
           Pennsylvania; owns and operates an electricity distribution utility
           ("Electric Utility") in northeastern Pennsylvania; and through its
           wholly owned subsidiary, UGI Development Company ("UGID"), owns
           interests in Pennsylvania-based electricity generation assets (which
           together with Electric Utility are referred to herein as "Electric
           Operations"). UGID's 50%-owned joint-venture partnership, Hunlock
           Creek Energy Ventures ("Energy Ventures"), is accounted for under the
           equity method. Gas Utility and Electric Utility are subject to
           regulation by the Pennsylvania Public Utility Commission ("PUC").
           UGID has been granted "Exempt Wholesale Generator" status by the
           Federal Energy Regulatory Commission.

           Our consolidated financial statements include the accounts of UGI
           Utilities and its majority-owned subsidiaries. We eliminate all
           significant intercompany accounts and transactions when we
           consolidate.

           The accompanying condensed consolidated financial statements are
           unaudited and have been prepared in accordance with the rules and
           regulations of the U.S. Securities and Exchange Commission ("SEC").
           They include all adjustments which we consider necessary for a fair
           statement of the results for the interim periods presented. Such
           adjustments consisted only of normal recurring items unless otherwise
           disclosed. These financial statements should be read in conjunction
           with the financial statements and the related notes included in our
           Annual Report on Form 10-K for the year ended September 30, 2002
           ("Company's 2002 Annual Report"). Due to the seasonal nature of our
           businesses, the results of operations for interim periods are not
           necessarily indicative of the results to be expected for a full year.

           COMPREHENSIVE INCOME. The following table presents the components of
           comprehensive income for the three and six months ended March 31,
           2003 and 2002:

<TABLE>
<CAPTION>
                                       Three Months Ended March 31,   Six Months Ended March 31,
                                       ----------------------------   --------------------------
                                             2003         2002              2003          2002
                                             ----         ----              ----          ----
<S>                                        <C>          <C>               <C>           <C>
Net income                                 $35,399      $22,549           $56,113       $36,594
Other comprehensive income                      25            7               226           468
----------                                 -------      -------           -------       -------
Comprehensive income                       $35,424      $22,556           $56,339       $37,062
                                           =======      =======           =======       =======
</TABLE>

           Other comprehensive income comprises changes in the fair value of
           interest rate protection agreements qualifying as hedges, net of
           reclassifications to net income.


                                      -4-
<PAGE>
                               UGI UTILITIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)
                             (Thousands of dollars)


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

2.         SEGMENT INFORMATION

           The Company currently has two reportable segments: (1) Gas Utility
           and (2) Electric Operations. The accounting policies of our two
           reportable segments are the same as those described in the
           Significant Accounting Policies note contained in the Company's 2002
           Annual Report. We evaluate each segment's profitability principally
           based upon its earnings before income taxes. No single customer
           represents more than 10% of the total revenues of either Gas Utility
           or Electric Operations. There are no significant intersegment
           transactions. In addition, all of our reportable segments' revenues
           are derived from sources within the United States. Financial
           information by reportable segment follows:

<TABLE>
<CAPTION>

THREE MONTHS ENDED MARCH 31, 2003:

                                                            Gas         Electric
                                            Total         Utility      Operations
                                          --------        -------      ----------
<S>                                       <C>            <C>           <C>
Revenues                                  $269,296       $239,920       $ 29,376
Depreciation and amortization                5,340          4,547            793
Operating income                            63,449         55,020          8,429
Interest expense                             4,141          3,502            639
Income before income taxes                  59,308         51,519          7,789
Total assets (at period end)               856,910        744,907        112,003
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2002:

                                                            Gas         Electric
                                            Total         Utility      Operations
                                          --------        -------      ----------
<S>                                       <C>            <C>           <C>
Revenues                                  $179,945       $158,160       $ 21,785
Depreciation and amortization                5,834          5,003            831
Operating income                            41,319         38,441          2,878
Interest expense                             4,228          3,632            596
Income before income taxes                  37,091         34,809          2,282
Total assets (at period end)               787,742        683,742        104,000
</TABLE>

