UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# Form 10-Q

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

For the quarterly period ended September 30, 2004

or

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

|For
the transition period from _______ to _______
|-------------------------------------------------

|            |  |                                    
|----------- |  | -----------------------------------
|Commission  |  | Registrant, State of Incorporation,
|File Number |  | Address and Telephone Number       
|            |  |                                    
|001-32206   |  | GREAT PLAINS ENERGY INCORPORATED   
|            |  | (A Missouri Corporation)           
|            |  | 1201 Walnut Street                 
|            |  | Kansas City, Missouri 64106        
|            |  | (816) 556-2200                     
|            |  | www.greatplainsenergy.com          
|            | 
|1-707       |  | KANSAS CITY POWER & LIGHT COMPANY  
|            |  | (A Missouri Corporation)           
|            |  | 1201 Walnut Street                 
|            |  | Kansas City, Missouri 64106        
|            |  | (816) 556-2200                     
|            |  | www.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 the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _

Indicated by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Great
Plains Energy Incorporated Yes X No _ Kansas City Power & Light Company Yes _
No X

As of November 1, 2004 the number of
shares outstanding of (i) Great Plains Energys common stock was 74,317,784 and (ii)
Kansas City Power & Light Companys common stock was one, which was held by Great
Plains Energy Incorporated.

Great Plains Energy Incorporated and
Kansas City Power & Light Company 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.

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.

This report should be read in its
entirety. No one section of the report deals with all aspects of the subject matter.

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. 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 the Company                                                                                                                                                                                                                                                    
| | 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 and constraints placed on the Company's actions by the Public Utility Company Act of 1935
| | adverse changes in applicable laws, regulations, rules, principles or practices governing tax, accounting and environmental matters including, but not limited to, air 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 the Company's pension plan assets and costs                                                                                                 
| | ability to maintain current 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 and deliverability of fuel                                                                                                                                                                                                                                                               
| | ability to achieve generation planning goals and the occurrence of unplanned generation outages                                                                                                                                                                                                             
| | delays in the anticipated in-service dates of additional generating capacity                                                                                                                                                                                                                                
| | nuclear operations                                                                                                                                                                                                                                                                                          
| | ability to enter new markets successfully and capitalize on growth opportunities in non-regulated businesses                                                                                                                                                                                                
| | performance of projects undertaken by the Company's 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.

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
|----------------------- | ----------
|2003 Form 10-K          |           
|                        |           
|                        |           
|35 Act                  |           
|AOCI                    |           
|ARO                     |           
|CAIR                    |           
|CO2                     |           
|Clean Air Act           |           
|Compact                 |           
|Company                 |           
|Consolidated KCP&L      |           
|Custom Energy Holdings  |           
|DOE                     |           
|EBITDA                  |           
|EEI                     |           
|EIRR                    |           
|EITF                    |           
|EPA                     |           
|EPS                     |           
|ERISA                   |           
|FASB                    |           
|FELINE PRIDESSM         |           
|                        |           
|FERC                    |           
|GDP                     |           
|GPP                     |           
|                        |           
|Great Plains Energy     |           
|HSS                     |           
|IEC                     |           
|                        |           
|ISO                     |           
|KCC                     |           
|KCP&L                   |           
|                        |           
|KLT Energy Services     |           
|KLT Gas                 |           
|KLT Gas portfolio       |           
|KLT Inc.                |           
|KLT Investments         |           
|kWh                     |           
|MAC                     |           
|MACT                    |           

3

|Abbreviation or Acronym | Definition
|----------------------- | ----------
|MPSC                    |           
|MWh                     |           
|NEIL                    |           
|NOx                     |           
|NRC                     |           
|OCI                     |           
|RSAE                    |           
|RTO                     |           
|Receivables Company     |           
|                        |           
|SE Holdings             |           
|SEC                     |           
|Services                |           
|SFAS                    |           
|SIP                     |           
|SO2                     |           
|SOx                     |           
|SPP                     |           
|Strategic Energy        |           
|WCNOC                   |           
|Wolf Creek              |           
|Worry Free              |           
|                        |           

4

|PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements                             
|-----------------------------------------------------------------------------------------------------
|
|(Unaudited)                                                                                          
|
|                                                                                                     
|(thousands)                                                                                          
|
|Cash and cash equivalents                                                                            
|Restricted cash                                                                                      
|Receivables                                                                                          
|Fuel inventories, at average cost                                                                    
|Materials and supplies, at average cost                                                              
|Deferred income taxes                                                                                
|Assets of discontinued operations                                                                    
|Other                                                                                                
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Nonutility Property and Investments                                                                  
|Affordable housing limited partnerships                                                              
|Nuclear decommissioning trust fund                                                                   
|Other                                                                                                
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Utility Plant, at Original Cost                                                                      
|Electric                                                                                             
|Less-accumulated depreciation                                                                        
|                                                                                                     
|Net utility plant in service                                                                         
|Construction work in progress                                                                        
|Nuclear fuel, net of amortization of $124,057 and $113,472                                           
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Deferred Charges                                                                                     
|Regulatory assets                                                                                    
|Prepaid pension costs                                                                                
|Goodwill                                                                                             
|Other deferred charges                                                                               
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5

