<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 SEPTEMBER 30, 2001 OR

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

                         Commission File Number 1-16157

                             NewPower Holdings, Inc.
             (Exact name of registrant as specified in its charter)

                Delaware                               52-2208601
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)               Identification No.)


         One Manhattanville Road

           Purchase, New York                            10577
(Address of principal executive offices)               (Zip Code)

                                 (914) 697-2100
              (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.  [X] Yes   No

As of November 10, 2001, there were 62,749,812 shares of NewPower Holdings, Inc.
common stock, par value $.01 per share, outstanding. As of November 10, 2001,
there were Class A warrants outstanding to purchase 64,419,200 shares of
NewPower Holdings, Inc. common stock at an exercise price of $0.05 per share.


<Page>


                             NEWPOWER HOLDINGS, INC.
                                    FORM 10-Q
             FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001

                                                                            PAGE
                                                                            ----

PART I - FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS

           Consolidated Balance Sheets
             September 30, 2001 and December 31, 2000                         3

           Consolidated Statements of Income
             Three and Nine Months Ended September 30, 2001 and 2000          4

           Consolidated Statements of Cash Flows
             Three and Nine Months Ended September 30, 2001 and 2000          5

           Notes to Financial Statements                                      6

         Item 2.  Management's Discussion and Analysis of Financial          15
                    Condition and Results of Operations

         Item 3.  Quantitative and Qualitative Disclosure About Market Risk  20

PART II - OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS                                          23

         ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                  23

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                            23

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS        23

         ITEM 5.  OTHER INFORMATION                                          23

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                           23

SIGNATURES                                                                   25



                                       2
<Page>

                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                             NEWPOWER HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>

                                                                  SEPTEMBER 30,  DECEMBER 31,
                                                                      2001           2000
                                                                  -------------  ------------
ASSETS                                                              (Unaudited)

<S>                                                                  <C>          <C>
CURRENT ASSETS

    Cash and Cash Equivalents                                        $  33,430    $ 179,885
    Restricted Cash                                                    180,228       16,193
    Accounts Receivable, net of allowance of $5,973 and $1,250          43,419       47,885
    Investments in Marketable Securities                                    --      257,189
    Inventory and Imbalances                                            98,820       44,663
    Prepaid Expenses                                                     8,716        8,024
                                                                     ---------    ---------
     TOTAL CURRENT ASSETS                                              364,613      553,839
                                                                     ---------    ---------

    Fixed Assets and Deferred Software Costs                            53,979       12,835
    Less: Accumulated Depreciation and Amortization                     (5,230)      (1,461)
                                                                     ---------    ---------
    Net Fixed Assets and Deferred Software Costs                        48,749       11,374
                                                                     ---------    ---------

    Investments in Marketable Securities                                   294      102,373
    Assets from Price Risk Management Activities                         4,697           --
    Other Assets                                                        13,057       12,761
    Restricted Cash, net of current                                     28,300           --
    Intangible Assets, net                                              54,059       31,995
                                                                     ---------    ---------
TOTAL ASSETS                                                         $ 513,769    $ 712,342
                                                                     =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

    Accounts Payable                                                 $  61,716    $  39,278
    Accrued Liabilities                                                  8,856       27,112
    Due to Affiliated Entities                                          17,566       29,960
    Liabilities from Price Risk Management Activities                   41,399           --
    Deferred Compensation                                               11,115        9,390
                                                                     ---------    ---------
     TOTAL CURRENT LIABILITIES                                         140,652      105,740
                                                                     ---------    ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

    Preferred Stock, $.01 par value, 50,000,000 shares authorized;          --           --
       0 shares issued and outstanding
    Common Stock, $.01 par value, 500,000,000 shares authorized;           582          581
       58,195,120 and 58,054,882 shares issued and outstanding
    Paid-in Capital                                                    777,759      777,437
    Deferred Compensation                                               (1,279)      (2,917)
    Accumulated Other Comprehensive Income                             (61,188)       1,335
    Accumulated Deficit                                               (342,757)    (169,834)
                                                                     ---------    ---------
     TOTAL STOCKHOLDERS' EQUITY                                        373,117      606,602
                                                                     ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $ 513,769    $ 712,342
                                                                     =========    =========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements



                                       3
<Page>

                             NEWPOWER HOLDINGS, INC.

                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>

                                              THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
                                                     2001           2000            2001             2000
                                                ------------    ------------    ------------    ------------

<S>                                             <C>             <C>             <C>             <C>
NET REVENUES                                    $     54,741    $     18,189    $    245,375    $     22,946
COST OF SALES                                         81,676          16,881         257,695          20,912
                                                ------------    ------------    ------------    ------------

GROSS MARGIN                                         (26,935)          1,308         (12,320)          2,034

OPERATING EXPENSES                                    45,243          72,490         181,276         118,048
                                                ------------    ------------    ------------    ------------

OPERATING LOSS                                       (72,178)        (71,182)       (193,596)       (116,014)

INTEREST (INCOME) EXPENSE                             (5,098)         (1,266)        (20,673)         (3,676)
                                                ------------    ------------    ------------    ------------

NET LOSS                                        $    (67,080)   $    (69,916)   $   (172,923)   $   (112,338)
                                                ============    ============    ============    ============

BASIC AND DILUTED NET LOSS PER COMMON SHARE           ($1.15)         ($2.96)         ($2.97)         ($5.06)

WEIGHTED AVERAGE SHARES USED TO COMPUTE BASIC
   AND DILUTED NET LOSS PER COMMON SHARE          58,180,446      23,581,097      58,149,525      22,189,251
</Table>



The accompanying notes are an integral part of these consolidated financial
statements


                                       4
<Page>

                             NEWPOWER HOLDINGS, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                             (DOLLARS IN THOUSANDS)

<Table>
<Caption>

                                                                          THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                             SEPTEMBER 30,             SEPTEMBER 30,
                                                                        ----------------------   -----------------------
                                                                           2001         2000        2001         2000
                                                                        ---------    ---------   ----------   ----------

<S>                                                                     <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Reconciliation of net loss to net cash used by operating activities

      Net loss                                                          $ (67,080)   $ (69,916)   $(172,923)   $(112,338)
      Depreciation and amortization                                         3,590        1,570        9,918        1,570
      Deferred compensation                                                 2,611        2,786        6,342        8,836
      Provision for doubtful accounts                                       3,000           --        4,723           --
      Net unrealized gains from price risk management activities          (12,565)          --      (24,601)          --
Changes in assets and liabilities
      (Increase) decrease in accounts receivable                            6,142       (8,326)         971       (8,094)
      Increase in inventory and imbalances                                (47,242)     (19,912)     (44,920)     (19,912)
      Increase in prepaid expenses                                           (417)      (1,814)        (692)      (4,116)
      Increase (decrease) in accounts payable and accrued liabilities      (7,521)      28,737          258       53,791
      Increase (decrease) in due to affiliates                             (9,065)       9,929      (12,395)       6,809
      Payments of deferred compensation                                    (1,722)          --       (2,830)          --
      Increase in other assets and intangibles                             (4,238)        (334)      (3,879)      (3,833)

