UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                    WASHINGTON, D.C. 20549
                                           FORM 10-Q


(Mark One)

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


For the quarterly period ended   September 30, 1999
                                 --------------------------------------------
                                              OR

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

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


Commission            Registrant, State of Incorporation,    I.R.S. Employer
File Number           Address and Telephone Number           Identification No.
-----------           ----------------------------           ------------------

1-6047                GPU, Inc.                                 13-5516989
                      (a Pennsylvania corporation)
                      300 Madison Avenue
                      Morristown, New Jersey 07962-1911
                      Telephone (973) 455-8200

1-3141                Jersey Central Power & Light Company      21-0485010
                      (a New Jersey corporation)
                      2800 Pottsville Pike
                      Reading, Pennsylvania 19640-0001
                      Telephone (610) 929-3601

1-446                 Metropolitan Edison Company               23-0870160
                      (a Pennsylvania corporation)
                      2800 Pottsville Pike
                      Reading, Pennsylvania 19640-0001
                      Telephone (610) 929-3601

1-3522                Pennsylvania Electric Company             25-0718085
                      (a Pennsylvania corporation)
                      2800 Pottsville Pike
                      Reading, Pennsylvania 19640-0001
                      Telephone (610) 929-3601


        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
                                                  ----     ----

        The  number of shares  outstanding  of each of the  issuer's  classes of
voting stock, as of October 31, 1999, was as follows:
                                                                     Shares
Registrant                           Title                         Outstanding
------------------------------------ ----------------------------- ------------
GPU, Inc.                            Common Stock, $2.50 par value 123,424,719
Jersey Central Power & Light Company Common Stock, $10 par value    15,371,270
Metropolitan Edison Company          Common Stock, no par value        859,500
Pennsylvania Electric Company        Common Stock, $20 par value     5,290,596



<PAGE>




                       GPU, Inc. and Subsidiary Companies
                          Quarterly Report on Form 10-Q
                               September 30, 1999

                                Table of Contents


                                                                       Page
PART I - Financial Information

        Combined Management's Discussion and Analysis
          of Financial Condition and Results of
          Operations                                                    3

        Consolidated Financial Statements:

            GPU, Inc.
               Balance Sheets                                          32
               Statements of Income                                    34
               Statements of Cash Flows                                35

            Jersey Central Power & Light Company
               Balance Sheets                                          36
               Statements of Income                                    38
               Statements of Cash Flows                                39

            Metropolitan Edison Company
               Balance Sheets                                          40
               Statements of Income                                    42
               Statements of Cash Flows                                43

            Pennsylvania Electric Company
               Balance Sheets                                          44
               Statements of Income                                    46
               Statements of Cash Flows                                47

        Combined Notes to Consolidated Financial Statements            48



PART II - Other Information                                            71

Signatures                                                             72
                               ---------------------------------

      The financial statements (not examined by independent accountants) reflect
all adjustments (which consist of only normal recurring  accruals) which are, in
the opinion of management, necessary for a fair statement of the results for the
interim periods presented.

      This combined  Quarterly  Report on Form 10-Q is separately  filed by GPU,
Inc.,  Jersey  Central Power & Light  Company,  Metropolitan  Edison Company and
Pennsylvania  Electric  Company.  Information  contained  herein relating to any
individual  registrant is filed by such  registrant  on its own behalf.  None of
these  registrants make any  representations  as to information  relating to the
other  registrants.  This  combined Form 10-Q  supplements  and updates the 1998
Annual  Report  on Form  10-K,  filed  by the  individual  registrants  with the
Securities and Exchange Commission and should be read in conjunction therewith.

      This Form 10-Q  contains  certain  forward-looking  statements  within the
meaning of the Private Securities Litigation Reform Act of 1995. Statements made
that are not historical  facts are  forward-looking  and,  accordingly,  involve
risks and  uncertainties  that could cause actual  results or outcomes to differ
materially from those expressed in the forward-looking statements. Although such
forward-looking  statements have been based on reasonable assumptions,  there is
no  assurance  that the expected  results will be achieved.  Some of the factors
that could  cause  actual  results  to differ  materially  include,  but are not
limited  to:  the  effects  of  regulatory  decisions;  changes in law and other
governmental  actions and initiatives;  the impact of deregulation and increased
competition in the industry; industry restructuring;  expected outcomes of legal
proceedings;  the completion of generation  asset  divestiture;  fuel prices and
availability;  the effects of the Year 2000 issue;  and  uncertainties  involved
with  foreign  operations   including   political  risks  and  foreign  currency
fluctuations.

<PAGE>



GPU, Inc. and Subsidiary Companies


                COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      GPU, Inc. owns all the outstanding common stock of three domestic electric
utilities -- Jersey Central Power & Light Company (JCP&L),  Metropolitan  Edison
Company  (Met-Ed) and  Pennsylvania  Electric  Company  (Penelec).  The customer
service,  transmission and distribution  operations of these electric  utilities
are  conducting  business under the name GPU Energy.  JCP&L,  Met-Ed and Penelec
considered  together  are  referred  to  as  the  "GPU  Energy  companies."  The
generation  operations  of  the  GPU  Energy  companies  are  conducted  by  GPU
Generation, Inc. (Genco) and GPU Nuclear, Inc. (GPUN). GPU Capital, Inc. and GPU
Electric, Inc. and their subsidiaries,  own, operate and fund the acquisition of
electric and gas transmission and distribution systems in foreign countries, and
are referred to as "GPU Electric." GPU  International,  Inc. and GPU Power, Inc.
and their subsidiaries,  develop,  own and operate generation  facilities in the
United  States and foreign  countries  and are referred to as the "GPUI  Group."
Other subsidiaries of GPU, Inc. include GPU Advanced  Resources,  Inc. (GPU AR),
which is  involved  in retail  energy  sales;  GPU Telcom  Services,  Inc.  (GPU
Telcom),  which is engaged  in  telecommunications-related  businesses;  and GPU
Service,  Inc.  (GPUS),  which provides legal,  accounting,  financial and other
services to the GPU companies.  All of these companies  considered  together are
referred to as "GPU."

<TABLE>

                            GPU RESULTS OF OPERATIONS

<CAPTION>

EARNINGS PER SHARE CONTRIBUTION:

                                  Three Months Ended                Nine Months Ended
(on a diluted basis)                 September 30,                     September 30,
                                 ------------------------        --------------------------
                                 1999      1998    Change         1999      1998    Change
                                 ------------------------        --------------------------
Operations:
<S>                            <C>       <C>       <C>          <C>       <C>       <C>
   GPU Energy companies *      $ 1.31    $ 0.94    $ 0.37       $ 3.04    $ 2.35    $ 0.69
   GPU Electric                 (0.08)     0.05     (0.13)        0.31      0.34     (0.03)
   GPUI Group                    0.06      0.04      0.02         0.08      0.09     (0.01)
   GPU AR                       (0.07)    --        (0.07)       (0.06)    (0.01)    (0.05)
   GPU, Inc. (Corporate)        (0.04)    (0.02)    (0.02)       (0.08)    (0.07)    (0.01)
                                -----     -----     -----        -----     -----     -----
      Total operations           1.18      1.01      0.17         3.29      2.70      0.59
Non-recurring items:
   GPU Energy companies           --       1.64     (1.64)       (0.32)    (0.52)     0.20
   GPU Electric                   --        --        --          0.08       --       0.08
                                -----     -----     -----        -----     -----     -----
      Total                    $ 1.18    $ 2.65    $(1.47)      $ 3.05    $ 2.18    $ 0.87
                                =====     =====     =====        =====     =====     =====

*  Includes GPU Telcom


      GPU's earnings for the third quarter ended  September 30, 1999 were $147.5
million,  as  compared  with  earnings of $338.1  million for the quarter  ended
September  30, 1998.  Earnings  per share on a diluted  basis were $1.18 for the
third  quarter of 1999,  compared  with earnings per share of $2.65 in the third
quarter of 1998. The third quarter 1998 results  included the reversal of $266.3
million  after-tax,  or $2.09 per share, of a non-recurring  charge taken in the
second quarter of 1998, as a result of amended  restructuring rate orders issued
to Met-Ed and Penelec by the Pennsylvania Public Utility

                                        3
</TABLE>


<PAGE>


GPU, Inc. and Subsidiary Companies


GPU RESULTS OF OPERATIONS (continued)


Commission (PaPUC); the recording of an additional non-recurring charge of $57.0
million  after-tax,  or $0.45 per share,  related to customer rate refunds,  the
write-off  of  regulatory  assets  related to  wholesale  energy  customers  and
start-up payments to an environmental fund. Excluding these non-recurring items,
GPU's third quarter 1998 earnings would have been $128.8  million,  or $1.01 per
share.

      The $0.17 per share earnings increase,  excluding non-recurring items, was
primarily due to the effect of increased  sales to other utilities and decreased
depreciation  expense at the GPU Energy  companies.  Partially  offsetting  this
increase was higher energy expenses at the GPU Energy companies;  higher O&M and
depreciation  expenses  due to the  purchase of Midlands;  and  increased  power
purchases at GPU AR.

      For the nine months ended  September 30, 1999,  GPU's earnings were $385.5
million,  or $3.05 per share,  as compared with earnings of $276.7  million,  or
$2.18 per share, for the nine months ended September 30, 1998. If you exclude: a
non-recurring  gain of $27.8  million  after-tax,  or $0.22 per  share,  for the
portion  of the  gain on the  sale  of  Penelec's  interest  in the  Homer  City
Generating Station (Homer City) related to wholesale operations; a non-recurring
charge of $68 million  after-tax,  or $0.54 per share,  resulting from a Summary
Restructuring  Order (Summary  Order) issued to JCP&L by the New Jersey Board of
Public Utilities (NJBPU); and a gain on the sale of the Midlands Electricity plc
(Midlands)  supply  business  of $9.7  million  after-tax,  or $0.08 per  share,
earnings for the nine months ended September 30, 1999 would have been $416.0, or
$3.29 per share.  Excluding  the effect of the PaPUC's rate actions for the nine
months ended  September 30, 1998,  earnings would have been $342.5  million,  or
$2.70 per share.

      The $0.59 per share earnings increase,  excluding non-recurring items, was
primarily due to increased sales to other utilities by the GPU Energy  companies
and  increased  profits  from  operations  at Midlands.  The  Midlands  earnings
increase  was more than offset by the  absence of gains  realized in 1998 on the
sale of GPU  Electric's  interest  in Solaris  Power  (Solaris)  and the sale of
AllGas Energy stock.


OPERATING REVENUES:

      Operating  revenues for the third  quarter  ended  September  30, 1999, as
compared  to the  third  quarter  of 1998,  increased  $255.5  million  to $1.42
billion.  For the nine months ended  September 30, 1999, as compared to the same
period  last year,  revenues  increased  $158.7  million to $3.39  billion.  The
components of the changes are as follows:








                                        4


<PAGE>


GPU, Inc. and Subsidiary Companies


GPU RESULTS OF OPERATIONS (continued)

                                             Changes (in millions)
                                     ----------------------------------------
                                        Three Months             Nine Months
                                            Ended                   Ended
                                     September 30, 1999   September 30, 1999
                                     ------------------   -------------------
GPU Energy companies:
   Kilowatt-hour (KWH) revenues           $ (141.0)                $(304.1)
   Energy and restructuring-related
     revenues                                 76.1                   107.8
   Obligation to refund revenues
     to customers per NJBPU Order               -                   (115.0)
   Obligation to refund revenues
     to customers per PaPUC Order             56.4                    56.4
    Competitive transition charge
      (CTC) revenues                          40.7                    99.4
   GPU Telcom revenues                        (5.9)                   (7.8)
   Other revenues                             14.2                     9.5
                                             -----                   -----
        Total GPU Energy companies            40.5                  (153.8)
GPU Electric                                 183.0                   240.6
GPUI Group                                    11.2                    18.8
GPU AR                                        20.8                    53.1
                                             -----                   -----
        Total increase                     $ 255.5                 $ 158.7
                                             =====                   =====


GPU Energy companies

Kilowatt-hour revenues

      The decrease  for the three and nine month  periods was  primarily  due to
lower  generation-related  revenues as a result of some  Pennsylvania  customers
choosing   another  electric  energy  supplier  and  a  decrease  in  nonutility
generation  (NUG)  revenues  for  Met-Ed  and  Penelec  (which  did  not  have a
significant  impact on earnings since  NUG-related  revenues are being collected
through the CTC effective January 1, 1999). Partially offsetting these decreases
were  increased  sales  to other  utilities,  the  absence  of an  earnings  cap
adjustment  (since  JCP&L was not in an over  earnings  position  in 1999) which
reduced JCP&L's 1998 revenues and higher weather-related sales.

Energy and restructuring-related revenues (JCP&L only)

      The increase for the three and nine month  periods was  primarily due to a
change in the  estimate  for  unbilled  revenue and the  inclusion  of revenues,
effective   August  1,  1999,   for  the  recovery  of  stranded  costs  due  to
restructuring  in  New  Jersey.  Changes  in  energy  and  restructuring-related
revenues do not affect earnings as they reflect corresponding changes in JCP&L's
levelized energy  adjustment clause (LEAC) or new mechanisms billed to customers
and expensed.

Obligation to refund revenues to customers per NJBPU Order

      The decrease for the nine month period  resulted from the NJBPU's  Summary
Order issued to JCP&L which requires JCP&L to refund customers 5% from rates

                                        5


<PAGE>


GPU, Inc. and Subsidiary Companies


GPU RESULTS OF OPERATIONS (continued)

in effect as of April 30, 1997 for service  rendered on and after August 1, 2002
through July 31, 2003.

Obligation to refund revenues to customers per PaPUC Order

      In 1998, as a result of amended  PaPUC  Restructuring  Orders,  Met-Ed and
Penelec  recorded  reductions  to operating  revenue of $56.4 million to reflect
their obligation to make refunds to customers from 1998 revenues.

Competitive transition charge (CTC) revenues (Met-Ed and Penelec Only)

      CTC revenues represent  Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance  with Met-Ed and Penelec's  final  Restructuring  Orders
effective  January 1, 1999.  Changes in CTC  revenues do not affect  earnings as
they are offset by corresponding changes in expense.

Other revenues

      The  increase  for the three and nine month  periods was due  primarily to
increased  transmission  revenues  at Met-Ed and Penelec as a result of customer
shopping in Pennsylvania.

GPU Electric

      The increase for the three and nine month periods was primarily due to the
inclusion  of revenues  from  Empresa  Distribuidora  Electrica  Regional,  S.A.
(Emdersa), an electric distribution business in Argentina, which was acquired by
GPU Electric in March 1999. Also  contributing to the increase was the inclusion
of revenues from the GPU GasNet and Midlands  acquisitions,  which were acquired
in June and July 1999, respectively (see Note 3, Acquisitions).

GPUI Group

      The increase for the three and nine month  periods was primarily due to an
increase in Empresa Guaracachi S.A. (EGSA) energy and capacity revenues, and the
effect of consolidating  Onondaga Cogen, L.P. (Onondaga)  beginning August 1998,
which was partially offset by lower management fee revenues.

GPU AR

      The increase for the three and nine month  periods was primarily due to an
increase in energy sales to customers who chose GPU AR as their electric  energy
supplier as part of retail customer choice in Pennsylvania.


OPERATING INCOME:

      Operating  income for the third  quarter  ended  September  30,  1999,  as
compared to the third quarter of 1998, increased $151.0 million to $377 million.
For the nine months ended September 30, 1999, operating income, as


                                        6


<PAGE>


GPU, Inc. and Subsidiary Companies


GPU RESULTS OF OPERATIONS (continued)


compared  to the same  period  last  year,  increased  $106.4  million to $807.6
million. The components of the changes are as follows:

                                          Changes (in millions)
                              -----------------------------------------
                                 Three Months              Nine Months
                                     Ended                   Ended
                              September 30, 1999    September 30, 1999
                              ------------------   --------------------

GPU Energy companies                $  115.2                 $  54.5
GPU Electric                            39.4                    54.1
GPUI Group                              11.5                    10.4
GPU AR                                 (12.7)                   (8.3)
GPU, Inc. (Corporate)                   (2.4)                   (4.3)
                                       -----                   -----
        Total increase               $ 151.0                 $ 106.4
                                       =====                   =====


GPU Energy companies

      The  increase  for the three and nine month  periods  was due to lower O&M
expenses  primarily due to Penelec's  sale of its interest in Homer City,  lower
depreciation  expense  at the GPU  Energy  companies  due to the  effect  of the
impairment  writedown  of Three Mile Island Unit 1 nuclear  generating  facility
(TMI-1) in 1998 and the sale of  Penelec's  interest  in Homer  City.  Partially
offsetting the decrease to expenses for the nine month period was lower revenues
(see Operating Revenues section for additional information).

GPU Electric

      The increase for the three and nine month periods was due to the inclusion
of Emdersa,  GPU GasNet and the other 50% of  Midlands,  which were  acquired in
1999.

GPUI Group

      The increase  for the three and nine month  periods was  primarily  due to
higher  revenues (see Operating  Revenues  section for additional  information).
Partially  offsetting  the  increase  was higher  fuel  expenses  at EGSA.  Also
contributing  to the  offset  for  the  nine  month  period  was the  effect  of
consolidating Onondaga beginning August 1998.

GPU AR

      The decrease  for the three and nine month  periods was  primarily  due to
increased power  purchases,  partially  offset by higher revenues (see Operating
Revenues section for additional information).






                                        7


<PAGE>


GPU, Inc. and Subsidiary Companies


GPU RESULTS OF OPERATIONS (continued)


OTHER INCOME AND DEDUCTIONS:

      Other income and  deductions  for the third  quarter  ended  September 30,
1999, as compared to the third quarter of 1998,  decreased $3.7 million to $12.0
million.  For the nine  months  ended  September  30,  1999,  other  income  and
deductions, as compared to the same period last year, increased $68.9 million to
$156.9 million. The components of the changes are as follows:

                                           Changes (in millions)
                               ------------------------------------------
                                  Three Months             Nine Months
                                     Ended                    Ended
                               September 30, 1999      September 30, 1999
                               ------------------      ------------------

GPU Energy companies                  $  8.7                  $ 67.8
GPU Electric                            (5.1)                   10.7
GPUI Group                              (7.3)                  (10.6)
GPU, Inc.                                 -                      1.0
                                        ----                    ----
   Total increase/(decrease)          $ (3.7)                 $ 68.9
                                        ====                    ====

GPU Energy companies

      The  increase  for  the  nine  month  period  was  primarily  due  to  the
recognition of the gain on the sale of Penelec's interest in Homer City relating
to wholesale  operations.  Also  contributing to the increase for the nine month
period was the absence of a charge for start-up  payments for the  establishment
of an environmental fund for Met-Ed and Penelec;  and the absence of a charge to
terminate a contract  with one of  Met-Ed's  wholesale  customers  in the second
quarter of 1998.

GPU Electric

      The increase for the nine month  period was  primarily  due to the gain on
the sale of the Midlands supply  business and increased  earnings from Midlands'
operations.  Also contributing to the increase for the nine month period was the
gain on the sale of the Enersis Group generation facility in Portugal. Partially
offsetting  the increase was the absence of gains realized in 1998 from the sale
of Solaris and the sale of AllGas Energy stock.

GPUI Group

      The decrease for the nine month period was primarily due to the absence of
a gain  realized  in 1998  from the sale of a 50%  interest  in the  Mid-Georgia
cogeneration project.


INTEREST CHARGES AND PREFERRED DIVIDENDS:

      Interest  charges and  preferred  dividends  for the third  quarter  ended
September 30, 1999, as compared to the third  quarter of 1998,  increased  $47.8
million to $143.7 million. For the nine months ended September 30, 1999,

                                        8


<PAGE>


GPU, Inc. and Subsidiary Companies


GPU RESULTS OF OPERATIONS (continued)


interest  charges and preferred  dividends,  as compared to the same period last
year,  increased $41.0 million to $334.6 million.  The components of the changes
are as follows:
                                           Changes (in millions)
                                ----------------------------------------
                                   Three Months              Nine Months
                                       Ended                   Ended
                                September 30, 1999     September 30, 1999
                                ------------------     ------------------

GPU Energy companies                   $(6.2)                $ (13.1)
GPU Electric                            53.4                    55.2
GPUI Group                               0.7                     1.0
GPU, Inc. (Corporate)                   (0.1)                   (2.1)
                                        ----                   -----
      Total increase                   $47.8                 $  41.0
                                        ====                   =====


GPU Energy companies

      The  decrease for the three month  period was  primarily  due to Penelec's
redemption of Company-obligated mandatorily redeemable preferred securities. The
decrease for the nine month period was primarily due to Penelec's  redemption of
first mortgage bonds (FMBs),  partially  offset by Penelec's  issuance of senior
notes;  and a decrease in preferred stock  dividends due to the  redemption,  by
Met-Ed and Penelec,  of all of their outstanding shares of cumulative  preferred
stock. As a result of the preferred stock  redemptions,  a reacquisition loss of
$0.5 million and $0.7 million was recorded by Met-Ed and Penelec, respectively.

GPU Electric

      The increase for the three and nine month periods was primarily due to the
Emdersa, GPU GasNet and Midlands acquisitions.


                           JCP&L RESULTS OF OPERATIONS

      JCP&L's  earnings  for the third  quarter  ended  September  30, 1999 were
$100.6 million,  compared to 1998 third quarter  earnings of $89.3 million.  The
increase in earnings was due primarily to increased sales to other utilities.

      For the nine  months  ended  September  30,  1999,  earnings  were  $143.6
million,  compared to $177.1 million for the same period last year. The decrease
was due to a  non-recurring  charge of $68  million,  as a result of the NJBPU's
Summary Order issued to JCP&L. Excluding the non-recurring charge,  earnings for
the nine months ended  September  30, 1999 would have been $211.6  million.  The
increase in earnings on this basis was primarily due to increased sales to other
utilities, higher weather-related sales and a decrease in depreciation expense.




                                        9


<PAGE>


GPU, Inc. and Subsidiary Companies


JCP&L RESULTS OF OPERATIONS (continued)


OPERATING REVENUES:

      Operating  revenues  for  the  third  quarter  ended  September  30,  1999
increased $22.6 million to $670.2  million,  as compared to the third quarter of
1998. For the nine months ended  September 30, 1999,  revenues  decreased  $20.7
million  to  $1.58  billion  as  compared  to the same  period  last  year.  The
components of the changes are as follows:

                                                  Changes (in millions)
                                        ---------------------------------------
                                          Three Months              Nine Months
                                              Ended                   Ended
                                        September 30, 1999   September 30, 1999
                                        ------------------   ------------------

   KWH revenues                            $ (51.6)                $ (13.5)
   Energy and restructuring-related
     revenues                                 76.1                   107.8
           Obligation to refund revenues
     to customers per NJBPU Order               -                   (115.0)
   Other revenues                             (1.9)                     -
                                            ------                  -------
        Increase/(Decrease) in revenues    $  22.6                 $ (20.7)
                                            ======                  ======

Kilowatt-hour revenues

      The  decrease  for the three and nine month  periods was due to  decreased
usage by residential and commercial customers. Partially offsetting the decrease
was the absence of an earnings  cap  adjustment  (since JCP&L was not in an over
earnings position in 1999) which reduced 1998 revenues.

Energy and restructuring-related revenues

      The increase for the three and nine month  periods was  primarily due to a
change in the  estimate  for  unbilled  revenue and the  inclusion  of revenues,
effective   August  1,  1999,   for  the  recovery  of  stranded  costs  due  to
restructuring  in  New  Jersey.  Changes  in  energy  and  restructuring-related
revenues do not affect earnings as they reflect corresponding changes in JCP&L's
levelized energy  adjustment clause (LEAC) or new mechanisms billed to customers
and expensed.

Obligation to refund revenues to customers per NJBPU Order

      The decrease for the nine month period  resulted from the NJBPU's  Summary
Order for JCP&L which  requires  JCP&L to refund to  customers  5% from rates in
effect as of April 30,  1997 for service  rendered  on and after  August 1, 2002
through July 31, 2003.