|GREAT PLAINS ENERGY
Consolidated Balance Sheets                                                      
|-----------------------------------------------------------------------------------------------------
|(Unaudited)                                                                                          
|
|                                                                                                     
|(thousands)                                                                                          
|
|Notes payable                                                                                        
|Current maturities of long-term debt                                                                 
|EIRR bonds classified as current                                                                     
|Accounts payable                                                                                     
|Accrued taxes                                                                                        
|Accrued interest                                                                                     
|Accrued payroll and vacations                                                                        
|Accrued refueling outage costs                                                                       
|Supplier collateral                                                                                  
|Liabilities of discontinued operations                                                               
|Other                                                                                                
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Deferred Credits and Other Liabilities                                                               
|Deferred income taxes                                                                                
|Deferred investment tax credits                                                                      
|Asset retirement obligations                                                                         
|Pension liability                                                                                    
|Other                                                                                                
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Capitalization                                                                                       
|Common stock equity                                                                                  
|Common stock-150,000,000 shares authorized without par value                                         
|74,321,659 and 69,259,203 shares issued, stated value                                                
|Unearned compensation                                                                                
|Capital stock premium and expense                                                                    
|Retained earnings                                                                                    
|Treasury stock-13,988 and 3,265 shares, at cost                                                      
|Accumulated other comprehensive loss                                                                 
|                                                                                                     
|Total                                                                                                
|Cumulative preferred stock $100 par value                                                            
|3.80% - 100,000 shares issued                                                                        
|4.50% - 100,000 shares issued                                                                        
|4.20% - 70,000 shares issued                                                                         
|4.35% - 120,000 shares issued                                                                        
|                                                                                                     
|Total                                                                                                
|Long-term debt (Note 6)                                                                              
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Commitments and Contingencies (Note 12)                                                              
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6

|GREAT PLAINS ENERGY
Consolidated Statements of Income                                                
|-----------------------------------------------------------------------------------------------------
|(Unaudited)                                                                                          
|
|
|                                                                                                     
|(thousands)                                                                                          
|Electric revenues - KCP&L                                                                            
|Electric revenues - Strategic Energy                                                                 
|Other revenues                                                                                       
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Operating Expenses                                                                                   
|Fuel                                                                                                 
|Purchased power - KCP&L                                                                              
|Purchased power - Strategic Energy                                                                   
|Other                                                                                                
|Maintenance                                                                                          
|Depreciation                                                                                         
|General taxes                                                                                        
|Gain on property                                                                                     
|                                                                                                     
|Total                                                                                                
|                                                                                                     
|Operating income                                                                                     
|Non-operating income                                                                                 
|Non-operating expenses                                                                               
|Interest charges                                                                                     
|                                                                                                     
|Income from continuing operations before                                                             
|income taxes, loss from equity investments                                                           
|and minority interest in subsidiaries                                                                
|Income taxes                                                                                         
|Loss from equity investments                                                                         
|Minority interest in subsidiaries                                                                    
|                                                                                                     
|Income from continuing operations                                                                    
|Gain (Loss) from discontinued operations,                                                            
|net of income taxes (Notes 7 and 8)                                                                  
|                                                                                                     
|Net income                                                                                           
|Preferred stock dividend requirements                                                                
|                                                                                                     
|Earnings available for common stock                                                                  
|                                                                                                     
|Average number of common shares outstanding                                                          
|                                                                                                     
|Basic and diluted earnings per common share                                                          
|Continuing operations                                                                                
|Discontinued operations                                                                              
|                                                                                                     
|Basic and diluted earnings per common share                                                          
|                                                                                                     
|Cash dividends per common share                                                                      
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

7

|GREAT PLAINS ENERGY
Consolidated Statements of Cash Flows                                            
|-----------------------------------------------------------------------------------------------------
|(Unaudited)                                                                                          
|
|                                                                                                     
|(thousands)                                                                                          
|Net income                                                                                           
|Less: Gain (loss) from discontinued operations, net of income taxes                                  
|                                                                                                     
|Income from continuing operations                                                                    
|Adjustments to reconcile income to net cash                                                          
|from operating activities:                                                                           
|Depreciation and depletion                                                                           
|Amortization of:                                                                                     
|Nuclear fuel                                                                                         
|Other                                                                                                
|Deferred income taxes (net)                                                                          
|Investment tax credit amortization                                                                   
|Loss from equity investments                                                                         
|Gain on property                                                                                     
|Minority interest                                                                                    
|Other operating activities (Note 4)                                                                  
|                                                                                                     
|Net cash from operating activities                                                                   
|                                                                                                     
|Cash Flows from Investing Activities                                                                 
|Utility capital expenditures                                                                         
|Allowance for borrowed funds used during construction                                                
|Purchases of investments                                                                             
|Purchases of nonutility property                                                                     
|Proceeds from sale of assets                                                                         
|Purchase of additional indirect interest in Strategic Energy                                         
|Hawthorn No. 5 partial insurance recovery                                                            
|Hawthorn No. 5 partial litigation settlements                                                        
|Other investing activities                                                                           
|                                                                                                     
|Net cash from investing activities                                                                   
|                                                                                                     
|Cash Flows from Financing Activities                                                                 
|Issuance of common stock                                                                             
|Issuance of long-term debt                                                                           
|Issuance fees                                                                                        
|Repayment of long-term debt                                                                          
|Net change in short-term borrowings                                                                  
|Dividends paid                                                                                       
|Other financing activities                                                                           
|                                                                                                     
|Net cash from financing activities                                                                   
|                                                                                                     
|Net Change in Cash and Cash Equivalents                                                              
|Cash and Cash Equivalents from Continuing                                                            
|Operations at Beginning of Year                                                                      
|                                                                                                     
|Cash and Cash Equivalents from Continuing                                                            
|Operations at End of Period                                                                          
|                                                                                                     
|                                                                                                     
|Net Change in Cash and Cash Equivalents from                                                         
|Discontinued Operations                                                                              
|Cash and Cash Equivalents from Discontinued                                                          
|Operations at Beginning of Year                                                                      
|                                                                                                     
|Cash and Cash Equivalents from Discontinued                                                          
|Operations at End of Period                                                                          
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