                                      -5-
<PAGE>
                               UGI UTILITIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)
                             (Thousands of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 2003:

                                                            Gas         Electric
                                            Total         Utility      Operations
                                          --------        -------      ----------
<S>                                       <C>            <C>           <C>
Revenues                                  $437,647       $384,995       $ 52,652
Depreciation and amortization               10,654          9,077          1,577
Operating income                           102,279         88,563         13,716
Interest expense                             8,476          7,220          1,256
Income before income taxes                  93,803         81,343         12,460
Total assets (at period end)               856,910        744,907        112,003
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 2002:

                                                            Gas         Electric
                                            Total         Utility      Operations
                                          --------        -------      ----------
<S>                                       <C>            <C>           <C>
Revenues                                  $321,426       $279,423       $ 42,003
Depreciation and amortization               11,644          9,976          1,668
Operating income                            68,928         63,342          5,586
Interest expense                             8,491          7,277          1,214
Income before income taxes                  60,437         56,065          4,372
Total assets (at period end)               787,742        683,742        104,000
</TABLE>

3.         COMMITMENTS AND CONTINGENCIES

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

           UGI Utilities does not expect its costs for investigation and
           remediation of hazardous substances at Pennsylvania MGP sites to be
           material to its results of operations because Gas Utility is
           currently permitted to include in rates, through future base rate
           proceedings, prudently incurred remediation costs associated with
           such sites. UGI Utilities has been notified of several sites outside
           Pennsylvania on which (1) MGPs were formerly operated by it or owned
           or operated by its former subsidiaries and (2) either environmental
           agencies or private parties are investigating the extent of
           environmental


                                      -6-
<PAGE>
                               UGI UTILITIES, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)
                             (Thousands of dollars)


           contamination or performing environmental remediation. UGI Utilities
           is currently litigating two claims against it relating to
           out-of-state sites.

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

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

4.         UGID TRANSACTIONS

           On February 25, 2003, Allegheny Energy Supply Company, LLC
           ("Allegheny Supply"), Allegheny Energy Supply Conemaugh, LLC, UGID
           and UGI entered into an asset purchase agreement ("Asset Purchase
           Agreement") pursuant to which UGID will acquire an additional 83
           megawatt ownership interest in the Conemaugh electricity generation
           station ("Conemaugh") from Allegheny Supply, a unit of Allegheny
           Energy, Inc. ("Allegheny") for approximately $51,300 in cash, subject
           to a $3,000 credit. Conemaugh is a 1,711-megawatt, coal-fired
           electricity generation station located near Johnstown, Pennsylvania
           and is owned by a consortium of energy companies and operated by a
           unit of Reliant Resources, Inc. under contract. The purchase will
           increase UGID's interest in Conemaugh to 102 megawatts (6.0%) from 19
           megawatts (1.1%) currently. The transaction, which is subject to
           customary closing conditions and regulatory approvals, is expected to
           close by the end of June 2003.

           On April 29, 2003, the Board of Directors of the Company declared a
           dividend of all of the common stock of UGID to UGI. UGID's net assets
           as of March 31, 2003 comprised approximately seven percent of the
           Company's consolidated net assets. The pending investment in
           Conemaugh by UGID described above is expected to occur after payment
           of the dividend of UGID common stock to UGI.


                                      -7-
<PAGE>
                               UGI UTILITIES, INC.


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

                       ANALYSIS OF RESULTS OF OPERATIONS

The following analyses compare our results of operations for (1) the three
months ended March 31, 2003 ("2003 three-month period") with the three months
ended March 31, 2002 ("2002 three-month period") and (2) the six months ended
March 31, 2003 ("2003 six-month period") with the six months ended March 31,
2002 ("2002 six-month period"). Our analyses of results of operations should be
read in conjunction with the segment information included in Note 2 to the
Condensed Consolidated Financial Statements.