                                                                        ---------    ---------    ---------    ---------
     NET CASH USED IN OPERATING ACTIVITIES                               (134,507)     (57,280)    (240,028)     (77,287)
                                                                        ---------    ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES

      Cash issued to purchase businesses, net of cash received                 --      (44,494)     (33,434)     (44,494)
      Capital expenditures                                                (13,392)        (175)     (38,881)     (10,495)
      Net sales of investment securities                                  194,299           --      358,049           --

                                                                        ---------    ---------    ---------    ---------
     NET CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES                180,907      (44,669)     285,734      (54,989)
                                                                        ---------    ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES

      Increase in surety bonds and deposits                               (52,691)          --     (192,336)          --
      Proceeds from sale of common stock & warrants                           175      109,400          175      214,400
      Contributions from EES                                                   --          700           --        3,564
                                                                        ---------    ---------    ---------    ---------
     NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES                (52,516)     110,100     (192,161)     217,964
                                                                        ---------    ---------    ---------    ---------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (6,116)       8,151     (146,455)      85,688

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                             39,546       77,537      179,885           --
                                                                        ---------    ---------    ---------    ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                $  33,430    $  85,688    $  33,430    $  85,688
                                                                        =========    =========    =========    =========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements


                                       5
<Page>


NEWPOWER HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS

NOTE 1-ORGANIZATION AND FORMATION

         NewPower Holdings, Inc. ("NPW" or the "Company"), formerly TNPC, Inc.
and EMW Energy Services Corp., generally through its subsidiary The New Power
Company, provides retail marketing and retail sales of natural gas and power to
residential and small commercial customers in ten states: Ohio, Indiana,
Georgia, Maryland, Pennsylvania, Michigan, New Jersey, Virginia, California and
Texas.

NATURE OF OPERATIONS

         NPW is a new company with a limited operating history in the new and
rapidly evolving restructured retail energy markets. The development of NPW's
operations will depend upon, among other things, favorable markets opening under
viable competitive rules, NPW's ability to expand its customer base in initial
markets and its ability to enter new markets in a timely manner at reasonable
costs.

         NPW has incurred net losses since inception and management expects to
continue to incur losses for a period of time. NPW's ability to become
profitable will depend on, among other things, it's ability to attract and
retain a critical mass of customers at a reasonable cost, to manage the costs of
its internal corporate organization and systems, and to manage effectively its
energy requirements and sell its products at a sufficient margin. In order to
obtain a critical mass of customers, NPW currently projects it needs additional
capital in 2002. If NPW cannot obtain additional debt or equity capital, the
Company's financial condition and business may be materially adversely affected.

         Since January 6, 2000, NPW has financed its activities through private
placements of its common stock, warrants to purchase its common stock and a
public offering of its common stock. NPW was capitalized in an initial private
placement valued at $100 million and funding was completed on January 6, 2000.
Further private placements of NPW common stock and warrants were made in May
2000 and July 2000 valued at $15 million and $104.4 million, respectively. Also,
NPW completed the initial public offering of its common stock in October 2000
from which the Company received net proceeds of $543 million.

         NPW is required by various state regulatory agencies, utilities with
which it does business, and trading counterparties to post cash, surety bonds,
lines of credit, parent guarantees and similar forms of assurance or collateral
to ensure fulfillment of its obligations. As of September 30, 2001, NPW had
provided approximately $204 million of cash collateral for these purposes.
Within this total, and because of significant recent declines in the prices for
electricity and natural gas, NPW was required to post approximately $110 million
in cash as collateral to secure its obligation based on the mark-to-market
comparison set out within its credit agreement with Enron. On October 18, 2001
NPW entered into an amendment to its credit agreement with Enron to permit the
substitution of receivables and inventory in lieu of cash collateral, based on
discount factors and up to specified limits. See Note 4 - "Related Party
Transactions." That amendment expires as of January 4, 2002. Assuming broadly
stable forward energy prices, NPW management believes that the Company has


                                       6
<Page>

sufficient financial resources to conduct its business until it secures
permanent asset-backed or similar financing, which will be necessary before the
build up of natural gas inventory in the third quarter of 2002. If NPW's cash
requirements prove to be greater than expected, NPW will need to obtain
additional funding prior to that time. NPW may not be able to secure such
financing or to raise additional capital on attractive terms, or at all,
which would have a material adverse effect on NPW and its ability to conduct
business.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The financial statements present the balance sheets, statements of
operations and statements of cash flows applicable to operations related to the
residential customers contributed by EES, the customers acquired through
acquisitions of businesses in 2000 and 2001, as described in Note 3, and
customers obtained through the marketing efforts of NPW since August 2000. In
the opinion of NPW, the accompanying unaudited financial statements contain all
adjustments necessary to present fairly the financial position of NPW as of
September 30, 2001, and the results of its operations and cash flows for the
three and nine months ended September 30, 2001 and 2000. Income from interim
periods may not be indicative of future results. Other than as noted,
adjustments were of a normal, recurring nature. Certain reclassifications have
been made to prior period financial data for consistency with current period
classification.

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining NPW's assets, liabilities, revenues and expenses.
Actual results could materially differ from those estimates.

CASH AND CASH EQUIVALENTS

         NPW considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents. The recorded carrying amounts of
NPW's cash and cash equivalents approximate their fair market value.

RESTRICTED CASH

         Certain state regulations, utilities with whom we do business for
local transmission and distribution services, as well as certain of NPW's
wholesale commodity providers, require that NPW provide collateral and other
assurances to ensure fulfillment of NPW's commitments. To meet these
requirements, NPW had provided cash collateral of $204.1 million as of
September 30, 2001. NPW's most significant counterparties are Enron
subsidiaries which hold $110 million of cash collateral at September 30,
2001. See Note 4 - "Related Party Transactions." A substantial portion of the
collateral would revert to NPW's control upon successful completion by NPW of
specified commitments. Such collateral is reflected as restricted cash in the
accompanying balance sheets. Any portion of cash collateral that would revert
to NPW in a period beyond twelve months from the balance sheet date is
classified as non-current.

                                       7
<Page>

         As of September 30, 2001, NPW also had $4.4 million in an escrow
account reported as restricted cash payable to IBM for system development
costs incurred. This amount is held in escrow in accordance with the dispute
resolution provisions of the agreement with IBM.

