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, 2000
                               -------------------

                                       OR

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

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



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

1-6047            GPU, Inc.                                 13-5516989
                  (a Pennsylvania corporation)
                  300 Madison Avenue
                  Morristown, New Jersey 07962-1911
                  Telephone (973) 401-8200

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  registrant's  classes of
voting stock, as of October 31, 2000, was as follows:
                                                                      Shares
Registrant                           Title                          Outstanding
----------                           -----                          -----------

GPU, Inc.                            Common Stock, $2.50 par value  121,338,841
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, 2000


                                Table of Contents
                                -----------------

                                                                          Page
                                                                          ----
PART I - Financial Information

      Combined Management's Discussion and Analysis
        of Financial Condition and Results of
        Operations                                                         1

      Consolidated Financial Statements:

          GPU, Inc.
          ---------
            Balance Sheets                                                26
            Statements of Income                                          28
            Statements of Cash Flows                                      29

          Jersey Central Power & Light Company
          ------------------------------------
            Balance Sheets                                                30
            Statements of Income                                          32
            Statements of Cash Flows                                      33

          Metropolitan Edison Company
          ---------------------------
            Balance Sheets                                                34
            Statements of Income                                          36
            Statements of Cash Flows                                      37

          Pennsylvania Electric Company
          -----------------------------
            Balance Sheets                                                38
            Statements of Income                                          40
            Statements of Cash Flows                                      41

      Combined Notes to Consolidated Financial Statements                 42

PART II - Other Information                                               68

Signatures                                                                69





      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 1999
Annual  Report  on Form  10-K,  filed  by the  individual  registrants  with the
Securities and Exchange Commission and should be read in conjunction therewith.


<PAGE>


                           SAFE HARBOR STATEMENT UNDER
              THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995


      In connection  with the safe harbor  provisions of the Private  Securities
Litigation  Reform Act of 1995, GPU, Inc., Jersey Central Power & Light Company,
Metropolitan   Edison  Company  and  Pennsylvania   Electric  Company  (the  GPU
registrants)  are hereby  filing  cautionary  statements  identifying  important
factors that could cause their actual  results to differ  materially  from those
projected in forward-looking  statements (as that term is defined in the Private
Securities  Litigation  Reform  Act of  1995)  made by or on  behalf  of the GPU
registrants  which are made in this Form 10-Q. Any statements  that express,  or
involve discussions as to, expectations, beliefs, plans, objectives, assumptions
or future events or performance (often, but not always, through the use of words
or phrases such as "anticipates," "believes," "estimates," "expects," "intends,"
"plans,"  "projects,"  "will  likely,"  "result,"  "will  continue"  or  similar
expressions) are not statements of historical facts and may be forward-looking.

      Forward-looking    statements   involve    estimates,    assumptions   and
uncertainties  and are  qualified  in their  entirety by  reference  to, and are
accompanied by, the following important factors, which are difficult to predict,
contain  uncertainties,  are beyond the control of the GPU  registrants  and may
cause  actual  results  to  differ  materially  from  those  contained  in those
forward-looking statements:

   -  the consummation of the proposed merger of GPU, Inc. with
      FirstEnergy Corp.;

   -  the effects of regulatory decisions, including any conditions imposed upon
      the proposed merger with FirstEnergy Corp.;

   -  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;

   -  energy prices and availability; and

   -  uncertainties  involved with foreign operations  including political risks
      and foreign currency fluctuations.

      Any  forward-looking  statement  speaks  only as of the date on which that
statement is made, and the GPU registrants undertake no obligation to update any
forward-looking  statement to reflect events or circumstances  after the date on
which that  statement  is made or to reflect  the  occurrence  of  unanticipated
events.  New  factors  emerge  from  time to  time  and it is not  possible  for
management to predict all of those factors, nor can it assess the impact of each
of those  factors  on the  business  or the  extent  to  which  any  factor,  or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.



<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).  These electric
utilities  are  conducting  business  under the name GPU Energy  and  considered
together are referred to as the "GPU Energy  companies."  GPU Capital,  Inc. and
GPU Electric,  Inc. and their subsidiaries own, operate and fund the acquisition
of electric distribution and gas transmission systems in foreign countries,  and
are referred to as "GPU  Electric." GPU  Electric's  foreign  utility  companies
include Midlands  Electricity plc (conducting business as GPU Power UK); Empresa
Distribuidora   Electrica   Regional  S.A.   (Emdersa);   and  GPU  GasNet.  GPU
International,  Inc. and GPU Power, Inc. and their subsidiaries develop, own and
operate  generation  facilities in the United States (US) 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; MYR Group Inc. (MYR), which is a utility
infrastructure  construction  services  company;  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."


                            GPU RESULTS OF OPERATIONS
                            -------------------------

EARNINGS PER SHARE CONTRIBUTION:
--------------------------------

                              Three Months Ended         Nine Months Ended
(on a diluted basis)             September 30,              September 30,
                            ---------------------     -----------------------
                            2000    1999  Change      2000     1999   Change
                            ----    ----  -------     ----     ----   -------
Operations:
   GPU Energy companies * $ 0.48  $ 1.31   $(0.83)    $ 1.72  $ 3.04  $(1.32)
   GPU Electric             0.03   (0.08)    0.11       0.59    0.31    0.28
   GPUI Group               0.08    0.06     0.02       0.11    0.08    0.03
   GPU AR                  (0.03)  (0.07)    0.04      (0.02)  (0.06)   0.04
   MYR                       --      --       --        0.01     --     0.01
   GPU, Inc. (Corporate)   (0.05)  (0.04)   (0.01)     (0.13)  (0.08)  (0.05)
                           -----   -----    -----      -----   -----   -----
     Total operations       0.51    1.18    (0.67)      2.28    3.29   (1.01)
Non-recurring items:
   GPU Energy companies     0.13     --      0.13       0.13   (0.32)   0.45
   GPU Electric              --      --       --       (2.43)   0.08   (2.51)
   GPUI Group               0.22     --      0.22       0.22     --     0.22
                           -----   -----    -----      -----   -----   -----
     Total                $ 0.86  $ 1.18   $(0.32)    $ 0.20  $ 3.05  $(2.85)
                           =====   =====    =====      =====   =====   =====

*  Includes GPU Telcom

      GPU's third  quarter  2000  income  before  non-recurring  items was $60.9
million, or $0.51 per share, against income before non-recurring items of $147.5
million,  or $1.18 per share in the third quarter of 1999.  The lower 2000 third
quarter  income  before  non-recurring  items was primarily due to the impact of
electric  utility  restructuring in New Jersey and  Pennsylvania,  GPU's sale of
substantially  all its  generation  facilities,  lower  demand  for  electricity
resulting from cooler weather during the Summer of 2000 compared to the previous
summer,  higher energy costs in Pennsylvania,  and lower electric delivery rates
charged to customers in New Jersey. Partially


                                        1


<PAGE>


offsetting the decrease was lower operating and  maintenance  (O&M) expenses and
depreciation  costs at the GPU Energy companies and higher GPU Electric earnings
primarily due to the acquisition of the remaining 50% ownership  interest of GPU
Power UK in July 1999.

      After taking into account the 2000  non-recurring  items, GPU recorded net
income of $103.5  million,  or $0.86 per share,  in the third quarter 2000.  The
2000  quarterly  results  included:  a  non-recurring  after-tax  gain of  $26.2
million,  or $0.22 per share,  for the  recognition  of a net gain  related to a
restructured  power supply agreement between a GPU independent power project and
Niagara Mohawk Corporation  (NIMO); and a non-recurring  after-tax gain of $16.5
million,  or $0.13 per share,  for the  reversal of certain  deferred  taxes and
realization  of an investment tax credit related to the sale of the Oyster Creek
Nuclear Generating Station (Oyster Creek).

      For the nine months ended September 30, 2000, income before  non-recurring
items was $276 million, or $2.28 per share, against $416.1 million, or $3.29 per
share,  for the  first  nine  months of 1999.  The same  factors  affecting  the
comparable quarterly results also affected the year to date comparison.

      Including  non-recurring items, GPU recorded net income for the first nine
months of 2000 of $23.7  million,  or $0.20 per  share,  against  net  income of
$385.5  million,  or $3.05 per share, in the first nine months of 1999. The nine
months  2000  net  income  included  a  non-recurring  charge  of  $295  million
after-tax,  or $2.43  per  share,  on the  June  2000  sale of GPU's  Australian
electric transmission subsidiary, GPU PowerNet, in addition to the non-recurring
gains  described  above.  The 1999  comparable  period  included a non-recurring
charge of $68  million  after-tax,  or $0.54 per share,  resulting  from the New
Jersey Board of Public Utilities'  (NJBPU)  restructuring  order (Summary Order)
issued to JCP&L ;  a  non-recurring  gain on the sale of the GPU Power UK supply
business of $9.7 million after-tax, or $0.08 per share; and 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.


OPERATING REVENUES:
-------------------

      Operating  revenues for the third  quarter 2000  increased  $31 million to
$1.5 billion,  as compared to the third quarter 1999.  For the nine months ended
September 30, 2000, operating revenues increased $526.4 million to $3.9 billion,
as compared to the same period last year.  The  components of the changes are as
follows:




                                        2


<PAGE>


                                            2000 vs. 1999 (in millions)
                                     ----------------------------------------
                                      Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                     -------------------   ------------------
GPU Energy companies:
  Kilowatt-hour (KWH) revenues            $ (98.4)                $(386.2)
  Energy and restructuring-related
    Revenues (NJ)                            43.1                   222.7
  Competitive transition charge
    (CTC) revenues (PA)                      (1.5)                   10.1
  Obligation to refund revenues (NJ)           --                   115.0
  GPU Telcom revenues                         1.4                     2.1
  Other revenues                            (29.6)                  (31.3)
                                           ------                  ------
    Total GPU Energy companies              (85.0)                  (67.6)
GPU Electric                                (36.3)                  336.4
GPUI Group                                   (2.4)                    2.4
GPU AR                                      (15.3)                  (12.9)
MYR                                         170.0                   268.1
                                           ------                  ------
    Total increase                        $  31.0                 $ 526.4
                                           ======                  ======

GPU Energy companies

Kilowatt-hour revenues
----------------------

      The decrease for the three and nine months  ended  September  30, 2000 was
due to GPU Energy having less  generation  available for sale to other utilities
in 2000 of  approximately  $29.5  million year to date,  lower rates  charged to
customers in New Jersey resulting in a decrease in revenues of approximately $82
million  year to date,  and lower  weather-related  sales due to cooler  weather
during the Summer of 2000 compared to the previous summer. In addition,  certain
JCP&L revenues  related to stranded cost recovery that were previously  included
in KWH revenues are now included in energy and  restructuring-related  revenues,
effective August 1, 1999.

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

      Changes  in  energy  and  restructuring-related  revenues  do  not  affect
earnings as they are offset by  corresponding  changes in expense.  The increase
for the three and nine months ended  September 30, 2000 was primarily due to the
inclusion of revenues,  effective  August 1, 1999,  for the recovery of stranded
costs due to restructuring in New Jersey. In addition, in 1999 JCP&L changed its
estimate for unbilled  revenue,  which  resulted in the  recording of additional
revenues, partially offsetting the increase in the nine month period.

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

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

Obligation to refund revenues (JCP&L)
-------------------------------------

      The increase for the nine month period was due to the absence this year of
a reduction in operating revenues of $115 million as a result of the



                                        3


<PAGE>


NJBPU's  Summary Order issued to JCP&L in 1999. The Summary Order requires JCP&L
to refund customers 5% from rates in effect as of April 30, 1997.

Other Revenues
--------------

      The decrease for both periods was due to decreased  transmission  revenues
as a result of less load served by alternative  suppliers in  Pennsylvania,  and
lower revenue taxes in New Jersey, which did not have an impact on earnings.

GPU Electric

      The increase in revenues for the nine months ended  September 30, 2000 was
primarily due to the inclusion of a full nine months of revenues from: GPU Power
UK (acquired the remaining 50% ownership  interest in July 1999),  approximately
$323.3  million year to date;  Emdersa  (acquired in March 1999),  approximately
$41.2  million  year  to  date;   and  GPU  GasNet   (acquired  in  June  1999),
approximately  $26.6  million year to date;  partially  offset by a reduction in
revenues at GPU  PowerNet.  The  decrease in revenues for the three months ended
September 30, 2000 was primarily due to the sale of GPU PowerNet in June 2000.

GPUI Group

      The  decrease  for the  three  months  ended  September  30,  2000 was due
primarily to lower revenues  associated with the Onondaga and Lake  cogeneration
projects.

      The increase for the nine months ended  September 30, 2000 was due in part
to higher energy and capacity  revenues at Empresa  Guaracachi  S.A. (EGSA) as a
result of new generating units that commenced operations in June 1999.

GPU AR

      The decrease for the three and nine months  ended  September  30, 2000 was
due to GPU AR having fewer  customers to supply  electricity  to compared to the
same periods last year.

MYR

      The increase for the three and nine months  ended  September  30, 2000 was
due to the inclusion of revenues from MYR following its acquisition by GPU, Inc.
in the second quarter 2000.


OPERATING INCOME:
-----------------

      Operating  income for the third quarter 2000  decreased  $184.9 million to
$192.2 million, as compared to the third quarter 1999. For the nine months ended
September 30, 2000, operating income decreased $417.2 million to $390.5 million,
as compared to the same period last year.  The  components of the changes are as
follows:

                                        4


<PAGE>
                                            2000 vs. 1999 (in millions)
                                     ----------------------------------------
                                      Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                     -------------------   ------------------

GPU Energy companies                      $(184.2)                $(208.6)
GPU Electric                                 (9.1)                 (223.5)
GPUI Group                                   (3.2)                    1.0
GPU AR                                        7.4                     6.6
MYR                                           3.9                     7.8
GPU, Inc.                                     0.3                    (0.5)
                                           ------                  ------
    Total decrease                        $(184.9)                $(417.2)
                                           ======                  ======

GPU Energy companies

      The decrease for the three and nine months  ended  September  30, 2000 was
due to lower  revenues as discussed  above (see Operating  Revenues  section for
additional  information)  and higher  energy costs for Met-Ed and Penelec due to
the  purchase  of more  energy  (approximately  $242.5  million  year  to  date)
following  the  sale of  their  generating  assets.  Partially  offsetting  this
decrease  was lower O&M  expenses  (approximately  $133.9  million year to date)
primarily due to the sale of essentially all GPU Energy's  generating  assets in
1999; and lower depreciation expense  (approximately $62.7 million year to date)
due to the sale of generating assets and the effect of the impairment write-down
of Oyster Creek, which was also recorded in 1999.

GPU Electric

      The decrease for the nine months ended  September  30, 2000 was due to the
pre-tax loss of $372 million  recorded in the second quarter 2000 on the sale of
GPU PowerNet.  Partially offsetting this decrease was increased operating income
at GPU Power UK due primarily to the  acquisition of the remaining 50% ownership
interest in 1999,  and the inclusion of Emdersa and GPU GasNet  following  their
acquisitions. Prior to its purchase of the remaining 50% ownership interest, GPU
accounted  for its  investment  in GPU  Power UK under  the  equity  method  and
included its share of GPU Power UK's income in Equity in undistributed  earnings
of affiliates, net on the Consolidated Statements of Income.

      Partially  offsetting the decrease was a credit to income of $15.9 million
pre-tax  resulting  from a  reduction  in the  estimated  liability  of  certain
long-term  purchase  obligations under natural gas supply contracts entered into
by GPU Power UK.  These  contracts  were at fixed prices in excess of the market
price of gas, and a liability was  established for the estimated loss under such
contracts;  however,  as a result of  increasing  gas  prices  during the second
quarter  of 2000,  GPU Power UK was able to enter  into  matching  forward  sale
contracts  for the majority of the gas  purchases.  In  addition,  in the second
quarter  2000 a pre-tax  gain of $4.5 million was realized on closed out forward
exchange  contracts  that  were  entered  into  by GPU  Electric  to lock in the
then-current  A$/US$  exchange  rate on the  projected  remittance of Australian
dollar proceeds arising from the expected sale of GPU PowerNet and GPU GasNet.

GPUI Group

      Lower revenues associated with the Onondaga and Lake cogeneration projects
reduced the 2000 quarterly  operating  income.  The increase for the nine months
ended  September 30, 2000 was due to the absence of an  impairment  loss of $6.5
million  recorded in 1999 against GPU  International,  Inc.'s  investment in the
Lake cogeneration project.

                                        5


<PAGE>


GPU AR

      The  decrease  in  operating  loss for the  three  and nine  months  ended
September 30, 2000 was primarily due to lower energy purchases related to GPU AR
having fewer customers to supply electricity to, as compared to the same periods
last year, partially offset by lower revenues for the same reason.

MYR

      The increase for the three and nine months  ended  September  30, 2000 was
due to the inclusion of MYR following its acquisition by GPU, Inc. in the second
quarter 2000.


OTHER INCOME AND DEDUCTIONS:
----------------------------

      Other income and  deductions  for the third quarter 2000  increased  $67.4
million to $79.3  million,  as compared to the third quarter 1999.  For the nine
months ended  September  30, 2000,  other income and  deductions  decreased  $21
million to $135.8  million,  as  compared  to the same  period  last  year.  The
components of the changes are as follows:

                                            2000 vs. 1999 (in millions)
                                     ----------------------------------------
                                      Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                     -------------------   ------------------

GPU Energy companies                      $   9.4                 $ (29.2)
GPU Electric                                  8.3                   (38.6)
GPUI Group                                   49.3                    45.9
GPU AR                                        0.2                     0.5
MYR                                           0.2                     0.4
GPU, Inc.                                      --                      --
                                           ------                  ------
    Total increase/(decrease)             $  67.4                 $ (21.0)
                                           ======                  ======

GPU Energy companies

      The increase for the three months ended  September 30, 2000 was due to the
reversal of the effect of discounting the receivable from AmerGen Energy Company
LLC (AmerGen) relating to Oyster Creek outage costs,  previously recorded in the
second quarter 2000,  higher interest income and a gain on the sale of property.
Partially  offsetting  the increase was the  write-down of regulatory  assets by
$11.7 million for Three Mile Island Unit 2 (TMI-2) decommissioning, representing
the  realized   gains   previously   recorded  by  Met-Ed  and  Penelec  on  the
accident-related portion of the TMI-2 decommissioning trusts.

      The decrease for the nine months ended  September 30, 2000 was due to: the
absence,  in 2000, of the gain of $38.3 million pre-tax on the sale of Penelec's
Homer City Station in the first quarter 1999;  and the  write-down of regulatory
assets by $11.7 million in the third quarter  2000;  partially  offset by higher
interest income and a gain on the sale of property.


                                        6


<PAGE>


GPU Electric

      The  decrease  for the  nine  months  ended  September  30,  2000  was due
primarily to the  consolidation of GPU Power UK following the acquisition of the
remaining  50%  ownership  interest  in 1999.  Prior to that,  the GPU  Power UK
investment  was  accounted  for under the equity  method and GPU's  share of GPU
Power  UK's  income  was  included  in  Equity  in  undistributed   earnings  of
affiliates,  net on the Consolidated  Statements of Income. The increase for the
three months  ended  September  30, 2000 was due to the  increase in  investment
income associated with GPU Power UK's investment in Turkey.

GPUI Group

      The increase for the three and nine months  ended  September  30, 2000 was
due to the  recognition  of a  $40.3  million  pre-tax  net  gain  related  to a
restructured  power supply agreement between a GPU independent power project and
NIMO.  For  additional  information,  see Note 3 to the  Consolidated  Financial
Statements.


INTEREST CHARGES AND PREFERRED DIVIDENDS:
-----------------------------------------

      Interest  charges  and  preferred  dividends  for the third  quarter  2000
decreased  $19.1  million to $124.5  million,  as compared to the third  quarter
1999.  For the nine  months  ended  September  30,  2000,  interest  charges and
preferred  dividends  increased $74.7 million to $409.3 million,  as compared to
the same period last year. The components of the changes are as follows:

                                            2000 vs. 1999 (in millions)
                                     ----------------------------------------
                                      Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                     -------------------   ------------------

GPU Energy companies                      $  (0.3)                $ (12.0)
GPU Electric                                (24.1)                   74.1
GPUI Group                                    0.8                     1.7
MYR                                           2.9                     5.3
GPU, Inc.                                     1.6                     5.6
                                           ------                  ------
    Total increase/(decrease)             $ (19.1)                $  74.7
                                           ======                  ======

GPU Energy companies

      The decrease for the nine months ended  September  30, 2000 was  primarily
due to the  following:  in 2000,  JCP&L  redeemed  $16.7  million  stated  value
cumulative  preferred  stock  pursuant to mandatory  and  optional  sinking fund
provisions;  Penelec  redeemed $25 million of long-term  debt;  JCP&L and Met-Ed
redeemed  $40 million and $50 million,  respectively,  of first  mortgage  bonds
(FMBs);  and in 1999,  Met-Ed and Penelec  redeemed all their  company-obligated
mandatorily  redeemable preferred securities and cumulative preferred stock; and
Penelec redeemed $600 million of FMBs. Partially offsetting these decreases were
increased interest expense associated with Penelec's issuance of $350 million of
senior  notes in 1999,  the  issuance  of $50  million and $68 million of senior
notes in April 2000 and August  2000,  respectively;  and the  issuance  of $100
million  each of  company-obligated  trust  preferred  securities  by Met-Ed and
Penelec in 1999.




                                        7

<PAGE>


GPU Electric

      The increase for the nine months ended  September  30, 2000 was  primarily
due to  higher  debt  levels  from the 1999  acquisitions  of GPU  Power UK (the
remaining 50% ownership  interest),  Emdersa and GPU GasNet,  which  resulted in
additional debt and related  interest  expense of  approximately  $105.3 million
year to date, partially offset by lower interest expense related to GPU PowerNet
due to its sale. The decrease for the three months ended  September 30, 2000 was
primarily  due to lower debt levels  resulting  from the sale of GPU PowerNet on
June 30, 2000.

MYR

      The increase for the three and nine months  ended  September  30, 2000 was
due to the inclusion of MYR following its acquisition by GPU, Inc. in the second
quarter 2000.

GPU, Inc.

      The  increase  for the  three  and nine  month  periods  was due to higher
average debt levels in 2000, partially due to the acquisition of MYR.