Other revenues

      Changes in other  revenues  do not affect  earnings  as they are offset by
corresponding changes in expense.

                                       10


<PAGE>


GPU, Inc. and Subsidiary Companies


JCP&L RESULTS OF OPERATIONS (continued)


OPERATING INCOME:

      The  increase  for the three  month  period  was  primarily  due to higher
revenues (see Operating Revenues section for additional information),  partially
offset by increased  purchased power. The decrease for the nine month period was
primarily due to lower  revenues and increased  purchase  power during the third
quarter.  Partially  offsetting  the  decrease  was lower  depreciation  expense
primarily due to the effect of the impairment writedown of TMI-1 in 1998.


OTHER INCOME AND DEDUCTIONS:

      No significant variances to explain for the three and nine month periods.


INTEREST CHARGES AND PREFERRED DIVIDENDS:

      No significant variances to explain for the three and nine month periods.


                          MET-ED RESULTS OF OPERATIONS

      Met-Ed's  earnings for the third  quarter  ended  September  30, 1999 were
$41.6  million,  compared with earnings of $176.8  million for the quarter ended
September 30, 1998. The third quarter 1998 results included a reversal of $183.2
million after-tax of a non-recurring charge taken in the second quarter of 1998,
as a result of amended PaPUC  restructuring rate orders; and the recording of an
additional  non-recurring  charge of $21.9 million after-tax related to customer
rate refunds, the write-off of regulatory assets related to its wholesale energy
customers  and start up  payments  to an  environmental  fund.  Excluding  these
non-recurring items,  Met-Ed's third quarter 1998 earnings would have been $15.5
million.  The increase on this basis was  primarily  due to  increased  sales to
other utilities and higher residential usage.

      For the nine months ended September 30, 1999, earnings were $93.0 million,
compared with earnings of $32.6 million for the same period last year. Excluding
the effect of the PaPUC's  rate  actions,  earnings  for the nine  months  ended
September 30, 1998 would have been $58.6 million.  This increase in earnings was
primarily  due to  increased  sales to other  utilities  and higher  residential
usage, partially offset by lower generation-related revenues as a result of some
Pennsylvania customers choosing another supplier.


OPERATING REVENUES:

      Operating  revenues  for  the  third  quarter  ended  September  30,  1999
increased $51.2 million to $280.2  million,  as compared to the third quarter of
1998. For the nine months ended September 30, 1999, revenues increased $17.6
                                       11


<PAGE>


GPU, Inc. and Subsidiary Companies


MET-ED RESULTS OF OPERATIONS (continued)


million  to $707.4  million  as  compared  to the same  period  last  year.  The
components of the changes are as
follows:

                                             Changes (in millions)
                                  ------------------------------------------
                                      Three Months           Nine Months
                                          Ended                 Ended
                                   September 30, 1999   September 30, 1999
                                  -------------------   --------------------

   KWH revenues                       $(16.6)                 $(89.1)
   Obligation to refund revenues
     to customers per PaPUC Order       27.2                    27.2
   CTC revenues                         28.5                    64.6
   Other revenues                       12.1                    14.9
                                        ----                   -----
       Increase in revenues           $ 51.2                  $ 17.6
                                        ====                   =====

Kilowatt-hour revenues

      The decrease  for the three and nine month  periods was  primarily  due to
lower  generation-related  revenues as a result of some  Pennsylvania  customers
choosing  another  supplier;  a decrease in NUG  revenues  (which did not have a
significant  impact on earnings since  NUG-related  revenues are being collected
through  the  CTC  effective  January  1,  1999);  partially  offset  by  higher
weather-related  sales,  increased usage by residential  customers and increased
sales to other utilities.

Obligation to refund revenues to customers per PaPUC Order

      In  1998,  as a result  of  amended  PaPUC  Restructuring  Orders,  Met-Ed
recorded  a  reduction  to  operating  revenue of $27.2  million to reflect  its
obligation to make refunds to customers from 1998 revenues.

CTC revenues

      Changes  in CTC  revenues  do not  affect  earnings  as they are offset by
corresponding changes in expense.

Other revenues

      The  increase  for the three and nine month  periods was due  primarily to
increased   transmission   revenues  as  a  result  of   customer   shopping  in
Pennsylvania.


OPERATING INCOME:

      The increase  for the three and nine month  periods was  primarily  due to
higher  revenues (see Operating  Revenues  section for additional  information).
Partially  offsetting  the  increase  was lower  depreciation  and  amortization
expense  primarily  due to the effect of the  impairment  writedown  of TMI-1 in
1998.
                                       12


<PAGE>


GPU, Inc. and Subsidiary Companies


MET-ED RESULTS OF OPERATIONS (continued)


OTHER INCOME AND DEDUCTIONS:

      The increase for the three and nine month periods was primarily due to the
absence  of  a  charge  for  start-up  payments  for  the  establishment  of  an
environmental fund; and the absence of a charge to terminate a contract with one
of Met-Ed's wholesale customers in the second quarter of 1998.


INTEREST CHARGES AND PREFERRED DIVIDENDS:

      The increase for the three and nine month periods was primarily due to the
issuance of $100  million of Trust  preferred  securities  by Met-Ed,  partially
offset by a decrease in  preferred  stock  dividends  due to the  redemption  of
Met-Ed's  outstanding  shares of  cumulative  preferred  stock.  As a result,  a
reacquisition loss of $0.5 million was recorded in the first quarter of 1999.


                          PENELEC RESULTS OF OPERATIONS

      Penelec's  earnings for the third  quarter  ended  September 30, 1999 were
$22.5  million,  compared  with  earnings of $62.9 million for the quarter ended
September 30, 1998. The third quarter 1998 results  included a reversal of $83.1
million after-tax of a non-recurring charge taken in the second quarter of 1998,
as a result of amended  PaPUC  restructuring  rate orders;  the  recording of an
additional  non-recurring  charge of $35.1 million after-tax related to customer
rate refunds, the write-off of regulatory assets related to its wholesale energy
customers  and start up  payments  to an  environmental  fund.  Excluding  these
non-recurring items, Penelec's third quarter 1998 earnings would have been $14.9
million.  The increase on this basis was  primarily  due to  increased  sales to
other utilities and higher residential usage.

      For the nine  months  ended  September  30,  1999,  earnings  were  $107.1
million,  compared with earnings of $21.1 million for the same period last year.
Excluding a non-recurring gain of $27.8 million after-tax for the portion of the
gain on the sale of  Penelec's  interest  in Homer  City  related  to  wholesale
operations,  earnings for the nine months  ended would have been $79.3  million.
Excluding the 1998 year-to-date effect of the PaPUC's rate actions, earnings for
the nine months ended  September  30, 1998 would have been $60.9  million.  This
increase in earnings was primarily due to increased sales to other utilities and
higher residential usage, partially offset by lower generation-related  revenues
as a result of some Pennsylvania customers choosing another supplier.


OPERATING REVENUES:

      Operating  revenues  for  the  third  quarter  ended  September  30,  1999
decreased  $4.7 million to $254.6  million,  as compared to the third quarter of
1998. For the nine months ended September 30, 1999, revenues decreased $67.4

                                       13


<PAGE>


GPU, Inc. and Subsidiary Companies


PENELEC RESULTS OF OPERATIONS (continued)

million to $706 million as compared to the same period last year. The components
of the changes are as
follows:
                              Changes (in millions)
                                   -----------------------------------------
                                     Three Months              Nine Months
                                        Ended                   Ended
                                    September 30, 1999   September 30, 1999
                                    ------------------   -------------------

   KWH revenues                       $(55.1)                 $(141.1)
   Obligation to refund revenues
     to customers per PaPUC Order       29.2                     29.2
   CTC revenues                         12.2                     34.8
   Other revenues                        9.0                      9.7
                                       -----                   ------
       Decrease in revenues           $ (4.7)                 $ (67.4)
                                       =====                   ======

Kilowatt-hour revenues

      The decrease  for the three and nine month  periods was  primarily  due to
lower  generation-related  revenues as a result of some  Pennsylvania  customers
choosing  another  supplier;  a decrease in NUG  revenues  (which did not have a
significant  impact on earnings since  NUG-related  revenues are being collected
through  the  CTC  effective  January  1,  1999);  partially  offset  by  higher
weather-related  sales,  increased usage by residential  customers and increased
sales to other utilities.

Obligation to refund revenues to customers per PaPUC Order

      In 1998,  as a result  of  amended  PaPUC  Restructuring  Orders,  Penelec
recorded  a  reduction  to  operating  revenue of $29.2  million to reflect  its
obligation to make refunds to customers from 1998 revenues.

CTC revenues

      Changes  in CTC  revenues  do not  affect  earnings  as they are offset by
corresponding changes in expense.

Other revenues

      The  increase  for the three and nine month  periods was due  primarily to
increased   transmission   revenues  as  a  result  of   customer   shopping  in
Pennsylvania.


OPERATING INCOME:

      The increase  for the three and nine month  periods was  primarily  due to
lower  depreciation  and  amortization  expense largely due to the effect of the
1998 impairment  writedown of TMI-1 and the sale of Penelec's  interest in Homer
City in March 1999,  partially offset by lower revenues (see Operating  Revenues
section for additional information).


                                       14


<PAGE>


GPU, Inc. and Subsidiary Companies


PENELEC RESULTS OF OPERATIONS (continued)


OTHER INCOME AND DEDUCTIONS:

      The increase for the three and nine month periods was primarily due to the
absence  of  a  charge  for  start-up  payments  for  the  establishment  of  an
environmental  fund. Also contributing to the increase for the nine month period
was the  recognition of the gain on the sale of Homer City relating to wholesale
operations.


INTEREST CHARGES AND PREFERRED DIVIDENDS:

      The  decrease  for  the  three  month  period  was  primarily  due  to the
redemption of Company-obligated mandatorily redeemable preferred securities. The
decrease for the nine month period was primarily  due to the  redemption of $600
million FMBs, partially offset by the issuance of $350 million senior notes; and
a decrease in preferred  stock  dividends due to the redemption of all Penelec's
outstanding  shares of cumulative  preferred stock. As a result, a reacquisition
loss of $0.7 million was recorded in the first quarter of 1999.


                          INVESTMENTS IN FUCOs AND EWGs

      GPU, Inc. has Securities and Exchange  Commission  (SEC)  authorization to
finance  investments in foreign utility  companies  (FUCOs) and exempt wholesale
generators  (EWGs)  up to an  aggregate  amount  equal to 100% of GPU's  average
consolidated  retained  earnings,  or approximately $2.4 billion as of September
30, 1999.  At September  30, 1999,  GPU,  Inc. has  remaining  authorization  to
finance approximately $188 million of additional  investments in FUCOs and EWGs.
GPU, Inc.'s  investments in FUCOs and EWGs are made through GPU Electric and the
GPUI Group.


                                  GPU ELECTRIC

      GPU Electric has ownership  interests in electric and gas transmission and
distribution  businesses  in  England,  Australia  and  Argentina.  Through  its
investment in Midlands,  GPU Electric also has ownership  interests in operating
generating facilities located in foreign countries totaling 4,244 megawatts (MW)
(of which GPU Electric's  equity interest  represents 1,163 MW) of capacity.  At
September 30, 1999,  GPU, Inc.'s  aggregate  investment in GPU Electric was $711
million.  GPU, Inc. has also guaranteed up to an additional $1.39 billion of GPU
Electric obligations.

      In  July  1999,  GPU  Electric  acquired  Cinergy  Corp.'s  (Cinergy)  50%
ownership interest in Avon Energy Partners Holdings (Avon), which owns Midlands,
for 452.5  million  British  pounds  (approximately  US $714  million).  GPU and
Cinergy had jointly formed Avon in 1996 to acquire Midlands, an English regional
electric company serving 2.3 million customers. For additional information,  see
Note 3, Acquisitions. The Office of Gas and

                                       15


<PAGE>


GPU, Inc. and Subsidiary Companies


Electricity  Markets in the United Kingdom has proposed base rate  reductions of
22 to 27 percent for Midlands  beginning in April 2000. A final  decision on the
reductions is expected in the fourth quarter of 1999.  There can be no assurance
as to the outcome of this matter.

      In June 1999, GPU Electric acquired the business of Transmission Pipelines
Australia  (TPA),  a  natural  gas  transmission  business,  from  the  State of
Victoria,  Australia for A$1.025 billion  (approximately  US $675 million).  TPA
(which  has  since  been  renamed  GPU  GasNet)  was sold as part of  Victoria's
privatization  of the natural gas industry.  The GPU GasNet  system  encompasses
1,105 miles of  transmission  pipelines,  and consists of two separate  networks
serving  approximately  1.3  million  residential  customers  and  about  40,000
industrial  and  commercial  customers   throughout  Victoria.   For  additional
information, see Note 3, Acquisitions.

      In March 1999,  GPU Electric  acquired  Emdersa for $375 million.  Emdersa
owns three  electric  distribution  companies  that  serve  three  provinces  in
northwest Argentina. For additional information, see Note 3, Acquisitions.

      In June 1999,  National Power plc acquired all the assets and  liabilities
of Midlands'  supply  business,  including  obligations  under  Midlands'  power
purchase  agreements,  for $300 million  ($150  million for GPU's share) plus an
adjustment for working capital.  As a result,  in the second quarter of 1999 GPU
recorded an after-tax gain on the sale of $10 million, or $0.08 per share.

      Management believes that the acquisitions completed to date have served to
establish  operational  bases for growth.  Future  acquisitions,  if made, would
likely  be small in size and  would  serve to  expand  capabilities  to grow the
non-regulated businesses or to provide critical mass to the current portfolio of
holdings.  For additional  information,  see  COMPETITIVE  ENVIRONMENT  AND RATE
MATTERS section of Management's Discussion and Analysis.


                                   GPUI GROUP

      The GPUI Group has  ownership  interests  in nine  operating  cogeneration
plants in the U.S.  totaling 1,147 MW (of which the GPUI Group's equity interest
represents 501 MW) of capacity and five operating generating  facilities located
in  foreign  countries  totaling  1,229 MW (of  which  the GPUI  Group's  equity
interest  represents  424 MW) of capacity.  At September 30, 1999,  GPU,  Inc.'s
aggregate  investment  in the GPUI Group was $240  million.  GPU,  Inc. has also
guaranteed up to an additional $43.4 million of GPUI Group obligations.


                         LIQUIDITY AND CAPITAL RESOURCES

Capital Expenditures and Investments

GPU Energy Companies

      The GPU Energy  companies'  capital  spending  for the nine  months  ended
September 30, 1999 was $212 million (JCP&L $99 million; Met-Ed $43 million;

                                       16


<PAGE>


GPU, Inc. and Subsidiary Companies


Penelec $66  million;  Other $4 million),  and was used  primarily to expand and
improve  existing  Transmission  and  Distribution  (T&D)  facilities,  for  new
customer  connections  and to implement an integrated  information  system.  For
1999, capital expenditures for the GPU Energy companies are estimated to be $397
million (JCP&L $183 million; Met-Ed $97 million;  Penelec $98 million; Other $19
million),  primarily  for ongoing T&D system  development  and to  implement  an
integrated  information  system.   Expenditures  for  maturing  obligations  are
expected to total $83 million (JCP&L $3 million; Met-Ed $30 million; Penelec $50
million) in 1999.  Management  estimates  that a substantial  portion of the GPU
Energy  companies'  1999 capital  outlays will be satisfied  through  internally
generated funds.

GPU Electric

      GPU Electric's  capital  spending for the nine months ended  September 30,
1999 was $1.7 billion and was used  primarily to acquire  Midlands,  Emdersa and
GPU  GasNet,   and  to  improve  GPU   PowerNet's   facilities.   Excluding  the
acquisitions, capital expenditures for 1999 are forecasted to be $19 million and
expenditures  for  maturing  obligations  are  expected  to total $453  million.
Capital  outlays for 1999 will be satisfied  through both  internally  generated
funds and external financings.

GPUI Group

      The GPUI Group's capital  spending for the nine months ended September 30,
1999 was $32 million and was used primarily for  construction  activities at one
of the GPUI Group's South American  investments.  For 1999, capital expenditures
are forecasted to be $37 million and expenditures  for maturing  obligations are
expected  to total $28  million.  Capital  outlays  for 1999  will be  satisfied
through both internally generated funds and external financings.

Financing

GPU, Inc.

     In January 1999, the GPU, Inc. Board of Directors authorized the repurchase
of up to $350 million of GPU, Inc. common stock.  Through October 28, 1999, GPU,
Inc. has  repurchased  4.7 million shares of common stock at an average price of
$36.86 per share.

      GPU has $1.8 billion of committed credit facilities, which include various
committed lines of credit totaling $207 million, a $250 million Revolving Credit
Agreement, and other credit agreements, as discussed below.

      GPU Capital has entered into a $1 billion 364-day senior  revolving credit
facility in support of the issuance of commercial paper to fund the GPU Electric
acquisitions.  GPU Capital is the largest of three  issuers ($1  billion) in the
$1.45  billion  commercial  paper  program.  The other issuers are GPU Australia
Holdings,  Inc. ($350 million) and GPU, Inc. ($100 million).  GPU Capital, along
with GPU Australia  Holdings,  will use the proceeds from the sale of commercial
paper to finance investments in FUCOs and EWGs.



                                       17


<PAGE>


GPU, Inc. and Subsidiary Companies


      GPU International has a Credit Agreement  providing for borrowings through
December  1999 of up to $30 million  outstanding  at any time. Up to $15 million
may be utilized to provide letters of credit.

      The $250 million  Revolving  Credit  Agreement  between GPU, Inc., the GPU
Energy companies and a consortium of banks expires May 6, 2001.

      GPU,  Inc.  has SEC  approval  to  issue  and sell up to $300  million  of
unsecured  debentures  through  2001.  Further  significant  investments  by GPU
Electric  and/or the GPUI Group,  or  otherwise,  may require GPU, Inc. to issue
additional debt and/or common stock.

GPU Energy companies

      Met-Ed and Penelec have  remaining  regulatory  approval to issue  through
December 31, 2000 senior notes and preferred  securities in aggregate amounts of
$150 million and $275 million, respectively, of which up to $25 million for each
company may  consist of  preferred  securities.  JCP&L has  regulatory  approval
through  December 31, 2000 to issue senior notes in the amount of $300  million,
and  intends to seek  regulatory  approval  to issue up to $200  million of such
amount as preferred securities.  Met-Ed and JCP&L will be issuing secured senior
notes (collateralized by FMBs issued to the senior note trustee) until such time
as more than 80% of the issued FMBs are held by the senior note trustee. At that
time,  the  outstanding  senior notes and any newly issued  senior notes will be
unsecured obligations. Penelec's senior notes are currently unsecured.

      Current plans call for the GPU Energy  companies to issue senior notes and
preferred  securities  during the next  three  years to fund the  redemption  of
maturing senior securities,  refinance outstanding senior securities and finance
construction activities. Following the initial issuance of senior notes, the GPU
Energy  companies  would not issue any additional  FMBs other than as collateral
for the senior notes.  The senior note indentures  prohibit  (subject to certain
exceptions)  the GPU Energy  companies  from issuing any debt which is senior to
the senior notes.

      The GPU Energy  companies' bond indentures  include  provisions that limit
the amount of FMBs the companies may issue. The GPU Energy  companies'  interest
coverage ratios are currently in excess of indenture restrictions. The amount of
FMBs that the GPU Energy  companies  could issue based on the bondable  value of
property  additions  is in  excess  of  amounts  currently  authorized.  JCP&L's
certificate  of  incorporation  includes  provisions  that  limit the  amount of
preferred stock and short-term  debt it may issue.  JCP&L's  preferred  dividend
coverage  ratio is  currently  in excess of the  charter  restrictions.  The GPU
Energy  companies also have  regulatory  authority to incur  short-term  debt, a
portion of which may be through the issuance of commercial paper.

      In  July  1999,   Penelec  redeemed  all  of  its  outstanding  shares  of
Company-obligated   mandatorily   redeemable  preferred  securities  for  $105.4
million.

GPU Electric

     Austran  Holdings,  Inc.  (Austran),  a  wholly  owned  subsidiary  of  GPU
Electric, has established a A$500 million (approximately U.S. $306 million)

                                       18


<PAGE>


GPU, Inc. and Subsidiary Companies


commercial  paper  program.  GPU PowerNet has guaranteed  Austran's  obligations
under  this  program.   As  of  September  30,  1999,  Austran  had  outstanding
approximately  A$457  million   (approximately  U.S.  $298  million)  under  the
commercial  paper  program,  the proceeds  from which were used to refinance the
maturing  portion of the senior  debt  credit  facility  used to finance the GPU
PowerNet acquisition. The Austran borrowings are classified as noncurrent on the
Consolidated  Balance  Sheet  since it is  management's  intent to  reissue  the
commercial paper on a long-term basis.

      In  the  third  quarter  of  1999,   Austran   refinanced   A$220  million
(approximately  US $142 million) of GPU PowerNet  acquisition debt with proceeds
from an Australian  Dollar medium term note  issuance.  In connection  with this
debt  refinancing  program,  a loss of A$20.3  million  (approximately  US $13.3
million)  related to certain interest rate swap positions was reflected in GPU's
third  quarter  1999  earnings.  In October  1999,  Austran  issued A$50 million
(approximately  US $32 million) of variable rate and A$120 million of fixed rate
(approximately US $77 million) medium term notes, proceeds of which were used to
refinance  acquisition  debt. For  information  relating to the financing of GPU
Electric's acquisition of Midlands, see Note 3, Acquisitions.

      GPU may further reduce the outstanding  commercial paper issued associated
with the  refinancing  of the Midlands  acquisition  debt in addition to the GPU
PowerNet  acquisition  debt with a portion of the proceeds  from the sale of the
GPU Energy  companies'  generating  facilities (see COMPETITIVE  ENVIRONMENT AND
RATE MATTERS section of Management's Discussion and Analysis).


Year 2000 Issue

      GPU has been  addressing the Year 2000 issue by undertaking  comprehensive
reviews of its computers,  software and equipment with embedded  systems such as
microcontrollers  (together,  "Year  2000  Components"),  and  of  its  business
relationships  with third  parties,  including key customers,  lenders,  trading
partners,  vendors,  suppliers  and  service  providers.  Remediation  plans and
corrective actions are substantially  complete.  The remediation plans included,
among other things,  the  modification  or replacement of Year 2000  Components,
which  were not  ready for use  beyond  1999.  In  addition,  GPU has  completed
development of contingency plans for mission-critical  systems.  GPU's Year 2000
project  has not caused any  material  delay in the GPU  information  technology
services group performing other planned projects.

      During 1999, an independent  consultant  retained by GPU conducted several
reviews to determine the adequacy of the GPU Energy  companies'  Year 2000 plans
and state of readiness.  In the most recent  review,  the  consultant  indicated
overall that the GPU Energy  companies  are well on their way to achieving  Year
2000  readiness.  A final  assessment  is  scheduled in November  1999.  Another
consultant  was retained to perform an independent  verification  and validation
audit  of  the  embedded   systems   used  within  the  GPU  Energy   companies'
infrastructure  operations.  This  consultant  concluded  overall  that "the T&D
Business Unit has completed  significant  steps to minimize the risk of failures
associated  with Y2K issues."  Within the GPU Electric  companies,  Midlands was
recently the subject of two independent reviews to determine Year 2000

                                       19


<PAGE>


GPU, Inc. and Subsidiary Companies


readiness both of which reported no significant concerns. The Regulator- General
of Australia  recently  conducted an audit of GPU PowerNet's Year 2000 readiness
program, which resulted in no adverse findings.

Regulatory Compliance for Year 2000 Readiness

      The GPU Energy  companies have complied with the existing  requirements of
the PaPUC and NJBPU on the Year 2000 issue.  GPU Nuclear has  notified  the U.S.
Nuclear  Regulatory  Commission  (NRC) that TMI-1 and the Oyster  Creek  nuclear
generating station (Oyster Creek) have completed Year 2000 readiness programs.

