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 March 31, 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 May 1, 2000, was as follows:

<TABLE>
<CAPTION>

                                                                           Shares

Registrant                             Title                              Outstanding
-----------------------------------    -----------------------------      -----------
<S>                                                  <C>                  <C>
GPU, Inc.                              Common Stock, $2.50 par value      121,323,533
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

</TABLE>

<PAGE>

                       GPU, Inc. and Subsidiary Companies

                          Quarterly Report on Form 10-Q

                                 March 31, 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                                                22
            Statements of Income                                          24
            Statements of Cash Flows                                      25

          Jersey Central Power & Light Company

          ------------------------------------
            Balance Sheets                                                26
            Statements of Income                                          28
            Statements of Cash Flows                                      29

          Metropolitan Edison Company

          ---------------------------
            Balance Sheets                                                30
            Statements of Income                                          32
            Statements of Cash Flows                                      33

          Pennsylvania Electric Company

          -----------------------------
            Balance Sheets                                                34
            Statements of Income                                          36
            Statements of Cash Flows                                      37

      Combined Notes to Consolidated Financial Statements                 38


PART II - Other Information                                               58

Signatures                                                                59
                       ---------------------------------

      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.

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

<PAGE>

GPU, Inc. and Subsidiary Companies

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

      GPU, Inc. owns all the outstanding common stock of three domestic electric
utilities -- Jersey Central Power & Light Company (JCP&L),  Metropolitan  Edison
Company  (Met-Ed) and  Pennsylvania  Electric  Company  (Penelec).  The customer
service function, transmission and distribution operations and the operations of
the remaining non-nuclear  generating facilities of these electric utilities are
conducting  business  under  the name GPU  Energy.  JCP&L,  Met-Ed  and  Penelec
considered  together are referred to as the "GPU Energy  companies." The nuclear
generation  operations of GPU Energy are conducted by GPU Nuclear,  Inc. (GPUN).
GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and
fund the acquisition of electric and gas transmission  and distribution  systems
in foreign countries,  and are referred to as "GPU Electric." GPU International,
Inc.  and GPU  Power,  Inc.  and their  subsidiaries  develop,  own and  operate
generation  facilities in the United  States (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  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:
--------------------------------

(on a diluted basis)                         Three Months Ended
                                                   March 31,
                                         ---------------------------
                                          2000     1999     Change
                                         -----    -----     ------
Operations:
   GPU Energy companies *              $ 0.79     $ 0.94    $(0.15)
   GPU Electric                          0.29       0.29       -
   GPUI Group                            0.03       0.04     (0.01)
   GPU AR                                0.01       0.01       -
   GPU, Inc. (Corporate)                (0.04)     (0.01)    (0.03)
                                        -----      -----     -----
     Total operations                    1.08       1.27     (0.19)
Non-recurring items:
   GPU Energy companies                     -       0.22     (0.22)
                                        -----      -----     -----
     Total                             $ 1.08     $ 1.49    $(0.41)
                                        =====      =====     =====

*  Includes GPU Telcom

      GPU's earnings for the first quarter 2000 were $131 million,  or $1.08 per
share,  compared with earnings of $190.7  million,  or $1.49 per share,  for the
same period in 1999. Excluding the non-recurring increase in March 1999 of $27.8
million  after-tax,  or $0.22 per share, for the portion of the gain on the sale
of the Homer City Generating Station related to wholesale  operations,  earnings
decreased $0.19 per share. This decrease was primarily due to lower revenues for
the GPU Energy  companies  as a result of the  Pennsylvania  and New Jersey rate
restructurings.  Specifically,  revenues  decreased  due to lower energy  supply
sales  resulting  from more  customers  buying  their energy  requirements  from
alternate  suppliers in Pennsylvania  and to a lesser extent in New Jersey,  and
lower rates charged to customers in New Jersey.

                                        1

<PAGE>

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

      Operating  revenues for the first quarter 2000 increased $107.7 million to
$1.2  billion,  as compared to the first  quarter  1999.  The  components of the
changes are as follows:

                                               2000 vs. 1999 (in millions)
                                               ---------------------------
                                                   Three Months Ended
                                                        March 31,
                                                    ------------------
GPU Energy companies:
  Kilowatt-hour (KWH) revenues                          $(192.6)
  Energy and restructuring-related
    revenues                                               64.2
  Competitive transition charge
    (CTC) revenues                                         13.3
  GPU Telcom revenues                                      (0.1)
  Other revenues                                           (1.2)
                                                          -----
    Total GPU Energy companies                           (116.4)
GPU Electric                                              210.6
GPUI Group                                                  6.6
GPU AR                                                      6.9
                                                          -----
    Total increase                                       $107.7
                                                          =====

GPU Energy companies

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

      The decrease for the three months ended March 31, 2000 was  primarily  due
to lower generation-related  revenues of approximately $89.5 million as a result
of more  Pennsylvania and New Jersey customers  choosing another electric energy
supplier,  and lower rates  charged to  customers  in New Jersey  resulting in a
decrease in revenues of approximately  $24.6 million.  Also  contributing to the
decrease  is the fact that  certain  JCP&L  revenues  related to  stranded  cost
recovery  are now  included  under  energy and  restructuring-related  revenues,
effective August 1, 1999.

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

      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 months ended March 31, 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 1999,  JCP&L changed its estimate for unbilled
revenue,  which  resulted in the  recording of  additional  revenues,  partially
offsetting the increase in the current period.

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

      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.

                                        2

<PAGE>

GPU Electric

      The  increase in revenues  for the three  months  ended March 31, 2000 was
primarily  due to the  inclusion  of  revenues  from:  Midlands  (of  which  the
remaining 50% was acquired in July 1999),  $151 million;  Empresa  Distribuidora
Electrica Regional,  S.A. (Emdersa)  (acquired in March 1999), $30 million;  and
GPU GasNet (acquired in June 1999), $11.7 million.

GPUI Group

      The  increase for the three months ended March 31, 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 began operations in June 1999.

GPU AR

      The increase  for the three months ended March 31, 2000 was due  primarily
to more KWH sales than in the same  period of 1999 and a slight  increase in the
average price per KWH.

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

      Operating  income for the first  quarter 2000  increased  $41.7 million to
$340.3  million,  as compared to the first quarter 1999.  The  components of the
changes are as follows:

                                 2000 vs. 1999 (in millions)
                                 ---------------------------
                                    Three Months Ended
                                           March 31,
                                ---------------------------

GPU Energy companies                      $(57.0)
GPU Electric                               102.5
GPUI Group                                  (2.0)
GPU AR                                      (0.1)
GPU, Inc.                                   (1.7)
                                           -----
    Total increase                        $ 41.7
                                           =====

GPU Energy companies

      The decrease 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  since the sale of GPU  Energy's
generating  assets.  Partially  offsetting this decrease was lower operation and
maintenance (O&M) expenses primarily due to the sale of GPU Energy's  generating
assets in 1999, lower depreciation  expense due to the sale of generating assets
and the effect of the  impairment  write-down of the Oyster Creek (Oyster Creek)
nuclear generating station, which was also recorded in 1999.

GPU Electric

      The increase was due primarily to the  consolidation of Midlands since the
acquisition of the remaining 50% ownership in 1999, and the inclusion of Emdersa
and GPU GasNet.  Prior to its purchase of the  remaining  50%, GPU accounted for
its investment in Midlands under the equity method and included

                                        3

<PAGE>

its share of Midlands' income in other income on the Consolidated  Statements of
Income.

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

      Other income and  deductions  for the first quarter 2000  decreased  $79.3
million to $23.1 million,  as compared to the first quarter 1999. The components
of the changes are as follows:

                                  2000 vs. 1999 (in millions)
                                 ---------------------------
                                    Three Months Ended
                                          March 31,
                                 ---------------------------


GPU Energy companies                      $(34.5)
GPU Electric                               (43.4)
GPUI Group                                  (1.5)
GPU AR                                       0.1
GPU, Inc.                                      -
                                           -----
    Total decrease                        $(79.3)
                                           =====

GPU Energy companies

      The decrease for the three months ended March 31, 2000 was  primarily  due
to the absence,  in 2000, of the gain of $38.3 million  pre-tax,  as a result of
the sale of Penelec's Homer City Station.

GPU Electric

      The decrease  for the three months ended March 31, 2000 was due  primarily
to the  consolidation  of Midlands  since the  acquisition  of the remaining 50%
ownership in 1999.  Prior to that,  the Midlands  investment  was  accounted for
under the equity  method and GPU's  share of  Midlands'  income was  included in
other income on the Consolidated Statements of Income.

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

      Interest  charges  and  preferred  dividends  for the first  quarter  2000
increased $49.7 million to $143 million,  as compared to the first quarter 1999.
The components of the changes are as follows:

                                 2000 vs. 1999 (in millions)
                                 ---------------------------
                                    Three Months Ended
                                          March 31,
                                 ---------------------------

GPU Energy companies                      $ (8.8)
GPU Electric                                56.7
GPUI Group                                   0.3
GPU, Inc.                                    1.5
                                           -----
    Total increase                        $ 49.7
                                           =====

GPU Energy companies

      The  decrease  was  primarily  due to the  following:  in 1999  Met-Ed and
Penelec redeemed all their  company-obligated  mandatorily  redeemable preferred
securities and cumulative preferred stock (the redemption of preferred stock

                                        4

<PAGE>

resulted in losses of $0.5 million and $0.7  million,  respectively,  for Met-Ed
and Penelec);  and Penelec redeemed $600 million of first mortgage bonds (FMBs).
Partially  offsetting these decreases were increased interest expense associated
with  Penelec's  issuance  of $350  million  of  senior  notes in 1999;  and the
issuance  of $100  million  each of trust  preferred  securities  by Met-Ed  and
Penelec, also in 1999.

GPU Electric

      The  increase  was  primarily  due to  higher  debt  levels  from the 1999
acquisitions  of Midlands (the  remaining  50%),  Emdersa and GPU GasNet,  which
resulted in additional interest expense of $46.9 million.

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

      JCP&L's  earnings for the first quarter 2000 were $43.1 million,  compared
to first quarter 1999 earnings of $51.3 million.  The decrease was primarily due
to lower  revenues as a result of lower rates  charged to  customers  due to 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 was recorded in 1999.

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

      Operating  revenues for the first quarter 2000 decreased  $64.2 million to
$452.7  million,  as compared to the first quarter 1999.  The  components of the
changes are as follows:

                                 2000 vs. 1999 (in millions)
                                 ---------------------------
                                    Three Months Ended
                                          March 31,
                                 ---------------------------


KWH revenues                              $(125.4)
Energy and restructuring-related
  revenues                                   64.2
Other revenues                               (3.0)
                                            -----
    Decrease in revenues                  $( 64.2)
                                            =====

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

      The decrease 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 $24.6 million and the effect of New Jersey
customers  choosing another electric energy supplier  resulting in a decrease of
revenues of approximately $20 million.

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

      The increase 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 1999, JCP&L changed its estimate for unbilled revenue, which resulted
in the recording of additional  revenues,  partially  offsetting the increase in
the current period. Changes in energy and restructuring-related

                                        5

<PAGE>

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

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

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

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

      Operating income for the first quarter 2000 decreased $17.1 million to $96
million,  as compared to the first quarter  1999.  The decrease was due to lower
revenues as  discussed  above.  Partially  offsetting  this  decrease  was lower
depreciation  expense due to the effect of the sale of generating assets and the
impairment write-down of Oyster Creek in 1999.

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

      Other income and  deductions  for the first  quarter 2000  increased  $2.6
million to $5.6  million,  as compared to the first  quarter  1999.  This slight
increase was due to a number of immaterial factors.

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

      Met-Ed's earnings for the first quarter 2000 were $26.5 million,  compared
to first  quarter 1999 earnings of $32.2  million.  The decrease in earnings was
primarily due to lower revenues as a result of Pennsylvania rate  restructuring,
and higher energy costs, partially offset by lower O&M expense.

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

      Operating  revenues for the first quarter 2000 decreased  $26.1 million to
$203.1  million,  as compared to the first quarter 1999.  The  components of the
changes are as follows:

                                 2000 vs. 1999 (in millions)
                                 ---------------------------
                                    Three Months Ended
                                          March 31,
                                 ---------------------------

KWH revenues                              $(36.7)
CTC revenues                                 9.4
Other revenues                               1.2
                                           -----
    Decrease in revenues                  $(26.1)
                                           =====

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

      The decrease was  primarily  due to lower  generation-related  revenues of
approximately $29.1 million as a result of more Pennsylvania  customers choosing
another electric energy supplier.

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.

                                        6

<PAGE>

Other revenues

--------------
      The increase was due  primarily  to increased  transmission  revenues as a
result of customer shopping in Pennsylvania.