ACCOUNTS RECEIVABLE

         As permitted under the amendment to the Enron credit agreement,
effective October 18, 2001, certain accounts receivable and unbilled receivables
have been substituted at a discounted rate for the Company's cash collateral
requirements. Also, Enron received a security interest in all the Company's
receivables . See Note 4 - "Related Party Transactions."

INVESTMENTS IN MARKETABLE SECURITIES

         NPW's investments in marketable securities are classified as available
for sale under the provisions of Statement of Financial Accounting Standards No.
115 - "Accounting for Certain Debt and Equity Securities".

         NPW invested excess proceeds from the IPO and private placements in
marketable securities to preserve capital and provide required liquidity. These
investments consisted of investment grade short-term bonds and commercial paper
and the recorded carrying value equals their fair market value.

INVENTORY AND IMBALANCES

         Inventories represent natural gas in storage, and are stated at the
lower of weighted average cost or market. In addition, the Company delivers
natural gas to the local distribution companies for further delivery to the
Company's customers. Actual usage by the Company's customers will differ from
the amount of natural gas delivered to the local distribution companies. This
difference is referred to as an "imbalance" and is stated at the lower of cost
or market. The Company periodically compares the carrying value of natural gas
in inventory and imbalances to its realizable market value. The carrying value
of any inventory or imbalances deemed to be not realizable are charged to
earnings.

    As permitted under the amendment to the Enron credit agreement, effective
October 18, 2001, inventory located at certain storage facilities has been
substituted at a discounted rate for the Company's cash collateral requirements.
Also, Enron received a security interest in all the Company's natural gas
inventory. See Note 4 - "Related Party Transactions."

INCOME TAXES

         Deferred taxes result from differences arising between the financial
and tax bases of NPW's assets and liabilities and are adjusted for changes in
tax rates and tax laws when changes are enacted. Valuation allowances are
recorded to reduce deferred tax assets when it is more likely than not that a
tax benefit will not be realized by NPW.



                                       8
<Page>

FIXED ASSETS AND DEFERRED SOFTWARE COSTS

         Fixed assets and deferred software costs are stated at cost. NPW
provides for depreciation on fixed assets on the straight-line basis over their
estimated useful lives, as follows:

                 Office furniture and fixtures                    3 years
                 Computer software and licenses                   3 years
                 Computer hardware                                3 years
                 Leasehold improvements                        Life of Lease

REVENUE RECOGNITION

     NPW recognizes revenue for the sale of power or natural gas once the
commodity has been delivered to a customer. Unbilled power and natural gas sales
are estimated and recorded each period. NPW's bills to customers may also
include charges relating to the transmission and distribution of the commodity,
for which the utility is ultimately responsible. These amounts are excluded from
NPW's net revenues. As a result, neither NPW's revenues nor costs include the
transmission and distribution charges included in customers' bills.

COMPREHENSIVE INCOME / LOSS

         Comprehensive income is reported as a component of stockholders'
equity. As of September 30, 2001, comprehensive loss of $61.2 million relates to
the fair market value of the Company's risk management assets and liabilities
plus the unrealized gains on available for sale securities included in the
balance sheet as investments in marketable securities.

NET LOSS PER COMMON SHARE

         Net loss per common share was determined by dividing net loss by the
weighted average common shares outstanding. Common equivalent shares related to
stock options and warrants are excluded from the calculation as their effect is
antidilutive. Accordingly, basic and diluted loss per common share are
equivalent.

         Common equivalents at September 30, 2001 and 2000 included 69,070,800
Class A warrants. Common stock equivalent shares attributable to the Class A
warrants at September 30, 2001 and 2000 computed on the treasury stock method
would have been approximately 68,472,969 and 68,906,346 shares, respectively.

CERTAIN RISKS AND CONCENTRATIONS

         NPW sells its energy services to residential and small commercial
customers in the United States. NPW maintains a reserve for doubtful accounts.

         NPW's business is subject to many risks and uncertainties including its
limited operating history; delays or changes in the rules for the restructuring
of the electric and natural gas markets; its ability to manage its energy
requirements and sell energy at a sufficient margin given the volatility in


                                       9
<Page>

prices for electricity and natural gas; the effect of commodity volatility on
collateral requirements and NPW's liquidity; its dependence on third parties to
provide critical functions to NPW and its customers; and conditions of the
capital markets affecting the availability of capital.

NOTE 3-ACQUISITIONS

         In August 2001, NPW completed an acquisition of approximately 6,000
residential and small commercial customers in Ohio from AMPO, Inc. The
acquisition was accounted for as a purchase. Total purchase consideration was
$0.3 million in cash.

         In June 2001, NPW completed the acquisition of approximately 130,000
gas and 7,000 power residential and small commercial customers in three
separate transactions. The customers, located in the Ohio, Pennsylvania and
Maryland markets, were acquired from AES Power Direct/Titan Energy, Inc.,
CoEnergy Trading Company and Energy East Solutions. The acquisitions were
accounted for as purchases. Total consideration for the customer contracts
consisted of approximately $18.6 million in cash. In connection with the
acquisitions, NPW also acquired other assets, including gas storage
inventory, accounts receivable and fixed assets for combined consideration of
approximately $8.4 million. Additionally, NPW assumed forward physical
commodity purchase contracts that had a negative value of $3.9 million as of
the acquisition date. NPW has accrued this amount as part of the cost of the
customers acquired. The amount will be amortized through cost of sales as the
related commodity purchases are delivered. The results of operations for each
of the portfolios acquired are included in operating results since June 2001
when the Company assumed operational control of the portfolios. The
allocation of purchase price for the portfolios described herein is
preliminary in nature and is subject to adjustments to actualize items such
as customer counts, inventory levels, accounts receivable and assumed
liabilities. As part of the agreement with AES Power Direct, AES was to be
released from a guarantee to Coral Energy Resources, who was a supplier of
energy to the AES customers. As of September 30, 2001, this release had not
occurred. AES, Coral Energy Resources and NPW are negotiating a resolution,
which is expected to be resolved during the fourth quarter of 2001.

         In May 2001, NPW exercised its option to not accept approximately
16,000 California residential power customers that were initially contributed to
NPW by EES. As a result, since May 1, 2001, service to these power customers has
reverted to the default provider in the respective local distribution areas.

         In the first quarter of 2001, NPW completed the acquisition of
approximately 7,200 residential and small commercial natural gas customers in
the Atlanta, Georgia market from Reliant Energy Retail, Inc. ("Reliant"). The
acquisition was accounted for as a purchase. Based on the mix of customers
acquired from Reliant and the average consumption of small commercial customers
in the Atlanta market, NPW estimates that the acquired portfolio equates to
approximately 40,000 residential customers. The total purchase consideration
included $4.5 million in cash. Also, in connection with the acquisition, NPW
purchased natural gas inventory for approximately $1.9 million. The results of
operations from the Reliant portfolio are included in operating results since
February 2001 when the Company assumed operational control of the Reliant
portfolio.