8

|GREAT PLAINS ENERGY
Consolidated Statements of Common Stock Equity                                   
|-----------------------------------------------------------------------------------------------------
|(Unaudited)                                                                                          
|
|                                                                                                     
|
|(thousands, except share data)                                                                       
|Beginning balance                                                                                    
|Issuance of common stock                                                                             
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Unearned Compensation                                                                                
|Beginning balance                                                                                    
|Compensation expense recognized                                                                      
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Capital Stock Premium and Expense                                                                    
|Beginning balance                                                                                    
|Other                                                                                                
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Retained Earnings                                                                                    
|Beginning balance                                                                                    
|Net income                                                                                           
|Loss on reissuance of treasury stock                                                                 
|Dividends:                                                                                           
|Common stock                                                                                         
|Preferred stock - at required rates                                                                  
|Options                                                                                              
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Treasury Stock                                                                                       
|Beginning balance                                                                                    
|Treasury shares acquired                                                                             
|Treasury shares reissued                                                                             
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Accumulated Other Comprehensive Loss                                                                 
|Beginning balance                                                                                    
|Derivative hedging activity                                                                          
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Total Common Stock Equity                                                                            
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

9

|GREAT PLAINS ENERGY
Consolidated Statements of Common Stock Equity                                   
|-----------------------------------------------------------------------------------------------------
|(Unaudited)                                                                                          
|
|                                                                                                     
|
|(thousands, except share data)                                                                       
|Beginning balance                                                                                    
|Issuance of common stock                                                                             
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Unearned Compensation                                                                                
|Beginning balance                                                                                    
|Compensation expense recognized                                                                      
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Capital Stock Premium and Expense                                                                    
|Beginning balance                                                                                    
|Issuance of common stock                                                                             
|FELINE PRIDESSM purchase contract                                                                    
|adjustment, allocated fees and expenses                                                              
|Other                                                                                                
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Retained Earnings                                                                                    
|Beginning balance                                                                                    
|Net income                                                                                           
|Loss on reissuance of treasury stock                                                                 
|Dividends:                                                                                           
|Common stock                                                                                         
|Preferred stock - at required rates                                                                  
|Options                                                                                              
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Treasury Stock                                                                                       
|Beginning balance                                                                                    
|Treasury shares acquired                                                                             
|Treasury shares reissued                                                                             
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Accumulated Other Comprehensive Loss                                                                 
|Beginning balance                                                                                    
|Derivative hedging activity                                                                          
|Minimum pension obligation                                                                           
|                                                                                                     
|Ending balance                                                                                       
|                                                                                                     
|Total Common Stock Equity                                                                            
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

10

|GREAT PLAINS ENERGY
Consolidated Statements of Comprehensive Income                                  
|-----------------------------------------------------------------------------------------------------
|(Unaudited)                                                                                          
|
|
|                                                                                                     
|(thousands)                                                                                          
|Net income                                                                                           
|                                                                                                     
|Other comprehensive income                                                                           
|Gain (loss) on derivative hedging instruments                                                        
|Income taxes                                                                                         
|                                                                                                     
|Net gain (loss) on derivative hedging instruments                                                    
|                                                                                                     
|Change in minimum pension obligation                                                                 
|Income taxes                                                                                         
|                                                                                                     
|Net change in minimum pension obligation                                                             
|                                                                                                     
|Reclassification to revenues and expenses, net of tax                                                
|                                                                                                     
|Comprehensive income                                                                                 
|                                                                                                     
|The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

11

|KANSAS CITY POWER & LIGHT COMPANY                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------
|
|(Unaudited)                                                                                                                                      
|
|
|                                                                                                                                                 
|ASSETS                                                                                                                                           
|Current Assets                                                                                                                                   
|Cash and cash equivalents                                                                                                                        
|Receivables                                                                                                                                      
|Fuel inventories, at average cost                                                                                                                
|Materials and supplies, at average cost                                                                                                          
|Deferred income taxes                                                                                                                            
|Other                                                                                                                                            
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Nonutility Property and Investments                                                                                                              
|Nuclear decommissioning trust fund                                                                                                               
|Other                                                                                                                                            
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Utility Plant, at Original Cost                                                                                                                  
|Electric                                                                                                                                         
|Less-accumulated depreciation                                                                                                                    
|                                                                                                                                                 
|Net utility plant in service                                                                                                                     
|Construction work in progress                                                                                                                    
|Nuclear fuel, net of amortization of $124,057 and $113,472                                                                                       
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Deferred Charges                                                                                                                                 
|Regulatory assets                                                                                                                                
|Prepaid pension costs                                                                                                                            
|Other deferred charges                                                                                                                           
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.

12

|KANSAS CITY POWER & LIGHT COMPANY                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------
|
|(Unaudited)                                                                                                                                      
|
|
|                                                                                                                                                 
|LIABILITIES AND CAPITALIZATION                                                                                                                   
|Current Liabilities                                                                                                                              
|Notes payable to Great Plains Energy                                                                                                             
|Current maturities of long-term debt                                                                                                             
|EIRR bonds classified as current                                                                                                                 
|Accounts payable                                                                                                                                 
|Accrued taxes                                                                                                                                    
|Accrued interest                                                                                                                                 
|Accrued payroll and vacations                                                                                                                    
|Accrued refueling outage costs                                                                                                                   
|Other                                                                                                                                            
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Deferred Credits and Other Liabilities                                                                                                           
|Deferred income taxes                                                                                                                            
|Deferred investment tax credits                                                                                                                  
|Asset retirement obligations                                                                                                                     
|Pension liability                                                                                                                                
|Other                                                                                                                                            
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Capitalization                                                                                                                                   
|Common stock equity                                                                                                                              
|Common stock-1,000 shares authorized without par value                                                                                           
|1 share issued, stated value                                                                                                                     
|Retained earnings                                                                                                                                
|Accumulated other comprehensive loss                                                                                                             
|                                                                                                                                                 
|Total                                                                                                                                            
|Long-term debt (Note 6)                                                                                                                          
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Commitments and Contingencies (Note 12)                                                                                                          
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.

