UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**







[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934





For
      the
      quarterly period ended **June
      30, 2006**





or





[
      ]
      TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934





For
      the
      transition period from _______ to _______




**Exact
                  name of registrant as specified in its charter,****Commission**
              
              **state
                  of incorporation, address of principal**
              
              **I.R.S.
                  Employer****File
                  Number**
              
              **executive
                  offices and telephone number**
              
              **Identification
                  Number**001-32206
              
              **GREAT
                  PLAINS ENERGY INCORPORATED**
              
              43-1916803(A
                  Missouri Corporation)1201
                  Walnut StreetKansas
                  City, Missouri 64106(816)
                  556-2200www.greatplainsenergy.com000-51873
              
              **KANSAS
                  CITY POWER & LIGHT COMPANY**
              
              44-0308720(A
                  Missouri Corporation)1201
                  Walnut StreetKansas
                  City, Missouri 64106(816)
                  556-2200www.kcpl.com






Indicate
                  by check mark whether the registrant (1) has filed all reports
                  required to
                  be filed by Section 13 or 15(d) of theSecurities
                  Exchange Act of 1934 during the preceding 12 months (or for such
                  shorter
                  period that the registrant was required tofile
                  such reports), and (2) has been subject to such filing requirements
                  for
                  the past 90 days.Great
                  Plains Energy Incorporated
              Yes
              X
              No
              _
              
              Kansas
                  City Power & Light Company
              Yes
              X
              NoIndicate
                  by check mark whether the registrant is a large accelerated filer,
                  an
                  accelerated filer, or a non-accelerated filer. Seedefinition
                  of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
                  Exchange Act.Great
                  Plains Energy Incorporated
              Large
                  accelerated filer
              X
              Accelerated
                  filer
              _
              Non-accelerated
                  filer
              _Kansas
                  City Power & Light Company
              Large
                  accelerated filer
              _
              Accelerated
                  filer
              _
              Non-accelerated
                  filer
              XIndicate
                  by check mark whether the registrant is a shell company (as defined
                  in
                  Rule 12b-2 of the Exchange Act).Great
                  Plains Energy Incorporated
              Yes
              _
              No
              X
              
              Kansas
                  City Power & Light Company
              Yes
              _
              No
              XOn August
                  1, 2006, Great Plains Energy Incorporated had 80,238,266 shares
                  of common
                  stock outstanding.On August
                  1, 2006, Kansas City Power & Light Company had one share of common
                  stock outstanding, which was held byGreat
                  Plains Energy Incorporated.


Great
        Plains Energy Incorporated and Kansas City Power & Light Company (KCP&L)
        separately file this combined Quarterly Report on Form 10-Q. Information
        contained herein relating to an individual registrant and its subsidiaries
        is
        filed by such registrant on its own behalf. Each registrant makes
        representations only as to information relating to itself and its
        subsidiaries.
 
 In
        March
        2006, KCP&L filed a registration statement to register its common stock
        under Section 12(g) of the Securities Exchange Act of 1934, as amended (Exchange
        Act). This registration statement became effective in April 2006 and KCP&L
        is now required to file reports, including quarterly reports on Form 10-Q,
        under
        Section 13(a) of the Exchange Act.
 
 This
        report should be read in its entirety. No one section of the report deals
        with
        all aspects of the subject matter. It should be read in conjunction with
        the
        consolidated financial statements and related notes and with the management’s
        discussion and analysis included in the companies’ 2005 Form 10-K.
 
 **CAUTIONARY
        STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION**
 Statements
        made in this report that are not based on historical facts are forward-looking,
        may involve risks and uncertainties, and are intended to be as of the date
        when
        made. Forward-looking statements include, but are not limited to, statements
        regarding projected delivered volumes and margins, the outcome of regulatory
        proceedings, cost estimates of the comprehensive energy plan and other matters
        affecting future operations. In connection with the safe harbor provisions
        of
        the Private Securities Litigation Reform Act of 1995, the registrants are
        providing a number of important factors that could cause actual results to
        differ materially from the provided forward-looking information. These important
        factors include: future economic conditions in the regional, national and
        international markets, including but not limited to regional and national
        wholesale electricity markets; market perception of the energy industry and
        Great Plains Energy; changes in business strategy, operations or development
        plans; effects of current or proposed state and federal legislative and
        regulatory actions or developments, including, but not limited to, deregulation,
        re-regulation and restructuring of the electric utility industry; decisions
        of
        regulators regarding rates KCP&L can charge for electricity; adverse changes
        in applicable laws, regulations, rules, principles or practices governing
        tax,
        accounting and environmental matters including, but not limited to, air and
        water quality; financial market conditions and performance including, but
        not
        limited to, changes in interest rates and in availability and cost of capital
        and the effects on pension plan assets and costs; credit ratings; inflation
        rates; effectiveness of risk management policies and procedures and the ability
        of counterparties to satisfy their contractual commitments; impact of terrorist
        acts; increased competition including, but not limited to, retail choice
        in the
        electric utility industry and the entry of new competitors; ability to carry
        out
        marketing and sales plans; weather conditions including weather-related damage;
        cost, availability, quality and deliverability of fuel; ability to achieve
        generation planning goals and the occurrence and duration of unplanned
        generation outages; delays in the anticipated in-service dates and cost
        increases of additional generating capacity; nuclear operations; ability
        to
        enter new markets successfully and capitalize on growth opportunities in
        non-regulated businesses and the effects of competition; application of critical
        accounting policies, including, but not limited to, those related to derivatives
        and pension liabilities; workforce risks including compensation and benefits
        costs; performance of projects undertaken by non-regulated businesses and
        the
        success of efforts to invest in and develop new opportunities and other risks
        and uncertainties.
  
 This
        list
        of factors is not all-inclusive because it is not possible to predict all
        factors. Part II Item 1A. Risk Factors included in this report should be
        carefully read for further understanding of potential risks to the companies.
        Other sections of this report and other periodic reports filed by the companies
        with the Securities and Exchange Commission (SEC) should also be read for
        more
        information regarding risk factors.
  2
 **GLOSSARY
          OF TERMS**
  The
          following is a glossary of frequently used abbreviations or acronyms that
          are
          found throughout this report.
  **Abbreviation
                      or Acronym**
                  
                  **Definition****BART**
                  
                  Best
                      available retrofit technology**CAIR**
                  
                  Clean
                      Air Interstate Rule**CAMR**
                  
                  Clean
                      Air Mercury Rule**CO****2**
                  
                  Carbon
                      Dioxide**Company**
                  
                  Great
                      Plains Energy Incorporated and its subsidiaries**Consolidated
                      KCP&L**
                  
                  KCP&L
                      and its wholly owned subsidiaries**Digital
                      Teleport**
                  
                  Digital
                      Teleport, Inc.**DOE**
                  
                  Department
                      of Energy**DTI**
                  
                  DTI
                      Holdings, Inc. and its subsidiaries, Digital Teleport, Inc.
                    and
                      Digital Teleport of Virginia, Inc.**EBITDA**
                  
                  Earnings
                      before interest, income taxes, depreciation and
                      amortization**EEI**
                  
                  Edison
                      Electric Institute**EIRR**
                  
                  Environmental
                      Improvement Revenue Refunding**EPA**
                  
                  Environmental
                      Protection Agency**EPS**
                  
                  Earnings
                      per common share**FASB**
                  
                  Financial
                      Accounting Standards Board**FELINE
                      PRIDES****SM**
                  
                  Flexible
                      Equity Linked Preferred Increased Dividend Equity Securities,a
                      service mark of Merrill Lynch & Co., Inc.**FERC**
                  
                  The
                      Federal Energy Regulatory Commission**FIN**
                  
                  Financial
                      Accounting Standards Board Interpretation**FSS**
                  
                  Forward
                      Starting Swap**Great
                      Plains Energy**
                  
                  Great
                      Plains Energy Incorporated and its subsidiaries**HSS**
                  
                  Home
                      Service Solutions Inc., a wholly owned subsidiary of KCP&L**IEC**
                  
                  Innovative
                      Energy Consultants Inc., a wholly owned subsidiary
                    of
                      Great Plains Energy**ISO**
                  
                  Independent
                      System Operator**KCC**
                  
                  The
                      State Corporation Commission of the State of Kansas**KCP&L**
                  
                  Kansas
                      City Power & Light Company, a wholly owned subsidiary
                    of
                      Great Plains Energy**KLT
                      Gas**
                  
                  KLT
                      Gas Inc., a wholly owned subsidiary of KLT Inc.**KLT
                      Inc.**
                  
                  KLT
                      Inc., a wholly owned subsidiary of Great Plains Energy**KLT
                      Investments**
                  
                  KLT
                      Investments Inc., a wholly owned subsidiary of KLT Inc.**KLT
                      Telecom**
                  
                  KLT
                      Telecom Inc., a wholly owned subsidiary of KLT Inc.**KW**
                  
                  Kilowatt**kWh**
                  
                  Kilowatt
                      hour**MAC**
                  
                  Material
                      Adverse Change**MD&A**
                  
                  Management’s
                      Discussion and Analysis of Financial Condition andResults
                      of Operations**MISO**
                  
                  Midwest
                      Independent Transmission System Operator, Inc.**MPSC**
                  
                  Public
                      Service Commission of the State of Missouri**MW**
                  
                  Megawatt
 3




**Abbreviation
                  or Acronym**
              
              **Definition****MWh**
              
              Megawatt
                  hour**NEIL**
              
              Nuclear
                  Electric Insurance Limited**NO****x**
              
              Nitrogen
                  Oxide**NPNS**
              
              Normal
                  Purchases and Normal Sales**NRC**
              
              Nuclear
                  Regulatory Commission**OCI**
              
              Other
                  Comprehensive Income**PJM**
              
              PJM
                  Interconnection**PRB**
              
              Powder
                  River Basin**Receivables
                  Company**
              
              Kansas
                  City Power & Light Receivables Company, a wholly owned
                subsidiary of KCP&L**RTO**
              
              Regional
                  Transmission Organization**SEC**
              
              Securities
                  and Exchange Commission**SECA**
              
              Seams
                  Elimination Charge Adjustment**SE
                  Holdings**
              
              SE
                  Holdings, L.L.C.**Services**
              
              Great
                  Plains Energy Services Incorporated**SFAS**
              
              Statement
                  of Financial Accounting Standards**SIP**
              
              State
                  Implementation Plan**SO****2**
              
              Sulfur
                  Dioxide**SPP**
              
              Southwest
                  Power Pool, Inc.**STB**
              
              Surface
                  Transportation Board**Strategic
                  Energy**
              
              Strategic
                  Energy, L.L.C., a subsidiary of KLT Energy Services**T
                  - Locks**
              
              Treasury
                  Locks**Union
                  Pacific**
              
              Union
                  Pacific Railroad Company**WCNOC**
              
              Wolf
                  Creek Nuclear Operating Corporation**Wolf
                  Creek**
              
              Wolf
                  Creek Generating Station**Worry
                  Free**
              
              Worry
                  Free Service, Inc., a wholly owned subsidiary of
                  HSS




4


**PART
      I - FINANCIAL INFORMATION**


**ITEM
      1. CONSOLIDATED FINANCIAL STATEMENTS**




**GREAT
                PLAINS ENERGY****Consolidated
                Balance Sheets**(Unaudited)**June
                30**
            
            December
                31**2006**
            
            2005**ASSETS**
            (thousands)**Current
                Assets**Cash
                and cash equivalents
            **$**
            **96,176**
            
            $
            103,068Restricted
                cash
            
            **-**
            
            
            1,900Receivables,
                net
            
            **290,330**
            
            
            259,043Fuel
                inventories, at average cost
            
            **29,912**
            
            
            17,073Materials
                and supplies, at average cost
            
            **58,193**
            
            
            57,017Deferred
                income taxes
            
            **31,469**
            
            
            **-**Assets
                of discontinued operations
            
            **-**
            
            
            627Derivative
                instruments
            
            **14,944**
            
            
            39,189Other
            
            **18,184**
            
            
            13,001Total
            
            **539,208**
            
            
            490,918**Nonutility
                Property and Investments**Affordable
                housing limited partnerships
            
            **25,440**
            
            
            28,214Nuclear
                decommissioning trust fund
            
            **94,991**
            
            
            91,802Other
            
            **16,284**
            
            
            17,291Total
            
            **136,715**
            
            
            137,307**Utility
                Plant, at Original Cost**Electric
            
            **5,049,618**
            
            
            4,959,539Less-accumulated
                depreciation
            
            **2,392,022**
            
            
            2,322,813Net
                utility plant in service
            
            **2,657,596**
            
            
            2,636,726Construction
                work in progress
            
            **219,646**
            
            
            100,952Nuclear
                fuel, net of amortization of $123,062 and $115,240
            
            **41,355**
            
            
            27,966Total
            
            **2,918,597**
            
            
            2,765,644**Deferred
                Charges and Other Assets**Regulatory
                assets
            
            **205,195**
            
            
            179,922Prepaid
                pension costs
            
            **83,514**
            
            
            98,295Goodwill
            
            **88,139**
            
            
            87,624Derivative
                instruments
            
            **4,281**
            
            
            21,812Other
            
            **45,526**
            
            
            52,204Total
            
            **426,655**
            
            
            439,857Total
            **$**
            **4,021,175**
            
            $
            3,833,726The
                accompanying Notes to Consolidated Financial Statements are an integral
                part of these statements.




5




**GREAT
                PLAINS ENERGY****Consolidated
                Balance Sheets**(Unaudited)**June
                30**
            
            December
                31**2006**
            
            2005**LIABILITIES
                AND CAPITALIZATION**
            (thousands)**Current
                Liabilities**Notes
                payable
            **$**
            **-**
            
            $
            6,000Commercial
                paper
            
            **82,400**
            
            
            31,900Current
                maturities of long-term debt
            
            **389,902**
            
            
            1,675Accounts
                payable
            
            **215,926**
            
            
            231,496Accrued
                taxes
            
            **61,458**
            
            
            37,140Accrued
                interest
            
            **13,680**
            
            
            13,329Accrued
                payroll and vacations
            
            **29,385**
            
            
            36,024Accrued
                refueling outage costs
            
            **14,996**
            
            
            8,974Deferred
                income taxes
            
            **-**
            
            
            1,351Supplier
                collateral
            
            **-**
            
            
            1,900Liabilities
                of discontinued operations
            
            **-**
            
            
            64Derivative
                instruments
            
            **50,067**
            
            
            7,411Other
            
            **24,601**
            
            
            25,658Total
            
            **882,415**
            
            
            402,922**Deferred
                Credits and Other Liabilities**Deferred
                income taxes
            
            **608,070**
            
            
            621,359Deferred
                investment tax credits
            
            **28,175**
            
            
            29,698Asset
                retirement obligations
            
            **153,697**
            
            
            145,907Pension
                liability
            
            **89,667**
            
            
            87,355Regulatory
                liabilities
            
            **73,899**
            
            
            69,641Derivative
                instruments
            
            **27,127**
            
            
            7,750Other
            
            **63,602**
            
            
            65,787Total
            
            **1,044,237**
            
            
            1,027,497**Capitalization**Common
                shareholders' equityCommon
                stock-150,000,000 shares authorized without par value80,267,216
                and 74,783,824 shares issued, stated value
            
            **890,425**
            
            
            744,457Retained
                earnings
            
            **458,291**
            
            
            488,001Treasury
                stock-45,680 and 43,376 shares, at cost
            
            **(1,367**
            **)**
            
            (1,304
            )Accumulated
                other comprehensive loss
            
            **(43,020**
            **)**
            
            (7,727
            )Total
            
            **1,304,329**
            
            
            1,223,427Cumulative
                preferred stock $100 par value3.80%
                - 100,000 shares issued
            
            **10,000**
            
            
            10,0004.50%
                - 100,000 shares issued
            
            **10,000**
            
            
            10,0004.20%
                - 70,000 shares issued
            
            **7,000**
            
            
            7,0004.35%
                - 120,000 shares issued
            
            **12,000**
            
            
            12,000Total
            
            **39,000**
            
            
            39,000Long-term
                debt (Note 8)
            
            **751,194**
            
            
            1,140,880Total
            
            **2,094,523**
            
            
            2,403,307**Commitments
                and Contingencies (Note 13)**Total
            **$**
            **4,021,175**
            
            $
            3,833,726The
                accompanying Notes to Consolidated Financial Statements are an integral
                part of these statements.




6






**GREAT
                PLAINS ENERGY****Consolidated
                Statements of Income**(Unaudited)**Three
                Months Ended**
            
            **Year
                to Date****June
                30**
            
            **June
                30****2006**
            
            2005
            
            **2006**
            
            2005**Operating
                Revenues**
            (thousands,
                except per share amounts)Electric
                revenues - KCP&L
            **$**
            **290,891**
            
            $
            272,083
            
            **$**
            **531,281**
            
            $
            505,298Electric
                revenues - Strategic Energy
            
            **350,506**
            
            
            359,172
            
            
            **668,518**
            
            
            670,488Other
                revenues
            
            **707**
            
            
            466
            
            
            **1,490**
            
            
            1,049Total
            
            **642,104**
            
            
            631,721
            
            
            **1,201,289**
            
            
            1,176,835**Operating
                Expenses**Fuel
            
            **56,197**
            
            
            44,803
            
            
            **103,597**
            
            
            86,293Purchased
                power - KCP&L
            
            **8,570**
            
            
            16,797
            
            
            **13,687**
            
            
            28,287Purchased
                power - Strategic Energy
            
            **329,347**
            
            
            338,836
            
            
            **655,105**
            
            
            616,702Skill
                set realignment costs (Note 9)
            
            **5,123**
            
            
            -
            
            
            **14,516**
            
            
            -Other
            
            **79,650**
            
            
            84,375
            
            
            **155,885**
            
            
            164,270Maintenance
            
            **24,899**
            
            
            20,552
            
            
            **47,489**
            
            
            49,910Depreciation
                and amortization
            
            **39,250**
            
            
            38,241
            
            
            **78,196**
            
            
            76,103General
                taxes
            
            **27,764**
            
            
            26,566
            
            
            **55,408**
            
            
            52,422Gain
                on property
            
            **(696**
            **)**
            
            (994
            )
            
            **(597**
            **)**
            
            (1,513
            )Total
            
            **570,104**
            
            
            569,176
            
            
            **1,123,286**
            
            
            1,072,474Operating
                income
            
            **72,000**
            
            
            62,545
            
            
            **78,003**
            
            
            104,361Non-operating
                income
            
            **3,904**
            
            
            9,847
            
            
            **6,889**
            
            
            11,771Non-operating
                expenses
            
            **(1,311**
            **)**
            
            (9,657
            )
            
            **(3,452**
            **)**
            
            (10,972
            )Interest
                charges
            
            **(17,816**
            **)**
            
            (18,386
            )
            
            **(35,139**
            **)**
            
            (35,873
            )Income
                from continuing operations before incometaxes,
                minority interest in subsidiaries and lossfrom
                equity investments
            
            **56,777**
            
            
            44,349
            
            
            **46,301**
            
            
            69,287Income
                taxes
            
            **(18,831**
            **)**
            
            (9,805
            )
            
            **(10,201**
            **)**
            
            (15,096
            )Minority
                interest in subsidiaries
            
            **-**
            
            
            (8,693
            )
            
            **-**
            
            
            (7,805
            )Loss
                from equity investments, net of income taxes
            
            **(289**
            **)**
            
            (344
            )
            
            **(579**
            **)**
            
            (689
            )Income
                from continuing operations
            
            **37,657**
            
            
            25,507
            
            
            **35,521**
            
            
            45,697Discontinued
                operations, net of income taxes (Note 11)
            
            **-**
            
            
            (3,606
            )
            
            **-**
            
            
            (3,606
            )Net
                income
            
            **37,657**
            
            
            21,901
            
            
            **35,521**
            
            
            42,091Preferred
                stock dividend requirements
            
            **412**
            
            
            412
            
            
            **823**
            
            
            823Earnings
                available for common shareholders
            **$**
            **37,245**
            
            $
            21,489
            
            **$**
            **34,698**
            
            $
            41,268Average
                number of common shares outstanding
            
            **76,997**
            
            
            74,592
            
            
            **75,834**
            
            
            74,515Basic
                and diluted earnings (loss) per common shareContinuing
                operations
            **$**
            **0.48**
            
            $
            0.34
            
            **$**
            **0.46**
            
            $
            0.60Discontinued
                operations
            
            **-**
            
            
            (0.05
            )
            
            **-**
            
            
            (0.05
            )Basic
                and diluted earnings per common share
            **$**
            **0.48**
            
            $
            0.29
            
            **$**
            **0.46**
            
            $
            0.55Cash
                dividends per common share
            **$**
            **0.415**
            
            $
            0.415
            
            **$**
            **0.83**
            
            $
            0.83The
                accompanying Notes to Consolidated Financial Statements are an integral
                part of these statements.




7




**GREAT
                PLAINS ENERGY****Consolidated
                Statements of Cash Flows**(Unaudited)Revised**Year
                to Date June 30**
            **2006**
            
            2005**Cash
                Flows from Operating Activities**
            (thousands)Net
                income
            **$**
            **35,521**
            
            $
            42,091Adjustments
                to reconcile income to net cash from operating activities:Depreciation
                and amortization
            
            **78,196**
            
            
            76,103Amortization
                of:Nuclear
                fuel
            
            **7,822**
            
            
            5,418Other
            
            **4,666**
            
            
            5,374Deferred
                income taxes, net
            
            **(16,804**
            **)**
            
            4,682Investment
                tax credit amortization
            
            **(1,523**
            **)**
            
            (1,944
            )Loss
                from equity investments, net of income taxes
            
            **579**
            
            
            689Gain
                on property
            
            **(597**
            **)**
            
            (1,611
            )Minority
                interest in subsidiaries
            
            **-**
            
            
            7,805Fair
                value impacts from energy contracts
            
            **37,925**
            
            
            (7,785
            )Other
                operating activities (Note 4)
            
            **(33,419**
            **)**
            
            (68,013
            )Net
                cash from operating activities
            
            **112,366**
            
            
            62,809**Cash
                Flows from Investing Activities**Utility
                capital expenditures
            
            **(229,910**
            **)**
            
            (224,496
            )Allowance
                for borrowed funds used during construction
            
            **(2,549**
            **)**
            
            (767
            )Purchases
                of investments
            
            **(700**
            **)**
            
            (14,976
            )Purchases
                of nonutility property
            
            **(2,805**
            **)**
            
            (2,886
            )Proceeds
                from sale of assets and investments
            
            **206**
            
            
            15,739Purchases
                of nuclear decommissioning trust investments
            
            **(26,387**
            **)**
            
            (16,197
            )Proceeds
                from nuclear decommissioning trust investments
            
            **24,574**
            
            
            14,421Hawthorn
                No. 5 partial insurance recovery
            
            **-**
            
            
            10,000Other
                investing activities
            
            **(818**
            **)**
            
            (2,269
            )Net
                cash from investing activities
            
            **(238,389**
            **)**
            
            (221,431
            )**Cash
                Flows from Financing Activities**Issuance
                of common stock
            
            **149,363**
            
            
            5,724Issuance
                fees
            
            **(5,728**
            **)**
            
            (8
            )Repayment
                of long-term debt
            
            **(872**
            **)**
            
            (2,495
            )Net
                change in short-term borrowings
            
            **44,500**
            
            
            169,775Dividends
                paid
            
            **(65,197**
            **)**
            
            (62,677
            )Other
                financing activities
            
            **(2,935**
            **)**
            
            (2,820
            )Net
                cash from financing activities
            
            **119,131**
            
            
            107,499**Net
                Change in Cash and Cash Equivalents**
            
            **(6,892**
            **)**
            
            (51,123
            )**Less: 
                Net Change in Cash and Cash Equivalents from****Discontinued
                Operations**
            
            **-**
            
            
            (537
            )**Cash
                and Cash Equivalents at Beginning of Year**
            
            **103,068**
            
            
            127,129**Cash
                and Cash Equivalents at End of Period**
            **$**
            **96,176**
            
            $
            76,543The
                accompanying Notes to Consolidated Financial Statements are an integral
                part of these statements.




8




**GREAT
                PLAINS ENERGY****Consolidated
                Statements of Common Shareholders' Equity**(Unaudited)**Year
                to Date June 30**
            **2006**
            
            2005**Shares**
            
            **Amount**
            
            Shares
            
            Amount**Common
                Stock**
            (thousands,
                except share amounts)Beginning
                balance
            
            **74,783,824**
            
            **$**
            **744,457**
            
            
            74,394,423
            
            $
            731,977Issuance
                of common stock
            
            **5,436,566**
            
            
            **149,363**
            
            
            200,848
            
            
            6,007Issuance
                of restricted common stock
            
            **46,826**
            
            
            **1,320**
            
            
            76,375
            
            
            2,334Common
                stock issuance fees
            
            
            
            
            **(5,190**
            **)**
            
            
            
            
            -Equity
                compensation expense
            
            
            
            
            **1,103**
            
            
            
            
            
            879Unearned
                CompensationIssuance
                of restricted common stock
            
            
            
            
            **(1,355**
            **)**
            
            
            
            
            (2,334
            )Forfeiture
                of restricted common stock
            
            
            
            
            **56**
            
            
            
            
            
            106Compensation
                expense recognized
            
            
            
            
            **640**
            
            
            
            
            
            731Other
            
            
            
            
            **31**
            
            
            
            
            
            (174
            )Ending
                balance
            
            **80,267,216**
            
            
            **890,425**
            
            
            74,671,646
            
            
            739,526**Retained
                Earnings**Beginning
                balance
            
            
            
            
            **488,001**
            
            
            
            
            
            451,491Net
                income
            
            
            
            
            **35,521**
            
            
            
            
            
            42,091Dividends:Common
                stock
            
            
            
            
            **(64,326**
            **)**
            
            
            
            
            (61,854
            )Preferred
                stock - at required rates
            
            
            
            
            **(823**
            **)**
            
            
            
            
            (823
            )Performance
                shares
            
            
            
            
            **(82**
            **)**
            
            
            
            
            -Ending
                balance
            
            
            
            
            **458,291**
            
            
            
            
            
            430,905**Treasury
                Stock**Beginning
                balance
            
            **(43,376**
            **)**
            
            **(1,304**
            **)**
            
            (28,488
            )
            
            (856
            )Treasury
                shares acquired
            
            **(3,519**
            **)**
            
            **(99**
            **)**
            
            (3,596
            )
            
            (109
            )Treasury
                shares reissued
            
            **1,215**
            
            
            **36**
            
            
            -
            
            
            -Ending
                balance
            
            **(45,680**
            **)**
            
            **(1,367**
            **)**
            
            (32,084
            )
            
            (965
            )**Accumulated
                Other Comprehensive Loss**Beginning
                balance
            
            
            
            
            **(7,727**
            **)**
            
            
            
            
            (41,018
            )Derivative
                hedging activity, net of tax
            
            
            
            
            **(35,293**
            **)**
            
            
            
            
            7,347Minimum
                pension obligation, net of tax
            
            
            
            
            **-**
            
            
            
            
            
            (37
            )Ending
                balance
            
            
            
            
            **(43,020**
            **)**
            
            
            
            
            (33,708
            )**Total
                Common Shareholders' Equity**
            
            
            
            **$**
            **1,304,329**
            
            
            
            
            $
            1,135,758The
                accompanying Notes to Consolidated Financial Statements are an integral
                part of these statements.




9




**GREAT
                PLAINS ENERGY****Consolidated
                Statements of Comprehensive Income**(Unaudited)**Three
                Months Ended**
            
            **Year
                to Date****June
                30**
            
            **June
                30****2006**
            
            2005
            
            **2006**
            
            2005(thousands)Net
                income
            **$**
            **37,657**
            
            $
            21,901
            
            **$**
            **35,521**
            
            $
            42,091Other
                comprehensive incomeGain
                (loss) on derivative hedging instruments
            
            **(36,461**
            **)**
            
            367
            
            
            **(77,164**
            **)**
            
            19,223Income
                taxes
            
            **15,052**
            
            
            (324
            )
            
            **32,335**
            
            
            (8,371
            )Net
                gain (loss) on derivative hedging instruments
            
            **(21,409**
            **)**
            
            43
            
            
            **(44,829**
            **)**
            
            10,852Reclassification
                to expenses, net of tax
            
            **4,314**
            
            
            (1,420
            )
            
            **9,536**
            
            
            (3,505
            )Derivative
                hedging activity, net of tax
            
            **(17,095**
            **)**
            
            (1,377
            )
            
            **(35,293**
            **)**
            
            7,347Change
                in minimum pension obligation
            
            **-**
            
            
            -
            
            
            **-**
            
            
            (60
            )Income
                taxes
            
            **-**
            
            
            -
            
            
            **-**
            
            
            23Net
                change in minimum pension obligation
            
            **-**
            
            
            -
            
            
            **-**
            
            
            (37
            )Comprehensive
                income
            **$**
            **20,562**
            
            $
            20,524
            
            **$**
            **228**
            
            $
            49,401The
                accompanying Notes to Consolidated Financial Statements are an integral
                part of these statements.