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

      Operating  income for the first  quarter 2000  decreased  $20.9 million to
$55.3 million, as compared to the first quarter 1999. The decrease was primarily
due to lower  revenues as  discussed  above and higher  energy  costs due to the
purchase  of more  energy  since  the sale of GPU  Energy's  generating  assets.
Partially  offsetting  the  decrease  was lower O&M  expense  due to the sale of
generating assets.

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

      Interest  charges  and  preferred  dividends  for the first  quarter  2000
decreased $1.1 million to $14.1 million,  as compared to the first quarter 1999.
The   decrease   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).  Partially offsetting the decrease was increased interest expense
associated  with the issuance of $100 million of trust  preferred  securities in
1999.

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

      Penelec's earnings for the first quarter 2000 were $26.9 million, compared
to first quarter 1999 earnings of $64.6 million. Excluding the net gain of $27.8
million  after-tax  for the sale of  Penelec's  Homer  City  Station  related to
wholesale  operations,  earnings  for 1999 would have been  $36.8  million.  The
decrease  in  earnings on this basis was  primarily  due to lower  revenues as a
result of Pennsylvania  rate  restructuring  and higher energy costs,  partially
offset by lower O&M and depreciation expense.

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

      Operating  revenues for the first quarter 2000 decreased  $26.1 million to
$220.1  million,  compared to the first  quarter  1999.  The  components  of the
changes are as follows:

                                 2000 vs. 1999 (in millions)
                                 ---------------------------
                                   Three Months Ended
                                          March 31,
                                ---------------------------

KWH revenues                              $(29.7)
CTC revenues                                 3.9
Other revenues                              (0.3)
                                           -----
    Decrease in revenues                  $(26.1)
                                           =====

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

      The decrease was  primarily  due to lower  generation-related  revenues of
approximately $40.3 million as a result of more Pennsylvania  customers choosing
another electric energy  supplier.  This decrease was partially offset by higher
sales to other utilities.

                                        7

<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.

OPERATING INCOME:
----------------
      Operating income for the first quarter 2000 decreased $19 million to $53.6
million,  as compared to the first quarter 1999.  The decrease was primarily due
to lower revenues discussed above and higher energy costs due to the purchase of
more energy since the sale of GPU Energy's  generating  assets. The decrease was
partially offset by lower O&M and depreciation expense mainly due to the sale of
generating assets.

OTHER INCOME AND DEDUCTIONS:
----------------------------
      Other income and  deductions  for the first quarter 2000  decreased  $38.1
million to $0.8 million, as compared to the first quarter 1999. The decrease was
due to the absence,  in 2000, of the gain of $38.3 million pre-tax,  as a result
of the sale of Penelec's Homer City Station.

INTEREST CHARGES AND PREFERRED DIVIDENDS:
-----------------------------------------
      Interest  charges  and  preferred  dividends  for the first  quarter  2000
decreased  $7.7 million to $9.1 million,  as compared to the first quarter 1999.
The  decrease  was   primarily   due  to  the   redemption   of  all   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),  and the  redemption  of $600  million  of  FMBs  in  1999.  Partially
offsetting these decreases were increased  interest expense  associated with the
issuance  of $350  million of senior  notes in 1999;  and the  issuance  of $100
million of trust preferred securities, also in 1999.

                          INVESTMENTS IN FUCOs AND EWGs
                          ---------------------------

      GPU, Inc. has Securities and Exchange  Commission  (SEC)  authorization to
finance  investments in foreign utility  companies  (FUCOs) and exempt wholesale
generators  (EWGs)  up to an  aggregate  amount  equal to 100% of GPU's  average
consolidated  retained  earnings,  or approximately $2.5 billion as of March 31,
2000.  At March 31, 2000,  GPU,  Inc.  has  remaining  authorization  to finance
approximately  $265 million of additional  investments  in FUCOs and EWGs.  GPU,
Inc.'s  investments in FUCOs and EWGs are made through GPU Electric and the GPUI
Group.

                                  GPU ELECTRIC
                                  -------------

      GPU Electric has ownership  interests in electric and gas transmission and
distribution  businesses  in  England,  Australia  and  Argentina.  Through  its
ownership in Midlands, 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

                                        8

<PAGE>

capacity.  At March 31, 2000, GPU, Inc.'s  aggregate  investment in GPU Electric
was $1.06  billion.  GPU, Inc. has also  guaranteed  up to an  additional  $1.05
billion of outstanding GPU Electric obligations.

    For a discussion of the potential sale of GPU's Australian subsidiaries, GPU
PowerNet and GPU GasNet,  see the  Financing  section of  Liquidity  and Capital
Resources below.

                                   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  March  31,  2000,  GPU,  Inc.'s
aggregate  investment in the GPUI Group was $250.2  million.  GPU, Inc. has also
guaranteed up to an additional $29.9 million of GPUI Group obligations.

                                       MYR
                                       ---

      In April 2000, following the receipt of SEC approval,  GPU, Inc. completed
its  acquisition  of MYR, a utility  infrastructure  construction  company,  for
approximately   $215  million.   For   additional   information,   see  Note  2,
Acquisitions.

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

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

GPU Energy companies

      The GPU Energy companies'  capital spending for the first quarter 2000 was
$54 million (JCP&L $24 million; Met-Ed $12 million; Penelec $11 million;

                                        9

<PAGE>

Other $7  million),  and was used  primarily  to  expand  and  improve  existing
transmission and distribution (T&D) facilities and for new customer connections.
For 2000,  capital  expenditures  are  estimated to be $349 million  (JCP&L $178
million;  Met-Ed $57 million;  Penelec $82 million;  Other $32  million),  which
management  estimates a substantial portion will be satisfied through internally
generated funds.

GPU Electric

      GPU  Electric's  capital  spending  for the first  quarter  2000 was $53.2
million,  and was used primarily to fund on-going  network  capital  replacement
schedules, network improvements and new connections in GPU PowerNet, Emdersa and
Midlands'  facilities.  For 2000, capital  expenditures are estimated to be $213
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 the
first quarter 2000,  the GPUI Group made an additional  investment of $4 million
in Ballard Generation System, Inc., representing its final  investment/milestone
payment.

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 March 31,
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. has 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  additional 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 March 31, 2000,  SSB
has  purchased 1.8 million  shares of GPU,  Inc.  common stock for $45.3 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 bank loans at
negotiated market rates.

      GPU,  Inc. and the GPU Energy  companies  have  available  $450 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 $261 million,  $150 million and $150
million, respectively, of short-term debt outstanding at any one time.

                                       10

<PAGE>

     GPU,  Inc.  also has SEC  approval to issue and sell up to $300  million of
unsecured debentures through 2001.

GPU Energy companies

      Met-Ed and Penelec  currently  have  regulatory  approval to issue through
December 31, 2000 senior notes and preferred  securities in aggregate amounts of
$150 million and $225 million, respectively, of which up to $25 million for each
company may consist of preferred  securities.  JCP&L has regulatory  approval to
issue  through  December 31, 2000 senior notes in the  aggregate  amount of $300
million.  Met-Ed and JCP&L intend to issue secured senior notes  (collateralized
by 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 bond indentures  include  provisions that limit the
amount of FMBs the companies  may issue.  JCP&L and Met-Ed's  interest  coverage
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  dividend  coverage  ratio is
currently in excess of these charter restrictions.

      In August 1999, JCP&L filed a petition with the New Jersey Board of Public
Utilities  (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 requests
to securitize the up-front  decommissioning and outage payments it has agreed to
make under the Oyster Creek sale agreement.

      In April  2000,  Penelec  issued  two  tranches  totaling  $50  million of
variable  rate senior  notes.  These senior  notes were  converted to fixed rate
obligations  through  interest  rate swap  agreements.  The $25  million  2-year
tranche and the $25 million  2.5-year  tranche were swapped into fixed  interest
rates of 7.12% and 7.185%, respectively.

      Based on March 31,  2000  financial  statements,  Met-Ed and  Penelec  had
retained  earnings  available to pay common stock dividends of $26.7 million and
$31.1  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

                                       11

<PAGE>

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 March  31,  2000,  the
common  equity ratios of Met-Ed,  Penelec and GPU,  Inc.  were 43.4%,  40.7% and
30.9%, respectively.

GPU Electric

     On May 5, 2000,  final bids for the purchase of GPU PowerNet and GPU GasNet
(the  Australian  companies)  were received.  GPU had  previously  announced its
intention to sell all, or at least 50%, of the Australian  companies,  for which
it paid  approximately $1.9 billion (GPU PowerNet) and $675 million (GPU GasNet)
in 1997 and 1999,  respectively.  GPU is continuing  to evaluate  these bids and
negotiate with bidders. In the event the sale is consummated, GPU estimates that
it will receive less than book value for the assets, in an amount which would be
material,  in addition to recognizing a foreign  exchange loss of  approximately
$132 million,  pre-tax.  GPU also expects to seek  additional  funds in order to
repay loans in  connection  with the  acquisition  of the  Australian  companies
either through new financings or other asset sales. If these efforts to complete
the sale are  unsuccessful,  GPU intends to pursue other financing  arrangements
and/or asset sales so that it may maintain its debt ratios  consistent  with the
requirements of its various loan agreements.

     On June 2,  2000,  approximately  $225  million  of GPU  GasNet  bank  debt
matures.  GPU GasNet has a commitment  from a bank for a  three-month  extension
during  which time it will seek  longer  term  refinancing  of the debt.  GPU is
unable to evaluate what effect not selling the Australian  companies  would have
on the terms of those companies' future financing requirements.

     In addition,  GPU had planned to use the net cash proceeds  raised from the
sales of the Australian  companies and from JCP&L's planned asset securitization
financing  to  repay  short-term  debt  incurred  in  connection  with  domestic
acquisitions and investments made during 2000. An inability to complete the sale
of the Australian  companies,  or a sale for substantially  less than their book
value,  coupled with a delay in the  securitization  financing (due to a pending
challenge  to  another  utility's  NJBPU  restructuring  order),  will delay the
repayment  of this  outstanding  debt and, at least in the short term,  restrict
GPU's access to funds for its acquisition program.

      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 established to fund GPU Electric  acquisitions.
GPU, Inc. has guaranteed GPU Capital's  obligations under this program. At March
31, 2000, $778 million was outstanding  under the commercial  paper program,  of
which $375 million is included in  long-term  debt on the  Consolidated  Balance
Sheets since it is management's  intent to reissue this amount of the commercial
paper on a long-term basis.

      GPU Australia  Holdings,  Inc. has $270 million available under its senior
revolving  credit  facility  expiring  in  November  2002.  This  facility,   in
combination with other GPU, Inc. credit facilities, serves as credit support for
GPU Australia  Holdings' $350 million  commercial  paper program.  GPU, Inc. has
guaranteed GPU Australia Holdings' obligations under this program. GPU Australia
Holdings has $185 million  outstanding  under its commercial paper program as of
March 31, 2000.

      Austran Holdings,  Inc. (Austran),  a wholly-owned  indirect subsidiary of
GPU Electric,  has a A$500 million  (approximately  US $303 million)  commercial
paper  program to  refinance  the  maturing  portion of the senior  debt  credit
facility  used to finance the 1997 GPU  PowerNet  acquisition.  GPU PowerNet has
guaranteed  Austran's  obligations  under this  program.  As of March 31,  2000,
Austran had  outstanding  approximately  A$423  million  (approximately  US $257
million) under this program.

      Midlands  maintains  a British  Pound 200 million  (approximately  US $318
million)  syndicated  revolving  credit facility with a bank for working capital
purposes, which matures in May 2001. At March 31, 2000, British Pound 80 million
(approximately US $128 million) was outstanding under this facility.

GPUI Group

      GPU  International,  Inc. has a revolving credit  agreement  providing for
borrowings  and/or letters of credit through  December 2000 of up to $30 million
outstanding  at any one time.  GPU,  Inc.  has  guaranteed  GPU  International's
obligations under this agreement. At March 31, 2000, no borrowings or letters of
credit were outstanding under this facility.

MYR

     In April 2000,  GPU,  Inc.  completed  its  acquisition  of MYR,  which was
partially financed through the issuance of GPU, Inc. short-term debt.







                                       12

<PAGE>

Capitalization

      On April 6, 2000, the GPU Board of Directors  raised the quarterly  common
stock  dividend  of GPU,  Inc.  by 2.8%.  On an  annualized  basis,  the current
dividend is $2.18 per share.