13

|KANSAS CITY POWER & LIGHT COMPANY                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------
|
|(Unaudited)                                                                                                                                      
|
|
|
|                                                                                                                                                 
|Operating Revenues                                                                                                                               
|Electric revenues                                                                                                                                
|Other revenues                                                                                                                                   
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Operating Expenses                                                                                                                               
|Fuel                                                                                                                                             
|Purchased power                                                                                                                                  
|Other                                                                                                                                            
|Maintenance                                                                                                                                      
|Depreciation                                                                                                                                     
|General taxes                                                                                                                                    
|Gain on property                                                                                                                                 
|                                                                                                                                                 
|Total                                                                                                                                            
|                                                                                                                                                 
|Operating income                                                                                                                                 
|Non-operating income                                                                                                                             
|Non-operating expenses                                                                                                                           
|Interest charges                                                                                                                                 
|                                                                                                                                                 
|Income from continuing operations before                                                                                                         
|income taxes and minority interest in subsidiaries                                                                                               
|Income taxes                                                                                                                                     
|Minority interest in subsidiaries                                                                                                                
|                                                                                                                                                 
|Income from continuing operations                                                                                                                
|Loss from discontinued operations, net                                                                                                           
|of income taxes (Note 8)                                                                                                                         
|                                                                                                                                                 
|Net income                                                                                                                                       
|                                                                                                                                                 
|The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

14

|KANSAS CITY POWER & LIGHT COMPANY                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------
|
|(Unaudited)                                                                                                                                      
|
|                                                                                                                                                 
|Cash Flows from Operating Activities                                                                                                             
|Net income                                                                                                                                       
|Less:  Loss from discontinued operations, net of income taxes                                                                                    
|                                                                                                                                                 
|Income from continuing operations                                                                                                                
|Adjustments to reconcile income to net cash                                                                                                      
|from operating activities:                                                                                                                       
|Depreciation and depletion                                                                                                                       
|Amortization of:                                                                                                                                 
|Nuclear fuel                                                                                                                                     
|Other                                                                                                                                            
|Deferred income taxes (net)                                                                                                                      
|Investment tax credit amortization                                                                                                               
|Gain on property                                                                                                                                 
|Minority interest                                                                                                                                
|Other operating activities (Note 4)                                                                                                              
|                                                                                                                                                 
|Net cash from operating activities                                                                                                               
|                                                                                                                                                 
|Cash Flows from Investing Activities                                                                                                             
|Utility capital expenditures                                                                                                                     
|Allowance for borrowed funds used during construction                                                                                            
|Purchases of investments                                                                                                                         
|Purchases of nonutility property                                                                                                                 
|Proceeds from sale of assets                                                                                                                     
|Hawthorn No. 5 partial insurance recovery                                                                                                        
|Hawthorn No. 5 partial litigation settlements                                                                                                    
|Other investing activities                                                                                                                       
|                                                                                                                                                 
|Net cash from investing activities                                                                                                               
|                                                                                                                                                 
|Cash Flows from Financing Activities                                                                                                             
|Repayment of long-term debt                                                                                                                      
|Net change in short-term borrowings                                                                                                              
|Dividends paid to Great Plains Energy                                                                                                            
|Equity contribution from Great Plains Energy                                                                                                     
|Other financing activities                                                                                                                       
|                                                                                                                                                 
|Net cash from financing activities                                                                                                               
|                                                                                                                                                 
|Net Change in Cash and Cash Equivalents                                                                                                          
|Cash and Cash Equivalents from Continuing                                                                                                        
|Operations at Beginning of Year                                                                                                                  
|                                                                                                                                                 
|Cash and Cash Equivalents from Continuing                                                                                                        
|Operations at End of Period                                                                                                                      
|                                                                                                                                                 
|                                                                                                                                                 
|Net Change in Cash and Cash Equivalents from                                                                                                     
|Discontinued Operations                                                                                                                          
|Cash and Cash Equivalents from Discontinued                                                                                                      
|Operations at Beginning of Year                                                                                                                  
|                                                                                                                                                 
|Cash and Cash Equivalents from Discontinued                                                                                                      
|Operations at End of Period                                                                                                                      
|                                                                                                                                                 
|The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

15

|KANSAS CITY POWER & LIGHT COMPANY       
|----------------------------------------
|
|(Unaudited)                             
|
|                                        
|
|(thousands, except share data)          
|Common Stock                            
|                                        
|Retained Earnings                       
|Beginning balance                       
|Net income                              
|Dividends:                              
|Common stock held by Great Plains Energy
|                                        
|Ending balance                          
|                                        
|Accumulated Other Comprehensive Loss    
|Beginning balance                       
|Derivative hedging activity             
|                                        
|Ending balance                          
|                                        
|Total Common Stock Equity               
|                                        

|Year to Date September 30                                                                                                                         | 2004                           | 2003
|------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ----
|                                                                                                                                                 
|
|Common Stock                                                                                                                                      | (thousands, except share data)
|Beginning balance                                                                                                                                 |                                |     
|Equity contribution from Great Plains Energy                                                                                                      |                                |     
|                                                                                                                                                  |                               
|Ending balance                                                                                                                                    |                                |     
|                                                                                                                                                 
|Retained Earnings                                                                                                                                 |                                |     
|Beginning balance                                                                                                                                 |                                |     
|Net income                                                                                                                                        |                                |     
|Dividends:                                                                                                                                        |                                |     
|Common stock held by Great Plains Energy                                                                                                          |                                |     
|                                                                                                                                                  |                               
|Ending balance                                                                                                                                    |                                |     
|                                                                                                                                                 
|Accumulated Other Comprehensive Loss                                                                                                              |                                |     
|Beginning balance                                                                                                                                 |                                |     
|Derivative hedging activity                                                                                                                       |                                |     
|Minimum pension obligation                                                                                                                        |                                |     
|                                                                                                                                                  |                               
|Ending balance                                                                                                                                    |                                |     
|                                                                                                                                                 
|Total Common Stock Equity                                                                                                                         |                                |     
|                                                                                                                                                 
|The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