10




**KANSAS
                CITY POWER & LIGHT COMPANY****Consolidated
                Balance Sheets**(Unaudited)**June
                30**
            
            December
                31**2006**
            
            2005**ASSETS**
            (thousands)**Current
                Assets**Cash
                and cash equivalents
            **$**
            **3,854**
            
            $
            2,961Receivables,
                net
            
            **97,777**
            
            
            70,264Fuel
                inventories, at average cost
            
            **29,912**
            
            
            17,073Materials
                and supplies, at average cost
            
            **58,193**
            
            
            57,017Deferred
                income taxes
            
            **12,635**
            
            
            8,944Prepaid
                expenses
            
            **12,721**
            
            
            11,292Derivative
                instruments
            
            **8,787**
            
            
            -Total
            
            **223,879**
            
            
            167,551**Nonutility
                Property and Investments**Nuclear
                decommissioning trust fund
            
            **94,991**
            
            
            91,802Other
            
            **6,825**
            
            
            7,694Total
            
            **101,816**
            
            
            99,496**Utility
                Plant, at Original Cost**Electric
            
            **5,049,618**
            
            
            4,959,539Less-accumulated
                depreciation
            
            **2,392,022**
            
            
            2,322,813Net
                utility plant in service
            
            **2,657,596**
            
            
            2,636,726Construction
                work in progress
            
            **219,646**
            
            
            100,952Nuclear
                fuel, net of amortization of $123,062 and $115,240
            
            **41,355**
            
            
            27,966Total
            
            **2,918,597**
            
            
            2,765,644**Deferred
                Charges and Other Assets**Regulatory
                assets
            
            **205,195**
            
            
            179,922Prepaid
                pension costs
            
            **83,514**
            
            
            98,002Other
            
            **29,023**
            
            
            27,905Total
            
            **317,732**
            
            
            305,829Total
            **$**
            **3,562,024**
            
            $
            3,338,520The
                disclosures regarding KCP&L included in the accompanying Notes to
                Consolidated Financial Statements arean
                integral part of these statements.




11




**KANSAS
                CITY POWER & LIGHT COMPANY****Consolidated
                Balance Sheets**(Unaudited)**June
                30**
            
            December
                31**2006**
            
            2005**LIABILITIES
                AND CAPITALIZATION**
            (thousands)**Current
                Liabilities**Notes
                payable to Great Plains Energy
            **$**
            **500**
            
            $
            500Commercial
                paper
            
            **82,400**
            
            
            31,900Current
                maturities of long-term debt
            
            **225,500**
            
            
            -Accounts
                payable
            
            **93,052**
            
            
            106,040Accrued
                taxes
            
            **57,817**
            
            
            27,448Accrued
                interest
            
            **11,872**
            
            
            11,549Accrued
                payroll and vacations
            
            **24,866**
            
            
            27,520Accrued
                refueling outage costs
            
            **14,996**
            
            
            8,974Derivative
                instruments
            
            **3,494**
            
            
            -Other
            
            **8,313**
            
            
            8,600Total
            
            **522,810**
            
            
            222,531**Deferred
                Credits and Other Liabilities**Deferred
                income taxes
            
            **628,929**
            
            
            627,048Deferred
                investment tax credits
            
            **28,175**
            
            
            29,698Asset
                retirement obligations
            
            **153,697**
            
            
            145,907Pension
                liability
            
            **86,228**
            
            
            85,301Regulatory
                liabilities
            
            **73,899**
            
            
            69,641Derivative
                instruments
            
            **3,267**
            
            
            2,601Other
            
            **42,109**
            
            
            38,387Total
            
            **1,016,304**
            
            
            998,583**Capitalization**Common
                shareholder's equityCommon
                stock-1,000 shares authorized without par value1
                share issued, stated value
            
            **1,021,656**
            
            
            887,041Retained
                earnings
            
            **277,646**
            
            
            283,850Accumulated
                other comprehensive loss
            
            **(26,731**
            **)**
            
            (29,909
            )Total
            
            **1,272,571**
            
            
            1,140,982Long-term
                debt (Note 8)
            
            **750,339**
            
            
            976,424Total
            
            **2,022,910**
            
            
            2,117,406**Commitments
                and Contingencies (Note 13)**
            
            ****Total
            **$**
            **3,562,024**
            
            $
            3,338,520The
                disclosures regarding KCP&L included in the accompanying Notes to
                Consolidated Financial Statements arean
                integral part of these statements.




12




**KANSAS
                CITY POWER & LIGHT COMPANY****Consolidated
                Statements of Income**(Unaudited)**Three
                Months Ended**
            
            **Year
                to Date****June
                30**
            
            **June
                30****2006**
            
            2005
            
            **2006**
            
            2005**Operating
                Revenues**
            (thousands)Electric
                revenues
            **$**
            **290,891**
            
            $
            272,083
            
            **$**
            **531,281**
            
            $
            505,298Other
                revenues
            
            **-**
            
            
            -
            
            
            **-**
            
            
            113Total
            
            **290,891**
            
            
            272,083
            
            
            **531,281**
            
            
            505,411**Operating
                Expenses**Fuel
            
            **56,197**
            
            
            44,803
            
            
            **103,597**
            
            
            86,293Purchased
                power
            
            **8,570**
            
            
            16,797
            
            
            **13,687**
            
            
            28,287Skill
                set realignment costs (Note 9)
            
            **4,937**
            
            
            -
            
            
            **14,230**
            
            
            -Other
            
            **64,808**
            
            
            68,863
            
            
            **127,366**
            
            
            134,826Maintenance
            
            **24,900**
            
            
            20,540
            
            
            **47,478**
            
            
            49,886Depreciation
                and amortization
            
            **37,346**
            
            
            36,665
            
            
            **74,346**
            
            
            73,060General
                taxes
            
            **26,875**
            
            
            25,454
            
            
            **53,164**
            
            
            50,009(Gain)
                loss on property
            
            **(695**
            **)**
            
            3
            
            
            **(598**
            **)**
            
            (513
            )Total
            
            **222,938**
            
            
            213,125
            
            
            **433,270**
            
            
            421,848Operating
                income
            
            **67,953**
            
            
            58,958
            
            
            **98,011**
            
            
            83,563Non-operating
                income
            
            **2,822**
            
            
            9,346
            
            
            **4,535**
            
            
            10,843Non-operating
                expenses
            
            **(1,235**
            **)**
            
            (627
            )
            
            **(2,292**
            **)**
            
            (1,780
            )Interest
                charges
            
            **(15,046**
            **)**
            
            (15,482
            )
            
            **(29,904**
            **)**
            
            (30,101
            )Income
                before income taxes andminority
                interest in subsidiaries
            
            **54,494**
            
            
            52,195
            
            
            **70,350**
            
            
            62,525Income
                taxes
            
            **(18,680**
            **)**
            
            (14,466
            )
            
            **(22,553**
            **)**
            
            (15,431
            )Minority
                interest in subsidiaries
            
            **-**
            
            
            (8,693
            )
            
            **-**
            
            
            (7,805
            )Net
                income
            **$**
            **35,814**
            
            $
            29,036
            
            **$**
            **47,797**
            
            $
            39,289The
                disclosures regarding consolidated KCP&L included in the accompanying
                Notes to ConsolidatedFinancial
                Statements are an integral part of these statements.




13




**KANSAS
                CITY POWER & LIGHT COMPANY****Consolidated
                Statements of Cash Flows**(Unaudited)**Year
                to Date June 30**
            **2006**
            
            2005**Cash
                Flows from Operating Activities**
            (thousands)Net
                income
            **$**
            **47,797**
            
            $
            39,289Adjustments
                to reconcile income to net cash from operating activities:Depreciation
                and amortization
            
            **74,346**
            
            
            73,060Amortization
                of:Nuclear
                fuel
            
            **7,822**
            
            
            5,418Other
            
            **3,302**
            
            
            3,900Deferred
                income taxes, net
            
            **(2,159**
            **)**
            
            (3,334
            )Investment
                tax credit amortization
            
            **(1,523**
            **)**
            
            (1,944
            )Gain
                on property
            
            **(598**
            **)**
            
            (513
            )Minority
                interest in subsidiaries
            
            **-**
            
            
            7,805Other
                operating activities (Note 4)
            
            **(23,813**
            **)**
            
            (65,568
            )Net
                cash from operating activities
            
            **105,174**
            
            
            58,113**Cash
                Flows from Investing Activities**Utility
                capital expenditures
            
            **(229,910**
            **)**
            
            (226,247
            )Allowance
                for borrowed funds used during construction
            
            **(2,549**
            **)**
            
            (767
            )Purchases
                of nonutility property
            
            **(42**
            **)**
            
            (117
            )Proceeds
                from sale of assets
            
            **206**
            
            
            173Purchases
                of nuclear decommissioning trust investments
            
            **(26,387**
            **)**
            
            (16,197
            )Proceeds
                from nuclear decommissioning trust investments
            
            **24,574**
            
            
            14,421Hawthorn
                No. 5 partial insurance recovery
            
            **-**
            
            
            10,000Other
                investing activities
            
            **(818**
            **)**
            
            (2,739
            )Net
                cash from investing activities
            
            **(234,926**
            **)**
            
            (221,473
            )**Cash
                Flows from Financing Activities**Net
                change in short-term borrowings
            
            **50,500**
            
            
            174,100Dividends
                paid to Great Plains Energy
            
            **(54,001**
            **)**
            
            (61,700
            )Equity
                contribution from Great Plains Energy
            
            **134,615**
            
            
            -Issuance
                fees
            
            **(469**
            **)**
            
            (8
            )Net
                cash from financing activities
            
            **130,645**
            
            
            112,392**Net
                Change in Cash and Cash Equivalents**
            
            **893**
            
            
            (50,968
            )**Cash
                and Cash Equivalents at Beginning of Year**
            
            **2,961**
            
            
            51,619**Cash
                and Cash Equivalents at End of Period**
            **$**
            **3,854**
            
            $
            651The
                disclosures regarding consolidated KCP&L included in the accompanying
                Notes to Consolidated FinancialStatements
                are an integral part of these statements.




14




**KANSAS
                CITY POWER & LIGHT COMPANY****Consolidated
                Statements of Common Shareholder's Equity**(Unaudited)**Year
                to Date June 30**
            **2006**
            
            2005**Shares**
            **Amount**
            
            Shares
            Amount**Common
                Stock**
            (thousands,
                except share amounts)Beginning
                balance
            
            **1**
            
            **$**
            **887,041**
            
            
            1
            
            $
            887,041Equity
                contribution from Great Plains Energy
            
            **-**
            
            
            **134,615**
            
            
            -
            
            
            -Ending
                balance
            
            **1**
            
            
            **1,021,656**
            
            
            1
            
            
            887,041**Retained
                Earnings**Beginning
                balance
            
            
            
            
            **283,850**
            
            
            
            
            
            252,893Net
                income
            
            
            
            
            **47,797**
            
            
            
            
            
            39,289Dividends:Common
                stock held by Great Plains Energy
            
            
            
            
            **(54,001**
            **)**
            
            
            
            
            (61,700
            )Ending
                balance
            
            
            
            
            **277,646**
            
            
            
            
            
            230,482**Accumulated
                Other Comprehensive Loss**Beginning
                balance
            
            
            
            
            **(29,909**
            **)**
            
            
            
            
            (40,334
            )Derivative
                hedging activity, net of tax
            
            
            
            
            **3,178**
            
            
            
            
            
            (1,414
            )Minimum
                pension obligation, net of tax
            
            
            
            
            **-**
            
            
            
            
            
            (37
            )Ending
                balance
            
            
            
            
            **(26,731**
            **)**
            
            
            
            
            (41,785
            )**Total
                Common Shareholder's Equity**
            
            
            
            **$**
            **1,272,571**
            
            
            
            
            $
            1,075,738The
                disclosures regarding consolidated KCP&L included in the accompanying
                Notes to Consolidated FinancialStatements
                are an integral part of these statements.




15




**KANSAS
                CITY POWER & LIGHT COMPANY****Consolidated
                Statements of Comprehensive Income**(Unaudited)**Three
                Months Ended**
            
            **Year
                to Date****June
                30**
            
            **June
                30****2006**
            
            2005
            
            **2006**
            
            2005(thousands)Net
                income
            **$**
            **35,814**
            
            $
            29,036
            
            **$**
            **47,797**
            
            $
            39,289Other
                comprehensive incomeGain
                (loss) on derivative hedging instruments
            
            **1,894**
            
            
            (3,589
            )
            
            **5,293**
            
            
            (2,291
            )Income
                taxes
            
            **(712**
            **)**
            
            1,378
            
            
            **(1,990**
            **)**
            
            880Net
                gain on derivative hedging instruments
            
            **1,182**
            
            
            (2,211
            )
            
            **3,303**
            
            
            (1,411
            )Reclassification
                to expenses, net of tax
            
            **(63**
            **)**
            
            (3
            )
            
            **(125**
            **)**
            
            (3
            )Derivative
                hedging activity, net of tax
            
            **1,119**
            
            
            (2,214
            )
            
            **3,178**
            
            
            (1,414
            )Change
                in minimum pension obligation
            
            **-**
            
            
            -
            
            
            **-**
            
            
            (60
            )Income
                taxes
            
            **-**
            
            
            -
            
            
            **-**
            
            
            23Net
                change in minimum pension obligation
            
            **-**
            
            
            -
            
            
            **-**
            
            
            (37
            )Comprehensive
                income
            **$**
            **36,933**
            
            $
            26,822
            
            **$**
            **50,975**
            
            $
            37,838The
                disclosures regarding consolidated KCP&L included in the accompanying
                Notes to Consolidated Financial Statementsare
                an integral part of these statements.




16


**GREAT
        PLAINS ENERGY INCORPORATED**
 **KANSAS
        CITY POWER & LIGHT COMPANY**
 **Notes
        to Unaudited Consolidated Financial Statements**
  The
        notes
        to unaudited consolidated financial statements that follow are a combined
        presentation for Great Plains Energy Incorporated and Kansas City Power &
Light Company, both registrants under this filing. The terms “Great Plains
        Energy,” “Company,” “KCP&L” and “consolidated KCP&L” are used throughout
        this report. “Great Plains Energy” and the “Company” refer to Great Plains
        Energy Incorporated and its consolidated subsidiaries, unless otherwise
        indicated. “KCP&L” refers to Kansas City Power & Light Company, and
“consolidated KCP&L” refers to KCP&L and its consolidated
        subsidiaries.
  **1.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**  **Organization**
 Great
        Plains Energy, a Missouri corporation incorporated in 2001, is a public utility
        holding company and does not own or operate any significant assets other
        than
        the stock of its subsidiaries. Great Plains Energy has four direct subsidiaries
        with operations or active subsidiaries:
 ·
              KCP&L
                  is an integrated, regulated electric utility that provides electricity
                  to
                  customers primarily in the states of Missouri and Kansas. KCP&L has
                  two wholly owned subsidiaries, Kansas City Power & Light Receivables
                  Company (Receivables Company) and Home Service Solutions Inc. (HSS).
                  HSS
                  has no active operations.


·
            KLT
                Inc. is an intermediate holding company that primarily holds, directly
                or
                indirectly, interests in Strategic Energy, L.L.C. (Strategic Energy),
                which provides competitive retail electricity supply services in
                several
                electricity markets offering retail choice, and affordable housing
                limited
                partnerships. KLT Inc. also wholly owns KLT Gas Inc. (KLT Gas), which
                has
                no active operations in 2006.  ·
            Innovative
                Energy Consultants Inc. (IEC) is an intermediate holding company
                that
                holds an indirect interest in Strategic Energy. IEC does not own
                or
                operate any assets other than its indirect interest in Strategic
                Energy.
                When combined with KLT Inc.’s indirect interest in Strategic Energy, the
                Company indirectly owns 100% of Strategic
                Energy.  ·
            Great
                Plains Energy Services Incorporated (Services) provides services
                at cost
                to Great Plains Energy and its subsidiaries, including consolidated
                KCP&L.  The
        operations of Great Plains Energy and its subsidiaries are divided into two
        reportable segments, KCP&L and Strategic Energy. Great Plains Energy’s legal
        structure differs from the functional management and financial reporting
        of its
        reportable segments. Other activities not considered a reportable segment
        include the operations of HSS, Services, all KLT Inc. operations other than
        Strategic Energy, and holding company operations.
  **2.**
            **BASIC
                AND DILUTED EARNINGS PER COMMON SHARE
                CALCULATION**  There
        was
        no significant dilutive effect on Great Plains Energy’s EPS from other
        securities for the three months ended and year to date June 30, 2006 and
        2005.
        To determine basic EPS, preferred stock dividend requirements are deducted
        from
        income from continuing operations and net income before dividing by the average
        number of common shares outstanding. The loss per share impact of discontinued
        operations, net of income taxes, is determined by dividing discontinued
        operations, net of income taxes, by the average number of common shares
        outstanding. The effect of dilutive securities, calculated using the treasury
        stock method, assumes the issuance of common shares applicable to stock options,
        performance shares, restricted stock, a forward sale agreement and FELINE
        PRIDES SM .
 
 17
 The
        following table reconciles
        Great Plains Energy’s basic and diluted EPS.


**Three
                  Months Ended**
              
              **Year
                  to Date****June
                  30**
              
              **June
                  30****2006**
              
              **2005**
              
              **2006**
              
              **2005****Income**
              (millions,
                  except per share amounts)Income
                  from continuing operations
              $
              37.6
              
              $
              25.5
              
              $
              35.5
              
              $
              45.7Less:
                  preferred stock dividend requirements
              
              0.4
              
              
              0.4
              
              
              0.8
              
              
              0.8Income
                  available to common shareholders
              $
              37.2
              
              $
              25.1
              
              $
              34.7
              
              $
              44.9**Common
                  Shares Outstanding**Average
                  number of common shares outstanding
              
              77.0
              
              
              74.6
              
              
              75.8
              
              
              74.5Add:
                  effect of dilutive securities
              
              -
              
              
              0.2
              
              
              -
              
              
              0.2Diluted
                  average number of common shares outstanding
              
              77.0
              
              
              74.8
              
              
              75.8
              
              
              74.7**Basic
                  and diluted EPS from continuing operations**
              $
              0.48
              
              $
              0.34
              
              $
              0.46
              
              $
              0.60




The
        computation of diluted EPS excludes anti-dilutive shares for the three months
        ended and year to date June 30, 2006, of 183,874 and 89,715 performance shares and 166,007 and 121,181 restricted stock shares,
        respectively. Additionally, for the three months ended and year to date June
        30,
        2006, 6.5 million of anti-dilutive FELINE PRIDES were excluded from the
        computation of diluted EPS and there were no anti-dilutive shares applicable
        to
        stock options or a forward sale agreement. For the three months ended and
        year
        to date June 30, 2005, there were no anti-dilutive shares applicable to stock
        options, performance shares, restricted stock or FELINE PRIDES.
  In
        July
        2006, the Board of Directors declared
        a quarterly dividend of $0.415 per share on Great Plains Energy’s common stock.
        The common dividend is payable September 20, 2006, to shareholders of record
        as
        of August 29, 2006. The Board of Directors also declared regular dividends
        on
        Great Plains Energy’s preferred stock, payable December 1, 2006, to shareholders
        of record as of November 8, 2006.
  **3.**
            **CASH**  **Cash
        and Cash Equivalents**
 Cash
        equivalents consist of highly liquid investments with maturities of three
        months
        or less at acquisition. For Great Plains Energy, this includes Strategic
        Energy’s cash held in trust of $14.1 million and
        $21.9 million at
        June
        30, 2006 and December 31, 2005, respectively.
  Strategic
        Energy has entered into collateral arrangements with selected electricity
        power
        suppliers that require selected customers to remit payment to lockboxes that
        are
        held in trust and managed by a Trustee. As part of the trust administration,
        the
        Trustee remits payment to the supplier of electricity purchased by Strategic
        Energy. On a monthly basis, any remittances into the lockboxes in excess
        of
        disbursements to the supplier are remitted back to Strategic Energy.
  **Restricted
        Cash**
 Strategic
        Energy has entered into Master Power Purchase and Sale Agreements with its
        power
        suppliers. Certain of these agreements contain provisions whereby, to the
        extent
        Strategic Energy has a net exposure to the purchased power supplier, collateral
        requirements are to be maintained. Collateral posted in the form of cash
        to
        Strategic Energy is restricted by agreement, but would become unrestricted
        in
        the event of a default by the purchased power supplier. Strategic Energy
        held no
        restricted cash
        collateral at June 30, 2006, and $1.9 million at
        December 31, 2005.
  18


**4.**
            **SUPPLEMENTAL
                CASH FLOW INFORMATION**


***Great
                  Plains Energy Other Operating Activities*****Revised****Year
                  to Date June 30**
              **2006**
              
              **2005**Cash
                  flows affected by changes in:
              (millions)Receivables
              $
              (31.0
              )
              $
              (96.1
              )Fuel
                  inventories
              
              (12.8
              )
              
              (2.2
              )Materials
                  and supplies
              
              (1.2
              )
              
              (1.1
              )Accounts
                  payable
              
              (16.2
              )
              
              30.4Accrued
                  taxes
              
              24.7
              
              
              (3.6
              )Accrued
                  interest
              
              0.3
              
              
              (0.4
              )Deposits
                  with suppliers
              
              (3.4
              )
              
              (10.6
              )Accrued
                  refueling outage costs
              
              6.0
              
              
              (10.9
              )Pension
                  and postretirement benefit assets and obligations
              
              4.3
              
              
              18.4Allowance
                  for equity funds used during construction
              
              (2.1
              )
              
              (0.9
              )Proceeds
                  from the sale of SO2emission allowances
              
              0.8
              
              
              0.7Other
              
              (2.8
              )
              
              8.3Total
                  other operating activities
              $
              (33.4
              )
              $
              (68.0
              )Cash
                  paid during the period:Interest
              $
              33.4
              
              $
              37.4Income
                  taxes
              $
              14.9
              
              $
              16.1
  ***Consolidated
                  KCP&L Other Operating Activities*****Year
                  to Date June 30**
              **2006**
              
              **2005**Cash
                  flows affected by changes in:
              (millions)Receivables
              $
              (27.5
              )
              $
              (79.8
              )Fuel
                  inventories
              
              (12.8
              )
              
              (2.2
              )Materials
                  and supplies
              
              (1.2
              )
              
              (1.1
              )Accounts
                  payable
              
              (14.5
              )
              
              4.1Accrued
                  taxes
              
              30.4
              
              
              13.8Accrued
                  interest
              
              0.3
              
              
              (0.3
              )Accrued
                  refueling outage costs
              
              6.0
              
              
              (10.9
              )Pension
                  and postretirement benefit assets and obligations
              
              2.5
              
              
              15.3Allowance
                  for equity funds used during construction
              
              (2.1
              )
              
              (0.9
              )Proceeds
                  from the sale of SO2emission allowances
              
              0.8
              
              
              0.7Other
              
              (5.7
              )
              
              (4.3
              )Total
                  other operating activities
              $
              (23.8
              )
              $
              (65.6
              )Cash
                  paid during the period:Interest
              $
              28.5
              
              $
              29.2Income
                  taxes
              $
              11.4
              
              $
              20.6
 **Discontinued
          Operations and Proceeds From Sale of
          SO****2****Emission Allowances
          Presentation**
 In
          the
          fourth quarter of 2005, the Company changed the presentation of its consolidated
          statements of cash flows to include the cash flows from operating, investing
          and
          financing activities of discontinued operations within the respective categories
          of operating, investing and financing activities as well as to reflect
          proceeds
          from the sale of SO2emission allowances by consolidated KCP&L as
          operating activities rather than investing activities and retroactively
          revised
          the consolidated statement of cash flows year to date June 30, 2005, to
          be
          consistent with this presentation. Great Plains Energy’s net cash flows from
          operating activities year to date June 30, 2005, increased $0.7 million
          for
          KCP&L’s proceeds from the sale of SO2 emission allowances and
          decreased $0.7 million for discontinued operations operating activities
          from
          amounts previously reported. Net cash flows from investing
  19
 activities
          increased $0.2 million for discontinued operations investing activities
          and
          decreased $0.7 million for KCP&L’s proceeds from the sale of SO2
          emission allowances from amounts previously reported.
  **5.**
              **RECEIVABLES**  The
          Company’s receivables are detailed in the following table .
 **June
                    30**
                **December
                    31****2006**
                **2005****Consolidated
                    KCP&L**
                (millions)Customer
                    accounts receivable(a)
                
                
                $
                54.0
                
                $
                34.0Allowance
                    for doubtful accounts
                
                
                
                (1.4
                )
                
                (1.0
                )Other
                    receivables
                
                
                
                45.2
                
                
                37.3Consolidated
                    KCP&L receivables
                
                
                
                97.8
                
                
                70.3**Other
                    Great Plains Energy**Other
                    receivables
                
                
                
                197.3
                
                
                193.0Allowance
                    for doubtful accounts
                
                
                
                (4.8
                )
                
                (4.3
                )Great
                    Plains Energy receivables
                
                
                $
                290.3
                
                $
                259.0(a)Customer
                    accounts receivable included unbilled receivables of $51.7
                    millionand
                    $31.4 million at June 30, 2006 and December 31, 2005,
                    respectively.




Consolidated
      KCP&L’s other receivables at
      June
      30, 2006 and December 31, 2005, consisted primarily of receivables from partners
      in jointly owned electric utility plants and wholesale sales receivables. Great
      Plains Energy’s other receivables at June 30, 2006 and December 31, 2005,
      consisted primarily of accounts receivable held by Strategic Energy, including
      unbilled receivables of $108.7 million and
      $99.9 million ,
      respectively.


Under
        an
        agreement, KCP&L sells all of its retail electric accounts receivable to its
        wholly owned subsidiary, Receivables Company, which in turn sells an undivided
        percentage ownership interest in the accounts receivable to Victory Receivables
        Corporation, an independent outside investor. KCP&L sells its receivables at
        a fixed price based upon the expected cost of funds and charge-offs. These
        costs
        comprise KCP&L’s loss on the sale of accounts receivable. KCP&L services
        the receivables and receives an annual servicing fee of 2.5% of the outstanding
        principal amount of the receivables sold to Receivables Company. KCP&L does
        not recognize a servicing asset or liability since management determined
        the
        collection agent fee earned by KCP&L approximates market value.
  20


Information
        regarding KCP&L’s sale of accounts receivable to Receivables Company under
        this agreement is reflected in the following tables .


**Receivables**
              **Consolidated****Three
                  Months Ended June 30, 2006**
              **KCP&L**
              **Company**
              **KCP&L**(millions)Receivables
                  (sold) purchased
              $
              (252.1
              )
              $
              252.1
              
              $
              -Gain
                  (loss) on sale of accounts receivable(a)
              
              (2.5
              )
              
              2.2
              
              
              (0.3
              )Servicing
                  fees
              
              0.6
              
              
              (0.6
              )
              
              -Fees
                  to outside investor
              
              -
              
              
              (1.0
              )
              
              (1.0
              )**Cash
                  flows during the period**Cash
                  from customers transferred toReceivables
                  Company
              
              (218.5
              )
              
              218.5
              
              
              -Cash
                  paid to KCP&L for receivables purchased
              
              216.3
              
              
              (216.3
              )
              
              -Servicing
                  fees
              
              0.6
              
              
              (0.6
              )
              
              -Interest
                  on intercompany note
              
              0.5
              
              
              (0.5
              )
              
              -


**Receivables**
                  **Consolidated****Year
                      to Date June 30, 2006**
                  **KCP&L**
                  **Company**
                  **KCP&L**(millions)Receivables
                      (sold) purchased
                  $
                  (449.3
                  )
                  $
                  449.3
                  
                  $
                  -Gain
                      (loss) on sale of accounts receivable(a)
                  
                  (4.5
                  )
                  
                  4.3
                  
                  
                  (0.2
                  )Servicing
                      fees
                  
                  1.2
                  
                  
                  (1.2
                  )
                  
                  -Fees
                      to outside investor
                  
                  -
                  
                  
                  (1.8
                  )
                  
                  (1.8
                  )**Cash
                      flows during the period**Cash
                      from customers transferred toReceivables
                      Company
                  
                  (431.0
                  )
                  
                  431.0
                  
                  
                  -Cash
                      paid to KCP&L for receivables purchased
                  
                  426.7
                  
                  
                  (426.7
                  )
                  
                  -Servicing
                      fees
                  
                  1.2
                  
                  
                  (1.2
                  )
                  
                  -Interest
                      on intercompany note
                  
                  0.8
                  
                  
                  (0.8
                  )
                  
                  -(a)The
                      net loss is the result of the timing difference inherent in
                      collecting
                      receivables and overthe
                      life of the agreement will net to zero.