                                       10
<Page>

         The New Power Company began servicing approximately 237,000 customers
in March 2001, pursuant to an agreement with PECO Energy Company ("PECO"). In
October 2000, NPW reached an agreement with PECO to supply service to up to 20
percent of PECO's residential power customers who had not selected a competitive
energy services provider. PECO provides electric delivery service in
southeastern Pennsylvania, which is one of NPW's initial target markets.
Pursuant to requirements in the 1998 settlement of PECO's electric restructuring
case, PECO issued a request for proposal for a third party to supply Competitive
Default Service to 20% of its residential customers for a three-year term
beginning January 1, 2001. As of September 30, 2001, NPW was servicing
approximately 203,000 customers.

         In December 2000, NPW acquired the residential and small commercial
retail energy business of Energy USA ("EUSA"), which was an operating unit of
NiSource, Inc.. The acquisition was accounted for as a purchase. NPW acquired
approximately 34,000 gas customers from EUSA. The results of operations of the
EUSA portfolio are included in NPW's operating results since December 2000.

         In July 2000, NPW acquired the residential and small commercial retail
energy business of the Columbia Energy Mass Markets Business Segment
("Columbia"), a retail provider of power and natural gas to residential and
small commercial customers in the United States. The acquisition was accounted
for as a purchase. NPW acquired approximately 285,000 gas customers and
approximately 20,000 power customers from Columbia. The results of operations of
the Columbia portfolio are included in NPW's operating results since the July
31, 2000 acquisition date. Subsequent to this acquisition, it was determined
that the preliminary allocation of the purchase price to the net assets acquired
needed to be reallocated based on the review of more complete information. Based
on the valuation, the net assets were reallocated, increasing the value of the
customer list and decreasing the value of the non-competition agreement and the
use of brands and trademarks proportionately.

NOTE 4-RELATED PARTY TRANSACTIONS

PURCHASES AND RELATED TRANSACTIONS

         NPW made purchases of natural gas and power from Enron and its
subsidiaries, during the three months ended September 30, 2001 and 2000,
respectively, totaling $73.4 million and $22.4 million. NPW made purchases of
natural gas and power from Enron and its subsidiaries, during the nine months
ended September 30, 2001 and 2000, respectively, totaling $232.7 million and
$26.4 million.

         In connection with the above purchases, as well as prior commodity
purchases from Enron and one or more of its subsidiaries, NPW had provided the
Enron parties cash collateral in the amount of approximately $110 million as of
September 30, 2001 under the terms of a credit agreement with the Enron parties
(the "Master Netting Agreement"). Pursuant to an amendment to the Master Netting
Agreement effective October 18, 2001, NPW is permitted, through January 4, 2002,
to substitute accounts receivable and natural gas inventory in lieu of cash
collateral at discounts and up to specified limits. In order to secure the Enron
parties' interest in that non-cash collateral, NPW has granted the Enron parties
a security interest in all its accounts


                                       11
<Page>

receivable, inventory and the cash proceeds derived therefrom. The amendment to
the Master Netting Agreement expires on January 4, 2002.

NOTE 5-PRICE RISK MANAGEMENT ACTIVITIES

         Effective January 1, 2001, NPW adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. SFAS No. 133
requires that each derivative instrument be recorded as an asset or liability
measured at its fair value and that changes in the fair value of derivative
instruments be recognized currently in earnings unless specific hedge accounting
criteria are met.

         The purpose of NPW's hedging strategy is to reduce the Company's risk
profile associated with delivering energy to the consumer, as well as to achieve
a more predictable cash flow, while reducing the Company's exposure to adverse
price fluctuations of commodities. The hedging instruments used are swaps and
forward contracts for physical commodity purchases.

         Subsequent to NPW's acquisition of customers from Columbia Energy
Group, the Company began using swap instruments to hedge commodity price and
basis exposure risk associated with its fixed price natural gas contracts. In
these swap instruments, the Company pays the counterparties the amount by which
the floating variable price (settlement price) is below the fixed swap price and
receives the amount by which the settlement price exceeds the fixed swap price.
In accordance with SFAS 133, NPW accounts for the financial swap transactions as
cash flow hedges. In periods prior to the occurrence of the hedged transaction,
the values of the hedges are recorded in the consolidated balance sheet as
assets and liabilities from price risk management activities with the resulting
unrealized gains or losses deferred and reflected as a component of the equity
account "Other Comprehensive Income." In the periods the hedged purchases occur,
the financial swaps are cash settled and deferred gains or losses pursuant to
the hedges are removed from the balance sheet and included in the cost of the
commodity purchased. Because of the high degree of effectiveness between the
hedging instruments and the underlying exposures being hedged, fluctuations in
the value of the derivative instruments are generally offset by changes in the
value or cash flows of the underlying exposures being hedged. The financial
instruments that are used in hedging transactions are assessed both at inception
and at least quarterly thereafter to ensure that they are effective in
offsetting changes in either the fair value or cash flows of the related
underlying exposures.

         Adoption of SFAS No. 133 required a one-time adjustment to NPW's
balance sheet of approximately $56 million, which was recorded as a net asset
(from price risk management activities) and as an increase to the stockholders'
equity account accumulated other comprehensive income. The following table
presents the activity in the accumulated other comprehensive income account from
December 31, 2000 through September 30, 2001, (in $000's):



                                       12
<Page>

<Table>
<Caption>

                                                    Cumulative
                                                    Unrealized    Accumulated   Total Other
                                                     Gains on     Derivative   Comprehensive
                                                    Investments     Gains      Income (Loss)
                                                    -----------   -----------  ------------
<S>                                                  <C>          <C>          <C>
Other Comprehensive Income, December 31, 2000        $   1,335    $       0    $   1,335
Cumulative effect of change in accounting for SFAS
       No. 133 on January 1, 2001                           --       56,000       56,000
   Unrealized losses on investments                     (1,219)          --       (1,219)
   Net change in value of cash flow hedges                  --     (102,894)    (102,894)
   Derivative gains reclassified to earnings -
      Settled financial swaps                               --      (14,410)     (14,410)
                                                     ---------    ---------    ---------

Other Comprehensive Income, September 30, 2001       $     116    ($ 61,304)   ($ 61,188)
</Table>

         As of September 30, 2001, NPW has financial swaps in place to hedge
certain expected future cash flows through October 2006 with the vast majority
of the forward swaps scheduled to settle in periods through the end of 2003.
Based on current market prices, NPW anticipates that approximately $52.9 million
of net derivative losses, currently reflected in accumulated Other Comprehensive
Income, will be reclassified to earnings during the next 12 month period,
pursuant to settlements of financial swaps. However, because these hedges are to
fix commodity purchase costs at a set rate, NPW would expect to offset these
swap losses with lowered commodity purchase costs and sales of the commodity to
existing gas customers.