                           JCP&L RESULTS OF OPERATIONS
                           ---------------------------

      JCP&L's earnings for the third quarter 2000 were $91.4 million compared to
third  quarter  1999  earnings  of $100.6  million.  Excluding  a  non-recurring
after-tax  gain of $16.5  million,  which  resulted from the reversal of certain
deferred  taxes and  realization of an investment tax credit related to the sale
of Oyster Creek,  earnings for the quarter  ended  September 30, 2000 would have
been $74.9  million.  The decline in earnings on this basis was primarily due to
lower demand for electricity  resulting from cooler weather during the Summer of
2000 compared to the previous summer;  and lower rates charged to customers as a
result of the New Jersey  restructuring.  Partially  offsetting the decrease was
lower  depreciation  expense due to the effect of the sale of generating  assets
and the impairment write-down of Oyster Creek, both of which occurred in 1999.

      For the nine months ended September 30, 2000, JCP&L's earnings were $177.3
million,  compared to $143.6 million for the same period in 1999.  Excluding the
non-recurring  gain  discussed  above,  earnings for 2000 would have been $160.8
million.  Excluding a non-recurring  charge of $68 million,  which resulted from
the  NJBPU's  Summary  Order  for  JCP&L,  earnings  for the nine  months  ended
September 30, 1999 would have been $211.6  million.  The decrease in earnings on
this basis was due to lower demand for electricity resulting from cooler weather
during the Summer of 2000  compared  to the  previous  summer;  and lower  rates
charged to customers under New Jersey rate restructuring.  Partially  offsetting
the  decrease  was lower  depreciation  expense due to the effect of the sale of
generating  assets and the  impairment  write-down of Oyster  Creek,  which were
recorded in 1999, and a reduction in O&M expenses.


OPERATING REVENUES:
-------------------

      Operating  revenues for the third quarter 2000 decreased  $65.2 million to
$605 million, as compared to the third quarter 1999. For the nine months


                                        8


<PAGE>


ended September 30, 2000,  earnings  decreased  $30.2 million,  to $1.5 billion,
compared  to the same  period last year.  The  components  of the changes are as
follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended   Nine Months Ended
                                        September 30,       September 30,
                                     ------------------   -----------------

KWH revenues                              $ (98.9)             $(355.3)
Energy and restructuring-related
  revenues                                   43.1                222.7
Obligation to refund revenues
  to customers per NJBPU Order                 --                115.0
Other revenues                               (9.4)               (12.6)
                                           ------               ------
    Decrease in revenues                  $ (65.2)             $ (30.2)
                                           ======               ======

KWH revenues
------------

      The decline for the three and nine month  periods was primarily due to the
fact that certain  revenues  related to stranded  cost recovery are now included
under energy and restructuring-related  revenues,  effective August 1, 1999. The
decrease was also due in part to lower rates charged to customers in New Jersey,
resulting in a decrease of revenues of  approximately  $82 million year to date,
the effect of New Jersey  customers  choosing other electric  energy  suppliers,
resulting in a decrease of revenues of  approximately  $79 million year to date,
and lower weather-related sales.

Energy and restructuring-related revenues
-----------------------------------------

      The  increase  for both  periods was  primarily  due to the  inclusion  of
revenues,  effective  August 1, 1999,  for the  recovery of stranded  costs as a
result of  restructuring  in New  Jersey.  In the first  quarter of 1999,  JCP&L
changed its estimate for unbilled  revenue,  which  resulted in the recording of
additional  revenues during that quarter,  partially  offsetting the increase in
the nine-month period. Changes in energy and  restructuring-related  revenues do
not affect earnings as they are offset by corresponding changes in expense.

Obligation to refund revenues to customers per NJBPU Order
----------------------------------------------------------

      The increase in the nine month period  resulted  from the NJBPU's  Summary
Order  for  JCP&L,  which  obligated  JCP&L to refund to  customers  (from  1999
revenues)  5% of April 30, 1997 rates for service  rendered  from August 1, 2002
through July 31, 2003. This occurred during the second quarter of 1999.

Other revenues
--------------

      The decrease for both periods was primarily  due to lower  revenue  taxes,
which did not have an impact on earnings.


OPERATING INCOME:
-----------------

      Operating  income for the third  quarter  2000  decreased  $59  million to
$135.8  million,  as compared to the third  quarter  1999.  The decrease was due
primarily to lower revenues,  resulting from lower rates charged to customers as
a result of the New Jersey rate restructuring. Partially offsetting the


                                        9


<PAGE>


decrease was a decline in depreciation expense, due to the effect of the sale of
generating assets and the impairment write-down of Oyster Creek in 1999.

      For the nine months ended September 30, 2000,  operating  income increased
$12.1 million, to $331.4 million, versus the same period last year. The increase
was due primarily to a decrease in  depreciation  expense  (approximately  $11.1
million) due to the effect of the sale of generating  assets and the  impairment
write-down of Oyster Creek in 1999,  and a decrease in O&M costs  (approximately
$24.6 million).  Partially offsetting the increase was lower operating revenues,
as discussed above.


OTHER INCOME AND DEDUCTIONS:
----------------------------

      Other income and  deductions  for the third quarter 2000  increased  $14.5
million to $16.1  million,  versus the third quarter  1999.  For the nine months
ended September 30, 2000, other income and deductions increased $11.3 million to
$20.6  million,  compared  to the same period  last year.  The  increase in both
periods was due to the reversal of the effect of discounting the receivable from
AmerGen relating to Oyster Creek outage costs, higher interest income and a gain
on the sale of property.


                          MET-ED RESULTS OF OPERATIONS
                          ----------------------------

      Met-Ed  incurred  a loss  for the  third  quarter  2000  of $3.8  million,
compared  to third  quarter  1999  earnings  of $41.6  million.  The  decline in
earnings was primarily due to higher energy costs  resulting  from Met-Ed's need
to purchase its energy  requirements on the open market, as a result of the sale
of its generating assets in 1999.  Partially  offsetting these higher costs were
lower O&M and depreciation costs, mainly due to the sale of generating assets.

      For the nine months ended September 30, 2000, earnings were $31.4 million,
compared to earnings of $93 million for the same period last year.  The decrease
in earnings was attributed primarily to higher energy purchase costs, which were
offset by reductions in O&M expenses and depreciation costs. In addition, Met-Ed
experienced   a  decline  in   revenues  as  a  result  of   Pennsylvania   rate
restructuring.


OPERATING REVENUES:
-------------------

      Operating  revenues for the third quarter 2000 decreased  $52.8 million to
$227.4 million,  as compared to the third quarter 1999.  Operating  revenues for
the  nine-month  period ended  September 30, 2000 decreased  $79.1  million,  to
$628.3  million,  as  compared  to same period in 1999.  The  components  of the
changes are as follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended   Nine Months Ended
                                        September 30,       September 30,
                                     ------------------   -----------------

KWH revenues                              $ (44.4)             $ (82.1)
CTC revenues                                 (0.6)                 9.1
Other revenues                               (7.8)                (6.1)
                                           ------               ------
    Decrease in revenues                  $ (52.8)             $ (79.1)
                                           ======               ======


                                       10


<PAGE>


KWH revenues
------------

      The  decrease  for the three  and nine  month  periods  was due in part to
Met-Ed having less  generation  available  for sale to other  utilities in 2000,
approximately $78.9 million year to date.

CTC revenues
------------

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

Other revenues
--------------

      The decrease for both periods was primarily due to decreased  transmission
revenues  as  a  result  of  less  load  served  by  alternative   suppliers  in
Pennsylvania.


OPERATING INCOME:
-----------------

      Operating  income for the third quarter 2000 decreased  $71.4 million,  to
$9.8 million, as compared to the third quarter 1999. The decrease was attributed
to higher energy  costs,  as a result of increased  energy  purchases due to the
sale of  Met-Ed's  generating  assets.  The  decrease  in  operating  income was
partially offset by a decrease in O&M expenses and depreciation expense,  mainly
due to the sale of generating assets.

      Operating  income for the nine months ended  September 30, 2000  decreased
$117.8 million, to $84.4 million, as compared to the nine months ended September
30, 1999. The decrease was attributed to lower revenues,  as discussed above, as
well as higher  energy  purchase  costs  (approximately  $112.5  million).  This
decrease was offset by a reduction in O&M expenses  (approximately $65 million),
and  depreciation  expense  (approximately  $24.6  million)  due to the  sale of
generating assets.


OTHER INCOME AND DEDUCTIONS:
----------------------------

      Other income and  deductions  for the third  quarter 2000  decreased  $3.2
million,  to a loss of $3.8 million,  as compared to the third quarter 1999. The
decrease  was due to the  write-down  of  regulatory  assets by $7.9 million for
TMI-2 decommissioning, representing the net realized gain previously recorded on
the accident-related portion of the TMI-2 decommissioning trust.

      For the nine months ended September 30, 2000,  other income and deductions
increased $4.8 million,  to $7.2 million,  versus the same period last year. The
change was due  primarily  to an  increase  in  interest  and  dividend  income,
partially  offset by the write-down of regulatory  assets by $7.9 million in the
third quarter 2000.


INTEREST CHARGES AND PREFERRED DIVIDENDS:
-----------------------------------------

      Interest  charges  and  preferred  dividends  for the third  quarter  2000
decreased $2.2 million to $13.5 million, versus the third quarter 1999.


                                       11


<PAGE>


Interest charges and preferred dividends for the nine months ended September 30,
2000 decreased $4.1 million to $41.3 million,  as compared to the same period in
1999.  The decrease for both periods was primarily due to the  redemption of all
Met-Ed's  company-obligated  mandatorily  redeemable  preferred  securities  and
cumulative  preferred  stock in 1999 (the redemption of preferred stock resulted
in a loss of $0.5  million);  and the  retirement  of $50 million of FMBs in the
second quarter 2000.  Partially  offsetting the decrease was increased  interest
expense associated with the issuance of $100 million of company-obligated  trust
preferred securities in 1999.


                          PENELEC RESULTS OF OPERATIONS
                          -----------------------------

      Penelec  incurred  a loss  for the  third  quarter  2000  of $14  million,
compared  to third  quarter  1999  earnings  of $22.5  million.  The  decline in
earnings was primarily due to higher energy costs  resulting from Penelec's need
to purchase its energy  requirements  on the open market,  since the sale of its
generating  assets in 1999.  Partially  offsetting  the higher energy costs were
lower O&M expense and  depreciation  costs mainly due to the sale of  generating
assets.

      For the nine months ended September 30, 2000, earnings were $17.5 million,
compared to earnings of $107.1 million for the same period last year.  Excluding
the net gain of $27.8  million  after-tax  for the  portion of the sale of Homer
City  related  to  wholesale  operations,  earnings  for the nine  months  ended
September  30, 1999 would have been $79.3  million.  The decrease in earnings on
this  basis was  primarily  due to higher  energy  purchase  costs,  which  were
partially  offset by reductions in O&M expenses and  depreciation  expense,  and
additional  income tax expense in 1999 related to the deregulation of generating
assets in  Pennsylvania.  In  addition,  the company  experienced  a decrease in
revenues as a result of Pennsylvania rate restructuring.


OPERATING REVENUES:
-------------------

      Operating revenues for the third quarter 2000 decreased $17.9 million,  to
$236.7  million,  compared to the third quarter 1999.  For the nine months ended
September  30,  2000,  revenues  decreased  $42.4  million,  to $663.6  million,
compared  to the same  period last year.  The  components  of the changes are as
follows:

                                           2000 vs. 1999 (in millions)
                                     --------------------------------------
                                     Three Months Ended   Nine Months Ended
                                        September 30,       September 30,
                                     ------------------   -----------------

KWH revenues                              $  (3.8)             $ (28.2)
CTC revenues                                 (0.9)                 1.0
Other revenues                              (13.2)               (15.2)
                                           ------               ------
    Decrease in revenues                  $ (17.9)             $ (42.4)
                                           ======               ======

KWH revenues
------------

      The  decrease  for the three  and nine  month  periods  was due in part to
Penelec having less  generation  available for sale to other  utilities in 2000,
approximately $24.5 million year to date.



                                       12


<PAGE>


CTC revenues
------------

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

Other revenues
--------------

      The decrease for both periods was primarily due to decreased  transmission
revenues  as  a  result  of  less  load  served  by  alternative   suppliers  in
Pennsylvania.


OPERATING INCOME:
-----------------

      Operating income for the third quarter 2000 decreased $52.7 million,  to a
loss of $11.1  million,  as compared to the third quarter 1999. The decrease was
attributed  primarily to higher energy costs, due to the purchase of more energy
as a  result  of the sale of  Penelec's  generating  assets.  The  decrease  was
partially offset by lower O&M and depreciation expenses,  mainly due to the sale
of generating assets.

      Operating  income for the nine months ended  September 30, 2000  decreased
$102 million,  to $57.2 million,  as compared to the nine months ended September
30, 1999. The decrease was attributed to lower revenues,  as discussed above, as
well as higher energy purchase costs (approximately $130 million). This decrease
was offset by a reduction  in O&M  expenses  (approximately  $47  million),  and
depreciation  expense  (approximately $27 million) due to the sale of generating
assets.


OTHER INCOME AND DEDUCTIONS:
----------------------------

      Other income and  deductions  for the third  quarter 2000  decreased  $2.5
million,  to a loss of $1.7 million,  as compared to the third quarter 1999. The
decrease  was due to the  write-down  of  regulatory  assets by $3.8 million for
TMI-2 decommissioning, representing the net realized gain previously recorded on
the accident-related portion of the TMI-2 decommissioning trust.

      Other income and deductions  for the nine months ended  September 30, 2000
decreased  $43.9 million,  to $3 million,  versus the same period last year. The
decrease was due to: the absence,  in 2000, of the gain of $38.3 million pre-tax
on the sale of Penelec's  Homer City Station in the first quarter 1999;  and the
write-down of regulatory assets by $3.8 million in the third quarter 2000.


INTEREST CHARGES AND PREFERRED DIVIDENDS:
-----------------------------------------

      Interest  charges  and  preferred  dividends  for the third  quarter  2000
increased $3 million, to $12.1 million, due primarily to an increase in interest
expense on notes payable and commercial paper.

      Interest charges and preferred dividends for the first nine months of 2000
decreased $2.5 million,  to $32.3 million,  as compared to the first nine months
of 1999. The decrease was primarily due to the redemption of all


                                       13


<PAGE>


Penelec's  company-obligated  mandatorily  redeemable  preferred  securities and
cumulative preferred stock (the redemption of preferred stock resulted in a loss
of $0.7  million),  the  redemption  of $600  million  of FMBs in 1999,  and the
redemption of $25 million of long-term debt in 2000.  Partially offsetting these
decreases were increased  interest expense  associated with the issuance of $350
million  of  senior   notes  in  1999;   the   issuance   of  $100   million  of
company-obligated  trust  preferred  securities in 1999; and the issuance of $68
million senior notes in 2000.


                   PENDING MERGER OF FIRSTENERGY CORP. AND GPU
                   -------------------------------------------

      On August 8, 2000,  GPU,  Inc.  entered  into an  agreement  to merge with
FirstEnergy Corp.  (FirstEnergy),  an Ohio corporation,  headquartered in Akron,
Ohio.  Under  the  merger  agreement,  FirstEnergy  would  acquire  all  of  the
outstanding  shares of GPU's common stock for approximately $4.5 billion in cash
and FirstEnergy common stock.

      The Merger has been  approved by the Boards of Directors of GPU,  Inc. and
FirstEnergy and is expected to close promptly after all of the conditions to the
consummation of the Merger,  including  shareholder  approval and the receipt of
all necessary regulatory approvals,  are fulfilled or waived. The receipt of all
necessary   federal  and  state   regulatory   approvals  is  expected  to  take
approximately  nine to twelve  months from the date of the merger  agreement.  A
joint  proxy  statement/prospectus  has  been  mailed  to  shareholders  of both
companies, and special meetings of the shareholders of GPU, Inc. and FirstEnergy
are scheduled for November 21, 2000 to consider and vote on the Merger.


                          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, 2000.  At September  30, 2000,  GPU,  Inc. has  remaining  authorization  to
finance approximately $527 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 owns electric distribution and gas transmission businesses in
England,  Australia and Argentina.  In June 2000, GPU Electric sold its electric
transmission business in Australia and, as a result,  recorded a pre-tax loss in
the quarter ended June 30, 2000 of $372 million,  ($295  million  after-tax,  or
$2.43 per share),  including a $94 million  foreign  currency loss.  Through its
ownership  in GPU Power UK,  GPU  Electric  also has  investments  in  operating
generating facilities located in foreign countries totaling 4,216 megawatts (MW)
(of which GPU Electric's  equity interest  represents 1,134 MW) of capacity.  At
September 30, 2000,  GPU, Inc.'s  aggregate  investment in GPU Electric was $571
million.  GPU, Inc. has also  guaranteed  up to an  additional  $1.04 billion of
outstanding GPU Electric obligations.



                                       14


<PAGE>


                                   GPUI GROUP
                                   ----------

      The GPUI  Group has  ownership  interests  in six  operating  cogeneration
plants in the US totaling  1,014 MW (of which the GPUI Group's  equity  interest
represents 496 MW) of capacity and four 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, 2000,  GPU,  Inc.'s
aggregate  investment in the GPUI Group was $291.7  million.  GPU, Inc. has also
guaranteed up to an additional $30.3 million of GPUI Group obligations.

      In October 2000, GPU, Inc. agreed to sell GPU  International,  Inc. (GPUI)
to Aquila  Energy  Corporation,  a  subsidiary  of  UtiliCorp  United,  for $225
million.  The sale  includes  GPUI's  interests  in its six  domestic  operating
plants, and a one-half interest in a 715 MW development stage project. GPU, Inc.
expects to  complete  the sale,  which is subject to certain  federal  and state
regulatory  approvals,  by the end of 2000 and  expects to realize an  after-tax
gain on the sale of between $60 million and $80 million.


                                 MYR GROUP INC.
                                 --------------

      In April 2000, GPU, Inc.  acquired MYR for  approximately  $217.5 million.
For additional information, see Note 2, Acquisitions and Dispositions.


                         LIQUIDITY AND CAPITAL RESOURCES
                         -------------------------------

Capital Expenditures and Investments
------------------------------------

GPU Energy companies

      The GPU Energy  companies'  capital  spending  for the nine  months  ended
September  30, 2000 was $211  million  (JCP&L $85  million;  Met-Ed $27 million;
Penelec $48 million;  Other $51 million),  and was used  primarily to expand and
improve  existing  transmission  and  distribution  (T&D) facilities and for new
customer  connections;  and for investments by GPU Telcom in  telecommunications
infrastructure and businesses.  For 2000, capital  expenditures are estimated to
be $349 million  (JCP&L $178 million;  Met-Ed $57 million;  Penelec $82 million;
Other $32 million),  a substantial portion of which management estimates will be
satisfied through internally generated funds.

GPU Electric

      GPU Electric's  capital  spending for the nine months ended  September 30,
2000 was $154.5 million, and was used primarily to fund on-going network capital
replacements,  network  improvements  and new  connections  in GPU  Power UK and
Emdersa's  facilities.  For 2000, capital  expenditures are estimated to be $201
million  which will be satisfied  through both  internally  generated  funds and
external financings.

GPUI Group

      For 2000, the GPUI Group's capital spending is estimated to be $2 million,
which will be satisfied through internally generated funds. In addition, in 2000
the GPUI Group made an additional investment of $4 million in Ballard Generation
Systems, Inc.


                                       15


<PAGE>



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  September
30,  2000,  7.2  million  shares of common  stock,  or  approximately  6% of the
outstanding shares, have been repurchased under the program, at an average price
of $34.28 per  share.  In  addition,  GPU,  Inc.  entered  into a forward  share
repurchase  agreement  with Salomon  Smith  Barney (SSB) on March 8, 2000.  Upon
expiration  of the  agreement,  GPU,  Inc.  has the  option to  purchase  shares
acquired  by SSB at the  forward  price or net  settle for cash or shares at the
difference  between the forward price and the then market price. As of September
30, 2000,  SSB has  purchased 1.9 million  shares of GPU, Inc.  common stock for
$49.5 million under the terms of this agreement.

      GPU has various credit  facilities in place, the most significant of which
are discussed below.  These credit  facilities  generally  provide GPU with bank
loans at negotiated market rates.

      GPU,  Inc. and the GPU Energy  companies  have  available  $465 million of
short-term borrowing  facilities,  which include a $250 million revolving credit
agreement  and various bank lines of credit.  In  addition,  GPU,  Inc.,  JCP&L,
Met-Ed and Penelec can issue  commercial paper in amounts of up to $100 million,
$150  million,  $75  million  and $100  million,  respectively.  GPU,  Inc.  has
regulatory authority to have outstanding at any one time a total of $250 million
of short-term debt under these programs.  JCP&L,  Met-Ed and Penelec are limited
by their charters or SEC  authorization  to $264 million,  $150 million and $150
million, respectively, of short-term debt outstanding at any one time.

     GPU,  Inc.  also has SEC  approval to issue and sell up to $300  million of
unsecured debentures through 2001. Subject to market conditions, GPU, Inc. plans
to sell these securities during the fourth quarter of 2000.

GPU Energy companies

      Met-Ed and Penelec have regulatory  approval to issue senior notes through
December 31, 2002 in the amounts of $150 million and $157 million, respectively.
JCP&L  has  regulatory  approval  to issue  senior  notes in the  amount of $300
million  through  December  31, 2002.  Met-Ed and JCP&L intend to issue  secured
senior notes (collateralized by first mortgage bonds (FMBs) issued to the senior
note trustee) until such time as more than 80% of the outstanding  FMBs are held
by the senior note  trustee.  At that time,  the FMBs will be cancelled  and the
outstanding  senior notes will become  unsecured  obligations.  Penelec's senior
notes are unsecured.

      Current  plans call for the GPU Energy  companies  to issue  senior  notes
during  the  next  three  years  to  fund  the  redemption  of  maturing  senior
securities,  refinance  outstanding  senior securities and finance  construction
activities.  The senior note indentures prohibit (subject to certain exceptions)
the GPU Energy  companies  from  issuing  any debt which is senior to the senior
notes.