**6.**
            **NUCLEAR
                PLANT**


KCP&L
        owns 47% of Wolf Creek Nuclear Operating Corporation (WCNOC), the operating
        company for Wolf Creek Generating Station (Wolf Creek), its only nuclear
        generating unit. Wolf Creek is regulated by the Nuclear Regulatory Commission
        (NRC), with respect to licensing, operations and safety-related requirements.
  **Nuclear
        Liability and Insurance**
 The
        owners of Wolf Creek (Owners) maintain nuclear insurance for Wolf Creek in
        four
        areas: liability, worker radiation, property and accidental outage. These
        policies contain certain industry standard exclusions, including, but not
        limited to, ordinary wear and tear, and war. Both the nuclear liability and
        property insurance programs subscribed to by members of the nuclear power
        generating industry include industry aggregate limits for non-certified acts
        of
        terrorism and related losses, as defined by the Terrorism Risk Insurance
        Act,
        including replacement power costs. An industry aggregate limit of $0.3 billion
        exists for liability claims, regardless of the number of non-certified acts
        affecting Wolf Creek or any other nuclear energy liability policy or the
        number
        of policies in place. An industry aggregate limit of $3.2 billion plus any
        reinsurance recoverable by Nuclear Electric Insurance Limited (NEIL), the
  21


Owners’
        insurance provider, exists for property claims, including accidental outage
        power costs for acts of terrorism affecting Wolf Creek or any other nuclear
        energy facility property policy within twelve months from the date of the
        first
        act. These limits are the maximum amount to be paid to members who sustain
        losses or damages from these types of terrorist acts. For certified acts
        of
        terrorism, the individual policy limits apply. In addition, industry-wide
        retrospective assessment programs (discussed below) can apply once these
        insurance programs have been exhausted.
  ***Liability
        Insurance***
 Pursuant
        to the Price-Anderson Act, which was reauthorized through December 31, 2025,
        by
        the Energy Policy Act of 2005, the Owners are required to insure against
        public
        liability claims resulting from nuclear incidents to the full limit of public
        liability, which is currently $10.8 billion. This limit of liability consists
        of
        the maximum available commercial insurance of $0.3 billion, and the remaining
        $10.5 billion is provided through an industry-wide retrospective assessment
        program mandated by law, known as the Secondary Financial Protection (SFP)
        program. Under the SFP program, the Owners can be assessed up to $100.6 million
        ($47.3 million, KCP&L’s 47% share) per incident at any commercial reactor in
        the country, payable at no more than $15 million ($7.1 million, KCP&L’s 47%
        share) per incident per year. This assessment is subject to an inflation
        adjustment based on the Consumer Price Index and applicable premium taxes.
        This
        assessment also applies to worker radiation claims insurance. In addition,
        the
        U.S. Congress could impose additional revenue-raising measures to pay claims.
  ***Property,
        Decontamination, Premature Decommissioning and Extra Expense Insurance***
 The
        Owners carry decontamination liability, premature decommissioning liability
        and
        property damage insurance for Wolf Creek totaling approximately $2.8 billion
        ($1.3 billion, KCP&L's 47% share). NEIL provides this insurance.
  In
        the
        event of an accident, insurance proceeds must first be used for reactor
        stabilization and site decontamination in accordance with a plan mandated
        by the
        NRC. KCP&L’s share of any remaining proceeds can be used for further
        decontamination, property damage restoration and premature decommissioning
        costs. Premature decommissioning coverage applies only if an accident at
        Wolf
        Creek exceeds $500 million in property damage and decontamination expenses,
        and
        only after trust funds have been exhausted.
  ***Accidental
        Nuclear Outage Insurance***
 The
        Owners also carry additional insurance from NEIL to cover costs of replacement
        power and other extra expenses incurred in the event of a prolonged outage
        resulting from accidental property damage at Wolf Creek.
  Under
        all
        NEIL policies, the Owners are subject to retrospective assessments if NEIL
        losses, for each policy year, exceed the accumulated funds available to the
        insurer under that policy. The estimated maximum amount of retrospective
        assessments under the current policies could total approximately
        $26.1 million ($12.3 million, KCP&L’s 47% share) per policy
        year.
  In
        the
        event of a catastrophic loss at Wolf Creek, the insurance coverage may not
        be
        adequate to cover property damage and extra expenses incurred. Uninsured
        losses,
        to the extent not recovered through rates, would be assumed by KCP&L and the
        other owners and could have a material adverse effect on KCP&L’s results of
        operations, financial position and cash flows.
  ***Low-Level
        Waste***
 The
        Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated that the
        various states, individually or through interstate compacts, develop alternative
        low-level radioactive waste disposal facilities. The states of Kansas, Nebraska,
        Arkansas, Louisiana and Oklahoma formed the Central
  22


Interstate
        Low-Level Radioactive Waste Compact (Compact) and selected a site in northern
        Nebraska to locate a disposal facility. WCNOC and the owners of the other
        five
        nuclear units in the Compact provided most of the pre-construction financing
        for
        this project.
  After
        many years of effort, Nebraska regulators denied the facility developer’s
        license application in December 1998, a prolonged lawsuit ensued, and Nebraska
        eventually settled the case by paying the Compact Commission $145.8 million
        in
        damages. The Compact Commission then paid out pro rata portions of the
        settlement money to the various parties who originally funded the project.
        To
        date, WCNOC has received refunds totaling $21.3 million (KCP&L’s 47% share
        being $10 million), including $1.7 million ($0.8 million, KCP&L’s 47% share)
        received in 2006. The Commission continues to explore alternative long-term
        waste disposal capability and has retained an insignificant portion of the
        settlement money. In April 2006, WCNOC and other affected generators filed
        a
        lawsuit in Federal District Court in Nebraska seeking to preserve their ability
        to continue to pursue their claim for their share of the retained amount
        plus
        interest.
  **7.**
            **REGULATORY
                MATTERS**  **KCP&L’s
        Comprehensive Energy Plan**
 KCP&L
        continues to make progress in implementing its comprehensive energy plan
        and
        orders received from the Public Service Commission of the State of Missouri
        (MPSC) and The State Corporation Commission of the State of Kansas (KCC)
        in
        2005. The Sierra Club and Concerned Citizens of Platte County have appealed
        the
        MPSC order, and the Sierra Club has appealed the KCC order. In March 2006,
        the
        Circuit Court of Cole County, Missouri, affirmed the MPSC Order and the Sierra
        Club has appealed the decision to the Missouri Court of Appeals. The Kansas
        District Court denied the Sierra Club’s appeal in May 2006 and the Sierra Club
        has appealed to the Kansas Court of Appeals. Although subject to the appeals,
        the MPSC and KCC orders remain in effect pending the applicable court’s
        decision.
  In
        February 2006 ,
        KCP&L filed requests with the MPSC and KCC for annual rate increases of
        $55.8 million or 11.5% and $42.3 million or 10.5%, respectively. The
        requested rate increases reflect recovery of increasing operating costs
        including fuel, transportation and pensions as well as investments in wind
        generation and customer programs and compensation for wholesale sales volatility
        and construction risks. The request is based on a return on equity of 11.5%
        and
        an adjusted equity ratio of 53.8%. Discovery is underway and management
        anticipates that any approved rate adjustments for both jurisdictions will
        go
        into effect January 1, 2007. The MPSC and KCC staffs and other parties are
        scheduled to file their cases in August 2006. Formal evidentiary hearings
        before
        the MPSC and KCC are scheduled for October 2006.
  Construction
        continues on KCP&L’s Spearville Wind Energy Facility, a 100.5 MW wind
        project in western Kansas. Completed and commissioned turbines are expected
        to
        begin being put into service during the third quarter and management expects
        the
        entire project to be completed and on-line in time for inclusion in the current
        rate cases. The environmental upgrades at LaCygne No. 1 began with the spring
        2006 outage and are anticipated to be completed during the spring 2007 outage.
        KCP&L has implemented nine affordability, energy efficiency and demand
        response programs in Missouri and three in Kansas. Year to date June 30,
        2006,
        initial results from the implemented programs are beginning to demonstrate
        an
        ability to manage KCP&L’s customers’ retail load requirements.
  KCP&L
        finalized Iatan No. 2 co-ownership agreements with Aquila Inc., The Empire
        District Electric Company, Kansas Electric Power Cooperative and Missouri
        Joint
        Municipal Electric Utility Commission during the second quarter. KCP&L will
        own 54.71% or approximately 465 MW of the new station. An owner’s engineer has
        been hired and the engineering design for Iatan Station is in progress. The
        Iatan No. 2 boiler and steam turbine and the Iatan Nos. 1 and 2 air
        emission control equipment procurements
  23


are
        in
        progress and plant construction site preparation work has started. In the
        first
        quarter of 2006, KCP&L received the air permit and a water quality
        certification from the Missouri Department of Natural Resources relating
        to
        Iatan Station. The Sierra Club is appealing the air permit. During the second
        quarter of 2006, KCP&L received the permits necessary to begin construction
        at Iatan Station, which included the wetlands permit and a permit for the
        construction of a temporary barge slip and collector wells from the U.S.
        Army
        Corps of Engineers (Corps). The Corps also executed an Environmental Assessment
        with a Finding of No Significant Impact.
  Although
        contracting is not complete, developing market conditions indicate a potential
        increase in the overall cost estimates of the comprehensive energy plan in
        the
        range of 10% to 20%. The primary drivers are increases in materials and labor
        costs and some scope additions. Management anticipates completion of its
        definitive estimates later in 2006 upon finalizing the largest of the Iatan
        No.
        2 contracts covering the boiler and air quality control systems and after
        review
        of these estimates with the Company’s Board of Directors. The definitive
        estimates could be materially different than the current estimates; however,
        management believes project costs will be competitive with other similar
        projects built in the same timeframe.
  **Regulatory
        Assets and Liabilities**
 KCP&L
        is subject to the provisions of Statement of Financial Accounting Standards
        (SFAS) No. 71, “Accounting for the Effects of Certain Types of Regulation” and
        has recorded assets and liabilities on its balance sheet resulting from the
        effects of the ratemaking process, which would not be recorded under GAAP
        for
        non-regulated entities.


**Amortization**
              
              **June
                  30**
              **December
                  31****ending
                  period**
              
              **2006**
              **2005****Regulatory
                  Assets**
              
              
              (millions)Taxes
                  recoverable through future rates
              
              
              
              $
              84.1
              
              $
              85.7Decommission
                  and decontaminate federal uraniumenrichment
                  facilities
              
              2007
              
              
              1.0
              
              
              1.3Loss
                  on reacquired debt
              
              2037
              
              
              6.8
              
              
              7.1January
                  2002 incremental ice storm costs (Missouri)
              
              2007
              
              
              2.7
              
              
              4.9Change
                  in depreciable life of Wolf Creek
              
              2045
              
              
              36.4
              
              
              27.4Cost
                  of removal
              
              
              
              
              10.5
              
              
              9.3Asset
                  retirement obligations
              
              
              
              
              25.9
              
              
              23.6Future
                  recovery of pension costs
              
              (a)
              
              
              27.3
              
              
              15.6Pension
                  accounting method difference
              
              (a)
              
              
              2.6
              
              
              -Other
              
              Various
              
              
              7.9
              
              
              5.0Total
                  Regulatory Assets
              
              
              
              $
              205.2
              
              $
              179.9**Regulatory
                  Liabilities**Emission
                  allowances
              
              (a)
              
              $
              64.5
              
              $
              64.3Pension
                  accounting method difference
              
              (a)
              
              
              -
              
              
              1.0Additional
                  Wolf Creek amortization (Missouri)
              
              (a)
              
              
              9.4
              
              
              4.3Total
                  Regulatory Liabilities
              
              
              
              $
              73.9
              
              $
              69.6(a)Will
                  be amortized in accordance with future rate cases.




Except
        as
        noted below, regulatory assets for which costs have been incurred have been
        included (or are expected to be included, for costs incurred subsequent to
        the
        most recently approved rate case) in KCP&L’s rate base, thereby providing a
        return on invested costs when included in rate base. Certain regulatory assets
        do not result from cash expenditures and therefore do not represent investments
        included in rate base or have offsetting liabilities that reduce rate base.
        The
        pension accounting
  24
 method
          difference (which may be either a regulatory asset or liability) and certain
          insignificant items in other regulatory assets are not included in rate
          base.
  **Southwest
          Power Pool****Regional Transmission
          Organization**
 KCP&L
          is a member of the Southwest Power Pool (SPP), which is a Federal Energy
          Regulatory Commission (FERC) approved Regional Transmission Organization
          (RTO).
          In February 2006, KCP&L reached an agreement with the MPSC staff and
          intervenors regarding approval to turn over functional control of KCP&L’s
          transmission facilities to SPP and participate in the energy imbalance
          service
          market. The MPSC held an on-the-record presentation concerning this agreement
          in
          May 2006. In June 2006, the MPSC issued an order approving KCP&L’s
          participation in the RTO. KCC has held workshops seeking additional information
          on KCP&L’s request to turn over functional control of its transmission
          facilities to SPP. KCC held a hearing concerning KCP&L’s application in July
          2006 and an order is expected to be issued in late summer 2006. In July
          2006,
          KCC granted interim approval for KCP&L to take SPP network integration
          transmission service for its retail customers. It is anticipated that the
          interim approval will become final once KCC rules on KCP&L’s request to
          participate in the RTO. In May 2006, SPP made a compliance filing in response
          to
          a previously issued FERC order on the SPP energy imbalance service market.
          In
          July 2006, FERC issued an order on the compliance filing accepting in part,
          as
          modified, and rejecting in part the filing, permitting the start of the
          SPP
          energy imbalance service market no earlier than October 1, 2006, and required
          SPP to make additional filings. The
          SPP
          is planning to file its market metrics and status with FERC in the third
          quarter
          of 2006. Subsequent to this FERC order, the SPP Board of Directors decided to set
          November 1, 2006, as the new target date for the start of the energy imbalance
          service market, with market readiness certification to FERC on October 1,
          2006. KCP&L is continuing preparation for this new start-up
          date.
  **Revenue
          Sufficiency Guarantee**
 Since
          the
          April 2005 implementation of Midwest Independent Transmission System Operator
          Inc. (MISO) market operations, MISO’s business practice manuals and other
          instructions to market participants have stated that Revenue Sufficiency
          Guarantee (RSG) charges will not be imposed on day-ahead virtual offers
          to
          supply power not supported by actual generation. RSG charges are collected
          by
          MISO in order to compensate generators that are standing by to supply
          electricity when called upon by MISO. In April 2006, FERC issued an order
          regarding MISO RSG charges. In its order, FERC interpreted MISO's tariff
          to
          require that virtual supply offers be included in the calculation of RSG
          charges
          and that to the extent that MISO did not charge market participants RSG
          charges
          on virtual supply offers, MISO violated its tariff. The FERC order requires
          MISO
          to recalculate RSG rates back to April 1, 2005, and make refunds to customers
          who paid RSG charges on imbalances, with interest, reflecting the recalculated
          charges. In order to make such refunds, RSG charges may be retroactively
          imposed
          on market participants who submitted virtual supply offers during the
          recalculation period.
  Strategic
          Energy is among the MISO participants that paid RSG charges on imbalances
          and
          could receive a refund as a result of the order. Strategic Energy may also
          be
          subject to a retroactive assessment from MISO for RSG charges on virtual
          supply
          offers it submitted during the recalculation period. Consistent with MISO’s
          business practice manuals, management does not believe Strategic Energy
          should
          be assessed RSG charges retroactively or prospectively.
  Numerous
          requests for rehearing have been filed and the matter remains pending before
          FERC. Management is currently unable to predict the outcome of these pending
          requests. In the event FERC affirms its order and MISO imposes retroactive
          RSG
          charges on virtual supply offers, Strategic Energy results of operations
          could
          be negatively impacted. Management has estimated the potential exposure
          could
          range from $0 to $6 million. The range of potential exposure is based on
          management’s judgments and assumptions and does not contemplate all possible
          outcomes. The actual exposure, if any, could ultimately be greater than
          the
          estimated range depending on the outcome of the requests pending before
          FERC.
  25
 **Seams
          Elimination Charge Adjustment**
 Seams
          Elimination Charge Adjustment (SECA) is a transitional pricing mechanism
          authorized by FERC and intended to compensate transmission owners for the
          revenue lost as a result of FERC’s elimination of regional through and out rates
          between PJM Interconnection (PJM) and MISO during a 16-month transition
          period
          from December 1, 2004 through March 31, 2006. Each relevant PJM and MISO
          zone and the load-serving entities within that zone are allocated a portion
          of
          SECA based on transmission services provided to that zone during 2002 and
          2003.
          For the three months ended June 30, 2006, Strategic Energy recorded a reduction
          of purchased power expense of $2.4 million for SECA recoveries from suppliers,
          which offset $2.7 million of expense recorded in the first quarter. Strategic
          Energy recorded purchased power expenses totaling $7.2 million in the second
          quarter of 2005 for these charges covering billings for the transition
          period
          through June 30, 2005. Strategic Energy recovered $0.9 million for the
          three months ended and $1.3 million year to date June 30, 2006, of its
          SECA
          costs through billings to its retail customers. No further billings are
          anticipated pending the outcome of proceedings discussed below.
  There
          are
          several unresolved matters and legal challenges related to SECA that are
          pending
          before FERC on rehearing. FERC established a schedule for resolution of
          certain
          SECA issues, including the issue of shifting SECA allocations to the shipper.
          The shipper in Strategic Energy’s situation is the wholesale supplier, which,
          through a contract with Strategic Energy, delivered power to various zones
          in
          which Strategic Energy was supplying retail customers. In most instances,
          the
          shipper was the purchaser of through and out transmission service and therefore
          included the cost of the through and out rate in its energy price. Management
          is
          unable to predict the outcome of legal and regulatory challenges to the
          SECA
          mechanism.
  26
 **8.**
                  **CAPITALIZATION**


Great
        Plains Energy and consolidated KCP&L’s long-term debt is detailed in the
        following table .


**June
                  30**
              **December
                  31****Year
                  Due**
              
              **2006**
              **2005****Consolidated
                  KCP&L**
              
              
              (millions)General
                  Mortgage Bonds7.95%
                  Medium-Term Notes
              
              2007
              
              $
              0.5
              
              $
              0.53.89%*
                  EIRR bonds
              
              2012-2035
              
              
              158.8
              
              
              158.8Senior
                  Notes6.00%
              
              2007
              
              
              225.0
              
              
              225.06.50%
              
              2011
              
              
              150.0
              
              
              150.06.05%
              
              2035
              
              
              250.0
              
              
              250.0Unamortized
                  discount
              
              
              
              
              (1.7
              )
              
              (1.8
              )EIRR
                  bonds4.75%
                  Series A & B
              
              2015
              
              
              104.1
              
              
              104.64.75%
                  Series D
              
              2017
              
              
              39.1
              
              
              39.34.65%
                  Series 2005
              
              2035
              
              
              50.0
              
              
              50.0Current
                  maturities
              
              
              
              
              (225.5
              )
              
              -Total
                  consolidated KCP&L excluding current maturities
              
              
              
              
              750.3
              
              
              976.4**Other
                  Great Plains Energy**7.74%
                  Affordable Housing Notes
              
              2006-2008
              
              
              1.7
              
              
              2.64.25%
                  FELINE PRIDES Senior Notes
              
              2009
              
              
              163.6
              
              
              163.6Current
                  maturities **
              
              
              
              
              (164.4
              )
              
              (1.7
              )Total
                  consolidated Great Plains Energy excluding current
                  maturities
              
              
              
              $
              751.2
              
              $
              1,140.9*
                  Weighted-average interest rates at June 30, 2006.**
                  Includes $163.6 million of FELINE PRIDES Senior Notes scheduled
                  to mature
                  in 2009 that must beremarketed
                  between August 16, 2006 and February 16, 2007.




**Effective
        Interest Rates on KCP&L’s Unsecured Notes at June 30,
        2006**
 Interest
        rate swaps on KCP&L’s Series A, B and D EIRR bonds resulted in an effective
        interest rate of 6.27%. As
        a
        result of amortizing the gain recognized in other comprehensive income (OCI)
        on
        KCP&L’s 2005 Treasury Locks (T-Locks), the effective interest rate on
        KCP&L’s $250.0 million of 6.05% Senior Notes that were issued via a private
        placement during 2005 is 5.78 %.
        In the
        second quarter of 2006, KCP&L completed an exchange of these privately
        placed notes for $250.0 million of registered 6.05% unsecured senior notes
        maturing in 2035 to fulfill its obligations under a 2005 registration rights
        agreement.
  27
 **Amortization
          of Debt Expense**
 Great
          Plains Energy’s and consolidated KCP&L’s amortization of debt expense is
          detailed in the following table.


**Three
                  Months Ended**
              **Year
                  to Date****June
                  30**
              **June
                  30****2006**
              **2005**
              **2006**
              **2005**(millions)Consolidated
                  KCP&L
              $
              0.5
              
              $
              0.5
              
              $
              1.0
              
              $
              1.1Other
                  Great Plains Energy
              
              0.1
              
              
              0.3
              
              
              0.3
              
              
              0.4Total
                  Great Plains Energy
              $
              0.6
              
              $
              0.8
              
              $
              1.3
              
              $
              1.5




**Forward
        Starting Swaps**
 During
        2006, KCP&L entered into two Forward Starting Swaps with a combined notional
        principal amount of $225.0 million to
        hedge
        interest rate volatility on the anticipated refinancing of KCP&L’s $225.0
        million senior notes that mature in March 2007. See Note 17 for additional
        information.
  **Short-Term
        Borrowings and Short-Term Bank Lines of Credit**
 During
        May 2006, Great Plains Energy entered into a five-year $600 million revolving
        credit facility with a group of banks. The facility replaced a $550 million
        revolving credit facility with a group of banks. A default by Great Plains
        Energy or any of its significant subsidiaries on other indebtedness totaling
        more than $25.0 million is a default under the facility. Under the terms
        of this
        agreement, Great Plains Energy is required to maintain a consolidated
        indebtedness to consolidated capitalization ratio, as defined in the agreement,
        not greater than 0.65 to 1.00 at all times. At June 30, 2006, the Company
        was in
        compliance with this covenant. At June 30, 2006, Great Plains Energy had
        no cash
        borrowings and had issued letters of credit totaling $77.9 million under
        the
        credit facility as credit support for Strategic Energy. At December 31,
        2005 ,
        Great
        Plains Energy had $6.0 million of outstanding borrowings with an interest
        rate
        of 4.98% and had issued letters of credit totaling $38.5 million under the
        credit facility as credit support for Strategic Energy.
  During
        May 2006, KCP&L entered into a five-year $400 million revolving credit
        facility with a group of banks to provide support for its issuance of commercial
        paper and other general corporate purposes. Great Plains Energy and KCP&L
        may transfer and re-transfer up to $200 million of unused lender commitments
        between Great Plains Energy’s and KCP&L’s facilities, so long as the
        aggregate lender commitments under either facility does not exceed $600 million
        and the aggregate lender commitments under both facilities does not exceed
        $1
        billion. The facility replaced a $250 million revolving credit facility with
        a
        group of banks. A default by KCP&L on other indebtedness totaling more than
        $25.0 million is a default under the facility. Under the terms of the agreement,
        KCP&L is required to maintain a consolidated indebtedness to consolidated
        capitalization ratio, as defined in the agreement, not greater than 0.65
        to 1.00
        at all times. At June 30, 2006, KCP&L was in compliance with this covenant.
        At June 30, 2006, KCP&L had $82.4 million of
        commercial paper outstanding, at a weighted-average interest rate of 5.48% and
        no
        cash borrowings under the facility. At December 31, 2005, KCP&L
        had $31.9 million of commercial paper outstanding, at a weighted-average
        interest rate of 4.35% and no cash borrowings under the facility.
  Strategic
        Energy has a $135 million revolving credit facility with a group of banks
        that
        expires in June 2009. So long as Strategic Energy is in compliance with the
        agreement, it may increase this amount by up to $15 million by increasing
        the
        commitment of one or more lenders that have agreed to such increase, or by
        adding one or more lenders with the consent of the administrative agent.
        Great
        Plains Energy has guaranteed $25.0 million of this facility. A default by
        Strategic Energy on other indebtedness, as defined in the facility, totaling
        more than $7.5 million is a default under the facility. Under the terms of
        this
        agreement, Strategic Energy is required to maintain a minimum net worth of
  28


$75.0
        million, a minimum fixed charge coverage ratio of at least 1.05 to 1.00 and
        a
        minimum debt service coverage ratio of at least 4.00 to 1.00, as those terms
        are
        defined in the agreement. In addition, under the terms of this agreement,
        Strategic Energy is required to maintain a maximum funded indebtedness to
        EBITDA
        ratio, as defined in the agreement, of 3.00 to 1.00, on a quarterly basis
        through June 30, 2007, and 2.75 to 1.00 thereafter. In the event of a
        breach of one or more of these four covenants, so long as no other default
        has
        occurred, Great Plains Energy may cure the breach through a cash infusion,
        a
        guarantee increase or a combination of the two. At June 30, 2006, Strategic
        Energy was in compliance with these covenants. At June 30, 2006,
        $58.6 million in
        letters of credit had been issued and there were no cash borrowings under
        the
        agreement. At December 31, 2005 ,
        $75.2
        million in letters of credit had been issued and there were no cash borrowings
        under the agreement.
  **Common
        Shareholders’ Equity**
 Great
        Plains Energy filed a shelf registration statement with the Securities and
        Exchange Commission (SEC) in May 2006 relating to relatere Senior
        Debt Securities, Subordinated Debt Securities, shares of Common Stock, Warrants,
        Stock Purchase Contracts and Stock Purchase Units. In May 2006, Great Plains
        Energy issued 5.2 million
        shares of common stock at $27.50 per share under this registration statement
        with $144.3 million in gross proceeds and issuance costs of $5.2 million.
  In
        May
        2006, Great Plains Energy also entered into a forward sale agreement with
        Merrill Lynch Financial Markets, Inc. (forward purchaser) for 1.8 million
        shares
        of Great Plains Energy common stock. The forward purchaser borrowed and sold
        the
        same number of shares of Great Plains Energy’s common stock to hedge its
        obligations under the forward sale agreement. Great Plains Energy did not
        initially receive any proceeds from the sale of common stock shares by the
        forward purchaser. The forward sale agreement provides for a settlement date
        or
        dates to be specified at Great Plains Energy’s discretion, subject to certain
        exceptions, no later than May 23, 2007. Subject to the provisions of the
        forward
        sale agreement, Great Plains Energy will receive an amount equal to $26.6062
        per
        share, plus interest based on the federal funds rate less a spread and less
        certain scheduled decreases if Great Plains Energy elects to physically settle
        the forward sale agreement by delivering solely shares of common stock. In
        most
        circumstances, Great Plains Energy also has the right, in lieu of physical
        settlement, to elect cash or net physical settlement.
  In
        May
        2006, Great Plains Energy registered an additional 1.0 million shares of
        common
        stock with the SEC for its Dividend Reinvestment and Direct Stock Purchase
        Plan,
        bringing the total number of shares registered under this plan to 4.0 million.
        The plan allows for the purchase of common shares by reinvesting dividends
        or
        making optional cash payments.
  In
        March
        2006, Great Plains Energy registered an additional 1.0 million shares of
        common
        stock with the SEC for a defined contribution savings plan, bringing the
        total
        number of shares registered under this plan to 10.3 million. Shares issued
        under
        the plans may be either newly issued shares or shares purchased in the open
        market.
  **9.**
            **PENSION****PLANS AND OTHER EMPLOYEE BENEFITS**  The
        Company maintains defined benefit pension plans for substantially all employees,
        including officers, of KCP&L, Services and WCNOC. Pension benefits under
        these plans reflect the employees’ compensation, years of service and age at
        retirement.
  The
        MPSC
        and KCC issued orders in 2005 establishing KCP&L’s annual pension costs at
        $22 million for the years 2005 and 2006 through the creation of regulatory
        assets and liabilities for future recovery from or refund to customers, as
        appropriate. During the third quarter of 2005, KCP&L implemented these
        orders retroactive to January 1, 2005. KCP&L’s 2006 pension costs were
        reduced and the corresponding regulatory assets were increased by $15.3
        million.
  29


In
        addition to providing pension benefits, the Company provides certain
        postretirement health care and life insurance benefits for substantially
        all
        retired employees of KCP&L, Services and WCNOC. The cost of postretirement
        benefits charged to KCP&L are accrued during an employee's years of service
        and recovered through rates.
  The
        following table provides the components of net periodic benefit costs prior
        to
        the effects of capitalization and sharing with joint-owners of power plants.
        Included in net periodic benefit costs are settlement charges related to
        the
        workforce realignment, discussed below. The total amount of 2006 pension
        settlement charges related to the workforce realignments and other retirements
        will be determined in the fourth quarter after the year-end of the pension
        plans.