         NPW's forward contracts for the physical purchase of commodities are
generally entered into for delivery of the commodities to meet the requirements
of the Company's residential and small commercial customers in future periods.
To the extent the forward contracts relate to forecasted customer demand, at the
inception of the contracts, NPW accounts for these contracts as normal purchases
and sales under SFAS 133. As such, these contracts are not reflected in the
Company's financial statements until the month of actual purchase or sale of the
commodity.

         NPW also commits to volumes of its forward purchase contracts above
forecasted customer demand volume. When the volumes pursuant to NPW's forward
purchase contracts exceed the probable volumes NPW expects to deliver to its
customers, the Company treats the excess positions as energy trading activities
and any gains or losses are reflected through current earnings. In addition, NPW
enters into forward purchase contracts in markets in which it has no customers
and also enters into speculative contracts for other energy products that are
trading activities. All of NPW's energy trading activities are accounted for
using mark to market accounting under Emerging Issues Task Force (EITF) Issue
No. 98-10, "Accounting for Energy Trading and Risk Management Activities". The
values of the forward energy trading contracts are recorded as assets and
liabilities from price risk management activities in the consolidated balance
sheet and changes in the values are reflected through the statement of income as
a component of cost of sales. Net realized and unrealized losses from trading
risk management activities totaled $4.3 million during the three months ended
September 30, 2001 and are recorded as a cost of sales. Net realized and
unrealized gains from trading risk management activities totaled $5.4 million
during the nine months ended September 30, 2001 and are recorded as a reduction
of cost of sales.



                                       13
<Page>

         Certain gains from trading activities are based upon market prices of
energy products whose prices are not regularly published or quoted. NPW has
estimated the market prices of these products based upon available published
quotes, internal analyses and its energy risk management expertise. Included in
the net gains from trading activities for the nine months ended September 30,
2001 are approximately $30.6 million of such estimated unrealized gains.

NOTE 6-COMMITMENTS AND CONTINGENCIES

COMMODITY PURCHASE COMMITMENTS

         As of September 30, 2001, NPW, under certain fixed rate commodity
contracts, had commitments for net purchases of 5,989,000 megawatt hours of
electricity at prices ranging from $18.00 - $145.00 per megawatt hour through
December, 2003.

         As of September 30, 2001, NPW had commitments to purchase, at market
prices, approximately 10,658,919 dth of natural gas at prices ranging from
$1.705 - $6.785 per dth through August, 2003.

LITIGATION

                  At September 30, 2001, NPW was engaged in routine disputes and
litigation arising in the ordinary course of business. In the opinion of
management, the ultimate liability thereunder, if any, will not have a material
adverse effect on the financial position or results of NPW.



                                       14
<Page>



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

OVERVIEW

         The following section should be read in conjunction with the unaudited
financial statements and the notes thereto included elsewhere in this Quarterly
Report on Form 10-Q. In November of 1999, we were formed by Enron to target the
rapidly restructuring residential and small commercial markets for power and
natural gas. We were capitalized through the contribution of certain assets by
EES, including 24,000 residential customer contracts, and a private placement to
outside investors, pursuant to an agreement executed on December 23, 1999. On
January 6, 2000, we completed our initial private placement of common stock and
two classes of warrants in exchange for an aggregate of $100 million in cash. In
exchange for its ownership, EES agreed to contribute the economic value of its
residential power and natural gas customers in California and Ohio to us and
entered into a number of agreements with us that we believe will offer us
competitive advantages as we grow our business.

         Following our initial private placement, we focused our efforts on
hiring our management team, refined our plans for the initial launch of our
services in Pennsylvania and New Jersey, developed our operating infrastructure
and identified other target markets. In conjunction with these activities, in
May 2000, we entered into an agreement with IBM for systems integration and
other services relating to customer acquisition, customer care and revenue
management over a ten-year term. We constantly review performance under the IBM
agreement to ensure that performance and cost measures are being achieved.
During 2001 we initiated the application development stage of certain projects
with IBM. As a result, during 2001 we have capitalized approximately $32.6
million of development costs as fixed assets. These costs will be depreciated
over a three-year period. These systems will communicate customer data and
utility data between NPW, the utility, our commodity vendors and our customers.
System requirements will vary significantly by market depending on the
specifications set to by the local regulatory agency.

         Through September 30, 2001, we had acquired approximately 212,000
customers through our direct marketing efforts. We acquired these customers on a
one-by-one basis, as is typical in a number of mass-market subscriber
industries, such as telephone service.

         In July 2000, we acquired the residential and small commercial retail
energy business of Columbia. The acquisition was accounted for as a purchase. We
acquired approximately 285,000 gas customers and approximately 20,000 power
customers from Columbia. The results of operations of the Columbia portfolio are
included in our operating results since the July 31, 2000 acquisition date.

         In December 2000, we acquired the residential and small commercial
retail energy business of EUSA. The acquisition was accounted for as a purchase.
We acquired approximately 34,000 gas customers from EUSA. The results of
operations of the EUSA portfolio are included in our operating results since
December 2000.



                                       15
<Page>

         In the first quarter of 2001 we completed the acquisition of
approximately 7,200 residential and small commercial natural gas customers in
the Atlanta, Georgia market from Reliant. The acquisition was accounted for as a
purchase. Based on the mix of customers acquired from Reliant and the average
consumption of small commercial customers in the Atlanta market, we estimate
that the acquired portfolio equates to approximately 40,000 residential
customers. The total purchase consideration included $4.5 million in cash. Also,
in connection with the acquisition, we purchased natural gas inventory for
approximately $1.9 million. For accounting purposes, the closing has been
reflected in February 2001.

         We began servicing approximately 237,000 customers during March 2001,
pursuant to an agreement with PECO. PECO provides electric delivery service in
southeastern Pennsylvania, which is one of our initial target markets. Pursuant
to requirements in the 1998 settlement of PECO's electric restructuring case,
PECO issued a request for proposal for a third party to supply Competitive
Default Service to 20% of its residential customers who had not selected a
competitive energy service provider for a three-year term beginning January 1,
2001. In October 2000, we reached an agreement with PECO to supply service to
those customers. As of September 30, 2001, NPW was servicing approximately
203,000 customers under this agreement.

         Currently all load serving entities, such as NPW, are subject to
installed capacity (ICAP) requirements within the PJM region, which includes the
states of Pennsylvania, New Jersey and Maryland. PJM ICAP requirements thus
apply to those customers we acquired from PECO. The PJM ICAP requirements are
satisfied for those entities that are "in-balance" between owned generation and
load served. Load serving entities that have more load service demand than
generation supply are "out of balance" and must purchase their ICAP requirements
through bi-lateral contracts, or in a spot or forward market, or be subject to
penalty assessments. We believe that these provisions, and the governance
procedures by which they are derived, are flawed and act as a deterrent to
creating a competitive marketplace. We are aggressively working towards
restructuring the PJM ICAP requirements and have filed a complaint with the
Federal Energy Regulatory Commission ("FERC") concerning these issues. If the
FERC action is unsuccessful, ICAP payments and penalties will continue to
adversely affect our profitability in certain electricity markets. During the
quarter ended September 30, 2001 we incurred approximately $7.5 million of ICAP
charges.