      JCP&L and Met-Ed's FMB indentures include provisions that limit the amount
of FMBs the companies may issue. JCP&L and Met-Ed's interest coverage


                                       16


<PAGE>


ratios are  currently  in excess of their FMB  indenture  restrictions.  JCP&L's
certificate  of  incorporation  includes  provisions  that  limit the  amount of
preferred stock it may issue. JCP&L's preferred stock dividend coverage ratio is
currently in excess of this charter restriction.

      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 the Oyster Creek
Nuclear  Generating  Station  (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. JCP&L
has  amended   its   petition  to  include   securitization   of  the   up-front
decommissioning  payment  it has  agreed to make  under the  Oyster  Creek  sale
agreement. For further information, see Recent Regulatory Actions.

      In August 2000,  Penelec issued two tranches totaling $68 million of fixed
rate senior notes.

      In July  2000,  JCP&L  redeemed  $16.7  million  stated  value  cumulative
preferred stock pursuant to mandatory and optional sinking fund provisions,  and
in August 2000, Penelec redeemed $25 million of long-term debt.

      Based on September 30, 2000 financial  statements,  Met-Ed and Penelec had
retained  earnings  available to pay common stock dividends of $16.5 million and
$11.6  million,  respectively,  net of amounts  restricted  under the companies'
respective FMB indentures.  In addition,  Met-Ed and Penelec had capital surplus
of $400 million and $285 million, respectively, which would also be available to
pay  common  dividends,  to  the  extent  authorized  by the  SEC  and as may be
permitted  under  their  respective  FMB  indentures.  Met-Ed and  Penelec  have
requested SEC approval to utilize  amounts now accounted for as capital  surplus
to declare and pay common  dividends,  from time to time  through  December  31,
2001, so long as their common equity ratios and GPU,  Inc.'s common equity ratio
are not less than 30% of total capitalization. At September 30, 2000, the common
equity  ratios of Met-Ed,  Penelec and GPU,  Inc.  were 40.4%,  36.2% and 31.8%,
respectively.

GPU Electric

      In August 2000, GPU GasNet  refinanced  A$375 million (US$203  million) of
maturing bank debt as follows: A$250 million (US$135 million) of proceeds from a
new  commercial  paper program at GPU GasNet;  A$51 million  (US$28  million) of
proceeds  from the  issuance of  additional  commercial  paper by GPU  Australia
Holdings under its commercial paper program; and A$37 million (US$20 million) of
cash  proceeds  from the  sale of  marketable  securities  by an  affiliate.  At
September 30, 2000, US$135 million of commercial paper was outstanding under the
GPU GasNet  commercial  paper  program  and  included in  Long-term  debt on the
Consolidated  Balance  Sheets.  GPU GasNet has also  established a A$750 million
(US$406 million) revolving credit facility, which serves as backstop for the GPU
GasNet  commercial  paper program.  No borrowings  were  outstanding  under this
facility at September 30, 2000.

      GPU Capital has a $1 billion  364-day senior  revolving  credit  agreement
expiring in December 2000 supporting the issuance of commercial paper for its $1
billion commercial paper program which has been established to fund GPU Electric
acquisitions. GPU, Inc. has guaranteed GPU Capital's obligations


                                       17


<PAGE>


under this program.  At September 30, 2000, $927 million was  outstanding  under
the  commercial  paper  program,  of which $585 million is included in Long-term
debt on the  Consolidated  Balance  Sheets  since it is  management's  intent to
reissue  this amount of  commercial  paper on a long-term  basis.  GPU,  Inc. is
negotiating a one year extension of this facility.

      GPU Australia Holdings, Inc. has $270 million (reducing to $180 million in
November  2000)  available  under its senior  revolving  credit  facility  which
matures in November 2001.  This bank credit  facility and other GPU, Inc. credit
facilities serve as credit support for GPU Australia Holdings'  commercial paper
program. GPU, Inc. has guaranteed GPU Australia Holdings' obligations under this
program.  Approximately  $183 million of commercial  paper was outstanding as of
September 30, 2000.

      GPU  Power  UK  maintains  a  (pound)150  million  (approximately  US $222
million) bilateral  revolving credit facility with six banks for working capital
purposes,  which  matures at various  dates  through June 2005. At September 30,
2000, no borrowings were outstanding under this facility.


                    COMPETITIVE ENVIRONMENT AND RATE MATTERS
                    ----------------------------------------

GPU Business Plan
-----------------

      The GPU Energy  companies  expect they will continue to serve customers in
markets  where there will be capped rates for varying  periods and their ability
to seek rate increases will be limited.  In addition,  inflation could adversely
affect GPU such that the resultant  increased  cost may not be recoverable in an
environment  where there are capped rates.  Since the GPU Energy  companies have
essentially exited the generation  business,  they will have to supply energy to
customers who do not choose an alternate  supplier  largely from  contracted and
open market  purchases.  While  management has  identified and addressed  market
risks  associated with these purchases by implementing a program to manage risk,
there can be no assurance  that the GPU Energy  companies  will be able to fully
recover  the costs to  supply  electricity  to  customers  who do not  choose an
alternate supplier.

      In October 1999,  GPU initiated a program to enhance  shareholder  returns
through  planned  cost  reductions  of $100 million ($55 million in 2000 and $45
million in 2001 and beyond) by  increasing  operating  efficiency  and by making
investments  of $40  million to $50 million to improve  the  reliability  of its
domestic  utility  operations.  As of  September  30,  2000,  the  planned  cost
reductions in 2000 for GPU Energy are generally  progressing  according to plan,
and GPU  Power UK is ahead of plan  with  its cost  reductions.  The GPU  Energy
companies are targeting  reductions of $30 million in 2000 and an additional $40
million in 2001 and beyond.  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.  GPU Power UK plans cost reductions of US $25 million in 2000 and US
$5 million in 2001.  These  cost  reductions  will be  achieved  by  eliminating
activities not provided for in its new regulated rate level, which was effective
in the  Spring of 2000,  and by  realizing  productivity  benefits  from its new
systems and organization.  Furthermore,  the sale of GPU PowerNet advances GPU's
plan to enhance  shareholder  value by reducing  its  ownership  in non-core and
under-performing assets.




                                       18


<PAGE>


      In March 2000, GPU, Inc.  announced its  participation  in America's Fiber
Network LLC (AFN),  of which GPU,  Inc.  anticipates  owning 25%. AFN is a high-
speed fiber optics  company  with a network of more than 7,000 route  miles,  or
140,000  fiber miles,  connecting  major  markets in the eastern US to secondary
markets  with a  growing  need  for  broadband  access.  GPU,  Inc.  anticipates
investing  approximately $40 million (of which $2.2 million has been invested as
of September 30, 2000) in AFN through GPU Telcom,  which  includes  existing and
new fiber routes and electronic equipment.

      In April 2000, GPU, Inc.  announced the formation of Telergy  Mid-Atlantic
(TMA),  a joint  venture  between  GPU Telcom and  Telergy,  Inc.  TMA  combines
established  telecommunications services and marketing expertise with utilities'
existing fiber networks and natural positioning in retail markets. TMA's initial
target markets are New Jersey and Pennsylvania,  with future expansions  planned
for contiguous  regions currently served by the network of GPU Telcom. TMA plans
to offer telecommunications  service and ultimately electricity,  marketing them
jointly to businesses,  hospitals and educational institutions, among others. As
of September  30,  2000,  GPU,  Inc.  has invested $20 million in Telergy,  Inc.
through GPU Telcom.

The GPU Energy Companies' Supply Plan
-------------------------------------

      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 Provider sections below.) Given that
the GPU Energy  companies have essentially  divested 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  from  contracted and open market  purchases.  Under its
order,  JCP&L is permitted to recover  reasonably  and prudently  incurred costs
associated with providing basic generation  service.  The PaPUC's  Restructuring
Orders,  however,  generally  do not allow  Met-Ed and Penelec to recover  their
energy costs in excess of established rate caps, which are in effect for varying
periods. While management has implemented a program to manage energy risk, there
can be no assurance that the GPU Energy  companies will be able to fully recover
the costs to supply  electricity  to  customers  who do not choose an  alternate
supplier.

      Following the sales in 1999 of substantially all their electric generating
facilities,  the GPU Energy companies have 285 MW of capacity and related energy
remaining to meet customer needs.  The GPU Energy  companies also have contracts
with non-utility  generation  (NUG) facilities  totaling 1,600 MW (JCP&L 926 MW;
Met-Ed 273 MW; Penelec 401 MW) and the GPU Energy companies have agreements with
other  utilities to provide for up to 1,700 MW (JCP&L  1,418 MW;  Met-Ed 267 MW;
Penelec 15 MW) of capacity,  as well as the energy associated with 400 MW of the
capacity  contracted  for by JCP&L.  The GPU  Energy  companies  have  agreed to
purchase  all of the  capacity  and  energy  from the Three Mile  Island  Unit 1
(TMI-1) and Oyster Creek nuclear generating stations (which they sold to AmerGen
Energy  Company LLC (AmerGen))  through  December 31, 2001 and through March 31,
2003,  respectively.  In addition, the GPU Energy companies have the capacity of
the Homer City  Station (in which  Penelec sold its 50% interest to a subsidiary
of Edison  Mission  Energy)  (942 MW)  through May 31, 2001 and the right to the
capacity of the generating  stations sold to Sithe Energies (3,970 MW),  through
May 31, 2002. The GPU Energy companies' remaining capacity and energy needs will
be met by short- to  intermediate-term  commitments  (one month to three  years)
during times of


                                       19


<PAGE>


expected  high energy price  volatility  and  reliance on spot market  purchases
during other periods.

Provider of Last Resort
-----------------------

      Under the 1998 PaPUC  Restructuring  Orders,  Met-Ed and Penelec customers
have been permitted to shop for their generation supplier since January 1, 1999.
The PaPUC has  approved a  competitive  bid  process to 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).
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.

      In February 2000,  GPU Energy  announced that it had not received any bids
in  response  to its offer to auction  CDS  service  for up to 20% of its retail
customers  and, as a result,  it would be increasing  its forward  purchasing of
electric power to accommodate  these  customers for whom it will now continue to
be the default supplier. At the PaPUC's direction,  Met-Ed and Penelec initiated
a collaborative  process in June 2000 with all interested  parties from the 1998
Restructuring Orders,  including the PaPUC, to address the companies' PLR risks.
This process was  concluded  without  resolution of the issues  surrounding  the
companies'  PLR risk.  In  November  2000,  Met-Ed  and  Penelec  plan to file a
petition with the PaPUC seeking  regulatory  relief in connection with their PLR
obligation. There can be no assurance as to the outcome of this matter.

      Met-Ed  and  Penelec  previously  estimated  that the failed CDS bid would
require  them to supply 550 MW of  electric  power  more than they had  planned.
Subsequently,  customers  requiring  approximately  600 MW of power  returned to
Met-Ed  and  Penelec  from  their  alternate  suppliers  for the Summer of 2000,
thereby  increasing  the  previously   estimated  amount  of  additional  supply
resulting  from the failed CDS bid to  approximately  670 MW. The total of these
additional  energy  requirements,  coupled with higher than  anticipated  energy
prices,  have resulted in GPU's  Pennsylvania  supply business  recording a loss
through September 2000 of approximately $0.31 per share.

      Under the terms of their restructuring settlements, Met-Ed and Penelec are
required  to seek  alternative  providers  through a CDS  bidding  process for a
portion  of their load again in 2001.  Should  the 2001 CDS  bidding  process be
successful, then up to 40% of Met-Ed and Penelec's load would be served by third
party energy  providers  starting on June 1, 2001. If the bidding process is not
successful  and  there is no  state  regulatory  relief,  GPU  expects  its 2001
earnings will continue to be negatively  impacted by Met-Ed and Penelec's supply
obligations.

      Met-Ed  and  Penelec  have  developed   incentive  programs  for  shopping
customers  in order to reduce  their PLR  exposure.  Met-Ed and Penelec are also
negotiating with large commercial and industrial customers to encourage shopping
on a long-term  basis and have been working with  generation  suppliers  who are
returning customers to Met-Ed and Penelec,  under PLR rates, to find alternative
power supply for these customers.  There can be no assurance that these or other
efforts to mitigate Met-Ed's and Penelec's PLR risk will be successful.


                                       20


<PAGE>



Basic Generation Service Provider
---------------------------------

      JCP&L is required to provide  basic  generation  services  (BGS) to retail
customers  who  choose  to  remain  with  JCP&L as  generation  customers  for a
three-year period ending July 31, 2002. Thereafter,  BGS service will be bid out
at the pre-established  BGS rates.  JCP&L's BGS rates are pre-determined for the
period  through July 31, 2003. The specific  details of the BGS bidding  process
will be the  subject of a future  NJBPU  proceeding.  Any  payment  received  or
required by JCP&L resulting from the bidding process will be deferred for future
refund or recovery.

GPU Energy Supply Market Risk
-----------------------------

      With the divestiture of essentially all their generating  plants,  the GPU
Energy  companies  are in a net  short  position  (load in  excess  of  supply).
Consequently,  the GPU Energy  companies  must manage their purchase and sale of
installed  capacity and ancillary  services to minimize business risk associated
with  their  reliability  obligation  in the  PJM  Interconnection,  LLC  (PJM).
Supply/risk  management  transactions  will be made  based on the  objective  of
decreasing  both price and volume  uncertainty.  The GPU Energy  companies  will
enter into supply/hedging market instruments for hedging purposes only.

Market Risk - Electricity
-------------------------

      The GPU  Energy  companies  are  generally  at risk of rising  prices  for
electricity and electricity-related  commodities.  These risks may differ during
some months of the year. To manage these risks,  the GPU Energy companies employ
a portfolio  approach  primarily  consisting of two party forward  purchases and
options,  but  may  also  include  New  York  Mercantile  Exchange  (NYMEX)  PJM
electricity  futures and similar  instruments,  as they become widely available.
This portfolio includes  transactions of various durations ranging from one hour
to greater than one year.

      The GPU Energy companies'  electricity  market risks can be price-related,
volume-related or cost-related as follows:

-     Price-related risk refers to the price exposure  associated with having to
      purchase  amounts  of  electricity,   installed  capacity,  and  ancillary
      services for load  requirements  from the PJM interchange spot market.  To
      the extent the GPU Energy  companies  must rely on the PJM pool to satisfy
      load  requirements,  financial  exposure exists for the difference between
      the PJM energy and  installed  capacity  spot market  prices and the fixed
      rates paid by customers.

-     Volume-related  risk refers to the uncertainty  associated with the amount
      of load the GPU Energy  companies are required to serve.  Deregulation  of
      the  electric  utility  industry  has  resulted  in the  ability  of their
      customers to purchase energy from other electric suppliers.  This customer
      shopping,  combined with weather  changes,  which affect  customer  energy
      usage, can affect the GPU Energy companies' position.

-     Cost  recovery-related  risk refers to the financial risk  associated with
      the  potential  prudency  audits  of the  NJBPU  that are part of  JCP&L's
      deferred energy and capacity cost recovery  mechanism  (Market  Transition
      Charge). Cost recovery-related risk also refers to the prudency risk


                                       21


<PAGE>


      associated  with future NUG cost recovery under the  Restructuring  Orders
      approved by the PaPUC and the NJBPU which require continued  mitigation of
      above market NUG costs.

Market Risk - Natural Gas
-------------------------

      As part of their NUG cost  mitigation  program,  the GPU Energy  companies
manage the natural gas requirements of certain NUGs that produce and sell energy
to JCP&L under long-term  contracts.  Prudently  incurred costs  associated with
natural gas commodity and  transportation for these NUGs are included in JCP&L's
BGS rates and Market Transition Charge.

      The GPU Energy  companies  employ a portfolio  approach  consisting of two
party forward purchases and NYMEX natural gas futures contracts.  The GPU Energy
companies' natural gas market risks can be price-related, volume-related or cost
recovery-related as follows:

-     Price-related risk refers to the price exposure  associated with having to
      purchase volumes of natural gas for New Jersey NUG  requirements  from the
      spot market.

-     Volume-related  risk refers to the uncertainty  associated with the amount
      of natural gas required for the dispatchable NUGs.

-     Cost  recovery-related  risk refers to the financial risk  associated with
      the  potential  prudency  audits of the NJBPU that are part of JCP&L's BGS
      rates and Market Transition Charge.

Generation Asset Divestiture
----------------------------

      In 1999,  the GPU  Energy  companies  completed  the  sales  of TMI-1  and
substantially all their fossil-fuel and hydroelectric generating stations.

      In August  2000,  JCP&L sold Oyster Creek to AmerGen,  a joint  venture of
PECO Energy and British Energy,  for approximately  $10 million.  As part of the
sale,  AmerGen has assumed full  responsibility for  decommissioning  the plant.
JCP&L has transferred $440 million of Oyster Creek  decommissioning  trust funds
to AmerGen, of which approximately $114 million was paid into the trust by JCP&L
at closing.  JCP&L has agreed to fund the station's outage cost (up to a maximum
of $88 million),  including the fuel reload,  for the refueling  outage which is
currently underway. AmerGen will repay these outage costs to JCP&L in nine equal
annual installments without interest,  beginning August 2001. In addition, JCP&L
has agreed to purchase  energy and  capacity  from Oyster  Creek at fixed prices
through  March 2003.  The Oyster Creek plant was written down to its fair market
value in 1999, consistent with its sale price. The write-down of the plant asset
was deferred as a regulatory asset.

Recent Regulatory Actions
-------------------------

New Jersey Restructuring

      In May 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate
unbundling,  stranded cost and restructuring filings. The Summary Order provides
for,  among  other  things,  customer  choice of  electric  generation  supplier
beginning August 1, 1999, rate reductions for all consumers and full recovery of
stranded  costs.  New Jersey  utilities began  accepting  customer  selection of
suppliers in October 1999.  The Summary Order did not address the sale of Oyster
Creek, because at the time the Summary Order was issued,



                                       22


<PAGE>


it was  uncertain  whether  the plant would be sold or retired  early.  JCP&L is
awaiting a more detailed order from the NJBPU.

      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  (for  additional  information,  see  Financing  section  of
Liquidity and Capital Resources).

      During  1999,   the  NJBPU  issued  final   electric   restructuring   and
generation-related  securitization  orders to Public  Service  Electric  and Gas
Company (PSE&G), a non-affiliated utility. Several parties appealed these orders
on a variety of grounds,  including  the use of deferred  accounting  associated
with above  market NUG costs and the Societal  Benefit  Charge,  which  includes
recovery of nuclear decommissioning costs. In April 2000, the Appellate Division
of the New Jersey Superior Court affirmed the orders, but that decision has been
appealed  to the New Jersey  Supreme  Court,  which is not  expected  to issue a
decision before January 2001. While JCP&L's Summary Order has not been appealed,
JCP&L is unable to determine the impact,  if any, the appeals to PSE&G's  orders
will have on its restructuring  order and petition for securitization or its use
of deferred accounting.

Pennsylvania Restructuring

      In October 1998, the PaPUC issued amended Restructuring Orders,  approving
Settlement  Agreements  entered into by Met-Ed and Penelec,  which,  among other
things,  provide  customer  choice of  electric  generation  supplier  beginning
January 1, 1999, a 1-year (1999) reduction in retail  distribution rates for all
consumers and recovery of a  substantial  portion of what  otherwise  would have
become stranded costs, subject to the results of the generation divestitures. In
connection with Phase II of their proceedings,  on September 1, 2000, Met-Ed and
Penelec submitted filings to reflect the impact of actual generation divestiture
results on their  stranded  costs.  The Phase II  proceedings  are  expected  to
conclude by the end of 2000.

      In 1999,  Penelec  deposited a portion of the proceeds from its generation
asset sale into a NUG Trust,  which has a balance at September  30, 2000 of $205
million.  To the extent Penelec incurs  above-market  NUG costs in excess of the
CTC revenues  allocated  for such costs,  Penelec may withdraw  amounts from the
trust.

Federal Regulation

      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).

Pending Complaint before the FERC
---------------------------------

      On June 30,  2000,  Allegheny  Electric  Cooperative  (AEC),  a  wholesale
customer,  filed a complaint with the FERC against Penelec claiming, among other
things,  that Penelec should not be permitted to charge AEC increased  purchased
power costs which Penelec has incurred  following  Penelec's  divestiture of its
generation plants.




                                       23


<PAGE>


      Penelec has filed an answer to the  complaint  which,  among other things,
renews a previous offer to release AEC from its supplemental power contract with
Penelec and shop for its generation  needs. In September 2000, an Administrative
Law Judge (ALJ) was  assigned to the  complaint  proceeding  and  established  a
procedural  schedule.  The initial ALJ decision is due by October 1, 2001. There
can be no assurance as to the outcome of this matter.

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 for terms of up to 20 years.

      The NJBPU Summary Order provides  JCP&L  assurance of full recovery of its
NUG costs (including  above-market NUG costs and certain buyout costs),  whereas
the PaPUC  Restructuring  Orders  provide  Met-Ed and Penelec  assurance of full
recovery of their  above-market  NUG costs and certain NUG buyout costs. The GPU
Energy  companies have recorded,  on a present value basis, a total liability of
$3.3 billion (JCP&L $1.6 billion; Met-Ed $0.8 billion;  Penelec $0.9 billion) on
the Consolidated  Balance Sheets for  above-market NUG costs.  These amounts are
offset  by  corresponding  regulatory  assets.  The  GPU  Energy  companies  are
continuing efforts to reduce the above-market  costs of these agreements.  There
can be no assurance as to the extent to which these efforts will be successful.


                               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 assured 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 operations.
The  transmission  and  distribution   portion  of  the  GPU  Energy  companies'
operations continue to be subject to the provisions of FAS 71.

      Statement of  Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities", as amended by FAS 137,


                                       24


<PAGE>


"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" and FAS 138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - An Amendment of FASB
Statement No. 133" (collectively, FAS 133), establishes accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  and for hedging  activities.  In general,  FAS 133
requires  that  companies   recognize  all   derivatives  as  either  assets  or
liabilities  on the balance sheet and measure those  instruments  at fair value.
FAS 133 (as amended)  excludes from its scope certain  contracts that qualify as
normal  purchases and sales. To qualify for this exclusion,  it must be probable
that the  contract  will  result  in  physical  delivery.  GPU will  adopt  this
statement on January 1, 2001.