                    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 since these  increased costs may not be recoverable in an environment
where there are capped rates.  Since the GPU Energy  companies  have, to a large
extent,  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  through  implementation of an energy risk
management program, 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) by increasing operating efficiency and by making investments of
$40 million to $50 million to improve the  reliability  of its domestic  utility
operations.  The GPU Energy companies are targeting reductions of $30 million in
2000 and an additional $40 million in 2001.  Cost reductions will be achieved by
using  new tools  from its  enterprise  resource  planning  system to  eliminate
significant  amounts  of  operational  overhead  expense  and by  improving  the
productivity  of all its  operations.  Midlands 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, GPU plans to raise
at least $500 million in cash from its current investment  portfolio by reducing
GPU's ownership in non-core and under-performing assets.

      In March 2000, GPU, Inc.  announced its  participation  in America's Fiber
Network LLC (AFN),  of which GPU, Inc.  will own 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 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

                                       13

<PAGE>

institutions,  among others. 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 largely 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 an energy risk management  program,  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 and an additional 619 MW of nuclear  generation
from  Oyster  Creek,  the  sale  of  which  is  pending  (see  Generation  Asset
Divestiture in this section).  The GPU Energy companies also have contracts with
non-utility  generation (NUG) facilities totaling 1,612 MW (JCP&L 928 MW; Met-Ed
273 MW; Penelec 411 MW) and JCP&L has agreements with other utilities to provide
for up to 400 MW of capacity and related energy.  The GPU Energy  companies have
agreed to  purchase  all of the  capacity  and energy from the Three Mile Island
Unit 1 (TMI-1) nuclear  generating station (in which they sold to AmerGen Energy
Company LLC (AmerGen) in 1999)  through  December 31, 2001 and from Oyster Creek
(following  its sale)  through  March 31,  2003.  In  addition,  the GPU  Energy
companies  have the right to call the capacity of the Homer City Station  (which
Penelec sold its 50% interest to a subsidiary of Edison  Mission Energy in 1999)
(942 MW) through May 31, 2001 and the capacity of the  generating  stations sold
to Sithe  Energies  (4,117 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 expected  high energy
price volatility and reliance on spot market purchases during other periods.

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

      Under the PaPUC  Restructuring  Orders,  Met-Ed and Penelec customers have
been permitted to shop for their generation  supplier since January 1, 1999. 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.

                                       14

<PAGE>

      In 1999, Met-Ed and Penelec filed a CDS petition with the PaPUC requesting
an auction by the  companies  of 20% of their  retail  customers,  for one year,
effective June 1, 2000.  Subsequently,  Met-Ed and Penelec  issued  requests for
bids to  provide  competitive  bidding  for CDS to the 20% of  retail  customers
beginning  in June 2000,  as  required  by the PaPUC  Restructuring  Orders.  In
February  2000,  GPU Energy  announced that no bids were received in response to
its offer and, as a result,  it would be  increasing  its forward  purchasing of
electric power to accommodate the 20% of customers for whom it will now continue
to be the default  supplier.  In March 2000,  the PaPUC adopted a proposed Order
granting  Met-Ed's and  Penelec's  request for  dismissal of their  previous CDS
petition.  The PaPUC has directed Met-Ed and Penelec to initiate a collaborative
process  starting  in June  2000  with  all  interested  parties  from  the 1998
Restructuring Orders, including the PaPUC, to address the companies' PLR risks.

     The GPU  Energy  companies  estimate  that the  above-mentioned  additional
energy  purchases  for the 20% of customers  for whom it will continue to be the
default  supplier will reduce its 2000 earnings per share by $0.04 to $0.08, but
expect to mitigate this impact through additional common stock  repurchases.  In
addition,  management  estimates that  customers  requiring  between  200-500 MW
(which would reduce 2000 earnings per share by approximately  $0.04 to $0.10) of
capacity  will be returning  to the GPU Energy  companies  from their  alternate
suppliers this summer.  The GPU Energy companies are currently in the process of
developing  incentive  programs to be offered to shopping  customers in order to
reduce their supplier of last resort  exposure.  There can be no assurance as to
the success of these incentive programs.

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 nearly 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  electricity  supply profile generally  reflects a
shortage of economic  on-peak  electricity,  resulting  in a net short  position
(load in excess of supply). Consequently, 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



                                       15

<PAGE>

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 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  deviations in weather,  which affects  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
      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 its 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.

                                       16

<PAGE>

-     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 October  1999,  JCP&L agreed to sell Oyster  Creek to AmerGen,  a joint
venture of PECO Energy and British Energy, for $10 million. As part of the terms
of the transaction,  AmerGen will assume full responsibility for decommissioning
the plant. JCP&L will transfer at closing $430 million of decommissioning  trust
funds and will fund the station's outage cost, including the fuel reload for the
next refueling outage  scheduled for the Fall of 2000.  AmerGen will repay these
outage  costs  (estimated  at  $88  million)  to  JCP&L  in  nine  equal  annual
installments without interest, beginning one year after the closing. The sale is
subject to various conditions  including the receipt of satisfactory federal and
state  regulatory  approvals  and  favorable  rulings  by the  Internal  Revenue
Service.

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 pending 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 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).

Pennsylvania Restructuring

      In 1996,  Pennsylvania adopted comprehensive  legislation (Customer Choice
Act) which  provides  for the  restructuring  of that state's  electric  utility
industry.  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.  A
final determination of stranded cost recovery will be provided for in a Phase II
proceeding,  which  began in early  2000.  An  appeal by one  intervenor  in the
restructuring  proceedings  is pending  before the  Pennsylvania  Supreme Court.
There can be no assurance as to the outcome of this appeal.

                                       17

<PAGE>

      In 1999,  Penelec  deposited a portion of the proceeds from its generation
asset  sale into a NUG  Trust,  which has a  balance  at March 31,  2000 of $267
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

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

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

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

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

Nonutility Generation Agreements
--------------------------------

      Pursuant to the mandates of PURPA and state regulatory directives, the GPU
Energy companies have been required to enter into power purchase agreements with
NUGs for the purchase of energy and capacity for terms of up to 20 years.

     The NJBPU  Summary  Order and PaPUC  Restructuring  Orders  provide the GPU
Energy  companies  assurance  of full  recovery  of their NUG  costs  (including
above-market NUG costs and certain buyout costs).  The GPU Energy companies have
recorded,  on a present value basis,  a total  liability of $3.3 billion  (JCP&L
$1.7  billion;  Met-Ed $0.7 billion;  Penelec $0.9 billion) on the  Consolidated
Balance Sheets for above-market NUG costs, and JCP&L has recorded a liability of
$48  million,  on a net present  value basis,  for  above-market  utility  power
purchase agreements, both amounts of which are offset by a corresponding

                                       18

<PAGE>

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.

                               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.

      In accordance  with  Statement of Financial  Accounting  Standards No. 121
(FAS  121),  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived  Assets to Be Disposed  Of,"  impairment  tests  performed by the GPU
Energy companies on the net book values of their remaining generation facilities
determined that the net investment in Oyster Creek was impaired. As of March 31,
2000,  this resulted in  write-downs  of $678 million to reflect  Oyster Creek's
fair  market  value.  The  total  impairment  amount  of  Oyster  Creek has been
reestablished  as a regulatory  asset since the Summary  Order  provides for its
recovery in the restructuring process.

      Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting
for  Derivative  Instruments  and Hedging  Activities"  (as amended by FAS 137),
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging activities. FAS 133 requires that companies recognize all derivatives as
either assets or liabilities on the balance sheet and measure those  instruments
at fair value.  GPU will be required to include its derivative  transactions  on
its balance sheet at fair value,  and recognize the  subsequent  changes in fair
value as either  gains or losses in earnings  or report  them as a component  of
other comprehensive  income,  depending upon the intended use and designation of
the derivative as a hedge. FAS 133 is

                                       19

<PAGE>

effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
GPU will  adopt  FAS 133 in the  first  quarter  2001 and is in the  process  of
evaluating  the impact of the  implementation  of this  statement.  GPU's use of
derivative  instruments is intended to manage the risk of interest rate, foreign
currency and commodity price  fluctuations and may include such  transactions as
electricity  and natural gas forward  and futures  contracts,  foreign  currency
swaps,  interest  rate swaps and  options.  GPU does not intend to hold or issue
derivative instruments for trading purposes.

                                       20

<PAGE>

                            (This page intentionally left blank)





                                       21

<PAGE>
<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

                           Consolidated Balance Sheets

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

                                                                    In Thousands

                                                         -----------------------------
                                                            March 31,     December 31,
                                                              2000            1999
                                                         ------------     --------
                                                          (Unaudited)
ASSETS

Utility Plant:
<S>                                                        <C>            <C>
  Transmission, distribution and general plant             $11,137,999    $11,240,218
  Generation plant                                             528,342        526,228
                                                            ----------     ----------
      Utility plant in service                              11,666,341     11,766,446
  Accumulated depreciation                                  (3,987,333)    (3,929,963)
                                                            ----------     ----------
      Net utility plant in service                           7,679,008      7,836,483
  Construction work in progress                                197,002        170,317
  Other, net                                                    16,344         18,128
                                                            ----------     ----------
      Net utility plant                                      7,892,354      8,024,928
                                                            ----------     ----------

Other Property and Investments:

  Equity investments                                            87,642         85,756
  Goodwill, net                                              2,507,964      2,615,301
  Nuclear decommissioning trusts, at market (Note 1)           638,091        636,284
  Nuclear fuel disposal trust, at market                       120,114        119,293
  Other, net                                                   839,679        837,415
                                                            ----------     ----------
      Total other property and investments                   4,193,490      4,294,049
                                                            ----------     ----------

Current Assets:
  Cash and temporary cash investments                          653,996        471,548
  Marketable securities                                         29,234         26,946
  Special deposits                                              42,674         42,687
  Accounts receivable:
    Customers, net                                             466,267        445,745
    Other                                                      230,678        185,968
  Unbilled revenues                                            166,785        152,263
  Materials and supplies, at average cost or less:
    Construction and maintenance                                94,894        100,807
    Fuel                                                           484            448
  Deferred income taxes                                         64,490         72,249
  Prepayments                                                  133,235        161,602
                                                            ----------     ----------
      Total current assets                                   1,882,737      1,660,263
                                                            ----------     ----------

Deferred Debits and Other Assets:
  Regulatory assets, net (Note 1)                            4,815,094      4,716,246
  Deferred income taxes                                      2,593,453      2,528,393
  Other                                                        482,527        494,203
                                                           -----------     ----------
      Total deferred debits and other assets                 7,891,074      7,738,842
                                                           -----------     ----------



      Total Assets                                        $21,859,655     $21,718,082
                                                           ==========      ==========


</TABLE>

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

                                       22

<PAGE>

<TABLE>

                       GPU, INC. AND SUBSIDIARY COMPANIES
                           Consolidated Balance Sheets

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

                                                                In Thousands
                                                             ---------------------
                                                            March 31,     December 31,
                                                              2000            1999
                                                          ------------    -----------
                                                          (Unaudited)
LIABILITIES AND CAPITALIZATION

Capitalization:

<S>                                                        <C>            <C>
  Common stock                                             $   331,958    $   331,958
  Capital surplus                                            1,011,687      1,011,721
  Retained earnings                                          2,557,496      2,426,350
  Accumulated other comprehensive income/(loss) (Note 5)       (31,739)        (6,341)
                                                            ----------     ----------
      Total                                                  3,869,402      3,763,688
  Reacquired common stock, at cost                            (326,686)      (298,735)
                                                            ----------     ----------
      Total common stockholders' equity                      3,542,716      3,464,953
  Cumulative preferred stock:
    With mandatory redemption                                   73,167         73,167
    Without mandatory redemption                                12,649         12,649
  Subsidiary-obligated mandatorily redeemable
    preferred securities                                       125,000        125,000
  Trust preferred securities                                   200,000        200,000
  Long-term debt                                             5,627,792      5,729,452
                                                            ----------     ----------
      Total capitalization                                   9,581,324      9,605,221
                                                            ----------     ----------

Current Liabilities:

  Securities due within one year                               646,572        581,147
  Notes payable                                              1,221,522      1,293,013
  Bank overdraft                                               236,210        224,585
  Obligations under capital leases                              44,968         48,165
  Accounts payable                                             547,773        489,075
  Taxes accrued                                                376,004        309,509
  Interest accrued                                              83,775         76,246
  Other                                                        674,225        732,110
                                                            ----------     ----------
      Total current liabilities                              3,831,049      3,753,850
                                                            ----------     ----------

Deferred Credits and Other Liabilities:

  Deferred income taxes                                      3,627,077      3,563,078
  Unamortized investment tax credits                            59,411         61,364
  Three Mile Island Unit 2 future costs (Note 1)               500,488        496,944
  Power purchase contract loss liability (Note 1)            3,325,596      3,300,878
  Other                                                        934,710        936,747
                                                            ----------     ----------
      Total deferred credits and other liabilities           8,447,282      8,359,011
                                                            ----------     ----------