Costs

      The  GPU  Energy   companies   currently   expect  to  spend  a  total  of
approximately $44.1 million (JCP&L $19.2 million; Met-Ed $12.3 million;  Penelec
$12.6  million) on the Year 2000 issue,  which includes $8.1 million (JCP&L $2.7
million;  Met-Ed $2.7  million;  Penelec $2.7  million) that is being spent as a
part of the purchase and  implementation of a new integrated  information system
(Project  Enterprise),  as described below. The $44.1 million also includes $7.4
million  (JCP&L $3.4 million;  Met-Ed $1.9  million;  Penelec $2.1 million) that
would  have been spent in any event for  maintenance  and  cyclical  replacement
plans.  Approximately  43% of the expected  costs  involve the  modification  or
replacement of Year 2000 Components;  and 57% are for labor (including  contract
labor) and contingencies.  The GPU Energy companies are funding these costs from
their operations.

      Through September 30, 1999, the GPU Energy companies have spent a total of
approximately $38.2 million (JCP&L $16.7 million; Met-Ed $10.7 million;  Penelec
$10.8  million)  on the Year 2000  issue,  of which  $17.5  million  (JCP&L $8.0
million; Met-Ed $4.7 million; Penelec $4.8 million) has been spent in 1999.

      GPU Electric  currently  expects to spend a total of  approximately  $15.8
million on the Year 2000 issue.  Through  September  30, 1999,  GPU Electric has
spent a total of  approximately  $11.4 million on the Year 2000 issue,  of which
$7.6 million has been spent in 1999.

      The total cost  associated  with the GPUI Group and GPU AR achieving  Year
2000  readiness is not expected to be material to GPU's  business  operations or
financial position.

      The Project Enterprise  system,  referenced above, is designed to help the
GPU  Energy  companies  manage  business  growth  and meet the  requirements  of
electric utility deregulation.  The system became substantially  operational for
the GPU Energy  companies and GPUS in December 1998, with add-on  implementation
of the work management and customer care system (CCS) modules completed in March
and August 1999, respectively. Year 2000 testing of the CCS module was completed
in October 1999, with favorable  results.  GPUN and Genco are not installing the
Project  Enterprise  information  system  before  2000,  but  rather  have  made
modifications to their existing legacy information  systems to achieve Year 2000
readiness.


                                       20


<PAGE>


GPU, Inc. and Subsidiary Companies


Milestones

      GPU  has  established  Inventory,  Assessment,  Remediation,  Testing  and
Monitoring of its  mission-critical  Year 2000  Components as the primary phases
for its Year  2000  program.  All  stages  of the Year  2000  program  have been
completed with the exception of Monitoring, which will be completed by March 31,
2000 for all GPU  companies  other than GPU  Electric  and Genco,  which will be
completed by April 30, 2000 and May 31, 2000, respectively.

Third Party Qualification

      Due to the  interdependence  of computer systems and the reliance on other
organizations  for materials,  supplies or services,  GPU is also addressing the
Year 2000 issue as it relates to the  readiness of critical  third  parties.  As
part of its Year  2000  strategy,  GPU has  contacted  key  customers,  lenders,
trading  partners,  vendors,  suppliers and service  providers to assess whether
they are adequately addressing the Year 2000 issue.

      With respect to computer software and equipment with embedded systems, the
GPU Energy  companies  have analyzed  where they are dependent  upon third party
data  and have  identified  several  critical  areas:  (1) the  Pennsylvania-New
Jersey-Maryland (PJM) Interconnection;  (2) electric generation suppliers,  such
as cogeneration  operators and NUGs; (3) Electronic Data Interchange  (EDI) with
trading   partners;   (4)   Electronic   Funds  Transfer  (EFT)  with  financial
institutions; (5) vendors; and (6) customers.

      The  following  summarizes  the  actions  that have been  taken by the GPU
Energy companies with critical third parties:

     -    PJM - Data link testing with PJM and all PJM member companies has been
          successfully completed.

     -    Electric generation suppliers - Preliminary  readiness information has
          been received from all critical electric generation  suppliers.  Based
          on the information  provided,  it is anticipated  that these suppliers
          will achieve Year 2000 readiness prior to year-end 1999.

     -    EDI  -  All  critical  organizations  with  which  data  is  exchanged
          electronically  have been  contacted and  successful  testing has been
          achieved with 90% of them.  There are  currently two  mission-critical
          EDI partners  remaining to be  successfully  tested.  The EDI partners
          have deferred  testing until the fourth  quarter of 1999 when they are
          expected  to  have  upgraded  their  systems  to be Year  2000  ready;
          however, contingency plans are in place for these systems.

     -    EFT - The  testing  of the  Electronic  Funds  Transfer  System  (EFT)
          encountered  Year 2000  date-related  issues that were reported to the
          software  vendor.   Corrections  from  the  vendor  were  received  in
          September 1999 and the software will be upgraded and tested during the
          fourth quarter of 1999;  however,  contingency  plans are in place for
          this system.


                                       21


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GPU, Inc. and Subsidiary Companies


      -  Vendors - Based on the information obtained, it is anticipated that all
         critical  vendors will achieve  Year 2000  readiness  prior to year-end
         1999.

      -  Customers - An assessment of the readiness  status of  mission-critical
         customers,  that generate an aggregate of approximately $2.5 billion of
         annual  revenue  for  GPU,  is  continuing   with  the  expectation  of
         completion prior to year-end 1999.

      As for GPU  Electric,  Midlands  has  stockpiled  three months of critical
supplies  (cable,  connectors,  etc.)  to  attempt  to  ensure  that it will not
experience  shortages of critical items.  As a buyer of electricity  through the
National  Grid in the United  Kingdom,  Midlands has no direct  control over its
power  supply;  however,  the National  Grid has said that it has carried out an
extensive  Year 2000 program of its own to ensure that there is no disruption of
service,  but is unable to  guarantee  this.  GPU  PowerNet has reviewed all its
mission-critical   interfaces  with  distributors,   generators  and  interstate
transmitters  in Australia and has found them to be Year 2000 ready.  GPU GasNet
does not  anticipate any  significant  Year  2000-related  problems with its two
material third party  relationships.  Emdersa has requested Year 2000 compliance
statements  from all of its  suppliers  and has received  assurance of Year 2000
compliance from all its critical suppliers.

      The GPUI Group has received  confirmation  of Year 2000 readiness from all
its critical third parties.

      GPU AR has completed  testing and  confirmation of Year 2000 readiness for
all its critical third parties.

Scenarios and Contingencies

      GPU believes that its Year 2000 preparations will be effective relative to
its mission-critical Year 2000 Components and has established  contingency plans
to deal with problems that may occur in an expeditious manner.  However,  due to
the interconnected  natures of both the electric and gas utility businesses,  it
is not possible to eliminate  the inherent  risk  involved in relying upon third
parties.  While GPU cannot predict what effect, if any, the Year 2000 issue will
have on its operations, one possible scenario could include, among other things,
interruptions  in  delivering  electric  and gas  service  to  customers,  and a
temporary inability to process  transactions,  provide bills or operate electric
generating  stations.  While GPU does not anticipate any "most reasonably likely
worst case Year 2000  scenarios"  that would cause a material  adverse effect on
its results of operations, liquidity and/or financial condition, there can be no
assurance as to the outcome of this matter.

      In June 1999,  the GPU  Energy  companies  filed  with the North  American
Electric  Reliability  Council  (NERC) a report  containing an overview of their
contingency  planning  strategies,  as well as details about certain contingency
plans. The GPU Energy companies and Genco successfully participated in Year 2000
drills coordinated by NERC in April and September 1999. The GPU Energy companies
also conducted several internal tests with favorable results in conjunction with
the drills. In addition, a GPU Energy Year 2000 Event
                                       22


<PAGE>


GPU, Inc. and Subsidiary Companies


Management Plan has been developed,  which provides for the  establishment  of a
Situation   Command  Center  ("SCC")  to  monitor  and  control  potential  Year
2000-related events during critical time frames. All of the GPU Energy companies
will be represented  in the SCC and they will be supported by various  technical
and  support  groups  housed  inside and  outside  the SCC.  The SCC will remain
mobilized until Year 2000-related  events that could potentially occur have been
fully resolved.

      Within  the  GPU  Electric  companies,   Midlands  is  conducting  ongoing
contingency rehearsals,  although the key mission-critical  processes associated
with  management of the  distribution  network have already been  completed with
successful  results.  Midlands is also planning for extra  staffing to deal with
any  potential  problems that may result.  GPU PowerNet has  conducted  scenario
workshops  and drills to identify  critical  Year 2000 risks.  In addition,  GPU
PowerNet  participated in an industry-wide  communication  drill in October 1999
with successful results,  and will participate in a full "transition  rehearsal"
on  November  30,  1999.  A recent  Year  2000  contingency  planning  audit was
conducted by the  Regulator-General  of Australia,  the results of which will be
published in November  1999. GPU PowerNet is also planning for extra staffing to
deal with any  potential  problems  that may  result,  and key  systems  will be
verified and  backed-up.  GPU GasNet will continue  testing at key sites through
November  and  December  1999 to ensure the  viability  of back-up  systems  and
contingency  plans.  GPU GasNet has also identified  various  potential  failure
scenarios and developed  appropriate  responses.  The full  availability  of key
personnel  during  critical  time  frames  has also been  ensured.  Emdersa  has
installed  new  computer  technology,  which  was  designed  to meet  Year  2000
requirements.  Therefore,  Emdersa's  Year  2000  program  has been  focused  on
contingency  planning,  including,  the  provision  of an  alternative  customer
billing system,  alternative communications  technologies,  and having available
personnel capable of manual operation of key facilities.

      The GPUI Group has  developed  detailed  contingency  plans for  corporate
activities,  plant  operations  and  third  party  relationships.   These  plans
prescribe  actions  to be taken to  mitigate  material  adverse  effects  in the
unlikely event of system failures.

      GPU AR has developed  contingency  plans for company  activities and third
party relationships. These plans identify possible system failures and prescribe
actions to be taken to mitigate  material  adverse  effects in the event of such
failures.


                    COMPETITIVE ENVIRONMENT AND RATE MATTERS

GPU Business Plan

      Currently,  and increasingly in the future,  the GPU Energy companies will
serve customers in markets where there will  essentially be capped rates.  Since
the GPU Energy companies expect to exit the merchant  generation business in the
near future,  they will need to supply energy largely from contracted  purchases
and purchases in the open market.  Management  is in the process of  identifying
and  addressing  market  risks.  There can be no  assurance  that the GPU Energy
companies will be able to supply electricity to customers that it
                                       23


<PAGE>


GPU, Inc. and Subsidiary Companies


has obtained at reasonable cost to the respective companies, which could have an
adverse effect on GPU's results of operations.

      GPU  expects  to  be  in  a  regulated   business  (the  transmission  and
distribution  of  electricity).  In the  future,  GPU's  ability  to  seek  rate
increases will be more limited than it has been in the past and, notwithstanding
increases in costs,  rates may be capped for varying periods.  Since GPU will be
exiting  the  merchant  generation  business,  it will  need  to  meet  capacity
obligations and supply energy largely from contracted  purchases and open market
purchases. In addition,  inflation may have various effects on GPU since it will
be a  factor  in  revenue  calculations  in some  jurisdictions,  but may  cause
increased  operating costs with GPU having a limited ability to pass these costs
to its  customers  because of capped rates in other areas.  Management is in the
process of identifying and addressing these market risks, however,  there can be
no assurance that GPU will be able to recover  through these capped rates all of
the costs of the electricity required to be purchased for customers.

      In October 1999,  GPU initiated a program to enhance  shareholder  returns
through  planned cost  reductions of $100 million during the next two years,  by
increasing  operating efficiency and by making investments of $40 million to $50
million to improve the reliability of its domestic business.

      These cost  reductions  will consist of cuts of $55 million in 2000 and an
additional  $45  million  in  2001.  The  GPU  Energy  companies  are  targeting
reductions  of $30 million in 2000 and an additional  $40 million in 2001.  Cost
reductions  will be  achieved  by using new tools from its  enterprise  resource
planning system to eliminate significant amounts of operational overhead expense
and by improving the productivity of all its operations. Midlands will make cost
reductions of $25 million in 2000 and $5 million in 2001.  Cost  reductions will
be achieved by eliminating activities not provided for in its new regulated rate
level  expected  to  take  effect  in  the  Spring  of  2000  and  by  realizing
productivity  benefits from its new systems and organization.  Furthermore,  GPU
plans to raise  at  least  $500  million  in cash  from its  current  investment
portfolio by reducing GPU's ownership in non-core and under- performing assets.

The GPU Energy Companies' Supply Plan

      As  the  GPU  Energy  companies   prepare  to  operate  in  a  competitive
environment,  their supply  planning  strategy  will focus on providing  for the
needs of existing retail customers who do not choose a competitive  supplier and
continue to receive energy supplied by the GPU Energy companies and whom the GPU
Energy companies continue to have an obligation to serve.

      After the pending sales of the GPU Energy companies' generating facilities
have been  completed,  GPU will have 200 MW of capacity and related  energy from
Yards Creek Pumped  Storage  Facility  (Yards Creek)  remaining to meet customer
needs (see the Oyster Creek  section of NUCLEAR  FACILITIES  for a discussion of
the pending sale of Oyster Creek).  The GPU Energy companies also have contracts
with NUG  facilities  totaling  1,681 MW and JCP&L  has  agreements  with  other
utilities  to provide for up to 584 MW of capacity and related  energy.  The GPU
Energy companies have agreed to purchase all of the
                                       24


<PAGE>


GPU, Inc. and Subsidiary Companies


capacity and energy from TMI-1  through  December 31, 2001 and from Oyster Creek
through March 31, 2003. In addition,  the GPU Energy companies have the right to
call the  capacity  of the  Homer  City  station  (942 MW) for two years and the
capacity of the generating  stations being sold to Sithe Energies  (Sithe)(4,117
MW) for three years, from the dates of sale. The GPU Energy companies' remaining
capacity and energy needs will focus on short- to intermediate-term  commitments
(one month to three years) during times of expected high energy price volatility
and reliance on spot market purchases during other periods. Management is in the
process of identifying and addressing the GPU Energy  companies' future capacity
and energy needs, and the impact of customer shopping and changes in demand.

      As a result of the NJBPU and the  PaPUC's  restructuring  orders,  the GPU
Energy companies are required to provide  generation service to customers who do
not choose an alternate supplier (For additional  information,  see the Provider
of Last Resort and Basic Generation  Service sections below.) Given that the GPU
Energy  companies  are  divesting  their  generation  business,  there  will  be
increased  market risks associated with providing  generation  service since the
GPU  Energy  companies  will have to supply  energy  to  non-shopping  customers
entirely from contracted and open market  purchases.  GPU Energy may not be able
to recover the cost of the energy purchased through rates, which in Pennsylvania
are capped for varying periods.  However, as part of the Summary Order, JCP&L is
permitted to recover  reasonable and prudently  incurred costs  associated  with
providing basic generation service.  Management is in the process of identifying
and addressing these market risks,  however,  there can be no assurance that the
GPU Energy companies will be able to supply  electricity to customers who do not
choose an alternate  supplier at a reasonable cost to the respective  companies,
which would have an adverse effect on GPU's results of operations.

Provider of Last Resort

      Under the PaPUC  Restructuring  Orders,  Met-Ed and Penelec customers have
been  permitted to shop for their  generation  supplier since January 1, 1999. A
PaPUC approved competitive bid process will assign provider of last resort (PLR)
service for 20% of Met-Ed and Penelec's retail customers on June 1, 2000, 40% on
June 1,  2001,  60% on June 1,  2002,  and  80% on  June 1,  2003,  to  licensed
generation  suppliers  referred to as Competitive  Default  Service (CDS). If no
qualified  bids for CDS are  received  at or below their  generation  rate caps,
Met-Ed and Penelec  will  continue to provide PLR service at the rate cap levels
until 2010 unless modified by the PaPUC.  Any retail  customers  assigned to CDS
may return to Met-Ed and  Penelec as the default  PLR at no  additional  charge.
Met-Ed and Penelec may meet any remaining PLR  obligation at rates not less than
the lowest rate charged by the winning CDS  provider,  but no higher than Met-Ed
and Penelec's rate cap.

Basic Generation Service Provider

      The NJBPU Summary Order states that JCP&L must provide BGS to those retail
customers  who  choose  to  remain  with  JCP&L as  generation  customers  for a
three-year period ending July 31, 2002. JCP&L's BGS rates will be pre-determined
for the period through July 31, 2003. The  responsibility for BGS after July 31,
2002 will be bid out. Bidders will bid for the right to
                                       25


<PAGE>


GPU, Inc. and Subsidiary Companies


provide  BGS during the year  commencing  August 1, 2002 at the  pre-established
shopping  credits.  Any payment received or required by JCP&L resulting from the
bidding  process will be included in the deferred  balance for future  refund or
recovery.

Generation Asset Divestiture

      In 1997, GPU announced its intention to begin a process to sell, through a
competitive  bid  process,  up to  all  of  the  fossil-fuel  and  hydroelectric
generating facilities owned by the GPU Energy companies.

      In March 1999, Penelec sold its 50% interest in Homer City to a subsidiary
of Edison Mission Energy for approximately $900 million. In July 1999, Penelec's
20% undivided  ownership interest in the Seneca Pumped Storage Facility was sold
to Cleveland  Electric  Illuminating  Company for $43 million.  These sales have
resulted in an after-tax  gain of $28.7  million  during 1999 for the portion of
the gains  related to  wholesale  operations  and the  deferral as a  regulatory
liability  of the  remaining  gain of  $626.9  million  pending  Phase II of the
Pennsylvania restructuring proceeding.

      In  October  1998,  the GPU Energy  companies  agreed to sell to Sithe all
their remaining  fossil-fuel and hydroelectric  generating facilities other than
JCP&L's 50% interest in Yards Creek for a total purchase price of  approximately
$1.7 billion  (JCP&L $442 million;  Met-Ed $677 million;  Penelec $604 million).
The sales are  expected to be  completed  in the fourth  quarter  1999.  The GPU
Energy  companies  have  agreed to assume up to $20  million  (JCP&L $7 million;
Met-Ed $9 million; Penelec $4 million) of employee severance costs for employees
not hired by Sithe.  For  additional  information,  see Note 2,  Accounting  for
Extraordinary and Non-recurring items.

      In  October  1998,  the  GPU  Energy  companies  entered  into  definitive
agreements to sell TMI-1 to AmerGen Energy  Company,  LLC (AmerGen),  which is a
joint  venture  between  PECO Energy and British  Energy.  Terms of the purchase
agreements are summarized as follows:

      -  The total cash purchase  price is  approximately  $100  million,  which
         represents  $23 million to be paid at closing,  and $77 million for the
         nuclear   fuel  in  the  reactor  to  be  paid  in  five  equal  annual
         installments  beginning one year after the closing.  The purchase price
         and  closing  payment are  subject to certain  adjustments  for capital
         expenditures and other items.

      -  AmerGen  will make  contingent  payments  of up to $80  million for the
         period  January 1, 2002  through  December  31, 2010  depending  on the
         actual energy market clearing prices through 2010.

      -  GPU will  purchase the energy and capacity  from TMI-1 from the closing
         through December 31, 2001, at predetermined rates.

      -  At  closing,   GPU  will  make  additional   deposits  into  the  TMI-1
         decommissioning  trusts to bring the  trust  totals up to a maximum  of
         $320 million and AmerGen will then assume all liability and  obligation
         for decommissioning TMI-1.


                                       26


<PAGE>


GPU, Inc. and Subsidiary Companies


      The sale is  subject  to  various  conditions,  including  the  receipt of
satisfactory federal and state regulatory  approvals.  There can be no assurance
as to the outcome of these matters.

      In  October  1999,  JCP&L  agreed  to sell  Oyster  Creek to  AmerGen  for
approximately $10 million. As part of the terms of the transaction, AmerGen will
assume full responsibility for decommissioning the plant. JCP&L would provide at
closing $430 million of decommissioning trust funding as well as funding for the
station's  outage cost,  including the fuel reload for the next refueling outage
scheduled  for  the  Fall  of  2000.  AmerGen  will  repay  these  costs  (up to
approximately  $88  million)  to  JCP&L  in  nine  annual  installments  without
interest,  beginning one year after the closing.  The sale,  which is subject to
various  conditions  including  the  receipt of  satisfactory  federal and state
regulatory  approvals and favorable rulings by the Internal Revenue Service,  is
expected to close in the Spring of 2000.

      The net proceeds from these  generation asset sales will be used to reduce
the capitalization of the respective GPU Energy companies,  repurchase GPU, Inc.
common stock,  fund  previously  incurred  liabilities  in  accordance  with the
Pennsylvania   settlement,   reduce  JCP&L's  company-owned  generation  related
stranded  costs and may also be  applied  to  reduce  short-term  debt,  finance
further acquisitions, and reduce acquisition debt of GPU Electric.

Recent Regulatory Actions

New Jersey Restructuring

      On May 24, 1999,  the NJBPU issued a Summary Order with respect to JCP&L's
rate unbundling,  stranded cost and  restructuring  filings.  This Summary Order
provides for, among other things, the following:

     -    customer  choice of electric  generation  supplier  for all  consumers
          beginning August 1, 1999. On October 25, 1999,  utilities are to begin
          accepting customer selection of suppliers;

     -    a 5% rate reduction commencing August 1, 1999;  additional  reductions
          of 1% in 2000 and 2% in 2001;  and an  additional  net 3% reduction in
          2002  inclusive  of a 5% rate  refund from rates in effect as of April
          30, 1997 for service  rendered on and after August 1, 2002,  partially
          offset by a 2% increase in the Market  Transition  Charge  (MTC).  The
          total rate reduction of 11% will remain in effect through July 2003;

     -    the removal from  regulation of the costs  associated  with  providing
          electric  generation  service.  JCP&L must  provide  basic  generation
          services  (BGS) to retail  customers who do not choose an  alternative
          generation supplier during the three-year period ending July 31, 2002.
          BGS after this period will be bid out;

     -    the  average  shopping  credits  will range from 5.14 cents per KWH in
          1999 to 5.40 cents in 2003;

     -    an average distribution rate of 3.35 cents per KWH;

                                       27


<PAGE>


GPU, Inc. and Subsidiary Companies


     -    the ability to recover stranded costs;

     -    the ability to securitize approximately $400 million of stranded costs
          associated with Oyster Creek (see below for additional information);

     -    effective  August 1, 1999,  JCP&L is no longer  subject to an earnings
          cap;

     -    the  establishment  of a  non-bypassable  societal  benefits charge to
          recover  costs   associated   with  nuclear   plant   decommissioning,
          demand-side management,  manufactured gas plant remediation, universal
          service fund, and consumer education; and

     -    the  NJBPU  will  conduct  an  annual  review  and  assessment  of the
          reasonableness  and  prudency  of  costs  incurred  by  JCP&L  in  the
          procurement of energy and capacity needed to serve BGS load as well as
          of NUG and utility power purchase agreement stranded costs.

In addition,  JCP&L will implement a non-bypassable MTC through which JCP&L will
collect:

     -    above-market  costs  associated  with  long-term NUG and utility power
          purchase agreements;

     -    any under-recovered deferred costs as of August 1, 1999 resulting from
          JCP&L's current levelized energy adjustment clause;

     -    the recovery,  over 11 years, of $130 million in early  retirement and
          severance-related costs should Oyster Creek be retired from service in
          2000; and

     -    the amortization of Oyster Creek sunk costs, pending securitization.

      A final  Restructuring Order containing a full discussion of the issues is
anticipated in the fourth quarter of 1999.

      In  August  1999,  JCP&L  filed  a  petition  with  the  NJBPU  requesting
authorization  to issue  transition bonds to securitize the recovery of bondable
stranded costs  attributable  to the projected net investment in Oyster Creek at
September 1, 2000.  The petition  also requests that the NJBPU order provide for
the imposition and collection of a usage based  non-bypassable  transition  bond
charge (TBC) and for the transfer of the bondable  transition  property relating
to the TBC to another entity.