16

|KANSAS CITY POWER & LIGHT COMPANY                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------
|
|(Unaudited)                                                                                                                                      
|
|
|
|                                                                                                                                                 
|(thousands)                                                                                                                                      
|Net income                                                                                                                                       
|                                                                                                                                                 
|Other comprehensive income                                                                                                                       
|Gain (loss) on derivative hedging instruments                                                                                                    
|Income taxes                                                                                                                                     
|                                                                                                                                                 
|Net gain (loss) on derivative hedging instruments                                                                                                
|                                                                                                                                                 
|Change in minimum pension obligation                                                                                                             
|Income taxes                                                                                                                                     
|                                                                                                                                                 
|Net change in minimum pension obligation                                                                                                         
|                                                                                                                                                 
|Reclassification to revenues and expenses, net of tax                                                                                            
|                                                                                                                                                 
|Comprehensive income                                                                                                                             
|                                                                                                                                                 
|The disclosures regarding KCP&L included in the accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

17

# GREAT PLAINS ENERGY
INCORPORATED KANSAS CITY POWER &LIGHT COMPANY Notes to Consolidated
Financial Statements

The notes to 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.

In managements opinion, the
consolidated interim financial statements reflect all adjustments (which, unless otherwise
noted, include only normal recurring adjustments) necessary to present fairly the results
of operations for the interim periods presented. These statements and notes should be read
in connection with the applicable financial statements and related notes included in the
combined 2003 Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A and
recast to reflect certain discontinued operations by the Current Report on Form 8-K dated
May 12, 2004 (2003 Form 10-K), of Great Plains Energy and consolidated KCP&L.

# 1.  ORGANIZATION

Great Plains Energy, a Missouri
corporation incorporated in 2001, is a public utility holding company registered with and
subject to the regulation of the Securities and Exchange Commission (SEC) under the Public
Utility Holding Company Act of 1935, as amended (35 Act). Great Plains Energy does not own
or operate any significant assets other than the stock of its subsidiaries.

Great Plains Energy has five direct
subsidiaries:

- KCP&L is an integrated, regulated electric utility, which provides reliable, affordable electricity to customers in the
         states of Missouri and Kansas.  KCP&L is one of Great Plains Energy's two reportable segments.  KCP&L's wholly-owned
         subsidiary, Home Service Solutions Inc. (HSS) has invested in Worry Free Service, Inc. (Worry Free).  Worry Free is no
         longer actively pursuing new customers and management does not anticipate significant additional capital investments in
         Worry Free.  Prior to the June 2003 disposition of R.S. Andrews Enterprises, Inc. (RSAE), HSS held an investment in RSAE.
         See Note 8 for additional information concerning the June 2003 disposition of RSAE.  KCP&L and its subsidiaries are referred
         to as consolidated KCP&L.
- KLT Inc. is an intermediate holding company that primarily holds interests in Strategic Energy, L.L.C. (Strategic Energy),
         KLT Gas Inc. (KLT Gas) and affordable housing limited partnerships.  Strategic Energy is the other reportable segment of
         Great Plains Energy.  The Company sold substantially all of the KLT Gas natural gas properties (KLT Gas portfolio) in the
         third and fourth quarters of 2004.  See Note 7 for additional information.
- Great Plains Power Incorporated (GPP) focuses on the development of wholesale generation.  Management decided during 2002 to
         limit the operations of GPP, which has made no significant investments to date.
- Innovative Energy Consultants Inc. (IEC) holds an indirect interest in Strategic Energy.  IEC does not own or operate any
         assets other than its indirect interest in Strategic Energy.

18
- Great Plains Energy Services Incorporated (Services) was formed in 2003 as a service company under the 35 Act to provide
         support and administrative services to Great Plains Energy and its subsidiaries.

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, GPP, Services, all KLT Inc. operations
other than Strategic Energy, and holding company operations.

# 2.  CASH

Cash and Cash Equivalents Cash equivalents consist of highly
liquid investments with original maturities of three months or less. For Great Plains
Energy this includes Strategic Energys cash held in trust of $19.8 million and $16.1
million at September 30, 2004, and December 31, 2003, 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 for
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 CashStrategic 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. Restricted
cash collateral at September 30, 2004, and December 31, 2003, was $11.6 million and $20.9
million, respectively.

# 3.  BASIC AND DILUTED
EARNINGS PER COMMON SHARE CALCULATION

There was no significant dilutive
effect on Great Plains Energys earnings per common share (EPS) from other securities
for the three months ended and year to date September 30, 2004 and 2003. To determine
basic EPS, preferred stock dividend requirements are deducted from income from continuing
operations and net income before dividing by average number of common shares outstanding.
The earnings (loss) per share impact of discontinued operations, net of income taxes, is
determined by dividing the gain (loss) from discontinued operations, net of income taxes,
by the average number of common shares outstanding. Diluted EPS assumes the issuance of
common shares applicable to stock options, performance shares, restricted stock and FELINE
PRIDES calculated using the treasury stock method.