**Pension
                  Benefits**
              **Other
                  Benefits****Three
                  Months Ended June 30**
              **2006**
              **2005**
              **2006**
              **2005****Components
                  of net periodic benefit cost**
              (millions)Service
                  cost
              $
              4.7
              
              $
              4.3
              
              $
              0.2
              
              $
              0.2Interest
                  cost
              
              7.7
              
              
              7.5
              
              
              0.8
              
              
              0.7Expected
                  return on plan assets
              
              (8.2
              )
              
              (8.0
              )
              
              (0.2
              )
              
              (0.1
              )Amortization
                  of prior service cost
              
              1.1
              
              
              1.0
              
              
              -
              
              
              -Recognized
                  net actuarial loss (gain)
              
              8.0
              
              
              4.6
              
              
              0.2
              
              
              0.1Transition
                  obligation
              
              -
              
              
              -
              
              
              0.3
              
              
              0.3Settlement
                  charge
              
              7.5
              
              
              -
              
              
              -
              
              
              -Net
                  periodic benefit cost beforeregulatory
                  adjustment
              
              20.8
              
              
              9.4
              
              
              1.3
              
              
              1.2Regulatory
                  adjustment
              
              (7.7
              )
              
              -
              
              
              -
              
              
              -Net
                  periodic benefit cost
              $
              13.1
              
              $
              9.4
              
              $
              1.3
              
              $
              1.2
 **Pension
                  Benefits**
              **Other
                  Benefits****Year
                  to Date June 30**
              **2006**
              **2005**
              **2006**
              **2005****Components
                  of net periodic benefit cost**
              (millions)Service
                  cost
              $
              9.4
              
              $
              8.6
              
              $
              0.4
              
              $
              0.5Interest
                  cost
              
              15.4
              
              
              14.9
              
              
              1.5
              
              
              1.4Expected
                  return on plan assets
              
              (16.4
              )
              
              (16.1
              )
              
              (0.3
              )
              
              (0.3
              )Amortization
                  of prior service cost
              
              2.2
              
              
              2.1
              
              
              0.1
              
              
              0.1Recognized
                  net actuarial loss (gain)
              
              16.0
              
              
              9.3
              
              
              0.4
              
              
              0.2Transition
                  obligation
              
              -
              
              
              -
              
              
              0.6
              
              
              0.6Settlement
                  charge
              
              7.5
              
              
              -
              
              
              -
              
              
              -Net
                  periodic benefit cost beforeregulatory
                  adjustment
              
              34.1
              
              
              18.8
              
              
              2.7
              
              
              2.5Regulatory
                  adjustment
              
              (15.3
              )
              
              -
              
              
              -
              
              
              -Net
                  periodic benefit cost
              $
              18.8
              
              $
              18.8
              
              $
              2.7
              
              $
              2.5
  **Skill
          Set Realignment and Pension Settlement Charges**
 In
          2005
          and early 2006, management undertook a process to assess, improve and reposition
          the skill sets of employees for implementation of the comprehensive energy
          plan.
          KCP&L recorded $9.4 million year
          to
          date June 30, 2006, related to this workforce realignment process
          reflecting severance, benefits and related payroll taxes provided by KCP&L
          to employees. Management is actively filling positions with the specific
          skill
          sets and talent needed to achieve KCP&L’s goals. Management believes that
          the realignment allows for optimization of employee levels and avoids future
          additional expense. In
          the
          second quarter of 2006, KCP&L incurred $7.3 million of
          pension settlement charges associated with the realignment resulting in
          $4.8
          million of
          expense recorded after amounts capitalized and billed to joint
  30
 owners
          of
          power plants. The pension settlement charges were a result of the number
          of
          employees retiring and selecting the lump-sum payment option.
  KCP&L
          anticipates recording additional expense related to pension settlement
          charges
          of approximately $7 million during the second half of 2006 associated with
          its
          management and union pension plans as a result of additional employees
          retiring
          and selecting the lump-sum payment option. The total amount of 2006 pension
          settlement charges related to the workforce realignments and other retirements
          will be determined in the fourth quarter after the year-end of the pension
          plans. In the second quarter of 2006, KCP&L requested regulatory accounting
          treatment from MPSC and KCC to defer pension settlement charges, retroactive
          to
          January 1, 2006, and amortize the deferred amount over a five-year period
          to be
          established in the rate proceeding following the current 2006 proceedings.
          At
          June 30, 2006, no amounts were deferred pending the outcome of this
          request.
  **10.**
              **EQUITY
                  COMPENSATION**  As
          of
          January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based
          Payment” using the modified prospective application method. The adoption of SFAS
          No. 123R had an insignificant effect on the companies’ consolidated statements
          of income and cash flows for the three months ended and year to date June
          30,
          2006.
  The
          Company’s Long-Term Incentive Plan is an equity compensation plan approved by
          its shareholders. KCP&L does not have an equity compensation plan; however,
          KCP&L officers participate in Great Plains Energy’s Long-Term Incentive
          Plan. The Long-Term Incentive Plan permits the grant of restricted stock,
          stock
          options, limited stock appreciation rights and performance shares to officers
          and other employees of the Company and its subsidiaries. The maximum number
          of
          shares of Great Plains Energy common stock that can be issued under the
          plan is
          3.0 million. Common stock shares delivered by the Company under the Long-Term
          Incentive Plan may be authorized but unissued, held in the treasury or
          purchased
          on the open market (including private purchases) in accordance with applicable
          security laws. The Company has
          a
          policy of delivering newly issued shares, or shares surrendered by Plan
          participants on account of withholding taxes and held in treasury, or both,
          to
          satisfy share option exercises and does not expect to repurchase common
          shares
          during 2006 to satisfy stock option exercises for the period.
  SFAS
          No.
          123R requires forfeitures to be estimated. Forfeiture rates are based on
          historical forfeitures and future expectations and will be reevaluated
          annually.
          The following table summarizes Great Plains Energy’s and KCP&L’s equity
          compensation expense and income tax benefits.
 **Three
                      Months Ended**
                  **Year
                      to Date****June
                      30**
                  **June
                      30****2006**
                  **2005**
                  **2006**
                  **2005****Compensation
                      expense**
                  (millions)Great
                      Plains Energy
                  $
                  0.9
                  
                  $
                  1.0
                  
                  $
                  1.7
                  
                  $
                  1.6KCP&L
                  
                  0.7
                  
                  
                  0.5
                  
                  
                  1.1
                  
                  
                  0.8**Income
                      tax benefits**Great
                      Plains Energy
                  
                  0.3
                  
                  
                  0.4
                  
                  
                  0.4
                  
                  
                  0.6KCP&L
                  
                  0.3
                  
                  
                  0.2
                  
                  
                  0.3
                  
                  
                  0.3
 **Stock
          Options Granted 2001 - 2003**
 Stock
          options were granted under the plan at market value of the shares on the
          grant
          date. The options vest three years after the grant date and expire in ten
          years
          if not exercised. The fair value for the stock options granted in 2001
          - 2003
          was estimated at the date of grant using the Black-Scholes option-pricing
          model.
          Compensation expense and accrued dividends related to stock options
          are
  31
 recognized
          over the stated vesting period. Exercise prices range
          from $24.90 to $27.73. The stock options are expected to be fully vested
          by the
          end of the third quarter of 2006 and management does not anticipate additional
          forfeitures for 2006. All stock option activity year to date June 30, 2006,
          is
          summarized in the following table.
 **Remaining****Exercise**
                **Contractual****Stock
                    Options**
                **Shares**
                **Price***
                **Term***Beginning
                    balance
                
                111,455
                
                $
                25.56Forfeited
                    or expired
                
                (1,983
                )
                
                27.73Ending
                    balance
                
                109,472
                
                
                25.52
                
                
                5.4Exercisable
                    at June 30
                
                95,000
                
                
                25.19
                
                
                5.2*
                    weighted-average
 
 A
            summary
            of the status of the Company’s nonvested stock options as of June 30, 2006, and
            changes during the period, is presented in the following table .
 **Nonvested**
                
                
                **Fair****Stock
                    Options**
                **Shares**
                **Value
                    ***Beginning
                    balance
                
                16,455
                
                $
                3.15Forfeited
                
                (1,983
                )
                
                3.15Ending
                    balance
                
                14,472
                
                
                3.15*
                    2003 grant-date fair value
 At
            June
            30, 2006, there was an insignificant amount of total unrecognized compensation
            expense related to nonvested stock options granted under the Plan, which
            will be
            recognized by the end of the third quarter of 2006.  The total fair value
            of shares vested was insignificant for the three months ended and year
            to date
            June 30, 2006 and 2005.
  **Performance
            Shares**
 The
            payment of performance shares is contingent upon achievement of specific
            performance goals over a stated period of time as approved by the Compensation
            and Development Committee of the Company’s Board of Directors. The number of
            performance shares ultimately paid can vary from the number of shares
            initially
            granted depending on Company performance, based on internal and external
            measures, over stated performance periods. Performance shares have a
            value equal
            to the market value of the shares on the grant date with accruing dividends.
            Compensation expense, calculated by multiplying shares by the related
            grant-date
            fair value less the present value of dividends, and accrued dividends
            related to
            performance shares are recognized over the stated period. Performance
            share
            activity year to date June 30, 2006, is summarized in the following
            table.
 **Grant
                      Date****Performance**
                  **Shares**
                  **Fair
                      Value *******Beginning
                      balance
                  
                  172,761
                  
                  $
                  30.17Performance
                      adjustment
                  
                  (2,650
                  )Granted
                  
                  94,159
                  
                  
                  28.20Issued
                  
                  (9,499
                  )
                  
                  27.73Ending
                      balance
                  
                  254,771
                  
                  
                  29.56*
                      weighted-average
  At
              June
              30, 2006, the remaining weighted-average contractual term was 1.6
              years .
              There
              was no activity for performance shares during the three months ended
              and the
              weighted-average grant-date fair value for shares granted was $28.20
              year to
              date June 30, 2006. The weighted-average grant-date
  32
 fair
              value of shares granted during the three months ended and year to date
              June 30, 2005, was $30.85 and $30.34, respectively. At June 30, 2006,
              there was $3.3 million of total unrecognized compensation expense,
              net of
              forfeiture rates, related to performance shares granted under the Plan,
              which
              will be recognized over the remaining weighted-average contractual
              term. 
The total fair value of shares vested was insignificant during the
              three months
              ended and year to date June 30, 2006 and 2005.
  **Restricted
              Stock**
 Restricted
              stock cannot be sold or otherwise transferred by the recipient prior
              to vesting
              and has a value equal to the fair market value of the shares on the
              issue date.
              Restricted stock shares vest over a stated period of time with accruing
              reinvested dividends. Compensation expense, calculated by multiplying
              shares by
              the related grant-date fair value less the present value of dividends,
              and
              accrued dividends related to restricted stock are recognized over the
              stated
              vesting period. Restricted stock activity year to date June 30, 2006,
              is
              summarized in the following table.
 **Nonvested**
                  
                  
                  **Grant
                      Date****Restricted
                      stock**
                  **Shares**
                  **Fair
                      Value *******Beginning
                      balance
                  
                  119,966
                  
                  $
                  30.50Issued
                  
                  48,041
                  
                  
                  28.22Forfeited
                  
                  (2,000
                  )
                  
                  28.20Ending
                      balance
                  
                  166,007
                  
                  
                  29.86*
                      weighted-average
 At
              June
              30, 2006, the remaining weighted-average contractual term was 1.6 years.
              The
              weighted-average grant-date fair value of shares granted during the
              three months
              ended and year to date June 30, 2006, was $28.81 and $28.22, respectively.
              The weighted-average grant-date fair value of shares granted during
              the three
              months ended and year to date June 30, 2005, was $31.05 and $30.56,
              respectively. At June 30, 2006, there was $2.1 million of total unrecognized
              compensation expense, net of forfeiture rates, related to nonvested
              restricted
              stock granted under the Plan, which will be recognized over the remaining
              weighted-average contractual term.  No shares vested during the three
              months ended and year to date June 30, 2006 and 2005.
  **11.**
                  **KLT
                      GAS DISCONTINUED OPERATIONS**  The
              KLT
              Gas natural gas properties (KLT Gas portfolio) was reported as discontinued
              operations in accordance with SFAS No. 144, “Accounting for the Impairment or
              Disposal of Long-Lived Assets” after the 2004 Board of Directors approval to
              sell the KLT Gas Portfolio and discontinue the gas business. During
              2004 and
              2005, KLT Gas completed sales of the KLT Gas portfolio and in 2006
              KLT Gas has
              no active operations.
  **12.**
                  **RELATED
                      PARTY TRANSACTIONS AND RELATIONSHIPS**  Consolidated
              KCP&L receives various support and administrative services from Services.
              These services are billed to consolidated KCP&L at cost, based on payroll
              and other expenses, incurred by Services for the benefit of consolidated
              KCP&L. These costs totaled $5.1 million and
              $9.5
              million for the
              three months ended and year to date June 30, 2006, respectively, and
              $15.5
              million and
              $30.9 million for the
              same periods in 2005. These costs consisted primarily of employee compensation,
              benefits and fees associated with various professional services. At
              June 30,
              2006, and December 31, 2005, consolidated KCP&L had a net intercompany
              payable to Services of $2.7 million and
              $3.5
              million ,
              respectively. In the third quarter of 2005, approximately 80% of Services’
employees were transferred to KCP&L to better align resources with the
              operating business. At June 30, 2006, and December 31, 2005, consolidated
              KCP&L’s balance sheets reflect a note payable from HSS to Great Plains
              Energy of $0.5 million.
  33
 **13.**
                      **COMMITMENTS
                          AND CONTINGENCIES**
 **Environmental
              Matters**
 The
              Company is subject to regulation by federal, state and local authorities
              with
              regard to air and other environmental matters primarily through KCP&L’s
              operations. The generation, transmission and distribution of electricity
              produces and requires disposal of certain hazardous products that are
              subject to
              these laws and regulations. In addition to imposing continuing compliance
              obligations, these laws and regulations authorize the imposition of
              substantial
              penalties for noncompliance, including fines, injunctive relief and
              other
              sanctions. Failure to comply with these laws and regulations could
              have a
              material adverse effect on consolidated KCP&L and Great Plains
              Energy.
  KCP&L
              operates in an environmentally responsible manner and seeks to use
              current
              technology to avoid and treat contamination. KCP&L regularly conducts
              environmental audits designed to ensure compliance with governmental
              regulations
              and to detect contamination. At June 30, 2006, and December 31, 2005,
              KCP&L had $0.3 million accrued
              for environmental remediation expenses. The accrual covers water monitoring
              at
              one site. The amounts accrued were established on an undiscounted basis
              and
              KCP&L does not currently have an estimated time frame over which the accrued
              amounts may be paid out.
  Environmental-related
              legislation is regularly introduced. Such legislation typically includes
              various
              compliance dates and compliance limits. Such legislation could have
              the
              potential for a significant financial impact on KCP&L, including the
              installation of new pollution control equipment to achieve compliance.
              However,
              KCP&L would seek recovery of capital costs and expenses for such compliance
              through rates. KCP&L will continue to monitor proposed
              legislation.
  The
              following table contains
              estimates of expenditures to comply with environmental laws and regulations
              described below. The allocation between states is based on location
              of the
              facilities and has no bearing as to recovery in jurisdictional
              rates.
 **Clean
                        Air Estimated Required**
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    **Estimated****Environmental
                        Expenditures**
                    
                    **Missouri**
                    **Kansas**
                    **Total**
                    **Timetable**(millions)CAIR
                    
                    $555
                    -
                    802
                    $
                    -
                    
                    $555
                    -
                    802
                    2006
                        - 2015Incremental
                        BART
                    
                    53
                    -
                    77
                    240
                    -
                    347
                    293
                    -
                    424
                    2006
                        - 2017Incremental
                        CAMR
                    
                    41
                    -
                    59
                    4
                    -
                    6
                    45
                    -
                    65
                    2010
                        - 2018Comprehensive
                        energy plan retrofits
                    
                    (171)
                    (101)
                    (272)
                    2006
                        - 2010Estimated
                        required environmental expenditures inexcess
                        of the comprehensive energy plan retrofits
                    
                    $478
                    -
                    767
                    $143
                    -
                    252
                    $621
                    -
                    1,019




Expenditure
        estimates provided in the table above include, but are not limited to, the
        accelerated environmental upgrade expenditures included in KCP&L’s
        comprehensive energy plan. KCP&L expects to provide definitive estimates of
        comprehensive energy plan expenditures later in 2006, which could significantly
        differ from the retrofit estimates above. These expenditures are expected
        to
        reduce SO 2 ,
        NO x ,
        mercury
        and air particulate matter emissions. KCP&L’s expectation is that any
        required environmental expenditures will be recovered through
        rates.
  ***Clean
        Air Interstate Rule***
 The
        Environmental Protection Agency (EPA) Clean Air Interstate Rule (CAIR) requires
        reductions in SO 2 and
        NO x emissions in 28 states, including Missouri. The reduction in both SO 2 and
        NO x emissions will be accomplished through establishment of permanent statewide
        caps
        for NO x effective January 1, 2009, and SO 2 effective January 1, 2010. More restrictive caps will be effective on
        January 1, 2015.
  34
  KCP&L’s
        fossil fuel-fired plants located in Missouri are subject to CAIR, while its
        fossil fuel-fired plants in Kansas are not.
  KCP&L
        expects to meet the emissions reductions required by CAIR at its Missouri
        plants
        through a combination of pollution control capital projects and the purchase
        of
        emission allowances in the open market as needed. The final rule establishes
        a
        market-based cap-and-trade program. Missouri has developed State Implementation
        Plan (SIP) rules, which include an emission allowance allocation mechanism,
        and
        is currently accepting comments on these preliminary rules. Facilities will
        demonstrate compliance with CAIR by holding sufficient allowances for each
        ton
        of SO 2 and
        NO x emitted
        in any given year with SO 2 emission
        allowances transferable among all regulated facilities nationwide and
        NO x emission
        allowances transferable among all regulated facilities within the 28 CAIR
        states. KCP&L will also be allowed to utilize unused SO 2 emission
        allowances that it has accumulated during previous years of the Acid Rain
        Program to meet the more stringent CAIR requirements. At June 30, 2006,
        KCP&L had accumulated unused SO 2 emission
        allowances sufficient to support just under 120,000 tons of SO 2 emission
        under the provisions of the Acid Rain program, which are recorded in inventory
        at zero cost. KCP&L is permitted to sell excess SO 2 emission
        allowances in accordance with KCP&L’s comprehensive energy plan as approved
        by the MPSC and KCC.
  Analysis
        of the final rule indicates that selective catalytic reduction technology
        for
        NO x control
        and scrubbers for SO 2 control
        will likely be required for KCP&L’s Montrose Station, in addition to the
        environmental upgrades at Iatan No. 1 included in the comprehensive energy
        plan.
        The timing of the installation of such control equipment is currently being
        developed. KCP&L continues to refine the preliminary cost estimates detailed
        in the table above and explore alternatives. The ultimate cost of these
        regulations could be significantly different from the amounts estimated.
        As
        discussed below, certain of the control technology for SO 2 and
        NO x will
        also aid in the control of mercury.
  ***Best
        Available Retrofit Technology Rule***
 The
        EPA
        best available retrofit technology rule (BART) directs state air quality
        agencies to identify whether visibility-reducing emissions from sources subject
        to BART are below limits set by the state or whether retrofit measures are
        needed to reduce emissions. BART applies to specific eligible facilities
        including LaCygne Nos. 1 and 2 in Kansas and Iatan No. 1 and Montrose No.
        3 in
        Missouri. The CAIR suggests that states that meet the CAIR requirements may
        also
        meet BART requirements for individual sources. Missouri is considering this
        proposal as part of the CAIR SIP, but no final decision has been reached.
        Kansas
        is not a CAIR state and therefore BART will likely impact LaCygne Nos. 1
        and 2.
        Kansas is in the process of completing modeling associated with the rule.
        States
        must submit a BART implementation plan in 2007 with required emission controls.
        If emission controls to comply with BART are required at LaCygne Nos. 1 and
        2,
        additional capital expenditures will be required above comprehensive energy
        plan
        upgrades. KCP&L continues to refine its preliminary cost estimates detailed
        in the table above and explore alternatives. The ultimate cost of these
        regulations could be significantly different from the amounts
        estimated.
  ***Mercury
        Emissions***
 The
        EPA
        Clean Air Mercury Rule (CAMR) regulates mercury emissions from coal-fired
        power
        plants located in 48 states, including Kansas and Missouri, under the New
        Source
        Performance Standards of the Clean Air Act. The rule established a market-based
        cap-and-trade program that will reduce nationwide utility emissions of mercury
        in two phases. The first phase cap is effective January 1, 2010, and will
        establish a permanent nationwide cap of 38 tons of mercury for coal-fired
        power
        plants. Management anticipates meeting the first phase cap by taking advantage
        of KCP&L’s mercury reductions achieved through capital expenditures to
        comply with CAIR and BART. The second phase is effective January 1, 2018,
        and
        will establish a permanent nationwide cap of 15 tons of mercury for coal-fired
        power plants. When fully implemented, the rule will reduce utility emissions
        of
        mercury by nearly 70% from current emissions of 48 tons per year.
  35
 Facilities
        will demonstrate compliance with the standard by holding allowances for each
        ounce of mercury emitted in any given year and allowances will be readily
        transferable among all regulated facilities nationwide. Under the cap-and-trade
        program, KCP&L will be able to purchase mercury allowances or elect to
        install pollution control equipment to achieve compliance. While it is expected
        that mercury allowances will be available in sufficient quantities for purchase
        in the 2010-2018 timeframe, the significant reduction in the nationwide cap
        in
        2018 may hamper KCP&L’s ability to obtain reasonably priced allowances
        beyond 2018. Management expects capital expenditures will be required to
        install
        additional pollution control equipment to meet the second phase cap. During
        the
        ensuing years, management will closely monitor advances in technology for
        removal of mercury from Powder River Basin (PRB) coal and expects to make
        decisions regarding second phase removal based on then available technology
        to
        meet the 2018 compliance date. KCP&L participated in the Department of
        Energy (DOE) National Energy Technology Laboratory project to investigate
        control technology options for mercury removal from coal-fired plants burning
        sub-bituminous coal. The ultimate cost of this rule could be significantly
        different from the amounts estimated in the table above.
  In
        May
        2006, the EPA took final action on petitions to reconsider CAMR .
        In
        response to these requests for reconsideration, the EPA made several changes
        to
        the CAMR correcting a number of technical aspects to clarify CAMR. These
        changes
        do not significantly impact KCP&L. In response to the remaining issues under
        reconsideration, the EPA determined that its decisions were reasonable and
        should not be changed.
  ***Carbon
        Dioxide***
 The
        Clear
        Skies Initiative includes a climate change policy, which is a voluntary program
        that relies heavily on incentives to encourage industry to voluntarily limit
        emissions. The strategy includes tax credits, energy conservation programs,
        funding for research into new technologies, and a plan to encourage companies
        to
        track and report their emissions so that companies could gain credits for
        use in
        any future emissions trading program. The greenhouse strategy links growth
        in
        emissions of greenhouse gases to economic output and is intended to reduce
        the
        greenhouse gas intensity of the U.S. economy 18% by 2012. Greenhouse gas
        intensity measures the ratio of greenhouse gas emissions to economic output
        as
        measured by Gross Domestic Product (GDP). Under this plan, as the economy
        grows,
        greenhouse gases also would continue to grow, although at a slower rate than
        they would have without these policies in place. When viewed per unit of
        economic output, the rate of emissions would drop. The plan projects that
        the
        U.S. would lower its rate of greenhouse gas emissions from an estimated 183
        metric tons per $1 million of GDP in 2002 to 151 metric tons per $1 million
        of GDP by 2012.
  KCP&L
        is a member of the Power Partners through Edison Electric Institute (EEI).
        Power
        Partners is a voluntary program with the DOE under which utilities commit
        to
        undertake measures to reduce, avoid or sequester CO 2 emissions. Power Partners entered into a cooperative umbrella memorandum
        of
        understanding (MOU) with the DOE. This MOU contains supply and demand-side
        actions as well as offset projects that will be undertaken to reduce the
        power
        sector’s CO 2 emissions per kWh generated (carbon intensity), consistent with the EEI’s 2003
        commitment of a 3% to 5% reduction over the next decade.
  ***Air
        Particulate Matter and Ozone***
 The
        EPA
        standards for ozone and particulate matter air quality include an eight-hour
        ozone standard and a standard for particulate matter less than 2.5 microns
        (PM-2.5) in diameter. The EPA has designated the Kansas City area as attainment
        with respect to the PM-2.5 National Ambient Air Quality Standards (NAAQS).
        Additionally, the EPA designated Jackson, Platte, Clay and Cass counties
        in
        Missouri and Johnson, Linn, Miami and Wyandotte counties in Kansas as attainment
        with respect to the eight-hour ozone NAAQS.
  36
 In
        January 2006, the EPA published proposed revisions to the NAAQS for particulate
        matter. With regard to PM-2.5, the EPA proposed to reduce the level of the
        24-hour PM-2.5 standard from 65 to 35 micrograms per cubic meter and to retain
        the level of the annual PM-2.5 standard at 15 micrograms per cubic meter.
        With
        regard to particles generally less than or equal to 10 micrograms per cubic
        meter, PM-10, the EPA proposes to revise the 24-hour PM-10 standard by
        establishing a new indicator for coarse particles (particles generally between
        2.5 and 10 micrograms per cubic meter), PM-10-2.5, at a level of 70 micrograms
        per cubic meter. The EPA outlined certain alternatives and issues related
        to
        implementation of the proposed revisions and sought public comment. The EPA
        plans to take action on the proposal by September 2006. At this time it is
        difficult to predict the final rule that might result from these proposed
        revisions and the subsequent impact of that final rule on attainment status
        of
        the revised NAAQS standards for particulate matter. If the EPA adopts a rule
        that results in the Kansas City area being designated as non-attainment,
        more
        restrictive regulation of new and existing units could result.
  ***Water
        Use Regulations***
 The
        EPA
        Clean Water Act established standards for cooling water intake structures.
        This
        regulation applies to certain existing power producing facilities that employ
        cooling water intake structures that withdraw 50 million gallons or more
        per day
        and use 25% or more of that water for cooling purposes. KCP&L is required to
        complete a comprehensive demonstration study on each of its generating
        facilities’ intake structures by the end of 2007. The studies are expected to
        cost a total of $1.2 million to $2.0 million. Depending on the outcome of
        the
        comprehensive demonstration studies, facilities may be required to implement
        technological, operational or restoration measures to achieve compliance.
        Compliance with this regulation is expected to be achieved between 2011 and
        2014. Until the comprehensive demonstration studies are completed, the impact
        of
        this regulation cannot be quantified.
  KCP&L
        holds a permit from the Missouri Department of Natural Resources covering
        water
        discharge from its Hawthorn Station. The permit authorizes KCP&L, among
        other things, to withdraw water from the Missouri river for cooling purposes
        and
        return the heated water to the Missouri river. KCP&L has applied for a
        renewal of this permit and the EPA has submitted an interim objection letter
        regarding the allowable amount of heat that can be contained in the returned
        water. Until this matter is resolved, KCP&L continues to operate under its
        current permit. KCP&L cannot predict the outcome of this matter; however,
        while less significant outcomes are possible, this matter may require KCP&L
        to reduce its generation at Hawthorn Station, install cooling towers or both.
        The outcome could also affect the terms of water permit renewals at KCP&L’s
        Iatan and Montrose Stations.
  **Contractual
        Commitments**
 Great
        Plains Energy’s and consolidated KCP&L’s contractual obligations have not
        significantly changed at June 30, 2006, compared to December 31, 2005, except
        for KCP&L’s fuel and Strategic Energy’s purchased power. KCP&L’s
        contractual commitments for fuel at June 30, 2006, totaled $464.1 million.
        Commitments for the remainder of 2006 total $91.9 million and for the years
        2007
        through 2010 total $97.2 million, $105.9 million, $45.9 million, and $43.6
        million, respectively. Commitments after 2010 total $79.6 million. Great
        Plains
        Energy’s contractual commitments at June 30, 2006, include KCP&L’s
        commitments for fuel and Strategic Energy’s commitments for purchased power.
        Strategic Energy’s commitments for purchased power at June 30, 2006, totaled
        $795.7 million. Commitments for the remainder of 2006 total $320.6 million
        and
        for the years 2007 through 2011 total $237.7 million, $114.0 million, $63.3
        million, $52.4 million and $7.7 million, respectively. Additionally, KCP&L
        has incurred contractual commitments related to its comprehensive energy
        plan
        totaling $242.5 million. These commitments are $126.2 million for the remainder
        of 2006, and $71.7 million, $33.5 million, $6.4 million and $4.7 million
        for the
        years 2007 through 2010, respectively.
  37
 **Uncertain
        Tax Positions**
 In
        July
        2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
        (FIN) No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of
        SFAS No. 109 “Accounting for Income Taxes”. FIN No. 48 clarifies how companies
        calculate and disclose uncertain tax positions. Great Plains Energy and
        consolidated KCP&L are required to adopt the provisions of FIN No. 48 for
        periods beginning in 2007, although earlier adoption is permitted. Management
        is
        currently evaluating the impact of FIN No. 48 and has not yet determined
        the
        impact on Great Plains Energy and consolidated KCP&L’s consolidated
        financial statements. Management evaluates and records tax liabilities for
        uncertain tax positions based on the probability of ultimately sustaining
        the
        tax deductions or income positions. Management assesses the probabilities
        of
        successfully defending the tax deductions or income positions based upon
        statutory, judicial or administrative authority.
  At
        June
        30, 2006 and December 31, 2005, the Company had $4.7 million and
        $4.6 million ,
        respectively, of liabilities for uncertain tax positions related to tax
        deductions or income positions taken on the Company’s tax returns. Consolidated
        KCP&L had liabilities for uncertain tax positions of $1.7 million and
        $1.2 million at
        June
        30, 2006 and December 31, 2005, respectively. Management believes the tax
        deductions or income positions are properly treated on such tax returns but
        has
        recorded reserves based upon its assessment of the probabilities that certain
        deductions or income positions may not be sustained when the returns are
        audited. The tax returns containing these tax deductions or income positions
        are
        currently under audit or will likely be audited. The timing of the resolution
        of
        these audits is uncertain. If the positions are ultimately sustained, the
        companies will reverse these tax provisions to net income. If the positions
        are
        not ultimately sustained, the companies may be required to make cash payments
        plus interest and/or utilize the companies’ federal and state credit
        carryforwards.
  **14.**
            **LEGAL
                PROCEEDINGS**  **Union
        Pacific**
 In
        2005,
        KCP&L filed a rate complaint case with the Surface Transportation Board
        (STB) charging that Union Pacific Railroad Company’s (Union Pacific) rates for
        transporting coal from the PRB in Wyoming to KCP&L’s Montrose Station are
        unreasonably high. Prior to the end of 2005, the rates were established under
        a
        contract with Union Pacific. Efforts to extend the term of the contract were
        unsuccessful and Union Pacific is the only service for coal transportation
        from
        the PRB to Montrose Station. KCP&L charged that Union Pacific possesses
        market dominance over the traffic and requested the STB prescribe maximum
        reasonable rates. In February 2006, the STB announced a rulemaking proceeding
        to
        address certain issues associated with the calculation of stand-alone costs
        in
        rate complaint cases. Proceedings in KCP&L’s rate complaint case have been
        suspended pending the outcome of this rulemaking, and management currently
        expects a decision in the case in 2008. Until the STB case is decided, KCP&L
        is paying tariff rates subject to refund.
  **Framatome**
 In
        2005,
        WCNOC filed a lawsuit on behalf of itself, KCP&L and the other two Wolf
        Creek owners against Framatome ANP, Inc., and Framatome ANP Richland, Inc.
        (Framatome) in the District Court of Coffey County, Kansas. The suit alleged
        various claims against Framatome related to the proposed design, licensing
        and
        installation of a digital control system. The suit sought recovery of
        approximately $16 million in damages from Framatome. Framatome filed a
        counterclaim against the three Wolf Creek owners seeking recovery of damages
        alleged to be in excess of $20 million. In May 2006, the parties settled
        this
        case. The settlement had no significant impact on KCP&L’s results of
        operations or financial position.
  **Hawthorn
        No. 5 Subrogation Litigation**
 KCP&L
        filed suit in 2001, in Jackson County, Missouri Circuit Court against multiple
        defendants who are alleged to have responsibility for the 1999 Hawthorn No.
        5
        boiler explosion. KCP&L and National
  38
 Union
        Fire Insurance Company of Pittsburgh, Pennsylvania (National Union) have
        entered
        into a subrogation allocation agreement under which recoveries in this suit
        are
        generally allocated 55% to National Union and 45% to KCP&L. Certain
        defendants were dismissed from the suit and various defendants settled, with
        KCP&L receiving a total of $38.2 million, of which $18.5 million was
        recorded as a recovery of capital expenditures. Trial of this case with the
        one
        remaining defendant resulted in a March 2004 jury verdict finding KCP&L’s
        damages as a result of the explosion were $452 million. After deduction of
        amounts received from pre-trial settlements with other defendants and an
        amount
        for KCP&L’s comparative fault (as determined by the jury), the verdict would
        have resulted in an award against the defendant of approximately $97.6 million
        (of which KCP&L would have received $33 million pursuant to the subrogation
        allocation agreement after payment of attorney’s fees). In response to
        post-trial pleadings filed by the defendant, in 2004, the trial judge reduced
        the award against the defendant to $0.2 million. Both KCP&L and the
        defendant appealed this case to the Court of Appeals for the Western District
        of
        Missouri, and in May 2006, the Court of Appeals ordered the Circuit Court
        to
        enter judgment in KCP&L’s favor in accordance with the jury verdict. The
        defendant has filed a motion for transfer of this case to the Missouri Supreme
        Court.
  KCP&L
        also received reimbursement for Hawthorn No. 5 damages under a property damage
        insurance policy with Travelers Property Casualty Company of America
        (Travelers). Travelers filed suit in the Federal District Court for the Eastern
        District of Missouri on November 18, 2005, against National Union, and KCP&L
        was added as a defendant on June 19, 2006. Travelers seeks recovery of $10
        million that KCP&L has or will recover in the April 2001 lawsuit described
        in the preceding paragraph. Management is unable to predict the outcome of
        this
        litigation.
  **Emergis
        Technologies, Inc.**
 In
        March
        2006, Emergis Technologies, Inc. f/k/a BCE Emergis Technologies, Inc. (Emergis)
        filed suit against KCP&L in Federal District Court for the Western District
        of Missouri, alleging infringement of a patent, entitled “Electronic Invoicing
        and Payment System.” This patent relates to automated electronic bill
        presentment and payment systems, particularly those involving Internet billing
        and collection. In March 2006, KCP&L filed a response and denied infringing
        the patent. KCP&L counterclaimed for a declaration that the patent is
        invalid and not infringed. Emergis responded to KCP&L’s counterclaims in
        April 2006. Court ordered mediation occurred in July 2006, but the case was
        not
        resolved. Management does not expect the outcome of this litigation to have
        a
        material impact on Great Plains Energy's or KCP&L's results of operations
        and financial position.
  **Spent
        Nuclear Fuel and Radioactive Waste**
 In
        2004,
        KCP&L and the other two Wolf Creek owners filed suit against the United
        States in the U.S. Court of Federal Claims seeking an unspecified amount
        of
        monetary damages resulting from the government’s failure to begin accepting
        spent fuel for disposal in January 1998, as the government was required to
        do by
        the Nuclear Waste Policy Act of 1982. Approximately sixty other similar cases
        are pending before that court. The court has stayed the Wolf Creek case until
        at
        least October 2006 to allow for some of the earlier cases to be decided first.
        Another federal court already has determined that the government breached
        its
        obligation to begin accepting spent fuel for disposal. The questions now
        before
        the court in the pending cases are whether and to what extent the utilities
        are
        entitled to monetary damages for that breach. KCP&L management cannot
        predict the outcome of the Wolf Creek case.
  **Class
        Action Complaint**
 In
        2005,
        a class action complaint for breach of contract was filed against Strategic
        Energy. The plaintiffs purportedly represent the interests of certain customers
        in Pennsylvania who entered into  Power
        Supply Coordination Service Agreements (Agreement) for a certain product
        in
        Pennsylvania. The complaint seeks monetary damages, attorney fees and costs
        and
        a declaration that the customers may terminate their Agreement with Strategic
        Energy. In response to Strategic Energy’s preliminary
  39
 objections,
        plaintiffs have filed an amended complaint that management is evaluating.
        Management is unable to predict the outcome of this litigation.
  **Texas
        Customer Dispute**
 In
        February 2006, a customer in Texas that procures electricity for schools
        notified Strategic Energy that it had selected another provider for its school
        members during the time it was under contract with Strategic Energy. Strategic
        Energy exercised it rights under the agreement for breach. In June 2006,
        Strategic Energy received a notice of demand for arbitration from the customer
        pursuant to the agreement. Management is evaluating the merits of the customer’s
        alleged damages and the parties are in the process of selecting an arbitrator.
        Management believes the ultimate outcome of this matter will not have a material
        impact on the Company’s financial position or results of
        operations.
  **Haberstroh**
 In
        2004,
        Robert C. Haberstroh filed suit for breach of employment contract and violation
        of the Pennsylvania Wage Payment Collection Act against Strategic Energy
        Partners, Ltd. (Partners), SE Holdings, L.L.C. (SE Holdings) and Strategic
        Energy in the Court of Common Pleas of Allegheny County, Pennsylvania. In
        the
        first quarter of 2006, the suit was settled and as part of the settlement,
        Great
        Plains Energy acquired the remaining indirect interest in Strategic Energy
        for
        an insignificant amount.
  **Weinstein
        v. KLT Telecom**
 Richard
        D. Weinstein (Weinstein) filed suit against KLT Telecom Inc. (KLT Telecom)
        in
        September 2003 in the St. Louis County, Missouri Circuit Court. KLT Telecom
        acquired a controlling interest in DTI Holdings, Inc. (Holdings) in February
        2001 through the purchase of approximately two-thirds of the Holdings stock
        held
        by Weinstein. In connection with that purchase, KLT Telecom entered into
        a put
        option in favor of Weinstein, which granted Weinstein an option to sell to
        KLT
        Telecom his remaining shares of Holdings stock. The put option provided for
        an
        aggregate exercise price for the remaining shares equal to their fair market
        value with an aggregate floor amount of $15 million and was exercisable between
        September 1, 2003, and August 31, 2005. In June 2003, the stock of Holdings
        was
        cancelled and extinguished pursuant to the joint Chapter 11 plan confirmed
        by
        the Bankruptcy Court. In September 2003, Weinstein delivered a notice of
        exercise of his claimed rights under the put option. KLT Telecom rejected
        the
        notice of exercise, and Weinstein filed suit, alleging breach of contract.
        Weinstein sought damages of at least $15 million, plus statutory interest.
        In
        April 2005, summary judgment was granted in favor of KLT Telecom, and Weinstein
        appealed this judgment to the Missouri Court of Appeals for the Eastern
        District. In May 2006, the Court of Appeals affirmed the judgment. During
        July
        2006, Weinstein filed an application for transfer of this case to the Missouri
        Supreme Court. The $15 million reserve has not been reversed pending the
        outcome
        of the appeal process.
  **15.**
            **SEGMENT
                AND RELATED INFORMATION**  **Great
        Plains Energy**
 Great
        Plains Energy has two reportable segments based on its method of internal
        reporting, which generally segregates the reportable segments based on products
        and services, management responsibility and regulation. The two reportable
        business segments are KCP&L, an integrated, regulated electric utility, and
        Strategic Energy, a competitive electricity supplier. Other includes the
        operations of HSS, Services, all KLT Inc. operations other than Strategic
        Energy, unallocated corporate charges, consolidating entries and intercompany
        eliminations. Intercompany eliminations include insignificant amounts of
        intercompany financing related activities. The summary of significant accounting
        policies applies to all of the reportable segments. For segment reporting,
        each
        segment’s income taxes include the effects of allocating holding company tax
        benefits. Segment performance is evaluated based on net income.
  40
 The
        following tables reflect
        summarized financial information concerning Great Plains Energy’s reportable
        segments.
 **Three
                    Months Ended**
                