Pennsylvania Restructuring

      In October 1998, the PaPUC issued amended  Restructuring  Orders approving
Settlement  Agreements  entered  into by Met-Ed  and  Penelec.  An appeal by one
intervenor in the  restructuring  proceedings is pending before the Pennsylvania
Supreme Court. There can be no assurance as to the outcome of this appeal.

      The results of Met-Ed and Penelec's  sale of their  generating  facilities
(see Generation Asset Divestiture) will be addressed in a Phase II of the

                                       28


<PAGE>


GPU, Inc. and Subsidiary Companies


Pennsylvania  restructuring  proceeding.  There  can be no  assurance  as to the
outcome of these matters.

Federal Regulation

      In November 1997, the Federal Energy  Regulatory  Commission (FERC) issued
an order to the PJM Power Pool  which,  among  other  things,  directed  the GPU
Energy companies to implement a single-system transmission rate, effective April
1, 1998. The  implementation  of the  single-system  rate has not affected total
transmission  revenues;  however,  it has increased the pricing for transmission
service in Met-Ed and Penelec's service  territories and reduced the pricing for
transmission service in JCP&L's service territory.

      The GPU Energy  companies have requested the FERC to reconsider its ruling
requiring a single-system transmission rate. The Restructuring Orders for Met-Ed
and Penelec provide for a transmission  and  distribution  rate cap exception to
recover the increase in the  transmission  rate from Met-Ed and Penelec's retail
customers  in the event the FERC denies the request for  reconsideration  of the
single-system  transmission  rate.  The FERC's ruling may also have an effect on
JCP&L's  distribution rates. There can be no assurance as to the outcome of this
matter.

      Several  bills  have  been   introduced   in  Congress   providing  for  a
comprehensive  restructuring  of the  electric  utility  industry.  These  bills
proposed,  among other  things,  retail  choice for all utility  customers,  the
opportunity for utilities to recover their prudently  incurred stranded costs in
varying degrees,  and repeal of both the Public Utility Regulatory  Policies Act
(PURPA) and the Public Utility Holding Company Act of 1935 (PUHCA).

      In April 1999, the Clinton  administration  introduced  the  Comprehensive
Electricity  Competition  Act,  which  proposes a flexible  mandate for customer
choice by January 1, 2003, reliability standards,  environmental provisions, and
the repeal of both PURPA and PUHCA.  The flexible  mandate  allows states to opt
out of the  mandate  if they  believe  consumers  would be  better  served by an
alternative policy.

Nonutility Generation Agreements

      Pursuant to the mandates of PURPA and state regulatory directives, the GPU
Energy companies have been required to enter into power purchase agreements with
NUGs for the purchase of energy and capacity  which  agreements  have  remaining
terms of up to 21 years. As of September 30, 1999,  facilities  covered by these
agreements  having  1,681 MW (JCP&L 928 MW;  Met-Ed 348 MW;  Penelec  405 MW) of
capacity were in service.

      The NJBPU Summary  Order and PaPUC  Restructuring  Orders  provide the GPU
Energy  companies  assurance  of full  recovery  of their NUG  costs  (including
above-market  NUG costs and certain buyout costs).  Accordingly,  the GPU Energy
companies have recorded a liability of $3.3 billion (JCP&L $1.6 billion;  Met-Ed
$0.7  billion;  Penelec  $1  billion)  on the  Consolidated  Balance  Sheets for
above-market  NUG costs  which is fully  offset by  Regulatory  assets,  net. In
addition,  JCP&L  recorded a liability of $70 million for  above-market  utility
purchase power agreements with a corresponding offset to Regulatory assets,

                                       29


<PAGE>


GPU, Inc. and Subsidiary Companies


net since there is  assurance of full  recovery.  The GPU Energy  companies  are
continuing  efforts to reduce the  above-market  costs of these  agreements  and
will,  where  beneficial,  attempt to renegotiate  the prices of the agreements,
offer  contract   buyouts  and  attempt  to  convert   must-run   agreements  to
dispatchable  agreements.  There can be no  assurance  as to the extent to which
these  efforts  will  be  successful.  See  the  Competition  and  the  Changing
Regulatory  Environment section of Note 1 of the Notes to Consolidated Financial
Statements.)

      In 1998,  Met-Ed  entered into a definitive  buyout  agreement  with Solar
Turbines Inc.  (Solar),  which was contingent upon Met-Ed  obtaining a final and
non-appealable  PaPUC order  allowing  for full  recovery of the buyout  payment
through  retail  rates.  In September  1999,  an amended  agreement was executed
obligating Solar to refund to Met-Ed any buyout amounts paid if the PaPUC issues
an order  rescinding  its current  approval of the buyout  which was received as
part of Met-Ed's  Restructuring  Order.  In October 1999, in accordance with the
amended  agreement,  Met-Ed paid Solar $51.3 million,  which represents the full
amount of the buyout costs.


                               ACCOUNTING MATTERS

      Statement of Financial  Accounting  Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation,"  applies to regulated utilities
that have the  ability to recover  their  costs  through  rates  established  by
regulators  and charged to customers.  In June 1997,  the  Financial  Accounting
Standards  Board's (FASB) Emerging Issues Task Force (EITF Issue 97-4) concluded
that  utilities  are no longer  subject to FAS 71, for the  relevant  portion of
their business, when they know details of their individual transition plans to a
competitive  electric  generation  marketplace.  The EITF  also  concluded  that
utilities can continue to carry previously recorded regulated assets, as well as
any newly established  regulated assets (including those related to generation),
on their balance  sheets if  regulators  have  guaranteed a regulated  cash flow
stream to recover the cost of these assets.

      On May 24,  1999,  the NJBPU  issued a  Summary  Order  regarding  JCP&L's
unbundling,   stranded  cost  and   restructuring   filings  which   essentially
deregulated the electric generation portion of JCP&L's business. Accordingly, in
the second quarter of 1999,  JCP&L  discontinued  the  application of FAS 71 and
adopted the  provisions of Statement of Financial  Accounting  Standards No. 101
(FAS  101),  "Regulated   Enterprises  Accounting  for  the  Discontinuation  of
Application  of FASB  Statement  No. 71" and EITF Issue 97-4 with respect to its
electric generation operations. In 1998, Met-Ed and Penelec, in conjunction with
receiving their Restructuring Orders, discontinued the application of FAS 71 and
adopted the provisions of FAS 101 and EITF 97-4 for their generation  operation.
The  transmission  and  distribution   portion  of  the  GPU  Energy  companies'
operations continue to be subject to the provisions of FAS 71.

      In accordance with the Statement of Financial Accounting Standards No. 121
(FAS  121),  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived  Assets to Be Disposed  Of,"  impairment  tests  performed by the GPU
Energy  companies  on  the  net  book  values  of  their  generation  facilities
determined that the net investments in TMI-1 and Oyster Creek were impaired.

                                       30


<PAGE>


GPU, Inc. and Subsidiary Companies


As of September 30, 1999, this resulted in write-downs of $530 million (pre-tax)
and $676 million  (pre-tax),  respectively  to reflect TMI-1 and Oyster  Creek's
fair market  values.  The majority of the TMI-1  write-down was recorded in 1998
while the Oyster Creek  write-down was recorded in the second and third quarters
of 1999.  Of the  amount  written  down for TMI-1,  however,  $520  million  was
reestablished as a regulatory asset because  management  believes it is probable
of  recovery   in  the   restructuring   process  and  $10  million   (the  FERC
jurisdictional portion) was charged to expense as an extraordinary item in 1998.
The  total  impairment  amount  of  Oyster  Creek  has been  reestablished  as a
regulatory asset since the Summary Order provides  recovery in the restructuring
process.

      Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting
for Derivative  Instruments and Hedging Activities"  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments  embedded in other contracts,  and for hedging  activities.  FAS 133
requires  that  companies   recognize  all   derivatives  as  either  assets  or
liabilities on the balance sheet and measure those instruments at fair value. In
accordance  with FAS  133,  GPU  will be  required  to  include  its  derivative
transactions  on its balance sheet at fair value,  and recognize the  subsequent
changes in fair value as either  gains or losses in earnings or report them as a
component of other  comprehensive  income,  depending  upon the intended use and
designation  of the  derivative as a hedge.  FAS 133 is effective for all fiscal
quarters of fiscal years  beginning  after June 15, 2000. GPU will adopt FAS 133
in the first quarter of 2001 and is in the process of  evaluating  the impact of
this statement.



                                       31


<PAGE>



                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                         In Thousands
                                                --------------------------------
                                                September 30,       December 31,
                                                     1999               1998
                                                ------------        ------------
                                                 (Unaudited)

ASSETS
Utility Plant:
  Transmission, distribution and
  general plant                                   $11,286,747      $ 7,579,455
  Generation plant                                  2,401,482        3,445,984
                                                   ----------       ----------
      Utility plant in service                     13,688,229       11,025,439
  Accumulated depreciation                         (5,484,955)      (4,460,341)
                                                   ----------       ----------
      Net utility plant in service                  8,203,274        6,565,098
  Construction work in progress                       164,373           94,005
  Other, net                                           98,481          145,792
                                                   ----------       ----------
      Net utility plant                             8,466,128        6,804,895
                                                   ----------       ----------

Other Property and Investments:
  Equity investments                                   88,697          667,998
  Goodwill, net                                     2,781,270          545,262
  Nuclear decommissioning trusts, at market
      (Note 1)                                        757,237          716,274
  Nuclear fuel disposal trust, at market              118,132          116,871
  Other, net                                          513,625          253,538
                                                   ----------       ----------
      Total other property and investments          4,258,961        2,299,943
                                                   ----------       ----------

Current Assets:
  Cash and temporary cash investments                 241,309           72,755
  Special deposits                                     42,956           62,673
  Accounts receivable:
    Customers, net                                    381,868          286,278
    Other                                             292,484          126,088
  Unbilled revenues                                   133,377          144,076
  Materials and supplies, at average
     cost or less:
    Construction and maintenance                      149,909          155,827
    Fuel                                               26,072           42,697
  Investments held for sale                            47,818           48,473
  Deferred income taxes                                24,560           47,521
  Prepayments                                         218,057           76,021
                                                   ----------       ----------
      Total current assets                          1,558,410        1,062,409
                                                   ----------       ----------

Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                   5,537,251        3,906,228
  Deferred income taxes                             2,333,768        2,004,278
  Other                                               510,670          210,356
                                                   ----------       ----------
      Total deferred debits and other assets        8,381,689        6,120,862
                                                   ----------       ----------



      Total Assets                                $22,665,188      $16,288,109
                                                   ==========       ==========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


                                       32


<PAGE>


                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets


                                                          In Thousands
                                                 September 30,      December 31,
                                                 ------------------------------
                                                      1999              1998
                                                 ------------       ------------
                                                  (Unaudited)
LIABILITIES AND CAPITALIZATION
Capitalization:
  Common stock                                     $   331,958      $   331,958
  Capital surplus                                    1,031,063        1,011,310
  Retained earnings                                  2,482,862        2,230,425
  Accumulated other
     comprehensive income/(loss) (Note 6)              (13,220)         (31,304)
                                                    ----------       ----------
      Total                                          3,832,663        3,542,389
  Reacquired common stock, at cost                    (232,549)         (77,741)
                                                    ----------       ----------
      Total common stockholders' equity              3,600,114        3,464,648
  Cumulative preferred stock:
    With mandatory redemption                           81,500           86,500
    Without mandatory redemption                        37,741           66,478
  Subsidiary-obligated mandatorily redeemable
    preferred securities                               225,000          330,000
  Trust preferred securities                           200,000              -
  Long-term debt                                     6,876,126        3,825,584
                                                    ----------       ----------
      Total capitalization                          11,020,481        7,773,210
                                                    ----------       ----------

Current Liabilities:
  Securities due within one year                       381,809          563,683
  Notes payable                                        823,500          368,607
  Obligations under capital leases                     125,936          126,480
  Accounts payable                                     506,387          394,815
  Taxes accrued                                        385,321           92,339
  Interest accrued                                      92,070           81,931
  Deferred energy credits                               47,741            2,411
  Other                                                637,395          377,594
                                                    ----------       ----------
      Total current liabilities                      3,000,159        2,007,860
                                                    ----------       ----------

Deferred Credits and Other Liabilities:
  Deferred income taxes                              3,556,621        3,044,947
  Unamortized investment tax credits                    96,772          114,308
  Three Mile Island Unit 2 future costs                493,551          483,515
  Power purchase contract loss liability             3,392,798        1,803,820
  Other                                              1,104,806        1,060,449
                                                    ----------       ----------
      Total deferred credits and
      other liabilities                              8,644,548        6,507,039
                                                    ----------       ----------


Commitments and Contingencies (Note 1)



      Total Liabilities and Capitalization         $22,665,188      $16,288,109
                                                    ==========       ==========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


                                       33


<PAGE>
<TABLE>


                       GPU, INC. AND SUBSIDIARY COMPANIES
<CAPTION>

                        Consolidated Statements of Income
                                   (Unaudited)
                                                                   In Thousands
                                                              (Except Per Share Data)
                                                       Three Months                  Nine Months
                                                    Ended September 30,         Ended September 30,
                                                    -------------------         -------------------
                                                       1999          1998           1999           1998
                                                       ----          ----           ----           ----

<S>                                                <C>           <C>            <C>            <C>
Operating Revenues                                 $1,424,286    $1,168,779     $3,385,689     $3,226,975
                                                    ---------     ---------      ---------      ---------

Operating Expenses:
   Fuel                                                86,448       119,692        255,367        316,745
   Power purchased and interchanged                   446,671       338,275        959,461        857,490
   Deferral of energy and capacity
     costs, net                                       (23,194)       (7,585)       (23,050)       (18,915)
   Other operation and maintenance                    347,144       308,836        860,495        810,064
   Depreciation and amortization                      139,799       127,592        382,894        389,608
   Taxes, other than income taxes                      50,448        56,019        142,892        170,777
                                                    ---------     ---------      ---------      ---------
      Total operating expenses                      1,047,316       942,829      2,578,059      2,525,769
                                                    ---------     ---------      ---------      ---------

Operating Income                                      376,970       225,950        807,630        701,206
                                                    ---------     ---------      ---------      ---------

Other Income and Deductions:
   Allowance for other funds used during
     construction                                          52           188            217            737
   Equity in undistributed earnings
    of affiliates, net                                  2,871        12,038         79,370         42,882
   Other income, net                                    9,049         3,465         77,283         44,377
                                                    ---------     ---------      ---------      ---------
      Total other income and deductions                11,972        15,691        156,870         87,996
                                                    ---------     ---------      ---------      ---------

Income Before Interest Charges
   and Preferred Dividends                            388,942       241,641        964,500        789,202
                                                    ---------     ---------      ---------      ---------

Interest Charges and Preferred Dividends:
   Long-term debt                                     126,929        78,309        285,768        240,243
   Trust preferred securities                           3,673         -              4,673            -
   Subsidiary-obligated mandatorily
     redeemable preferred securities                    5,308         7,222         19,752         21,666
   Other interest                                       6,758         8,933         18,769         26,776
   Allowance for borrowed funds used
     during construction                               (1,343)       (1,201)        (2,987)        (3,548)
   Preferred stock dividends of subsidiaries,
     inclusive of $1,268 loss on
     reacquisition (1st Qtr. 1999)                      2,338         2,624          8,628          8,516
                                                    ---------     ---------      ---------      ---------
      Total interest charges and
        preferred dividends                           143,663        95,887        334,603        293,653
                                                    ---------     ---------      ---------      ---------

Income Before Income Taxes
   and Minority Interest                              245,279       145,754        629,897        495,549
   Income taxes                                        98,284        56,355        242,573        191,684
   Minority interest net income                          (552)          708          1,796          1,457
                                                    ---------     ---------      ---------      ---------

Income Before Extraordinary Item                      147,547        88,691        385,528        302,408
   Extraordinary item (net of income taxes
     of $178,790 and $16,300)                             -         249,355            -         ( 25,755)
                                                    ---------     ---------      ---------      ---------
Net Income                                         $  147,547    $  338,046     $  385,528     $  276,653
                                                    =========     =========      =========      =========

Basic - Earnings Per Avg. Common Share
         Before Extraordinary Item                 $     1.18    $     0.69     $     3.06     $     2.38
Extraordinary Item                                        -            1.96              -          (0.20)
                                                    ---------     ---------      ---------     -----------
Basic - Earnings Per Avg. Common Share             $     1.18    $     2.65     $     3.06     $     2.18
                                                    =========     =========      =========      =========
         Avg. Common Shares Outstanding               125,046       127,940        126,123        126,796
                                                    =========     =========      =========      =========

Diluted - Earnings Per Avg. Common Share
           Before Extraordinary Item               $     1.18    $     0.69     $     3.05     $     2.38
Extraordinary Item                                        -            1.96              -          (0.20)
                                                    ---------     ---------      ---------     -----------
Diluted - Earnings Per Avg. Common Share           $     1.18    $     2.65     $     3.05     $     2.18
                                                    =========     =========      =========      =========
           Avg. Common Shares Outstanding             125,307       128,068        126,383        127,019
                                                    =========     =========      =========      =========

Cash Dividends Paid Per Share                      $     .530    $     .515     $    1.575     $     1.53
                                                    =========     =========      =========      =========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       34
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                         In Thousands
                                                                 ---------------------------
                                                                         Nine Months
                                                                      Ended September 30,
                                                                 ----------------------------
                                                                       1999            1998
                                                                       ----            ----
Operating Activities:
<S>                                                              <C>               <C>
   Net income                                                    $   385,528       $ 276,653
   Extraordinary item (net of income tax
      benefit of $16,300)                                                -            25,755
                                                                  ----------        --------
   Income before extraordinary item                                  385,528         302,408
   Adjustments to reconcile income to cash provided:
     Depreciation and amortization                                   401,340         414,688
     Amortization of property under capital leases                    37,538          40,323
     NJBPU restructuring rate order                                  115,000             -
     PaPUC restructuring rate orders                                     -            68,500
     Gain on sale of investments                                     (40,209)        (43,600)
     Equity in undistributed earnings
       of affiliates, net of distributions received                  (75,724)        (30,025)
     Nuclear outage maintenance costs, net                            (7,184)         12,461
     Deferred income taxes and investment tax
       credits, net                                                 (436,712)       (123,004)
     Deferred energy and capacity costs, net                         (22,767)        (17,835)
     Allowance for other funds used during construction                 (217)           (737)
   Changes in working capital:
     Receivables                                                     (65,913)         (2,986)
     Materials and supplies                                            5,205           5,480
     Special deposits and prepayments                                (84,240)        (57,113)
     Payables and accrued liabilities                                237,482          17,479
   Nonutility generation contract buyout costs                       (41,500)        (21,667)
   Other, net                                                         10,603           8,428
                                                                  ----------        --------
      Net cash provided by operating activities                      418,230         572,800
                                                                  ----------        --------

Investing Activities:
   Capital expenditures and investments                           (1,947,151)       (262,582)
   Proceeds from sale of investments                                 937,540         163,768
   Contributions to decommissioning trusts                           (26,531)        (38,057)
   Other, net                                                         79,290          14,256
                                                                  ----------        --------
      Net cash required by investing activities                     (956,852)       (122,615)
                                                                  ----------        --------

Financing Activities:
   Issuance of trust preferred securities                            193,070             -
   Issuance of long-term debt                                      1,792,828         227,855
   Increase/(decrease) in notes payable, net                         788,200         (54,821)
   Retirement of long-term debt                                   (1,540,183)       (476,389)
   Capital lease principal payments                                  (36,185)        (38,695)
   Reacquisition of common stock                                    (160,112)            -
   Issuance of common stock                                              -           269,448
   Redemption of subsidiary-obligated mandatorily
     redeemable preferred securities                                (105,383)            -
   Dividends paid on common stock                                   (199,023)       (192,149)
   Redemption of preferred stock of subsidiaries                     (35,004)        (15,000)
                                                                  ----------        --------
      Net cash provided/(required)
        by financing activities                                      698,208        (279,751)
                                                                  ----------        --------

Effect of exchange rate changes on cash                                8,968          (7,257)
                                                                  ----------        --------

Net increase in cash and temporary cash
  investments from above activities                                  168,554         163,177
Cash and temporary cash investments, beginning of year                72,755          85,099
                                                                  ----------        --------
Cash and temporary cash investments, end of period               $   241,309       $ 248,276
                                                                  ==========        ========

Supplemental Disclosure:
   Interest and preferred dividends paid                         $   322,348       $ 295,338
                                                                  ==========        ========
   Income taxes paid                                             $   345,254       $ 254,411
                                                                  ==========        ========
   New capital lease obligations incurred                        $    36,962       $  30,587
                                                                  ==========        ========
   Common stock dividends declared but not paid                  $       -         $     -
                                                                  ==========       =========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       35

</TABLE>

<PAGE>
<TABLE>

<CAPTION>

           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                           Consolidated Balance Sheets

                                                                              In Thousands
                                                                     --------------------------------
                                                                     September 30,       December 31,
                                                                         1999                1998
                                                                     ------------        ------------
                                                                      (Unaudited)

ASSETS
Utility Plant:
<S>                                                                    <C>              <C>
  Transmission, distribution, and general plant                        $3,160,308       $3,108,697
  Generation plant                                                      1,068,374        1,646,576
                                                                        ---------        ---------
      Utility plant in service                                          4,228,682        4,755,273
  Accumulated depreciation                                             (2,349,995)      (2,217,108)
                                                                        ---------        ---------
      Net utility plant in service                                      1,878,687        2,538,165
  Construction work in progress                                            71,775           48,126
  Other, net                                                               38,636           98,491
                                                                        ---------        ---------
      Net utility plant                                                 1,989,098        2,684,782
                                                                        ---------        ---------

Other Property and Investments:
  Nuclear decommissioning trusts, at market (Note 1)                      461,387          422,277
  Nuclear fuel disposal trust, at market                                  118,132          116,871
  Other, net                                                                1,796            9,596
                                                                        ---------        ---------
       Total other property and investments                               581,315          548,744
                                                                        ---------        ---------

Current Assets:
  Cash and temporary cash investments                                       1,070            1,850
  Special deposits                                                          3,461            6,047
  Accounts receivable:
    Customers, net                                                        231,727          152,120
    Other                                                                  48,071           32,562
  Unbilled revenues                                                        82,946           56,391
  Materials and supplies, at average cost or less:
    Construction and maintenance                                           20,603           79,863
    Fuel                                                                   10,203           13,144
  Deferred income taxes                                                     3,465           20,812
  Prepayments                                                              68,280           27,648
                                                                        ---------        ---------
      Total current assets                                                469,826          390,437
                                                                        ---------        ---------

Deferred Debits and Other Assets:
   Regulatory assets, net (Note 1)                                      3,014,096          763,500
   Deferred income taxes                                                  191,741          179,237
  Other                                                                    15,078           15,422
                                                                        ---------        ---------
      Total deferred debits and other assets                            3,220,915          958,159
                                                                        ---------        ---------






      Total Assets                                                     $6,261,154       $4,582,122
                                                                        =========        =========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.




                                       36

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                           Consolidated Balance Sheets


                                                                              In Thousands
                                                                     --------------------------------
                                                                     September 30,       December 31,
                                                                          1999               1998
                                                                     ------------        ------------
                                                                      (Unaudited)

LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                                    <C>              <C>
  Common stock                                                         $  153,713       $  153,713
  Capital surplus                                                         510,769          510,769
  Retained earnings                                                       886,621          893,016
  Accumulated other comprehensive income/(loss)(Note 6)                      (425)            (425)
                                                                        ---------        ---------
      Total common stockholder's equity                                 1,550,678        1,557,073
  Cumulative preferred stock:
    With mandatory redemption                                              81,500           86,500
    Without mandatory redemption                                           37,741           37,741
  Company-obligated mandatorily redeemable
    preferred securities                                                  125,000          125,000
   Trust preferred securities                                                 -                -
  Long-term debt                                                        1,133,700        1,173,532
                                                                        ---------        ---------
      Total capitalization                                              2,928,619        2,979,846
                                                                        ---------        ---------

Current Liabilities:
  Securities due within one year                                           42,513            2,512
  Notes payable                                                            84,000          122,344
  Obligations under capital leases                                         71,947           85,366
  Accounts payable:
    Affiliates                                                             68,435           40,861
    Other                                                                  92,960           80,233
  Taxes accrued                                                            32,582            5,559
  Interest accrued                                                         28,326           26,678
  Deferred energy credits                                                  47,741            2,411
  Other                                                                    67,301          104,408
                                                                        ---------        ---------
      Total current liabilities                                           535,805          470,372
                                                                        ---------        ---------

Deferred Credits and Other Liabilities:
  Deferred income taxes                                                   585,953          670,961
  Unamortized investment tax credits                                       46,884           50,225
   Three Mile Island Unit 2 future costs                                  123,395          120,904
   Nuclear fuel disposal fee                                              146,229          141,270
   Power purchase contract loss liability                               1,657,939              -
  Other                                                                   236,330          148,544
                                                                        ---------        ---------
      Total deferred credits and other liabilities                      2,796,730        1,131,904
                                                                        ---------        ---------


Commitments and Contingencies (Note 1)

      Total Liabilities and Capitalization                             $6,261,154       $4,582,122
                                                                        =========        =========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.