Commitments and Contingencies (Note 1)



      Total Liabilities and Capitalization                $21,859,655     $21,718,082
                                                           ==========      ==========

</TABLE>

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

                                       23

<PAGE>
<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

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

                                                            In Thousands
                                                       (Except Per Share Data)
                                                       -------------------------
                                                            Three Months
                                                           Ended March 31,
                                                       -------------------------
                                                           2000          1999
                                                           ----          ----

Operating Revenues                                     $1,176,444    $1,068,703
                                                        ---------     ---------

Operating Expenses:

<S>                                                        <C>           <C>
  Fuel                                                     19,483        96,476
  Power purchased and interchanged                        411,471       246,509
  Deferred costs, net                                     (33,514)       20,370
  Other operation and maintenance                         257,548       240,124
  Depreciation and amortization                           129,595       117,244
  Taxes, other than income taxes                           51,549        49,347
                                                        ---------     ---------
        Total operating expenses                          836,132       770,070
                                                        ---------     ---------

Operating Income                                          340,312       298,633
                                                        ---------     ---------

Other Income and Deductions:
  Allowance for other funds used during
     construction                                             245            65
  Equity in undistributed earnings
     of affiliates, net                                     3,652        53,252
  Other income, net                                        19,178        49,081
                                                        ---------     ---------
        Total other income and deductions                  23,075       102,398
                                                        ---------     ---------

Income Before Interest Charges

  and Preferred Dividends                                 363,387       401,031
                                                        ---------     ---------

Interest Charges and Preferred Dividends:

  Long-term debt and notes payable                        132,914        81,124
  Trust preferred securities                                3,673           -
  Subsidiary-obligated mandatorily
    redeemable preferred securities                         2,675         7,222
  Other interest                                            2,070         1,565
  Allowance for borrowed funds used
    during construction                                      (830)         (608)
  Preferred stock dividends of subsidiaries, inclusive
    of loss on reacquisition of $1,268 in 1999              2,461         3,920
                                                        ---------     ---------
        Total interest charges and
          preferred dividends                             142,963        93,223
                                                        ---------     ---------

Income Before Income Taxes and Minority Interest          220,424       307,808
  Income taxes                                             88,949       116,266
  Minority interest net income                                477           823
                                                        ---------     ---------

Net Income                                             $  130,998    $  190,719
                                                        =========     =========

Basic - Earnings Per Avg. Common Share                 $     1.08    $     1.49
                                                        =========     =========
      - Avg. Common Shares Outstanding (In Thousands)     121,367       127,652
                                                        =========     =========

Diluted - Earnings Per Avg. Common Share               $     1.08    $     1.49
                                                        =========     =========
        - Avg. Common Shares Outstanding (In Thousands)   121,426       127,926
                                                        =========     =========

Cash Dividends Paid Per Share                          $      .53    $     .515
                                                        =========     =========

</TABLE>

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

                                       24

<PAGE>

<TABLE>
<CAPTION>

                       GPU, INC. AND SUBSIDIARY COMPANIES

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

                                                             In Thousands
                                                       -------------------------
                                                             Three Months
                                                            Ended March 31,
                                                       -------------------------
                                                            2000         1999
                                                            ----         ----
Operating Activities:

<S>                                                     <C>          <C>
  Net income                                            $ 130,998    $ 190,719
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                         138,634      128,602
    Amortization of property under capital leases           3,209       12,855
    Gain on sale of investments                               -        (38,252)
    Equity in undistributed earnings
      of affiliates, net of distributions received         (2,266)     (48,492)
    Deferred income taxes and investment tax
      credits, net                                         17,778     (345,848)
    Deferred costs, net                                   (33,514)      20,478
  Changes in working capital:
    Receivables                                           (77,853)     (67,716)
    Materials and supplies                                  2,230        2,956
    Special deposits and prepayments                       44,665     (633,054)
    Payables and accrued liabilities                      131,974      386,563
  Nonutility generation contract buyout costs              (5,660)     (34,750)
  Other, net                                              (25,887)      40,808
                                                         --------     --------
     Net cash provided/(required)
       by operating activities                            324,308     (385,131)
                                                         --------     --------

Investing Activities:

  Acquisitions, net of cash acquired                          -       (374,908)
  Capital expenditures and investments                   (111,551)     (82,618)
  Proceeds from sale of investments                           -        894,450
  Contributions to decommissioning trusts                  (7,510)      (8,710)
  Other, net                                               (2,052)      26,295
                                                         --------     --------
     Net cash provided/(required)
       by investing activities                           (121,113)     454,509
                                                         --------     --------

Financing Activities:

  Issuance of long-term debt                               16,142      705,136
  Increase/(decrease) in notes payable, net                87,427     (197,717)
  Retirement of long-term debt                            (50,083)    (382,688)
  Capital lease principal payments                         (5,937)     (10,261)
  Reacquisition of common stock                           (22,383)     (58,138)
  Dividends paid on common stock                          (64,409)     (65,917)
  Redemption of preferred stock of subsidiaries               -        (30,004)
                                                         --------     --------
     Net cash required by financing activities            (39,243)     (39,589)
                                                         --------     --------
Effect of exchange rate changes on cash                    18,496          (43)
                                                         --------     --------

Net increase in cash and temporary

  cash investments from above activities                  182,448       29,746
Cash and temporary cash investments, beginning of year    471,548       72,755
                                                         --------     --------
Cash and temporary cash investments, end of period      $ 653,996    $ 102,501
                                                         ========     ========

Supplemental Disclosure:

  Interest and preferred dividends paid                 $ 134,376    $ 103,264
                                                         ========     ========
  Income taxes paid                                     $   7,074    $   2,374
                                                         ========     ========
  New capital lease obligations incurred                $     -      $     220
                                                         ========     ========
  Common stock dividends declared but not paid          $     -      $     -
                                                         ========     ========


</TABLE>

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

                                       25

<PAGE>
<TABLE>
<CAPTION>

               JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                           Consolidated Balance Sheets
                           ---------------------------
                                                               In Thousands
                                                         ---------------------------
                                                          March 31,     December 31,
                                                            2000             1999
                                                         ------------     --------
                                                          (Unaudited)

ASSETS

Utility Plant:

<S>                                                        <C>            <C>
  Transmission, distribution, and general plant            $3,110,347     $3,097,150
  Generation plant                                            503,209        504,545
                                                            ---------      ---------
      Utility plant in service                              3,613,556      3,601,695
  Accumulated depreciation                                 (1,898,047)    (1,872,422)
                                                            ---------      ---------
      Net utility plant in service                          1,715,509      1,729,273
  Construction work in progress                                90,371         80,671
  Other, net                                                   13,102         14,781
                                                            ---------      ---------
      Net utility plant                                     1,818,982      1,824,725
                                                            ---------      ---------


Other Property and Investments:

  Nuclear decommissioning trusts, at market (Note 1)          397,079        394,941
  Nuclear fuel disposal trust, at market                      120,114        119,293
  Other, net                                                    2,775          1,252
                                                            ---------      ---------
      Total other property and investments                    519,968        515,486
                                                            ---------      ---------


Current Assets:

  Cash and temporary cash investments                          89,885         68,684
  Special deposits                                              3,001          1,035
  Accounts receivable:
    Customers, net                                            149,332        164,099
    Other                                                      89,299         69,688
  Unbilled revenues                                            68,490         78,251
  Fuel inventory, at average cost or less                         243            240
  Deferred income taxes                                           -            1,652
  Prepayments                                                   6,620         23,000
                                                            ---------      ---------
      Total current assets                                    406,870        406,649
                                                            ---------      ---------


Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                           2,856,347      2,810,854
  Deferred income taxes                                       207,636        221,668
  Other                                                        34,892         31,615
                                                            ---------      ---------
      Total deferred debits and other assets                3,098,875      3,064,137
                                                            ---------      ---------





      Total Assets                                         $5,844,695     $5,810,997
                                                            =========      =========

</TABLE>

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

                                       26

<PAGE>
<TABLE>
<CAPTION>

               JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

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

                                                                In Thousands
                                                         ----------------------------
                                                            March 31,     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                                           718,987        720,878
  Accumulated other comprehensive income/(loss)(Note 5)             7              7
                                                            ---------      ---------
      Total common stockholder's equity                     1,383,476      1,385,367
  Cumulative preferred stock:
    With mandatory redemption                                  73,167         73,167
    Without mandatory redemption                               12,649         12,649
  Company-obligated mandatorily redeemable
    preferred securities                                      125,000        125,000
  Long-term debt                                            1,133,820      1,133,760
                                                            ---------      ---------
      Total capitalization                                  2,728,112      2,729,943
                                                            ---------      ---------


Current Liabilities:

  Securities due within one year                               10,846         50,846
  Obligations under capital leases                             44,957         48,165
  Accounts payable:
    Affiliates                                                 76,142         60,527
    Other                                                      72,517         82,355
  Taxes accrued                                                50,051         13,079
  Interest accrued                                             27,722         24,523
  Other                                                        33,985         36,169
                                                            ---------      ---------
      Total current liabilities                               316,220        315,664
                                                            ---------      ---------


Deferred Credits and Other Liabilities:

  Deferred income taxes                                       582,847        570,568
  Unamortized investment tax credits                           30,659         32,114
  Nuclear fuel disposal fee                                   150,054        148,009
  Three Mile Island Unit 2 future costs (Note 1)              125,127        124,241
  Power purchase contract loss liability (Note 1)           1,643,161      1,624,769
  Other                                                       268,515        265,689
                                                            ---------      ---------
      Total deferred credits and other liabilities          2,800,363      2,765,390
                                                            ---------      ---------


Commitments and Contingencies (Note 1)


      Total Liabilities and Capitalization                 $5,844,695     $5,810,997
                                                            =========      =========


</TABLE>

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

                                       27

<PAGE>

<TABLE>
<CAPTION>

              JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

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

                                                            In Thousands
                                                       ---------------------
                                                            Three Months
                                                           Ended March 31,
                                                       ---------------------
                                                         2000          1999
                                                         ----          ----

<S>                                                    <C>           <C>
Operating Revenues                                     $452,745      $516,889
                                                        -------       -------

Operating Expenses:

  Fuel                                                    5,867        22,117
  Power purchased and interchanged:
    Affiliates                                           20,276        15,949
    Others                                              194,122       153,450
  Deferred costs, net                                   (33,514)       20,370
  Other operation and maintenance                        98,127       107,846
  Depreciation and amortization                          56,143        62,696
  Taxes, other than income taxes                         15,729        21,334
                                                        -------       -------
     Total operating expenses                           356,750       403,762
                                                        -------       -------

Operating Income                                         95,995       113,127
                                                        -------       -------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                            216            54
  Other income, net                                       5,432         3,019
                                                        -------       -------
     Total other income and deductions                    5,648         3,073
                                                        -------       -------

Income Before Interest Charges                          101,643       116,200
                                                        -------       -------

Interest Charges:

  Long-term debt and notes payable                       23,262        23,190
  Company-obligated mandatorily

    redeemable preferred securities                       2,675         2,675
  Other interest                                            152           195
  Allowance for borrowed funds used
    during construction                                    (346)         (232)
                                                        -------       -------
     Total interest charges                              25,743        25,828
                                                        -------       -------

Income Before Income Taxes                               75,900        90,372
  Income taxes                                           30,330        36,675
                                                         ------       -------

Net Income                                               45,570        53,697
  Preferred stock dividends                               2,461         2,432
                                                        -------       -------
Earnings Available for Common Stock                    $ 43,109      $ 51,265
                                                        =======       =======



</TABLE>

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

                                       28

<PAGE>
<TABLE>
<CAPTION>

              JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY

                      Consolidated Statements of Cash Flows

                      -------------------------------------
                                   (Unaudited)

                                                            In Thousands
                                                        ---------------------
                                                            Three Months
                                                            Ended March 31,
                                                        ---------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:

<S>                                                     <C>          <C>
  Net income                                            $  45,570    $  53,697
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          64,494       70,278
    Amortization of property under capital leases           3,209        7,546
    Deferred income taxes and investment tax
      credits, net                                          7,135        9,463
    Deferred costs, net                                   (33,514)      20,478
  Changes in working capital:
    Receivables                                             4,917      (23,979)
    Materials and supplies                                    (83)      13,309
    Special deposits and prepayments                       14,414       19,823
    Payables and accrued liabilities                       43,830        5,253
  Nonutility generation contract buyout costs                 -        (30,000)
  Other, net                                                 (330)      25,925
                                                         --------     --------
     Net cash provided by operating activities            149,642      171,793
                                                         --------     --------