                
                **Strategic**
                
                
                **Great
                    Plains****June
                    30, 2006**
                **KCP&L**
                **Energy**
                **Other**
                **Energy**(millions)Operating
                    revenues
                $
                290.9
                
                $
                351.2
                
                $
                -
                
                $
                642.1Depreciation
                    and amortization
                
                (37.3
                )
                
                (2.0
                )
                
                -
                
                
                (39.3
                )Interest
                    charges
                
                (15.0
                )
                
                (0.6
                )
                
                (2.2
                )
                
                (17.8
                )Income
                    taxes
                
                (18.7
                )
                
                (2.7
                )
                
                2.5
                
                
                (18.9
                )Loss
                    from equity investments
                
                -
                
                
                -
                
                
                (0.3
                )
                
                (0.3
                )Net
                    income (loss)
                
                35.8
                
                
                4.2
                
                
                (2.4
                )
                
                37.6
 **Three
                    Months Ended**
                
                
                **Strategic**
                
                
                **Great
                    Plains****June
                    30, 2005**
                **KCP&L**
                **Energy**
                **Other**
                **Energy**(millions)Operating
                    revenues
                $
                272.1
                
                $
                359.6
                
                $
                -
                
                $
                631.7Depreciation
                    and amortization
                
                (36.7
                )
                
                (1.5
                )
                
                -
                
                
                (38.2
                )Interest
                    charges
                
                (15.5
                )
                
                (0.7
                )
                
                (2.2
                )
                
                (18.4
                )Income
                    taxes
                
                (14.5
                )
                
                (3.0
                )
                
                7.7
                
                
                (9.8
                )Loss
                    from equity investments
                
                -
                
                
                -
                
                
                (0.4
                )
                
                (0.4
                )Discontinued
                    operations
                
                -
                
                
                -
                
                
                (3.6
                )
                
                (3.6
                )Net
                    income (loss)
                
                29.1
                
                
                3.7
                
                
                (10.9
                )
                
                21.9
 **Year
                    to Date**
                
                
                **Strategic**
                
                
                **Great
                    Plains****June
                    30, 2006**
                **KCP&L**
                **Energy**
                **Other**
                **Energy**(millions)Operating
                    revenues
                $
                531.3
                
                $
                670.0
                
                $
                -
                
                $
                1,201.3Depreciation
                    and amortization
                
                (74.3
                )
                
                (3.9
                )
                
                -
                
                
                (78.2
                )Interest
                    charges
                
                (29.9
                )
                
                (0.9
                )
                
                (4.3
                )
                
                (35.1
                )Income
                    taxes
                
                (22.6
                )
                
                7.2
                
                
                5.2
                
                
                (10.2
                )Loss
                    from equity investments
                
                -
                
                
                -
                
                
                (0.6
                )
                
                (0.6
                )Net
                    income (loss)
                
                47.8
                
                
                (6.7
                )
                
                (5.6
                )
                
                35.5
 **Year
                    to Date**
                
                
                **Strategic**
                
                
                **Great
                    Plains****June
                    30, 2005**
                **KCP&L**
                **Energy**
                **Other**
                **Energy**(millions)Operating
                    revenues
                $
                505.3
                
                $
                671.4
                
                $
                0.1
                
                $
                1,176.8Depreciation
                    and amortization
                
                (73.0
                )
                
                (3.0
                )
                
                (0.1
                )
                
                (76.1
                )Interest
                    charges
                
                (30.1
                )
                
                (1.5
                )
                
                (4.3
                )
                
                (35.9
                )Income
                    taxes
                
                (16.0
                )
                
                (11.5
                )
                
                12.4
                
                
                (15.1
                )Loss
                    from equity investments
                
                -
                
                
                -
                
                
                (0.7
                )
                
                (0.7
                )Discontinued
                    operations
                
                -
                
                
                -
                
                
                (3.6
                )
                
                (3.6
                )Net
                    income (loss)
                
                39.9
                
                
                16.5
                
                
                (14.3
                )
                
                42.1
 
 41
 **Strategic**
                  
                  
                  **Great
                      Plains****KCP&L**
                  **Energy**
                  **Other**
                  **Energy****June
                      30, 2006**
                  (millions)Assets
                  $
                  3,558.5
                  
                  $
                  421.0
                  
                  $
                  41.7
                  
                  $
                  4,021.2Capital
                      expenditures(a)
                  
                  230.0
                  
                  
                  2.5
                  
                  
                  0.2
                  
                  
                  232.7**December
                      31, 2005**Assets
                  $
                  3,334.6
                  
                  $
                  441.8
                  
                  $
                  57.3
                  
                  $
                  3,833.7Capital
                      expenditures(a)
                  
                  332.2
                  
                  
                  6.6
                  
                  
                  (4.7
                  )
                  
                  334.1(a)Capital
                      expenditures reflect year to date amounts for the periods
                      presented.




**Consolidated
        KCP&L**
 The
        following tables reflect
        summarized financial information concerning consolidated KCP&L’s reportable
        segment. Other includes the operations of HSS and intercompany eliminations.
        Intercompany eliminations include insignificant amounts of intercompany
        financing related activities.
 **Three
                  Months Ended**
              
              
              
              
              **Consolidated****June
                  30, 2006**
              **KCP&L**
              **Other**
              **KCP&L**(millions)Operating
                  revenues
              $
              290.9
              
              $
              -
              
              $
              290.9Depreciation
                  and amortization
              
              (37.3
              )
              
              -
              
              
              (37.3
              )Interest
                  charges
              
              (15.0
              )
              
              -
              
              
              (15.0
              )Income
                  taxes
              
              (18.7
              )
              
              -
              
              
              (18.7
              )Net
                  income
              
              35.8
              
              
              -
              
              
              35.8
 **Three
                  Months Ended**
              
              
              
              
              **Consolidated****June
                  30, 2005**
              **KCP&L**
              **Other**
              **KCP&L**(millions)Operating
                  revenues
              $
              272.1
              
              $
              -
              
              $
              272.1Depreciation
                  and amortization
              
              (36.7
              )
              
              -
              
              
              (36.7
              )Interest
                  charges
              
              (15.5
              )
              
              -
              
              
              (15.5
              )Income
                  taxes
              
              (14.5
              )
              
              -
              
              
              (14.5
              )Net
                  income (loss)
              
              29.1
              
              
              (0.1
              )
              
              29.0
 **Year
                  to Date**
              
              
              
              
              **Consolidated****June
                  30, 2006**
              **KCP&L**
              **Other**
              **KCP&L**(millions)Operating
                  revenues
              $
              531.3
              
              $
              -
              
              $
              531.3Depreciation
                  and amortization
              
              (74.3
              )
              
              -
              
              
              (74.3
              )Interest
                  charges
              
              (29.9
              )
              
              -
              
              
              (29.9
              )Income
                  taxes
              
              (22.6
              )
              
              -
              
              
              (22.6
              )Net
                  income (loss)
              
              47.8
              
              
              -
              
              
              47.8
 **Year
                  to Date**
              
              
              
              
              **Consolidated****June
                  30, 2005**
              **KCP&L**
              **Other**
              **KCP&L**(millions)Operating
                  revenues
              $
              505.3
              
              $
              0.1
              
              $
              505.4Depreciation
                  and amortization
              
              (73.0
              )
              
              (0.1
              )
              
              (73.1
              )Interest
                  charges
              
              (30.1
              )
              
              -
              
              
              (30.1
              )Income
                  taxes
              
              (16.0
              )
              
              0.6
              
              
              (15.4
              )Net
                  income (loss)
              
              39.9
              
              
              (0.6
              )
              
              39.3
   42
 **Consolidated****KCP&L**
              **Other**
              **KCP&L****June
                  30, 2006**
              (millions)Assets
              $
              3,558.5
              
              $
              3.5
              
              $
              3,562.0Capital
                  expenditures(a)
              
              230.0
              
              
              -
              
              
              230.0**December
                  31, 2005**Assets
              $
              3,334.6
              
              $
              3.9
              
              $
              3,338.5Capital
                  expenditures(a)
              
              332.2
              
              
              -
              
              
              332.2(a)Capital
                  expenditures reflect year to date amounts for the periods
                  presented.
 **16.**
              **ASSET
                  RETIREMENT OBLIGATIONS**
 Asset
          retirement obligations (ARO) associated with tangible long-lived assets
          are
          those for which a legal obligation exists under enacted laws, statutes
          and
          written or oral contracts, including obligations arising under the doctrine
          of
          promissory estoppel. These liabilities are recognized at estimated fair
          value as
          incurred and capitalized as part of the cost of the related long-lived
          assets
          and depreciated over their useful lives. Accretion of the liabilities due
          to the
          passage of time is recorded as an operating expense. Changes in the estimated
          fair values of the liabilities are recognized when known.
  In
          the
          second quarter of 2006, KCP&L incurred an ARO related to decommissioning and
          site remediation associated with its Spearville Wind Energy Facility, a
          100.5 MW
          wind project in western Kansas. KCP&L is obligated to remove the wind
          turbine towers and perform site remediation within 12 months after the
          end of
          the associated 30-year land lease agreements. The ARO was derived from
          a third
          party estimate of decommissioning and remediation costs. To estimate the
          ARO,
          KCP&L used a credit-adjusted risk free discount rate of 6.68%. This rate was
          based on the rate at which KCP&L could issue 30-year bonds.
  At
          June
          30, 2006, KCP&L recorded a $3.1 million ARO for the decommissioning and site
          remediation and increased property and equipment by $3.1 million. KCP&L is a
          regulated utility subject to the provisions of SFAS No. 71 and management
          believes it is probable that any differences between expenses under FIN
          No. 47,
“Accounting for Conditional Asset Retirement Obligations” or SFAS No. 143,
“Accounting for Asset Retirement Obligation,” and expense recovered currently in
          rates will be recoverable in future rates. The following table summarizes
          the
          change in Great Plains Energy’s and consolidated KCP&L’s AROs.
 **June
                    30**
                **December
                    31****2006**
                **2005**(millions)Beginning
                    balance
                $
                145.9
                
                $
                113.7Additions
                
                3.1
                
                
                26.7Settlements
                
                -
                
                
                (2.0
                )Accretion
                
                4.7
                
                
                7.5Ending
                    balance
                $
                153.7
                
                $
                145.9
   **17.**
              **DERIVATIVE
                  INSTRUMENTS**  The
          companies are exposed to a variety of market risks including interest rates
          and
          commodity prices. Management has established risk management policies and
          strategies to reduce the potentially adverse effects that the volatility
          of the
          markets may have on the companies’ operating results. The risk management
          activities, including the use of derivative instruments, are subject to
          the
          management, direction and control of internal risk management committees.
          Management’s interest rate risk management strategy uses derivative instruments
          to adjust the companies’ liability portfolio to optimize
  43
 the
          mix
          of fixed and floating rate debt within an established range. In addition,
          management uses derivative instruments to hedge against future interest
          rate
          fluctuations on anticipated debt issuances. Management maintains commodity-price
          risk management strategies that use derivative instruments to reduce the
          effects
          of fluctuations in fuel and purchased power expense caused by commodity
          price
          volatility. Counterparties to commodity derivatives and interest rate swap
          agreements expose the companies to credit loss in the event of nonperformance.
          This credit loss is limited to the cost of replacing these contracts at
          current
          market rates less the application of counterparty collateral held and
          contract-based netting of credit exposures against payable balances. Derivative
          instruments, excluding those instruments that qualify for the Normal Purchases
          and Normal Sales (NPNS) election, which are accounted for by accrual accounting,
          are recorded on the balance sheet at fair value as an asset or liability.
          Changes in the fair value are recognized currently in net income unless
          specific
          hedge accounting criteria are met.
  **Fair
          Value Hedges - Interest Rate Risk Management**
 In
          2002,
          KCP&L remarketed its 1998 Series A, B and D EIRR bonds totaling $146.5
          million to a five-year fixed interest rate of 4.75% ending October 1, 2007.
          Simultaneously with the remarketing, KCP&L entered into an interest rate
          swap for the $146.5 million based on the London Interbank Offered Rate
          (LIBOR)
          to effectively create a floating interest rate obligation. The transaction
          is a
          fair value hedge with no ineffectiveness. Changes in the fair market value
          of
          the swap are recorded on the balance sheet as an asset or liability with
          an
          offsetting entry to the respective debt balances with no net impact on
          net
          income.
  **Cash
          Flow Hedges - Forward Starting Swaps**
 In
          the
          first quarter of 2006, KCP&L entered into two Forward Starting Swaps (FSS)
          to hedge against interest rate fluctuations on the long-term debt that
          KCP&L
          plans to issue before the end of the first quarter of 2007. The FSS will
          be
          settled simultaneously with the issuance of the long-term fixed rate debt.
          The
          FSS effectively removes most of the interest rate and credit spread uncertainty
          with respect to the debt to be issued, thereby enabling KCP&L to predict
          with greater assurance what its future interest costs on that debt will
          be. The
          FSS is accounted for as a cash flow hedge and the fair value is recorded
          as a
          current asset or liability with an offsetting entry to OCI, to the extent
          the
          hedge is effective, until the forecasted transaction occurs. No ineffectiveness
          has been recorded on the FSS. The pre-tax gain or loss on the FSS recorded
          to
          OCI will be reclassified to interest expense over the life of the future
          debt
          issuance.
  **Cash
          Flow Hedges - Commodity Risk Management**
 KCP&L’s
          risk management policy is to use derivative instruments to mitigate its
          exposure
          to market price fluctuations on a portion of its projected natural gas
          purchases
          to meet generation requirements for retail and firm wholesale sales. As
          of June
          30, 2006, KCP&L had hedged nearly all of its 2006 projected natural gas
          usage for retail load and firm MWh sales, primarily by utilizing fixed
          forward
          physical contracts. The fair values of these instruments are recorded as
          current
          assets or current liabilities with an offsetting entry to OCI for the effective
          portion of the hedge. To the extent the hedges are not effective, the
          ineffective portion of the change in fair market value is recorded currently
          in
          fuel expense. KCP&L did not record any gains or losses due to
          ineffectiveness during the three months ended and year to date June 30,
          2006 and
          2005, respectively.
  Strategic
          Energy maintains a commodity-price risk management strategy that uses forward
          physical energy purchases and other derivative instruments to reduce the
          effects
          of fluctuations in purchased power expense caused by commodity-price volatility.
          Derivative instruments are used to limit the unfavorable effect that price
          increases will have on electricity purchases, effectively fixing the future
          purchase price of electricity for the applicable forecasted usage and protecting
          Strategic Energy from significant price volatility. The maximum term over
          which
          Strategic Energy hedged its exposure and variability of future cash flows
          was
          approximately five years at June 30, 2006 and December 31, 2005.
  44
 Certain
          forward fixed price purchases and swap agreements are designated as cash
          flow
          hedges. The fair values of these instruments are recorded as assets or
          liabilities with an offsetting entry to OCI for the effective portion of
          the
          hedge. To the extent the hedges are not effective, the ineffective portion
          of
          the change in fair market value is recorded currently in purchased power.
          When
          the forecasted purchase is completed, the amounts in OCI are reclassified
          to
          purchased power. Purchased power expense for the three months ended and
          year to
          date June 30, 2006, includes a $3.4 million and $14.0 million loss,
          respectively, due to ineffectiveness of the cash flow hedges. Strategic
          Energy
          did not record any gains or losses for the three months ended June 30,
          2005, and
          recorded a $2.1 million gain year to date June 30, 2005, due to ineffectiveness
          of the cash flow hedges.
  As
          part
          of its commodity-price risk management strategy, Strategic Energy also
          enters
          into economic hedges (non-hedging derivatives) that do not qualify for
          cash flow
          hedge accounting. The changes in the fair value of these derivative instruments
          recorded to purchased power expense were a $1.4 million loss and $2.8 million
          gain for the three months ended June 30, 2006 and 2005, respectively, and
          a
          $23.9 million loss and $5.7 million gain year to date June 30, 2006 and
          2005,
          respectively.
  The
          fair
          value of non-hedging derivatives at June 30, 2006, also includes certain
          forward
          contracts at Strategic Energy that were amended during 2005. Prior to being
          amended, the contracts were accounted for under the NPNS election in accordance
          with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
          Activities.” As a result of being amended, the contracts no longer qualify for
          NPNS exceptions or cash flow hedge accounting and are now accounted for
          as
          non-hedging derivatives with the fair value at amendment being recorded
          as a
          deferred liability that will be reclassified to net income as the contracts
          settle. For the three months ended and year to date June 30, 2006, Strategic
          Energy amortized $0.9 and $4.6 million of the deferred liability to purchased
          power expense related to the delivery of power under the contracts. Strategic
          Energy will amortize the remaining deferred liability over the remaining
          original contract lengths, which end in the first quarter of 2008. After
          the
          amendment, Strategic Energy is recording the change in fair value of these
          contracts to purchased power expense.
  45
 The
          notional and recorded fair values of the companies’ derivative instruments are
          summarized in the following table. The fair values of these derivatives
          are
          recorded on the consolidated balance sheets.
 **June
                    30**
                
                **December
                    31****2006**
                
                **2005****Notional**
                
                
                
                **Notional****Contract**
                
                **Fair**
                
                **Contract**
                
                **Fair****Amount**
                
                **Value**
                
                **Amount**
                
                **Value****Great
                    Plains Energy**
                (millions)Swap
                    contractsCash
                    flow hedges
                $
                341.8
                
                $
                (21.0
                )
                $
                164.7
                
                $
                23.8Non-hedging
                    derivatives
                
                57.4
                
                
                (6.5
                )
                
                35.5
                
                
                -Forward
                    contractsCash
                    flow hedges
                
                402.6
                
                
                (17.5
                )
                
                121.9
                
                
                21.0Non-hedging
                    derivatives
                
                241.4
                
                
                (18.4
                )
                
                178.3
                
                
                3.6Forward
                    starting swapCash
                    flow hedges
                
                225.0
                
                
                8.8
                
                
                -
                
                
                -Interest
                    rate swapsFair
                    value hedges
                
                146.5
                
                
                (3.3
                )
                
                146.5
                
                
                (2.6
                )**Consolidated
                    KCP&L**Forward
                    contractsCash
                    flow hedges
                
                13.6
                
                
                (3.5
                )
                
                -
                
                
                -Forward
                    starting swapCash
                    flow hedges
                
                225.0
                
                
                8.8
                
                
                -
                
                
                -Interest
                    rate swapsFair
                    value hedges
                
                146.5
                
                
                (3.3
                )
                
                146.5
                
                
                (2.6
                )
  The
            amounts recorded in accumulated OCI related to the cash flow hedges are
            summarized in the following table.
 **Great
                    Plains Energy**
                **Consolidated
                    KCP&L****June
                    30**
                **December
                    31**
                **June
                    30**
                **December
                    31****2006**
                **2005**
                **2006**
                **2005**(millions)Current
                    assets
                $
                21.2
                
                $
                35.8
                
                $
                20.5
                
                $
                11.9Other
                    deferred charges
                
                1.4
                
                
                11.8
                
                
                -
                
                
                -Other
                    current liabilities
                
                (22.6
                )
                
                1.6
                
                
                (3.5
                )
                
                -Deferred
                    income taxes
                
                4.9
                
                
                (20.5
                )
                
                (6.4
                )
                
                (4.5
                )Other
                    deferred credits
                
                (10.5
                )
                
                1.0
                
                
                -
                
                
                -Total
                $
                (5.6
                )
                $
                29.7
                
                $
                10.6
                
                $
                7.4
  Great
            Plains Energy’s accumulated OCI includes $21.9 million that is expected to be
            reclassified to expense over the next twelve months. Consolidated KCP&L’s
            accumulated OCI includes an insignificant amount that is expected to
            be
            reclassified to expense over the next twelve months.
  46
 The
            amounts reclassified to expenses are summarized in the following
            table.
 **Three
                    Months Ended**
                
                **Year
                    to Date****June
                    30**
                
                **June
                    30****2006**
                
                **2005**
                
                **2006**
                
                **2005****Great
                    Plains Energy**
                (millions)Purchased
                    power expense
                $
                7.5
                
                $
                (2.5
                )
                $
                16.6
                
                $
                (6.1
                )Interest
                    expense
                
                (0.2
                )
                
                -
                
                
                (0.2
                )
                
                -Income
                    taxes
                
                (3.0
                )
                