                                       37

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                        Consolidated Statements of Income
                                   (Unaudited)

                                                                        In Thousands
                                                         ---------------------------------------------
                                                            Three Months                  Nine Months
                                                         Ended September 30,     Ended September 30,
                                                         ----------------------- -----------------------

                                                           1999          1998          1999         1998
                                                           ----          ----          ----         ----

<S>                                                     <C>           <C>          <C>           <C>
Operating Revenues                                      $ 670,245     $ 647,625    $1,578,159    $1,598,853
                                                         --------      --------     ---------     ---------

Operating Expenses:
   Fuel                                                    31,399        29,709        75,114        72,453
   Power purchased and interchanged:
     Affiliates                                            53,831        31,320       111,419        46,388
     Others                                               220,614       193,237       518,972       501,942
   Deferral of energy and capacity costs, net             (23,194)       (7,585)      (23,050)      (18,915)
   Other operation and maintenance                        114,211       140,632       329,956       354,392
   Depreciation and amortization                           59,859        55,435       186,917       187,114
   Taxes, other than income taxes                          18,679        27,796        59,573        75,330
                                                         --------      --------     ---------     ---------
      Total operating expenses                            475,399       470,544     1,258,901     1,218,704
                                                         --------      --------     ---------    ----------

Operating Income                                          194,846       177,081       319,258       380,149
                                                         --------      --------     ---------     ---------

Other Income and Deductions:
   Allowance for other funds used during
     construction                                             -             184           123           652
   Other income, net                                        1,693         2,314         9,175         7,232
                                                         --------      --------    ----------     ---------
      Total other income and deductions                     1,693         2,498         9,298         7,884
                                                         --------      --------    ----------     ---------

Income Before Interest Charges                            196,539       179,579       328,556       388,033
                                                         --------      --------     ---------     ---------

Interest Charges:
   Long-term debt                                          21,792        21,814        65,404        65,455
   Company-obligated mandatorily
     redeemable preferred securities                        2,675         2,675         8,025         8,025
   Other interest                                           3,112         3,058         7,626         8,645
   Allowance for borrowed funds used
     during construction                                     (633)         (418)       (1,319)       (1,336)
                                                         --------      --------     ---------     ---------
      Total interest charges                               26,946        27,129        79,736        80,789
                                                         --------      --------     ---------     ---------

Income Before Income Taxes                                169,593       152,450       248,820       307,244
   Income taxes                                            66,690        60,843        98,075       122,536
                                                         --------      --------     ---------     ---------
Net Income                                                102,903        91,607       150,745       184,708
   Preferred stock dividends                                2,338         2,330         7,140         7,633
                                                         --------      --------     ---------     ---------
Earnings Available for Common Stock                     $ 100,565     $  89,277    $  143,605    $  177,075
                                                         ========      ========     =========     =========





The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.






                                       38
</TABLE>

<PAGE>
<TABLE>

<CAPTION>

           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                         In Thousands
                                                                   -------------------------
                                                                          Nine Months
                                                                      Ended September 30,
                                                                   --------------------------
                                                                      1999            1998
                                                                      ----            ----
Operating Activities:
<S>                                                                <C>             <C>
   Net income                                                      $ 150,745       $ 184,708
   Adjustments to reconcile income to cash provided:
     Depreciation and amortization                                   209,045         206,758
     Amortization of property under capital leases                    22,659          22,010
     NJBPU restructuring rate order                                  115,000             -
     Nuclear outage maintenance costs, net                            (3,673)          5,393
     Deferred income taxes and investment tax
       credits, net                                                  (29,932)        (37,052)
     Deferred energy and capacity costs, net                         (22,767)        (17,835)
     Allowance for other funds used
       during construction                                              (123)           (652)
   Changes in working capital:
     Receivables                                                    (121,671)        (43,577)
     Materials and supplies                                           15,518           2,580
     Special deposits and prepayments                                (38,046)       ( 51,259)
     Payables and accrued liabilities                                 67,938          62,009
   Nonutility generation contract buyout costs                       (35,500)        (15,000)
   Other, net                                                          8,046          25,127
                                                                    --------        --------
      Net cash provided
        by operating activities                                      337,239         343,210
                                                                    --------        --------

Investing Activities:
   Capital expenditures and investments                              (99,526)       (111,704)
   Contributions to decommissioning trusts                           (19,777)        (20,775)
   Other, net                                                          1,743          (6,214)
                                                                    --------        --------
      Net cash used
        for investing activities                                    (117,560)       (138,693)
                                                                    --------        --------

Financing Activities:
   Decrease in notes payable, net                                    (38,344)        (42,761)
   Retirement of long-term debt                                          (12)            -
   Capital lease principal payments                                  (20,057)        (21,965)
   Dividends paid on common stock                                   (150,000)       (110,000)
   Dividends paid on preferred stock                                  (7,046)         (7,939)
   Redemption of preferred stock                                      (5,000)        (15,000)
                                                                    ---------       --------
      Net cash required
        by financing activities                                     (220,459)       (197,665)
                                                                    --------        --------

Net increase/(decrease) in cash and temporary cash
  investments from above activities                                     (780)          6,852
Cash and temporary cash investments, beginning of year                 1,850           2,994
                                                                    --------        --------
Cash and temporary cash investments, end of period                 $   1,070       $   9,846
                                                                    ========        ========

Supplemental Disclosure:
   Interest and preferred dividends paid                           $  85,460       $  83,893
                                                                    ========        ========
   Income taxes paid                                               $  84,130       $ 139,334
                                                                    ========        ========
   New capital lease obligations incurred                          $   9,239       $  30,515
                                                                    ========        ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


                                       39

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                              In Thousands
                                                                     --------------------------------
                                                                     September 30,       December 31,
                                                                         1999                1998
                                                                     ------------        ------------
                                                                      (Unaudited)

ASSETS
Utility Plant:
<S>                                                                    <C>              <C>
   Transmission, distribution and general plant                        $1,508,471       $1,481,958
  Generation plant                                                        762,059          765,669
                                                                        ---------        ---------
      Utility plant in service                                          2,270,530        2,247,627
  Accumulated depreciation                                             (1,051,531)      (1,008,438)
                                                                        ---------        ---------
      Net utility plant in service                                      1,218,999        1,239,189
  Construction work in progress                                            22,776           19,380
  Other, net                                                               36,509           27,819
                                                                        ---------        ---------
      Net utility plant                                                 1,278,284        1,286,388
                                                                        ---------        ---------

Other Property and Investments:
   Nuclear decommissioning trusts, at market (Note 1)                     213,523          211,194
  Other, net                                                                6,167           11,742
                                                                        ---------        ---------
      Total other property and investments                                219,690          222,936
                                                                        ---------        ---------

Current Assets:
  Cash and temporary cash investments                                      44,949              442
  Special deposits                                                            214            1,062
  Accounts receivable:
    Customers, net                                                         64,631           60,012
    Other                                                                  50,587           41,895
  Unbilled revenues                                                        24,922           43,687
  Materials and supplies, at average cost or less:
    Construction and maintenance                                           18,289           24,727
    Fuel                                                                   10,260           12,218
  Deferred income taxes                                                     1,954            2,945
  Prepayments                                                              24,588           20,616
                                                                        ---------        ---------
      Total current assets                                                240,394          207,604
                                                                        ---------        ---------

Deferred Debits and Other Assets:
   Regulatory assets, net (Note 1)                                      1,566,514        1,615,726
   Deferred income taxes                                                  641,318          714,202
  Other                                                                    19,517           18,113
                                                                        ---------        ---------
      Total deferred debits and other assets                            2,227,349        2,348,041
                                                                        ---------        ---------







      Total Assets                                                     $3,965,717       $4,064,969
                                                                        =========        =========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.




                                       40

</TABLE>

<PAGE>
<TABLE>

<CAPTION>

              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets


                                                                              In Thousands
                                                                     --------------------------------
                                                                     September 30,       December 31,
                                                                         1999                1998
                                                                     -----------         ------------
                                                                      (Unaudited)

LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                                    <C>              <C>
  Common stock                                                         $   66,273       $   66,273
  Capital surplus                                                         400,200          370,200
  Retained earnings                                                       272,081          234,066
  Accumulated other comprehensive income (Note 6)                          19,401           16,520
                                                                        ---------        ---------
      Total common stockholder's equity                                   757,955          687,059
  Cumulative preferred stock                                                  -             12,056
  Company-obligated mandatorily redeemable
    preferred securities                                                  100,000          100,000
  Trust preferred securities                                              100,000              -
  Long-term debt                                                          496,882          546,904
                                                                        ---------        ---------
      Total capitalization                                              1,454,837        1,346,019
                                                                        ---------        ---------

Current Liabilities:
  Securities due within one year                                           80,025           30,024
  Notes payable                                                               -             79,540
  Obligations under capital leases                                         35,696           27,135
  Accounts payable:
    Affiliates                                                            124,094           75,933
    Other                                                                  17,015          102,390
  Taxes accrued                                                            13,672           19,463
  Interest accrued                                                         10,973           16,747
  Other                                                                    82,388           42,598
                                                                        ---------        ---------
      Total current liabilities                                           363,863          393,830
                                                                        ---------        ---------

Deferred Credits and Other Liabilities:
  Deferred income taxes                                                   995,417        1,010,982
  Unamortized investment tax credits                                       25,681           27,157
  Three Mile Island Unit 2 future costs                                   246,690          241,707
  Nuclear fuel disposal fee                                                33,032           31,912
  Power purchase contract loss liability                                  759,565          787,440
  Other                                                                    86,632          225,922
                                                                        ---------        ---------
      Total deferred credits and other liabilities                      2,147,017        2,325,120
                                                                        ---------        ---------



Commitments and Contingencies (Note 1)



      Total Liabilities and Capitalization                             $3,965,717       $4,064,969
                                                                        =========        =========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.





                                       41

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income
                                   (Unaudited)

                                                                        In Thousands
                                                       -------------------------------------------------------
                                                             Three Months                Nine Months
                                                         Ended September 30,      Ended September 30,
                                                       ------------------------   ----------------------------
                                                            1999         1998           1999          1998

<S>                                                     <C>           <C>           <C>          <C>
Operating Revenues                                      $ 280,235     $ 229,051     $  707,402       $ 689,829
                                                         --------      --------      ---------        --------

Operating Expenses:
   Fuel                                                    26,162        28,079         75,305          80,322
   Power purchased and interchanged:
     Affiliates                                               863         7,122          3,071          12,540
     Others                                                84,541        68,413        171,538         168,896
   Other operation and maintenance                         58,155        68,586        164,072
175,871Depreciation and amortization                       19,004        29,879         57,324          82,597
   Taxes, other than income taxes                          10,253        13,368         33,960          44,421
                                                         --------      --------      ---------       ---------
      Total operating expenses                            198,978       215,447        505,270         564,647
                                                         --------      --------      ---------       ---------
Operating Income                                           81,257        13,604        202,132         125,182
                                                         --------      --------      ---------       ---------

Other Income and Deductions:
   Allowance for other funds used during
     construction                                              52             4             94            85
   Other income/(expense), net                               (679)       (5,417)         2,357       (14,798)
                                                         --------      --------      ---------      --------
      Total other income and deductions                      (627)       (5,413)         2,451       (14,713)
                                                         --------      --------      ---------      --------

Income Before Interest Charges                             80,630         8,191        204,583       110,469
                                                         --------      --------      ---------      --------

Interest Charges:
   Long-term debt                                          10,622        10,623         31,869        31,870
   Trust preferred securities                               1,838           -            2,532           -
   Company-obligated mandatorily
     redeemable preferred securities                        2,250         2,250          6,750         6,750
   Other interest                                           1,300         2,017          5,020         6,570
   Allowance for borrowed funds used
     during construction                                     (332)         (151)          (790)         (591)
                                                         --------      --------      ---------     ---------
      Total interest charges                               15,678        14,739         45,381        44,599
                                                         --------      --------      ---------     ----------

Income/(Loss) Before Income Taxes                          64,952        (6,548)       159,202        65,870
   Income taxes                                            23,330        (3,004)        65,606        26,136
                                                        ---------      --------      ---------     ---------

Income/(Loss) Before Extraordinary Item                    41,622        (3,544)        93,596        39,734
  Extraordinary item (net of income taxes
   of $128,102 and $4,708)                                    -         180,475            -          (6,805)
                                                         --------      --------      ---------     ---------

Net Income                                                 41,622       176,931         93,596        32,929
   Preferred stock dividends                                  -             120             66           362
   Loss on preferred stock reacquisition                      -             -              542           -
                                                         --------      --------      ---------     ----------
Earnings Available for Common Stock                     $  41,622     $ 176,811     $   92,988    $   32,567
                                                         ========      ========      =========     =========



The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.



                                       42

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                         In Thousands
                                                                    ------------------------
                                                                         Nine Months
                                                                     Ended September 30,
                                                                    ------------------------
                                                                      1999         1998
                                                                      ----         ----
Operating Activities:
<S>                                                                <C>             <C>
   Net income                                                      $  93,596       $  32,929
   Extraordinary item (net of income tax
      benefit of $4,708)                                                 -             6,805
                                                                    --------        --------
   Income before extraordinary item                                   93,596          39,734
   Adjustments to reconcile income to cash provided:
     Depreciation and amortization                                    59,942          87,025
     Amortization of property under capital leases                     9,921          11,011
     PaPUC restructuring rate orders                                     -            32,900
     Nuclear outage maintenance costs, net                            (2,338)          4,709
     Deferred income taxes and investment tax
       credits, net                                                   34,929         (36,848)
     Allowance for other funds used
       during construction                                               (94)            (85)
   Changes in working capital:
     Receivables                                                     (13,310)        (19,474)
     Materials and supplies                                            8,395           2,162
     Special deposits and prepayments                                 (3,124)         (5,251)
     Payables and accrued liabilities                                 (8,989)        (16,513)
  Nonutility generation contract buyout costs                         (2,500)         (6,667)
  Other, net                                                         (55,591)         12,698
                                                                    --------        ---------
      Net cash provided by
         operating activities                                        120,837         105,401
                                                                    --------        --------

Investing Activities:
   Capital expenditures and investments                              (43,368)        (33,356)
   Contributions to decommissioning trusts                            (1,488)        (13,328)
   Other, net                                                            (46)             44
                                                                    --------        --------
      Net cash required
        by investing activities                                      (44,902)        (46,640)
                                                                    --------        --------

Financing Activities:
   Issuance of trust preferred securities                             96,535             -
   Increase/(decrease) in notes payable, net                         (79,540)          8,921
   Retirement of long-term debt                                          (23)            (22)
   Capital lease principal payments                                  (10,736)         (9,956)
   Contribution from parent corporation                               30,000             -
   Dividends paid on common stock                                    (55,000)        (60,000)
   Dividends paid on preferred stock                                     (66)           (362)
   Redemption of preferred stock                                     (12,598)            -
                                                                    --------        ---------
      Net cash required
        by financing activities                                      (31,428)        (61,419)
                                                                    --------        --------

Net increase/(decrease) in cash and temporary cash
  investments from above activities                                   44,507          (2,658)
Cash and temporary cash investments, beginning of year                   442           6,116
                                                                    --------        --------
Cash and temporary cash investments, end of period                 $  44,949       $   3,458
                                                                    ========        ========

Supplemental Disclosure:
   Interest and preferred dividends paid                           $  50,087       $  50,146
                                                                    ========        ========
   Income taxes paid                                               $  25,564       $  60,189
                                                                    ========        ========
   New capital lease obligations incurred                          $  18,482       $      39
                                                                    ========        ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.



                                       43

</TABLE>

<PAGE>
<TABLE>


             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

                                                                              In Thousands
                                                                     --------------------------------
                                                                     September 30,       December 31,
                                                                         1999                1998
                                                                     ------------        ------------
                                                                      (Unaudited)

ASSETS
Utility Plant:
<S>                                                                    <C>              <C>
  Transmission, distribution and general plant                         $1,789,420       $1,768,621
  Generation plant                                                        571,049        1,033,739
                                                                        ---------        ---------
      Utility plant in service                                          2,360,469        2,802,360
  Accumulated depreciation                                             (1,022,941)      (1,175,842)
                                                                        ---------        ---------
      Net utility plant in service                                      1,337,528        1,626,518
  Construction work in progress                                            34,964           18,862
  Other, net                                                               23,336           19,482
                                                                        ---------        ---------
      Net utility plant                                                 1,395,828        1,664,862
                                                                        ---------        ---------

Other Property and Investments:
   Nuclear decommissioning trusts, at market (Note 1)                      82,327           82,803
  Other, net                                                                1,518            7,705
                                                                        ---------        ---------
      Total other property and investments                                 83,845           90,508
                                                                        ---------        ---------

Current Assets:
  Cash and temporary cash investments                                      22,253            2,750
  Special deposits                                                            223            2,632
  Accounts receivable:
    Customers, net                                                         67,449           69,887
    Other                                                                  33,481           28,893
  Unbilled revenues                                                        25,509           43,998
  Materials and supplies, at average cost or less:
    Construction and maintenance                                           17,105           39,452
    Fuel                                                                    5,401           17,107
  Deferred income taxes                                                     7,589            7,589
  Prepayments                                                              24,825           31,551
                                                                        ---------        ---------
      Total current assets                                                203,835          243,859
                                                                        ---------        ---------

Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                                         956,641        1,561,603
  Deferred income taxes                                                 1,161,846          951,471
  Other                                                                    14,125           12,504
                                                                        ---------        ---------
      Total deferred debits and other assets                            2,132,612        2,525,578
                                                                        ---------        ---------







      Total Assets                                                     $3,816,120       $4,524,807
                                                                        =========        =========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.




                                       44

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets


                                                                              In Thousands
                                                                     ---------------------------------
                                                                     September 30,       December 31,
                                                                         1999                1998
                                                                     ------------        ------------
                                                                      (Unaudited)

LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                                    <C>              <C>
  Common stock                                                         $  105,812       $  105,812
  Capital surplus                                                         285,486          285,486
  Retained earnings                                                        94,723          367,653
  Accumulated other comprehensive income (Note 6)                           9,726            8,353
                                                                        ---------        ---------
      Total common stockholder's equity                                   495,747          767,304
  Cumulative preferred stock                                                  -             16,681
  Company-obligated mandatorily redeemable
    preferred securities                                                      -            105,000
  Trust preferred securities                                              100,000            -
  Long-term debt                                                          424,595          626,434
                                                                        ---------        ---------
      Total capitalization                                              1,020,342        1,515,419
                                                                        ---------        ---------


Current Liabilities:
  Securities due within one year                                               13           50,012
  Notes payable                                                               -             86,023
  Obligations under capital leases                                         18,293           13,979
  Accounts payable:
     Affiliates                                                            36,994           47,164
     Other                                                                 22,911           47,795
  Taxes accrued                                                           168,090           32,755
  Interest accrued                                                         11,382           19,700
  Other                                                                    36,459           37,272
                                                                        ---------        ---------
      Total current liabilities                                           294,142          334,700
                                                                        ---------        ---------


Deferred Credits and Other Liabilities:
  Deferred income taxes                                                 1,257,119        1,338,235
  Unamortized investment tax credits                                       24,207           36,926
  Three Mile Island Unit 2 future costs                                   123,466          120,904
  Nuclear fuel disposal fee                                                16,516           15,956
  Power purchase contract loss liability                                  975,293        1,016,380
  Other                                                                   105,035          146,287
                                                                        ---------        ---------
      Total deferred credits and other liabilities                      2,501,636        2,674,688
                                                                        ---------        ---------


Commitments and Contingencies (Note 1)


      Total Liabilities and Capitalization                             $3,816,120       $4,524,807
                                                                        =========        =========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.




                                       45

</TABLE>

<PAGE>
<TABLE>

<CAPTION>

             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income
                                   (Unaudited)

                                                                        In Thousands
                                                       -----------------------------------------------------
                                                            Three Months                Nine Months
                                                         Ended September 30,         Ended September 30,
                                                       ------------------------ ----------------------------
                                                            1999         1998          1999          1998


<S>                                                     <C>           <C>          <C>           <C>
Operating Revenues                                      $ 254,609     $ 259,354    $  705,955    $  773,364
                                                         --------      --------     ---------     ---------

Operating Expenses:

   Fuel                                                    18,399        48,418        71,652       133,519
   Power purchased and interchanged:
     Affiliates                                             1,444            74         5,997         1,227
     Others                                               105,651        73,820       199,642       178,632
   Other operation and maintenance                         57,807        81,097       172,425       206,210
   Depreciation and amortization                           18,389        29,332        59,849        82,716
   Taxes, other than income taxes                          11,306        14,854        37,126        50,875
                                                         --------      --------     ---------     ---------
      Total operating expenses                            212,996       247,595       546,691       653,179
                                                         --------      --------     ---------     ---------

Operating Income                                           41,613        11,759       159,264       120,185
                                                         --------      --------     ---------     ---------

Other Income and Deductions:
   Other income/(expense), net                                790        (6,045)       46,891        (4,312)
                                                         --------      --------     ---------     ---------
      Total other income and deductions                       790        (6,045)       46,891        (4,312)
                                                         --------      --------     ---------     ---------

Income Before Interest Charges                             42,403         5,714       206,155       115,873
                                                         --------      --------     ---------     ---------

Interest Charges:
   Long-term debt                                           6,513        11,948        25,324        35,922
   Trust preferred securities                               1,835        -              2,141           -
   Company-obligated mandatorily
     redeemable preferred securities                          383         2,297         4,977         6,891
   Other interest                                             764         2,192         3,289         6,651
   Allowance for borrowed funds used
     during construction                                     (378)         (632)         (878)       (1,621)
                                                         --------      --------     ---------     ---------
      Total interest charges                                9,117        15,805        34,853        47,843
                                                         --------      --------     ---------     ---------

Income/(Loss) Before Income Taxes                          33,286       (10,091)      171,302        68,030
   Income taxes                                            10,771        (4,231)       63,352        27,494
                                                         --------      --------     ---------     ---------

Income/(Loss) Before Extraordinary Item                    22,515        (5,860)      107,950        40,536
  Extraordinary item (net of income taxes
   of $50,688 and $11,592)                                    -          68,880           -         (18,950)
                                                         --------      --------     ---------     ---------

Net Income                                                 22,515        63,020       107,950        21,586
   Preferred stock dividends                                  -             174           154           521
   Loss on preferred stock reacquisition                      -             -             726           -
                                                         --------      --------     ---------     ----------
Earnings Available for Common Stock                     $  22,515     $  62,846    $  107,070    $   21,065
                                                         ========      ========     =========     =========




The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.