2003 THREE-MONTH PERIOD COMPARED WITH 2002 THREE-MONTH PERIOD

<TABLE>
<CAPTION>
 Three Months Ended March 31,                         2003       2002            Increase
 ----------------------------                        ------     ------      ------------------
 (Dollars in millions)

<S>                                                  <C>        <C>         <C>          <C>
 GAS UTILITY:
      Revenues                                       $239.9     $158.2      $ 81.7       51.6%
      Total margin (a)                               $ 80.9     $ 61.4      $ 19.5       31.8%
      Operating income                               $ 55.0     $ 38.4      $ 16.6       43.2%
      Natural gas system throughput - bcf              32.4       26.1         6.3       24.1%
      Heating degree days - % colder (warmer)
           than normal                                  7.9      (16.9)         --         --

 ELECTRIC OPERATIONS:
      Revenues                                       $ 29.4     $ 21.8      $  7.6       34.9%
      Total margin (a)                               $ 13.9     $  8.2      $  5.7       69.5%
      Operating income                               $  8.4     $  2.9      $  5.5      189.7%
      Electric Utility distribution sales - gwh       281.1      248.1        33.0       13.3%
</TABLE>

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

(a)    Gas Utility's total margin represents total revenues less cost of sales.
       Electric Operation's total margin represents total revenues less cost of
       sales and revenue-related taxes, i.e. Electric Utility gross receipts
       taxes. For financial statement purposes, revenue-related taxes are
       included in "taxes other than income taxes" on the Condensed Consolidated
       Statements of Income.

GAS UTILITY. Total distribution system throughput increased 6.3 bcf or 24.1% as
the significantly colder 2003 three-month period weather resulted in greater
heating-related sales to firm- residential, commercial and industrial
("core-market") customers and, to a lesser extent, greater volumes transported
for residential, commercial and industrial delivery service customers.

The increase in Gas Utility revenues reflects the greater core-market volumes
and residential, commercial and industrial delivery service volumes and the
effects of higher core-market purchased gas cost ("PGC") rates. The higher 2003
three-month period PGC rates resulted from the pass through of higher natural
gas commodity costs. Gas Utility cost of gas was $159.0


                                      -8-
<PAGE>
                               UGI UTILITIES, INC.


million in the 2003 three-month period compared to $96.8 million in the 2002
three-month period reflecting the higher core-market volumes and PGC rates.

The increase in Gas Utility total margin principally reflects a $14.3 million
increase in margin from core-market customers and, to a lesser extent, greater
margin from residential, commercial and industrial delivery service customers.

The higher Gas Utility operating income is due to the previously mentioned
increase in total margin, slightly higher other income, and lower depreciation
expense partially offset by a $4.6 million increase in operating and
administrative expenses. The higher operating and administrative expenses
reflect, among other things, the impact of colder weather on distribution system
maintenance expenses, higher uncollectible accounts expense, and greater
incentive compensation expenses. Depreciation expense declined $0.5 million in
the 2003 three-month period due to a change, effective April 1, 2002, in the
estimated useful lives of Gas Utility's distribution assets resulting from a
PUC-mandated asset life study.

ELECTRIC OPERATIONS. Electric Operations benefited from the effects of weather
that was 8.0% colder than normal in the 2003 three-month period compared to
weather that was 16.4% warmer than normal in the prior-year period. Electric
Utility's distribution sales increased 13.3% principally as a result of the
colder weather.

The increase in Electric Operations' revenues reflects the effects of the
greater Electric Utility distribution sales and a $4.4 million increase in
revenues from sales of electricity produced by our interests in electricity
generation assets to third parties. Prior to September 2002, substantially all
of the electricity generated by our interests in electricity generation assets
was used by Electric Utility to meet a portion of its distribution system
requirements. Beginning September 2002, Electric Utility began purchasing
substantially all of its electricity requirements under fixed-price energy and
capacity contracts with unaffiliated third-party suppliers, and we began selling
electricity produced by our interests in generation assets and related capacity
on the spot market. Electric Operations' cost of sales was $14.2 million in the
2003 three-month period compared to $12.4 million in the prior year reflecting
the third-party spot market sales in the 2003 three-month period partially
offset by the effects of lower Electric Utility per-unit purchased power costs.