                1.2
                
                
                (6.9
                )
                
                2.7OCI
                $
                4.3
                
                $
                (1.3
                )
                $
                9.5
                
                $
                (3.4
                )**Consolidated
                    KCP&L**Interest
                    expense
                $
                (0.2
                )
                $
                -
                
                $
                (0.2
                )
                $
                -Income
                    taxes
                
                0.1
                
                
                -
                
                
                0.1
                
                
                -OCI
                $
                (0.1
                )
                $
                -
                
                $
                (0.1
                )
                $
                -
 
    47
 **ITEM
            2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
            OPERATIONS**
  The
            MD&A that follows is a combined presentation for Great Plains Energy and
            consolidated KCP&L, both registrants under this filing. The discussion and
            analysis by management focuses on those factors that had a material effect
            on
            the financial condition and results of operations of the registrants
            during the
            periods presented.
  Great
            Plains Energy is a public utility holding company and does not own or
            operate
            any significant assets other than the stock of its subsidiaries. Great
            Plains
            Energy’s direct subsidiaries with operations or active subsidiaries are
            KCP&L, KLT Inc., IEC and Services. As a diversified energy company, Great
            Plains Energy’s reportable business segments include KCP&L and Strategic
            Energy.
  **EXECUTING
            ON STRATEGIC INTENT**
 **KCP&L’s
            Comprehensive Energy Plan**
 KCP&L
            continues to make progress in implementing its comprehensive energy plan
            and
            orders received from the MPSC and KCC in 2005. The Sierra Club and Concerned
            Citizens of Platte County have appealed the MPSC order, and the Sierra
            Club has
            appealed the KCC order. In March 2006, the Circuit Court of Cole County,
            Missouri, affirmed the MPSC Order and the Sierra Club has appealed the
            decision
            to the Missouri Court of Appeals. The Kansas District Court denied the
            Sierra
            Club’s appeal in May 2006 and the Sierra Club has appealed to the Kansas Court
            of Appeals. Although subject to the appeals, the MPSC and KCC orders
            remain in
            effect pending the applicable court’s decision.
  In
            February 2006 ,
            KCP&L filed requests with the MPSC and KCC for annual rate increases of
            $55.8 million or 11.5% and $42.3 million or 10.5%, respectively. The
            requested rate increases reflect recovery of increasing operating costs
            including fuel, transportation and pensions as well as investments in
            wind
            generation and customer programs and compensation for wholesale sales
            volatility
            and construction risks. The request is based on a return on equity of
            11.5% and
            an adjusted equity ratio of 53.8%. Discovery is underway and management
            anticipates that any approved rate adjustments for both jurisdictions
            will go
            into effect January 1, 2007. The MPSC and KCC staffs and other parties
            are
            scheduled to file their cases in August 2006. Formal evidentiary hearings
            before
            the MPSC and KCC are scheduled for October 2006.
  Construction
            continues on KCP&L’s Spearville Wind Energy Facility, a 100.5 MW wind
            project in western Kansas. Completed and commissioned turbines are expected
            to
            begin being put into service during the third quarter and management
            expects the
            entire project to be completed and on-line in time for inclusion in the
            current
            rate cases. The environmental upgrades at LaCygne No. 1 began with the
            spring
            2006 outage and are anticipated to be completed during the spring 2007
            outage.
            KCP&L has implemented nine affordability, energy efficiency and demand
            response programs in Missouri and three in Kansas. Year to date June
            30, 2006,
            initial results from the implemented programs are beginning to demonstrate
            an
            ability to manage KCP&L’s customers’ retail load requirements.
  KCP&L
            finalized Iatan No. 2 co-ownership agreements with Aquila Inc., The Empire
            District Electric Company, Kansas Electric Power Cooperative and Missouri
            Joint
            Municipal Electric Utility Commission during the second quarter. KCP&L will
            own 54.71% or approximately 465 MW of the new station. An owner’s engineer has
            been hired and the engineering design for Iatan Station is in progress.
            The
            Iatan No. 2 boiler and steam turbine and the Iatan Nos. 1 and 2 air
            emission control equipment procurements are in progress and plant construction
            site preparation work has started. In the first quarter of 2006, KCP&L
            received the air permit and a water quality certification from the Missouri
            Department of Natural Resources relating to Iatan Station. The Sierra
            Club is
            appealing the air permit. During the second quarter of 2006, KCP&L received
            the permits necessary to begin construction at Iatan Station, which included
            the
            wetlands permit and a permit for the construction of a temporary barge
            slip and
            collector
  48
 wells
            from the U.S. Army Corps of Engineers (Corps). The Corps also executed
            an
            Environmental Assessment with a Finding of No Significant Impact.
  Although
            contracting is not complete, developing market conditions indicate a
            potential
            increase in the overall cost estimates of the comprehensive energy plan
            in the
            range of 10% to 20%. The primary drivers are increases in materials and
            labor
            costs and some scope additions. Management anticipates completion of
            its
            definitive estimates later in 2006 upon finalizing the largest of the
            Iatan No.
            2 contracts covering the boiler and air quality control systems and after
            review
            of these estimates with the Company’s Board of Directors. The definitive
            estimates could be materially different than the current estimates; however,
            management believes project costs will be competitive with other similar
            projects built
            in
            the same timeframe .
  **KCP&L
            BUSINESS OVERVIEW**
  KCP&L
            is an integrated, regulated electric utility that engages in the generation,
            transmission, distribution and sale of electricity. KCP&L has over
            4,000 MWs of
            generating capacity and has transmission and distribution facilities
            that
            provide electricity to slightly over 500,000 customers in the states of Missouri and Kansas. KCP&L has continued to
            experience modest load growth. Load growth consists of higher usage per
            customer
            and the addition of new customers. Retail electricity rates are below
            the
            national average.
  KCP&L’s
            residential customers’ usage patterns are significantly affected by weather.
            Bulk power sales, the major component of wholesale sales, vary with system
            requirements, generating unit and purchased power availability, fuel
            costs and
            requirements of other electric systems. Less than 1% of revenues include
            an
            automatic fuel adjustment provision. KCP&L’s coal base load equivalent
            availability factor was 80% for the
            three months ended and year to date June 30, 2006, consistent with the
            same
            periods in 2005.
  KCP&L’s
            nuclear unit, Wolf Creek, accounts for approximately 20% of its base
            load
            capacity. Replacement power costs for scheduled Wolf Creek outages are
            accrued
            evenly over the unit’s 18-month operating cycle. The next refueling outage is
            scheduled to begin in October 2006. The owners of Wolf Creek have on
            hand or
            under contract all of the
            uranium and conversion services needed to operate Wolf Creek through
            March 2011
            and approximately 75% after that date through September 2018. The owners
            also
            have under contract 100% of the uranium enrichment required to operate
            Wolf
            Creek through March 2008. A letter of intent has been issued with a supplier
            for
            a substantial portion of Wolf Creek’s uranium enrichment requirements extending
            through at least 2024. Fabrication requirements are under contract through
            2024.
            Management expects its cost of nuclear fuel to remain relatively stable
            through
            2009 because of contracts in place. Between 2010 and 2018, management
            anticipates the cost of nuclear fuel to increase approximately 30% to
            50% due to
            higher contracted prices and market conditions .
            Even
            with this anticipated increase, management expects nuclear fuel cost
            per MWh
            generated to remain less than the cost of other fuel sources.
  The
            fuel
            cost per MWh generated and the purchased power cost per MWh has a significant
            impact on the results of operations for KCP&L. Generation fuel mix can
            substantially change the fuel cost per MWh generated. Nuclear fuel cost
            per MWh
            generated is substantially less than the cost of coal per MWh generated,
            which
            is significantly lower than the cost of natural gas and oil per MWh generated.
            The cost per MWh for purchased power is significantly higher than the
            cost per
            MWh of coal and nuclear generation. KCP&L continually evaluates its system
            requirements, the availability of generating units, availability and
            cost of
            fuel supply and purchased power, and the requirements of other electric
            systems
            to provide reliable power economically.
  49
 Rail
            companies have experienced longer cycle times for coal deliveries to
            utilities
            across the country since 2004. Approximately 98% of KCP&L’s coal
            requirements come from the PRB and originate on the Burlington Northern
            Santa Fe
            and the Union Pacific railroads, both of which have been affected by
            the current
            rail situation. Maintenance to repair significant sections of track on
            this rail
            line began in 2005 and is expected to be completed by the end of 2006.
            These
            repairs must be completed before normal train operations from the PRB
            can
            resume, which affects all users of PRB coal. Year to date coal shipments
            have
            significantly improved compared to the 10% to 15% reduction in deliveries
            experienced in 2005 and as a result, inventory levels have improved.
            During the
            second quarter of 2006, KCP&L
            suspended its coal conservation measures of reducing coal generation
            and does
            not anticipate additional coal conservation measures in the second half
            of 2006.
            However, an inability to obtain timely delivery of coal to meet generation
            requirements could materially impact KCP&L’s results of operations by
            increasing its cost to serve its retail customers and/or reducing wholesale
            MWh
            sales. Management is monitoring the situation closely and steps will
            be taken,
            as necessary, to maintain an adequate energy supply for KCP&L’s retail load
            and firm MWh sales.
  **STRATEGIC
            ENERGY BUSINESS OVERVIEW**
  Great
            Plains Energy indirectly owns 100% of Strategic Energy. Strategic Energy
            does
            not own any generation, transmission or distribution facilities. Strategic
            Energy provides competitive retail electricity supply services by entering
            into
            power supply contracts to supply electricity to its end-use customers.
            Of the
            states that offer retail choice, Strategic Energy operates in California,
            Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania
            and
            Texas. Strategic Energy has begun expansion into Illinois, as well as
            into
            additional utility territories in New York. Deliveries in Illinois are
            expected
            to begin in 2007.
  In
            addition to competitive retail electricity supply services, Strategic
            Energy
            also provides strategic planning, consulting and billing and scheduling
            services
            in the natural gas and electricity markets. The cost of supplying electric
            service to retail customers can vary widely by geographic market. This
            variability can be affected by many factors, including, but not limited
            to,
            geographic differences in the cost per MWh of purchased power, renewable
            energy
            requirements and capacity charges due to regional purchased power availability
            and requirements of other electricity providers and differences in transmission
            charges.
  Strategic
            Energy provides services to approximately 55,600 commercial, institutional and small manufacturing accounts for approximately
            16,300 customers including numerous Fortune 500 companies, smaller companies
            and
            governmental entities. Strategic Energy offers an array of products,
            including
            fixed price, index-based and month-to-month renewal products, designed
            to meet
            the various requirements of a diverse customer base. Strategic Energy’s
            volume-based customer retention rate, excluding month-to-month customers
            on
            market-based rates, was 54% for the three months ended and 52% year to
            date June 30, 2006. The corresponding volume-based customer retention
            rates
            including month-to-month customers on market-based rates were 65% and
            63% ,
            respectively. Retention rates for the three months ended and year to
            date June
            30, 2006, are lower than Strategic Energy has experienced. The decline
            is
            attributable to customer contract expirations in midwestern states where
            the
            savings competitive suppliers can offer to customers are reduced or in
            some
            cases unavailable due to host utility default rates that are not aligned
            with
            market prices for power. In these states, customers can receive better
            rates
            from the host utility and are choosing to return to host utility service
            as
            their contracts with Strategic Energy expire. Management expects to have
            continued difficulty competing in these states until more competitive
            market-driven pricing mechanisms are in place or market prices for power
            decrease below host utility rates.
  Management
            has repositioned sales and marketing efforts to focus on states that
            currently
            provide a more competitive pricing environment in relation to host utility
            default rates. In these states, Strategic
  50
 Energy
            continues to experience improvement in certain key metrics, including
            strong
            forecasted future MWh commitments (backlog) growth and longer contract
            durations. As a result, total backlog grew to 25.7 million at
            June 30, 2006, compared to 18.4 million at June 30, 2005, and average
            contract durations grew to 17 months from 14 months ,
            respectively. Based solely on expected usage under current signed contracts,
            Strategic Energy has backlog of 8.5 million for the remainder of 2006,
            8.9
            million and 4.7 million for the years 2007 and 2008, respectively, and
            3.6
            million for 2009
            through 2011. The combination of MWhs delivered in the first half of
            2006 and
            backlog for the remainder of the year is 16.1 million. Total MWhs delivered
            in
            2006 are projected to range from 16 to 18 million. Strategic Energy expects
            to
            deliver additional MWhs in 2007 through 2011 through new and renewed
            term
            contracts and MWh deliveries to month-to-month customers.
  The
            average retail gross margin per MWh (retail revenues less retail purchased
            power
            divided by retail MWhs delivered) reflected in the 8.9 million MWhs of
            2007
            backlog is projected to be in the range of $4.50 to $5.50. This range
            excludes
            unrealized changes in fair value of non-hedging energy contracts and
            from hedge
            ineffectiveness because management does not predict the future impact
            of these
            unrealized changes. This range is higher than the retail gross margin
            per MWh
            for new customer contracts discussed below primarily due to more favorable
            customer and product mix. While this level of retail gross margin per
            MWh is
            currently in backlog, overall retail gross margin per MWh for 2007 is
            expected
            to end up slightly lower than the $4.50 to $5.50 range as sales to larger
            customers enter backlog later this year and early next year. Larger customers
            typically have shorter duration contracts and lower retail gross margins
            per MWh
            than smaller customers.
  Management
            continues to expect Strategic Energy’s retail gross margin per MWh on new
            customer contracts entered into in 2006 to average from $3.00 to
            $4.00 ,
            excluding unrealized changes in fair value of non-hedging energy contracts
            and
            from hedge ineffectiveness. Management expects to realize additional
            retail
            gross margin on fixed price contracts of up to $0.50 per MWh over the
            life of
            the contract. The additional expected margin is derived from management
            of the
            retail portfolio load requirements. These activities include benefits
            from
            financial transmission rights and auction revenue rights, short-term
            load
            balancing activities, short-term arbitrage activities and identifying
            and
            executing on favorable transmission paths. Actual retail gross margin
            per MWh
            may differ from these estimates.
  51
 **GREAT
            PLAINS ENERGY RESULTS OF OPERATIONS**
 The
              following table summarizes
              Great Plains Energy’s comparative results of operations.
 **Three
                      Months Ended**
                  
                  **Year
                      to Date****June
                      30**
                  
                  **June
                      30****2006**
                  
                  **2005**
                  
                  **2006**
                  
                  **2005**(millions)Operating
                      revenues
                  
                  $
                  642.1
                  
                  $
                  631.7
                  
                  $
                  1,201.3
                  
                  $
                  1,176.8Fuel
                  
                  
                  (56.2
                  )
                  
                  (44.8
                  )
                  
                  (103.6
                  )
                  
                  (86.3
                  )Purchased
                      power
                  
                  
                  (337.9
                  )
                  
                  (355.6
                  )
                  
                  (668.8
                  )
                  
                  (645.0
                  )Skill
                      set realignment costs
                  
                  
                  (5.1
                  )
                  
                  -
                  
                  
                  (14.5
                  )
                  
                  -Other
                      operating expenses
                  
                  
                  (132.3
                  )
                  
                  (131.5
                  )
                  
                  (258.8
                  )
                  
                  (266.5
                  )Depreciation
                      and amortization
                  
                  
                  (39.3
                  )
                  
                  (38.2
                  )
                  
                  (78.2
                  )
                  
                  (76.1
                  )Gain
                      on property
                  
                  
                  0.7
                  
                  
                  1.0
                  
                  
                  0.6
                  
                  
                  1.5Operating
                      income
                  
                  
                  72.0
                  
                  
                  62.6
                  
                  
                  78.0
                  
                  
                  104.4Non-operating
                      income (expenses)
                  
                  
                  2.6
                  
                  
                  0.2
                  
                  
                  3.4
                  
                  
                  0.8Interest
                      charges
                  
                  
                  (17.8
                  )
                  
                  (18.4
                  )
                  
                  (35.1
                  )
                  
                  (35.9
                  )Income
                      taxes
                  
                  
                  (18.9
                  )
                  
                  (9.8
                  )
                  
                  (10.2
                  )
                  
                  (15.1
                  )Minority
                      interest in subsidiaries
                  
                  
                  -
                  
                  
                  (8.7
                  )
                  
                  -
                  
                  
                  (7.8
                  )Loss
                      from equity investments
                  
                  
                  (0.3
                  )
                  
                  (0.4
                  )
                  
                  (0.6
                  )
                  
                  (0.7
                  )Income
                      from continuing operations
                  
                  
                  37.6
                  
                  
                  25.5
                  
                  
                  35.5
                  
                  
                  45.7Discontinued
                      operations
                  
                  
                  -
                  
                  
                  (3.6
                  )
                  
                  -
                  
                  
                  (3.6
                  )Net
                      income
                  
                  
                  37.6
                  
                  
                  21.9
                  
                  
                  35.5
                  
                  
                  42.1Preferred
                      dividends
                  
                  
                  (0.4
                  )
                  
                  (0.4
                  )
                  
                  (0.8
                  )
                  
                  (0.8
                  )Earnings
                      available for common shareholders
                  
                  $
                  37.2
                  
                  $
                  21.5
                  
                  $
                  34.7
                  
                  $
                  41.3
 Great
            Plains Energy’s earnings for the three months ended June 30, 2006, increased to
            $37.2 million, or $0.48 per share ,
            from
            $21.5 million, or $0.29 per share ,
            in the
            same period of 2005. Earnings year to date June 30, 2006, decreased to
            $34.7 million, or $0.46 per share ,
            from
            $41.3 million, or $0.55 per share ,
            compared to the same period of 2005.


Consolidated
        KCP&L’s net income increased $6.8 million for the three months ended and
        $8.5 million year to date June 30, 2006, compared to the same periods in
        2005 due to higher retail and wholesale revenues and lower purchased power
        expenses. These increases to net income were partially offset by costs related
        to skill set realignments and increased fuel expense.
  Strategic
        Energy’s net income increased $0.5 million for the three months ended and
        decreased $23.2 million year to date June 30, 2006, compared to the same
        periods in 2005. The year to date decrease was primarily the result of the
        impact of $37.9 million in
        changes in fair value related to non-hedging energy contracts and from cash
        flow
        hedge ineffectiveness.
  Lower
        reductions in affordable housing investments partially offset by lower related
        tax credits increased other non-regulated operations net income for the three
        months ended and year to date June 30, 2006, compared to the same periods
        in 2005 by $3.9 million and $1.6 million ,
        respectively.  52
 **CONSOLIDATED
        KCP&L RESULTS OF OPERATIONS**
  The
        following discussion of consolidated KCP&L results of operations includes
        KCP&L, an integrated, regulated electric utility and HSS, an unregulated
        subsidiary of KCP&L. References to KCP&L, in the discussion that
        follows, reflect only the operations of the utility. The following table summarizes
        consolidated KCP&L's comparative results of operations.
 **Three
                  Months Ended**
              
              **Year
                  to Date****June
                  30**
              
              **June
                  30****2006**
              
              **2005**
              
              **2006**
              
              **2005**(millions)Operating
                  revenues
              
              $
              290.9
              
              $
              272.1
              
              $
              531.3
              
              $
              505.4Fuel
              
              
              (56.2
              )
              
              (44.8
              )
              
              (103.6
              )
              
              (86.3
              )Purchased
                  power
              
              
              (8.6
              )
              
              (16.8
              )
              
              (13.7
              )
              
              (28.3
              )Skill
                  set realignment costs
              
              
              (4.9
              )
              
              -
              
              
              (14.2
              )
              
              -Other
                  operating expenses
              
              
              (116.7
              )
              
              (114.8
              )
              
              (228.1
              )
              
              (234.6
              )Depreciation
                  and amortization
              
              
              (37.3
              )
              
              (36.7
              )
              
              (74.3
              )
              
              (73.1
              )Gain
                  on property
              
              
              0.7
              
              
              -
              
              
              0.6
              
              
              0.5Operating
                  income
              
              
              67.9
              
              
              59.0
              
              
              98.0
              
              
              83.6Non-operating
                  income (expenses)
              
              
              1.6
              
              
              8.7
              
              
              2.3
              
              
              9.0Interest
                  charges
              
              
              (15.0
              )
              
              (15.5
              )
              
              (29.9
              )
              
              (30.1
              )Income
                  taxes
              
              
              (18.7
              )
              
              (14.5
              )
              
              (22.6
              )
              
              (15.4
              )Minority
                  interest in subsidiaries
              
              
              -
              
              
              (8.7
              )
              
              -
              
              
              (7.8
              )Net
                  income
              
              $
              35.8
              
              $
              29.0
              
              $
              47.8
              
              $
              39.3


**Consolidated
      KCP&L Sales Revenues and MWh Sales**


**Three
                  Months Ended**
              
              
              
              **Year
                  to Date****June
                  30**
              
              **%**
              **June
                  30**
              
              **%****2006**
              
              **2005**
              
              **Change**
              **2006**
              
              **2005**
              
              **Change**Retail
                  revenues
              
              (millions)
              
              
              
              (millions)Residential
              
              $
              97.9
              
              $
              91.8
              
              
              7
              
              $
              170.2
              
              $
              165.0
              
              
              3Commercial
              
              
              115.0
              
              
              111.7
              
              
              3
              
              
              207.5
              
              
              203.0
              
              
              2Industrial
              
              
              26.7
              
              
              26.3
              
              
              1
              
              
              48.9
              
              
              49.1
              
              
              -Other
                  retail revenues
              
              
              2.2
              
              
              2.1
              
              
              4
              
              
              4.4
              
              
              4.3
              
              
              4Total
                  retail
              
              
              241.8
              
              
              231.9
              
              
              4
              
              
              431.0
              
              
              421.4
              
              
              2Wholesale
                  revenues
              
              
              46.2
              
              
              37.3
              
              
              24
              
              
              93.7
              
              
              76.4
              
              
              23Other
                  revenues
              
              
              2.9
              
              
              2.9
              
              
              3
              
              
              6.6
              
              
              7.5
              
              
              (13
              )KCP&L
                  electric revenues
              
              
              290.9
              
              
              272.1
              
              
              7
              
              
              531.3
              
              
              505.3
              
              
              5Subsidiary
                  revenues
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              0.1
              
              
              NMConsolidated
                  KCP&L revenues
              
              $
              290.9
              
              $
              272.1
              
              
              7
              
              $
              531.3
              
              $
              505.4
              
              
              5




53


**Three
                Months Ended**
            
            
            
            **Year
                to Date****June
                30**
            
            **%**
            
            **June
                30**
            
            **%****2006**
            
            **2005**
            
            **Change**
            
            **2006**
            
            **2005**
            
            **Change**Retail
                MWh sales
            
            (thousands)
            
            
            
            (thousands)Residential
            
            1,305
            
            1,223
            
            7
            
            2,463
            
            2,403
            
            2Commercial
            
            1,835
            
            1,783
            
            3
            
            3,537
            
            3,461
            
            2Industrial
            
            555
            
            548
            
            1
            
            1,064
            
            1,058
            
            1Other
                retail MWh sales
            
            20
            
            19
            
            7
            
            42
            
            40
            
            6Total
                retail
            
            3,715
            
            3,573
            
            4
            
            7,106
            
            6,962
            
            2Wholesale
                MWh sales
            
            1,078
            
            1,038
            
            4
            
            2,182
            
            2,248
            
            (3
            )KCP&L
                electric MWh sales
            
            4,793
            
            4,611
            
            4
            
            9,288
            
            9,210
            
            1


Retail
      revenues increased $9.9 million for the three months ended and $9.6 million
      year
      to date June 30, 2006, compared to the same periods in 2005 primarily due
      to warmer weather in the second quarter of 2006. Residential usage per customer
      increased 6% for the
      three months ended June 30, 2006, driven by a 27% increase
      in cooling degree-days, which were 53% above
      normal.


Wholesale
        revenues increased $8.9 million for the three months ended and
        $17.3
        million year to date June 30, 2006, compared to the same periods in 2005
        primarily due to an increase in the average market price per MWh. Average
        market
        price per MWh increased 23% to $47.02 for the three months and 33% to $48.68
        year to date primarily
        due to coal conservation in the region and higher natural gas prices during
        the
        first quarter. Wholesale MWh sales in 2006 remained relatively consistent
        with
        comparable periods in 2005 despite the greater availability of Wolf Creek,
        resulting from the spring 2005 outage, due to KCP&L’s lower coal base load
        capacity factor of 71% for the three months ended and year to date June 30,
        2006, compared to 78% and 76% for the same periods in 2005. The lower capacity
        factor was due to KCP&L’s coal conservation efforts during the first half of
        2006.
  **Consolidated
        KCP&L Fuel and Purchased Power**
 **Three
                  Months Ended**
              
              
              **Year
                  to Date****June
                  30**
              
              **%**
              
              **June
                  30**
              
              **%****2006**
              
              **2005**
              
              **Change**
              
              **2006**
              
              **2005**
              
              **Change**Net
                  MWhs Generated by Fuel Type
              
              (thousands)
              
              
              
              (thousands)Coal
              
              
              3,471
              
              
              3,813
              
              
              (9
              )
              
              6,878
              
              
              7,416
              
              
              (7
              )Nuclear
              
              
              1,215
              
              
              651
              
              
              87
              
              
              2,425
              
              
              1,694
              
              
              43Natural
                  gas and oil
              
              
              175
              
              
              103
              
              
              70
              
              
              176
              
              
              101
              
              
              75Total
                  Generation
              
              
              4,861
              
              
              4,567
              
              
              6
              
              
              9,479
              
              
              9,211
              
              
              3


Fuel
      expense increased $11.4 million for
      the
      three months ended and $17.3 million year to date June 30, 2006, compared
      to the same periods in 2005 due to the 6% and 3% increases, respectively, in
      MWhs generated and increased coal and coal transportation costs. KCP&L’s
      current coal and coal transportation contracts, including higher tariff rates
      being charged by Union Pacific, were entered into at higher average prices
      than
      related contracts in the same periods of 2005. KCP&L has filed a rate case
      complaint against Union Pacific with the STB and until the case is finalized,
      KCP&L is paying the tariff rates subject to refund. See Note 14 to
      the
      consolidated financial statements for
      more
      information.


Purchased
        power expense decreased $8.2 million for the
        three months ended and $14.6 million year to date June 30, 2006, compared
        to the same periods in 2005 primarily due to just under a 50% reduction
        in MWhs purchased for both periods and a $2.3 million and $5.9
        million ,
        respectively, decrease in capacity payments due to the expiration of two
        large
        contracts in the second quarter of 2005. KCP&L entered into new capacity
        contracts in June 2006. The reduction in MWhs purchased was due to
  54
 uneconomical
        purchased power prices and the increase in net MWhs generated as a result
        of the
        spring 2005 Wolf Creek refueling outage.
  In
        August
        2005, Hawthorn No. 5’s generator step-up transformer (GSU) failed. A spare GSU
        was installed in September 2005; however, the size of the spare GSU limited
        the
        net capacity of the unit to 500 MW. During June 2006, a new GSU was installed
        at
        Hawthorn No. 5 returning its net capacity to 563 MW. The outage for the
        installation lasted 14 days.
  **Consolidated
        KCP&L Other Operating Expenses*****(including other
        operating, maintenance and general taxes)***
 Consolidated
        KCP&L's other operating expenses for the three months ended June 30, 2006,
        were relatively unchanged when compared to the same period of 2005. Reflected
        in
        other operating expenses were increased production maintenance expenses of
        $3.0
        million primarily due to more significant scheduled plant maintenance in
        2006
        offset by decreased pension expense of $2.7 million due to the regulatory
        accounting treatment of pension expense in accordance with MPSC and KCC orders,
        which was first recorded in the third quarter of 2005.
  Consolidated
        KCP&L's other operating expenses decreased $6.5 million year
        to
        date June 30, 2006, compared to the same period of 2005 primarily due to
        decreased pension expense of $5.5 million due to
        the regulatory accounting treatment of pension expense and decreased expenses
        of
        $5.0 million due
        to
        restoration costs for a January 2005 ice storm and June 2005 wind storms.
        Partially offsetting these decreases were increased property tax expenses
        of
        $2.0 million due
        to
        higher assessed values and tax levies.
  **Consolidated
        KCP&L Skill Set Realignment and Pension Settlement
        Charges**
 In
        2005
        and early 2006, management undertook a process to assess, improve and reposition
        the skill sets of employees for implementation of the comprehensive energy
        plan.
        KCP&L recorded $9.4 million year
        to
        date June 30, 2006, related to this workforce realignment process
        reflecting severance, benefits and related payroll taxes provided by KCP&L
        to employees. Management is actively filling positions with the specific
        skill
        sets and talent needed to achieve KCP&L’s goals. Management believes that
        the realignment allows for optimization of employee levels and avoids future
        additional expense. In
        the
        second quarter of 2006, KCP&L incurred $7.3 million of
        pension settlement charges associated with the realignment resulting in $4.8
        million of
        expense recorded after amounts capitalized and billed to joint owners of
        power
        plants.  The pension settlement charges were a result of the number of
        employees retiring and selecting the lump-sum payment option.
  KCP&L
        anticipates recording additional expense related to pension settlement charges
        of approximately $7 million during the second half of 2006 associated with
        its
        management and union pension plans as a result of additional employees retiring
        and selecting the lump-sum payment option. The total amount of 2006 pension
        settlement charges related to the workforce realignments and other retirements
        will be determined in the fourth quarter after the year-end of the pension
        plans. In the second quarter of 2006, KCP&L requested regulatory accounting
        treatment from MPSC and KCC to defer pension settlement charges, retroactive
        to
        January 1, 2006, and amortize the deferred amount over a five-year period
        to be
        established in the rate proceeding following the current 2006 proceedings.
        At
        June 30, 2006, no amounts were deferred pending the outcome of this
        request.
  **Potential
        Future Pension Settlement Charges**
 Through
        2010, approximately 24% of KCP&L’s current employees are eligible to retire
        with full pension benefits. The timing and number of employees retiring and
        selecting the lump-sum payment option could result in additional settlement
        charges that could materially affect KCP&L’s results of operations for 2006
        and thereafter.
  55
 **Strategic
        Energy Results of Operations**
  The
        following table summarizes
        Strategic Energy's comparative results of operations.
 **Three
                  Months Ended**
              
              **Year
                  to Date****June
                  30**
              
              **June
                  30****2006**
              
              **2005**
              
              **2006**
              
              **2005**(millions)Operating
                  revenues
              
              $
              351.2
              
              $
              359.6
              
              $
              670.0
              
              $
              671.4Purchased
                  power
              
              
              (329.3
              )
              
              (338.8
              )
              
              (655.1
              )
              
              (616.7
              )Other
                  operating expenses
              
              
              (13.4
              )
              
              (12.6
              )
              
              (25.9
              )
              
              (23.3
              )Depreciation
                  and amortization
              
              
              (2.0
              )
              
              (1.5
              )
              
              (3.9
              )
              
              (3.0
              )Operating
                  income (loss)
              
              
              6.5
              
              
              6.7
              
              
              (14.9
              )
              
              28.4Non-operating
                  income (expenses)
              
              
              1.0
              
              
              0.7
              
              
              1.9
              
              
              1.1Interest
                  charges
              
              
              (0.6
              )
              
              (0.7
              )
              
              (0.9
              )
              
              (1.5
              )Income
                  taxes
              
              
              (2.7
              )
              
              (3.0
              )
              
              7.2
              
              
              (11.5
              )Net
                  income (loss)
              
              $
              4.2
              
              $
              3.7
              
              $
              (6.7
              )
              $
              16.5


Retail
      MWhs delivered decreased 23% to 3.9 million for
      the
      three months ended and 22% to 7.6 million year to
      date June 30, 2006, compared to the same periods in 2005 due to the effect
      of market conditions in midwestern states and competition in other markets
      where
      Strategic Energy serves customers. The average retail gross margin per MWh
      improved to $5.32 for the
      three months ended and declined to $1.76 year to
      date June 30, 2006, compared to $3.87 and
      $5.43 for the same periods in 2005. The decline in the average retail gross
      margin per MWh year to date was primarily due to the impact of $37.9
      million in
      changes in fair value related to non-hedging energy contracts and from cash
      flow
      hedge ineffectiveness.