         In May 2001, we exercised our option to not accept approximately 16,000
California residential power customers that were initially contributed to us by
EES. As a result, since May 1, 2001, service to these power customers has
reverted to the default provider in the respective local distribution areas.

         In June 2001, we completed the acquisition of approximately 130,000 gas
and 7,000 power residential and small commercial customers in three separate
transactions. The customers, located in the Ohio, Pennsylvania and Maryland
markets, were acquired from AES Power Direct/Titan Energy, Inc., CoEnergy
Trading Company and Energy East Solutions. The acquisitions were accounted for
as purchases. Total consideration for the customer contracts consisted of
approximately $18.6 million in cash. In connection with the acquisitions, we
also acquired other assets, including gas storage inventory, accounts receivable
and fixed assets for combined consideration of approximately $8.4 million.
Additionally, we assumed forward


                                       16
<Page>

physical commodity purchase contracts that had a negative value of $3.9
million as of the acquisition date. We have accrued this amount as part of
the cost of the customers acquired. The amount will be amortized through cost
of sales as the related commodity purchases are settled for cash. The results
of operations for each of the portfolios acquired are included in our
operating results since June 2001 when we assumed operational control of the
portfolios. The allocation of purchase price for the portfolios described
herein is preliminary in nature and is subject to adjustments to actualize
items such as customer counts, inventory levels, accounts receivable and
assumed liabilities. As part of the agreement with AES Power Direct, AES was
to be released from a guarantee to Coral Energy Resources who was a supplier
of energy to the AES customers. As of September 30, 2001, this release had not
occurred. AES, Coral Energy Resources and NPW are negotiating a resolution,
which is expected to be resolved during the fourth quarter of 2001.

         In August 2001, NPW completed an acquisition of approximately 6,000
residential and small commercial customers in Ohio from AMPO, Inc. The
acquisition was accounted for as a purchase. Total purchase consideration was
$0.3 million.

         As of September 30, 2001, we have entered into contracts with
approximately 59,000 customers in Texas. We have worked closely with the
Electric Reliability Council of Texas (ERCOT), the centralized entity
responsible for overseeing wholesale market scheduling and retail customer
switching, as well as other affected parties in the Texas market, and ERCOT has
cleared NPW's backlog of customer enrollments that previously existed. We expect
that with the completion of customer switching by ERCOT, the commencement of
power provided by NPW flowing to customers, and the sequence of billing and
payment from customers, revenue from Texas power customers will begin to
increase substantially in the fourth quarter of 2001.

         As of September 30, 2001, we have obtained licenses to act as an
electricity marketer in California, Maine, Massachusetts, New Jersey, Ohio,
Pennsylvania, Texas, Connecticut, Delaware and Maryland. We have decided not to
renew the license in Maine because we do not foresee commencing operations in
any power market in that state within the near future and can seek to reinstate
a license in the event circumstances change. Also, we have obtained licenses to
act as a natural gas marketer in Georgia, New Jersey, Pennsylvania, Virginia and
Maryland.

         We recognize revenue for the sale of power or natural gas once the
commodity has been delivered to the customer. Our bills to customers may also
include charges relating to the transmission and distribution of the commodity,
for which the utility is ultimately responsible. These amounts are excluded from
our net revenues. As a result, neither our revenues nor our costs include the
transmission and distribution charges included in our customers' bills.
Additionally, we fully expense in the period incurred the marketing and
operations costs associated with organic customer acquisition.

RESULTS OF OPERATIONS

         Our revenues are currently derived from the sale and delivery of power
and natural gas to retail customers in the United States. For the three months
ended September 30, 2001 and 2000, respectively, revenues were $54.7 million and
$18.2 million. For the nine months ended September 30, 2001 and 2000,
respectively, revenues were $245.4 million and $22.9 million. The increase in


                                       17
<Page>

revenues is attributable to the growth in our customers through organic
marketing and portfolio deals in 2001 as compared to the prior year period.

         Our cost of sales represents the direct costs of acquiring and
delivering power and natural gas to our customers. For the three months ended
September 30, 2001 and 2000, respectively, cost of sales, as a percentage of
revenues, totaled 149% and 93%. For the nine months ended September 30, 2001 and
2000, respectively, cost of sales, as a percentage of revenues, totaled 105% and
91%. The increase in cost of sales as a percent of revenue is primarily
attributable to costs of providing energy to an increased customer base as
compared to the prior year period, installed capacity and other charges of $18.7
million in the PJM markets, approximately $3.1 million in losses on power
contracts in Texas incurred because of ERCOT processing delays in switching
customers and the net impact of our energy trading activities. During the three
months ended September 30, 2001, our energy trading activities resulted in
losses of $4.3 million. During the nine months ended September 30, 2001, our
energy trading activities resulted in gains of $5.4 million. No such gains or
losses were recognized for the comparable periods of 2000.

         Our operating expenses include costs incurred related to acquiring and
supporting residential and small commercial customers that were not part of the
direct process of delivering power and natural gas to our customers. For the
three months ended September 30, 2001 and 2000, respectively, operating expenses
were $45.2 million and $72.5 million. For the nine months ended September 30,
2001 and 2000, respectively, operating expenses were $181.3 million and $118.3
million. The increase in operating expenses over the prior year's comparative
periods relates primarily to significantly increasing our staff and
infrastructure to execute our business plan, and cost of acquiring and servicing
our increased customer base. Our customer base increased significantly over the
prior year, from approximately 316,000 to approximately 805,000. Operating
expenses for the three and nine months ended September 30, 2001, respectively,
included $5.5 million and $61.4 million for systems development and other
professional services, $12.0 million and $27.7 million for direct marketing, and
$12.0 million and $30.6 million for billing and customer care. Also,
compensation expenses recorded during the nine months ended September 30, 2001
and 2000, respectively, included costs for the recruitment of certain
executives, which resulted in $5.5 million and $8.8 million of deferred
compensation expense. The decrease in operating expenses for the quarter ended
September 30, 2001, as compared to the prior year period, reflects the increased
cost control efforts, primarily in systems development and professional expense
categories. On November 1, 2001 the Company realigned its staffing needs, which
resulted in a reduction in staff of approximately 38 employees. In the fourth
quarter of 2001 the Company will record the costs associated with staff
reduction, consisting primarily of severance and other restructuring costs
currently estimated to be $4 million.