      GPU's use of  derivative  instruments  is  intended  to manage the risk of
fluctuations in commodity prices,  interest rates, and foreign  currencies.  GPU
does not intend to hold or issue  derivative  instruments for trading  purposes.
GPU enters into  fixed-price  contracts for future  purchases of electricity and
natural gas with  individual  counterparties  or through traded  exchanges.  The
majority of these  commodity  contracts  entered into by GPU would be considered
"normal  purchases,"  as defined in FAS 133, and,  therefore,  would be excluded
from the statement's  scope.  Commodity  contracts  accounted for as derivatives
under  FAS 133  would  be  designated  as cash  flow  hedges  of the  underlying
commodity  purchases,  to the extent they  qualify for such  treatment.  FAS 133
requires  that  the  effective  portion  of the  gain or  loss  on a  derivative
instrument  designated  and  qualifying  as a cash flow hedge be  reported  as a
component  of  Other  Comprehensive  Income,  net of tax.  If GPU  adopted  this
statement as of September 30, 2000, management believes the impact of FAS 133 as
it relates to these commodity contracts would be immaterial to GPU's earnings or
financial position.

      GPU  also  uses   various   types  of  interest   rate  swaps  to  convert
floating-rate  loans to fixed rates.  These instruments will be accounted for as
cash flow hedges,  to the extent they are effective  hedges. If GPU adopted this
statement as of September 30, 2000, the value of these interest rate swaps under
FAS 133 would be immaterial to GPU's earnings or financial position.

      GPU uses  currency  swap  agreements  to manage  currency  risk  caused by
fluctuations  in the US dollar exchange rate related to debt issued in the US by
Avon Energy Partners  Holdings.  These instruments will be accounted for as cash
flow hedges, to the extent they are effective hedges. If FAS 133 were applied to
currency   swaps  in  place  at  September  30,  2000,   derivative   assets  of
approximately $50 million would be recognized on the Consolidated Balance Sheet,
with an offset, net of tax, to Accumulated other comprehensive income.  Currency
swaps determined to be ineffective hedges would have had an immaterial impact on
the  Consolidated  Statement of Income for the nine months ended  September  30,
2000.

      GPU has entered into numerous  forward  capacity  purchase  contracts with
third parties.  GPU has also entered into fixed  transmission  rights agreements
(FTRs)  periodically for the purpose of hedging against high transmission  rates
along certain routes during times of congestion. Evaluation of the impact of FAS
133 as it relates to capacity purchase contracts and FTRs is in process.

      The actual  impact of FAS 133 upon  adoption  would differ from that noted
above depending on the portfolio of derivative contracts in effect on January 1,
2001,  prevailing  market  rates,  the  completion  of the  pending  sale of GPU
International,  Inc. or  implementation  issues to be resolved by the  Financial
Accounting Standards Board's Derivatives Implementation Group.


                                       25


<PAGE>
<TABLE>




<CAPTION>


                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets
                           ---------------------------

                                                                    In Thousands
                                                         -----------------------------
                                                         September 30,    December 31,
                                                             2000             1999
                                                         -------------    ------------
                                                          (Unaudited)
ASSETS
Utility Plant:
<S>                                                        <C>             <C>
  Utility plant in service                                 $ 9,941,749     $11,766,446
  Accumulated depreciation                                  (3,218,081)     (3,929,963)
                                                            ----------      ----------
      Net utility plant in service                           6,723,668       7,836,483
  Construction work in progress                                222,281         170,317
  Other, net                                                    18,687          18,128
                                                            ----------      ----------
      Net utility plant                                      6,964,636       8,024,928
                                                            ----------      ----------

Other Property and Investments:
  Equity investments                                           223,297         207,029
  Goodwill, net                                              1,999,695       2,615,301
  Nuclear decommissioning trusts, at market (Note 1)           389,588         636,284
  Nuclear fuel disposal trust, at market                       125,698         119,293
  Other, net                                                   613,667         716,142
                                                            ----------      ----------
      Total other property and investments                   3,351,945       4,294,049
                                                            ----------      ----------

Current Assets:
  Cash and temporary cash investments                          398,807         471,548
  Marketable securities                                         30,953          26,946
  Special deposits                                              66,239          42,687
  Accounts receivable:
    Customers, net                                             608,316         445,745
    Other                                                      211,166         185,968
  Unbilled revenues                                            163,383         152,263
  Cost and estimated earnings in excess of
    billings on uncompleted contracts                           28,846             -
  Materials and supplies, at average cost or less               78,258         101,255
  Deferred income taxes                                         37,948          72,249
  Prepayments                                                  282,205         141,352
                                                            ----------      ----------
      Total current assets                                   1,906,121       1,640,013
                                                            ----------      ----------

Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                            5,020,086       4,716,246
  Deferred income taxes                                      2,501,836       2,528,393
  Other                                                        588,462         494,203
                                                            ----------      ----------
      Total deferred debits and other assets                 8,110,384       7,738,842
                                                            ----------      ----------






      Total Assets                                        $20,333,086      $21,697,832
                                                           ==========       ==========
</TABLE>


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



                                       26


<PAGE>
<TABLE>
<CAPTION>


                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets
                           ---------------------------

                                                                    In Thousands
                                                         -----------------------------
                                                          September 30,   December 31,
                                                              2000            1999
                                                         --------------   ------------
                                                          (Unaudited)
LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                        <C>             <C>
  Common stock                                             $   331,958     $   331,958
  Capital surplus                                            1,014,196       1,011,721
  Retained earnings                                          2,317,970       2,426,350
  Accumulated other comprehensive loss (Note 5)                (59,628)         (6,341)
                                                            ----------      ----------
      Total                                                  3,604,496       3,763,688
  Reacquired common stock, at cost                            (313,643)       (298,735)
                                                            ----------      ----------
      Total common stockholders' equity                      3,290,853       3,464,953
  Cumulative preferred stock:
    With mandatory redemption                                   51,500          73,167
    Without mandatory redemption                                12,649          12,649
  Subsidiary-obligated mandatorily redeemable
    preferred securities                                       125,000         125,000
  Subsidiary-obligated trust preferred securities (Note 6)     200,000         200,000
  Long-term debt                                             4,268,567       5,631,394
                                                            ----------      ----------
      Total capitalization                                   7,948,569       9,507,163
                                                            ----------      ----------

Current Liabilities:
  Securities due within one year                               919,624         581,147
  Notes payable                                              1,486,722       1,391,071
  Bank overdraft                                               248,666         224,585
  Obligations under capital leases                                 474          48,165
  Accounts payable                                             456,348         468,825
  Billings in excess of cost and estimated
    earnings on uncompleted contracts                           21,751             -
  Taxes accrued                                                  6,379         309,509
  Interest accrued                                              80,811          76,246
  Other                                                        450,383         732,110
                                                            ----------      ----------
      Total current liabilities                              3,671,158       3,831,658
                                                            ----------      ----------

Deferred Credits and Other Liabilities:
  Deferred income taxes                                      3,847,077       3,563,078
  Unamortized investment tax credits                            45,745          61,364
  Three Mile Island Unit 2 future costs (Note 1)               507,577         496,944
  Power purchase contract loss liability (Note 1)            3,309,791       3,300,878
  Other                                                      1,003,169         936,747
                                                            ----------      ----------
      Total deferred credits and other liabilities           8,713,359       8,359,011
                                                            ----------      ----------


Commitments and Contingencies (Note 1)



      Total Liabilities and Capitalization                $20,333,086      $21,697,832
                                                           ==========       ==========

</TABLE>


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

                                       27

<PAGE>


<TABLE>
<CAPTION>


                       GPU, INC. AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income
                        ---------------------------------
                                   (Unaudited)

                                                          In Thousands
                                                     (Except Per Share Data)
                                          -----------------------------------------------
                                               Three Months               Nine Months
                                            Ended September 30,      Ended September 30,
                                          ----------------------   ----------------------
                                              2000        1999         2000        1999
                                              ----        ----         ----        ----

<S>                                       <C>         <C>          <C>         <C>
Operating Revenues                        $1,455,286  $1,424,286   $3,912,104  $3,385,689
                                           ---------   ---------    ---------   ---------

Operating Expenses:
  Fuel                                        13,928      86,448       55,484     255,367
  Power purchased and interchanged           787,033     462,675    1,704,997     994,797
  Deferred costs, net                       (131,954)    (23,194)    (198,950)    (23,050)
  Other operation and maintenance            379,671     331,140    1,014,543     825,159
  Loss on sale of business                       -           -        372,492         -
  Depreciation and amortization              136,621     139,799      400,648     382,894
  Taxes, other than income taxes              77,825      50,448      172,420     142,892
                                           ---------   ---------    ---------   ---------
     Total operating expenses              1,263,124   1,047,316    3,521,634   2,578,059
                                           ---------   ---------    ---------   ---------

Operating Income                             192,162     376,970      390,470     807,630
                                           ---------   ---------    ---------   ---------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                 442          52          983         217
  Equity in undistributed earnings
    of affiliates, net                        16,506       2,871       22,278      79,370
  Other income, net                           62,357       9,049      112,568      77,283
                                           ---------   ---------    ---------   ---------
     Total other income and deductions        79,305      11,972      135,829     156,870
                                           ---------   ---------    ---------   ---------

Income Before Interest Charges
  and Preferred Dividends                    271,467     388,942      526,299     964,500
                                           ---------   ---------    ---------   ---------

Interest Charges and Preferred Dividends:
  Long-term debt and notes payable           116,394     132,427      383,470     301,231
  Subsidiary-obligated trust
    preferred securities                       2,672       3,673       10,017       4,673
  Subsidiary-obligated mandatorily,
    redeemable preferred securities            2,675       5,308        8,025      19,752
  Other interest                               2,388       1,260        4,857       3,306
  Allowance for borrowed funds used
    during construction                         (972)     (1,343)      (2,558)     (2,987)
  Preferred stock dividends of subsidiaries,
    inclusive of $1,268 loss on
    reacquisition (9 Mos. 1999)                1,391       2,338        5,513       8,628
                                           ---------   ---------    ---------   ---------
     Total interest charges and
       preferred dividends                   124,548     143,663      409,324     334,603
                                           ---------   ---------    ---------   ---------

Income Before Income Taxes
 and Minority Interest                       146,919     245,279      116,975     629,897
  Income taxes                                41,679      98,284       90,464     242,573
  Minority interest net income/(loss)          1,730        (552)       2,816       1,796
                                           ---------    --------    ---------   ---------

Net Income                                $  103,510  $  147,547   $   23,695  $  385,528
                                           =========   ==========   =========   =========


Basic -  Earnings Per Avg. Common Share   $     0.86  $     1.18   $     0.20  $     3.06
                                           =========   =========    =========   =========
      -  Avg. Common Shares Outstanding      121,329     125,046      121,299     126,123
                                           =========   =========    =========   =========

Diluted  - Earnings Per Avg. Common Share $     0.86  $     1.18   $     0.20  $     3.05
                                           =========   =========    =========   =========
         - Avg. Common Shares Outstanding    121,409     125,307      121,391     126,383
                                           =========   =========    =========   =========

Cash Dividends Paid Per Share             $    0.545  $     0.53   $     1.62  $    1.575
                                           =========   =========    =========   =========


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

                                       28
</TABLE>


<PAGE>



                       GPU, INC. AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows
                      -------------------------------------
                                   (Unaudited)
                                                                    In Thousands
                                                       -------------------------
                                                               Nine Months
                                                           Ended September 30,
                                                       -------------------------
                                                            2000         1999
                                                            ----         ----
Operating Activities:
  Net income                                            $  23,695    $  385,528
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                         429,300       401,340
    Amortization of property under capital leases          11,472        37,538
    Gain on restructured supply agreement                 (42,781)          -
    NJBPU restructuring rate order                            -         115,000
    (Gain)/Loss on sale of business/investments           370,053       (40,209)
    Equity in undistributed earnings
      of affiliates, net of distributions received        (18,270)      (75,724)
    Deferred income taxes and investment tax
      credits, net                                        445,075      (436,712)
    Deferred costs, net                                  (198,950)      (22,767)
  Changes in working capital:
    Receivables                                          (303,000)      (65,913)
    Cost and estimated earnings in excess of
      billings on uncompleted contracts                    (1,916)          -
    Materials and supplies                                 13,680         5,205
    Special deposits and prepayments                     (141,501)      (84,240)
    Payables and accrued liabilities                     (309,390)      237,482
    Billings in excess of cost and estimated
      earnings on uncompleted contracts                     1,940           -
  Nonutility generation contract buyout costs              (5,660)      (41,500)
  Other, net                                              (44,295)        3,202
                                                        ---------     ---------
     Net cash provided by operating activities            229,452       418,230
                                                        ---------     ---------

Investing Activities:
  Acquisitions, net of cash acquired                     (220,242)   (1,670,739)
  Capital expenditures and investments                   (382,511)     (276,412)
  Proceeds from sale of business/investments            1,164,875       937,540
  Contributions to decommissioning trusts                (136,499)      (26,531)
  Proceeds from nonutility generation trusts               62,116           -
  Trust fund established for repayment of debt            (95,861)          -
  Other, net                                                8,009        79,290
                                                        ---------     ---------
     Net cash provided/(required)
       by investing activities                            399,887      (956,852)
                                                        ---------     ---------

Financing Activities:
  Issuance of long-term debt                              335,241     1,792,828
  Issuance of subsidiary-obligated
    trust preferred securities                                -         193,070
  Retirement of long-term debt                           (977,910)   (1,540,183)
  Increase in notes payable, net                          264,387       788,200
  Capital lease principal payments                        (48,516)      (36,185)
  Reacquisition of common stock                           (22,383)     (160,112)
  Redemption of subsidiary-obligated mandatorily
    redeemable preferred securities                           -        (105,383)
  Dividends paid on common stock                         (196,631)     (199,023)
  Redemption of preferred stock of subsidiaries           (21,667)      (35,004)
                                                        ---------     ---------
     Net cash provided/(required)
       by financing activities                           (667,479)      698,208
                                                        ---------     ---------

Effect of exchange rate changes on cash                   (34,601)        8,968
                                                        ---------     ---------

Net increase/(decrease) in cash and temporary
  cash investments from above activities                  (72,741)      168,554
Cash and temporary cash investments, beginning of year    471,548        72,755
                                                        ---------     ---------
Cash and temporary cash investments, end of period     $  398,807    $  241,309
                                                        =========     =========

Supplemental Disclosure:
  Interest and preferred dividends paid                $  365,499    $  322,348
                                                        =========     =========
  Income taxes paid                                    $  159,053    $  345,254
                                                        =========     =========
  New capital lease obligations incurred               $   41,580    $   36,962
                                                        =========     =========
  Common stock dividends declared but not paid         $      -      $      -
                                                        =========     =========

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


                                       29


<PAGE>
<TABLE>
<CAPTION>


           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                           Consolidated Balance Sheets
                           ---------------------------

                                                                    In Thousands
                                                         -----------------------------
                                                          September 30,   December 31,
                                                              2000            1999
                                                         --------------   ------------
                                                          (Unaudited)

ASSETS
Utility Plant:
<S>                                                        <C>             <C>
  Utility plant in service                                 $3,215,351      $3,601,695
  Accumulated depreciation                                 (1,213,560)     (1,872,422)
                                                            ---------       ---------
      Net utility plant in service                          2,001,791       1,729,273
  Construction work in progress                               105,362          80,671
  Other, net                                                   15,312          14,781
                                                            ---------       ---------
      Net utility plant                                     2,122,465       1,824,725
                                                            ---------       ---------


Other Property and Investments:
  Nuclear decommissioning trusts, at market (Note 1)          122,834         394,941
  Nuclear fuel disposal trust, at market                      125,698         119,293
  Other, net                                                    3,095           1,252
                                                            ---------       ---------
      Total other property and investments                    251,627         515,486
                                                            ---------       ---------


Current Assets:
  Cash and temporary cash investments                             391          68,684
  Special deposits                                              2,529           1,035
  Accounts receivable:
    Customers, net                                            196,092         164,099
    Affiliates                                                 27,985          34,992
    Other                                                      34,923          34,696
  Unbilled revenues                                            78,971          78,251
  Fuel inventory, at average cost or less                         146             240
  Deferred income taxes                                        13,440           1,652
  Prepayments                                                 181,993          23,000
                                                            ---------       ---------
      Total current assets                                    536,470         406,649
                                                            ---------       ---------


Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                           3,143,472       2,810,854
  Deferred income taxes                                       103,951         221,668
  Other                                                        36,819          31,615
                                                            ---------       ---------
      Total deferred debits and other assets                3,284,242       3,064,137
                                                            ---------       ---------







      Total Assets                                         $6,194,804      $5,810,997
                                                            =========       =========
</TABLE>


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

                                       30

<PAGE>
<TABLE>
<CAPTION>


           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                           Consolidated Balance Sheets
                           ---------------------------


                                                                    In Thousands
                                                         -----------------------------
                                                          September 30,   December 31,
                                                              2000            1999
                                                         --------------   ------------
                                                          (Unaudited)

LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                        <C>             <C>
  Common stock                                             $  153,713      $  153,713
  Capital surplus                                             510,769         510,769
  Retained earnings                                           768,162         720,878
  Accumulated other comprehensive income (Note 5)                   7               7
                                                            ---------       ---------
      Total common stockholder's equity                     1,432,651       1,385,367
  Cumulative preferred stock:
    With mandatory redemption                                  51,500          73,167
    Without mandatory redemption                               12,649          12,649
  Company-obligated mandatorily redeemable
    preferred securities                                      125,000         125,000
  Long-term debt                                            1,133,940       1,133,760
                                                            ---------       ---------
      Total capitalization                                  2,755,740       2,729,943
                                                            ---------       ---------


Current Liabilities:
  Securities due within one year                               10,846          50,846
  Notes Payable                                               163,000             -
  Obligations under capital leases                                -            48,165
  Accounts payable:
    Affiliates                                                105,629          60,527
    Other                                                      98,754          82,355
  Taxes accrued                                                 1,327          13,079
  Interest accrued                                             27,818          24,523
  Other                                                        33,280          36,169
                                                            ---------       ---------
      Total current liabilities                               440,654         315,664
                                                            ---------       ---------


Deferred Credits and Other Liabilities:
  Deferred income taxes                                       804,824         570,568
  Unamortized investment tax credits                           17,987          32,114
  Nuclear fuel disposal fee                                   154,541         148,009
  Three Mile Island Unit 2 future costs (Note 1)              126,899         124,241
  Power purchase contract loss liability (Note 1)           1,640,329       1,624,769
  Other                                                       253,830         265,689
                                                            ---------       ---------
      Total deferred credits and other liabilities          2,998,410       2,765,390
                                                            ---------       ---------


Commitments and Contingencies (Note 1)


      Total Liabilities and Capitalization                 $6,194,804      $5,810,997
                                                            =========       =========

</TABLE>

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

                                       31

<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,
                                               --------------------   --------------------
                                                  2000       1999        2000       1999
                                                  ----       ----        ----       ----

<S>                                            <C>        <C>        <C>        <C>
Operating Revenues                             $ 605,045  $ 670,245  $1,547,940 $1,578,159
                                                --------   --------   ---------  ---------

Operating Expenses:
  Fuel                                             4,773     31,399      19,966     75,114
  Power purchased and interchanged:
    Affiliates                                     6,430     53,831      37,683    111,419
    Others                                       417,837    220,614     835,112    518,972
  Deferred costs, net                           (131,954)   (23,194)   (198,950)   (23,050)
  Other operation and maintenance                 97,579    114,211     305,406    329,956
  Depreciation and amortization                   57,467     59,859     169,773    186,917
  Taxes, other than income taxes                  17,078     18,679      47,567     59,573
                                                --------   --------   ---------  ---------
     Total operating expenses                    469,210    475,399   1,216,557  1,258,901
                                                --------   --------   ---------  ---------

Operating Income                                 135,835    194,846     331,383    319,258
                                                --------   --------   ---------  ---------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                     442        -           955        123
  Other income, net                               15,701      1,693      19,632      9,175
                                                --------   --------   ---------  ---------
     Total other income and deductions            16,143      1,693      20,587      9,298
                                                --------   --------   ---------  ---------

Income Before Interest Charges                   151,978    196,539     351,970    328,556
                                                --------   --------   ---------  ---------

Interest Charges:
  Long-term debt and notes payable                24,143     24,501      69,965     71,971
  Company-obligated mandatorily
    redeemable preferred securities                2,675      2,675       8,025      8,025
  Other interest                                     537        403         897      1,059
  Allowance for borrowed funds used
    during construction                             (620)      (633)     (1,439)    (1,319)
                                                --------   --------   ---------  ---------
     Total interest charges                       26,735     26,946      77,448     79,736
                                                --------   --------   ---------  ---------

Income Before Income Taxes                       125,243    169,593     274,522    248,820
  Income taxes                                    32,450     66,690      91,725     98,075
                                                --------   --------   ---------  ---------

Net Income                                        92,793    102,903     182,797    150,745
  Preferred stock dividends                        1,391      2,338       5,513      7,140
                                                --------   --------   ---------  ---------
Earnings Available for Common Stock            $  91,402  $ 100,565  $  177,284 $  143,605
                                                ========   ========   =========  =========



</TABLE>



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


                                       32

<PAGE>


           JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                      Consolidated Statements of Cash Flows
                      -------------------------------------
                                   (Unaudited)

                                                             In Thousands
                                                       -------------------------
                                                              Nine Months
                                                          Ended September 30,
                                                       -------------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:
  Net income                                            $ 182,797    $ 150,745
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                         195,620      209,045
    Amortization of property under capital leases          11,472       22,659
    NJBPU restructuring rate order                            -        115,000
    Deferred income taxes and investment tax
      credits, net                                        285,710      (29,932)
    Deferred costs, net                                  (198,950)     (22,767)
  Changes in working capital:
    Receivables                                           (32,939)     (99,320)
    Materials and supplies                                     95       15,518
    Special deposits and prepayments                     (160,487)     (38,046)
    Payables and accrued liabilities                      (11,983)      40,364
    Due to/from affiliates                                 52,108        5,223
  Nonutility generation contract buyout costs                 -        (35,500)
  Other, net                                             (103,754)       4,250
                                                         --------     --------
     Net cash provided by operating activities            219,689      337,239
                                                         --------     --------