The increase in Electric Operations' total margin reflects greater Electric
Utility total margin, resulting from lower per-unit purchased power costs and
greater distribution system sales, and margin from third-party spot market sales
of electricity produced by our electricity generation assets. Electric
Operations' operating income increased in the 2003 three-month period reflecting
the increase in total margin.


                                      -9-
<PAGE>
                               UGI UTILITIES, INC.

2003 SIX-MONTH PERIOD COMPARED WITH 2002 SIX-MONTH PERIOD

<TABLE>
<CAPTION>

 Six Months Ended March 31,                           2003       2002            Increase
 --------------------------                          ------     ------      ------------------
 (Dollars in millions)

<S>                                                  <C>        <C>         <C>         <C>
 GAS UTILITY:
      Revenues                                       $385.0     $279.4      $105.6       37.8%
      Total margin                                   $137.6     $107.4      $ 30.2       28.1%
      Operating income                               $ 88.6     $ 63.3      $ 25.3       40.0%
      Natural gas system throughput - bcf              55.7       45.5        10.2       22.4%
      Heating degree days - % colder (warmer)
           than normal                                  7.3      (17.8)         --         --

 ELECTRIC OPERATIONS:
      Revenues                                       $ 52.6     $ 42.0      $ 10.6       25.2%
      Total margin                                   $ 23.9     $ 15.7      $  8.2       52.2%
      Operating income                               $ 13.7     $  5.6      $  8.1      144.6%
      Electric Utility distribution sales - gwh       525.5      476.0        49.5       10.4%
</TABLE>

GAS UTILITY. Weather in Gas Utility's service territory was 7.3% colder than
normal during the 2003 six-month period compared to weather that was 17.8%
warmer than normal during the 2002 six-month period. The significantly colder
weather resulted in higher heating-related sales to core-market customers and,
to a lesser extent, greater volumes transported for residential, commercial and
industrial delivery service customers.

Gas Utility revenues increased principally as a result of the greater sales to
core-market customers and higher average PGC rates. Gas Utility cost of gas was
$247.4 million in the 2003 six-month period compared to $172.0 million in the
2002 six-month period principally reflecting the higher core-market volumes sold
and higher core-market PGC rates.

The increase in Gas Utility total margin in the 2003 six-month period
principally reflects a $24.2 million increase in core-market total margin due to
the higher core-market sales and increased margin from greater delivery service
volumes.

The increase in Gas Utility operating income reflects the increase in total
margin and lower depreciation expense partially offset by a $5.5 million
increase in operating and administrative expenses. The higher operating and
administrative expenses reflect, among other things, greater distribution system
maintenance expenses, higher uncollectible accounts expense and increased
incentive compensation expense. Depreciation expense declined $0.9 million due
to the previously mentioned change in the estimated useful lives of Gas
Utility's distribution assets. Other income of $5.7 million in the 2003
six-month period was generally comparable to the prior-year period as higher
non-tariff service income was offset by a decline in pension income and lower
interest income on PGC undercollections.

ELECTRIC OPERATIONS. Electric Utility's 2003 six-month period kilowatt-hour
sales increased principally as a result of weather that was 8.6% colder than
normal compared to weather that was 16.7% warmer than normal in the prior-year
period.


                                      -10-
<PAGE>
                               UGI UTILITIES, INC.


The higher Electric Operations' revenues reflect higher Electric Utility sales
and greater sales of electricity produced by our electric generation assets to
third parties. Notwithstanding the significant increase in Electric Operations'
revenues, cost of sales increased only $2.0 million in the 2003 six-month period
as the impact on cost of sales resulting from the greater distribution and
generation sales was substantially offset by lower Electric Utility per-unit
purchased power costs.

The increase in Electric Operations' total margin principally reflects the
increased Electric Utility sales and lower Electric Utility per-unit purchased
power costs. The increase in operating income reflects the greater total margin
and higher other income partially offset by slightly higher 2003 six-month
period general and administrative expenses.