Investing Activities:

  Capital expenditures and investments                    (24,411)     (27,972)
  Contributions to decommissioning trusts                  (5,917)      (7,228)
  Other, net                                               (4,100)       4,596
                                                         --------     --------
     Net cash required by for investing activities        (34,428)     (30,604)
                                                         --------     --------

Financing Activities:

  Decrease in notes payable, net                              -        (93,444)
  Retirement of long-term debt                            (40,000)         -
  Capital lease principal payments                         (5,937)      (4,819)
  Dividends paid on common stock                          (45,000)     (30,000)
  Dividends paid on preferred stock                        (3,076)      (2,432)
                                                         --------     --------
     Net cash required by financing activities            (94,013)    (130,695)
                                                         --------     --------

Net increase in cash and temporary

  cash investments from above activities                   21,201       10,494
Cash and temporary cash investments, beginning of year     68,684        1,850
                                                         --------     --------
Cash and temporary cash investments, end of period      $  89,885    $  12,344
                                                         ========     ========


Supplemental Disclosure:

  Interest and preferred dividends paid                 $  25,024    $  25,248
                                                         ========     ========
  Income taxes paid                                     $     190    $  (2,804)
                                                         ========     ========
  New capital lease obligations incurred                $     -      $      54
                                                         ========     ========

</TABLE>

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

                                       29

<PAGE>
<TABLE>
<CAPTION>

                  METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

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

                                                              In Thousands
                                                        ---------------------------
                                                          March 31,     December 31,
                                                            2000             1999
                                                         ------------     --------
                                                          (Unaudited)

ASSETS

Utility Plant:

<S>                                                        <C>            <C>
  Transmission, distribution and general plant             $1,505,806     $1,500,417
  Generation plant                                             25,133         21,683
                                                            ---------      ---------
      Utility plant in service                              1,530,939      1,522,100
  Accumulated depreciation                                   (470,211)      (462,709)
                                                            ---------      ---------
      Net utility plant in service                          1,060,728      1,059,391
  Construction work in progress                                24,768         25,329
  Other, net                                                      643            643
                                                            ---------      ---------
      Net utility plant                                     1,086,139      1,085,363
                                                            ---------      ---------


Other Property and Investments:

  Nuclear decommissioning trusts, at market (Note 1)          144,617        144,261
  Other, net                                                    3,010          3,010
                                                            ---------      ---------
      Total other property and investments                    147,627        147,271
                                                            ---------      ---------


Current Assets:

  Cash and temporary cash investments                             686         10,899
  Special deposits                                                161            160
  Accounts receivable:
    Customers, net                                             62,638         60,188
    Other                                                      91,796        123,444
  Unbilled revenues                                            27,347         28,956
  Deferred income taxes                                         2,945          2,945
  Prepayments                                                  15,307         16,715
                                                            ---------      ---------
      Total current assets                                    200,880        243,307
                                                            ---------      ---------


Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                           1,265,460      1,232,865
  Deferred income taxes                                       735,309        738,189
  Other                                                        41,721         41,198
                                                            ---------      ---------
      Total deferred debits and other assets                2,042,490      2,012,252
                                                            ---------      ---------







      Total Assets                                        $3,477,136      $3,488,193
                                                           =========       =========

</TABLE>

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

                                       30

<PAGE>

<TABLE>
<CAPTION>

                  METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

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

                                                                In Thousands
                                                         ----------------------------
                                                           March 31,      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                                            30,074         13,581
  Accumulated other comprehensive income (Note 5)              20,635         21,363
                                                            ---------      ---------
       Total common stockholder's equity                      517,182        501,417
  Trust preferred securities                                  100,000        100,000
  Long-term debt                                              496,884        496,883
                                                            ---------      ---------
      Total capitalization                                  1,114,066      1,098,300
                                                            ---------      ---------


Current Liabilities:

  Securities due within one year                               50,025         50,025
  Notes payable                                                26,477            -
  Accounts payable:
    Affiliates                                                 49,083        125,179
    Other                                                      31,577         30,106
  Taxes accrued                                                44,473         35,976
  Interest accrued                                             11,702         16,738
  Other                                                        16,861         18,208
                                                            ---------      ---------
      Total current liabilities                               230,198        276,232
                                                            ---------      ---------


Deferred Credits and Other Liabilities:

  Deferred income taxes                                     1,004,839        993,427
  Unamortized investment tax credits                           14,798         15,010
  Three Mile Island Unit 2 future costs (Note 1)              250,152        248,381
  Nuclear fuel disposal fee                                    33,892         33,430
  Power purchase contract loss liability (Note 1)             742,450        735,833
  Other                                                        86,741         87,580
                                                            ---------      ---------
      Total deferred credits and other liabilities          2,132,872      2,113,661
                                                            ---------      ---------



Commitments and Contingencies (Note 1)





      Total Liabilities and Capitalization                 $3,477,136     $3,488,193
                                                            =========      =========

</TABLE>

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

                                       31

<PAGE>
<TABLE>
<CAPTION>

                 METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                        Consolidated Statements of Income
                        ---------------------------------

                                   (Unaudited)

                                                            In Thousands
                                                       -------------------------
                                                            Three Months
                                                           Ended March 31,
                                                       -------------------------
                                                         2000          1999
                                                         ----          ----

<S>                                                    <C>           <C>
Operating Revenues                                     $203,056      $229,157
                                                        -------       -------

Operating Expenses:

  Fuel                                                      -          25,629
  Power purchased and interchanged:
    Affiliates                                               52         2,208
    Others                                               92,498        40,958
  Other operation and maintenance                        28,000        51,915
  Depreciation and amortization                          15,804        19,129
  Taxes, other than income taxes                         11,383        13,066
                                                        -------       -------
     Total operating expenses                           147,737       152,905
                                                        -------       -------

Operating Income                                         55,319        76,252
                                                        -------       -------

Other Income and Deductions:
  Allowance for other funds used during
    construction                                             29            11
  Other income, net                                       2,771         1,133
                                                        -------       -------
     Total other income and deductions                    2,800         1,144
                                                        -------       -------

Income Before Interest Charges                           58,119        77,396
                                                        -------       -------

Interest Charges:

  Long-term debt and notes payable                       11,935        12,088
  Trust preferred securities                              1,838           -
  Company-obligated mandatorily
    redeemable preferred securities                         -           2,250
  Other interest                                            526           422
  Allowance for borrowed funds used
    during construction                                    (184)         (176)
                                                        -------       -------
     Total interest charges                              14,115        14,584
                                                        -------       -------

Income Before Income Taxes                               44,004        62,812
  Income taxes                                           17,511        29,980
                                                        -------       -------

Net Income                                               26,493        32,832
  Preferred stock dividends                                 -              66
  Loss on preferred stock reacquisition                     -             542
                                                        -------       -------
Earnings Available for Common Stock                    $ 26,493      $ 32,224
                                                        =======       =======



</TABLE>

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

                                       32

<PAGE>
<TABLE>
<CAPTION>

                 METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES

                      Consolidated Statements of Cash Flows

                      -------------------------------------
                                   (Unaudited)

                                                            In Thousands
                                                       -------------------------
                                                            Three Months
                                                            Ended March 31,
                                                       -------------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:
<S>                                                     <C>          <C>
  Net income                                            $  26,493    $  32,832
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          15,883       22,223
    Amortization of property under capital leases             -          3,540
    Deferred income taxes and investment tax
      credits, net                                          6,211       13,356
  Changes in working capital:
    Receivables                                            29,198      (11,395)
    Materials and supplies                                    -          9,506
    Special deposits and prepayments                        1,407      (11,578)
    Payables and accrued liabilities                      (72,510)     (12,930)
  Nonutility generation contract buyout costs              (1,250)      (1,250)
  Other, net                                              (18,983)     (26,607)
                                                         --------     --------
     Net cash provided/(required)
      by operating activities                             (13,551)      17,697
                                                         ---------    --------

Investing Activities:
  Capital expenditures and investments                    (11,556)     (15,294)
  Contributions to decommissioning trusts                  (1,583)      (1,482)
  Other, net                                                  -            (10)
                                                         --------     --------
     Net cash required by investing activities            (13,139)     (16,786)
                                                         --------     --------

Financing Activities:
  Increase in notes payable, net                           26,477       36,160
  Capital lease principal payments                            -         (3,619)
  Redemption of preferred stock                               -        (12,598)
  Dividends paid on common stock                          (10,000)     (30,000)
  Dividends paid on preferred stock                           -            (66)
  Contribution from parent corporation                        -         15,000
                                                         --------      -------
     Net cash provided   by financing activities           16,477        4,877
                                                         --------      -------

Net increase/(decrease) in cash and temporary cash
  investments from above activities                       (10,213)       5,788
Cash and temporary cash investments, beginning of year     10,899          442
                                                         --------     --------
Cash and temporary cash investments, end of period      $     686    $   6,230
                                                         ========     ========


Supplemental Disclosure:

  Interest and preferred dividends paid                 $  18,448    $  20,374
                                                         ========     ========
  Income taxes paid                                     $   3,276    $   1,902
                                                         ========     ========
  New capital lease obligations incurred                $     -      $     111
                                                         ========     ========

</TABLE>

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

                                       33

<PAGE>
<TABLE>
<CAPTION>

                 PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

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

                                                              In Thousands
                                                         ---------------------------
                                                           March 31,      December 31,
                                                             2000             1999
                                                         ------------     --------
                                                          (Unaudited)

ASSETS

Utility Plant:

<S>                                                        <C>            <C>
  Transmission, distribution and general plant             $1,743,060     $1,732,386
  Accumulated depreciation                                   (564,006)      (552,449)
                                                            ---------      ---------
      Net utility plant in service                          1,179,054      1,179,937
  Construction work in progress                                31,540         30,329
  Other, net                                                    2,598          2,704
                                                            ---------      ---------
      Net utility plant                                     1,213,192      1,212,970
                                                            ---------      ---------


Other Property and Investments:

  Nonutility generation trusts, at market                     267,312        266,700
  Nuclear decommissioning trusts, at market (Note 1)           96,395         97,082
  Other, net                                                      658          1,233
                                                            ---------      ---------
      Total other property and investments                    364,365        365,015
                                                            ---------      ---------


Current Assets:

  Cash and temporary cash investments                             129         32,250
  Special deposits                                                233            233
  Accounts receivable:
    Customers, net                                             71,716         69,752
    Other                                                      66,012         40,204
  Unbilled revenues                                            28,730         30,836
  Deferred income taxes                                         7,589          7,589
  Prepayments                                                  18,385         15,484
                                                            ---------      ---------
      Total current assets                                    192,794        196,348
                                                            ---------      ---------


Deferred Debits and Other Assets:

  Regulatory assets, net (Note 1)                             693,287        672,527
  Deferred income taxes                                     1,216,379      1,225,150
  Other                                                        23,711         23,781
                                                            ---------      ---------
      Total deferred debits and other assets                1,933,377      1,921,458
                                                            ---------      ---------




      Total Assets                                         $3,703,728     $3,695,791
                                                            =========      =========

</TABLE>

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

                                       34

<PAGE>
<TABLE>
<CAPTION>

             PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

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

                                                                 In Thousands
                                                         ----------------------------
                                                           March 31,      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                                            41,207         59,265
  Accumulated other comprehensive income (Note 5)              10,252         10,619
                                                            ---------      ---------
      Total common stockholder's equity                       442,757        461,182
  Trust preferred securities                                  100,000        100,000
  Long-term debt                                              424,687        424,641
                                                            ---------      ---------
      Total capitalization                                    967,444        985,823
                                                            ---------      ---------


Current Liabilities:

  Securities due within one year                                   13             13
  Notes payable                                               121,200         53,600
  Obligations under capital leases                                 11            -
  Accounts payable:
    Affiliates                                                 15,143         66,223
    Other                                                      32,587         34,845
  Taxes accrued                                               114,812        108,005
  Interest accrued                                             13,156          6,588
  Other                                                        17,484         17,567
                                                            ---------      ---------
      Total current liabilities                               314,406        286,841
                                                            ---------      ---------


Deferred Credits and Other Liabilities:

  Deferred income taxes                                     1,248,385      1,250,490
  Unamortized investment tax credits                           13,954         14,240
  Three Mile Island Unit 2 future costs (Note 1)              125,209        124,322
  Nuclear fuel disposal fee                                    16,948         16,717
  Power Purchase contract loss liability (Note 1)             939,985        940,276
  Other                                                        77,397         77,082
                                                            ---------      ---------
      Total deferred credits and other liabilities          2,421,878      2,423,127
                                                            ---------      ---------