Investing Activities:
  Capital expenditures and investments                    (84,569)     (99,526)
  Contributions to decommissioning trusts                (130,141)     (19,777)
  Proceeds from sale of investments                         9,265          -
  Other, net                                                  320        1,743
                                                         --------     --------
     Net cash required by investing activities           (205,125)    (117,560)
                                                         --------     --------

Financing Activities:
  Retirement of long-term debt                            (40,000)         (12)
  Increase/(decrease) in notes payable, net               163,000      (38,344)
  Redemption of preferred stock                           (21,667)      (5,000)
  Capital lease principal payments                        (48,516)     (20,057)
  Dividends paid on common stock                         (130,000)    (150,000)
  Dividends paid on preferred stock                        (5,674)      (7,046)
                                                         --------     --------
     Net cash required by financing activities            (82,857)    (220,459)
                                                         --------     --------

Net decrease in cash and temporary
  cash investments from above activities                  (68,293)        (780)
Cash and temporary cash investments, beginning of year     68,684        1,850
                                                         --------     --------
Cash and temporary cash investments, end of period      $     391    $   1,070
                                                         ========     ========


Supplemental Disclosure:
  Interest and preferred dividends paid                 $  79,007    $  85,460
                                                         ========     ========
  Income taxes paid/(refunded)                          $ (40,634)   $  84,130
                                                         ========     ========
  New capital lease obligations incurred                $  41,580    $   9,239
                                                         ========     ========


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

                                       33


<PAGE>
<TABLE>
<CAPTION>


              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets
                           ---------------------------

                                                                 In Thousands
                                                         -----------------------------
                                                         September 30,    December 31,
                                                             2000             1999
                                                         -------------    ------------
                                                          (Unaudited)

ASSETS
Utility Plant:
<S>                                                        <C>             <C>
  Utility plant in service                                 $1,549,875      $1,522,100
  Accumulated depreciation                                   (487,833)       (462,709)
                                                            ---------       ---------
      Net utility plant in service                          1,062,042       1,059,391
  Construction work in progress                                28,693          25,329
  Other, net                                                      596             643
                                                            ---------       ---------
      Net utility plant                                     1,091,331       1,085,363
                                                            ---------       ---------


Other Property and Investments:
  Nuclear decommissioning trusts, at market (Note 1)          161,912         144,261
  Other, net                                                    3,005           3,010
                                                            ---------       ---------
      Total other property and investments                    164,917         147,271
                                                            ---------       ---------


Current Assets:
  Cash and temporary cash investments                           3,196          10,899
  Special deposits                                                282             160
  Accounts receivable:
    Customers, net                                             74,957          60,188
    Affiliates                                                 45,543          77,067
    Other                                                      36,250          46,377
  Unbilled revenues                                            30,839          28,956
  Deferred income taxes                                         4,644           2,945
  Prepayments                                                  10,315          16,715
                                                            ---------       ---------
      Total current assets                                    206,026         243,307
                                                            ---------       ---------


Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                           1,227,821       1,232,865
  Deferred income taxes                                       746,229         738,189
  Other                                                        40,620          41,198
                                                            ---------       ---------
      Total deferred debits and other assets                2,014,670       2,012,252
                                                            ---------       ---------








      Total Assets                                         $3,476,944      $3,488,193
                                                           ==========       =========

</TABLE>


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

                                       34


<PAGE>

<TABLE>
<CAPTION>

              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets
                           ---------------------------


                                                                  In Thousands
                                                         -----------------------------
                                                         September 30,    December 31,
                                                             2000             1999
                                                         -------------    ------------
                                                          (Unaudited)

LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                        <C>             <C>
  Common stock                                             $   66,273      $   66,273
  Capital surplus                                             400,200         400,200
  Retained earnings                                            19,950          13,581
  Accumulated other comprehensive income (Note 5)                 130          21,363
                                                            ---------       ---------
       Total common stockholder's equity                      486,553         501,417
  Company-obligated trust preferred securities (Note 6)       100,000         100,000
  Long-term debt                                              496,886         496,883
                                                            ---------       ---------
      Total capitalization                                  1,083,439       1,098,300
                                                            ---------       ---------


Current Liabilities:
  Securities due within one year                                   25          50,025
  Notes payable                                               121,100             -
  Accounts payable:
    Affiliates                                                 53,412         125,179
    Other                                                      38,191          30,106
  Taxes accrued                                                13,406          35,976
  Interest accrued                                             10,715          16,738
  Other                                                        12,417          18,208
                                                            ---------       ---------
      Total current liabilities                               249,266         276,232
                                                            ---------       ---------


Deferred Credits and Other Liabilities:
  Deferred income taxes                                       995,533         993,427
  Unamortized investment tax credits                           14,374          15,010
  Three Mile Island Unit 2 future costs (Note 1)              253,695         248,381
  Nuclear fuel disposal fee                                    34,910          33,430
  Power purchase contract loss liability (Note 1)             761,496         735,833
  Other                                                        84,231          87,580
                                                            ---------       ---------
      Total deferred credits and other liabilities          2,144,239       2,113,661
                                                            ---------       ---------



Commitments and Contingencies (Note 1)





      Total Liabilities and Capitalization                 $3,476,944      $3,488,193
                                                            =========       =========

</TABLE>


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

                                       35


<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,
                                               --------------------    ---------------------
                                                   2000      1999         2000        1999
                                                   ----      ----         ----        ----

<S>                                            <C>        <C>          <C>         <C>
Operating Revenues                             $ 227,442  $ 280,235    $ 628,312   $ 707,402
                                                --------   --------     --------    --------

Operating Expenses:
  Fuel                                               -       26,162          -        75,305
  Power purchased and interchanged:
    Affiliates                                        79        863        1,427       3,071
    Others                                       156,927     84,541      360,991     171,538
  Other operation and maintenance                 32,838     58,155       99,043     164,072
  Depreciation and amortization                   16,519     19,004       48,264      57,324
  Taxes, other than income taxes                  11,235     10,253       34,211      33,960
                                                --------   --------     --------    --------
     Total operating expenses                    217,598    198,978      543,936     505,270
                                                --------   --------     --------    --------

Operating Income                                   9,844     81,257       84,376     202,132
                                                --------   --------     --------    --------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                     -           52           28          94
  Other income/(expense),net                      (3,825)      (679)       7,195       2,357
                                                --------   ---------    --------    --------
     Total other income and deductions            (3,825)      (627)       7,223       2,451
                                                --------   ---------    --------    --------

Income Before Interest Charges                     6,019     80,630       91,599     204,583
                                                --------   --------     --------    --------

Interest Charges:
  Long-term debt and notes payable                11,900     11,350       35,240      35,466
  Company-obligated trust preferred securities     1,143      1,838        4,818       2,532
  Company-obligated mandatorily
    redeemable preferred securities                  -        2,250          -         6,750
  Other interest                                     579        572        1,665       1,423
  Allowance for borrowed funds used
    during construction                             (137)      (332)        (405)       (790)
                                                --------   --------     --------    --------
     Total interest charges                       13,485     15,678       41,318      45,381
                                                --------   --------     --------    --------

Income/(Loss) Before Income Taxes                 (7,466)    64,952       50,281     159,202
  Income taxes                                    (3,675)    23,330       18,912      65,606
                                                --------   --------     --------    --------

Net Income/(Loss)                                 (3,791)    41,622       31,369      93,596
  Preferred stock dividends                          -          -            -            66
  Loss on preferred stock reacquisition              -          -            -           542
                                                --------   --------     --------    --------
Earnings/(Losses) Available for Common Stock   $  (3,791) $  41,622    $  31,369   $  92,988
                                                ========   ========     ========    ========




</TABLE>



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

                                       36


<PAGE>
<TABLE>
<CAPTION>


              METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows
                      -------------------------------------
                                   (Unaudited)

                                                              In Thousands
                                                       ------------------------
                                                              Nine Months
                                                         Ended September 30,
                                                           2000         1999
                                                           ----         ----
Operating Activities:
<S>                                                     <C>          <C>
  Net income                                            $  31,369    $  93,596
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          55,699       59,942
    Amortization of property under capital leases             -          9,921
    Nuclear outage maintenance costs, net                     -         (2,338)
    Deferred income taxes and investment tax
      credits, net                                          1,077       34,929
  Changes in working capital:
    Receivables                                            (4,641)        (937)
    Materials and supplies                                    -          8,395
    Special deposits and prepayments                        6,278       (3,124)
    Payables and accrued liabilities                      (26,299)     (57,150)
    Due to/from affiliates                                (40,214)      35,788
  Nonutility generation contract buyout costs              (1,250)      (2,500)
  Other, net                                              (30,505)     (55,685)
                                                         --------     --------
     Net cash provided/(required)
      by operating activities                              (8,486)     120,837
                                                         --------     --------

Investing Activities:
  Capital expenditures and investments                    (38,989)     (43,368)
  Contributions to decommissioning trusts                  (6,328)      (1,488)
  Other, net                                                  -            (46)
                                                         --------     --------
     Net cash required by investing activities            (45,317)     (44,902)
                                                         --------     --------

Financing Activities:
  Increase/(decrease) in notes payable, net               121,100      (79,540)
  Retirement of long-term debt                            (50,000)         (23)
  Issuance of company-obligated trust
    preferred securities                                      -         96,535
  Redemption of preferred stock                               -        (12,598)
  Capital lease principal payments                            -        (10,736)
  Dividends paid on common stock                          (25,000)     (55,000)
  Dividends paid on preferred stock                           -            (66)
  Contribution from parent corporation                        -         30,000
                                                         --------     --------
     Net cash provided by financing activities             46,100      (31,428)
                                                         --------     --------

Net increase/(decrease) in cash and temporary cash
  investments from above activities                        (7,703)      44,507
Cash and temporary cash investments, beginning of year     10,899          442
                                                         --------     --------
Cash and temporary cash investments, end of period      $   3,196    $  44,949
                                                         ========     ========

Supplemental Disclosure:
  Interest and preferred dividends paid                 $  45,153    $  50,087
                                                         ========     ========
  Income taxes paid                                     $  52,230    $  25,564
                                                         ========     ========
  New capital lease obligations incurred                $     -      $  18,482
                                                         ========     ========
</TABLE>

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

                                       37


<PAGE>
<TABLE>
<CAPTION>


             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets
                           ---------------------------

                                                                 In Thousands
                                                         -----------------------------
                                                         September 30,    December 31,
                                                             2000             1999
                                                         -------------    ------------
                                                          (Unaudited)

ASSETS
Utility Plant:
<S>                                                        <C>             <C>
  Utility plant in service                                 $1,768,155      $1,732,386
  Accumulated depreciation                                   (583,525)       (552,449)
                                                            ---------       ---------
      Net utility plant in service                          1,184,630       1,179,937
  Construction work in progress                                38,166          30,329
  Other, net                                                    2,779           2,704
                                                            ---------       ---------
      Net utility plant                                     1,225,575       1,212,970
                                                            ---------       ---------


Other Property and Investments:
  Nonutility generation trusts, at market                     204,584         266,700
  Nuclear decommissioning trusts, at market (Note 1)          104,842          97,082
  Other, net                                                      418           1,233
                                                            ---------       ---------
      Total other property and investments                    309,844         365,015
                                                            ---------       ---------


Current Assets:
  Cash and temporary cash investments                             473          32,250
  Special deposits                                                302             233
  Accounts receivable:
    Customers, net                                             80,237          69,752
    Affiliates                                                 25,309          15,546
    Other                                                      19,373          24,658
  Unbilled revenues                                            30,972          30,836
  Deferred income taxes                                         8,428           7,589
  Prepayments                                                  64,353          15,484
                                                            ---------       ---------
      Total current assets                                    229,447         196,348
                                                            ---------       ---------


Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                             648,793         672,527
  Deferred income taxes                                     1,181,805       1,225,150
  Other                                                        23,541          23,781
                                                            ---------       ---------
      Total deferred debits and other assets                1,854,139       1,921,458
                                                            ---------       ---------







      Total Assets                                         $3,619,005      $3,695,791
                                                            =========       =========

</TABLE>


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

                                       38


<PAGE>

<TABLE>
<CAPTION>

             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets
                           ---------------------------


                                                                  In Thousands
                                                         -----------------------------
                                                         September 30,    December 31,
                                                             2000             1999
                                                         -------------    ------------
                                                          (Unaudited)

LIABILITIES AND CAPITALIZATION
Capitalization:
<S>                                                        <C>             <C>
  Common stock                                             $  105,812      $  105,812
  Capital surplus                                             285,486         285,486
  Retained earnings                                            21,737          59,265
  Accumulated other comprehensive income (Note 5)                  10          10,619
                                                            ---------       ---------
      Total common stockholder's equity                       413,045         461,182
  Company-obligated trust preferred securities (Note 6)       100,000         100,000
  Long-term debt                                              517,780         424,641
                                                            ---------       ---------
      Total capitalization                                  1,030,825         985,823
                                                            ---------       ---------


Current Liabilities:
  Securities due within one year                                   13              13
  Notes payable                                               109,300          53,600
  Obligations under capital leases                                474             -
  Accounts payable:
    Affiliates                                                 34,529          66,223
    Other                                                      46,540          34,845
  Taxes accrued                                                 4,157         108,005
  Interest accrued                                             14,164           6,588
  Other                                                         6,640          17,567
                                                            ---------       ---------
      Total current liabilities                               215,817         286,841
                                                            ---------       ---------


Deferred Credits and Other Liabilities:
  Deferred income taxes                                     1,253,749       1,250,490
  Unamortized investment tax credits                           13,384          14,240
  Three Mile Island Unit 2 future costs (Note 1)              126,983         124,322
  Nuclear fuel disposal fee                                    17,455          16,717
  Power Purchase contract loss liability (Note 1)             907,966         940,276
  Other                                                        52,826          77,082
                                                            ---------       ---------
      Total deferred credits and other liabilities          2,372,363       2,423,127
                                                            ---------       ---------


Commitments and Contingencies (Note 1)





      Total Liabilities and Capitalization                 $3,619,005      $3,695,791
                                                            =========       =========

</TABLE>


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

                                       39


<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,
                                               --------------------   ---------------------
                                                   2000      1999        2000        1999
                                                   ----      ----        ----        ----

<S>                                            <C>        <C>        <C>         <C>
Operating Revenues                             $ 236,729  $ 254,609  $  663,623  $  705,955
                                                --------   --------   ---------   ---------

Operating Expenses:
  Fuel                                               -       18,399         -        71,652
  Power purchased and interchanged:
    Affiliates                                       946      1,444       1,979       5,997
    Others                                       179,473    105,651     405,304     199,642
  Other operation and maintenance                 42,157     57,807     125,388     172,425
  Depreciation and amortization                   13,343     18,389      38,346      59,849
  Taxes, other than income taxes                  11,877     11,306      35,363      37,126
                                                --------   --------   ---------   ---------
     Total operating expenses                    247,796    212,996     606,380     546,691
                                                --------   --------   ---------   ---------

Operating Income/(Loss)                          (11,067)    41,613      57,243     159,264
                                                --------   --------   ---------   ---------

Other Income and Deductions:
  Other income/(expense), net                     (1,748)       790       2,957      46,891
                                                ---------  --------   ---------   ---------
     Total other income and deductions            (1,748)       790       2,957      46,891
                                                --------   --------   ---------   ---------

Income/(Loss) Before Interest Charges            (12,815)    42,403      60,200     206,155
                                                --------   --------   ---------   ---------

Interest Charges:
  Long-term debt and notes payable                10,494      6,992      26,895      27,789
  Company-obligated trust preferred securities     1,529      1,835       5,199       2,141
  Company-obligated mandatorily
    redeemable preferred securities                  -          383         -         4,977
  Other interest                                     331        285         938         824
  Allowance for borrowed funds used
    during construction                             (215)      (378)       (714)       (878)
                                                --------   --------   ---------   ---------
     Total interest charges                       12,139      9,117      32,318      34,853
                                                --------   --------   ---------   ---------

Income/(Loss) Before Income Taxes                (24,954)    33,286      27,882     171,302
  Income taxes                                   (10,945)    10,771      10,410      63,352
                                                --------   --------   ---------   ---------

Net Income/(Loss)                                (14,009)    22,515      17,472     107,950
  Preferred stock dividends                          -          -           -           154
  Loss on preferred stock reacquisition              -          -           -           726
                                                --------   --------   ---------   ---------
Earnings/(Losses) Available for Common Stock   $ (14,009) $  22,515  $   17,472  $  107,070
                                                ========   ========   =========   =========


</TABLE>







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

                                       40


<PAGE>



             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows
                      -------------------------------------
                                   (Unaudited)

                                                              In Thousands
                                                       ------------------------
                                                              Nine Months
                                                          Ended September 30,
                                                           2000         1999
                                                           ----         ----
Operating Activities:
  Net income                                            $  17,472    $ 107,950
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          41,006       58,776
    Amortization of property under capital leases             -          4,958
    Gain/(loss) on sale of investment                       1,813      (40,209)
    Deferred income taxes and investment tax
      credits, net                                         58,360     (301,604)
  Changes in working capital:
    Receivables                                            (5,198)       9,156
    Materials and supplies                                    -         34,053
    Special deposits and prepayments                      (48,938)       9,135
    Payables and accrued liabilities                      (95,504)     101,321
    Due to/from affiliates                                (41,458)     (21,476)
  Nonutility generation contract buyout costs              (4,410)      (3,500)
  Other, net                                              (64,397)     (57,835)
                                                         --------     --------
     Net cash required by operating activities           (141,254)     (99,275)
                                                         --------     --------

Investing Activities:
  Capital expenditures and investments                    (48,356)     (65,779)
  Proceeds from sale of investment                            -        937,540
  Proceeds from nonutility generation trusts               62,116          -
  Contributions to decommissioning trusts                     (30)      (5,266)
  Other, net                                                2,047        1,945
                                                         --------     --------
     Net cash provided by investing activities             15,777      868,440
                                                         --------     --------

Financing Activities:
  Issuance of long-term debt                              118,000      348,172
  Issuance of company-obligated trust
      preferred securities                                    -         96,535
  Retirement of long-term debt                            (25,000)    (600,011)
  Increase/(decrease) in notes payable, net                55,700      (86,023)
  Redemption of preferred stock                               -        (17,406)
  Redemption of company-obligated mandatorily
    redeemable preferred securities                           -       (105,383)
  Capital lease principal payments                            -         (5,392)
  Dividends paid on common stock                          (55,000)    (380,000)
  Dividends paid on preferred stock                           -           (154)
                                                         --------     --------
     Net cash provided/(required)
       by financing activities                             93,700     (749,662)
                                                         --------     --------

Net increase/(decrease) in cash and temporary
  cash investments from above activities                  (31,777)      19,503
Cash and temporary cash investments, beginning of year     32,250        2,750
                                                         --------     --------
Cash and temporary cash investments, end of period      $     473    $  22,253
                                                         ========     ========

Supplemental Disclosure:
  Interest and preferred dividends paid                 $  23,039    $  42,167
                                                         ========     ========
  Income taxes paid                                     $ 117,293    $ 245,574
                                                         ========     ========
  New capital lease obligations incurred                $     -      $   9,241
                                                         ========     ========

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

                                       41


<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).  These electric
utilities are  conducting  business  under the name GPU Energy,  and  considered
together are referred to as the "GPU Energy  companies."  GPU Capital,  Inc. and
GPU Electric,  Inc. and their subsidiaries own, operate and fund the acquisition
of electric distribution and gas transmission systems in foreign countries,  and
are referred to as "GPU  Electric." GPU  Electric's  foreign  utility  companies
include Midlands  Electricity plc (conducting business as GPU Power UK); Empresa
Distribuidora   Electrica   Regional  S.A.   (Emdersa);   and  GPU  GasNet.  GPU
International,  Inc. and GPU Power, Inc. and their subsidiaries develop, own and
operate  generation  facilities in the United States (US) 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; MYR Group Inc. (MYR), which is a utility
infrastructure  construction  services  company;  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 1999  Annual  Report on Form  10-K.  The
December  31,  1999  balance  sheet data  contained  in the  attached  financial
statements  was derived  from  audited  financial  statements.  For  disclosures
required by  accounting  principles  generally  accepted in the US, see the 1999
Annual Report on Form 10-K.


1.    COMMITMENTS AND CONTINGENCIES

                   PENDING MERGER OF FIRSTENERGY CORP. AND GPU
                   -------------------------------------------

      On August 8, 2000,  GPU,  Inc.  entered  into an  agreement  to merge with
FirstEnergy Corp.  (FirstEnergy),  an Ohio corporation,  headquartered in Akron,
Ohio.  Under  the  merger  agreement,  FirstEnergy  would  acquire  all  of  the
outstanding  shares of GPU's common stock for approximately $4.5 billion in cash
and FirstEnergy common stock.

      Under the agreement,  GPU shareholders would receive $36.50 for each share
of GPU common stock they own,  payable in cash or the  equivalent  of $36.50 per
share in FirstEnergy  common stock, as long as FirstEnergy's  common stock price
is between $24.24 and $29.63.  Each GPU  shareholder  would be able to elect the
form of  consideration  they wish to receive,  subject to  proration so that the
aggregate  consideration to all GPU shareholders  will be 50 percent cash and 50
percent  FirstEnergy  common stock.  Each GPU share  converted into  FirstEnergy
common stock would  receive not less than 1.2318 and not more than 1.5055 shares
of  FirstEnergy  common  stock,  depending  on  the  average  closing  price  of
FirstEnergy  stock during the 20-day  trading period ending on the sixth trading
date prior to the merger closing.

      The Merger has been  approved by the Boards of Directors of GPU,  Inc. and
FirstEnergy and is expected to close promptly after all of the conditions to the
consummation of the Merger, including shareholder approval and the

                                       42


<PAGE>


receipt of all necessary  regulatory  approvals,  are  fulfilled or waived.  The
receipt of all necessary  federal and state regulatory  approvals is expected to
take  approximately nine to twelve months from the date of the merger agreement.
A joint  proxy  statement/prospectus  has been  mailed to  shareholders  of both
companies and special  meetings of the shareholders of GPU, Inc. and FirstEnergy
are scheduled for November 21, 2000 to consider and vote on the Merger.


               COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT

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  1998,  the  Pennsylvania  Public  Utility  Commission  (PaPUC)  issued
Restructuring  Orders to Met-Ed and Penelec which,  among other things,  provide
for Met-Ed and  Penelec's  recovery of a substantial  portion of what  otherwise
would have become stranded costs, and provide for Phase II proceedings following
the completion of their generation divestitures to make a final determination of
the extent of that stranded cost recovery.

      On January 31, 2000,  Met-Ed and Penelec submitted Phase II Reports to the
PaPUC addressing actual net divestiture  proceeds and reconciliation of stranded
costs pursuant to the 1998  Restructuring  Orders.  The PaPUC and other parties,
which participated in the 1998 Restructuring Orders, are currently reviewing the
Reports.  On  September 1, 2000 Met-Ed and Penelec  requested  approval of their
Phase II Reports by no later than January 2001.  On October 25, 2000,  the PaPUC
issued  an  order  establishing   evidentiary  proceedings  for  the  companies'
petitions and testimony.  These proceedings are scheduled to end by December 31,
2000. There can be no assurance as to the outcome of this matter.

      In May 1999,  the New Jersey Board of Public  Utilities  (NJBPU)  issued a
Summary  Order with  respect  to  JCP&L's  rate  unbundling,  stranded  cost and
restructuring  filings.  The Summary  Order  provides  for,  among other things,
customer choice of electric  generation  supplier  beginning  August 1, 1999 and
full recovery of stranded  costs.  The Summary Order did not address the sale of
Oyster Creek, because at the time the Summary Order was issued, it was uncertain
whether  the plant  would be sold or retired  early.  JCP&L is  awaiting a final
order from the NJBPU.

      During  1999,   the  NJBPU  issued  final   electric   restructuring   and
generation-related  securitization  orders to Public  Service  Electric  and Gas
Company (PSE&G), a non-affiliated utility. Several parties appealed these orders
on a variety of grounds,  including  the use of deferred  accounting  associated
with above  market NUG costs and the Societal  Benefit  Charge,  which  includes
recovery of nuclear decommissioning costs. In April 2000, the Appellate Division
of the New Jersey Superior Court affirmed the orders, but that decision has been
appealed  to the New Jersey  Supreme  Court,  which is not  expected  to issue a
decision before January 2001. While JCP&L's Summary Order has not been appealed,
JCP&L is unable to determine the impact, if any,

                                       43


<PAGE>


the appeals to PSE&G's orders will have on its restructuring  order and petition
for securitization or its use of deferred accounting.

      As a result of the NJBPU and the PaPUC  restructuring  decisions,  the GPU
Energy  companies  are required to supply  electricity  to customers  who do not
choose  an  alternate  supplier.  Given  that  the  GPU  Energy  companies  have
essentially divested their generation  business,  there will be increased market
risks associated with supplying that electricity, since the GPU Energy companies
will  have  to  supply  electricity  to  non-shopping  customers  entirely  from
contracted and open market purchases.  JCP&L is permitted to recover  reasonable
and prudently  incurred costs associated with providing basic generation service
to  non-shopping  customers.  However,  Met-Ed and Penelec are unable to recover
their energy costs in excess of established  rate caps,  absent a request to the
PaPUC, or specific rate treatment provided for in the 1998 Restructuring Orders.
Management has  implemented a program to manage energy risk, but there can be no
assurance that the GPU Energy  companies will be able to fully recover the costs
to supply electricity to customers who do not choose an alternate supplier.

Generation Agreements:
---------------------

      The  evolving  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.

      The GPU Energy  companies  have entered into  agreements  with third party
suppliers  to  purchase   capacity  and  energy.   Payments  pursuant  to  these
agreements,  which  include  firm  commitments  as well as  certain  assumptions
regarding,  among other things, call/put arrangements,  are estimated to be $222
million in 2000,  $910 million in 2001,  $339  million in 2002,  $138 million in
2003 and $44 million in 2004.

      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 non-utility  generators (NUGs) for
the purchase of energy and capacity, which agreements have remaining terms of up
to 20 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 following table shows actual payments from 1998 through
September 30, 2000, and estimated payments thereafter through 2005:



                                       44


<PAGE>


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

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

      1998                 788        403         174         211
      1999                 774        388         167         219
      2000                 762        411         146         205
      2001                 788        453         144         191
      2002                 787        452         147         188
      2003                 770        427         151         192
      2004                 769        408         156         205
      2005                 753        393         160         200

      The NJBPU Summary Order provides  JCP&L  assurance of full recovery of its
NUG costs (including  above-market NUG costs and certain buyout costs),  whereas
the PaPUC  Restructuring  Orders  provide  Met-Ed and Penelec  assurance of full
recovery of their  above-market  NUG costs and certain NUG buyout costs. The GPU
Energy  companies have recorded,  on a present value basis, a total liability of
$3.3 billion (JCP&L $1.6 billion; Met-Ed $0.8 billion;  Penelec $0.9 billion) on
the Consolidated  Balance Sheets for above-market NUG costs which is offset by a
corresponding  regulatory asset. The GPU Energy companies are continuing efforts
to reduce the above-market costs of these 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,  provided for the recovery of costs  associated with the buyout of
the Freehold  Cogeneration power purchase agreement (Freehold buyout). The NJBPU
approved the cost recovery of up to $135 million,  over a seven-year  period, on
an interim basis subject to refund.  The NJBPU's  Summary Order provides for the
continued recovery of the Freehold buyout in the Market Transition Charge (MTC),
but has not  altered  the  interim  nature  of such  recovery,  pending  a final
decision  by the  NJBPU.  There can be no  assurance  as to the  outcome of this
matter.


                               ACCOUNTING MATTERS
                               ------------------

      JCP&L,  in  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,  "Regulated
Enterprises  -  Accounting  for  the  Discontinuation  of  Application  of  FASB
Statement   No.  71,"  and  Emerging   Issues  Task  Force  (EITF)  Issue  97-4,
"Deregulation  of the Pricing of Electricity - Issues Related to the Application
of FAS 71 and FAS 101",  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,  2000 and  December  31, 1999
Consolidated Balance Sheets in accordance with the provisions of FAS 71 and EITF
Issue 97-4 were as follows:









                                       45


<PAGE>


GPU, Inc. and Subsidiary Companies
----------------------------------
                                                       (in thousands)
                                                ----------------------------
                                                 September 30,   December 31,
                                                     2000           1999
                                                -------------    ------------
Market transition charge (MTC) / basic
  generation service                               $2,684,852    $2,397,071
Competitive transition charge (CTC)                   785,397       803,064
Reserve for generation divestiture                    533,941       536,904
Power purchase contract loss not in CTC               369,290       369,290
Income taxes recoverable through future rates, net    280,889       280,268
Costs recoverable through distribution rates          260,126       296,842
Three Mile Island Unit 2 (TMI-2)
  decommissioning costs                                49,517       100,794
Societal benefits charge                              198,494       116,941
Above-market deferred NUG costs                      (189,619)     (252,348)
Other, net                                             47,199        67,420
                                                    ---------     ---------
     Total regulatory assets, net                  $5,020,086    $4,716,246
                                                    =========     =========

JCP&L
-----

MTC / basic generation service                    $2,684,852     $2,397,071
Costs recoverable through distribution rates         260,126        296,842
Societal benefits charge                             198,494        116,941
                                                   ---------      ---------
     Total regulatory assets, net                 $3,143,472     $2,810,854
                                                   =========      =========

Met-Ed
------

CTC                                               $  614,074     $  591,316
Power purchase contract loss not in CTC              271,270        271,270
Reserve for generation divestiture                   143,434        137,037
Income taxes recoverable through future rates, net   121,692        115,713
TMI-2 decommissioning costs                           16,637         65,455
Above-market deferred NUG costs                       10,067            545
Other, net                                            50,647         51,529
                                                   ---------      ---------
     Total regulatory assets, net                 $1,227,821     $1,232,865
                                                   =========      =========

Penelec
-------

Reserve for generation divestiture                $  390,507     $  399,867
Above-market deferred NUG costs                     (199,686)      (252,893)
CTC                                                  171,323        211,748
Income taxes recoverable through future rates, net   159,197        164,555
Power purchase contract loss not in CTC               98,020         98,020
TMI-2 decommissioning costs                           32,880         35,339
Other, net                                            (3,448)        15,891
                                                   ---------      ---------
     Total regulatory assets, net                 $  648,793     $  672,527
                                                   =========      =========

      Statement of  Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative  Instruments  and  Hedging  Activities",   as  amended  by  FAS  137,
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" and FAS 138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - An Amendment of FASB
Statement No. 133" (collectively, FAS 133), establishes accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  and for hedging  activities.  In general,  FAS 133
requires  that  companies   recognize  all   derivatives  as  either  assets  or
liabilities  on the balance sheet and measure those  instruments  at fair value.
FAS 133 (as amended)  excludes from its scope certain  contracts that qualify as
normal purchases and sales. To



                                       46


<PAGE>


qualify for this exclusion, it must be probable that the contract will result in
physical delivery. GPU will adopt this statement on January 1, 2001.

      GPU's use of  derivative  instruments  is  intended  to manage the risk of
fluctuations in commodity prices,  interest rates, and foreign  currencies.  GPU
does not intend to hold or issue  derivative  instruments for trading  purposes.
GPU enters into  fixed-price  contracts for future  purchases of electricity and
natural gas with  individual  counterparties  or through traded  exchanges.  The
majority of these  commodity  contracts  entered into by GPU would be considered
"normal  purchases,"  as defined in FAS 133, and,  therefore,  would be excluded
from the statement's  scope.  Commodity  contracts  accounted for as derivatives
under  FAS 133  would  be  designated  as cash  flow  hedges  of the  underlying
commodity  purchases,  to the extent they  qualify for such  treatment.  FAS 133
requires  that  the  effective  portion  of the  gain or  loss  on a  derivative
instrument  designated  and  qualifying  as a cash flow hedge be  reported  as a
component  of  Other  Comprehensive  Income,  net of tax.  If GPU  adopted  this
statement as of September 30, 2000, management believes the impact of FAS 133 as
it relates to these commodity contracts would be immaterial to GPU's earnings or
financial position.

      GPU  also  uses   various   types  of  interest   rate  swaps  to  convert
floating-rate  loans to fixed rates.  These instruments will be accounted for as
cash flow hedges,  to the extent they are effective  hedges. If GPU adopted this
statement as of September 30, 2000, the value of these interest rate swaps under
FAS 133 would be immaterial to GPU's earnings or financial position.

      GPU uses  currency  swap  agreements  to manage  currency  risk  caused by
fluctuations  in the US dollar exchange rate related to debt issued in the US by
Avon Energy Partners  Holdings.  These instruments will be accounted for as cash
flow hedges, to the extent they are effective hedges. If FAS 133 were applied to
currency   swaps  in  place  at  September  30,  2000,   derivative   assets  of
approximately $50 million would be recognized on the Consolidated Balance Sheet,
with an offset, net of tax, to Accumulated other comprehensive income.  Currency
swaps determined to be ineffective hedges would have had an immaterial impact on
the  Consolidated  Statement of Income for the nine months ended  September  30,
2000.

      GPU has entered into numerous  forward  capacity  purchase  contracts with
third parties.  GPU has also entered into fixed  transmission  rights agreements
(FTRs)  periodically for the purpose of hedging against high transmission  rates
along certain routes during times of congestion. Evaluation of the impact of FAS
133 as it relates to capacity purchase contracts and FTRs is in process.

      The actual  impact of FAS 133 upon  adoption  would differ from that noted
above depending on the portfolio of derivative contracts in effect on January 1,
2001,  prevailing  market  rates,  the  completion  of the  pending  sale of GPU
International,  Inc. or  implementation  issues to be resolved by the  Financial
Accounting Standards Board's Derivatives Implementation Group.


                               NUCLEAR FACILITIES
                               ------------------

Investments:
-----------

      In December 1999,  the GPU Energy  companies sold Three Mile Island Unit 1
(TMI-1) to AmerGen Energy Company, LLC (AmerGen), a joint venture of PECO Energy
and British Energy, for approximately $100 million. In August

                                       47


<PAGE>


2000, JCP&L sold Oyster Creek to AmerGen for approximately $10 million.  As part
of the sales,  AmerGen has assumed full  responsibility for  decommissioning the
plants,  and the GPU Energy  companies  have  transferred  $320 million and $430
million of TMI-1 and Oyster Creek decommissioning trust funds, respectively,  to
AmerGen. JCP&L, Met-Ed and Penelec jointly own TMI-2, which was damaged during a
1979 accident, in the percentages of 25%, 50% and 25%. JCP&L's net investment in
TMI-2 as of  September  30, 2000 and  December  31, 1999 was $57 million and $61
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.

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 US 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
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 US 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 US 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

                                       48


<PAGE>


"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.  In November  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. In June 2000,
the US Supreme Court denied petitions by GPU, Inc., the GPU Energy companies and
the plaintiffs.

      In September 2000, the defendants  filed a Motion for Summary  Judgment in
the District Court. Meanwhile, the plaintiffs have taken an interlocutory appeal
to the Third Circuit seeking review of the District Court's  determination  that
the remaining  plaintiffs should be allowed to advance causation  theories based
only on the admissible evidence of record at the close of discovery in the case.

      The Third Circuit has scheduled oral arguments on the  plaintiffs'  appeal
for  January  2001.  There  can  be no  assurance  as to  the  outcome  of  this
litigation.

      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 US Department of Energy (DOE).

      In 1995,  a  consultant  performed  a  site-specific  study of TMI-2  that
considered   various   decommissioning   methods  and   estimated  the  cost  of
decommissioning  the  radiological  portion  and  the  cost  of  removal  of the
nonradiological  portion  of the plant,  using the prompt  removal/dismantlement
method.  Management has reviewed the methodology  and  assumptions  used in this
study, is in agreement with them, and believes the results are  reasonable.  The
TMI-2  funding  completion  date is 2014,  consistent  with TMI-2  remaining  in
long-term  storage.  The retirement cost estimates under the 1995  site-specific
study,  assuming   decommissioning  of  TMI-2  in  2014,  is  $446  million  for
radiological  decommissioning and $36 million for non-radiological removal costs
(net of $12.6 million spent as of September 30, 2000)(in 2000 dollars).

      Each of the GPU Energy  companies is responsible  for retirement  costs in
proportion to its respective ownership percentage. The ultimate cost of retiring
TMI-2 may be different  from the cost estimate  contained in this  site-specific
study. Also, the cost estimate contained in this site-specific


                                       49


<PAGE>


study  is  significantly  greater  than  the  decommissioning   funding  targets
established by the NRC.

      The estimated  liability for future TMI-2  retirement  costs (reflected as
Three Mile Island Unit 2 future costs on the Consolidated  Balance Sheets) as of
September  30, 2000 and December 31, 1999 is $508 million  (JCP&L $127  million;
Met-Ed $254 million; Penelec $127 million) and $497 million (JCP&L $124 million;
Met-Ed $249 million;  Penelec $124  million),  respectively.  This  liability is
based upon the 1995  site-specific  study  estimates  (in 2000 and 1999 dollars,
respectively)   discussed  above  and  an  estimate  for  remaining  incremental
monitored  storage costs of $25 million  (JCP&L $6 million;  Met-Ed $13 million;
Penelec $6 million)  and $27  million  (JCP&L $7  million;  Met-Ed $13  million;
Penelec  $7  million)  as  of   September   30,  2000  and  December  31,  1999,
respectively, as a result of TMI-2 entering long-term monitored storage in 1993.

      Offsetting  the $508 million  liability  as of September  30, 2000 is $121
million  (JCP&L $7 million;  Met-Ed $84  million;  Penelec $30  million),  which
management  believes  is probable of recovery  from  customers  and  included in
Regulatory  assets,  net on the  Consolidated  Balance Sheets,  and $390 million
(JCP&L $123 million;  Met-Ed $162 million;  Penelec $105 million) in trust funds
for TMI-2 and  included  in  Nuclear  decommissioning  trusts,  at market on the
Consolidated Balance Sheets.

      The NJBPU has granted JCP&L revenues for TMI-2  retirement  costs based on
the 1995  site-specific  study  estimates.  In addition,  JCP&L is  recovering a
portion of 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.

      As  of  September  30,  2000,  the   accident-related   portion  of  TMI-2
radiological  decommissioning  costs is estimated  to be $79 million  (JCP&L $20
million;  Met-Ed $39 million;  Penelec $20 million),  which is based on the 1995
site-specific study (in 2000 dollars). In connection with rate case resolutions,
JCP&L, Met-Ed and Penelec made contributions to irrevocable  external trusts for
their respective shares of the  accident-related  portion of the decommissioning
liability in amounts of $15 million, $40 million and $20 million,  respectively.
These  contributions  were not  recoverable  from customers and were expensed in
1990, in the case of JCP&L, and in 1991 for Met-Ed and Penelec.

      The GPU Energy  companies  intend to seek  recovery  for any  increases in
TMI-2 retirement costs, but recognize that recovery cannot be assured.

      Prior to  September  2000,  increases in the  accident-related  portion of
Met-Ed and Penelec's TMI-2 decommissioning liability were charged to expense, in
amounts  totaling  $23.2 million  (Met-Ed $15.4  million;  Penelec $7.8 million)
through  August 2000.  Likewise,  through  August  2000,  earnings on Met-Ed and
Penelec's  contributions to external  trusts,  in amounts totaling $34.9 million
(Met-Ed $23.3 million;  Penelec $11.6  million),  were taken to income,  and the
related   unrealized  gains  and  losses  were  accrued  to  Accumulated   Other
Comprehensive Income on the Consolidated Balance Sheets.

      During the  course of  ongoing  regulatory  proceedings  in  Pennsylvania,
Met-Ed and Penelec determined, in the third quarter 2000, that a portion of

                                       50


<PAGE>


their  regulatory  assets  for  TMI-2  decommissioning  previously  regarded  as
probable of recovery in rates, are now no longer deemed probable of recovery. As
a result,  in the third quarter 2000, Met-Ed and Penelec charged to income $11.7
million (Met-Ed $7.9 million;  Penelec $3.8 million)  pre-tax for the write-down
of their respective  regulatory assets for TMI-2  decommissioning,  representing
the net realized gain they previously recorded on the  accident-related  portion
of the TMI-2 decommissioning trust. Furthermore,  the unrealized gains or losses
associated with the accident-related  portion of the TMI-2 decommissioning trust
(previously recorded in Accumulated other comprehensive income) were transferred
to Regulatory assets, net on the Consolidated Balance Sheets, and will no longer
be recorded in Accumulated other comprehensive income.


                                    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.  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.

      GPU has  purchased  property and  decontamination  insurance  coverage for
TMI-2 totaling $150 million.

      The  Price-Anderson  Act  limits an  owner's  liability  to third  parties
resulting from a nuclear  incident to approximately  $9.5 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.  Although TMI-2 is
exempt from retrospective premium assessments, the plant is still covered by the
provisions of the Price-Anderson Act. In addition,  the GPU Energy companies are
subject  to  other   retrospective   premium  assessments  related  to  policies
applicable to TMI-1 prior to its sale to AmerGen.


                              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  addition,  federal and state law
provides for payment by responsible parties for damage to natural resources.

      GPU has been  formally  notified by the  Environmental  Protection  Agency
(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


                                       51


<PAGE>


and/or toxic waste sites in the  following  number of instances  (in some cases,
more than one company is named for a given site):

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

        6        3         2         1        2         11

      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/or  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. As of
September  30, 2000, a liability  of  approximately  $6 million was recorded for
nine PRP sites where it is probable that a loss has been incurred and the amount
could be reasonably estimated.

      The ultimate cost of  remediation of all these and other  hazardous  waste
sites 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 US District
Court for the  District of Delaware  for  enforcement  of its  Unilateral  Order
(Order)  issued against GPU, Inc. to clean up the former Dover Gas Light Company
(Dover)  manufactured gas production site (Site) in Dover,  Delaware.  Dover was
part of the  AGECO/AGECORP  group of companies  from 1929 until 1942;  GPU, Inc.
emerged  from the  AGECO/AGECORP  reorganization  proceedings  in  1946.  All of
Dover's  common stock,  which was sold in 1942 to an  unaffiliated  entity,  was
subsequently  acquired by Chesapeake Utilities Corporation  (Chesapeake),  which
merged with Dover in 1960. Chesapeake is currently performing the cleanup at the
Site.  According to the  complaint,  the EPA is seeking (1)  enforcement  of the
Order  against GPU; (2) recovery of its past response  costs;  (3) a declaratory
judgment that GPU is liable for any remaining cleanup costs of the Site; and (4)
statutory penalties for noncompliance with the Order. The EPA has stated that it
has incurred  approximately  $1.4 million of past response costs as of September
30, 2000. The EPA estimates the total Site cleanup costs at  approximately  $4.2
million.  Consultants  to Chesapeake  have  estimated the remaining  remediation
ground  water  costs  to be  approximately  $11.3  million  to $19  million.  In
accordance  with its penalty  policy,  and in discussions  with GPU, the EPA has
demanded  penalties  calculated  at a daily  rate of  $8,800,  rather  than  the
statutory maximum of $27,500 per day. As of September 30, 2000, if the statutory
maximum were applied,  the total amount of penalties would be approximately  $42
million.  GPU believes  that it has  meritorious  defenses to the  imposition of
penalties, or that if a penalty is assessed, it should be at a lower daily rate.
Chesapeake has also sued GPU, Inc. for  contribution to the cleanup of the Dover
Site.  The US District Court for the District of Delaware has  consolidated  the
case  filed  by  Chesapeake  with the case  filed  by the EPA and  discovery  is
proceeding. There can be no assurance as to the outcome of these proceedings.





                                       52


<PAGE>


      In August 2000,  Rochester  Gas & Electric  Corporation  (RG&E) filed suit
against GPU, Inc. in the United States  District Court for the Western  District
of New York for the  reimbursement  of $5.2  million of costs and damages it has
allegedly incurred, and a declaratory judgement with respect to future costs and
damages,  in  connection  with two former MGP sites and a third  property  where
wastes from one of those sites were allegedly  deposited.  All of the properties
are located in  Rochester,  New York.  According to the  complaint,  RG&E was an
indirect  subsidiary of AGECO from May 1929 until January 1946, and a subsidiary
of General  Public  Utilities  (now by merger and change of name GPU, Inc.) from
January 1946 until October 1949,  when it was divested by order of the SEC under
the Public  Utility  Holding  Company  Act.  GPU,  Inc. has not yet answered the
complaint. There can be no assurance as to the outcome of this matter.