                                       46
</TABLE>


<PAGE>

<TABLE>

             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<CAPTION>

                                                                          In Thousands
                                                                   --------------------------
                                                                          Nine Months
                                                                       Ended September 30,
                                                                   ---------------------------
                                                                       1999          1998
Operating Activities:
<S>                                                                <C>             <C>
   Net income                                                      $ 107,950       $   21,586
   Extraordinary item (net of income tax
      benefit of $11,592)                                                -             18,950
                                                                    --------         --------
   Income before extraordinary item                                  107,950           40,536
   Adjustments to reconcile income to cash provided:
     Depreciation and amortization                                    58,776           80,097
     Amortization of property under capital leases                     4,958            6,324
     PaPUC restructuring rate orders                                     -             35,600
     Gain on sale of investment                                      (40,209)             -
    Nuclear outage maintenance costs, net                             (1,173)           2,359
     Deferred income taxes and investment tax
       credits, net                                                 (301,604)         (19,382)
   Changes in working capital:
     Receivables                                                      (2,150)           6,583
     Materials and supplies                                           34,053              721
     Special deposits and prepayments                                 9,135            (5,992)
     Payables and accrued liabilities                                 91,151           12,766
   Nonutility generation contract buyout costs                        (3,500)             -
   Other, net                                                        (56,662)         (17,098)
                                                                    --------         --------
      Net cash provided/(required)
       by operating activities                                       (99,275)         142,514
                                                                    --------         --------

Investing Activities:
   Capital expenditures and investments                              (65,779)         (64,869)
   Proceeds from sale of investment                                  937,540              -
  Contributions to decommissioning trusts                             (5,266)          (3,954)
   Other, net                                                          1,945              (39)
                                                                    --------         -------- -
      Net cash provided/(used)
       for investing activities                                      868,440          (68,862)
                                                                    --------         --------

Financing Activities:
   Issuance of trust preferred securities                             96,535              -
  Issuance of long-term debt                                         348,172              -
  Increase/(decrease) in notes payable, net                          (86,023)           2,019
   Retirement of long-term debt                                     (600,011)         (30,011)
   Capital lease principal payments                                   (5,392)          (5,796)
   Dividends paid on common stock                                   (380,000)         (35,000)
   Dividends paid on preferred stock                                    (154)            (521)
   Redemption of company-obligated mandatorily
     redeemable preferred securities                                (105,383)             -
   Redemption of preferred stock                                     (17,406)             -
                                                                    --------         ---------
      Net cash required by financing activities                     (749,662)         (69,309)
                                                                    --------         -------- -

Net increase in cash and temporary cash
  investments from above activities                                   19,503            4,343
Cash and temporary cash investments, beginning of year                 2,750              -
                                                                    --------         ---------
Cash and temporary cash investments, end of period                 $  22,253       $    4,343
                                                                    ========         =========

Supplemental Disclosure:
   Interest and preferred dividends paid                           $  42,167       $   58,549
                                                                    ========        =========
   Income taxes paid                                               $ 245,574       $   53,178
                                                                    ========        =========
   New capital lease obligations incurred                          $   9,241       $       33
                                                                    ========        =========

The accompanying notes are an integral part of the consolidated financial statements.
                                       47

</TABLE>

<PAGE>



GPU, Inc. and Subsidiary Companies


               COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      GPU, Inc. owns all the outstanding common stock of three domestic electric
utilities -- Jersey Central Power & Light Company (JCP&L),  Metropolitan  Edison
Company  (Met-Ed) and  Pennsylvania  Electric  Company  (Penelec).  The customer
service,  transmission and distribution  operations of these electric  utilities
are  conducting  business under the name GPU Energy.  JCP&L,  Met-Ed and Penelec
considered  together  are  referred  to  as  the  "GPU  Energy  companies."  The
generation  operations  of  the  GPU  Energy  companies  are  conducted  by  GPU
Generation, Inc. (Genco) and GPU Nuclear, Inc. (GPUN). GPU Capital, Inc. and GPU
Electric, Inc. and their subsidiaries,  own, operate and fund the acquisition of
electric and gas transmission and distribution systems in foreign countries, and
are referred to as "GPU Electric." GPU  International,  Inc. and GPU Power, Inc.
and their subsidiaries,  develop,  own and operate generation  facilities in the
United  States and foreign  countries  and are referred to as the "GPUI  Group."
Other subsidiaries of GPU, Inc. include GPU Advanced  Resources,  Inc. (GPU AR),
which is  involved  in retail  energy  sales;  GPU Telcom  Services,  Inc.  (GPU
Telcom),  which is engaged  in  telecommunications-related  businesses;  and GPU
Service,  Inc.  (GPUS),  which provides legal,  accounting,  financial and other
services to the GPU companies.  All of these companies  considered  together are
referred to as "GPU."

      These notes should be read in conjunction  with the notes to  consolidated
financial  statements  included  in the 1998  Annual  Report on Form  10-K.  The
December  31,  1998  balance  sheet data  contained  in the  attached  financial
statements  was derived  from  audited  financial  statements.  For  disclosures
required by generally accepted accounting principles, see the 1998 Annual Report
on Form 10-K.


1.    COMMITMENTS AND CONTINGENCIES

               COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT

Generation Asset Divestiture:

     In 1997, GPU announced its intention to begin a process to sell,  through a
competitive  bid  process,  up to  all  of  the  fossil-fuel  and  hydroelectric
facilities owned by the GPU Energy companies. GPU subsequently announced that it
would consider selling the Three Mile Island Unit 1 nuclear generating  facility
(TMI-1) and the Oyster Creek nuclear generating station (Oyster Creek). In March
and July of 1999, GPU completed the sales of its interests in the Homer City and
Seneca Pumped Storage Stations,  respectively. For additional information on the
completed  sales,  see Note 2, Accounting for  Extraordinary  and  Non-recurring
items.

     In October 1998, the GPU Energy  companies  agreed to sell TMI-1 to AmerGen
Energy  Company,  LLC (AmerGen),  for  approximately  $100 million.  Of the $100
million,  $23 million will be paid at closing and $77 million,  which is for the
nuclear  fuel in the  reactor,  will be paid in five equal  annual  installments
beginning  one year after  closing.  The sale is subject to various  conditions,
including the receipt of satisfactory  federal and state  regulatory  approvals.
There can be no assurance as to the outcome of these matters.  Highlights of the
agreements are presented in the Competitive Environment and Rate Matters section
of Management's Discussion and Analysis.
                                       48


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GPU, Inc. and Subsidiary Companies


     Also in  October  1998,  the GPU Energy  companies  agreed to sell to Sithe
Energies (Sithe) all their remaining  fossil-fuel and  hydroelectric  generating
facilities,  other than JCP&L's 50%  interest in the Yards Creek Pumped  Storage
Facility (Yards Creek) for a total purchase price of approximately  $1.7 billion
(JCP&L $442 million;  Met-Ed $677 million;  Penelec $561 million).  The sales to
Sithe are expected to be completed in the fourth quarter of 1999.

     In  October  1999,  JCP&L  agreed  to sell  Oyster  Creek  to  AmerGen  for
approximately  $10 million and reimbursement of the cost (estimated at about $88
million) of the next scheduled  refueling outage. This transaction is subject to
the receipt of various federal and state regulatory approvals. Highlights of the
agreements are presented in the Competitive Environment and Rate Matters section
of Management's Discussion and Analysis.

     JCP&L and Public  Service  Electric & Gas Company  (PSE&G)  each hold a 50%
undivided  ownership  interest in Yards Creek.  In December 1998,  JCP&L filed a
petition  with the New  Jersey  Board of  Public  Utilities  (NJBPU)  seeking  a
declaratory  order  that  PSE&G's  right of first  refusal to  purchase  JCP&L's
ownership  interest at its current book value under a 1964 agreement between the
companies is void and  unenforceable.  Management  believes that the fair market
value of JCP&L's ownership interest in Yards Creek is substantially in excess of
its September  30, 1999 book value of $22 million.  There can be no assurance of
the outcome of this matter.

Stranded Costs and Regulatory Restructuring Orders:

     With the current market price of  electricity  being below the cost of some
utility-owned  generation  and power  purchase  commitments,  and the ability of
customers to choose their energy suppliers, certain costs, which generally would
be  recoverable  in  a  regulated  environment,  may  not  be  recoverable  in a
competitive  environment.  These  costs are  generally  referred  to as stranded
costs.

      In June and October  1998,  the  Pennsylvania  Public  Utility  Commission
(PaPUC)  issued  Restructuring  Orders to Met-Ed and Penelec.  The amended PaPUC
Restructuring Orders provides for Met-Ed and Penelec's recovery of a substantial
portion of what otherwise would have become  stranded costs,  and provided for a
Phase II proceeding following the completion of their generation divestitures to
make a final  determination  of the extent of that  stranded cost  recovery.  An
appeal by one intervenor in the restructuring  proceedings is pending before the
Pennsylvania Supreme Court. There can be no assurance as to the outcome of these
matters.

      In April 1999,  JCP&L  entered  into a settlement  agreement  with several
parties to its stranded cost and rate unbundling proceedings, pending before the
NJBPU.  In May 1999,  the NJBPU issued a Summary Order  (Summary  Order),  which
approved the  settlement  with certain  modifications.  Among other things,  the
Summary Order provides for full recovery of JCP&L's stranded costs, and requires
a separate  review and approval of JCP&L's  pending sales of its interest in its
non-nuclear  generation assets and in TMI-1. In October 1999, the NJBPU approved
the sales of JCP&L's non-nuclear generating assets. There can be no assurance as
to the  outcome of the TMI-1  review.  The  Summary  Order did not  address  the
pending sale of Oyster Creek, because at the time the

                                       49


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GPU, Inc. and Subsidiary Companies


Summary Order was issued,  it was  uncertain  whether the plant would be sold or
retired early. For details of the Summary Order, see Competitive Environment and
Rate Matters section of Management's Discussion and Analysis. As a result of the
NJBPU's  actions,  in the second quarter of 1999,  JCP&L recorded a reduction in
operating revenues of $115 million reflecting JCP&L's obligation to make refunds
to customers.  JCP&L  anticipates that the NJBPU will issue a Final Order in the
fourth quarter of 1999. For additional  information,  see Note 2, Accounting for
Extraordinary and Non-recurring Items.

     Under  the  NJBPU  and the  PaPUC  restructuring  orders,  the  GPU  Energy
companies  are required to provide  generation  service to customers  who do not
choose an alternate  supplier.  As noted above,  the GPU Energy  companies  have
agreed to sell substantially all of their generation assets. Consequently, there
will be increased  market risks  associated  with providing  generation  service
since the GPU Energy  companies will have to supply energy almost  entirely from
contracted  and  open  market  purchases.  Under  the  Summary  Order,  JCP&L is
permitted to recover  reasonable and prudently  incurred costs  associated  with
providing basic generation  service and to defer the portion of these costs that
cannot be  recovered  currently.  The  PaPUC's  Restructuring  Orders,  however,
generally  do not allow  Met-Ed and Penelec to recover  their  costs,  including
their energy costs in excess of  established  rate caps. An inability of the GPU
Energy  companies  to  supply  electricity  to  customers  who do not  choose an
alternate supplier at a cost recoverable under their capped rates, would have an
adverse  effect,  which  may  be  material,  on  GPU's  results  of  operations.
Highlights of generation  service  obligations  are presented in the Competitive
Environment and Rate Matters section of Management's Discussion and Analysis.

Generation Agreements:

     The  emerging   competitive   generation  market  has  created  uncertainty
regarding  the  forecasting  of the GPU Energy  companies'  energy supply needs,
which has  caused  the GPU  Energy  companies  to seek  shorter-term  agreements
offering  more  flexibility.  The GPU Energy  companies'  supply plan focuses on
short- to  intermediate-term  commitments  (one month to three  years)  covering
times of expected high energy price  volatility  (that is, peak demand  periods)
and reliance on spot market purchases during other periods.

     Pursuant to the mandates of the federal Public Utility Regulatory  Policies
Act and state regulatory directives, the GPU Energy companies have been required
to enter into power purchase  agreements with nonutility  generators  (NUGs) for
the  purchase  of energy and  capacity  which have  remaining  terms of up to 21
years. The rates under virtually all of the GPU Energy companies' NUG agreements
are  substantially  in excess of current and projected  prices from  alternative
sources.  The projected  cost of energy from new  generation  supply sources has
also  decreased  due to  improvements  in power  plant  technologies  and  lower
forecasted  fuel prices.  The  following  table shows actual  payments from 1997
through September 30, 1999, and estimated payments thereafter through 2004.





                                       50


<PAGE>


GPU, Inc. and Subsidiary Companies


                          Payments Under NUG Agreements
                          -----------------------------
                                  (in millions)

                               Total         JCP&L  Met-Ed  Penelec
                               -----         -----  ------  -------

        1997                     759           384    172     203
        1998                     788           403    174     211
        1999                     780           392    171     217
        2000                     794           405    157     232
        2001                     778           410    154     214
        2002                     799           422    158     219
        2003                     802           413    163     226
        2004                     808           407    168     233

     The NJBPU  Summary  Order and PaPUC  Restructuring  Orders  provide the GPU
Energy  companies  assurance  of full  recovery  of their NUG  costs  (including
above-market  NUG costs and certain buyout costs).  Accordingly,  the GPU Energy
companies have recorded,  on a present value basis, a liability for above-market
NUG costs of $3.3 billion (JCP&L $1.6 billion;  Met-Ed $0.7 billion;  Penelec $1
billion) on the Consolidated  Balance Sheets which is fully offset by Regulatory
assets,  net.  In  addition,  JCP&L  recorded a  liability  of $70  million  for
above-market  utility purchase power  agreements with a corresponding  offset to
Regulatory assets,  net, since there is also assurance of full recovery of these
costs.  The  GPU  Energy   companies  are  continuing   efforts  to  reduce  the
above-market  costs of these agreements and will, where  beneficial,  attempt to
renegotiate the prices of the agreements,  offer contract buyouts and attempt to
convert  must-run  agreements  to  dispatchable  agreements.  There  can  be  no
assurance as to the extent to which these efforts will be successful.

     In 1997, the NJBPU approved a Stipulation of Final Settlement which,  among
other things,  provides for the recovery of costs  associated with the buyout of
the Freehold  Cogeneration  project (Freehold buyout).  The Stipulation of Final
Settlement  provides for recovery through the levelized energy adjustment clause
of:  (1)  buyout  costs up to $130  million,  and (2) 50% of any costs from $130
million to $140 million,  over a seven-year  period for the  termination  of the
Freehold  power purchase  agreement.  The NJBPU approved the cost recovery on an
interim  basis  subject  to refund,  pending  further  review by the NJBPU.  The
NJBPU's Summary Order provides for the continued recovery of the Freehold buyout
in the market transition  charge, but has not altered the interim nature of such
recovery. There can be no assurance as to the outcome of this matter.

                                   ACCOUNTING MATTERS

     JCP&L,  in the  second  quarter of 1999,  and  Met-Ed and  Penelec in 1998,
discontinued the application of Statement of Financial  Accounting Standards No.
71 (FAS 71),  "Accounting for the Effects of Certain Types of  Regulation,"  and
adopted the  provisions of Statement of Financial  Accounting  Standards No. 101
(FAS 101),  "Regulated  Enterprises  -  Accounting  for the  Discontinuation  of
Application of FASB Statement No. 71, and Emerging  Issues Task Force Issue 97-4
(EITF Issue 97-4),  Deregulation  of the Pricing of Electricity - Issues Related
to the Application of FASB Statement No. 71 "Accounting for the

                                       51


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<TABLE>
<CAPTION>


GPU, Inc. and Subsidiary Companies


Effects of Certain  Types of  Regulation"  and No.  101  "Regulated  Enterprises
Accounting  for the  Discontinuation  of  Application of FASB Statement No. 71,"
with respect to their  electric  generation  operations.  The  transmission  and
distribution  portion of the GPU Energy  companies'  operations  continue  to be
subject to the provisions of FAS 71.

     Regulatory  assets, net as reflected in the September 30, 1999 and December
31, 1998 Consolidated Balance Sheets in accordance with the provisions of FAS 71
and EITF Issue 97-4 were as follows:


GPU, Inc. and Subsidiary Companies                               (in thousands)
                                                          -------------------------------
                                                          September 30,     December 31,
                                                               1999             1998
                                                          -------------     -------------

Market transition charge (MTC) / basic
<S>                                                          <C>              <C>
  generation service (NJ)                                    $2,457,120       $      -
Competitive transition charge (CTC) (PA)                        947,587        1,023,815
Reserve for generation divestiture                              769,835        1,527,985
Power purchase contract loss not in CTC (PA)                    369,290          369,290
Costs recoverable through distribution rates (NJ)               298,546              -
Income taxes recoverable through future rates, net              267,370          396,937
Net divestiture proceeds recoverable
  through MTC (NJ)                                              170,427              -
Three Mile Island Unit 2 (TMI-2)
  decommissioning costs                                         100,828          119,571
Societal benefits charge (NJ)                                    88,003              -
Other postretirement benefits                                    25,822           73,770
Nonutility generation contract buyout costs                         -            123,208
Unamortized property losses (NJ)                                    -             80,287
Net investment in TMI-2 (NJ)                                        -             65,787
Environmental remediation (NJ)                                      -             50,214
Other, net                                                       42,423          109,965
                                                              ---------        ---------
     Total regulatory assets, net                            $5,537,251       $3,940,829
                                                              =========        =========


JCP&L                                                            (in thousands)
                                                          -------------------------------
                                                          September 30,     December 31,
                                                               1999             1998
                                                          -------------     -------------

Market transition charge (MTC) / basic
  generation service                                         $2,457,120       $      -
Costs recoverable through distribution rates                    298,546              -
Net divestiture proceeds recoverable through MTC                170,427              -
Societal benefits charge                                         88,003              -
Reserve for generation divestiture                                  -            146,419
Income taxes recoverable through future rates, net                  -            137,217
Nonutility generation contract buyout costs                         -            120,708
Unamortized property losses                                         -             80,287
Net investment in TMI-2                                             -             65,787
Environmental remediation                                           -             50,214
Other, net                                                          -            162,868
                                                              ---------        ---------
     Total regulatory assets, net                            $3,014,096       $  763,500
                                                              =========        =========



                                       52

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<PAGE>

<TABLE>
<CAPTION>

GPU, Inc. and Subsidiary Companies


Met-Ed                                                           (in thousands)
                                                          -------------------------------
                                                          September 30,     December 31,
                                                               1999             1998
                                                          -------------     -------------

<S>                                                          <C>              <C>
Competitive transition charge                                $  645,072       $  680,213
Reserve for generation divestiture                              444,177          435,386
Power purchase contract loss not in CTC                         271,270          271,270
Income taxes recoverable through future rates, net              113,190          122,781
TMI-2 decommissioning costs                                      66,255           68,091
Other, net                                                       26,550           37,985
                                                              ---------        ---------
     Total regulatory assets, net                            $1,566,514       $1,615,726
                                                              =========        =========


Penelec                                                          (in thousands)
                                                          -------------------------------
                                                          September 30,     December 31,
                                                              1999              1998
                                                          ------------      -------------

Reserve for generation divestiture                           $  325,658       $  946,181
Competitive transition charge                                   302,515          343,602
Income taxes recoverable through future rates, net              154,180          136,939
Power purchase contract loss not in CTC                          98,020           98,020
Other, net                                                       76,268           36,861
                                                              ---------        ---------
     Total regulatory assets, net                            $  956,641       $1,561,603
                                                              =========        =========


     In accordance with the Statement of Financial  Accounting Standards No. 121
(FAS  121),  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived  Assets to Be Disposed  Of,"  impairment  tests  performed by the GPU
Energy  companies  on  the  net  book  values  of  their  generation  facilities
determined that the net investments in TMI-1 and Oyster Creek were impaired.  As
of September  30, 1999,  this resulted in  write-downs  of $530 million and $676
million,  respectively,  to reflect TMI-1 and Oyster Creek's fair market values.
The majority of the TMI-1 write-down was recorded in 1998 while the Oyster Creek
write-down  was recorded in the second and third quarters of 1999. Of the amount
written down for TMI-1,  however, $520 million was reestablished as a regulatory
asset   because   management   believes  it  is  probable  of  recovery  in  the
restructuring process, and $10 million (the Federal Energy Regulatory Commission
jurisdictional portion) was charged to expense as an extraordinary item in 1998.
The  total  impairment  amount  of  Oyster  Creek  has been  reestablished  as a
regulatory  asset  since the  Summary  Order  provides  for its  recovery in the
restructuring process.

     Statement of Financial Accounting Standards No. 133 (FAS 133),  "Accounting
for Derivative  Instruments and Hedging Activities,"  establishes accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments  embedded in other contracts,  and for hedging  activities.  FAS 133
requires  that  companies   recognize  all   derivatives  as  either  assets  or
liabilities  on the balance sheet and measure those  instruments  at fair value.
GPU will be required to include its derivative transactions on its balance sheet
at fair value,  and  recognize  the  subsequent  changes in fair value as either
gains or losses in earnings or report them as a component of other comprehensive
income,  depending upon the intended use and  designation of the derivative as a
hedge.  FAS 133 is effective for all fiscal  quarters of fiscal years  beginning
after June 15, 2000. GPU will adopt FAS

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GPU, Inc. and Subsidiary Companies


133 in the first quarter of 2001 and is in the process of evaluating  the impact
of this statement.

                               NUCLEAR FACILITIES

Investments:

     The GPU Energy  companies  have made  investments  in three  major  nuclear
projects  -- TMI-1 and  Oyster  Creek,  both of which are  operating  generation
facilities, and TMI-2, which was damaged during a 1979 accident. TMI-1 and TMI-2
are jointly owned by JCP&L,  Met-Ed and Penelec in the  percentages  of 25%, 50%
and 25%,  respectively.  Oyster Creek is owned by JCP&L.  GPU has agreed to sell
TMI-1 and Oyster Creek to AmerGen. Highlights of the agreements are presented in
the Competitive  Environment and Rate Matters section of Management's Discussion
and Analysis. JCP&L's net investment in TMI-2 at September 30, 1999 and December
31, 1998 was $62  million and $66  million,  respectively.  JCP&L is  collecting
revenues for TMI-2 on a basis which  provides for the recovery of its  remaining
investment in the plant by 2008. Met-Ed and Penelec's  remaining  investments in
TMI-2 were written off in 1998 after receiving the PaPUC's Restructuring Orders.

     Costs associated with the operation,  maintenance and retirement of nuclear
plants  have  continued  to be  significant  and  less  predictable  than  costs
associated  with other  sources  of  generation,  in large part due to  changing
regulatory  requirements,   safety  standards,  availability  of  nuclear  waste
disposal  facilities and experience  gained in the construction and operation of
nuclear  facilities.  In addition,  for economic or other reasons,  operation of
these plants for the full term of their  operating  licenses  cannot be assured.
Also,  not all risks  associated  with the  ownership  or  operation  of nuclear
facilities may be adequately insured or insurable. Consequently, the recovery of
costs  associated  with  nuclear  projects,  including  replacement  power,  any
unamortized investment at the end of each plant's useful life (whether scheduled
or premature),  the carrying costs of that  investment and retirement  costs, is
not assured.

     If the GPU Energy  companies  do not  complete  the pending  sales of their
nuclear  facilities,  in addition to the above,  they may experience added costs
and reduced output at these facilities because of the prevailing design criteria
at the time of construction and the age of the plants' systems and equipment.

TMI-2:

      As a result of the 1979 TMI-2  accident,  individual  claims  for  alleged
personal injury (including claims for punitive  damages),  which are material in
amount,   were  asserted  against  GPU,  Inc.  and  the  GPU  Energy  companies.
Approximately  2,100 of such  claims  were filed in the United  States  District
Court for the Middle  District  of  Pennsylvania.  Some of the claims  also seek
recovery for injuries from alleged  emissions of radioactivity  before and after
the accident.

      At the time of the TMI-2 accident,  as provided for in the  Price-Anderson
Act, the GPU Energy companies had (a) primary financial protection in the form

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GPU, Inc. and Subsidiary Companies


of insurance policies with groups of insurance  companies providing an aggregate
of $140 million of primary coverage,  (b) secondary financial  protection in the
form of private liability insurance under an industry  retrospective rating plan
providing  for up to an aggregate of $335 million in premium  charges under such
plan,  and (c) an indemnity  agreement  with the Nuclear  Regulatory  Commission
(NRC) for up to $85 million,  bringing their total financial protection up to an
aggregate of $560 million.  Under the secondary  level, the GPU Energy companies
are subject to a  retrospective  premium charge of up to $5 million per reactor,
or a total of $15 million.