                        FINANCIAL CONDITION AND LIQUIDITY

FINANCIAL CONDITION

The Company's long-term debt outstanding at March 31, 2003 totaled $222.3
million (including current maturities of $50.0 million) compared with $248.4
million (including current maturities of $76.0 million) at September 30, 2002.
On October 1, 2002, the Company repaid $26 million of maturing long-term debt.

At March 31, 2003, the Company had commitments under revolving credit agreements
providing for borrowings of up to $97 million. These agreements expire at
various dates from June 2003 through June 2005. The Company currently expects to
renew or replace those agreements expiring in June 2003 prior to their maturity.
At March 31, 2003, the Company had borrowings under these agreements totaling
$17.7 million and an additional $10 million under an uncommitted facility. UGI
Utilities also has a shelf registration statement with the SEC under which it
may issue up to an additional $85 million of debt securities.

CASH FLOWS

The Company's cash flows from operating activities are seasonal and are
generally greatest during the second and third fiscal quarters when customers
pay bills incurred during the heating season and are generally lowest during the
first and fourth fiscal quarters. Accordingly, cash flows from operations for
the six months ended March 31, 2003 are not necessarily indicative of cash flows
to be expected for a full year.

OPERATING ACTIVITIES. Cash provided by operating activities was $69.4 million
during the six months ended March 31, 2003 compared with $20.5 million in the
prior-year six-month period. Cash flow from operating activities before changes
in operating working capital was $60.2 million in the 2003 six-month period
compared to the $50.6 million in the prior-year six-month period reflecting the
significant increase in 2003 six-month period results. Changes in operating
working capital provided $9.3 million of operating cash flow during the six
months ended March 31, 2003 compared with $30.1 million of cash used during the
prior-year six-month period principally reflecting greater cash flow from
changes in Gas Utility deferred fuel overcollections, accounts payable and
accrued income taxes partially offset by the effects of the higher natural gas
volumes sold and higher natural gas commodity prices on customer accounts
receivable.


                                      -11-
<PAGE>
                               UGI UTILITIES, INC.


INVESTING ACTIVITIES. Expenditures for property, plant and equipment were $15.5
million in the 2003 six-month period, slightly higher than the $14.6 million
recorded in the prior-year period. The lower costs on disposals of property,
plant and equipment in the 2003 six-month period reflect lower disposal activity
during the 2003 six-month period.

FINANCING ACTIVITIES. During the 2003 and 2002 six-month periods, we paid
dividends of $14.9 million and $11.0 million, respectively, to UGI. We also paid
dividends of $0.8 million on our redeemable preferred stock in both periods.
During the 2003 six-month period, we repaid $26 million of maturing Medium-Term
Notes. As a result of the improved operating cash flow, we reduced our bank loan
borrowings $9.5 million compared to net borrowings of $1.1 million during the
prior-year period.

UGID TRANSACTIONS

On February 25, 2003, Allegheny Energy Supply Company, LLC ("Allegheny Supply"),
Allegheny Energy Supply Conemaugh, LLC, UGID and UGI entered into an asset
purchase agreement ("Asset Purchase Agreement") pursuant to which UGID will
acquire an additional 83 megawatt ownership interest in the Conemaugh
electricity generation station ("Conemaugh") from Allegheny Supply, a unit of
Allegheny Energy, Inc. ("Allegheny") for approximately $51,300 in cash, subject
to a $3,000 credit. Conemaugh is a 1,711-megawatt, coal-fired electricity
generation station located near Johnstown, Pennsylvania and is owned by a
consortium of energy companies and operated by a unit of Reliant Resources, Inc.
under contract. The purchase will increase UGID's interest in Conemaugh to 102
megawatts (6.0%) from 19 megawatts (1.1%) currently. The transaction, which is
subject to customary closing conditions and regulatory approvals, is expected to
close by the end of June 2003.

On April 29, 2003, the Board of Directors of the Company declared a dividend of
all of the common stock of UGID to UGI. UGID's net assets as of March 31, 2003
comprised approximately seven percent of the Company's consolidated net assets.
The pending investment in Conemaugh by UGID described above is expected to occur
after payment of the dividend of UGID common stock to UGI.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board ("FASB") recently issued Statement of
Financial Accounting Standards ("SFAS") No. 149; "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ("SFAS 149"); SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146");
and FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45").