19

The following tables reconcile Great
Plains Energys basic and diluted EPS from continuing operations:

|                                          
|------------------------------------------
|
|                                          
|(thousands except per share amounts)      
|Income from continuing operations         
|Less: Preferred stock dividend requirement
|                                          
|Basic EPS                                 
|Income available to common stockholders   
|Add: effect of dilutive securities        
|                                          
|Diluted EPS                               
|                                          

|                                          
|------------------------------------------
|
|                                          
|(thousands except per share amounts)      
|Income from continuing operations         
|Less: Preferred stock dividend requirement
|                                          
|Basic EPS                                 
|Income available to common stockholders   
|Add: effect of dilutive securities        
|                                          
|Diluted EPS                               
|                                          

|                                          
|------------------------------------------
|
|                                          
|(thousands except per share amounts)      
|Income from continuing operations         
|Less: Preferred stock dividend requirement
|                                          
|Basic EPS                                 
|Income available to common stockholders   
|Add: effect of dilutive securities        
|                                          
|Diluted EPS                               
|                                          

|                                          
|------------------------------------------
|
|                                          
|(thousands except per share amounts)      
|Income from continuing operations         
|Less: Preferred stock dividend requirement
|                                          
|Basic EPS                                 
|Income available to common stockholders   
|Add: effect of dilutive securities        
|                                          
|Diluted EPS                               
|                                          

For the three months ended September 30,
2004 and 2003, and year to date September 30, 2004, there were no anti-dilutive shares
applicable to stock options, performance shares and restricted stock. For the three months
ended and year to date September 30, 2004, the FELINE PRIDES were anti-dilutive. Options
to purchase 27,898 shares of common stock year to date September 30, 2003, were excluded
from the computation of diluted EPS because they were anti-dilutive due to the option
exercise prices being greater than the average market price of the common shares during
the period.

During the second quarter of 2004,
the Company adopted Emerging Issues Task Force (EITF) No. 03-6, Participating Securities
and the Two-Class Method under SFAS No. 128, Earnings Per Share. For the three
months ended and year to date September 30, 2004 and 2003, Great Plains Energy did not
have any participating securities; therefore, EITF No. 03-6 did not have an effect on EPS.

20

# 4.  SUPPLEMENTAL CASH
FLOW INFORMATION

|Great Plains Energy Other Operating Activities           
|---------------------------------------------------------
|                                                         
|
|                                                         
|Cash flows affected by changes in:                       
|Receivables                                              
|Fuel inventories                                         
|Materials and supplies                                   
|Accounts payable                                         
|Accrued taxes                                            
|Accrued interest                                         
|Wolf Creek refueling outage accrual                      
|Deposits with suppliers                                  
|Pension and postretirement benefit assets and obligations
|Allowance for equity funds used during construction      
|Other                                                    
|                                                         
|Total other operating activities                         
|                                                         
|Cash paid during the period:                             
|Interest                                                 
|Income taxes                                             
|                                                         

|Consolidated KCP&L Other Operating Activities            
|---------------------------------------------------------
|                                                         
|
|                                                         
|Cash flows affected by changes in:                       
|Receivables                                              
|Fuel inventories                                         
|Materials and supplies                                   
|Accounts payable                                         
|Accrued taxes                                            
|Accrued interest                                         
|Wolf Creek refueling outage accrual                      
|Pension and postretirement benefit assets and obligations
|Allowance for equity funds used during construction      
|Other                                                    
|                                                         
|Total other operating activities                         
|                                                         
|Cash paid during the period:                             
|Interest                                                 
|Income taxes                                             
|                                                         

KCP&L adopted Statement of
Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement
Obligations, on January 1, 2003, and recorded a liability for asset retirement
obligations (ARO) of $99.2 million and increased property and equipment, net of
accumulated depreciation, by $18.3 million. KCP&L is a regulated utility subject to
the provisions of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation, and management believes it is probable that any differences between
expenses under SFAS No. 143 and expenses recovered currently in rates will be recoverable
in future rates. As a result, the $16.3 million net cumulative effect ($80.9 million gross
cumulative effect net of $64.6 million decommissioning liability previously accrued) of
the adoption of SFAS No. 143 was recorded as a regulatory asset; therefore, it had no
impact on net income. The adoption of SFAS No. 143 had no effect on Great Plains Energy
and consolidated KCP&Ls cash flows.

21

# 5.  RECEIVABLES

The Companys receivables are
comprised of the following:

|                                     
|-------------------------------------
|
|                                     
|Customer accounts receivable sold to 
|Receivables Company                  
|Consolidated KCP&L other receivables 
|                                     
|Consolidated KCP&L receivables       
|Great Plains Energy other receivables
|                                     
|Great Plains Energy receivables      
|                                     

KCP&L has entered into a
revolving agreement to sell all of its right, title and interest in the majority of its
customer accounts receivable to Kansas City Power & Light Receivables Company
(Receivables Company), which in turn sells most of the receivables to outside investors.
KCP&L expects to renew the agreement when it expires in January 2005. Accounts
receivable sold under this revolving agreement totaled $106.4 million and $87.9 million at
September 30, 2004, and December 31, 2003, respectively. These sales included unbilled
receivables of $36.6 million and $28.4 million at September 30, 2004, and December 31,
2003, respectively. As a result of the sale to outside investors, Receivables Company
receives up to $70 million in cash, which is forwarded to KCP&L as consideration for
its sale. At September 30, 2004, and December 31, 2003, Receivables Company had received
$65.0 million and $70.0 million in cash, respectively. The agreement is structured as a
true sale under which the creditors of Receivables Company are entitled to be satisfied
out of the assets of Receivables Company prior to any value being returned to KCP&L or
its creditors.

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 0.25% of the outstanding principal
amount of the receivables sold and retains any late fees charged to customers.