      In connection with the 1999 sale of its Seward Generation Station to Sithe
Energies,  Penelec has assumed up to $6 million of remediation  costs associated
with certain coal mine refuse piles which are the subject of an earlier  consent
decree with the  Pennsylvania  Department of Environmental  Protection.  Penelec
expects  recovery of these  remediation  costs in Phase II of its  restructuring
proceeding and has recorded a corresponding regulatory asset.

      JCP&L has entered into agreements with the NJDEP for the investigation and
remediation of 17 formerly owned MGP sites.  JCP&L has also entered into various
cost-sharing  agreements  with  other  utilities  for most of the  sites.  As of
September 30, 2000, JCP&L has spent approximately $39 million in connection with
the  cleanup of these  sites.  In  addition,  JCP&L has  recorded  an  estimated
environmental  liability  of $54 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 the $54
million  due to  significant  uncertainties,  including  changes  in  acceptable
remediation methods and technologies.

      In 1997,  the NJBPU  approved  JCP&L's  request to establish a Remediation
Adjustment Clause for the recovery of MGP remediation  costs. As a result of the
NJBPU's Summary Order, effective August 1, 1999, the recovery of these costs was
transferred to the Societal Benefits Charge. As of September 30, 2000, JCP&L had
recorded on its  Consolidated  Balance Sheet a regulatory  asset of $46 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
filed a complaint with the Superior  Court of New Jersey against  several of its
insurance  carriers,  relative to these MGP sites,  and has settled with all but
one of those insurance carriers.


                       OTHER COMMITMENTS AND CONTINGENCIES
                       -----------------------------------

Class Action Litigation:
-----------------------

GPU Energy

      In July 1999, New Jersey  experienced a severe heat storm that resulted in
major power outages and temporary service interruptions,  which affected JCP&L's
service  territory.  As a result,  the NJBPU initiated an investigation into the
reliability of the transmission and distribution systems of all New

                                       53


<PAGE>


Jersey  utilities and their response to power outages.  This  investigation  was
essentially  completed in April 2000, resulting in Phase I and Phase II Reports.
Both Reports contain, among other things,  recommendations as to certain actions
that should be undertaken by JCP&L,  and were adopted by NJBPU orders  requiring
JCP&L to act on the recommendations  and to report back on such  implementation.
The NJBPU order  adopting  the Phase II Report  stated that there is not a prima
facie case demonstrating  that,  overall,  JCP&L provided unsafe,  inadequate or
improper service to its customers.  In addition,  two class action lawsuits were
commenced in New Jersey Superior Court in July 1999 against GPU, Inc. and JCP&L,
seeking both  compensatory  and punitive damages for alleged losses suffered due
to service  interruptions.  The GPU defendants originally requested the Court to
stay or dismiss the litigation in deference to the NJBPU's primary jurisdiction.
The Court denied the motion, consolidated the two actions, and certified them as
class actions on behalf of a class that includes JCP&L customers as well as "all
dependents,  tenants,  employees,  and other intended beneficiaries of customers
who suffered damages as a result" of the outages. In January 2000, the Appellate
Division agreed to review the trial court's decision on primary jurisdiction. In
June  2000,  the  Appellate   Division   affirmed  the  trial  court's  decision
recognizing,  however,  that  future  developments  in the  case may  require  a
reference of certain  issues to the NJBPU.  The  Appellate  Division also stated
that the NJBPU's  findings could be probative but not  determinative of at least
some issues in the  litigation.  In response to GPU's  demand for a statement of
damages,  the  plaintiffs  have  stated  that they are  seeking  damages of $700
million,  subject to the results of  pre-trial  discovery.  GPU has notified its
insurance carriers of the plaintiffs' allegations. The primary insurance carrier
has stated that while the substance of the  plaintiffs'  allegations are covered
under  GPU's  policy,  it  is  reserving  its  rights  concerning   coverage  as
circumstances  develop.  In  September  2000,  GPU  received  from  its  primary
insurance  carrier the  initial  indemnification  payment  for certain  expenses
incurred by GPU relative to these lawsuits.  In October 2000, the GPU defendants
filed a motion in the trial court,  seeking  decertification of the class. There
can be no assurance as to the outcome of these matters.

GPU Electric

      As a result of the  September  1998  fire and  explosion  at the  Longford
natural gas plant in Victoria, Australia,  Victorian gas users (plaintiffs) have
brought a class action in the  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.  The
plaintiffs  claim that Esso was,  among other  things,  negligent in  designing,
maintaining  and  operating  the  Longford  plant and also assert  claims  under
Australian fair trade practices law.

      Esso has joined as third party  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
affiliate  Transmission  Pipelines (Assets) Australia (TPAA). GPU, Inc., through
GPU GasNet,  acquired the assets of TPA and the shares of TPAA from the State in
June 1999.  Esso asserts that the State and the gas industry  were  negligent in
that,  among  other  things,  they  failed to ensure  that the gas system  would
provide  a secure  supply  of gas to users  and also  asserts  claims  under the
Australian fair trade  practices law. In addition,  GPU GasNet and other private
entities  (Buyers)  that  purchased the Victorian gas assets from the State have
joined Esso as third party defendants. Esso

                                       54


<PAGE>


asserts that if the gas industry is liable as alleged,  that  liability has been
transferred to the Buyers as part of the State's privatization process.

      Under the acquisition agreement with the State, GPU GasNet has indemnified
TPA and the State against third party claims arising out of, among other things,
the operation of TPA's  business.  TPA and the State have commenced  proceedings
against GPU GasNet to enforce the indemnity in respect of any liability that may
flow to TPA as a result of Esso's claim.

      GPU GasNet and TPAA have filed  answers  denying  liability  to Esso,  the
State and TPA, which could be material.  GPU GasNet and TPAA have notified their
insurance  carriers of this action.  The insurers  have notified GPU GasNet that
they have  formed  the  preliminary  view that GPU  GasNet  is not  entitled  to
coverage under the liability policy.  GPU GasNet believes that it is entitled to
coverage,  and  discussions  with the insurers are  continuing.  There can be no
assurance as to the outcome of this matter.

Investments and Guarantees:
--------------------------

GPU, Inc.

      GPU,  Inc. has made  significant  investments  in foreign  businesses  and
facilities  through its  subsidiaries,  GPU Electric  and the GPUI Group.  As of
September 30, 2000,  GPU,  Inc.'s  investment in GPU Electric and the GPUI Group
was $571 million and $292 million,  respectively. As of that date, GPU, Inc. has
also  guaranteed  an  additional  $1.04  billion and $30 million  (including  $9
million of guarantees  related to domestic  operations) of GPU Electric and GPUI
Group outstanding  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 risks inherent
to operating in such locations, including foreign currency fluctuations.

GPU Electric

      In June 2000, GPU sold GPU PowerNet for A$2.1 billion  (US$1.26  billion).
For further information, see Note 2, Acquisitions and Dispositions.

      In August 2000, GPU GasNet  refinanced  A$375 million (US$203  million) of
maturing bank debt as follows: A$250 million (US$135 million) of proceeds from a
new  commercial  paper program at GPU GasNet;  A$51 million  (US$28  million) of
proceeds  from the  issuance of  additional  commercial  paper by GPU  Australia
Holdings under its commercial paper program; and A$37 million (US$20 million) of
cash  proceeds  from the  sale of  marketable  securities  by an  affiliate.  At
September 30, 2000, $135 million of commercial  paper was outstanding  under the
GPU GasNet  commercial  paper  program  and  included in  Long-term  Debt on the
Consolidated  Balance  Sheets.  GPU GasNet has also  established a A$750 million
(US$406 million)  revolving  credit  facility,  which serves as backstop for the
GasNet  commercial  paper program.  No borrowings  were  outstanding  under this
facility at September 30, 2000.

      GPU  Power  UK has a 40%  equity  interest  in a 586 MW power  project  in
Pakistan  (the Uch Power  Project),  which  was  originally  scheduled  to begin
commercial operation in late 1998. In June 1999, certain Project lenders for the
Uch Power Project issued notices of default to the Project  sponsors  (including
GPU Power UK) for,  among other  things,  failure to pay  principal and interest
under  various  loan  agreements.  In November  1999,  the Project  sponsors and
lenders reached an agreement under which repayment of the construction  loan was
extended, principal and interest payments deferred, and

                                       55


<PAGE>


the sponsors  agreed to fund the  completion  of the plant through the remaining
equity contribution  commitments.  The plant commenced commercial  operations in
October 2000.

      Uch has renegotiated several of the project agreements with the Government
of Pakistan and its  agencies,  under which it agreed,  among other  things,  to
accept a reduction in the power purchase tariff averaging  approximately 8% over
the  project  term.  The  agreement  includes  options to extend the term of the
project from 23 to 30 years.  Although  commercial  operations have begun, there
remains a risk that  project  revenues  may be delayed due to the poor  economic
situation in Pakistan.

      GPU's  investment  in the Uch Power  Project as of September  30, 2000 was
approximately $37.9 million, plus a guarantee letter of credit of $ 3.6 million,
and its share of the projected  completion  costs  represents an additional $3.1
million  commitment.  Cinergy  Corp.  (the  former  owner  of  50%  of  Midlands
Electricity  plc)  agreed  to  fund up to an  aggregate  of $20  million  of the
required capital contributions, for a period of one year from July 15, 1999, and
"cash losses," which could be incurred on the Uch Power Project, for a period of
up to ten years from July 15, 1999. Cinergy has reimbursed GPU Electric for $4.9
million of capital contributions through September 30, 2000, leaving a remaining
commitment of up to $15.1  million.  There can be no assurance as to the outcome
of this matter.

      As part of the 1999  sale of the GPU  Power  UK  supply  business  and the
purchase  of the 50% of GPU  Power  UK that  GPU did not  already  own,  certain
long-term purchase obligations under natural gas supply contracts were retained.
Most of these contracts, which extend to September 2005, were at fixed prices in
excess of the market price of gas, and a liability had been  established for the
estimated  loss under such  contracts.  However,  as a result of increasing  gas
prices  during the second  quarter of 2000,  GPU Power UK was able to enter into
matching forward sale contracts for the majority of the gas purchases, resulting
in a reduction  in the  estimated  liability  and a pre-tax  credit to income of
$15.9 million. Other open gas contracts, which extend to 2005, require GPU Power
UK to  purchase  or to sell gas at fixed  prices.  The  estimated  out-of-market
position of all  contracts at September 30, 2000 was $24 million;  however,  the
remaining open positions included both sales and purchases, thereby reducing the
remaining exposure to future price changes.

      In  an  English  court  decision  involving  two  unaffiliated   utilities
(National Grid and National  Power),  the court held that  utilities  improperly
used a pension  plan  surplus in the UK  Electricity  Supply  Pension  Scheme to
eliminate  scheduled  payments in respect of early retirement costs and employer
contributions.  The Court found that,  in the case of National Grid and National
Power,  procedures had not been strictly followed,  and as such, a liability may
now exist. At a subsequent  hearing,  the Court refused to consider the validity
or  effectiveness  of  retrospective  amendments to the plan.  National Grid and
National Power have appealed the Court's decision to the House of Lords. Pending
the outcome of the Appeal, the requirement for any payments has been stayed. The
appeal in the House of Lords is  expected  to be heard in the first  quarter  of
2001.  If a similar  complaint  were to be made  against GPU Power UK, GPU Power
UK's  potential  liability is  estimated  to be a maximum of  (pound)63  million
(US$96 million),  exclusive of any applicable interest charges or penalties. The
GPU Power UK  section  of the  Electricity  Supply  Pension  Scheme  remains  in
substantial  surplus and any payment to the plan that might  ultimately prove to
be necessary would be accounted for as an

                                       56


<PAGE>


increase in pension  assets,  and would not have an immediate  impact on income.
However, any related penalties or interest (which could be assessed, though none
are currently proposed) would adversely affect income. There can be no assurance
as to the outcome of this matter.

      Emdersa's operating companies are subject to a number of government claims
related to Value-added tax liabilities and to Social Security taxes collected in
their electric rates, which aggregate  approximately $22 million. The claims are
generally  related to  transitional  issues  surrounding  the  privatization  of
Argentina's electricity industry. There can be no assurance as to the outcome of
these matters.

GPUI Group

      On July 9, 1999,  DIAN (the  Colombian  national tax  authority)  issued a
"Special  Requirement"  on the  Termobarranquilla  S.A.,  Empresa  de  Servicios
Publicos  (TEBSA) 1996 income tax return,  which  challenges  the exclusion from
taxable  income of an inflation  adjustment  related to the value of assets used
for power generation (EI  Barranquilla,  a wholly owned subsidiary of GPU Power,
ABB Barranquilla,  Corporacion Electrica de la Costa Atlantica and Distral Group
have a 28.7%,  28.7%,  42.5%  and 0.1%  interest  in TEBSA,  respectively).  The
failure to give notice of this Special  Requirement to the US Export Import Bank
(EXIM  Bank) is an event of  default  under the loan  agreement.  GPU Power also
believes  that other  events of default  exist  under the loan  agreements  with
project lenders including the Overseas Private  Investments  Corporation  (OPIC)
and a commercial bank syndicate.  As a result,  certain required  certifications
have not been delivered to EXIM Bank, OPIC and the other project lenders,  which
failure is, itself, an event of default under the loan agreements.  These issues
are currently being discussed with EXIM Bank, the other project lenders, and the
Government of Colombia,  as well as the other partners in the TEBSA project.  As
of September 30, 2000, GPU Power has an investment of approximately  $88 million
in TEBSA and is committed to make  additional  standby equity  contributions  of
$21.3 million, which GPU, Inc. has guaranteed. The total outstanding senior debt
of the TEBSA  project is $385 million at September  30, 2000,  and, in addition,
GPU  International  has guaranteed the obligations of the operators of the TEBSA
project,  up to a maximum of $5  million,  under the  project's  operations  and
maintenance  agreement.  There can be no  assurance  as to the  outcome of these
matters.

      With regard to the "Special Requirement" issued by DIAN, DIAN asserts that
TEBSA should be liable for approximately $4.9 million consisting of $1.5 million
in additional  tax and $3.4 million in penalties  and interest.  TEBSA has filed
both  procedural  and  substantive  objections  to  these  assertions,  the DIAN
responded to these objections  reiterating its previous position,  and TEBSA, in
turn,  filed an appeal  with the DIAN on June 2, 2000.  A response  is  expected
within six months.

      In July 2000, the DIAN issued a "Special  Requirement"  on the 1997 income
tax return of TEBSA challenging a tax exemption benefit under a Colombian income
tax  statute.  The  DIAN  requested  payment  of  approximately  $1  million  in
additional tax and penalties.  On October 12, 2000,  TEBSA filed a response with
the DIAN stating arguments  supporting its tax exemption benefit.  Management is
unable to determine the outcome of this matter.




                                       57


<PAGE>


GPU Telcom

      In March 2000, GPU, Inc.  announced its  participation  in America's Fiber
Network  LLC  (AFN),  of  which  GPU,  Inc.  anticipates  owning  25%.  AFN is a
high-speed  fiber optics  company with a network of more than 7,000 route miles,
or 140,000 fiber miles,  connecting major markets in the eastern US to secondary
markets  with a  growing  need  for  broadband  access.  GPU,  Inc.  anticipates
investing  approximately $40 million (of which $2.2 million has been invested as
of September 30, 2000) in AFN through GPU Telcom,  which  includes  existing and
new fiber routes and electronic equipment.

     In April 2000,  GPU, Inc.  announced the formation of Telergy  Mid-Atlantic
(TMA),  a joint  venture  between  GPU Telcom and  Telergy,  Inc.  TMA  combines
established  telecommunication  services and marketing expertise with utilities'
existing fiber networks and natural positioning in serving retail markets.  GPU,
Inc. has invested $20 million in Telergy, Inc. through GPU Telcom.

Other:
-----

      JCP&L and PSE&G  each hold a 50%  undivided  ownership  interest  in Yards
Creek Pumped Storage  Facility  (Yards Creek).  In December 1998,  JCP&L filed a
petition with the 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, 2000 book value of $22 million.
There can be no assurance as to the outcome of this matter.

      In March  1999,  Penelec  and New York State  Electric  & Gas  Corporation
(NYSEG)  each sold their 50%  undivided  ownership  interests  in the Homer City
Station  to a  subsidiary  of Edison  Mission  Energy  (EME) for a total of $1.9
billion.  In connection with the sale,  Penelec and NYSEG  indemnified the buyer
with  respect to certain  contingent  liabilities,  including  costs or expenses
which the EPA might  impose for  failure to comply  with New Source  Performance
Standards,  Prevention  of  Significant  Deterioration  and  New  Source  Review
regulations  under the Clean Air Act prior to the date of the sale. In 1998, the
EPA  had  conducted  inspections  at  Homer  City  with  regard  to the  plant's
compliance with these regulations. On October 30, 2000, EME notified Penelec and
NYSEG that the EPA had concluded  that these  regulations  applied to Homer City
prior to the sale to EME and that Homer City was operating in violation of these
Clean  Air Act  regulations.  Penelec,  NYSEG  and EME  have  met  with  the EPA
regarding  the EPA's  initial  findings  and  conclusions.  If it is  ultimately
determined  that these  regulations  were so applicable  to Homer City,  the EPA
could assess substantial monetary penalties and require capital modifications to
the plant, the costs of which would be material. To the extent Penelec and NYSEG
are  obligated  to  indemnify  EME for any of these  costs,  they  would each be
severally liable for a 50% share. There can be no assurance as to the outcome of
this matter.

      Concurrent  with  GPU's July 1999  acquisition  of the 50% of GPU Power UK
which it did not already own, GPU began to evaluate existing restructuring plans
and formulate  additional plans to reduce operating expenses and achieve ongoing
cost reductions. As of December 31, 1999, GPU had identified and approved a cost
reduction plan. At the  acquisition  date, GPU Power UK had recorded a liability
of $28.6 million related to previous cost reduction

                                       58


<PAGE>


plans.  GPU retained  $25.7 million of this  liability,  related to  contractual
termination and other severance benefits for 276 employees  identified in a 1999
business  process  reengineering  project.  GPU  identified  an  additional  355
employees (234 in Engineering  Services,  38 in metering, 21 in Network Services
and 62 from other  specific  functions) to be terminated as part of the plan and
recorded an additional liability of $39.3 million. A net charge of $18.2 million
for GPU's 50% share of these adjustments was included in expense in 1999 and the
other 50% was recorded in Goodwill as a purchase accounting adjustment.

      In 2000, a change in the investment return assumptions, due to better than
expected investment  performance,  resulted in a reduction of approximately $6.9
million,  to $22.6  million,  in the  estimated  liability for the remaining 459
employees.  Consequently,  goodwill  was  credited  for $3.4 million (50% of the
change in estimate)  and $3.5  million was credited to income.  During the first
nine months of 2000,  $16.2  million was paid to 378  employees.  The  remaining
severance  liability of $5.2 million at  September  30, 2000  reflects the above
transactions as well as currency translation adjustments and the impact of seven
employees who were retained, and is included in Other Current Liabilities on the
Consolidated Balance Sheets. Management expects 46 of the remaining 74 employees
to leave by year-end 2000, and the balance of the employees by March 31, 2001.

      GPU  AR has  entered  into  contracts  to  supply  electricity  to  retail
customers through June 2002. In connection with meeting its supply  obligations,
GPU AR has  entered  into  purchase  commitments  for energy and  capacity  with
payment  obligations  totaling  approximately  $17.3 million as of September 30,
2000. GPU, Inc. has guaranteed up to $19 million of these payments.

      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.  In 1996, the DOE notified the GPU Energy companies and other
standard  contract  holders that it would 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.  In June 1997, a
consortium of electric utilities,  including GPU Nuclear,  Inc. (GPUN),  filed a
license  application  with  the NRC  seeking  permission  to  build  an  interim
above-ground disposal facility for spent nuclear fuel in Utah.

      At  September  30, 2000,  GPU has  recorded a liability of $206.9  million
(JCP&L $154.5 million; Met-Ed $34.9 million;  Penelec $17.5 million) owed to the
Nuclear Waste Fund,  related to spent nuclear fuel generated  prior to the sales
of TMI-1 and Oyster  Creek to AmerGen.  AmerGen has  assumed all  liability  for
disposal costs related to spent nuclear fuel generated following its purchase of
the plants.

      On July 26,  2000,  GPUN filed suit in the United  States  Court of Claims
seeking to recover damages as a result of the DOE's failure to commence disposal
of GPUN's spent  nuclear  fuel on January 31, 1998,  as required by the terms of
the Standard Contract between GPUN and DOE. The complaint seeks damages from the
Government in an amount to be  determined at trial.  GPUN has alleged that it is
entitled to damages  attributable  to operations at both TMI-1 and Oyster Creek.
The Government has not yet answered the complaint.  There can be no assurance as
to the outcome of this matter.

                                       59


<PAGE>



      GPU, Inc. and consolidated  affiliates have approximately 15,200 employees
worldwide,  of whom  11,150  are  employed  in the US,  3,550 are in the  United
Kingdom  (UK) and the  remaining  500 are in South  America and  Australia.  The
majority of the US workforce is employed by the GPU Energy companies (4,800) and
MYR  (5,900),  of  which  approximately  3,100  and  5,200,  respectively,   are
represented  by  unions  for  collective   bargaining   purposes.   In  the  UK,
approximately  2,300 GPU Power UK employees are  represented by unions,  and the
terms and conditions of various  bargaining  agreements  are generally  reviewed
annually,  on  April  1.  JCP&L,  Met-Ed  and  Penelec's  collective  bargaining
agreements with the  International  Brotherhood of Electrical  Workers expire on
October  31,  2002,  May 1,  2003  and May  14,  2002,  respectively.  Penelec's
collective  bargaining  agreement  with the  Utility  Workers  Union of  America
expires on June 30, 2001.