         The Company is currently evaluating the continuing value of certain
deferred costs relating to payments made to America-On-Line pursuant to an
Interactive Marketing Agreement and related amendments in light of changes in
the Company's marketing efforts and the success of the marketing services
received. At September 30, 2001 approximately $13.3 million has been deferred
and is recorded as other assets in the accompanying balance sheet. If value
cannot be realized through future related net cash flows, an impairment charge
of all or a portion of the net unamortized balance will be reflected within
operating expenses in the fourth quarter.



                                       18
<Page>

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operating activities of $134.5 million and $57.3
million for the three months ended September 30, 2001 and 2000, respectively,
and $240.0 million and $77.3 million for the nine months ended September 30,
2001 and 2000, respectively, resulted primarily from net losses of $67.1 million
and $69.9 million for the respective three-month periods and $172.9 million and
$112.3 million for the respective nine-month periods. During the nine months
ended September 30, 2001, we used cash of $33.4 million to purchase portfolios
of customers and certain other assets, including storage inventory. We also used
approximately $187.9 million of cash to purchase surety bonds and as collateral
deposits, including $50 million related to servicing the customers acquired from
PECO. Pursuant to our contract with PECO, we expect that approximately $40
million of our cash collateral will be returned in December, 2001. The balance
will be returned at established intervals pursuant to the terms of the
agreement.

         As of September 30, 2001, we had cash, cash equivalents, restricted
cash and investment securities of approximately $242.3 million. Certain state
regulations, utilities with whom we do business for local transmission and
distribution services, as well as certain of our counterparties, require us to
provide collateral or other assurance to ensure fulfillment of our commitments.
To meet these requirements, we have provided cash collateral of $204 million as
of September 30, 2001.

         Of the total cash collateral, and because of significant recent
declines in the prices for electricity and natural gas, we have been required to
post approximately $110 million in cash as collateral with Enron as of September
30, 2001. On October 18, 2001 NPW entered into an amendment to its credit
agreements with Enron to permit the substitution of receivables and inventory in
lieu of cash collateral based on discount factors and up to specified limits.
That amendment expires as of January 4, 2002, at which time we may be
required to post additional cash collateral.

         To reduce the risk that further declines in commodity prices could
cause, through the posting of additional cash collateral, material adverse
effects on our liquidity, we executed a series of commodity trades in October
2001. These trades effectively offset the risk of being required to post
additional cash collateral on further mark-to-market changes with respect to
approximately 60 percent of our pre-existing NYMEX hedges for future delivery of
natural gas to our customers.

         With the amendment to the Master Netting Agreement, the Company's cost
reduction efforts, and absent any additional decline in commodity prices or
other significant events, the Company believes that it has sufficient financial
resources to conduct its business until it secures ongoing asset-backed
financing, which will be necessary before the build up of natural gas inventory
in the third quarter of 2002. The Company has been and is actively seeking to
arrange asset-backed financing with other parties, although to date no such
arrangements have been secured. The Company may not be able to secure such
financing or to raise additional capital on attractive terms, or at all, which
would have a material adverse effect on the Company and its ability to conduct
business. The financial statements do not reflect the impact, if any, of the
material adverse effects that would result without additional financing.



                                       19
<Page>

         We have no debt outstanding. Accordingly, we have not been exposed to
near term adverse changes in interest rates. We are, however, continually
exploring the possibility of establishing credit lines or other debt instruments
to assist us in providing necessary letters of credit and to fund part of our
working capital requirements on a cost effective basis. If we incur debt in the
future we may experience increased volatility as a result of changes in interest
rates. Additionally, we do not expect inflation to have a material effect on our
results of operations. We have no foreign currency exposure and therefore, are
not affected by changes in foreign exchange rates.

SEASONALITY

         Our revenues are impacted by seasonality in that power sales generally
increase during the warmer summer months, whereas natural gas sales have a
reverse seasonality and increase during the colder winter months. These factors
will cause our financial results to vary from quarter to quarter.

FORWARD-LOOKING STATEMENTS

         Certain statements in this Form 10-Q are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. The words "estimate," "project," "intend," "expect,"
"believe" and similar expressions are intended to identify forward-looking
statements. These forward-looking statements are found at various places
throughout this Form 10-Q and throughout the other documents incorporated herein
by reference. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Although we believe that our expectations are based on reasonable assumptions,
we can give no assurance that our goals will be achieved. Important factors that
could cause actual results to differ from estimates or projections contained in
the forward-looking statements include our limited operating history; delays or
changes in the rules for the restructuring of the electric and natural gas
markets; our ability to attract and retain customers; our ability to manage our
energy requirements and sell energy at a sufficient margin given the volatility
in prices for electricity and natural gas; the effect of commodity volatility on
collateral requirements and liquidity; our dependence on third parties to
provide critical functions to us and to our customers; and conditions of the
capital markets affecting the availability of capital. Readers are referred to
the Company's Annual Report on Form 10-K for the year ending December 31, 2000,
our Report on Form 8-K filed on October 19, 2001, and our Registration Statement
on Form S-1 (No. 333-41412) on file with the Securities and Exchange Commission
for a discussion of factors that could cause actual results to differ materially
from these forward-looking statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         We are exposed primarily to counterparty risks and risks related to
commodity price changes in the power and natural gas markets. We conduct
business solely in the United States and are not subject to foreign operations
risk.



                                       20
<Page>

         Counterparty risk relates to the risk of loss that we would incur as a
result of nonperformance by counterparties pursuant to the terms of their
contractual obligations. We have established counterparty limits for each
trading partner.

         Commodity price risk is the risk of loss arising from adverse movements
in commodity prices. We have established a risk control group that monitors
commodity price risk to ensure compliance with our stated risk management
policies. Our current risk management policies and procedures are to use
physical and financial products to manage our commodity price risk and maintain
a balanced commodity portfolio within specified limits. Our policies and
procedures cover, among others, areas of (1) general authorization of
transaction activity by designated individuals and significant limits, (2)
classification of risks into identifiable portfolios, (3) responsibilities,
segregation of duties, and functions to be performed by commodity procurement,
credit, legal/contract management, risk controls groups, and the chief risk
officer, and (4) performance and exposure reporting and notification
requirements.

         We utilize derivative commodity instruments to hedge future purchases
of commodities to be provided to our customers. The purpose of our hedging
strategy is to achieve a more predictable cash flow, as well as to reduce our
exposure to adverse price fluctuations of commodities. Although the use of these
hedging arrangements limits the downside risk of adverse price movements, they
may limit future revenues from favorable price movements. The use of hedging
transactions also involves the risk that the counterparties will be unable to
meet the financial terms of such transactions. The hedging instruments we use
are swaps and forward contracts for physical commodity purchases. These
contracts are placed with counterparties that we believe are minimal credit
risks.