Commitments and Contingencies (Note 1)





      Total Liabilities and Capitalization                 $3,703,728     $3,695,791
                                                            =========      =========


</TABLE>

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

                                       35

<PAGE>
<TABLE>
<CAPTION>

                PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

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

                                                             In Thousands
                                                        ---------------------
                                                             Three Months
                                                             Ended March 31,
                                                        ---------------------
                                                         2000          1999
                                                         ----          ------

<S>                                                    <C>           <C>
Operating Revenues                                     $220,105      $246,249
                                                        -------       -------

Operating Expenses:

  Fuel                                                      -          36,544
  Power purchased and interchanged:
    Affiliates                                              157         1,562
    Others                                              105,013        39,031
  Other operation and maintenance                        38,806        59,403
  Depreciation and amortization                          11,534        23,053
  Taxes, other than income taxes                         10,963        14,014
                                                        -------       -------
     Total operating expenses                           166,473       173,607
                                                        -------       -------

Operating Income                                         53,632        72,642
                                                        -------       -------

Other Income and Deductions:

  Other income, net                                         847        38,909
                                                        -------       -------
     Total other income and deductions                      847        38,909
                                                        -------       -------

Income Before Interest Charges                           54,479       111,551
                                                        -------       -------

Interest Charges:

  Long-term debt and notes payable                        7,277        13,428
  Trust preferred securities                              1,835           -
  Company-obligated mandatorily
    redeemable preferred securities                         -           2,297
  Other interest                                            296           407
  Allowance for borrowed funds used
    during construction                                    (300)         (200)
                                                        -------       -------

     Total interest charges                               9,108        15,932
                                                        -------       -------

Income Before Income Taxes                               45,371        95,619
  Income taxes                                           18,429        30,129
                                                        -------       -------

Net Income                                               26,942        65,490
  Preferred stock dividends                                 -             154
  Loss on preferred stock reacquisition                     -             726
                                                        -------       -------
Earnings Available for Common Stock                    $ 26,942      $ 64,610
                                                        =======       =======





</TABLE>

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

                                       36

<PAGE>
<TABLE>
<CAPTION>

                PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

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

                                                             In Thousands
                                                      ----------------------
                                                             Three Months
                                                            Ended March 31,
                                                      ---------------------
                                                           2000         1999
                                                           ----         ----
Operating Activities:

<S>                                                     <C>          <C>
  Net income                                            $  26,942    $  65,490
  Adjustments to reconcile income to cash provided:
    Depreciation and amortization                          12,271       22,732
    Amortization of property under capital leases             -          1,769
    Gain on sale of investment                                -        (38,252)
    Deferred income taxes and investment tax
      credits, net                                          8,885     (307,797)
  Changes in working capital:
    Receivables                                           (27,771)      (8,184)
    Materials and supplies                                    -         32,169
    Special deposits and prepayments                       (2,901)    (611,092)
    Payables and accrued liabilities                      (40,047)     312,561
  Nonutility generation contract buyout costs              (4,410)      (3,500)
  Other, net                                              (18,286)     (43,610)
                                                         --------     --------
     Net cash required by operating activities            (45,317)    (577,714)
                                                         --------     --------

Investing Activities:

  Capital expenditures and investments                    (11,494)     (15,868)
  Proceeds from sale of investments                           -        894,450
  Contributions to decommissioning trusts                     (10)         -
  Other, net                                                2,100          911
                                                         --------     --------
     Net cash provided/(required)
       by investing activities                            ( 9,404)     879,493
                                                         ---------    --------

Financing Activities:

  Increase/(decrease) in notes payable, net                67,600      (86,023)
  Redemption of preferred stock                               -        (17,406)
  Capital lease principal payments                            -         (1,823)
  Dividends paid on common stock                          (45,000)    (180,000)
  Dividends paid on preferred stock                           -           (154)
                                                         --------     --------
     Net cash provided/(required)
       by financing activities                             22,600     (285,406)
                                                         --------     --------

Net increase/(decrease) in cash and temporary

  cash investments from above activities                  (32,121)      16,373
Cash and temporary cash investments, beginning of year     32,250        2,750
                                                         --------     --------
Cash and temporary cash investments, end of period      $     129    $  19,123
                                                         ========     ========


Supplemental Disclosure:

  Interest and preferred dividends paid                 $   2,031    $  25,169
                                                         ========     ========
  Income taxes paid                                     $   3,400    $   3,409
                                                         ========     ========
  New capital lease obligations incurred                $     -      $      55
                                                         ========     ========
</TABLE>

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

                                       37
<PAGE>

GPU, Inc. and Subsidiary Companies

             COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      GPU, Inc. owns all the outstanding common stock of three domestic electric
utilities -- Jersey Central Power & Light Company (JCP&L),  Metropolitan  Edison
Company  (Met-Ed) and  Pennsylvania  Electric  Company  (Penelec).  The customer
service function, transmission and distribution operations and the operations of
the remaining non-nuclear  generating facilities of these electric utilities are
conducting  business  under  the name GPU  Energy.  JCP&L,  Met-Ed  and  Penelec
considered  together are referred to as the "GPU Energy  companies." The nuclear
generation  operations of GPU Energy are conducted by GPU Nuclear,  Inc. (GPUN).
GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and
fund the acquisition of electric and gas transmission  and distribution  systems
in foreign countries,  and are referred to as "GPU Electric." GPU International,
Inc.  and GPU  Power,  Inc.  and their  subsidiaries  develop,  own and  operate
generation  facilities in the United  States (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  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

             COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT

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

      In 1999, the GPU Energy companies completed the sales of Three Mile Island
Unit 1 (TMI-1) nuclear  generating station and substantially all of their fossil
and  hydroelectric  generating  stations.  In October 1999, JCP&L agreed to sell
Oyster  Creek  nuclear  generating  station  (Oyster  Creek) to  AmerGen  Energy
Company,  LLC (AmerGen),  a joint venture of PECO Energy and British Energy, for
$10 million and reimbursement of the cost (estimated at $88 million) of the next
scheduled refueling outage. The sale is subject to various conditions, including
the receipt of various  federal and state  regulatory  approvals  and  favorable
rulings by the Internal  Revenue Service.  It is currently  anticipated that the
sale will close in the Summer of 2000.

      JCP&L and Public  Service  Electric & Gas Company  (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 New Jersey Board of
Public Utilities (NJBPU) seeking a declaratory order that PSE&G's right of first
refusal to purchase JCP&L's ownership interest at its current book value under a
1964  agreement  between the  companies  is void and  unenforceable.  Management
believes that the fair market value of JCP&L's ownership interest

                                       38


<PAGE>


in Yards  Creek is  substantially  in excess of its March 31, 2000 book value of
$22 million. There can be no assurance as to the outcome of this matter.

Stranded Costs and Regulatory Restructuring Orders:
--------------------------------------------------

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

      In  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 a Phase  II  proceeding
following  the  completion  of  their  generation  divestitures  to make a final
determination  of the extent of that  stranded cost  recovery.  An appeal by one
intervenor in the  restructuring  proceedings is pending before the Pennsylvania
Supreme Court. There can be no assurance as to the outcome of this appeal.

      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. There can be no assurance as to the outcome of this matter.

      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 and full recovery of stranded costs. The Summary Order
did not  address  the  pending  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.

      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 largely
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.  While JCP&L is permitted to recover  reasonable and
prudently  incurred costs associated with providing basic generation  service to
non-shopping customers, Met-Ed and Penelec are generally unable to recover their
energy  costs  in  excess  of  established   rate  caps.  While  management  has
implemented an energy risk  management  program,  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

                                       39


<PAGE>


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.

      As of  March  31,  2000,  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 and the timing
of the pending Oyster Creek sale, are estimated to be $607 million in 2000, $578
million in 2001,  $313 million in 2002,  $137 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
March 31, 2000, and estimated payments thereafter through 2005:

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

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

      1998                 788        403         174         211
      1999                 774        388         167         219
      2000                 735        382         139         214
      2001                 727        389         136         202
      2002                 731        391         140         200
      2003                 747        398         144         205
      2004                 763        403         148         212
      2005                 747        390         152         205

      The NJBPU Summary  Order and PaPUC  Restructuring  Orders  provide the GPU
Energy  companies  assurance  of full  recovery  of their NUG  costs  (including
above-market NUG costs and certain buyout costs).  The GPU Energy companies have
recorded,  on a present value basis,  a total  liability of $3.3 billion  (JCP&L
$1.7  billion;  Met-Ed $0.7 billion;  Penelec $0.9 billion) on the  Consolidated
Balance Sheets for above-market NUG costs, and JCP&L has recorded a liability of
$48  million,  on a net present  value basis,  for  above-market  utility  power
purchase  agreements,  both  amounts  of which  are  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

                                       40


<PAGE>


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  March  31,  2000  and  December  31,  1999
Consolidated Balance Sheets in accordance with the provisions of FAS 71 and EITF
Issue 97-4 were as follows:

GPU, Inc. and Subsidiary Companies
----------------------------------
                                                       (in thousands)
                                                ----------------------------
                                                   March 31,     December 31,
                                                     2000           1999
                                                -------------    ------------
Market transition charge (MTC) / basic
  generation service                               $2,397,387    $2,359,529
Competitive transition charge (CTC)                   808,736       803,064
Reserve for generation divestiture                    537,957       536,904
Power purchase contract loss not in CTC               369,290       369,290
Costs recoverable through distribution rates          291,005       296,842
Income taxes recoverable through future rates, net    286,910       280,268
Three Mile Island Unit 2 (TMI-2)
  decommissioning costs                               101,766       100,794
Societal benefits charge                              108,541       116,941
Above-market deferred NUG costs                      (214,318)     (252,348)
Net divestiture proceeds recoverable through MTC       59,414        37,542
Other, net                                             68,406        67,420
                                                    ---------     ---------
     Total regulatory assets, net                  $4,815,094    $4,716,246
                                                    =========     =========

JCP&L
-----

MTC / basic generation service                    $2,397,387     $2,359,529
Costs recoverable through distribution rates         291,005        296,842
Societal benefits charge                             108,541        116,941
Net divestiture proceeds recoverable through MTC      59,414         37,542
                                                   ---------       --------
     Total regulatory assets, net                 $2,856,347     $2,810,854
                                                   =========      =========

Met-Ed
------

CTC                                               $  597,280     $  591,316
Power purchase contract loss not in CTC              271,270        271,270
Reserve for generation divestiture                   141,029        137,037
Income taxes recoverable through future rates, net   124,311        115,713
TMI-2 decommissioning costs                           65,363         65,455
Other, net                                            66,207         52,074
                                                   ---------      ---------
     Total regulatory assets, net                 $1,265,460     $1,232,865
                                                   =========      =========



                                       41


<PAGE>


Penelec
-------

Reserve for generation divestiture                $  396,928     $  399,867
Above-market deferred NUG costs                     (228,934)      (252,893)
CTC                                                  211,456        211,748
Income taxes recoverable through future rates, net   162,599        164,555
Power purchase contract loss not in CTC               98,020         98,020
Other, net                                            53,218         51,230
                                                   ---------      ---------
     Total regulatory assets, net                 $  693,287     $  672,527
                                                   =========      =========

      Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting
for  Derivative  Instruments  and Hedging  Activities"  (as amended by FAS 137),
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging activities. FAS 133 requires that companies recognize all derivatives as
either assets or liabilities on the balance sheet and measure those  instruments
at fair value.  GPU will be required to include its derivative  transactions  on
its balance sheet at fair value,  and recognize the  subsequent  changes in fair
value as either  gains or losses in earnings  or report  them as a component  of
other comprehensive  income,  depending upon the intended use and designation of
the  derivative  as a hedge.  FAS 133 is  effective  for all fiscal  quarters of
fiscal years  beginning after June 15, 2000. GPU will adopt FAS 133 in the first
quarter  2001  and  is  in  the  process  of   evaluating   the  impact  of  the
implementation  of  this  statement.  GPU's  use of  derivative  instruments  is
intended to manage the risk of interest  rate,  foreign  currency and  commodity
price  fluctuations and may include such transactions as electricity and natural
gas forward and futures contracts,  foreign currency swaps,  interest rate swaps
and options.  GPU does not intend to hold or issue  derivative  instruments  for
trading purposes.

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

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

      In  December  1999,  the GPU Energy  companies  sold TMI-1 to AmerGen  for
approximately $100 million.  In addition,  JCP&L has agreed to sell Oyster Creek
to AmerGen for $10  million  and  reimbursement  of the cost  (estimated  at $88
million) of the next refueling outage. JCP&L's net investment, including nuclear
fuel,  in  Oyster  Creek as of March  31,  2000 and  December  31,  1999 was $10
million.  The net investment reflects the impairment  write-down  resulting from
the proposed sale of the facility 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 March 31, 2000 and December
31, 1999 was $59  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.