      In 1995,  the U.S.  Court of Appeals for the Third  Circuit ruled that the
Price-Anderson  Act provides coverage under its primary and secondary levels for
punitive as well as compensatory damages, but that punitive damages could not be
recovered  against the  Federal  Government  under the third level of  financial
protection. In so doing, the Court of Appeals referred to the "finite fund" (the
$560  million of financial  protection  under the  Price-Anderson  Act) to which
plaintiffs must resort to get compensatory as well as punitive damages.

      The Court of  Appeals  also ruled  that the  standard  of care owed by the
defendants  to a plaintiff  was  determined  by the specific  level of radiation
which was  released  into the  environment,  as measured  at the site  boundary,
rather than as measured at the specific  site where the plaintiff was located at
the time of the accident (as the defendants proposed). The Court of Appeals also
held that each plaintiff still must demonstrate  exposure to radiation  released
during the TMI-2  accident and that such  exposure had resulted in injuries.  In
1996,  the U.S.  Supreme Court denied  petitions  filed by GPU, Inc. and the GPU
Energy companies to review the Court of Appeals' rulings.

      In 1996, the District Court granted a motion for summary judgment filed by
GPU,  Inc. and the GPU Energy  companies,  and  dismissed  the ten initial "test
cases,"  which had been  selected  for a test  case  trial as well as all of the
remaining 2,100 pending claims. The Court ruled that there was no evidence which
created a genuine issue of material fact  warranting  submission of  plaintiffs'
claims to a jury.  The  plaintiffs  appealed the District  Court's ruling to the
Court of Appeals for the Third  Circuit.  On November 2, 1999, the Third Circuit
affirmed the District  Court's  dismissal of the ten "test cases," but set aside
the dismissal of the additional  pending claims,  remanding them to the District
Court for further proceedings. In remanding these claims, the Third Circuit held
that the District Court had erred in extending its summary judgment  decision to
the other  plaintiffs  and imposing on these  plaintiffs  the  District  Court's
finding that radiation exposures below 10 rems were too speculative to establish
a causal  link to cancer.  The Court of Appeals  stated that the  non-test  case
plaintiffs  should be permitted to present  their own  individual  evidence that
exposure to radiation from the accident caused their cancers.

      GPU, Inc. and the GPU Energy companies  believe that the Third Circuit has
misinterpreted  the  record  before  the  District  Court,  as it applies to the
non-test  case  plaintiffs,  and are  considering  asking the Third  Circuit for
reconsideration  or rehearing of its  decision.  There can be no assurance as to
the outcome of this litigation.

                                       55


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GPU, Inc. and Subsidiary Companies


      GPU, Inc. and the GPU Energy companies believe that any liability to which
they  might be  subject by reason of the TMI-2  accident  will not exceed  their
financial protection under the Price-Anderson Act.


                         NUCLEAR PLANT RETIREMENT COSTS

      Retirement   costs  for  nuclear   plants  include   decommissioning   the
radiological  portions of the plants and the cost of removal of  nonradiological
structures  and  materials.  The  disposal  of  spent  nuclear  fuel is  covered
separately by contracts with the U.S. Department of Energy (DOE).

      In 1995, a consultant to GPUN  performed  site-specific  studies of TMI-1,
TMI-2  and  Oyster   Creek   (updated   in  1998),   that   considered   various
decommissioning   methods  and  estimated  the  cost  of   decommissioning   the
radiological portions and the cost of removal of the nonradiological portions of
each plant, using the prompt  removal/dismantlement  method. GPUN management has
reviewed the methodology and assumptions used in these studies,  is in agreement
with them, and believes the results are reasonable.  Under NRC regulations,  the
GPU Energy  companies  intend to complete the funding for Oyster Creek and TMI-1
retirement  costs  by the end of the  plants'  license  terms,  2009  and  2014,
respectively. The TMI-2 funding completion date is 2014, consistent with TMI-2's
remaining  in  long-term  storage and being  decommissioned  at the same time as
TMI-1.  The NRC may require an acceleration of the  decommissioning  funding for
Oyster  Creek if the  pending  sale is not  completed  and the plant is  retired
early.  The retirement  cost  estimates  under the 1995  site-specific  studies,
assuming decommissioning at the end of the plants' license terms, are as follows
(in 1999 dollars):

                                  (in millions)
                                                                      Oyster
                                             TMI-1       TMI-2         Creek
                                             -----       -----         -----

Radiological decommissioning                   $358       $435         $591
Nonradiological cost of removal                  88         34*          32
                                                ---         ---         ---
   Total                                       $446       $469         $623
                                                ===        ===          ===

* Net of $12.6 million spent as of September 30, 1999.

Each  of the GPU  Energy  companies  is  responsible  for  retirement  costs  in
proportion to its respective ownership percentage. The ultimate cost of retiring
the GPU Energy  companies'  nuclear  facilities  may be different  from the cost
estimates  contained in these  site-specific  studies.  Also, the cost estimates
contained  in these site  specific  studies are  significantly  greater than the
decommissioning funding targets established by the NRC.

      The 1995 Oyster Creek  site-specific study was updated in 1998 in response
to the  previously  announced  potential  early closure of the plant in the year
2000. An early shutdown would increase the retirement  costs shown above to $632
million  ($600  million  for  radiological  decommissioning  and $32 million for
nonradiological  cost of removal).  Both estimates include substantial  spending
for an on-site dry storage facility for spent nuclear fuel and


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GPU, Inc. and Subsidiary Companies



significant  costs for storing the fuel until the DOE complies  with the Nuclear
Waste Policy Act of 1982. See OTHER  COMMITMENTS AND  CONTINGENCIES  section for
further information.

      The agreements to sell TMI-1 to AmerGen provide,  among other things, that
upon  financial  closing,  the GPU Energy  companies  will  transfer  up to $320
million in decommissioning  trust funds to AmerGen,  which will assume all TMI-1
decommissioning liabilities.

      The  agreements  to sell  Oyster  Creek to AmerGen  provide,  among  other
things,  that upon financial closing,  JCP&L will transfer up to $430 million in
decommissioning  trust funds to AmerGen,  which will  assume all  liability  for
decommissioning Oyster Creek.

      The GPU  Energy  companies  charge  to  depreciation  expense  and  accrue
retirement  costs based on amounts  being  collected  from  customers.  Customer
collections are contributed to external trust funds.  These deposits,  including
the related  earnings,  are  classified as Nuclear  decommissioning  trusts,  at
market on the Consolidated Balance Sheets.

      The NJBPU has granted  JCP&L  annual  revenues  for TMI-1 and Oyster Creek
retirement costs of $5.2 million and $22.5 million,  respectively,  based on the
1995  site-specific  studies.  The  recovery  of Oyster  Creek  retirement  cost
escalates  to $34.4  million  in August  2000 if the plant were to be retired in
2000.

      In the Restructuring Orders, the PaPUC granted Met-Ed and Penelec recovery
of  TMI-1   decommissioning   costs  of  $103.4   million  and  $67.8   million,
respectively, as part of the Competitive Transition Charge (CTC). These amounts,
which are computed on a present value basis, are based on the 1995 site-specific
study and will be  adjusted  in Phase II of Met-Ed and  Penelec's  restructuring
proceedings,  once the net proceeds from the generation  asset  divestiture  are
determined.

     In the event the GPU Energy  companies do not complete the pending sales of
their  nuclear  plants,  management  believes  that any TMI-1 and  Oyster  Creek
retirement  costs,  in  excess  of those  currently  recognized  for  ratemaking
purposes, should be recoverable from customers.

     The estimated  liabilities for TMI-2 future  retirement costs (reflected as
Three Mile Island Unit 2 future costs on the Consolidated  Balance Sheets) as of
September 30, 1999 and December 31, 1998 are as follows:

                                           (in millions)
                          GPU           JCP&L        Met-Ed        Penelec
                          ---           -----        ------        -------

September 30, 1999        $494          $124         $246          $124
December 31, 1998         $484          $121         $242          $121

These amounts are based upon the 1995 site-specific study estimates (in 1999 and
1998  dollars,  respectively)  discussed  above and an  estimate  for  remaining
incremental monitored storage costs of $28 million (JCP&L $7 million; Met-Ed $14
million; Penelec $7 million) as of September 30, 1999 and $29 million

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GPU, Inc. and Subsidiary Companies


(JCP&L $7 million;  Met-Ed $15  million;  Penelec $7 million) as of December 31,
1998, as a result of TMI-2's entering  long-term  monitored storage in 1993. The
GPU Energy companies are incurring annual incremental monitored storage costs of
approximately $1.8 million (JCP&L $450 thousand;  Met-Ed $900 thousand;  Penelec
$450 thousand).

      Offsetting  the $494  million  liability  at  September  30,  1999 is $252
million  (JCP&L $16 million;  Met-Ed $152  million;  Penelec $84 million)  which
management  believes  is probable of recovery  from  customers  and  included in
Regulatory  assets,  net on the  Consolidated  Balance Sheets,  and $288 million
(JCP&L $112 million;  Met-Ed $130  million;  Penelec $46 million) in trust funds
for TMI-2 and  included  in  Nuclear  decommissioning  trusts,  at market on the
Consolidated  Balance  Sheets.  Earnings on trust fund  deposits are included in
amounts shown on the Consolidated  Balance Sheets under Regulatory assets,  net.
TMI-2  decommissioning costs charged to depreciation expense for the nine months
ended  September 30, 1999 amounted to $3.7 million  (JCP&L $1.7 million;  Met-Ed
$1.4 million; Penelec $0.6 million).

      The NJBPU has granted JCP&L revenues for TMI-2  retirement  costs based on
the 1995 site-specific  estimates. In addition, JCP&L is recovering its share of
TMI-2  incremental  monitored  storage  costs.  The PaPUC  Restructuring  Orders
granted Met-Ed and Penelec  recovery of TMI-2  decommissioning  costs as part of
the CTC,  but also  allowed  Met-Ed and Penelec to defer as a  regulatory  asset
those amounts that are above the level provided for in the CTC.

      At September 30, 1999, the accident-related  portion of TMI-2 radiological
decommissioning costs is considered to be $77 million (JCP&L $19 million; Met-Ed
$39 million;  Penelec $19  million),  which is the  difference  between the 1995
TMI-1 and TMI-2 site-specific  study estimates (in 1999 dollars).  In connection
with rate case  resolutions  at the time,  JCP&L,  Met-Ed and Penelec  have made
contributions  to irrevocable  external  trusts  relating to their shares of the
accident-related portions of the decommissioning liability in the amounts of $15
million, $40 million and $20 million, respectively. These contributions were not
recoverable from customers and have been expensed. The GPU Energy companies will
not pursue recovery from customers for any amounts  contributed in excess of the
$77 million accident-related portion referred to above.

      JCP&L  intends to seek  recovery  for any  increases  in TMI-2  retirement
costs,  and Met-Ed and Penelec  intend to seek recovery for any increases in the
nonaccident-related portion of such costs, but recognize that recovery cannot be
assured.

                                    INSURANCE

     GPU  has  insurance   (subject  to  retentions  and  deductibles)  for  its
operations and facilities  including coverage for property damage,  liability to
employees  and  third  parties,   and  loss  of  use  and  occupancy  (primarily
incremental  replacement  power  costs).  There  is no  assurance  that GPU will
maintain all existing  insurance  coverages.  Losses or liabilities that are not
completely  insured,  unless allowed to be recovered through  ratemaking,  could
have a material adverse effect on the financial position of GPU.


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     The  decontamination  liability,  premature  decommissioning  and  property
damage  insurance  coverage for the TMI station and for Oyster Creek totals $2.7
billion per site. In accordance with NRC regulations,  these insurance  policies
generally  require that proceeds first be used for stabilization of the reactors
and then to pay for decontamination  and debris removal expenses.  Any remaining
amounts available under the policies may then be used for repair and restoration
costs and decommissioning costs. Consequently, there can be no assurance that in
the event of a nuclear  incident,  property damage  insurance  proceeds would be
available for the repair and restoration of that station.

     The  Price-Anderson  Act limits  GPU's  liability  to third  parties  for a
nuclear incident at one of its sites to approximately $9.7 billion. Coverage for
the first $200 million of such liability is provided by private  insurance.  The
remaining  coverage,   or  secondary  financial   protection,   is  provided  by
retrospective  premiums  payable by all nuclear reactor owners.  Under secondary
financial  protection,  a nuclear incident at any licensed nuclear power reactor
in the country,  including those owned by the GPU Energy companies, could result
in  assessments  of up to $88  million per  incident  for each of the GPU Energy
companies' two operating  reactors,  subject to an annual maximum payment of $10
million per  incident  per reactor.  In addition to the  retrospective  premiums
payable under the Price-Anderson  Act, the GPU Energy companies are also subject
to  retrospective  premium  assessments  of up to  $26.0  million  (JCP&L  $16.3
million;  Met-Ed  $6.5  million;  Penelec  $3.2  million)  in any one year under
insurance policies applicable to nuclear operations and facilities.

     The  GPU  Energy   companies  have  insurance   coverage  for   incremental
replacement  power  costs  resulting  from an  accident-related  outage at their
nuclear  plants.  Coverage  commences  after a  12-week  waiting  period at $1.8
million  and $2.6  million  per week for 52 weeks for  Oyster  Creek and  TMI-1,
respectively, decreasing to 80% of such amounts for the next 110 weeks.

                              ENVIRONMENTAL MATTERS

     As a result of existing  and  proposed  legislation  and  regulations,  and
ongoing legal proceedings dealing with environmental matters,  including but not
limited to acid rain,  water  quality,  ambient  air  quality,  global  warming,
electromagnetic  fields,  and storage and  disposal of  hazardous  and/or  toxic
wastes,  GPU may be required to incur substantial  additional costs to construct
new equipment,  modify or replace  existing and proposed  equipment,  remediate,
decommission  or cleanup  waste  disposal and other sites  currently or formerly
used by it, including  formerly owned  manufactured gas plants (MGP),  coal mine
refuse piles and generation facilities.

     In 1997 and 1998 the U.S.  Environmental  Protection  Agency (EPA)  adopted
new, more stringent rules on ozone and particulate  matter.  Several groups have
filed  suit in the U.S.  Court of  Appeals  to  overturn  these new air  quality
standards on the grounds that, among other things,  they are based on inadequate
scientific  evidence.  The GPU Energy  companies  are unable to  determine  what
additional costs, if any, will be incurred if the EPA rules are




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GPU, Inc. and Subsidiary Companies


upheld.  Moreover,  the timing and amounts of expenditures under Titles I and IV
of the  federal  Clean Air Act  Amendments  of 1990 will be  dependent  upon the
timing of the sales of the related generating facilities.

     GPU  has  been  formally  notified  by  the  EPA  and  state  environmental
authorities that it is among the potentially  responsible parties (PRPs) who may
be  jointly  and  severally  liable  to pay for the  costs  associated  with the
investigation  and  remediation  at hazardous  and/or toxic waste sites (in some
cases, more than one company is named for a given site):

   JCP&L         MET-ED      PENELEC         GPUN        GPU, INC.      TOTAL
   -----         ------      -------         ----        ---------      -----

    8              4           2              1              1           13

In addition,  certain of the GPU companies have been requested to participate in
the  remediation  or  supply  information  to the  EPA and  state  environmental
authorities  on several other sites for which they have not been formally  named
as PRPs,  although the EPA and state authorities may nevertheless  consider them
as  PRPs.  Certain  of the GPU  companies  have  also  been  named  in  lawsuits
requesting  damages  (which are material in amount) for  hazardous  and/or toxic
substances  allegedly  released  into  the  environment.  The  ultimate  cost of
remediation  will  depend upon  changing  circumstances  as site  investigations
continue,  including (a) the existing technology required for site cleanup,  (b)
the remedial action plan chosen and (c) the extent of site contamination and the
portion attributed to the GPU companies involved.

     In 1997,  the EPA filed a complaint  against GPU, Inc. in the United States
District  Court for the District of Delaware for  enforcement  of its unilateral
order issued  against GPU,  Inc. to clean up the former Dover Gas Light  Company
(Dover) manufactured gas production site in Dover,  Delaware.  Dover was part of
the AGECO/AGECORP  group of companies from 1929 until 1942 and GPU, Inc. emerged
from the AGECO/AGECORP  reorganization  proceedings.  All of the common stock of
Dover was sold in 1942 by a member of the AGECO/AGECORP group to an unaffiliated
entity,  and was  subsequently  acquired  by  Chesapeake  Utilities  Corporation
(Chesapeake).  According to the complaint, the EPA is seeking up to $0.5 million
in past costs,  $4.2 million for the cleanup of the Dover site and approximately
$19 million in penalties.  GPU, Inc. has responded to the EPA complaint  stating
that such claims  should be  dismissed  because,  among other  things,  they are
barred by the  operation  of the  Final  Decree  entered  by the  United  States
District  Court for the Southern  District of New York at the  conclusion of the
1946 reorganization proceedings of AGECO/AGECORP.  Chesapeake has also sued GPU,
Inc.  for a  contribution  to the cleanup of the Dover site.  The United  States
District  Court  for the  District  of  Delaware  has  refused  to  dismiss  the
complaints  and  discovery  is  proceeding.  There can be no assurance as to the
outcome of these proceedings.

     Pursuant  to federal  environmental  monitoring  requirements,  Penelec has
reported to the Pennsylvania Department of Environmental Protection (PaDEP) that
contaminants  from coal mine refuse piles were identified in storm water run-off
at Penelec's Seward station  property.  Penelec signed a modified Consent Order,
which became  effective  December 1996, and a third  Amendment in December 1998,
that establish a schedule for submitting a plan for long-term


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GPU, Inc. and Subsidiary Companies


remediation,  based on future operating  scenarios.  Penelec currently estimates
that the remediation of the Seward station  property will range from $12 million
to $20 million and has a recorded  liability  of $12  million at  September  30,
1999.  These cost  estimates  are subject to  uncertainties  based on continuing
discussions  with the  PaDEP as to the  method  of  remediation,  the  extent of
remediation  required  and  available  cleanup  technologies.   Penelec  expects
recovery of these remediation costs in Phase II of its restructuring  proceeding
and has recorded a corresponding  regulatory asset of approximately  $12 million
at September 30, 1999.

     In 1997, the GPU Energy  companies  filed with the PaDEP  applications  for
re-permitting  seven (JCP&L one; Met-Ed - three;  Penelec - three) operating ash
disposal  sites,  including  projected site closure  procedures and related cost
estimates.  The cost  estimates  for the  closure  of  these  sites  range  from
approximately $17 million to $22 million,  and a liability of $17 million (JCP&L
$1  million;  Met-Ed $4  million;  Penelec  $12  million)  is  reflected  on the
Consolidated  Balance Sheets at September 30, 1999. Met-Ed and Penelec expect to
be  granted  recovery  of  these  costs  in  Phase  II  of  their  restructuring
proceedings.  As a result,  a regulatory asset of $17 million (JCP&L $1 million;
Met-Ed $4 million; Penelec $12 million) is reflected on the Consolidated Balance
Sheets at  September  30,  1999.  There can be no assurance as to the outcome of
these proceedings.

     JCP&L  has  entered  into  agreements  with the New  Jersey  Department  of
Environmental  Protection for the  investigation  and remediation of 17 formerly
owned  manufactured  gas plant (MGP) sites.  JCP&L has also entered into various
cost-sharing  agreements  with  other  utilities  for most of the  sites.  As of
September 30, 1999, JCP&L has spent approximately $34 million in connection with
the  cleanup of these  sites.  In  addition,  JCP&L has  recorded  an  estimated
environmental  liability  of $53 million  relating to expected  future  costs of
these sites (as well as two other properties). This estimated liability is based
upon  ongoing site  investigations  and  remediation  efforts,  which  generally
involve  capping the sites and pumping and treatment of ground water.  Moreover,
the cost to clean up these  sites could be  materially  in excess of $53 million
due to significant  uncertainties,  including changes in acceptable  remediation
methods  and  technologies.  In  addition,  federal and state law  provides  for
payment by responsible parties for damage to natural resources.

     In 1997,  JCP&L's request to establish a Remediation  Adjustment Clause for
the recovery of MGP  remediation  costs was approved by the NJBPU.  At September
30, 1999,  JCP&L had  recorded on its  Consolidated  Balance  Sheet a regulatory
asset of $44  million.  JCP&L is  continuing  to pursue  reimbursement  from its
insurance  carriers for remediation costs already spent and for future estimated
costs.  In 1994,  JCP&L  commenced  litigation in the New Jersey  Superior Court
against several of its insurance  carriers,  relative to these MGP sites and has
settled with all but one of those insurance companies.

                       OTHER COMMITMENTS AND CONTINGENCIES

Class Action Litigation:

     In July 1999,  New Jersey  experienced  a severe heat wave that resulted in
major power outages and temporary service interruptions including JCP&L's

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GPU, Inc. and Subsidiary Companies


service  territory.  As a result,  the NJBPU has initiated an investigation into
the reliability of the transmission  and distribution  systems of all New Jersey
utilities and their  response to power outages.  In addition,  two lawsuits were
filed in New Jersey Superior Court (Court) against GPU, Inc.,  JCP&L and certain
of their  affiliates  seeking  class action  certification  for all  individuals
including  customers,  businesses and employees,  who incurred financial losses,
including  both  compensatory  and punitive  damages.  In October 1999,  the GPU
defendants'  motion to dismiss the complaints was denied and the two proceedings
were consolidated and certified as class actions.  The GPU defendants have filed
a motion  for  leave to  appeal  the  Court's  decision.  GPU has  notified  its
insurance  carriers who have  reserved  their rights to contest  coverage  under
GPU's  insurance  policies  for  losses  which  GPU may  incur.  There can be no
assurance as to the outcome of these matters.

      As a result of the fire and  explosion in September  1998, at the Longford
natural gas plant in Victoria,  Australia, three class actions have been brought
in Australian  Federal Court  against Esso  Australia  Limited and its affiliate
(Esso), the owner and operator of the plant, for losses suffered due to the lack
of natural  gas  supply  and  related  damages.  Plaintiffs  claim that Esso was
negligent in designing,  maintaining  and operating the Longford  plant and also
assert claims under various Australian fair trade practices laws.

      Esso has joined as additional defendants the State of Victoria (State) and
various State-owned  entities which operated the Victorian gas industry prior to
its  privatization,  including  Transmission  Pipelines  Australia (TPA) and its
subsidiary  Transmission Pipelines (Assets) Australia (TPAA). GPU, Inc. acquired
the assets of TPA  (renamed  GPU  GasNet) and TPAA from the State of Victoria in
June  1999.  Esso has named GPU  GasNet as an  additional  defendant.  Under the
acquisition  agreement with the State,  GPU GasNet has  indemnified  TPA against
third party claims.  Esso is seeking  contribution  and indemnity from the third
party  defendants  for any  damages  for  which  Esso  may be found  liable.  In
addition,  Esso has asserted  several  separate claims against the State and the
former  State-owned  entities for damages,  and contends that GPU GasNet assumed
TPA's liabilities as part of the State's privatization process.

      GPU GasNet has filed an answer denying  liability and has moved to dismiss
portions of Esso's claims.  GPU GasNet has also notified its insurance  carriers
of this action. The insurers have reserved their rights to deny coverage.  There
can be no assurance as to the outcome of this matter.


GPU, Inc. Investments and Guarantees:

     GPU,  Inc.  has made  significant  investments  in foreign  businesses  and
facilities  through  its  subsidiaries,  GPU  Electric  and the GPUI  Group.  At
September 30, 1999,  GPU,  Inc.'s  investment in GPU Electric and the GPUI Group
was $711 million and $240 million,  respectively. As of that date, GPU, Inc. has
also guaranteed up to an additional  $1.39 billion and $43.4 million  (including
$22.1 million of guarantees related to domestic  operations) of GPU Electric and
GPUI Group obligations,  respectively.  Although management attempts to mitigate
the risks of  investing in certain  foreign  countries  by, among other  things,
securing political risk insurance, GPU faces additional

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GPU, Inc. and Subsidiary Companies


risks  inherent to  operating  in such  locations,  including  foreign  currency
fluctuations.