SFAS 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 149 amends
SFAS 133 for decisions made (1) as part of the FASB's Derivatives Implementation
Group ("DIG") process; (2) in connection with other FASB projects dealing with
financial instruments; and (3) in connection with implementation issues raised
in relation to the application of the definition of a derivative. SFAS 149 is
effective for contracts entered into or modified after June 30, 2003. Based upon
the types of contracts currently entered into by the Company, we do not believe
SFAS 149 will have a material impact on our financial position or results of
operations.


                                      -12-
<PAGE>
                               UGI UTILITIES, INC.


SFAS 146 addresses accounting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force ("EITF") No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity." Generally, SFAS 146 requires that a liability for costs
associated with an exit or disposal activity, including contract termination
costs, employee termination benefits and other associated costs, be recognized
when the liability is incurred. Under EITF No. 94-3, a liability was recognized
at the date an entity committed to an exit plan. SFAS 146 is effective for
disposal activities initiated after December 31, 2002. The initial adoption of
the provisions of SFAS 146 did not affect our financial position or results of
operations.

FIN 45 expands the existing disclosure requirements for certain guarantees and
requires that companies recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken when issuing the guarantee. The
initial recognition and measurement provisions of FIN 45 are effective for
guarantees issued or modified after December 31, 2002. The application of FIN 45
did not have a material effect on our financial position or results of
operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Gas Utility's tariffs contain clauses that permit recovery of substantially all
of the prudently incurred cost of natural gas it sells to its customers. The
recovery clauses provide for a periodic adjustment for the difference between
the total amount actually collected from customers and the recoverable costs
incurred. Because of this ratemaking mechanism, there is limited commodity price
risk associated with our Gas Utility operations.

Prior to September 2002, Electric Utility purchased all of its electric power
needs, in excess of the electric power it obtained from its interests in
electricity generation facilities, under power supply arrangements of various
lengths and on the spot market. Beginning September 2002, Electric Utility began
purchasing its power needs from electricity suppliers under fixed-price energy
and capacity contracts and, to a much lesser extent, on the spot market, and our
electricity generation business began selling its electricity production and
capacity on the spot market to third parties. Prices for electricity can be
volatile especially during periods of high demand or tight supply. Although the
generation component of Electric Utility's rates is subject to various rate cap
provisions, Electric Utility's fixed-price contracts with electricity marketers
mitigate most risks associated with offering customers a fixed price during the
contract periods. However, should any of the suppliers under these contracts
fail to provide electric power under the terms of the power and capacity
contracts, increases, if any, in the cost of replacement power or capacity would
negatively impact Electric Utility results. In order to reduce this
non-performance risk, Electric Utility has diversified its purchases across
several suppliers and entered into bilateral collateral arrangements with
certain of them.

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

In order to reduce interest rate risk associated with near-term issuances of
fixed-rate debt, we may enter into interest rate protection agreements. At March
31, 2003, the fair value of our unsettled interest rate protection agreement,
which has been designated and qualifies as a cash flow hedge, was



                                      -13-
<PAGE>
                               UGI UTILITIES, INC.


a loss of $1.0 million. An adverse change in interest rates on ten-year U.S.
treasury notes of 50 basis points would result in a $1.1 million decrease in the
fair value of this interest rate protection agreement.

ITEM 4.  CONTROLS AND PROCEDURES

An evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures was carried out within the 90-day period
prior to the filing of this quarterly report by the Company under the
supervision and with the participation of the Company's management, including
the Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures have been designed and are
being operated in a manner that provides reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. A controls
system, no matter how well designed and operated, cannot provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected. Subsequent to the date of
the most recent evaluation of the Company's internal controls, there were no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.



                                      -14-
<PAGE>
                               UGI UTILITIES, INC.


                            PART II OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      List of Exhibits:

                  10.1     UGI Corporation 1997 Stock Option and Dividend
                           Equivalent Plan Amended and Restated as of April 29,
                           2003 is incorporated by reference to Exhibit 10.4 to
                           UGI's Quarterly Report on Form 10-Q for the quarter
                           ended March 31, 2003.