Information regarding
KCP&Ls sale of accounts receivable is reflected in the following table.

|                                   
|-----------------------------------
|
|
|                                   
|Gross proceeds on sale of          
|accounts receivable                
|Collections                        
|Loss on sale of accounts receivable
|Late fees                          
|                                   

Consolidated KCP&Ls other
receivables at September 30, 2004, and December 31, 2003, consist primarily of receivables
from partners in jointly-owned electric utility plants, wholesale sales receivables and
accounts receivable held by Worry Free. The December 31, 2003, amounts also included
insurance recoveries. Great Plains Energys other receivables at September 30, 2004,
and December 31, 2003, are primarily the accounts receivable held by Strategic Energy
including unbilled receivables of $97.2 million and $81.2 million, respectively.

22

# 6.  CAPITALIZATION

Great Plains Energy and consolidated
KCP&Ls long-term debt is as follows:

|                                                                   
|-------------------------------------------------------------------
|
|                                                                   
|(thousands)                                                        
|General Mortgage Bonds                                             
|7.95%* and 7.55%** Medium-Term Notes                               
|2.00%* and 2.36%** EIRR bonds                                      
|Senior Notes                                                       
|7.125%                                                             
|6.500%                                                             
|6.000%                                                             
|Unamortized discount                                               
|EIRR bonds                                                         
|2.78%* and 2.16%** Series A & B                                    
|2.38%* and 2.25%** Series C                                        
|2.78%* and 2.16%** Series D                                        
|8.3% Junior Subordinated Deferred Interest Bonds                   
|1.67%* and 1.25%** Combustion Turbine Synthetic Lease              
|Current liabilities                                                
|EIRR bonds classified as current                                   
|Current maturities                                                 
|                                                                   
|Total consolidated KCP&L excluding current liabilities             
|Other Great Plains Energy                                          
|4.25% FELINE PRIDES Senior Notes                                   
|7.63%* and 7.84%** Affordable Housing Notes                        
|Current maturities                                                 
|                                                                   
|Total consolidated Great Plains Energy excluding current maturities
|                                                                   
|*   Weighted-average rate as of September 30, 2004                 
|**   Weighted-average rate as of December 31, 2003                 

During the first quarter of 2004,
Great Plains Energy syndicated a $150.0 million 364-day revolving credit facility and a
$150.0 million three-year revolving credit facility with a group of banks. These
facilities replaced a $225.0 million revolving credit facility with a group of banks. A
default by Great Plains Energy or any of its significant subsidiaries of other
indebtedness totaling more than $25.0 million is a default under these bank lines. Under
the terms of these agreements, Great Plains Energy is required to maintain a consolidated
indebtedness to consolidated capitalization ratio not greater than 0.65 to 1.0 at all
times and an interest coverage ratio greater than 2.25 to 1.0, as those ratios are defined
in the agreement. At September 30, 2004, the Company was in compliance with these
covenants. At September 30, 2004, Great Plains Energy had no outstanding borrowings under
these lines and had issued letters of credit totaling $18.0 million under the three-year
revolving credit facility as credit support for Strategic Energy. At December 31, 2003,
Great Plains Energy had $87.0 million of outstanding borrowings under the $225.0 million
revolving credit facility with a weighted-average interest rate of 2.12% and had issued a
letter of credit for $15.8 million as credit support for Strategic Energy.

During the third quarter of 2004,
Strategic Energy syndicated a $125.0 million three-year revolving credit facility with a
group of banks. Great Plains Energy has guaranteed $25.0 million of this facility.

23

This facility replaced a $95.0 million revolving credit facility with a group of banks. A
default by Strategic Energy of other indebtedness, as defined in the new 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 $62.5 million,
a maximum funded indebtedness to EBITDA ratio of 2.25 to 1.00, 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 are defined in the agreement. 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 September 30, 2004, Strategic Energy was in compliance with these
covenants. At September 30, 2004, $68.6 million in letters of credit had been issued and
there were no borrowings under the agreement.

Great Plains Energy filed a
registration statement, which became effective in April 2004, for the issuance of an
aggregate amount up to $500.0 million of any combination of senior debt securities,
subordinated debt securities, trust preferred securities and related guarantees, common
stock, warrants, stock purchase contracts or stock purchase units. The prospectus filed
with this registration statement also included $148.2 million of securities remaining
available to be offered under a prior registration statement providing for an aggregate
amount of availability of $648.2 million. In June 2004, Great Plains Energy issued 5.0
million shares of common stock at $30 per share under this registration statement with
$150.0 million in gross proceeds. Issuance costs of $5.6 million are reflected in capital
stock premium and expense on Great Plains Energys consolidated balance sheet and
statement of common stock equity.

In June 2004, Great Plains Energy
also issued $163.6 million of FELINE PRIDES under this registration statement. After these
transactions, $171.0 million remains available under the registration statement. FELINE
PRIDES, each with a stated amount of $25, initially consist of an interest in a senior
note due February 16, 2009, and a contract requiring the holder to purchase the
Companys common stock on February 16, 2007. Each purchase contract obligates the
holder of the purchase contract to purchase, and Great Plains Energy to sell, on February
16, 2007, for $25 in cash, newly issued shares of the Companys common stock equal to
the settlement rate. The settlement rate will vary according to the applicable market
value of the Companys common stock at the settlement date. Applicable market value
will be measured by the average of the closing price per share of the Companys
common stock on each of the 20 consecutive trading days ending on the third trading day
immediately preceding February 16, 2007. The settlement rate will be applied to the 6.5
million FELINE PRIDES at the settlement date to issue a number of common shares determined
as follows:

|                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------
|
|                                                                                                                                               
|$35.40 or greater                                                                                                                              
|                                                                                                                                               
|$35.40 to $30.00                                                                                                                               
|                                                                                                                                               
|$30.00 or less                                                                                                                                 
|                                                                                                                                               
|(a) Assumes that the market price of the Company's common stock on February 16, 2007, is 
             the same as the applicable market value.