**Three
                    Months Ended**
              
              **Year
                  to Date****June
                  30**
              
              **June
                  30****2006**
              
              **2005**
              
              **2006**
              
              **2005**Average
                  retail gross margin per MWh
              
              $
              5.32
              
              $
              3.87
              
              $
              1.76
              
              $
              5.43Change
                  in fair value related to non-hedging energycontracts
                  and from cash flow hedge ineffectiveness
              0.52
              
              
              (0.54
              )
              
              4.97
              
              
              (0.80
              )Average
                  retail gross margin per MWh withoutfair
                  value impacts
              
              $
              5.84
              
              $
              3.33
              
              $
              6.73
              
              $
              4.63


Average
      retail gross margin per MWh without fair value impacts is a non-GAAP financial
      measure that differs from GAAP because it excludes the impact of unrealized
      fair
      value gains or losses. Management and the Board of Directors use this as a
      measurement of Strategic Energy’s realized retail gross margin per delivered
      MWh, which are settled upon delivery at contracted prices. Fair value impacts
      result from changes in fair value of non-hedging energy contracts and from
      hedge
      ineffectiveness associated with MWhs under contract but not yet delivered.
      Due
      to their non-cash nature and volatility during periods prior to delivery,
      management believes excluding these fair value impacts results in a measure
      of
      retail gross margin per MWh that is more representative of contracted
      prices.


As
        detailed in the table above, average retail gross margin per MWh without
        the
        impact of unrealized fair value gains and losses increased to $5.84 for the
        three months ended and $6.73 year to date June 30, 2006, compared to $3.33
        and $4.63 for the same periods in 2005. The increases for the three months
        ended
        and year to date June 30, 2006, were primarily due to the net impact of SECA
  56
 recoveries
        and charges as compared to the same periods of 2005. The net SECA impact
        increased average retail gross margin per MWh for the three months ended
        and
        year to date June 30, 2006, by $0.82 and $0.13, respectively, and decreased
        average retail gross margin per MWh in the same periods of 2005 by $1.40
        and
        $0.74, respectively. The three months ended and year to date June 30, 2006,
        reflect recoveries from certain suppliers and retail customers of a portion
        of
        SECA charges incurred by Strategic Energy, partially offset in the three
        months
        ended by SECA charges incurred through the end of the March 2006 transition
        period. Strategic Energy was invoiced and recorded SECA charges in the three
        months ended June 30, 2005, totaling $7.2 million ,
        which
        covered billings to Strategic Energy for the transition period beginning
        December 1, 2004, through June 30, 2005. Additional impacts to the
        average retail gross margin per MWh included increases primarily due to the
        management of retail portfolio load requirements, favorable product mix and
        settlements of supplier contracts. The increases were partially offset by
        higher
        customer acquisition fees in 2006. Additionally, the year to date increase
        was
        partially offset by a $1.2 million reduction
        of a gross receipts tax contingency in the first quarter of 2005.
  **Strategic
        Energy Purchased Power**
 Purchased
        power is the cost component of Strategic Energy’s average retail gross margin.
        Strategic Energy purchases electricity from power suppliers based on forecasted
        peak demand for its retail customers. Actual customer demand does not always
        equate to the volume purchased based on forecasted peak demand. Consequently,
        Strategic Energy makes short-term power purchases in the wholesale market
        when
        necessary to meet actual customer requirements. Strategic Energy also sells
        any
        excess retail electricity supply over actual customer requirements back into
        the
        wholesale market. These sales occur on many contracts, are usually short-term
        power sales (day ahead) and typically settle within the reporting period.
        Excess
        retail electricity supply sales also include long-term and short-term forward
        physical sales to wholesale counterparties, which are accounted for on a
        mark-to-market basis. Strategic Energy typically executes these transactions
        to
        manage basis and credit risks. The proceeds from excess retail supply sales
        are
        recorded as a reduction of purchased power, as they do not represent the
        quantity of electricity consumed by Strategic Energy’s customers. The amount of
        excess retail supply sales that reduced purchased power was $62.7 million
        for
        the three months ended and $114.1 million year
        to
        date June 30, 2006, compared to $30.8 million and $55.3 million for the
        same periods of 2005. Additionally, in certain markets, load-serving entities
        are required to sell to and purchase power from a RTO/ISO rather than directly
        transact with suppliers and end use customers. The sale and purchase activity
        related to these certain RTO/ISO markets is reflected on a net basis in
        Strategic Energy’s purchased power.
  Strategic
        Energy utilizes derivative instruments, including forward physical delivery
        contracts, in the procurement of electricity. Purchased power is also impacted
        by the net change in fair value related to non-hedging energy contracts and
        from
        cash flow hedge ineffectiveness. Net changes in fair value increased purchased
        power expenses by $2.0 million for the
        three months ended and $37.9 million year to
        date June 30, 2006, compared to reductions of $2.8 million and $7.8
        million for the
        same periods in 2005. See Note 17 to the consolidated financial statements
        for
        more information.
  **OTHER
        NON-REGULATED ACTIVITIES**
  **Investment
        in Affordable Housing Limited Partnerships - KLT
        Investments**
 KLT
        Investments Inc.’s (KLT Investments) net income for the three months ended
        June 30, 2006, totaled $1.4 million (including an insignificant after-tax
        reduction in its affordable housing investment) compared
        to a $2.5 million net
        loss
        for the three months ended June 30, 2005 (including an after tax reduction
        of $5.3 million in its
        affordable housing investment). KLT Investments accrued tax credits related
        to
        its investments in affordable housing limited partnerships of $2.3
        million and $3.9
        million for
        the
        three months ended June 30, 2006 and 2005, respectively. Net income year to
        date June 30, 2006, totaled $2.1 million (including
        an after tax reduction of $0.7 million in its
        affordable housing investment)
 57
 compared
        to net income of $0.5 million year to
        date June 30, 2005 (including an after tax reduction of $5.3
        million in its
        affordable housing investment). KLT Investments’ net income included accrued tax
        credits of $4.6 million and $7.8
        million year to
        date June 30, 2006 and 2005, respectively.
  At
        June 30, 2006, KLT Investments had $25.4 million in
        affordable housing limited partnerships. Approximately 61% of these
        investments were recorded at cost; the equity method was used for the remainder.
        Tax expense is reduced in the year tax credits are generated. The investments
        generate future cash flows from tax credits and tax losses of the partnerships.
        The investments also generate cash flows from sales of the properties. For
        most
        investments, tax credits are received over ten years. A change in accounting
        principle relating to investments made after May 19, 1995, requires
        the use of the equity method when a company owns more than 5% in a limited
        partnership investment. Of the investments recorded at cost, $15.1
        million exceed
        this 5% level but were made before May 19, 1995. Management does not
        anticipate making additional investments in affordable housing limited
        partnerships at this time.
  On
        a
        quarterly basis, KLT Investments compares the cost of properties accounted
        for
        by the cost method to the total of projected residual value of the properties
        and remaining tax credits to be received. Based on the latest comparison,
        KLT
        Investments reduced its investments in affordable housing limited partnerships
        by $0.1 million and $1.2 million for
        the
        three months ended and year to date June 30, 2006, respectively, compared
        to $8.6 million for the three months ended and year to date June 30, 2005.
        Pre-tax reductions in affordable housing investments are estimated to be
        insignificant for the remainder of 2006 and $2 million for
        2007. These projections are based on the latest information available but
        the
        ultimate amount and timing of actual reductions could be significantly different
        from the above estimates. Even after these estimated reductions, net income
        from
        the investments in affordable housing is expected to be positive for 2006
        through 2008 .
        The
        properties underlying the partnership investment are subject to certain risks
        inherent in real estate ownership and management.
  **GREAT
          PLAINS ENERGY AND CONSOLIDATED KCP&L****Significant Balance
          Sheet Changes****(June 30, 2006 compared to December 31,
          2005)**
  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s receivables increased $31.3
                  million and $27.5 million, respectively. KCP&L’s receivables increased
                  $19.6 million due to seasonal increases from higher summer tariff
                  rates
                  and usage and $13.8 million due to additional receivables from
                  joint
                  owners related to Iatan No. 2. Partially offsetting these increases
                  was a
                  $6.3 million decrease in KCP&L’s wholesale receivables primarily due
                  to lower market prices resulting from lower natural gas
                  prices.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s fuel inventories increased
                  $12.8 million primarily due to coal conservation, scheduled plant
                  outages
                  and improved railroad performance in delivering coal during the
                  first half
                  of 2006.  ·
              Great
                  Plains Energy’s combined deferred income taxes - current assets and
                  deferred income taxes - current liabilities changed from a liability
                  of
                  $1.3 million at December 31, 2005, to an asset of $31.5 million.
                  The
                  change in the fair value of Strategic Energy’s energy-related derivative
                  instruments increased the asset $28.2 million. Consolidated KCP&L’s
                  deferred income taxes - current assets increased $3.7 million primarily
                  due to the timing of the Wolf Creek refueling
                  outage.  ·
              Great
                  Plains Energy’s derivative instruments, including current and deferred
                  assets and liabilities, decreased $103.8million primarily due to a $108.4 milliondecrease in the fair value of Strategic Energy’s energy-related derivative
                  instruments as a result of decreases in the forward market prices
                  for
                  power compounded by increased contract volume. Consolidated KCP&L’s  58
 derivative
                      instruments, including current and deferred assets and liabilities,
                      increased $4.6 million to reflect the $8.8 million change in
                      the fair
                      value of Forward Starting Swaps offset by a $3.5 million decrease
                      in the
                      fair value of commodity derivatives resulting from decreasing
                      gas prices
                      and a $0.7 million decrease in the fair value of EIRR swaps.
  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s construction work in progress
                  increased $118.7 million primarily due to $78.1 million related to
                  KCP&L’s comprehensive energy plan, including $45.5 million for wind
                  generation, $14.2 million for environmental upgrades and $18.4
                  millionrelated to Iatan No. 2.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s regulatory assets increased
                  $25.3 million primarily due to the regulatory accounting treatment
                  for pension expense and the change in Wolf Creek depreciable life
                  for
                  regulatory purposes in accordance with MPSC and KCC orders.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s prepaid pension costs
                  decreased $14.8 million and $14.5 million, respectively, due to
                  2006
                  pension expense accruals, including pension settlement charges
                  of $6.8
                  million, in excess of contributions.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s commercial paper increased
                  $50.5 million primarily to support expenditures related to the
                  comprehensive energy plan.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s accounts payable decreased
                  $15.6 million and $13.0 million primarily due to the timing of
                  cash
                  payments partially offset by higher coal and coal transportation
                  costs and
                  increased natural gas purchases during June
                  2006.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s accrued taxes increased $24.3
                  million and $30.4 million, respectively, primarily due to the timing
                  of
                  property tax payments and income taxes currently payable due to
                  year to
                  date June 30, 2006, taxable income.  ·
              Great
                  Plains Energy’s and consolidated KCP&L’s accrued payroll and vacations
                  decreased $6.6 million and $2.7 million primarily due to the payout
                  of
                  employee incentive compensation accrued at December 31, 2005, partially
                  offset by incentive compensation accruals for 2006.  ·
              Great
                  Plains Energy’s accumulated other comprehensive loss increased $35.3
                  million primarily due to changes in the fair value of Strategic
                  Energy’s
                  energy related derivative instruments mostly due to decreases in
                  the
                  forward market prices for power compounded by increased contract
                  volume.  ·
              Great
                  Plains Energy’s long-term debt decreased $389.7 million primarily to
                  reflect FELINE PRIDES Senior Notes and consolidated KCP&L’s $225.0
                  million 6.00% Senior Notes as current maturities. Current maturities
                  of
                  long-term debt for the respective companies increased as a result
                  of these
                  classifications.  **CAPITAL
            REQUIREMENTS AND LIQUIDITY**
  Great
            Plains Energy operates through its subsidiaries and has no material assets
            other
            than the stock of its subsidiaries. Great Plains Energy’s ability to make
            payments on its debt securities and its ability to pay dividends is dependent
            on
            its receipt of dividends or other distributions from its subsidiaries
            and
            proceeds from the issuance of its securities.
  Great
            Plains Energy’s capital requirements are principally comprised of KCP&L’s
            utility construction and other capital expenditures, debt maturities
            and credit
            support provided to Strategic Energy. These items as well as additional
            cash and
            capital requirements for the companies are discussed below.
  59
 Great
              Plains Energy's liquid resources at June 30, 2006, consisted of $96.2
              million of
              cash
              and cash equivalents on hand, including $3.9 million at
              consolidated KCP&L, and $916.1 million of
              unused
              bank lines of credit. The unused lines consisted
              of $317.6 million from KCP&L's revolving credit facility, $76.4 million from
              Strategic Energy’s revolving credit facility and $522.1 million from Great
              Plains Energy's revolving credit facility. See the Debt Agreements
              section below
              for more information on these agreements. At July 31, 2006, Great Plains
              Energy's unused bank lines of credit decreased $45.4 million from the
              amount at
              June 30, 2006, due to a $25.5 million decrease at consolidated KCP&L and a
              $19.9 million decrease due to more letters of credit outstanding due
              to a
              combination of higher collateral requirements at Strategic Energy and
              more
              emphasis on using Great Plains Energy’s facilities for credit support due to its
              lower cost. The $25.5 million decrease at consolidated KCP&L is due to an
              increase in commercial paper outstanding used to fund comprehensive
              energy plan
              expenditures.
 KCP&L
            currently expects to fund its comprehensive energy plan from a combination
            of
            internal and external sources including, but not limited to, contributions
            from
            rate increases, capital contributions to KCP&L from Great Plains Energy's
            proceeds of new equity financing and 2004 FELINE PRIDES equity in 2007,
            new
            short and long-term debt financing and internally generated funds.
  KCP&L
            expects to meet day-to-day cash flow requirements including interest
            payments,
            construction requirements (excluding its comprehensive energy plan),
            dividends
            to Great Plains Energy and pension benefit plan funding requirements,
            discussed
            below, with internally generated funds. KCP&L might not be able to meet
            these requirements with internally generated funds because of the effect
            of
            inflation on operating expenses, the level of MWh sales, regulatory actions,
            compliance with future environmental regulations and the availability
            of
            generating units. The funds Great Plains Energy and consolidated KCP&L need
            to retire maturing debt will be provided from operations, the issuance
            of long
            and short-term debt and/or the issuance of equity or equity-linked instruments.
            In addition, the Company may issue debt, equity and/or equity-linked
            instruments
            to finance growth or take advantage of new opportunities.
  Strategic
            Energy expects to meet day-to-day cash flow requirements including interest
            payments, credit support fees, capital expenditures and dividends to
            Great
            Plains Energy with internally generated funds. Strategic Energy might
            not be
            able to meet these requirements with internally generated funds because
            of the
            effect of inflation on operating expenses, the level of MWh sales, seasonal
            working capital requirements, commodity-price volatility and the effects
            of
            counterparty non-performance.
  **Cash
            Flows from Operating Activities**
 Great
            Plains Energy and consolidated KCP&L generated positive cash flows from
            operating activities for the periods presented. The increase in cash
            flows from
            operating activities for Great Plains Energy and consolidated KCP&L year to
            date June 30, 2006, compared to the same period in 2005 was primarily
            due to
            KCP&L’s $65.0 million change
            in
            cash flows from accounts receivable as a result of the January 2005 termination
            of KCP&L’s previous customer accounts receivables sales agreement. The
            timing of the Wolf Creek outage affects the refueling outage accrual,
            deferred
            income taxes and amortization of nuclear fuel. Other changes in working
            capital
            detailed in Note 4 to the consolidated financial statements also impacted
            operating cash flows. The individual components of working capital vary
            with
            normal business cycles and operations.
  **Cash
            Flows from Investing Activities**
 Great
            Plains Energy’s and consolidated KCP&L’s cash used for investing activities
            varies with the timing of utility capital expenditures and purchases
            of
            investments and nonutility property. Investing activities are offset
            by the
            proceeds from the sale of properties and insurance recoveries. During
            2006,
            KCP&L’s cash utility capital expenditures included $75.2 million related
            to KCP&L’s comprehensive energy plan, $11.0 million to upgrade a
            transmission line and $13.8 million to purchase automated
 60
 meter
            reading equipment. During 2005, KCP&L’s capital expenditures included the
            exercise of its early termination option in the combustion turbine synthetic
            lease to purchase the leased property for $154.0 million. Additionally
            in 2005,
            KCP&L received
            $10.0 million of insurance recoveries related to Hawthorn No. 5.
  **Cash
            Flows from Financing Activities**
 The
            change in Great Plains Energy’s cash flows from financing activities year to
            date June 30, 2006, compared to the same period in 2005 reflects Great
            Plains
            Energy’s May 2006 proceeds of $144.3 million from the issuance of 5.2 million
            shares of common stock at $27.50 per share. Fees related to this issuance
            were
            $5.2 million. Great Plains Energy used the proceeds to make a $134.6
            million
            equity contribution to KCP&L. KCP&L’s equity contribution proceeds were
            offset by lower short-term borrowings year to date June 30, 2006, compared
            to
            the same period in 2005, due to the 2005 purchase of the combustion
            turbine synthetic lease property.
  **Significant
            Financing Activities**
 Great
            Plains Energy filed a shelf registration statement with the Securities
            and
            Exchange Commission (SEC) in May 2006 relating to relatere Senior
            Debt Securities, Subordinated Debt Securities, shares of Common Stock,
            Warrants,
            Stock Purchase Contracts and Stock Purchase Units. In May 2006, Great
            Plains
            Energy issued 5.2 million
            shares of common stock at $27.50 per share under this registration statement
            with $144.3 million in gross proceeds and issuance costs of $5.2 million.
  In
            May
            2006, Great Plains Energy also entered into a forward sale agreement
            with
            Merrill Lynch Financial Markets, Inc. (forward purchaser) for 1.8 million
            shares
            of Great Plains Energy common stock. The forward purchaser borrowed and
            sold the
            same number of shares of Great Plains Energy’s common stock to hedge its
            obligations under the forward sale agreement. Great Plains Energy did
            not
            initially receive any proceeds from the sale of common stock shares by
            the
            forward purchaser. The forward sale agreement provides for a settlement
            date or
            dates to be specified at Great Plains Energy’s discretion, subject to certain
            exceptions, no later than May 23, 2007. Subject to the provisions of
            the forward
            sale agreement, Great Plains Energy will receive an amount equal to $26.6062
            per
            share, plus interest based on the federal funds rate less a spread and
            less
            certain scheduled decreases if Great Plains Energy elects to physically
            settle
            the forward sale agreement by delivering solely shares of common stock.
            In most
            circumstances, Great Plains Energy also has the right, in lieu of physical
            settlement, to elect cash or net physical settlement.
  KCP&L’s
            long-term financing activities are subject to the authorization of the
            MPSC. In
            November 2005, the MPSC authorized KCP&L to issue up to $635.0 million of
            long-term debt and to enter into interest rate hedging instruments in
            connection
            with such debt through December 31, 2009. KCP&L utilized $250.0 million of
            this amount with the issuance of its 6.05% unsecured senior notes maturing
            in
            2035 leaving $385.0 million of authorization remaining. Under stipulations
            with
            the MPSC and KCC, Great Plains Energy and KCP&L maintain common equity at
            not less than 30% and 35%, respectively, of total capitalization.
  During
            2006, FERC authorized KCP&L to issue up to a total of $600.0 million in
            outstanding short-term debt instruments through February 2008. The
            authorizations are subject to four restrictions: (i) proceeds of debt
            backed by
            utility assets must be used for utility purposes; (ii) if any utility
            assets
            that secure authorized debt are divested or spun off, the debt must follow
            the
            assets and also be divested or spun off; (iii) if any proceeds of the
            authorized
            debt are used for non-utility purposes, the debt must follow the non-utility
            assets (specifically, if the non-utility assets are divested or spun
            off, then a
            proportionate share of the debt must follow the divested or spun off
            non-utility
            assets); and (iv) if utility assets financed by the authorized short-term
            debt
            are divested or spun off to another entity, a proportionate share of
            the debt
            must also be divested or spun off.
  61
 During
            2006, KCP&L entered into two Forward Starting Swaps with a combined notional
            principal amount of $225.0 million to
            effectively remove most of the interest rate and credit spread uncertainty
            with
            respect to the anticipated refinancing of KCP&L’s $225.0 million senior
            notes that mature in March 2007. See Note 17 to the consolidated financial
            statements. KCP&L is planning to file a shelf registration statement in the
            second half of 2006 for authority to issue long-term debt securities
            to refinance
            these senior notes, as well as to finance capital expenditures and to
            meet other
            general corporate requirements.
  In
            the
            second quarter of 2006, KCP&L completed an exchange of $250.0 million
            privately placed notes for $250.0 million registered 6.05% unsecured
            senior
            notes maturing in 2035 to fulfill its obligations under a 2005 registration
            rights agreement.
  **Debt
            Agreements**
 During
            May 2006, Great Plains Energy entered into a five-year $600 million revolving
            credit facility with a group of banks. The facility replaced a $550 million
            revolving credit facility with a group of banks. A default by Great Plains
            Energy or any of its significant subsidiaries on other indebtedness totaling
            more than $25.0 million is a default under the facility. Under the terms
            of this
            agreement, Great Plains Energy is required to maintain a consolidated
            indebtedness to consolidated capitalization ratio, as defined in the
            agreement,
            not greater than 0.65 to 1.00 at all times. At June 30, 2006, the Company
            was in
            compliance with this covenant. At June 30, 2006, Great Plains Energy
            had no cash
            borrowings and had issued letters of credit totaling $77.9 million under
            the
            credit facility as credit support for Strategic Energy.
  During
            May 2006, KCP&L entered into a five-year $400 million revolving credit
            facility with a group of banks to provide support for its issuance of
            commercial
            paper and other general corporate purposes. Great Plains Energy and KCP&L
            may transfer and re-transfer up to $200 million of unused lender commitments
            between Great Plains Energy’s and KCP&L’s facilities, so long as the
            aggregate lender commitments under either facility does not exceed $600
            million
            and the aggregate lender commitments under both facilities does not exceed
            $1
            billion. The facility replaced a $250 million revolving credit facility
            with a
            group of banks. A default by KCP&L on other indebtedness totaling more than
            $25.0 million is a default under the facility. Under the terms of the
            agreement,
            KCP&L is required to maintain a consolidated indebtedness to consolidated
            capitalization ratio, as defined in the agreement, not greater than 0.65
            to 1.00
            at all times. At June 30, 2006, KCP&L was in compliance with this covenant.
            At June 30, 2006, KCP&L had $82.4 million of
            commercial paper outstanding, at a weighted-average interest rate of
            5.48% and
            no
            cash borrowings under the facility.
  Strategic
            Energy has a $135 million revolving credit facility with a group of banks
            that
            expires in June 2009. So long as Strategic Energy is in compliance with
            the
            agreement, it may increase this amount by up to $15 million by increasing
            the
            commitment of one or more lenders that have agreed to such increase,
            or by
            adding one or more lenders with the consent of the administrative agent.
            Great
            Plains Energy has guaranteed $25.0 million of this facility. A default
            by
            Strategic Energy on other indebtedness, as defined in the facility, totaling
            more than $7.5 million is a default under the facility. Under the terms
            of this
            agreement, Strategic Energy is required to maintain a minimum net worth
            of $75.0
            million, a minimum fixed charge coverage ratio of at least 1.05 to 1.00
            and a
            minimum debt service coverage ratio of at least 4.00 to 1.00, as those
            terms are
            defined in the agreement. In addition, under the terms of this agreement,
            Strategic Energy is required to maintain a maximum funded indebtedness
            to EBITDA
            ratio, as defined in the agreement, of 3.00 to 1.00, on a quarterly basis
            through June 30, 2007, and 2.75 to 1.00 thereafter. In the event of a
            breach of one or more of these four covenants, so long as no other default
            has
            occurred, Great Plains Energy may cure the breach through a cash infusion,
            a
            guarantee increase or a combination of the two. At June 30, 2006, Strategic
            Energy was in compliance with these covenants. At June 30, 2006,
            $58.6 million in
            letters of credit had been issued and there were no cash borrowings under
            the
            agreement.
  62
 Great
            Plains Energy has agreements with KLT Investments associated with notes
            KLT
            Investments issued to acquire its affordable housing investments. Great
            Plains
            Energy has agreed not to take certain actions including, but not limited
            to,
            merging, dissolving or causing the dissolution of KLT Investments, or
            withdrawing amounts from KLT Investments if the withdrawals would result
            in KLT Investments
            not being in compliance with minimum net worth and cash balance requirements.
            The agreements also give KLT Investments’ lenders the right to have KLT
            Investments repurchase the notes if Great Plains Energy’s senior debt rating
            falls below investment grade or if Great Plains Energy ceases to own
            at least
            80% of KCP&L’s stock. At June 30, 2006, KLT Investments had
            $1.7 million in
            outstanding notes, including current maturities.
  **KCP&L
            Projected Utility Capital Expenditures**
 KCP&L's
            utility capital expenditure plan is subject to continual review and change
            and
            includes utility capital expenditures related to KCP&L's comprehensive
            energy plan for environmental investments and new capacity. Based on
            the latest
            information available, management believes approximately $85 million
            originally
            estimated to be expended in 2009 related to Iatan No. 2 will be expended
            in
            2007, raising projected 2007 expenditures reported in the companies’ 2005 Form
            10-K for Iatan No. 2 from $120.4 million to approximately $205 million.
            Although
            contracting is not complete, developing market conditions indicate a
            potential
            increase in the overall cost estimates of the comprehensive energy plan
            in the
            range of 10% to 20%. The primary drivers are increases in materials and
            labor
            costs and some scope additions. Management anticipates completion of
            its
            definitive estimates later in 2006 upon finalizing the largest of the
            Iatan No.
            2 contracts covering the boiler and air quality control systems and after
            review
            of these estimates with the Company’s Board of Directors. The definitive
            estimates could be materially different than the current estimates; however,
            management is confident that project costs will be competitive with other
            similar projects built in the same timeframe.
  **Pensions**
 The
            Company maintains defined benefit plans for substantially all employees
            of
            KCP&L, Services and WCNOC and incurs significant costs in providing the
            plans, with the majority incurred by KCP&L. At a minimum, plans are funded
            on an actuarial basis to provide assets sufficient to meet benefits to
            be paid
            to plan participants consistent with the funding requirements of the
            Employee
            Retirement Income Security Act of 1974 (ERISA) and further contributions
            may be
            made when deemed financially advantageous.
  Year
            to
            date June 30, 2006, the Company has contributed $16.5 million to the
            plans and
            expects to contribute an additional $3.3 million during the remainder
            of 2006,
            all of which will be paid by KCP&L. Management believes the Company has
            adequate access to capital resources through cash flows from operations
            or
            through existing lines of credit to support the funding requirements.
  Participants
            in the plans may request a lump-sum cash payment upon termination of
            their
            employment. A change in payment assumptions, including the amount and
            timing of
            lump-sum distributions, could result in increased cash requirements from
            pension
            plan assets with the Company being required to accelerate future funding.
            Under
            the terms of the pension plans, the Company reserves the right to amend
            or
            terminate the plans, and from time to time benefits have changed.
  Legislative
            changes have been proposed that would alter the manner in which pension
            plan
            assets and liabilities are valued for purposes of calculating required
            pension
            contributions and change the timing and manner in which required contributions
            to underfunded plans are made. If these proposals are adopted, the funding
            requirements could be significantly affected.
  **Strategic
            Energy Supplier Concentration and Credit**
 Strategic
            Energy enters into forward physical contracts with multiple suppliers.
            At June
            30, 2006, Strategic
            Energy’s five largest suppliers under forward supply contracts represented
            76 %
            of the
            total
  63
 future
            dollar committed purchases. Strategic Energy’s five largest suppliers, or their guarantors, are rated
            investment grade. In the event of supplier non-delivery or default, Strategic
            Energy’s results of operations could be affected to the extent the cost of
            replacement power exceeded the combination of the contracted price with
            the
            supplier and the amount of collateral held by Strategic Energy to mitigate its
            credit risk with the supplier. In addition to the collateral, if any,
            that the
            supplier provides, Strategic Energy’s risk may be further mitigated by the
            obligation of the supplier to make a default payment equal to the shortfall
            and
            to pay liquidated damages in the event of a failure to deliver power.
            There is
            no assurance that the supplier in such an instance would make the default
            payment and/or pay liquidated damages. Strategic Energy’s results of operations
            and financial position could also be affected, in a given period, if
            it were
            required to make a payment upon termination of a supplier contract to
            the extent
            the contracted price with the supplier exceeded the market value of the
            contract
            at the time of termination.
  The
            following tables provide
            information on Strategic Energy’s credit exposure to suppliers, net of
            collateral, at June 30, 2006.
 **Number
                      Of**
                  