      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.    ACQUISITIONS AND DISPOSITIONS

                           MYR Group Inc. Acquisition
                           --------------------------

      In April 2000, GPU, Inc.  acquired MYR for  approximately  $217.5 million.
The fair value of the assets acquired totaled  approximately  $156.9 million and
the amount of liabilities assumed totaled approximately $99.7 million.

      MYR,  a  suburban  Chicago-based   infrastructure   construction  services
company,  is the fifth  largest  specialty  contractor in the US. MYR provides a
complete range of power line and  commercial/industrial  electrical construction
services for electric utilities,  telecommunications  providers,  commercial and
industrial  facilities  and government  agencies  across the US. MYR also builds
cellular towers for the wireless communications market.

      The acquisition was partially  financed  through the issuance of GPU, Inc.
short-term  debt and was accounted for under the purchase  method of accounting.
Although certain  preacquisition  items are still being  investigated,  the fair
value of net  assets  acquired  is  estimated  to be $57.2  million.  The  total
acquisition  cost  exceeded  this  amount  by  $160.3  million.  This  excess is
considered  goodwill  and is being  amortized on a  straight-line  basis over 40
years.

      The following is a summary of  significant  accounting  policies for MYR's
construction services business:

Revenue Recognition - MYR recognizes revenue on construction contracts using the
percentage-of-completion  accounting method determined in each case by the ratio
of  cost  incurred  to  date  on  the  contract  (excluding  uninstalled  direct
materials) to management's  estimate of the contract's total cost. Contract cost
includes all direct material, subcontract and labor costs and those

                                       60


<PAGE>


indirect costs related to contract performance,  such as supplies,  tool repairs
and  depreciation.  MYR charges  selling,  general,  and  administrative  costs,
including  indirect costs  associated  with  maintaining  district  offices,  to
expense as incurred.

      Provisions for estimated  losses on uncompleted  contracts are recorded in
the period in which such losses are  determined.  Changes in estimated  revenues
and costs are  recognized  in the periods in which such  estimates  are revised.
Significant claims are included in revenue in accordance with industry practice.

      The  asset,  "Costs  and  estimated  earnings  in  excess of  billings  on
uncompleted  contracts,"  represents  revenues  recognized  in excess of amounts
billed.  The liability,  "Billings in excess of costs and estimated  earnings on
uncompleted   contracts,"  represents  amounts  billed  in  excess  of  revenues
recognized.

Classification  of Current Assets and Current  Liabilities - The length of MYR's
contracts  vary,  with some larger  contracts  exceeding one year. In accordance
with industry practice,  MYR includes in current assets and current  liabilities
amounts realizable and payable under contracts which may extend beyond one year.


                                GPU PowerNet Sale
                                -----------------

      On June  30,  2000,  GPU,  Inc.  sold  GPU  PowerNet  to  Singapore  Power
International (SPI) for A$2.1 billion  (approximately US $1.26 billion). As part
of the sales price, SPI assumed liability for A$230 million  (US$137.8  million)
of medium term notes.  GPU  applied the net  proceeds  from the sale as follows:
A$1,288  million  (US$772  million)  was used to repay debt;  and A$579  million
(US$347 million) was placed in a trust (which is included in Special deposits on
the  Consolidated  Balance Sheets) to provide for the repayment of the remaining
medium term notes  (A$174  million/US$104  million) and  outstanding  commercial
paper (A$405  million/US$243  million) at maturity. As a result of the sale, GPU
recorded in  Operating  expenses on the  Consolidated  Statements  of Income,  a
pre-tax  loss in the quarter  ended June 30, 2000 of $372  million($295  million
after-tax,  or $2.43 per share),  including a $94 million foreign currency loss.
During the third quarter,  all $243 million of commercial  paper  outstanding at
June 30, 2000 was redeemed from trust assets.  The Medium Term Notes, which will
also be retired  using trust  assets,  mature as follows:  A$50  million  (US$27
million) in April 2001 and A$120 million (US$65 million) in October 2001.


                                Oyster Creek Sale
                                -----------------

      In 1999,  the GPU  Energy  companies  completed  the  sales  of TMI-1  and
substantially all of their fossil-fuel and hydroelectric generating stations. In
August 2000, JCP&L sold Oyster Creek to AmerGen for  approximately  $10 million.
As part of the sale, AmerGen has assumed full responsibility for decommissioning
the plant.  JCP&L has transferred  $440 million of Oyster Creek  decommissioning
trust funds to AmerGen,  of which  approximately  $114 million was paid into the
trust by JCP&L at closing.  JCP&L has agreed to fund the station's  outage costs
(up to a maximum of $88 million),  including the fuel reload,  for the refueling
outage,  which is currently  underway.  AmerGen will repay these outage costs to
JCP&L in nine equal annual

                                       61


<PAGE>


installments  without  interest,  beginning August 2001. In addition,  JCP&L has
agreed to purchase energy and capacity from Oyster Creek at fixed prices through
March 2003.  The Oyster Creek plant was written down to its fair market value in
1999,  consistent  with its sale price.  The  write-down  of the plant asset was
deferred as a regulatory asset.


                 Pending Sale of GPU International, Inc. (GPUI)
                 ----------------------------------------------

      In  October  2000,  GPU,  Inc.  agreed  to  sell  GPUI  to  Aquila  Energy
Corporation,  a  subsidiary  of UtiliCorp  United,  for $225  million.  The sale
includes GPUI's  interests in its six domestic  operating  plants and a one-half
interest in a 715 MW development stage project.

      GPU,  Inc.  expects  to  complete  the sale,  which is  subject to certain
federal and state regulatory  approvals,  by the end of the year. GPU expects to
realize an after-tax gain on the sale of between $60 million and $80 million.


3.    ACCOUNTING FOR DERIVATIVE INSTRUMENTS

      GPU's use of derivative  instruments  is intended  primarily to manage the
risk of interest rate,  foreign currency and commodity price  fluctuations.  GPU
does not intend to hold or issue derivative instruments for trading purposes.

Commodity Derivatives:
---------------------

      The GPU Energy companies use New York Mercantile  Exchange (NYMEX) futures
and  Over-the-Counter  (OTC) Options on forwards contracts to manage the risk of
fluctuations in the market price of electricity and natural gas. These contracts
qualify for hedge  accounting  treatment  under current  accounting  rules since
price  movements of the commodity  derivatives  are highly  correlated  with the
underlying  hedged  commodities and the transactions are designated as hedges at
inception.  Accordingly,  under the  deferral  method of  accounting,  gains and
losses related to commodity  derivatives  are recognized in Power  purchased and
interchanged  in  the   Consolidated   Statements  of  Income  when  the  hedged
transaction  closes or if the  commodity  derivative  is no longer  sufficiently
correlated.  Prior to  income or loss  recognition,  deferred  gains and  losses
relating  to these  transactions  are  recorded  in  Current  Assets or  Current
Liabilities in the Consolidated Balance Sheets.

Interest Rate Swap Agreements:
-----------------------------

      GPU Electric  uses  interest  rate swap  agreements  to manage the risk of
increases in variable interest rates. As of September 30, 2000, these agreements
covered  approximately  $510  million of debt,  and were  scheduled to expire on
various  dates  through  June 2006.  Differences  between the  amounts  paid and
received  under  interest rate swaps are recorded as adjustments to the interest
expense of the underlying  debt since the swaps are related to specific  assets,
liabilities  or  anticipated  transactions.  All of the  agreements  effectively
convert  variable rate debt to fixed rate debt. For the quarter ended  September
30, 2000,  the variable rate interest  expense that would have been incurred had
the swaps not been in place exceeded the fixed rate interest expense incurred in
connection with the swap agreements by approximately $345 thousand.

                                       62


<PAGE>



      In April 2000,  Penelec  issued a total of $50  million of  variable  rate
senior notes as unsecured medium-term notes. These variable rate securities were
converted to fixed rate obligations through interest rate swap agreements.

Currency Swap Agreements:
------------------------

      GPU Electric uses currency swap  agreements to manage currency risk caused
by  fluctuations in the US dollar exchange rate related to debt issued in the US
by Avon Energy  Partners  Holdings  (Avon).  These swap  agreements  effectively
convert principal and interest payments on this US dollar debt to fixed sterling
principal and interest payments,  and expire on the maturity dates of the bonds.
Interest  expense is recorded based on the fixed  sterling  interest rate. As of
September 30, 2000, these currency swap agreements  covered  (pound)527  million
(US $779 million) of debt.  Interest expense would have been (pound)9.8  million
(US $14.5 million) as compared to (pound)9.9  million (US $14.6 million) for the
quarter ended September 30, 2000 had these agreements not been in place.

Gain on Forward Foreign Exchange Contracts:
------------------------------------------

      In  connection  with  its  previously  announced  intention  to  sell  its
Australian  assets, GPU Electric entered into forward foreign exchange contracts
in order  to lock in the  then-current  A$/US$  exchange  rate on the  projected
remittance of Australian  dollar proceeds  arising from the expected sale of GPU
PowerNet and GPU GasNet. On May 24, 2000, GPU announced that it had declined all
bids submitted in connection with the sale process.  Consequently,  GPU Electric
closed out its forward foreign exchange positions, and recognized a pre-tax gain
of $4.5 million in the second quarter of 2000.

Indexed Swap Agreement:
----------------------

     In June 1998, Onondaga  Cogeneration L.P. (Onondaga),  a GPU International,
Inc. subsidiary,  and Niagara Mohawk Power Corporation (NIMO) renegotiated their
existing power  purchase  agreement and entered into a 10-year power put indexed
swap agreement.

      The power put agreement gives Onondaga the right,  but not the obligation,
to sell energy and capacity to NIMO at a proxy market price up to the  specified
contract quantity.

      Under the indexed swap  agreement,  Onondaga pays NIMO the market price of
energy and capacity and NIMO pays  Onondaga a contract  price which is fixed for
the first two years and then adjusted monthly, according to an indexing formula,
for the remaining term. As of September 30, 2000, the unamortized balance of the
swap contract was valued at $90.8 million,  and was included in Other - Deferred
Debits and Other Assets on the Consolidated  Balance Sheets.  This valuation was
derived using the discounted  estimated cash flows related to payments  expected
to be received by Onondaga.

        Effective  September 29, 2000,  Onondaga terminated its rights under the
power put thereby  terminating  all  agreements  Onondaga  had with NIMO to sell
energy and  capacity  under the  restructured  power  purchase  agreement.  As a
result,  in the third  quarter  2000,  a net pre-tax  gain of $42.8  million was
recorded in Other Income and Deductions on the Consolidated Statement of Income,
as  follows:  the  deferred  gain  of  $86.7  million  pre-tax  related  to  the
restructured  power purchase  agreement with NIMO was recognized in income;  and


                                       63

<PAGE>

the indexed  swap  agreement  was marked to market and the  associated  deferred
revenue was taken to income  resulting  in a pre-tax gain of $90.8  million.  In
addition,  as a result  of  terminating  the  power  put with  NIMO and based on
information  supplied by an outside  independent expert,  management  determined
that the Onondaga plant would not operate on an economically profitable basis in
the merchant  generation market, and that the equipment would be technologically
obsolete.  As a result,  an  impairment  test was performed  under  Statement of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets  and for  Long-Lived  Assets to Be  Disposed  Of,"  using the
undiscounted cash flows of its operations,  and it was determined that the plant
was  impaired.  Management  has written down the carrying  value of the plant by
$69.1  million  pre-tax  as of  September  30,  2000.  Also,  as a result of the
termination  of  Onondaga's  rights  under  the  power  put,  a review of firmly
committed  long-term  executory gas  transportation  contracts was performed and
determined  to be out of market,  which  resulted in a charge to income of $65.6
million  for  out-of-market  gas  transportation  costs.  Management's  analysis
utilized gas and energy pricing supplied by an independent expert.


4.    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 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 GPU  Generation,  Inc.  (sold in late
1999),  GPUN,  GPU  Telcom  and  GPUS.  For  additional   information  on  GPU's
organizational   structure  and   businesses,   see  preface  to  the  Notes  to
Consolidated Financial Statements.





                                       64


<PAGE>

<TABLE>
<CAPTION>


Business Segment Data (in thousands)
                                                                                            Income
                                                                    Interest              Before Extra-
                                                   Depreciation  Charges and  Income Tax  ordinary and                  Capital
                                        Operating     and          Preferred   Expense/   Non-recurring    Total      Expenditures
                                        Revenues   Amortization    Dividends (Benefit)(a)     Items       Assets(b) and Investments
                                        ---------  ------------  -----------  ----------  ------------ ------------  ---------------
For the nine months ended September 30, 2000
--------------------------------------------

Domestic Segments:
  Electric Utility
<S>                                     <C>          <C>          <C>          <C>         <C>           <C>          <C>
        Operations (GPU Energy)         $2,788,456   $  256,744   $  156,597   $136,585    $  208,339    $13,666,814  $  220,154
  Independ Power Prod
        (GPU International)                 61,769        7,077        1,357      4,533         7,113        338,333       4,975
  Electric Retail
        Energy Sales (GPU AR)               48,502        -             -        (1,078)       (2,196)        17,225          10
  Construction Services
        (MYR) (e)                          268,147        3,451        5,277      2,054           791        335,763       2,232
                                         ---------      -------      -------    -------       -------     ----------     -------
     Subtotal                            3,166,874      267,272      163,231    142,094       214,047     14,358,135     227,371
                                         ---------      -------      -------    -------       -------     ----------     -------

Foreign Segments:
  Electric/Gas Utility
        Operations: (GPU Electric)
   Electric Distribution
         - United Kingdom                  442,374       85,105      136,231     35,218        54,280      4,309,055     114,683
   Electric Distribution
         - Argentina                       134,870       13,096       19,640      7,834         2,805        613,343      32,270
   Electric Transmission
        - Australia (d)                     90,007       19,947       46,822    (10,921)        9,242        -             4,993
   Gas Transmission - Australia             45,929       10,534       32,410     (7,904)        5,391        869,173       2,573
  Independ Power Prod
        - S. America (GPU Power)            32,050        4,694        2,559      4,004         6,710        247,217         121
                                         ---------      -------      -------    -------       -------     ----------     -------
     Subtotal                              745,230      133,376      237,662     28,231        78,428      6,038,788     154,640
                                         ---------      -------      -------    -------       -------     ----------     -------

Corporate and Eliminations                      -         -            8,431       -          (16,430)       (63,837)        500
                                         ---------      -------      -------    -------       -------     ----------     -------

     Consolidated Total                 $3,912,104   $  400,648  $  409,324  $  170,325    $  276,045    $20,333,086  $  382,511
                                        ==========   ==========   ========== ==========    ==========    ===========  ==========

For the nine months ended September 30, 1999
--------------------------------------------

Domestic Segments:
  Electric Utility Operations
        (GPU Energy)                    $2,856,087   $  304,323   $  168,598    263,562    $  383,942    $13,224,051  $  212,436
  Independ Power Prod
        (GPU International)                 62,681        7,045          803      3,126         3,923        359,374       1,011
  Electric Retail Energy
        Sales (GPU AR)                      61,402          -            -       (3,627)       (6,783)        24,630         -
                                         ---------      -------      -------    -------       -------     ----------     -------
     Subtotal                            2,980,170      311,368      169,401    263,061       381,082     13,608,055     213,447
                                         ---------      -------      -------    -------       -------     ----------     -------

Foreign Segments:
  Electric/Gas Utility
        Operations: (GPU Electric)
   Electric Distribution -
        United Kingdom                     119,041       21,587       50,617      4,656        44,792(c)   4,687,476       4,018
   Electric Distribution -
        Argentina                           93,700        9,453       15,603        837         2,590        579,907      19,839
   Electric Transmission -
        Australia (d)                      144,678       32,348       77,994      3,728        (4,957)     1,824,309       5,199
   Gas Transmission -
        Australia                           19,373        3,744       16,719     (2,169)       (3,255)       795,527       3,392
  Independ Power Prod -
        S. America (GPU Power)              28,727        4,394        1,435      3,758         6,150        238,644      30,517
                                         ---------      -------      -------    -------       -------     ----------     -------
    Subtotal                              405,519       71,526      162,368     10,810        45,320      8,125,863      62,965
                                         ---------      -------      -------    -------       -------     ----------     -------

Corporate and Eliminations                     -            -          2,834        -         (10,336)       (36,086)        -
                                         ---------      -------      -------    -------       -------     ----------     -------

     Consolidated Total                 $3,385,689   $  382,894   $  334,603 $  273,871    $  416,066    $21,697,832  $  276,412
                                        ==========   ==========   ========== ==========    ==========    ===========  ==========
</TABLE>

(a)    Represents income taxes on income before  extraordinary and non-recurring
       items.
(b)    The comparative 1999 Total Assets is as of December 31, 1999.
(c)    Includes  equity in net  income of  investee  accounted  for under the
       equity method of $74 million,  for the period prior to the  consolidation
       of GPU Power UK.
(d)    Represents GPU PowerNet, which was sold in June 2000.
(e)    MYR was acquired in April 2000.

                                       65


<PAGE>


5.    COMPREHENSIVE INCOME

      For the nine  months  ended  September  30,  2000 and 1999,  comprehensive
income is summarized below.
                                                           (in thousands)
                                                             Nine months
                                                         Ended September 30,
                                                         -------------------
GPU, Inc. and Subsidiary Companies                         2000        1999
----------------------------------                         ----        -----

Net income                                             $  23,695    $ 385,528
                                                        --------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized loss on investments                  (11,785)      (5,291)
     Foreign currency translation                        (41,502)      23,375
                                                        --------     --------
       Total other comprehensive income/(loss)           (53,287)      18,084
                                                        --------     --------
Comprehensive income/(loss)                            $ (29,592)   $ 403,612
                                                        =========    ========

JCP&L
-----

Net income                                             $ 182,797    $ 150,745
                                                        --------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gain on investments                      -            -
                                                        --------     --------
Comprehensive income                                   $ 182,797    $ 150,745
                                                        ========     =========

Met-Ed
------

Net income                                             $  31,369    $  93,596
                                                        --------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gain/(loss) on investments           (21,233)       2,881
                                                        --------     --------
Comprehensive income                                   $  10,136    $  96,477
                                                        ========     ========

Penelec
-------

Net income                                             $  17,472    $ 107,950
                                                        --------     ---------
Other comprehensive income/(loss), net of tax:
     Net unrealized gain/(loss) on investments           (10,609)       1,373
                                                        --------     --------
Comprehensive income                                   $   6,863    $ 109,323
                                                        ========     ========


      The net unrealized  loss on  investments,  reflected  above,  for the nine
months ended  September  30, 2000,  is due to the  reclassification  of previous
unrealized  gains  totaling $31.8 million  (Met-Ed $21.2 million;  Penelec $10.6
million),  from Accumulated other comprehensive income to Regulatory assets, net
on the Consolidated  Balance Sheets.  See Nuclear Plant Retirement Costs section
of Note 1, COMMITMENTS & CONTINGENCIES.



                                       66


<PAGE>


6.    COMPANY-OBLIGATED TRUST PREFERRED SECURITIES

      In 1999, Met-Ed Capital Trust, a wholly-owned subsidiary of Met-Ed, issued
$100 million of trust preferred  securities (Met-Ed Trust Preferred  Securities)
at 7.35%,  due 2039.  The sole  assets  of  Met-Ed  Capital  Trust are the 7.35%
Cumulative  Preferred  Securities of Met-Ed Capital II, L.P. (Met-Ed Partnership
Preferred Securities).  Each Met-Ed Trust Preferred Security represents a Met-Ed
Partnership  Security.  Met-Ed Capital II, L.P. is a wholly-owned  subsidiary of
Met-Ed  and the  sponsor  of Met-Ed  Capital  Trust.  The sole  assets of Met-Ed
Capital II, L.P. are Met-Ed's 7.35% Subordinated Debentures, Series A, due 2039,
which have an aggregate principal amount of $103.1 million. Met-Ed has fully and
unconditionally  guaranteed the Met-Ed Partnership  Preferred  Securities,  and,
therefore, the Met-Ed Trust Preferred Securities.

      In 1999,  Penelec  Capital Trust,  a  wholly-owned  subsidiary of Penelec,
issued $100  million of trust  preferred  securities  (Penelec  Trust  Preferred
Securities) at 7.34%, due 2039. The sole assets of Penelec Capital Trust are the
7.34%  Cumulative  Preferred  Securities  of Penelec  Capital II, L.P.  (Penelec
Partnership  Preferred  Securities).   Each  Penelec  Trust  Preferred  Security
represents  a Penelec  Partnership  Security.  Penelec  Capital  II,  L.P.  is a
wholly-owned subsidiary of Penelec and the sponsor of Penelec Capital Trust. The
sole  assets of Penelec  Capital  II,  L.P.  are  Penelec's  7.34%  Subordinated
Debentures,  Series A, due 2039,  which have an  aggregate  principal  amount of
$103.1  million.  Penelec has fully and  unconditionally  guaranteed the Penelec
Partnership  Preferred Securities,  and, therefore,  the Penelec Trust Preferred
Securities.





                                       67


<PAGE>




                                     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 11, 2000, under Item 5 (Other Events)
                 Dated October 6, 2000, under Item 5 (Other Events)

                 Jersey Central Power & Light Company:
                 ------------------------------------

                 Dated August 11, 2000, under Item 5 (Other Events)

                 Metropolitan Edison Company:
                 ---------------------------

                 Dated August 11, 2000, under Item 5 (Other Events)

                 Pennsylvania Electric Company:
                 -----------------------------

                 Dated August 11, 2000, under Item 5 (Other Events)



                                       68


<PAGE>




                                   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 9, 2000                 By:  /s/ B. L. Levy
                                    -----------------------------------
                                    B. L. Levy, Senior Vice President and
                                    Chief Financial Officer



November 9, 2000                 By:  /s/ P. E. Maricondo
                                    -----------------------------------
                                    P. E. Maricondo, Vice President
                                    and Comptroller
                                    (principal accounting officer)



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



November 9, 2000                 By:  /s/ M. J. Chesser
                                    -----------------------------------
                                    M. J. Chesser, President and
                                    Chief Executive Officer


November 9, 2000                 By:  /s/ M. P. O'Flynn
                                    -----------------------------------
                                    M. P. O'Flynn, Vice President- Finance
                                    and Rates & Comptroller
                                    (principal accounting officer)



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