         We have followed a policy of hedging our customer contracts by
purchasing gas or electricity for future delivery, based on expected future
delivery volumes. When gas and electric prices decline significantly, as they
have in recent months, the amount of collateral that we are required to post
under the Master Netting Agreement with the Enron parties increases on a
mark-to-market basis. Accordingly, (i) the substantial increase in the number of
customers we have acquired since the Fall of 2000 has required a correspondingly
large increase in forward transactions, which transactions entered into with the
Enron parties are secured under the Master Netting Agreement, and (ii) the
recent substantial decline in commodity prices has required a significant
increase in the cash collateral provided to the Enron parties.

         Any significant increase in the amount of collateral that we are
required to post to the Enron parties, as a result of further declining gas and
electric prices, additional transactions or otherwise, could adversely affect
our liquidity and financial resources. If we were unable to post the required
amount of cash collateral under the Master Netting Agreement, Enron would be
entitled to (i) declare a default under all the underlying trading contracts,
(ii) terminate those agreements and (iii) foreclose on the collateral we
previously posted to secure them. Any such declaration, termination or
foreclosure would have a material adverse effect on the Company and our ability
to conduct business.



                                       21
<Page>

         NPW has recently entered into a series of transactions in order to
reduce the risk of posting additional cash as collateral in the event of further
significant declines in commodity prices. These transactions, which are an
exception to the Company's normal hedging strategy, increase the Company's
exposure to commodity price fluctuations. The Company expects to return to its
normal hedging strategy once asset-backed or similar financing has been secured.
Please refer to management's discussion and analysis for further explanation of
capital resources.

         We account for the financial swap transactions as cash flow hedges. In
periods prior to the occurrence of the hedged transaction, the value of the
hedges are recorded in the consolidated balance sheet as assets and liabilities
with the resulting unrealized gains or losses deferred and reflected as a
component of the equity account "Other Comprehensive Income." In the periods the
hedged purchases occur, the financial swaps are cash settled and deferred gains
or losses pursuant to the hedges are removed from the balance sheet and included
in the cost of the commodity purchased.

         Our forward contracts for the physical purchase of commodities are
generally entered into for delivery to our residential and small commercial
customers in future periods. To the extent the forward contracts relate to
forecasted customer demand, at the inception of the contracts, we account for
these contracts as normal purchases and sales in accordance with SFAS 133. As
such, these contracts are not reflected in our financial statements until the
month of actual purchase of the commodity. We periodically compare the committed
volumes of our forward contracts to our forecasted customer demand volume. When
the volumes pursuant to our forward contracts exceed the probable volumes we
expect to deliver to our customers, we treat the excess positions as trading
activities and any hedge gains or losses previously deferred as a component of
the equity account "Other Comprehensive Income" are reflected through current
earnings. All of our trading activities are accounted for using mark to market
accounting under Emerging Issues Task Force (EITF) Issue No. 98-10, "Accounting
for Energy Trading and Risk Management Activities". The value of the forward
energy trading contracts are recorded as assets and liabilities in the
consolidated balance sheet and changes in the values are reflected through the
statement of income as a component of cost of sales.

         See "Note 5 - Price Risk Management Activities", to the unaudited
consolidated financial statements, for additional information on our risk
management activities.



                                       22
<Page>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         See "Note 6 - Commitments and Contingencies" to the unaudited
consolidated financial statements.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

10.25    Second Amendment dated as of October 18, 2001 to Master Cross-Product
         Netting, Setoff, and Security Agreement dated March 14, 2001 by and
         among The New Power Company, Enron North America Corp., Enron Energy
         Services, Inc., and Enron Power Marketing, Inc. (incorporated by
         reference to Exhibit 99.1 to the Form 8-K filed by the registrant dated
         October 19, 2001)

10.26    First Amendment dated as of May 4, 2001 to Master Cross-Product
         Netting, Setoff, and Security Agreement dated March 14, 2001 by and
         among The New Power Company, Enron North America Corp., Enron Energy
         Services, Inc., and Enron Power Marketing, Inc. (incorporated by
         reference to Exhibit 99.2 to the Form 8-K filed by the registrant dated
         October 19, 2001)

10.27    Master Cross-Product Netting, Setoff, and Security Agreement dated
         March 14, 2001 by and among The New Power Company, Enron North America
         Corp., and Enron Energy Services, Inc. (incorporated by reference to
         Exhibit 99.3 to the Form 8-K filed by the registrant dated October 19,
         2001)



                                       23
<Page>

10.28    General Security Agreement dated as of October 18, 2001, by and among
         The New Power Company, Enron North America Corp., Enron Energy
         Services, Inc., and Enron Power Marketing, Inc. (incorporated by
         reference to Exhibit 99.4 to the Form 8-K filed by the registrant dated
         October 19, 2001)

10.29    Ratification of Guaranty dated as of October 18, 2001 and executed by
         the Company as guarantor. (incorporated by reference to Exhibit 99.5 to
         the Form 8-K filed by the registrant dated October 19, 2001)

10.30    Ratification of Guaranty dated as of May 4, 2001 and executed by the
         Company as guarantor. (incorporated by reference to Exhibit 99.6 to the
         Form 8-K filed by the registrant dated October 19, 2001)

10.31    Guaranty Agreement dated as of March 14, 2001 and executed by the
         Company as guarantor. (incorporated by reference to Exhibit 99.7 to the
         Form 8-K filed by the registrant dated October 19, 2001)

10.32    ISDA Master Agreement dated as of August 10, 2000, between The New
         Power Company and Enron North America Corp., including the Credit
         Support Annex thereto. (incorporated by reference to Exhibit 99.8 to
         the Form 8-K filed by the registrant dated October 19, 2001)

10.33    Master Power Purchase and Sale Agreement dated as of May 4, 2001,
         between Enron Power Marketing, Inc. and The NewPower Company.
         (incorporated by reference to Exhibit 99.9 to the Form 8-K filed by the
         registrant dated October 19, 2001)

10.34    Enfolio(R)Master Firm Purchase/Sale Agreement dated as of January 1,
         2000, between ENA and Columbia Energy Services Corporation.
         (incorporated by reference to Exhibit 99.10 to the Form 8-K filed by
         the registrant dated October 19, 2001)

         (b) Reports on Form 8-K

         Current Report on Form 8-K dated October 19, 2001 was filed pursuant to
         Item 5 (Other Events).


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<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.

                                       NEWPOWER HOLDINGS, INC.


Date: November 14, 2001                By: /s/ William I. Jacobs
                                          --------------------------------------
                                          William I Jacobs
                                          Managing Director, Chief Financial
                                          Officer and Director

Date: November 14, 2001                By: /s/  Chaitu Parikh
                                          --------------------------------------
                                          Chaitu Parikh
                                          Controller











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