      Costs associated with the operation, maintenance and retirement of nuclear
plants  have  continued  to be  significant  and  less  predictable  than  costs
associated  with other  sources  of  generation,  in large part due to  changing
regulatory  requirements,   safety  standards,  availability  of  nuclear  waste
disposal  facilities and experience  gained in the construction and operation of
nuclear  facilities.  Also,  not all  risks  associated  with the  ownership  or
operation of nuclear facilities may be adequately insured or

                                       42


<PAGE>


insurable. Consequently, the recovery of costs associated with nuclear projects,
including  replacement  power,  any  unamortized  investment  at the end of each
plant's useful life (whether scheduled or premature), the carrying costs of that
investment and retirement costs, is not assured.

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 "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

                                       43


<PAGE>


to the District Court for further  proceedings.  In remanding these claims,  the
Third  Circuit held that the District  Court had erred in extending  its summary
judgment  decision to the other  plaintiffs and imposing on these plaintiffs the
District  Court's  finding  that  radiation  exposures  below  10 rems  were too
speculative  to establish a causal link to cancer.  The Court of Appeals  stated
that the non-test  case  plaintiffs  should be  permitted  to present  their own
individual  evidence that exposure to radiation  from the accident  caused their
cancers.

      GPU, Inc. and the GPU Energy companies  believe that the Third Circuit has
misinterpreted  the  record  before  the  District  Court as it  applies  to the
non-test  case  plaintiffs,  and in November  1999,  filed  petitions  seeking a
rehearing and  reconsideration  of the Court's decision  regarding the remaining
claims.  The "test case"  plaintiffs  also  requested a rehearing of the Court's
decision  upholding the dismissal of their claims. In January 2000, the Court of
Appeals  denied both  petitions.  In April 2000,  GPU,  Inc.  and the GPU Energy
companies filed a petition with the US Supreme Court seeking review of the Third
Circuit Court of Appeals decision. The plaintiffs have also sought Supreme Court
review. 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 to GPUN performed site-specific studies of TMI-2 and
Oyster Creek (updated in 1998), that considered various  decommissioning methods
and estimated the cost of decommissioning the radiological portions and the cost
of removal  of the  nonradiological  portions  of each  plant,  using the prompt
removal/dismantlement  method.  GPUN management has reviewed the methodology and
assumptions  used in these studies,  is in agreement with them, and believes the
results are reasonable. Under NRC regulations, JCP&L is making periodic payments
to  complete  the funding for Oyster  Creek  retirement  costs by the end of the
plant's  license  term of  2009.  The  TMI-2  funding  completion  date is 2014,
consistent  with TMI-2  remaining in long-term  storage.  The NRC may require an
acceleration of the decommissioning funding for Oyster Creek if the pending sale
is not completed and the plant is retired early.  The retirement  cost estimates
under the 1995  site-specific  studies,  assuming  decommissioning  of TMI-2 and
Oyster Creek in 2014 and 2009, respectively, are as follows (in 2000 dollars):

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

Radiological decommissioning              $439             $596
Nonradiological cost of removal             35*              32
                                           ---              ---
   Total                                  $474             $628
                                           ===              ===

* Net of $12.6 million spent as of March 31, 2000.

                                       44


<PAGE>


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

      The 1995 Oyster Creek  site-specific study was updated in 1998 in response
to the  previously  announced  potential  early closure of the plant in 2000. An
early shutdown  would increase the retirement  costs shown above to $637 million
($605   million   for   radiological   decommissioning   and  $32   million  for
nonradiological  cost of removal).  Both estimates include substantial  spending
for an on-site dry storage facility for spent nuclear fuel and significant costs
for storing the fuel until the DOE complies with the Nuclear Waste Policy Act of
1982.  For  additional  information,  see OTHER  COMMITMENTS  AND  CONTINGENCIES
section.

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

      The NJBPU has granted  JCP&L annual  revenues for Oyster Creek  retirement
costs of $22.5 million based on the 1995  site-specific  study.  In August 2000,
the  recovery  of Oyster  Creek  retirement  costs  escalates  to $34.4  million
annually if the plant is retired in 2000.

      In the event JCP&L does not  complete  the pending  sale of Oyster  Creek,
management  believes that any  retirement  costs,  in excess of those  currently
recognized for ratemaking purposes, should be recoverable from customers.

      The estimated  liabilities for TMI-2 future retirement costs (reflected as
Three Mile Island Unit 2 future costs on the Consolidated  Balance Sheets) as of
March 31, 2000 and  December  31,  1999 are $500  million  (JCP&L $125  million;
Met-Ed $250 million; Penelec $125 million) and $497 million (JCP&L $124 million;
Met-Ed $249  million;  Penelec $124  million),  respectively.  These amounts are
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 $27 million  (JCP&L $7 million;  Met-Ed $13 million;
Penelec $7 million) as of March 31, 2000 and December  31, 1999,  as a result of
TMI-2 entering long-term monitored storage in 1993.

      Offsetting the $500 million liability as of March 31, 2000 is $199 million
(JCP&L $15 million; Met-Ed $147 million;  Penelec $37 million), which management
believes is  probable of recovery  from  customers  and  included in  Regulatory
assets,  net on the  Consolidated  Balance Sheets,  and $354 million (JCP&L $113
million; Met-Ed $145 million;  Penelec $96 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  estimates. In addition, JCP&L is recovering its share of
TMI-2  incremental  monitored  storage  costs.  The PaPUC  Restructuring  Orders
granted Met-Ed and Penelec  recovery of TMI-2  decommissioning  costs as part of
the CTC,  but also  allowed  Met-Ed and Penelec to defer as a  regulatory  asset
those amounts that are above the level provided for in the CTC.

                                       45


<PAGE>


      As of March 31, 2000, the  accident-related  portion of TMI-2 radiological
decommissioning  costs is  considered  to be $78 million  (JCP&L $19.5  million;
Met-Ed  $39  million;  Penelec  $19.5  million),  which  is  based  on the  1995
site-specific study estimates (in 2000 dollars).

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

                                    INSURANCE
                                    ---------

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

      The  decontamination  liability,  premature  decommissioning  and property
damage  insurance  coverage for Oyster Creek totals $2.75 billion.  In addition,
GPU has  purchased  property and  decontamination  insurance  coverage for TMI-2
totaling  $150 million.  In accordance  with NRC  regulations,  these  insurance
policies  generally require that proceeds first be used for stabilization of the
reactors and then to pay for  decontamination  and debris removal expenses.  Any
remaining  amounts  available under the policies may then be used for repair and
restoration  costs  and  decommissioning  costs.  Consequently,  there can be no
assurance that in the event of a nuclear  incident,  property  damage  insurance
proceeds would be available for the repair and restoration of that station.

      The  Price-Anderson  Act limits  GPU's  liability  to third  parties for a
nuclear incident at Oyster Creek 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.  Under secondary
financial  protection,  a nuclear incident at any licensed nuclear power reactor
in the country,  including Oyster Creek,  could result in an assessment of up to
$88 million per incident,  subject to an annual  maximum  payment of $10 million
per incident per reactor.  Although  TMI-2 is exempt from this  assessment,  the
plant is still covered by the provisions of the Price-Anderson  Act. In addition
to the  retrospective  premiums  payable under the  Price-Anderson  Act, the GPU
Energy companies are also subject to retrospective  premium assessments of up to
$10.5 million for insurance  policies  currently in effect applicable to nuclear
operations and  facilities.  The GPU Energy  companies are also subject to other
retrospective  premium assessments related to policies applicable to TMI-1 prior
to the sale of the plant to AmerGen.

      JCP&L has  insurance  coverage  for  incremental  replacement  power costs
should an accident-related outage at Oyster Creek occur. Coverage would commence
after a 12-week waiting period at $2.1 million per week for 52 weeks, decreasing
to 80% of such amount for the next 110 weeks.

                                       46


<PAGE>


                              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 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       4         2        1          1        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
March 31, 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 million of past response costs as of December 31,
1999. The EPA estimates the total Site

                                       47


<PAGE>


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 March 31,
2000, if the statutory maximum were applied, the total amount of penalties would
be approximately $36.5 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.

      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 March
31,  2000,  JCP&L has spent  approximately  $37 million in  connection  with the
cleanup  of  these  sites.   In  addition,   JCP&L  has  recorded  an  estimated
environmental  liability  of $52 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 $52
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 March 31, 2000,  JCP&L had
recorded on its  Consolidated  Balance Sheet a regulatory  asset of $45 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

                                       48


<PAGE>


Jersey  utilities and their response to power outages.  This  investigation  was
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.  JCP&L has
begun to act on these  recommendations.  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 Court's decision on primary jurisdiction. The NJBPU has filed a brief
with the Appellate  Division  stating its view that its adoption of the Phase II
Report completed its exercise of its primary jurisdiction.  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  who have  reserved  their rights to
contest coverage under GPU's insurance policies for losses, which GPU may incur.
There can be no assurance as to the outcome of these matters.

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 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.

                                       49


<PAGE>


     GPU GasNet and TPAA have filed  answers  denying  liability to Esso,  which
could be material, and intend shortly to file an answer denying liability to the
State and TPA. GPU GasNet and TPAA have  notified  their  insurance  carriers of
this action. The insurers have reserved their rights to deny coverage. There can
be no assurance as to the outcome of this matter.

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
March 31, 2000,  GPU,  Inc.'s  investment in GPU Electric and the GPUI Group was
$1.06 billion and $250.2 million,  respectively.  As of that date, GPU, Inc. has
also  guaranteed an additional  $1.05 billion and $29.9 million  (including $8.7
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

      On May 5, 2000, final bids for the purchase of GPU PowerNet and GPU GasNet
(the  Australian  companies)  were received.  GPU had  previously  announced its
intention to sell all, or at least 50%, of the Australian  companies,  for which
it paid  approximately $1.9 billion (GPU PowerNet) and $675 million (GPU GasNet)
in 1997 and 1999,  respectively.  GPU is continuing  to evaluate  these bids and
negotiate with bidders. In the event the sale is consummated, GPU estimates that
it will receive less than book value for the assets, in an amount which would be
material,  in addition to recognizing a foreign  exchange loss of  approximately
$132 million,  pre-tax.  GPU also expects to seek  additional  funds in order to
repay loans in  connection  with the  acquisition  of the  Australian  companies
either through new financings or other asset sales. If these efforts to complete
the sale are  unsuccessful,  GPU intends to pursue other financing  arrangements
and/or asset sales so that it may maintain its debt ratios  consistent  with the
requirements of its various loan agreements.

      On June 2,  2000,  approximately  $225  million  of GPU  GasNet  bank debt
matures.  GPU GasNet has a commitment  from a bank for a  three-month  extension
during  which time it will seek  longer  term  refinancing  of the debt.  GPU is
unable to evaluate what effect not selling the Australian  companies  would have
on the terms of those companies' future financing requirements.

    In addition,  GPU had planned to use the net cash proceeds  raised from the
sales of the Australian  companies and from JCP&L's planned asset securitization
financing  to  repay  short-term  debt  incurred  in  connection  with  domestic
acquisitions and investments made during 2000. An inability to complete the sale
of the Australian  companies,  or a sale for substantially  less than their book
value,  coupled with a delay in the  securitization  financing (due to a pending
challenge  to  another  utility's  NJBPU  restructuring  order),  will delay the
repayment  of this  outstanding  debt and, at least in the short term,  restrict
GPU's access to funds for its acquisition program.

      Midlands 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  Midlands)
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 will be  extended,
principal  and  interest  payments  deferred,  and the  sponsors  will  fund the
completion of the plant through the remaining equity  contribution  commitments.
Testing of the plant has begun, but the start of commercial  operations has been
further delayed pending the resolution of certain technical problems,  which are
being addressed.

      Uch has renegotiated several of the project agreements with the Government
of  Pakistan  and its  agencies.  In April  2000,  Uch  signed a  Memorandum  of
Understanding with Pakistani authorities, in which it agreed,

                                       50


<PAGE>


among other things, to accept a reduction in the power purchase tariff averaging
approximately  8% over the project term.  The agreement also extends the term of
the  project  from 22 to 30 years.  Commercial  operations  are now  planned  to
commence  on June 1, 2000.  There  remains  risk that  project  revenues  may be
delayed due to the poor economic situation in Pakistan.