                  **Net
                      Exposure Of****Counterparties**
                  
                  **Counterparties****Exposure**
                  
                  
                  
                  
                  
                  **Greater
                      Than**
                  
                  **Greater
                      Than****Before
                      Credit**
                  
                  **Credit**
                  
                  **Net**
                  
                  **10%
                      Of Net**
                  
                  **10%
                      of Net****Rating**
                  **Collateral**
                  
                  **Collateral**
                  
                  **Exposure**
                  
                  **Exposure**
                  
                  **Exposure**External
                      rating
                  (millions)
                  
                  (millions)Investment Grade
                  $
                  46.4
                  
                  $
                  -
                  
                  $
                  46.4
                  
                  
                  1
                  
                  $
                  30.7Non-Investment Grade
                  
                  10.8
                  
                  
                  10.8
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Internal
                      ratingInvestment Grade
                  
                  0.3
                  
                  
                  -
                  
                  
                  0.3
                  
                  
                  -
                  
                  
                  -Non-Investment Grade
                  
                  1.2
                  
                  
                  1.0
                  
                  
                  0.2
                  
                  
                  -
                  
                  
                  -Total
                  $
                  58.7
                  
                  $
                  11.8
                  
                  $
                  46.9
                  
                  
                  1
                  
                  $
                  30.7




**Maturity
                Of Credit Risk Exposure Before Credit
                Collateral****Less
                Than**
            
            
            
            **Total****Rating**
            **2
                Years**
            
            **2
                - 5 Years**
            
            **Exposure**External
                rating
            (millions)Investment Grade
            $
            46.1
            
            $
            0.3
            
            $
            46.4Non-Investment Grade
            
            6.1
            
            
            4.7
            
            
            10.8Internal
                ratingInvestment Grade
            
            0.3
            
            
            -
            
            
            0.3Non-Investment Grade
            
            (0.3
            )
            
            1.5
            
            
            1.2Total
            $
            52.2
            
            $
            6.5
            
            $
            58.7




External
        ratings are determined by using publicly available credit ratings of the
        counterparty. If a counterparty has provided a guarantee by a higher rated
        entity, the determination has been based on the rating of its guarantor.
        Internal ratings are determined by, among other things, an analysis of the
        counterparty’s financial statements and consideration of publicly available
        credit ratings of the counterparty’s parent. Investment grade counterparties are
        those with a minimum senior unsecured debt rating of BBB- from Standard &
Poor’s or Baa3 from Moody’s Investors Service. Exposure before credit collateral
        has been calculated considering all netting agreements in place, netting
        accounts payable and receivable exposure with net mark-to-market exposure.
        Exposure before credit collateral, after consideration of all netting
        agreements, is impacted significantly by the power supply volume under contract
        with a given counterparty and the relationship between current market prices
        and
        contracted power supply prices. Credit collateral includes the amount of
        cash
        deposits and letters of
  64
 credit
        received from counterparties. Net exposure has only been calculated for those
        counterparties to which Strategic Energy is exposed and excludes counterparties
        exposed to Strategic Energy.
  In
        December 2005, Calpine Energy Services filed a motion in bankruptcy court
        seeking to reject a power sales agreement with Strategic Energy. In the second
        quarter of 2006, Strategic Energy terminated its agreement with Calpine Energy
        Services, which did not materially affect results of operations.
  Strategic
        Energy’s total exposure before credit collateral at June 30, 2006, decreased
        $166.6 million
        from December 31, 2005, primarily due to lower wholesale electricity prices.
        At
        June 30, 2006, Strategic Energy had exposure before collateral to non-investment
        grade counterparties totaling $12.0 million,
        of which 48 %
        is
        scheduled to mature in less than two years. In addition, Strategic Energy
        held
        collateral totaling $11.8 million
        limiting its exposure to these non-investment grade counterparties to
        $0.2 million.
  Strategic
        Energy contracts with national and regional counterparties that have direct
        supplies and assets in the region of demand. Strategic Energy also manages
        its
        counterparty portfolio through disciplined margining, collateral requirements
        and contract-based netting of credit exposures against payable
        balances.
  **Supplemental
        Capital Requirements and Liquidity Information**
 Great
        Plains Energy’s and consolidated KCP&L’s contractual obligations have not
        significantly changed at June 30, 2006, compared to December 31, 2005, except
        for KCP&L’s fuel and Strategic Energy’s purchased power. KCP&L’s
        contractual commitments for fuel at June 30, 2006, totaled $464.1 million.
        Commitments for the remainder of 2006 total $91.9 million and for the years
        2007
        through 2010 total $97.2 million, $105.9 million, $45.9 million, and $43.6
        million, respectively. Commitments after 2010 total $79.6 million. Great
        Plains
        Energy’s contractual commitments at June 30, 2006, include KCP&L’s
        commitments for fuel and Strategic Energy’s commitments for purchased power.
        Strategic Energy’s commitments for purchased power at June 30, 2006, totaled
        $795.7 million. Commitments for the remainder of 2006 total $320.6 million
        and
        for the years 2007 through 2011 total $237.7 million, $114.0 million, $63.3
        million, $52.4 million and $7.7 million, respectively. Additionally, KCP&L
        has incurred contractual commitments related to its comprehensive energy
        plan totaling $242.5 million. These commitments are $126.2 million for the
        remainder of 2006, and $71.7 million, $33.5 million, $6.4 million and $4.7
        million for the years 2007 through 2010, respectively.
  **Off-Balance
        Sheet Arrangements**
 In
        the
        normal course of business, Great Plains Energy and certain of its subsidiaries
        enter into various agreements providing financial or performance assurance
        to
        third parties on behalf of certain subsidiaries. Such agreements include,
        for
        example, guarantees, stand-by letters of credit and surety bonds. These
        agreements are entered into primarily to support or enhance the creditworthiness
        otherwise attributed to a subsidiary on a stand-alone basis, thereby
        facilitating the extension of sufficient credit to accomplish the subsidiaries’
intended business purposes. Great Plains Energy’s guarantees provided on behalf
        of Strategic Energy for its power purchases and regulatory requirements
        increased $55.0 million to $177.0 million
        at June 30, 2006, compared to $122.0 million
        at December 31, 2005. This increase is comprised of $15.5
        million in
        direct guarantees and $39.4 million of
        letters of credit and is due to a combination of higher collateral requirements
        at Strategic Energy and more emphasis on using Great Plains Energy’s facilities
        for credit support due to its lower cost. Consolidated KCP&L’s guarantees of
        $3.9 million
        at June 30, 2006, were unchanged from December 31, 2005.
  65
  **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
  Great
        Plains Energy and consolidated KCP&L are exposed to market risks associated
        with commodity price and supply, interest rates and equity prices. Market
        risks
        are handled in accordance with established policies, which may include entering
        into various derivative transactions. In the normal course of business, Great
        Plains Energy and consolidated KCP&L also face risks that are either
        non- financial
        or non-quantifiable. Such risks principally include business, legal, regulatory,
        operational and credit risks and are discussed elsewhere in this document
        as
        well as in the 2005 Form 10-K and therefore are not represented
        here.
  Great
        Plains Energy and consolidated KCP&L interim period disclosures about market
        risk included in quarterly reports on Form 10-Q address material changes,
        if
        any, from the most recently filed annual report on Form 10-K. Therefore,
        these
        interim period disclosures should be read in connection with Item 7A.
        Quantitative and Qualitative Disclosures About Market Risk, included in the
        companies’ 2005 Form 10-K, incorporated herein by reference. There have been no
        material changes in Great Plains Energy’s or consolidated KCP&L’s market
        risk since December 31, 2005.
  **ITEM
        4. CONTROLS AND PROCEDURES**
  **Disclosure
        Controls and Procedures**
 Great
        Plains Energy and KCP&L carried out evaluations of their disclosure controls
        and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities
        Exchange Act of 1934, as amended) as of the end of the fiscal quarter ended
        June
        30, 2006. These evaluations were conducted under the supervision, and with
        the
        participation, of each company’s management, including the chief executive
        officer and chief financial officer of each company and the companies’
disclosure committee.
  Based
        upon these evaluations, the chief executive officer and chief financial officer
        of Great Plains Energy, and the chief executive officer and chief financial
        officer of KCP&L, respectively, have concluded as of the end of the period
        covered by this report that the disclosure controls and procedures of Great
        Plains Energy and KCP&L are functioning effectively to provide reasonable
        assurance that: (i) the information required to be disclosed by the respective
        companies in the reports that they file or submit under the Securities Exchange
        Act of 1934, as amended, is recorded, processed, summarized and reported
        within
        the time periods specified in the SEC’s rules and forms, and (ii) the
        information required to be disclosed by the respective companies in the reports
        that they file or submit under the Securities Exchange Act of 1934, as amended,
        is accumulated and communicated to their respective management, including
        the
        principal executive and principal financial officers, as appropriate to allow
        timely decisions regarding required disclosure.
  **Changes
        in Internal Control Over Financial Reporting**
 There
        has
        been no change in Great Plains Energy’s or KCP&L’s internal control over
        financial reporting that occurred during the quarterly period ended June
        30,
        2006, that has materially affected, or is reasonably likely to materially
        affect, those companies’ internal control over financial reporting.
  **PART
        II*****-*****OTHER
        INFORMATION**
  **ITEM 1.
        LEGAL PROCEEDINGS**
  **KCP&L
        Stipulations and Agreements**
 On
        March
        28, 2005, and April 27, 2005, KCP&L filed Stipulations and Agreements with
        the MPSC and KCC, respectively, containing a regulatory plan and other
        provisions. The MPSC issued its Report and Order, approving the Stipulation
        and
        Agreement, on July 28, 2005, and KCC issued its Order Approving Stipulation
        and
        Agreement on August 5, 2005. On September 22, 2005, the Sierra Club and
        Concerned Citizens of Platte County, two nonprofit corporations, filed a
        petition for review in the Circuit Court of Cole County, Missouri, seeking
        to
        review and set aside the MPSC Report and Order. On
  66
 March
        13,
        2006, the Circuit Court affirmed the MPSC Order. On April 21, 2006, the Sierra
        Club filed a Notice of Appeal from the Circuit Court decision to the Missouri
        Court of Appeals, Western District. On October 21, 2005, the Sierra Club
        filed a
        petition for review in the District Court of Shawnee County, Kansas, seeking
        to
        set aside or remand the KCC order. The Kansas District Court denied the Sierra
        Club’s appeal on May 1, 2006, and the Sierra Club has appealed to the Kansas
        Court of Appeals. Although
        subject to the appeals, the MPSC and KCC orders remain in effect pending
        the
        court’s decision.
  **Hawthorn
        No. 5 Litigation**
 KCP&L
        filed suit on April 3, 2001, in Jackson County, Missouri Circuit Court against
        multiple defendants who are alleged to have responsibility for the 1999 boiler
        explosion at KCP&L’s Hawthorn No. 5 generating unit, which was subsequently
        reconstructed and returned to service. KCP&L and National Union Fire
        Insurance Company of Pittsburgh, Pennsylvania (National Union) entered into
        a
        subrogation allocation agreement under which recoveries in this suit are
        generally allocated 55% to National Union and 45% to KCP&L. Certain
        defendants were dismissed from the suit and various defendants settled, with
        KCP&L receiving a total of $38.2 million under the terms of the subrogation
        allocation agreement. Trial of this case with the one remaining defendant
        resulted in a March 2004 jury verdict finding KCP&L’s damages as a result of
        the explosion were $452 million. After deduction of amounts received from
        pre-trial settlements with other defendants and an amount for KCP&L’s
        comparative fault (as determined by the jury), the verdict would have resulted
        in an award against the defendant of approximately $97.6 million (of which
        KCP&L would have received $33 million pursuant to the subrogation allocation
        agreement after payment of attorney’s fees). In response to post-trial pleadings
        filed by the defendant, in May 2004, the trial judge reduced the award against
        the defendant to $0.2 million. Both KCP&L and the defendant appealed this
        case to the Court of Appeals for the Western District of Missouri, and on
        May 9,
        2006, the Court of Appeals ordered the Circuit Court to enter judgment in
        KCP&L’s favor in accordance with the jury verdict. The defendant has filed a
        motion for transfer of this case to the Missouri Supreme Court.
  KCP&L
        also received reimbursement for Hawthorn No. 5 damages under a property damage
        insurance policy with Travelers Property Casualty Company of America
        (Travelers). Travelers filed suit in the Federal District Court for the Eastern
        District of Missouri on November 18, 2005, against National Union, and KCP&L
        was added as a defendant on June 19, 2006. Travelers seeks recovery of $10
        million that KCP&L has or will recover in the April 2001 lawsuit described
        in the preceding paragraph.
  **Framatome**
 In
        2005,
        WCNOC filed a lawsuit on behalf of itself, KCP&L and the other two Wolf
        Creek owners against Framatome ANP, Inc., and Framatome ANP Richland, Inc.
        (Framatome) in the District Court of Coffey County, Kansas. The suit alleged
        various claims against Framatome related to the proposed design, licensing
        and
        installation of a digital control system. The suit sought recovery of
        approximately $16 million in damages from Framatome. Framatome removed the
        case
        to U.S. District Court for the District of Kansas. Thereafter, the plaintiffs
        filed a motion to remand the case back to Coffey County District Court, which
        was granted. Framatome filed a counterclaim against the three Wolf Creek
        owners
        seeking recovery of damages alleged to be in excess of $20 million. In May
        2006,
        the parties settled this case. The settlement had no significant impact on
        KCP&L’s results of operations or financial position.
  **Weinstein
        v.** **KLT Telecom**
 Richard
        D. Weinstein (Weinstein) filed suit against KLT Telecom Inc. (KLT Telecom)
        in
        September 2003 in the St. Louis County, Missouri Circuit Court. KLT Telecom
        acquired a controlling interest in DTI Holdings, Inc. (Holdings) in February
        2001 through the purchase of approximately two-thirds of the Holdings stock
        held
        by Weinstein. In connection with that purchase, KLT Telecom entered into
        a put
        option in favor of Weinstein, which granted Weinstein an option to sell to
        KLT
        Telecom his remaining
  67
 shares
        of
        Holdings stock. The put option provided for an aggregate exercise price for
        the
        remaining shares equal to their fair market value with an aggregate floor
        amount
        of $15 million and was exercisable between September 1, 2003, and August
        31,
        2005. In June 2003, the stock of Holdings was cancelled and extinguished
        pursuant to the joint Chapter 11 plan confirmed by the Bankruptcy Court.
        In
        September 2003, Weinstein delivered a notice of exercise of his claimed rights
        under the put option.
        KLT Telecom rejected the notice of exercise, and Weinstein filed suit alleging
        breach of contract. Weinstein sought damages of at least $15 million, plus
        statutory interest. In April 2005, summary judgment was granted in favor
        of KLT
        Telecom, and Weinstein appealed this judgment to the Missouri Court of Appeals
        for the Eastern District. On May 16, 2006, the Court of Appeals affirmed
        the
        judgment. Weinstein has filed a motion for transfer of this case to the Missouri
        Supreme Court. The $15 million reserve has not been reversed pending the
        outcome
        of the appeal process.
  **ITEM
        1A. RISK FACTORS**
  Actual
        results in future periods for Great Plains Energy and consolidated KCP&L
        could differ materially from historical results and the forward-looking
        statements contained in this report. Factors that might cause or contribute
        to
        such differences include, but are not limited to, those discussed below and
        in
        Item 1A. Risk Factors included in the companies’ 2005 Form 10-K. The companies’
business is influenced by many factors that are difficult to predict, involve
        uncertainties that may materially affect actual results, and are often beyond
        the companies’ control. Additional risks and uncertainties not presently known
        or that the companies’ management currently believes to be immaterial may also
        adversely affect the companies. The information presented below updates the
        risk
        factors described in the companies’ 2005 Form 10-K. This information, as well as
        the other information included in this report and in the other documents
        filed
        with the SEC, should be carefully considered before making an investment
        in the
        securities of Great Plains Energy and KCP&L. Risk factors of consolidated
        KCP&L are also risk factors for Great Plains Energy.
  **The
        outcome of KCP&L’s pending retail rate proceedings, which could have a
        material impact on its business, are largely outside its control.**
 The
        rates
        that KCP&L is allowed to charge its customers are the single most important
        item influencing its results of operations, financial position and liquidity.
        These rates are subject to the determination, in large part, of governmental
        entities outside of KCP&L’s control, including the MPSC, KCC and FERC.
        Decisions made by these entities could have a material impact on KCP&L’s
        business including its results of operations, financial position, or liquidity.
  In
        February 2006, for the first time in 20 years, KCP&L filed with the MPSC and
        KCC requests to increase the rates it is permitted to charge its retail
        customers in Missouri and Kansas, respectively. In these initial filings
        KCP&L is seeking an increase in annual rates of 11.5% in Missouri and 10.5%
        in Kansas. The requested rate increases are subject to the approval of the
        MPSC
        and KCC, which are expected to rule by December 2006. It is possible that
        the
        MPSC and/or KCC will authorize a lower rate increase than what KCP&L has
        requested, or no increase or a rate reduction. Management cannot predict
        or
        provide any assurances regarding the outcome of these proceedings. Any rate
        changes approved by the MPSC and KCC are expected to take effect on January
        1,
        2007.
  As
        a part
        of the Missouri and Kansas stipulations approved by the MPSC and KCC in 2005,
        KCP&L undertook to implement a Comprehensive Energy Plan (Plan). Under the
        Plan, KCP&L will undertake certain projects, including building and owning a
        portion of Iatan No. 2, installing a new wind-powered generating facility,
        and
        installing environmental upgrades to certain existing plants. A reduction
        or
        rejection by the MPSC or KCC of rate increase requests may result in increased
        financing requirements for KCP&L. This could have a material impact on its
        results of operations, financial position or liquidity.
  68
 In
        response to competitive, economic, political, legislative and regulatory
        pressures, KCP&L may be subject to rate moratoriums, rate refunds, limits on
        rate increases or rate reductions, including phase-in plans. Any or all of
        these
        could have a significant adverse effect on KCP&L’s results of operations,
        financial position or liquidity.
  **KCP&L
        has Retirement-Related Risks**
 Through
        2010, approximately 24% of
        KCP&L’s current employees will be eligible to retire with full pension
        benefits. Failure to hire and adequately train replacement employees, including
        the transfer of significant internal historical knowledge and expertise to
        the
        new employees, may adversely affect KCP&L’s ability to manage and operate
        its business.
 
 Substantially
        all of KCP&L’s employees participate in defined benefit and postretirement
        plans. If KCP&L employees retire when they become eligible for retirement
        through 2010, or if KCP&L’s plans experience adverse market returns on their
        investments, or if interest rates materially fall, KCP&L’s pension expense
        and contributions to the plans could rise substantially over historical levels.
        KCP&L expects to recognize additional pension settlement charges in 2006
        resulting from employees retiring and electing to receive the pension benefit
        lump-sum payment option. The current estimate of additional expense related
        to pension settlement charges, based on retirement-eligible employees who
        left the company through July 2006, is approximately $7 million. The actual
        pension settlement charges in 2006 will depend on actual pension plan results
        during the pension plan year and the number of employees retiring throughout
        the
        year who select the lump-sum payment option. The amount of expense related
        to
        pension settlement charges to be recognized in 2006 may be materially greater
        than the current estimate. The timing and number of employees retiring after
        2006 and selecting the lump-sum payment option could result in further pension
        settlement charges that could materially affect KCP&L’s results of
        operations. KCP&L has requested regulatory accounting treatment from MPSC
        and KCC to defer pension settlement charges, retroactive to January 1, 2006,
        and
        amortize the deferred amount over a five-year period to be established in
        the
        rate proceeding following the current 2006 proceedings. At June 30, 2006,
        no
        amounts were deferred pending the outcome of this request. In addition,
        assumptions related to future costs, returns on investments, interest rates
        and
        other actuarial assumptions, including projected retirements, have a significant
        impact on KCP&L’s results of operations and financial position. Proposed
        legislation pending in Congress on pension reform could result in increased
        pension funding requirements. The FASB has a project to reconsider the
        accounting for pensions and other post-retirement benefits. This project
        may
        result in accelerated expense, liability recognition and
        contributions.
  **ITEM
          2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
          PROCEEDS**
  None
  **ITEM
          3. DEFAULTS UPON SENIOR SECURITIES**
  None.
  **ITEM
          4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  **Great
          Plains Energy**
 Great
          Plains Energy’s annual meeting of shareholders was held on May 2, 2006. The
          shareholders elected eleven directors and ratified the appointment of Deloitte
          & Touch LLP as independent auditors.  69
 The
          eleven persons named below were elected, as proposed in the proxy statement,
          to
          serve as directors until Great Plains Energy’s annual meeting in 2007 and until
          their successors are elected and qualified.
  **Nominee**
                  
                  **Votes
                      For**
                  
                  **Votes
                      Withheld**
                  
                  **Total
                      Votes***David
                      L. Bodde
                  
                  65,941,374
                  
                  1,103,235
                  
                  67,044,609Michael
                      J. Chesser
                  
                  65,880,647
                  
                  1,163,963
                  
                  67,044,610William
                      H. Downey
                  
                  65,877,877
                  
                  1,166,732
                  
                  67,044,609Mark
                      A. Ernst
                  
                  57,646,323
                  
                  9,398,287
                  
                  67,044,610Randall
                      C. Ferguson, Jr.
                  
                  66,048,234
                  
                  996,375
                  
                  67,044,609William
                      K. Hall
                  
                  65,982,503
                  
                  1,062,106
                  
                  67,044,609Luis
                      A. Jimenez
                  
                  66,040,620
                  
                  1,003,989
                  
                  67,044,609James
                      A. Mitchell
                  
                  66,014,343
                  
                  1,028,267
                  
                  67,042,610William
                      C. Nelson
                  
                  65,986,984
                  
                  1,057,626
                  
                  67,044,610Linda
                      H. Talbot
                  
                  65,860,476
                  
                  1,184,133
                  
                  67,044,609Robert
                      H. West
                  
                  65,870,782
                  
                  1,173,827
                  
                  67,044,609




*No
        votes
        were cast against the nominees due to cumulative voting.
  Great
        Plains Energy shareholders ratified the appointment of Deloitte & Touche LLP
        as independent auditors for 2006. The voting regarding the appointment was
        as
        follows:


**Votes
                  For**
              
              **Votes
                  Against**
              
              **Abstentions**
              
              **Total
                  Votes**Deloitte
                  & Touche LLP
              
              66,256,666
              
              461,879
              
              326,061
              
              67,044,606




**KCP&L**
 Great
        Plains Energy is KCP&L’s sole shareholder. By a unanimous written consent
        dated as of May 2, 2006, Great Plains Energy, as the sole shareholder, elected
        the following directors of Great Plains Energy as the directors of KCP&L for
        the ensuing year and until their successors are duly elected and qualified,
        or
        until their resignations: David L. Bodde; Michael J. Chesser; William H.
        Downey;
        Mark A. Ernst; Randall C. Ferguson, Jr.; Juis A. Jimenez; James A. Mitchell;
        William C. Nelson and Linda H. Talbot.
  **ITEM
        5. OTHER INFORMATION**
  None.
  **ITEM
        6. EXHIBITS**
  **Great
        Plains Energy Documents**
 Exhibit
                  Number
                
                Description
                    of Document10.1.a
                *
                Confirmation
                    of Forward Stock Sale Transaction between Great Plains Energy
                    Incorporated
                    and Merrill Lynch Financial Markets, Inc., dated May 17, 2006
                    (Exhibit 1.2
                    to Form 8-K filed May 23, 2006).10.1.b
                
                Credit
                    Agreement dated as of May 11, 2006, among Great Plains Energy
                    Incorporated, Bank of America, N.A., JPMorgan Chase Bank, N.A.,
                    BNP
                    Paribas, The Bank of Tokyo-Mitsubishi UFJ, Limited, Chicago Branch,
                    Wachovia Bank N.A., The Bank of New York, Keybank National Association,
                    The Bank of Nova Scotia, UMB Bank, N.A., and Commerce Bank,
                    N.A.
  70
 10.1.c
                
                Consent
                    dated as of May 31, 2006, to Amended and Restated Credit Agreement,
                    dated
                    as of July 2, 2004, by and among Strategic Energy, L.L.C., LaSalle
                    Bank
                    National Association, PNC Bank, National Association, Citizens
                    Bank of
                    Pennsylvania, National City Bank of Pennsylvania, Fifth Third
                    Bank, Sky
                    Bank and First National Bank of Pennsylvania.12.1
                
                Ratio
                    of Earnings to Fixed Charges.31.1.a
                
                Rule
                    13a-14(a)/15d-14(a) Certifications of Michael J. Chesser.31.1.b
                
                Rule
                    13a-14(a)/15d-14(a) Certifications of Terry Bassham.32.1
                
                Section
                    1350 Certifications.


*
      Filed
      with the SEC as exhibits to prior reports and are incorporated herein by
      reference and made a part hereof. The exhibit number and the number of the
      documents so filed and incorporated herein by reference are stated in
      parentheses in the description of such exhibit.


Copies
        of
        any of the exhibits filed with the SEC in connection with this document may
        be
        obtained from Great Plains Energy upon written request.
  **KCP&L
        Documents**
 Exhibit
                  Number
                
                Description
                    of Document10.2.a
                
                Iatan
                    Unit 2 and Common Facilities Ownership Agreement, dated as of
                    May 19,
                    2006, among Kansas City Power & Light Company, Aquila, Inc., The
                    Empire District Electric Company, Kansas Electric Power Cooperative,
                    Inc.,
                    and Missouri Joint Municipal Electric Utility Commission.10.2.b
                
                Credit
                    Agreement dated as of May 11, 2006, among Kansas City Power & Light
                    Company, Bank of America, N.A., JPMorgan Chase Bank, N.A., BNP
                    Paribas,
                    The Bank of Tokyo-Mitsubishi UFJ, Limited, Chicago Branch, Wachovia
                    Bank
                    N.A., The Bank of New York, Keybank National Association, The
                    Bank of Nova
                    Scotia, UMB Bank, N.A., and Commerce Bank, N.A.12.2
                
                Ratio
                    of Earnings to Fixed Charges.31.2.a
                
                Rule
                    13a-14(a)/15d-14(a) Certifications of William H. Downey.31.2.b
                
                Rule
                    13a-14(a)/15d-14(a) Certifications of Terry Bassham.32.2
                
                Section
                    1350 Certifications.


Copies
      of
      any of the exhibits filed with the SEC in connection with this document may
      be
      obtained from KCP&L upon written request.  71


**SIGNATURES**
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, Great Plains
        Energy
        Incorporated and Kansas City Power & Light Company have duly caused
        this report to be signed on its behalf by the undersigned thereunto duly
        authorized.
  **GREAT
                    PLAINS ENERGY INCORPORATED**Dated:
                    August 4, 2006
                By:/s/Michael
                    J. Chesser(Michael
                    J. Chesser)(Chief
                    Executive Officer)Dated:
                    August 4, 2006
                By:/s/Lori
                    A. Wright(Lori
                    A. Wright)(Principal
                    Accounting Officer)




**KANSAS
                  CITY POWER & LIGHT COMPANY**Dated:
                  August 4, 2006
              By:/s/William
                  H. Downey(William
                  H. Downey)(Chief
                  Executive Officer)Dated:
                  August 4, 2006
              By:/s/Lori
                  A. Wright(Lori
                  A. Wright)(Principal
                  Accounting Officer)






72