      As a result of GPU's  purchase  from  Cinergy  Corp.  (Cinergy) of the 50%
interest  in  Midlands  Electricity  plc  (Midlands),  which  GPU did  not  own,
effective in the third quarter of 1999,  GPU began  accounting  for its Midlands
investment as a consolidated  entity.  As a result of this change in accounting,
GPU's equity investments as of September 30, 1999 are no longer presented in the
Combined Notes to Consolidated  Financial Statements since these investments are
considered immaterial to GPU's results of operations or financial condition.

GPU Electric

     The  Office  of Gas and  Electricity  Markets  in the  United  Kingdom  has
proposed  base rate  reductions  of 22 to 27 percent for  Midlands  beginning in
April 2000. A final decision on the reductions is expected in the fourth quarter
of 1999. There can be no assurance as to the outcome of this matter.
     Midlands has a 40% ownership interest in a 586 MW power project in Pakistan
(the Uch Power  Project)  which was  originally  scheduled  to begin  commercial
operation in late 1998, but testing and commercial operation have been delayed.

     On June 30,  1999,  the Project  lenders  issued a notice of default to the
project sponsors (including  Midlands) for failure to obtain permanent financing
and repay the construction debt by the original loan due date. In November 1999,
the Project  sponsors  reached an agreement with the Project lenders under which
the construction  loan terms will be extended,  principal and interest  payments
will be deferred and the Project  sponsors have agreed to fund completion of the
plant through their remaining equity contribution commitments. Midlands' current
investment in the Uch Power Project is approximately $75 million,  and its share
of the completion  costs could  represent an additional $12 million  investment.
Testing  and  commercial  operations  of the  plant is now  anticipated  for the
beginning of 2000. As part of GPU's purchase of Cinergy's 50% ownership interest
in Midlands, Cinergy has agreed to fund up to an aggregate of $20 million of the
required  capital  contributions  and/or  certain future "cash losses" which GPU
could incur on the Uch Power Project.  (For further information on the Midlands'
purchase, See Note 3, Acquisitions.) There can be no assurance as to the outcome
of this matter.


Other:

     GPU's  capital  programs,  for  which  substantial  commitments  have  been
incurred and which extend over several years,  contemplate  expenditures of $453
million (JCP&L $183 million; Met-Ed $97 million;  Penelec $98 million; Other $75
million) during 1999.

      The GPU Energy  companies  have  entered  into  long-term  contracts  with
nonaffiliated  mining companies for the purchase of coal for certain  generating
stations in which they have ownership interests (JCP&L - 16.67% ownership

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GPU, Inc. and Subsidiary Companies


interest in Keystone; and Met-Ed - 16.45% ownership interest in Conemaugh).  The
GPU Energy companies' share of the cost of coal purchased under these agreements
is expected to aggregate  $135 million  (JCP&L $27 million;  Met-Ed $57 million;
Penelec $51 million) for 1999.  These  contracts will be assumed by Sithe,  upon
the  closings  of the  sales  of the GPU  Energy  companies'  fossil  generation
facilities.

      JCP&L has  entered  into  agreements  with  other  utilities  to  purchase
capacity and energy for various periods through 2004. Payments pursuant to these
agreements  are estimated to be $114 million in 1999,  $91 million in 2000,  $99
million in 2001,  $109 million in 2002, and $113 million in 2003 and $48 million
in 2004.

      GPU  AR has  entered  into  contracts  to  supply  electricity  to  retail
customers   through   December  31,  2000  and  estimates  that  it  will  spend
approximately  $21  million to  purchase  energy and  capacity  related to these
contracts.  GPU  AR has  firm  purchase  commitments  which  obligate  it to pay
approximately $11 million for energy and capacity and has the option to purchase
additional amounts under various agreements.  GPU, Inc. has guaranteed up to $19
million if GPU AR fails to meet its contractual payment obligations.

      In accordance  with the Nuclear  Waste Policy Act of 1982 (NWPA),  the GPU
Energy companies have entered into contracts with, and have been paying fees to,
the DOE for the future disposal of spent nuclear fuel in a repository or interim
storage facility. Following its purchase of TMI-1 and Oyster Creek, AmerGen will
assume all liability for disposal  costs related to spent fuel  generated  after
such  sales.  In 1996,  the DOE  notified  the GPU  Energy  companies  and other
standard  contract  holders that it will be unable to begin  acceptance of spent
nuclear fuel for disposal by 1998,  as mandated by the NWPA.  The DOE  requested
recommendations  from  contract  holders  for  handling  the  delay.  The  DOE's
inability  to accept spent  nuclear  fuel could have a material  impact on GPU's
results of operations, as additional costs may be incurred to build and maintain
interim  on-site storage at Oyster Creek.  TMI-1 has sufficient  on-site storage
capacity to accommodate spent nuclear fuel through the end of its licensed life.
In June 1997,  a  consortium  of electric  utilities,  including  GPUN,  filed a
license  application  with  the NRC  seeking  permission  to  build  an  interim
above-ground  disposal  facility for spent  nuclear fuel in  northwestern  Utah.
There can be no assurance as to the outcome of these matters.

      GPU, Inc. and consolidated  affiliates have approximately 13,000 employees
worldwide, of which nearly 8,100 are employed in the U.S and approximately 3,900
are employed primarily in the United Kingdom. The majority of the U.S. workforce
is  employed  by the GPU  Energy  companies,  of which  approximately  4,300 are
represented by unions for collective  bargaining purposes.  Met-Ed and Penelec's
collective   bargaining   agreements  with  the  International   Brotherhood  of
Electrical   Workers  (IBEW)  expire  on  April  30,  2000  and  May  14,  2002,
respectively.  JCP&L's collective  bargaining agreement with the IBEW expired on
October 31, 1999 and a new agreement is currently under  negotiation.  There can
be no assurance as to the outcome of these  negotiations.  Penelec's  collective
bargaining  agreement with the Utility  Workers Union of America expires on June
30, 2001.

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GPU, Inc. and Subsidiary Companies


      During the normal course of the operation of its  businesses,  in addition
to the matters  described  above, GPU is from time to time involved in disputes,
claims and, in some cases,  as a defendant in litigation  in which  compensatory
and punitive damages are sought by the public, customers,  contractors,  vendors
and other suppliers of equipment and services and by employees alleging unlawful
employment practices. While management does not expect that the outcome of these
matters will have a material  effect on GPU's  financial  position or results of
operations, there can be no assurance that this will continue to be the case.


2.   ACCOUNTING FOR EXTRAORDINARY AND NON-RECURRING ITEMS

JCP&L Restructuring Write-off:

      In  May  1999,  the  NJBPU  issued  a  Summary  Order  regarding   JCP&L's
unbundling,   stranded  cost  and  restructuring  filings.  Accordingly,   JCP&L
discontinued the application of FAS 71 and has adopted the provisions of FAS 101
and EITF 97-4 with respect to its electric generation operations, effective with
the second quarter of 1999. The transmission and distribution portion of the GPU
Energy companies' operations continue to be subject to the provisions of FAS 71.

      For the  quarter  ended  June 30,  1999,  JCP&L  recorded a  reduction  in
operating  revenues of $115 million relating to the Summary Order which resulted
in an  after-tax  charge to earnings of $68  million,  or $0.54 per share.  This
reduction  reflects  JCP&L's  obligation to refund to customers 5% from rates in
effect as of April 30,  1997 for service  rendered  on and after  August 1, 2002
through July 31, 2003.

     Since JCP&L is no longer  subject to FAS 71 for the  generation  portion of
its business,  GPU  performed an  impairment  test on Oyster Creek in accordance
with FAS 121. This test  determined that JCP&L's net investment in Oyster Creek,
including  plant,  nuclear  fuel and  materials  and supplies  inventories,  was
impaired.  This investment was written down by a total of $676 million (pre-tax)
in the second and third quarters of 1999 to reflect its fair market value.  This
impairment,  which was recorded as an extraordinary  deduction, was reversed and
reestablished  as a regulatory  asset since the Summary Order  provides for rate
recovery.

Generation Asset Divestiture:

     In 1997, GPU announced its intention to begin a process to sell,  through a
competitive  bid  process,  up to  all  of  the  fossil-fuel  and  hydroelectric
facilities owned by the GPU Energy companies.

     In March 1999, Penelec sold its 50% interest in the Homer City Station to a
subsidiary of Edison Mission Energy for approximately $900 million. As a result,
Penelec recorded an after-tax gain of $27.8 million in the first quarter of 1999
for the portion of the gain  related to wholesale  operations  and deferred as a
regulatory  liability the remaining gain of $596.7  million  pending Phase II of
the Pennsylvania restructuring proceeding.


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GPU, Inc. and Subsidiary Companies


     In July 1999,  Penelec sold its 20% interest in the Seneca  Pumped  Storage
Hydroelectric  Generating Station to The Cleveland Electric Illuminating Company
for $43 million. The sale resulted in the recording of an after-tax gain of $0.9
million  in the third  quarter of 1999 for the  portion  of the gain  related to
wholesale  operations and the deferral of the remaining gain of $30.2 million as
a  regulatory  liability  pending  Phase  II of the  Pennsylvania  restructuring
proceeding.

     For  information  on the GPU Energy  companies'  pending  generation  asset
sales, see Note 1, Commitments and Contingencies.


3.    ACQUISITIONS

GPU Electric

                 Empresa Distribuidora Electrica Regional, S.A.

      In March 1999,  GPU  Electric  acquired  Empresa  Distribuidora  Electrica
Regional,  S.A.  (Emdersa)  for US $375  million.  The fair  value of the assets
acquired  totaled  approximately  $253.4  million and the amount of  liabilities
assumed  totaled  approximately  $146.7  million.  Emdersa  owns three  electric
distribution  companies that serve three provinces in northwest  Argentina.  The
acquisition  was  financed  through  the  issuance  of  commercial  paper by GPU
Capital,  guaranteed by GPU, Inc. and a $50 million  contribution from GPU, Inc.
The  acquisition has been accounted for under the purchase method of accounting.
The total  acquisition  cost exceeded the estimated  value of net assets by $268
million.  This  excess  is  considered  goodwill  and is  being  amortized  on a
straight-line basis over 40 years.

                        Transmission Pipelines Australia

      In June  1999,  GPU  Electric  acquired  TPA, a natural  gas  transmission
business,   from  the  State  of  Victoria,   Australia   for  A$1.025   billion
(approximately US $675 million). TPA has been renamed GPU GasNet. The fair value
of the assets acquired  totaled  approximately US $586 million and the amount of
liabilities assumed totaled approximately US $103 million.

      The acquisition was financed through: (1) an A$750 million  (approximately
US $495 million) senior credit facility, which is non-recourse to GPU, Inc.; and
(2) an equity  contribution from GPU Capital of A$275 million  (approximately US
$180 million)  provided  through the issuance of commercial  paper guaranteed by
GPU, Inc.

      The  acquisition  has been  accounted for under the purchase  method.  The
total  acquisition  cost exceeded the estimated  value of net assets acquired by
$188.6 million.  This excess is considered  goodwill and is being amortized on a
straight-line basis over 40 years.

                            Midlands Electricity plc

      In July 1999, GPU Electric  acquired  Cinergy's 50% ownership  interest in
Avon Energy Partners  Holdings  (Avon),  which owns Midlands,  for 452.5 million
British pounds (approximately US $714 million). GPU and Cinergy had jointly

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GPU, Inc. and Subsidiary Companies


formed Avon in 1996 to acquire  Midlands.  The fair value of the assets acquired
by Avon  totaled  approximately  US $4.2  billion  and the  liabilities  totaled
approximately US $3 billion.

      GPU Electric  financed the acquisition  primarily through a combination of
equity and debt. The equity was funded from: (1) a US $250 million  contribution
from GPU,  Inc.,  and (2) the issuance of US $50 million of commercial  paper by
GPU Capital, which is guaranteed by GPU, Inc. The debt has been provided through
a two-year 245 million  British pounds  (approximately  US $382 million)  credit
agreement  entered into by EI UK  Holdings,  of which GPU,  Inc. has  guaranteed
approximately US $100 million.

      As a result of GPU's  purchase of  Cinergy's  50%  ownership  in Midlands,
effective in the third quarter of 1999,  GPU began  accounting for Midlands as a
consolidated  entity,  rather than under the equity  method of accounting as was
previously the practice. Consequently, Goodwill, net on the Consolidated Balance
Sheet increased by  approximately  $1.7 billion in the third quarter of 1999. Of
this amount,  $1.6 billion relates to the previous 1996  acquisition of Midlands
by GPU and Cinergy  and $121  million  represents  goodwill as a result of GPU's
purchase of Cinergy's 50% share of Midlands.  The goodwill is being amortized on
a straight-line basis over 40 years.


4.   ACCOUNTING FOR DERIVATIVE INSTRUMENTS

     GPU's use of derivative financial and commodity  instruments is intended to
manage  risk.  GPU does not  intend  to hold or issue  derivative  financial  or
commodity instruments for trading purposes.

Interest Rate Swap Agreements:

     GPU  Electric  uses  interest  rate swap  agreements  to manage the risk of
increases in variable  interest rates. At September 30, 1999,  these  agreements
covered  approximately $1.7 billion of debt, including commercial paper, and are
scheduled to expire on various dates through November 2007. GPU Electric records
amounts paid and received  under the  agreements as  adjustments to the interest
expense of the underlying  debt since the swaps are related to specific  assets,
liabilities or anticipated  transactions of GPU Electric.  For the quarter ended
September 30, 1999, fixed rate interest expense exceeded  variable rate interest
by approximately $17.4 million. For additional information, see GPU Electric and
the GPUI Group section of Management's Discussion and Analysis.

     In the third quarter of 1999,  Austran Holdings  (Austran),  a wholly owned
subsidiary  of GPU Electric,  refinanced  A$220 million (US $142 million) of GPU
PowerNet  acquisition  debt with proceeds from an Australian  Dollar medium term
notes issuance.  In connection  with this debt  refinancing  program,  a loss of
A$20.3 million (approximately US $13.3 million) related to certain interest rate
swap positions was reflected in GPU's third quarter 1999 earnings.


Indexed Swap Agreement:

      In 1998, GPU  International  entered into a 10-year indexed swap agreement
with Niagara Mohawk Power Corporation which, among other things, provides GPU
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GPU, Inc. and Subsidiary Companies


International  a fixed revenue  stream (over the life of the swap  agreement) on
its investment in the Onondaga  Cogeneration project. At September 30, 1999, the
indexed  swap  agreement  is valued at $56.9  million  and is  included in Other
Deferred Debits and Other Assets on the Consolidated Balance Sheets.



5. SEGMENT INFORMATION

     The  following  is  presented  in  accordance  with  Statement of Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related Information."

      GPU's  reportable  segments are strategic  business units that are managed
separately due to their different operating and regulatory  environments.  GPU's
management evaluates the performance of its business units based upon net income
before  extraordinary  and  non-recurring  items.  For the purpose of  providing
segment  information,  domestic  electric  utility  operations  (GPU  Energy) is
comprised of the three electric utility operating companies serving customers in
New Jersey and  Pennsylvania,  as well as Genco,  GPUN, GPU Telcom and GPUS. For
further  information  on GPU's  organizational  structure  and  businesses,  see
preface to the Combined Notes to Consolidated Financial Statements.

                                       68


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<TABLE>
<CAPTION>


GPU, Inc. and Subsidiary Companies


Business Segment Data (in thousands)

                                                              Depreciation                                         Investments
                                                   Operating       and     Financing      Net        Total         and Capital
                                                   Revenues   Amortization  Charges     Income(a)   Assets(b)     Expenditures
                                                   --------   ------------  -------     ---------   ---------     ------------

For the nine months ended September 30, 1999

Domestic Segments:
<S>                                              <C>          <C>         <C>          <C>         <C>             <C>
  Electric Utility Operations (GPU Energy)       $2,856,087   $  304,323  $  168,598   $  383,942  $14,323,232     $  212,436
  Independ Power Prod (GPU International)            62,681        7,045         803        3,923      384,176          1,011
  Electric Retail Energy Sales (GPU AR)              61,402          -           -         (6,783)      22,505              -
                                                  ---------    ---------   ---------    ---------   ----------      ----------
      Subtotal                                    2,980,170      311,368     169,401      381,082   14,729,913        213,447
                                                  ---------    ---------   ---------    ---------   ----------      -----------


Foreign Segments:
  Electric/Gas Utility Operations: (GPU Electric)
    Electric Distribution - United Kingdom          119,041       21,587      50,617       44,792    4,529,688        642,453
    Electric Distribution - Argentina                93,700        9,453      15,603        2,590      538,251        399,125
    Electric Transmission - Australia               144,678       32,348      77,994       (4,957)   1,890,968          5,199
    Gas Transmission - Australia                     19,373        3,744      16,719       (3,255)     783,413        652,392
  Independ Power Prod - S. America (GPU Power)       28,727        4,394       2,476        6,150      236,208         30,517
                                                  ---------    ---------   ---------    ---------   ----------      ----------
      Subtotal                                      405,519       71,526     163,409       45,320    7,978,528      1,729,686
                                                  ---------    ---------   ---------    ---------   ----------      ----------

Corporate and Eliminations                              -            -         1,793      (10,336)     (43,253)             -
                                                  ---------    ---------   ---------    ---------   ----------      -----------
   ----------

      Consolidated Total                         $3,385,689   $  382,894  $  334,603   $  416,066  $22,665,188     $1,943,133
                                                  =========    =========   =========    =========   ==========     ===========

For the nine months ended September 30, 1998

Domestic Segments:
  Electric Utility Operations (GPU Energy)       $3,009,856   $  352,427  $  181,747   $  298,118  $13,298,257     $  213,132
  Independ Power Prod (GPU International)            50,459        2,067         460       10,477      397,523         21,203
  Electric Retail Energy Sales (GPU AR)               8,337          -           -         (1,428)       2,651             22
                                                  ---------    ---------   ---------    ---------   ----------     ----------
      Subtotal                                    3,068,652      354,494     182,207      307,167   13,698,431        234,357
                                                  ---------    ---------   ---------    ---------   ----------     ----------

Foreign Segments:
  Electric/Gas Utility Operations: (GPU Electric)
    Electric Distribution - United Kingdom              319          273      23,743       18,863      617,737            -
    Electric Transmission - Australia               135,886       30,455      81,979       24,019    1,788,877         16,930
  Independ Power Prod - S. America (GPU Power)       23,480        4,386       3,317        1,563      237,162         11,295
                                                  ---------    ---------   ---------    ---------   ----------     -----------
      Subtotal                                      159,685       35,114     109,039       44,445    2,643,776        28,225
                                                  ---------    ---------   ---------    ---------   ----------     -----------

Corporate and Eliminations                           (1,362)         -         2,407       (9,127)     (54,098)           -
                                                  ---------    ---------   ---------    ---------   ----------     -----------
   ----------

      Consolidated Total                         $3,226,975   $  389,608  $  293,653   $  342,485  $16,288,109     $  262,582
                                                  =========    =========   =========    =========   ==========     ===========

(a)  Represents  net income  before  extraordinary  and  non-recurring  items as
discussed in Management's Discussion and Analysis of
    Financial Condition and Results of Operations.

(b) The comparative 1998 Total Assets column is as of December 31, 1998.

                                       69
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<PAGE>

<TABLE>
<CAPTION>

GPU, Inc. and Subsidiary Companies


6.   COMPREHENSIVE INCOME

     For the nine months ended September 30, 1999 and 1998, comprehensive income
is summarized below.

                                                                       (in thousands)
                                                                         Nine months
                                                                      Ended September 30,
GPU, Inc. and Subsidiary Companies                                   1999           1998
----------------------------------                                   ----           -----

<S>                                                                <C>           <C>
Net income                                                         $385,528      $ 276,653
                                                                    -------       --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(losses) on investments                    (5,291)           728
     Foreign currency translation gains/(losses)                     23,375        (15,175)
                                                                    -------       --------
       Total other comprehensive income/(loss)                       18,084        (14,447)
                                                                    -------       --------
Comprehensive income                                               $403,612      $ 262,206
                                                                    =======       ========

JCP&L

Net income                                                         $150,745      $ 184,708
                                                                    -------       --------
Other comprehensive income, net of tax                                 -              -
Comprehensive                                                      -------        --------
income                                                             $150,745      $ 184,708
                                                                    =======       ========

Met-Ed

Net income                                                         $ 93,596      $  32,929
                                                                    -------       --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(losses) on investments                     2,881           (892)
                                                                    -------       --------
Comprehensive income                                               $ 96,477      $  32,037
                                                                    =======        ========
Penelec

Net income                                                         $107,950      $  21,586
                                                                    -------       --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(losses) on investments                     1,373           (470)
                                                                    -------       --------
Comprehensive income                                               $109,323      $  21,116
                                                                    =======       ========




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GPU, Inc. and Subsidiary Companies


                                     PART II

ITEM 1 -       LEGAL PROCEEDINGS

               Information  concerning  the  current  status  of  certain  legal
               proceedings  instituted  against  GPU,  Inc.  and the GPU  Energy
               companies discussed in Part I of this report in Combined Notes to
               Consolidated  Financial  Statements  is  incorporated  herein  by
               reference and made a part hereof.

ITEM 6 -       EXHIBITS AND REPORTS ON FORM 8-K

               (a) Exhibits

                (12)   Statements Showing Computation of Ratio of Earnings to
                    Fixed Charges and Ratio of Earnings to Combined Fixed
                   Charges and Preferred Stock Dividends Based on SEC
                   Regulation S-K, Item 503

                    A - GPU, Inc. and Subsidiary Companies
                    B - JCP&L
                    C - Met-Ed
                    D - Penelec

                (27)   Financial Data Schedules

                    A - GPU, Inc. and Subsidiary Companies
                    B - JCP&L
                    C - Met-Ed
                    D - Penelec

               (b) Reports on Form 8-K
                      GPU, Inc.
                      Dated August 13, 1999, under Item 5 (Other Events).
                      Dated August 16, 1999, under Item 5 (Other Events).
                      Dated September 15, 1999, under Item 5 (Other Events).
                      Dated October 19, 1999, under Item 5 (Other Events).
                      Dated November 5, 1999, under Item 5 (Other Events).

                      Jersey  Central Power & Light Company
                      Dated  September 15, 1999, under Item 5 (Other Events).
                      Dated October 19, 1999, under Item 5 (Other Events).
                      Dated November 5, 1999, under Item 5 (Other Events).

                      Metropolitan Edison Company
                      Dated August 16, 1999, under Item 5 (Other Events).
                      Dated August 18, 1999, under Item 5 (Other Events).
                      Dated November 5, 1999, under Item 5 (Other Events).

                      Pennsylvania Electric Company
                      Dated August 16, 1999, under Item 5 (Other Events).
                      Dated November 5, 1999, under Item 5 (Other Events).


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GPU, Inc. and Subsidiary Companies


                                          Signatures
                                          ----------

    Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, the
registrants  have duly caused  this  report to be signed on their  behalf by the
undersigned thereunto duly authorized.


                                GPU, INC.



November 10, 1999          By:  /s/ B. L. Levy
                               ----------------------------------------
                                B. L. Levy, Senior Vice President
                                (Chief Financial Officer)



November 10, 1999          By:  /s/ P. E. Maricondo
                               ---------------------------------------
                                P. E. Maricondo, Vice President
                                and Comptroller
                                (Chief Accounting Officer)



                                JERSEY CENTRAL POWER & LIGHT COMPANY
                                METROPOLITAN EDISON COMPANY
                                PENNSYLVANIA ELECTRIC COMPANY



November 10, 1999          By:  /s/ R. L. Wise
                               ---------------------------------------
                                R. L. Wise, President
                                (Principal Operating Officer)


November 10, 1999          By:  /s/ M. P. O'Flynn
                               ---------------------------------------
                                M. P. O'Flynn, Vice President- Finance
                                and Rates & Comptroller
                                (Principal Accounting Officer)



                                       72