      Midlands'  investment  in the Uch Power  Project as of March 31,  2000 was
approximately $34.7 million,  plus a guarantee letter of credit of $5.2 million,
and its share of the projected  completion  costs  represents an additional $6.3
million  commitment.  Cinergy Corp. has agreed to fund up to an aggregate of $20
million of the  required  capital  contributions  and/or  certain  future  "cash
losses,"  which  could  be  incurred  on the  Uch  Power  Project.  Cinergy  has
reimbursed  Midlands for $3.7 million of capital  contributions  as of March 31,
2000,  leaving a remaining  commitment of up to $16.3  million.  There can be no
assurance as to the outcome of this matter.

      As part of the 1999 sale of the Midlands' supply business and the purchase
of the  50% of  Midlands  that  GPU  did  not  already  own,  certain  long-term
obligations  under natural gas supply  contracts  were  retained.  Most of these
contracts  were at fixed prices in excess of the market price of gas as of March
31, 2000. A liability was  previously  established  for the estimated loss under
such contracts,  which extend to September  2005. The estimated  liability as of
March 31, 2000 was $47 million.

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,  an  investment  in which GPU Power has a 29%  interest)  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.
The failure to give notice of this Special  Requirement  to the US Export Import
Bank may be  asserted  as an event of  default  under  the loan  agreement.  The
occurrence of an event of default would  entitle  TEBSA's  lenders to accelerate
the payment of outstanding loans of TEBSA and require payment of certain standby
equity commitments by TEBSA's shareholders and equity guarantors,  which include
a  subsidiary  of GPU Power and GPU,  Inc.,  respectively.  The lenders have not
asserted  that an event of default has occurred or  indicated  whether they will
pursue remedies under the project financing documents. As of March 31, 2000, GPU
Power has an  investment of  approximately  $85.5 million in TEBSA and GPU, Inc.
has  guaranteed  $21.3 million in standby  equity  commitments.  There can be no
assurance as to the outcome of these matters.

GPU Telcom

      In March 2000, GPU, Inc.  announced its  participation  in America's Fiber
Network LLC (AFN),  of which GPU, Inc.  will own 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 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.


                                       51


<PAGE>


Other:
-----

      Concurrent  with GPU's July 1999  acquisition of the 50% of Midlands 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,  Midlands had recorded a liability of
$28.6  million  related to previous cost  reduction  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 the first quarter 2000, a change in the investment  return  assumptions,
due to better than expected investment  performance,  resulted in a reduction of
approximately  $6.9 million in the  estimated  liability,  from $29.5 million at
December 31, 1999 to $22.6 million. Consequently, goodwill was credited for $3.5
million (50% of the change in estimate)  and $3.5 million was credited to income
in the first  quarter 2000.  Also in the first  quarter 2000,  $11.3 million was
paid to 272 employees.  The remaining  severance  liability of $11.3 million for
the remaining 187 employees is included in Other current liabilities,  and $28.3
million  to be  funded  out of  pension  plan  assets is  included  as a pension
liability.  Management  expects  the plan  will be  substantially  completed  by
September 2000.

      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 $26.8 million as of March 31, 2000.
GPU, Inc. has guaranteed up to $19.1 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.  AmerGen has assumed all liability for disposal costs related
to spent fuel  generated  after its  purchase  of TMI-1 and has agreed to assume
this liability for Oyster Creek  following its purchase of that plant.  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.  The DOE's  inability to accept spent
nuclear fuel could have a material  impact on GPU's  results of  operations,  as
additional  costs may be incurred to build and maintain  interim on-site storage
at Oyster  Creek.  In June 1997, a consortium of electric  utilities,  including
GPUN, filed a license  application  with the NRC seeking  permission to build an
interim above-ground disposal facility for spent nuclear fuel in Utah. There can
be no assurance as to the outcome of these matters.

                                       52


<PAGE>


     GPU, Inc. and consolidated  affiliates have approximately  10,300 employees
worldwide,  of whom 6,100 are  employed in the US and 3,500 are  employed in the
United  Kingdom  (UK).  The  majority of the US workforce is employed by the GPU
Energy  companies,  of which  approximately  3,300 are represented by unions for
collective   bargaining  purposes.  In  the  UK,  approximately  3,100  Midlands
employees are  represented  by unions,  and the terms and  conditions of various
bargaining  agreements are generally  reviewed  annually,  on April 1. JCP&L and
Penelec's collective bargaining agreements with the International Brotherhood of
Electrical  Workers  expire on October 31, 2002 and May 14, 2002,  respectively.
Met-Ed's collective  bargaining agreement with the International  Brotherhood of
Electrical  Workers  expired  April 30, 2000,  and  negotiations  are  currently
underway.  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

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

     In April 2000,  following the receipt of SEC approval,  GPU, Inc. completed
its acquisition of MYR Group Inc. (MYR) for approximately  $215 million.  MYR, a
suburban Chicago-based infrastructure construction 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 will be accounted for under the
purchase method of accounting.  To the extent the total acquisition cost exceeds
the  estimated  value of net assets  acquired,  goodwill  will be  recorded  and
amortized on a straight-line basis over 40 years.

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  futures  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

                                       53


<PAGE>


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 March 31, 2000,  these  agreements
covered approximately $1.4 billion of debt, including commercial paper, and were
scheduled to expire on various dates through November 2007.  Differences between
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,  including  commercial  paper, to fixed
rate debt.  For the quarter ended March 31, 2000,  fixed rate  interest  expense
incurred in  connection  with the swap  agreements  exceeded the  variable  rate
interest  expense that would have been  incurred had the swaps not been in place
by approximately $1.9 million.

      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
March 31, 2000, these currency swap agreements covered British Pound 517 million
(US $850  million) of debt.  Interest  expense would have been British Pound 9.1
million (US $14.5  million)  as compared to British  Pound 9.8 million (US $15.6
million) for the quarter ended March 31, 2000 had these  agreements  not been in
place.

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 March 31, 2000, the unamortized

                                       54


<PAGE>


balance of the swap  contract was valued at $53.3  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.  A  corresponding  amount was
recorded in deferred  revenue (which is included in Other - Current  Liabilities
on the  Consolidated  Balance  Sheets) and will be  recognized  to income over a
period not to exceed 10 years.

      Concurrent with the establishment of a competitive  market for electricity
in New York (Power  Exchange)  and meeting  specific  trading  volume  criteria,
certain rights  between  Onondaga and NIMO expire under the power put agreement.
As a result, in 2000, GPU International, Inc. expects to recognize in income all
unamortized  deferred  revenue,  including that from the indexed swap agreement,
which will be largely  offset by an  impairment  of the Onondaga  facility and a
provision for out-of-market gas transportation costs.

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.

                                       55


<PAGE>
<TABLE>
<CAPTION>


GPU, Inc. and Subsidiary Companies

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 three months ended March 31, 2000
-----------------------------------------
<S>                                       <C>             <C>         <C>        <C>       <C>           <C>               <C>
Domestic Segments:
  Electric Utility Operations
     (GPU Energy)                           $ 851,531    $ 83,698   $  51,427   $ 66,192     $ 96,432   $13,497,216    $   54,001
  Independ Power Prod
     (GPU International)                       23,010       2,332         254        828        1,251       371,149         4,183
  Electric Retail Energy Sales
     (GPU AR)                                  23,329           -          -       1,120        1,645        24,329             7
                                              -------      ------      ------     ------      ------     ----------        ------
     Subtotal                                 897,870      86,030      51,681     68,140      99,328     13,892,694        58,191
                                             -------       ------      ------     ------      ------     ----------        ------

Foreign Segments:
  Electric/Gas Utility Operations:
     (GPU Electric)
   Electric Distribution -
     United Kingdom                           166,298      25,562       46,626    19,068      33,043      4,701,666         44,010
   Electric Distribution -
     Argentina                                 43,422       3,313       7,208        400         745        611,841          5,199
   Electric Transmission -
     Australia                                 47,208      10,271      24,014      1,589       2,952      1,728,898          1,689
   Gas Transmission -
     Australia                                 11,942       2,805      10,543     (1,426)     (2,004)       744,107          1,936
   Independ Power Prod - S. America
     (GPU Power)                                9,704       1,614       1,076      1,178       2,135        244,856            26
                                              -------       ------      ------     ------      ------     ----------        ------
     Subtotal                                 278,574      43,565      89,467     20,809      36,871      8,031,368         52,860
                                              -------       ------      ------     ------      ------     ----------        ------

Corporate and Eliminations                         -           -        1,815          -      (5,201)       (64,407)          500
                                              -------       ------      ------     ------      ------     ----------        ------

     Consolidated Total                    $1,176,444  $  129,595  $  142,963   $ 88,949  $  130,998    $21,859,655      $ 111,551
                                           ==========  ==========  ==========   ========  ==========    ===========      =========

For the three months ended  March 31, 1999
------------------------------------------

Domestic Segments:
  Electric Utility Operations
     (GPU Energy)                          $  967,895  $  104,882     $60,264     86,496  $  120,557    $13,244,301     $   60,276
  Independ Power Prod
     (GPU International)                       17,958       (533)         454      2,184       3,511        359,374            239
  Electric Retail Energy Sales
     (GPU AR)                                  16,460          -           -       1,081       1,681         24,630             14
                                            ---------     -------      ------     ------     -------     ----------        ------
     Subtotal                               1,002,313     104,349      60,718     89,761     125,749     13,628,305         60,529
                                            ---------     -------      ------     ------     -------     ----------        ------

Foreign Segments:
  Electric/Gas Utility Operations:
     (GPU Electric)
   Electric Distribution -
      United Kingdom                              304          -        4,927     13,395      33,999(c)   4,687,476            -
   Electric Distribution -
      Argentina                                10,772       1,165       1,866        128         293        579,907         5,540
   Electric Transmission -
      Australia                                47,188      10,384     24,885       1,460       3,292      1,824,309            -
   Gas Transmission -
      Australia                                     -           -           -          -           -        795,527            -
   Independ Power Prod - S. America
     (GPU Power)                                8,864       1,346         772      1,062       1,597        238,644        16,549
                                            ---------     -------      ------     ------     -------     ----------        ------
     Subtotal                                  67,128      12,895      32,450     16,045      39,181      8,125,863        22,089
                                            ---------     -------      ------     ------     -------     ----------        ------
Corporate and Eliminations                       (738)          -          55          -      (2,003)       (36,086)            -
                                            ---------     -------      ------     ------     -------     ----------        ------
     Consolidated Total                    $1,068,703  $  117,244  $   93,223   $105,806  $  162,927    $21,718,082      $ 82,618
                                           ==========  ==========  ==========   ========  ==========    ===========      ========
<FN>

(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 $52.5  million,  for the  period  prior to the  consolidation  of
     Midlands.
</FN>
</TABLE>


                                       56


<PAGE>


5.    COMPREHENSIVE INCOME

      For the three months ended March 31, 2000 and 1999,  comprehensive  income
is summarized below.

                                                           (in thousands)
                                                            Three months
                                                            Ended March 31,
                                                           -----------------
GPU, Inc. and Subsidiary Companies                         2000        1999
----------------------------------                         ----        ----

Net income                                              $130,998    $ 190,719
                                                         -------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments           14,089       (2,195)
     Foreign currency translation                        (39,487)       1,452
                                                         -------     --------
       Total other comprehensive income/(loss)           (25,398)        (743)
                                                         -------     --------
Comprehensive income                                    $105,600    $ 189,976
                                                         =======     ========

JCP&L
-----

Net income                                              $ 45,570    $  53,697
                                                         -------      -------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments             -            -
                                                         -------      ----
Comprehensive income                                    $ 45,570    $  53,697
                                                         =======      =======

Met-Ed
------

Net income                                              $ 26,493    $  32,832
                                                         -------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments             (728)       1,646
                                                         -------     --------
Comprehensive income                                    $ 25,765    $  34,478
                                                         =======     ========

Penelec
-------
Net income                                              $ 26,942    $  65,490
                                                         -------     --------
Other comprehensive income/(loss), net of tax:
     Net unrealized gains/(loss) on investments             (366)         752
                                                         -------     --------
Comprehensive income                                    $ 26,576    $  66,242
                                                         =======     ========




                                       57


<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 April 18, 2000, under Item 5 (Other Events).
                Dated May 1, 2000, under Item 5 (Other Events).




                                       58


<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.



May 12, 2000                  By:  /s/ B. L. Levy
                                   --------------------------------
                                   B. L. Levy, Senior Vice President and
                                   Chief Financial Officer

May 12, 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



May 12, 2000                  By:  /s/ M. J.Chesser
                                   --------------------------------
                                   M. J. Chesser, President and
                                   Chief Executive Officer


May 12, 2000                  By:  /s/ M. P. O'Flynn
                                   --------------------------------
                                   M. P. O'Flynn, Vice  President- Finance
                                   and Rates & Comptroller
                                   (principal accounting officer)


                                       59