                  10.2     UGI Corporation 2000 Stock Incentive Plan Amended and
                           Restated as of April 29, 2003 is incorporated by
                           reference to Exhibit 10.5 to UGI's Quarterly Report
                           on Form 10-Q for the quarter ended March 31, 2003.

                  10.3     UGI Corporation 1992 Non-Qualified Stock Option Plan
                           Amended and Restated as of April 29, 2003 is
                           incorporated by reference to Exhibit 10.6 to UGI's
                           Quarterly Report on Form 10-Q for the Quarter ended
                           March 31, 2003.

                  10.4     UGI Corporation 2002 Non-Qualified Stock Option Plan
                           Amended and Restated as of April 29, 2003 is
                           incorporated by reference to Exhibit 10.7 to UGI's
                           Quarterly Report on Form 10-Q for the quarter ended
                           March 31, 2003.

                  12.1     Computation of ratio of earnings to fixed charges.

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

                  99       Certification by the Chief Executive Officer and
                           Chief Financial Officer relating to the Registrant's
                           Report on Form 10-Q for the quarter ended March 31,
                           2003.

         (b)      The Company filed the following Current Report on Form 8-K
                  during the fiscal quarter ended March 31, 2003.

<TABLE>
<CAPTION>
       DATE               ITEM NUMBER                      CONTENT
<S>                       <C>              <C>
February 26, 2003             5            Press release regarding purchase of
                                           additional electricity generation by
                                           UGI Development Company
</TABLE>


                                      -15-
<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.


                                           UGI Utilities, Inc.
                                           -------------------
                                             (Registrant)



Date:  May 15, 2003                        By:  /s/ J.C. Barney
                                              --------------------------------
                                           J. C. Barney
                                           Senior Vice President - Finance
                                           (Principal Financial Officer)


                                      -16-
<PAGE>
                                 CERTIFICATIONS

I, Robert J. Chaney, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of UGI Utilities,
         Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         (a)      designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

         (b)      evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

         (c)      presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors:

         (a)      all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         (b)      any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officer and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.



Date:  May 15, 2003

                                           Robert J. Chaney
                                           -------------------------------------
                                           Robert J. Chaney
                                           President and Chief Executive Officer


                                      -17-
<PAGE>
I, John C. Barney, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of UGI Utilities, Inc.;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      (a)   designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      (b)   evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      (c)   presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of the registrant's board of directors:

      (a)   all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officer and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date:  May 15, 2003

                                           John C. Barney
                                           -------------------------------------
                                           John C. Barney
                                           Senior Vice President -
                                           Finance and Chief Financial Officer


                                      -18-
<PAGE>
                      UGI UTILITIES, INC. AND SUBSIDIARIES

                                  EXHIBIT INDEX

10.1     UGI Corporation 1997 Stock Option and Dividend Equivalent Plan Amended
         and Restated as of April 29, 2003 is incorporated by reference to
         Exhibit 10.4 to UGI's Quarterly Report on Form 10-Q for the quarter
         ended March 31, 2003.

10.2     UGI Corporation 2000 Stock Incentive Plan Amended and Restated as of
         April 29, 2003 is incorporated by reference to Exhibit 10.5 to UGI's
         Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.

10.3     UGI Corporation 1992 Non-Qualified Stock Option Plan
         Amended and Restated as of April 29, 2003 is incorporated by
         reference to Exhibit 10.6 to UGI's Quarterly Report on Form 10-Q for
         the Quarter ended March 31, 2003.

10.4     UGI Corporation 2002 Non-Qualified Stock Option Plan Amended and
         Restated as of April 29, 2003 is incorporated by reference to Exhibit
         10.7 to UGI's Quarterly Report on Form 10-Q for the quarter ended
         March 31, 2003.

12.1     Computation of ratio of earnings to fixed charges

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

99       Certification by the Chief Executive Officer and the Chief Financial
         Officer relating to the Registrant's Report on Form 10-Q for the
         quarter ended March 31, 2003.