Great Plains Energy will make
quarterly contract adjustment payments at the rate of 3.75% per year and interest payments
at the rate of 4.25% per year both payable in February, May, August and November of each
year, which commenced August 16, 2004. Great Plains Energy must attempt to remarket the
senior notes, in whole but not in part. If the senior notes are not successfully
remarketed by February 16, 2007, Great Plains Energy will exercise its rights as a secured
party to dispose of the

24

senior notes in accordance with applicable law and satisfy in full
each holders obligation to purchase the Companys common stock under the
purchase contracts.

The June 2004 fair value of the
contract adjustment payments of $15.4 million was recorded as a liability in other deferred
credits and other liabilities with a corresponding amount recorded as capital stock
premium and expense on Great Plains Energys consolidated balance sheet. Expenses
incurred with the offering were allocated between the senior notes and the purchase
contracts. Expenses allocated to the senior notes of $1.2 million have been deferred and
are being recognized as interest expense over the term of the notes. Expenses allocated to
the purchase contracts of $4.2 million were recorded as capital stock premium and expense.
Great Plains Energy has the right to defer the contract adjustment payment on the purchase
contracts, but not the interest payments on the senior notes. In the event Great Plains
Energy exercises its option to defer the payment of contract adjustment payments, Great
Plains Energy and its subsidiaries are not permitted to, with certain exceptions, declare
or pay dividends on, make distributions with respect to, or redeem, purchase or acquire,
or make a liquidation payment with respect to, any capital stock of Great Plans Energy
until the deferred contract adjustment payments have been paid.

In 1997, KCPL Financing I issued
$150.0 million of 8.3% preferred securities and KCP&L invested $4.6 million in common
securities of KCPL Financing I. The sole asset of KCPL Financing I was the $154.6 million
principal amount of 8.3% Junior Subordinated Deferrable Interest Debentures, due 2037,
issued by KCP&L. In July 2004, KCP&L redeemed the $154.6 million 8.3% Junior
Subordinated Deferred Interest Debentures. KCPL Financing I used the proceeds from the
repayment of the 8.3% Junior Subordinated Deferrable Interest Debentures to redeem the
$4.6 million of common securities held by KCP&L and the $150.0 million of 8.3%
preferred securities. KCP&L also retired $54.5 million of its medium-term notes at
maturity during the third quarter of 2004.

# KCP&L EIRR Bonds
Classified as Current Liabilities

During the third quarter of 2004,
KCP&L remarketed its secured 1994 series Environmental Improvement Revenue Refunding
(EIRR) bonds totaling $35.9 million at a fixed rate of 2.25% and its 1998 Series C
unsecured EIRR bonds totaling $50.0 million at a fixed rate of 2.38% ending August 31,
2005. If the bonds could not be remarketed, KCP&L would be obligated to either
purchase or retire the bonds. KCP&L also remarketed its secured 1993 series EIRR bonds
totaling $12.4 million at a fixed rate of 4.0% until maturity at January 2, 2012. The
previous interest rate periods on these three series, with interest rates of 3.9%, 2.25%
and 3.9%, respectively, expired on August 31, 2004.

In August 2004, KCP&L secured a
municipal bond insurance policy as a credit enhancement to its secured 1992 series EIRR
bonds totaling $31.0 million. This municipal bond insurance policy replaced a 364-day
credit facility with a bank, which expired in August 2004 that previously supported full
liquidity of these bonds. These variable-rate, secured EIRR bonds with a final maturity in
2017 are remarketed on a weekly basis. The insurance agreement between KCP&L and XL
Capital Assurance Inc. (XLCA), the issuer of the municipal bond insurance policy, provides
for reimbursement by KCP&L for any amounts that XLCA pays under the municipal bond
insurance policy. The insurance policy is in effect for the term of the bonds. The
insurance agreement contains a covenant that the indebtedness to total capitalization
ratio of KCP&L and its consolidated subsidiaries will not be greater than 0.68 to 1.0.
At September 30, 2004, KCP&L was in compliance with this covenant. KCP&L is also
restricted from issuing additional bonds under its General Mortgage Indenture if, after
giving effect to such additional bonds, the proportion of secured debt to total
indebtedness would be more than 75%, or more than 50% if the long term rating for such
bonds by Standard & Poors or Moodys Investors Service would be at or below
A- or A3, respectively. In the event of a default under the insurance agreement, XLCA may
take any available legal or equitable action against KCP&L, including seeking specific
performance of the covenants.

25

The $35.9 million of secured 1994
series EIRR bonds and $50.0 million of 1998 Series C unsecured EIRR bonds discussed above
were classified as current liabilities at September 30, 2004. The $35.9 million of secured
1994 series EIRR bonds, $50.0 million of 1998 Series C unsecured EIRR bonds, $12.4 million
of secured 1993 series EIRR bonds and $31.0 million of secured 1992 series EIRR bonds
discussed above totaled $129.3 million and were classified as current liabilities at
December 31, 2003.

# 7.  KLT GAS DISCONTINUED
OPERATIONS

In February 2004, the Board of
Directors approved the sale of the KLT Gas portfolio and discontinuation of the gas
business. Consequently, in the first quarter of 2004, the KLT Gas portfolio was reported
as discontinued operations and KLT Gas historical activities were reclassified in
accordance with SFAS No. 144 Accounting for the Impairment or Disposal of Long-lived
Assets.

In the third quarter of 2004, KLT Gas
completed the sale of the majority of the KLT Gas portfolio for $19.6 million cash, net of
$1.2 million transaction costs. The gain on the third quarter sales totaled $8.6 million,
or $0.12 per share. In October 2004, KLT Gas completed the sale of the remaining
significant KLT Gas portfolio at a sales price of $4 million for a gain of approximately
$2 million, or $0.02 per share.

The impact of the gain from the third
quarter 2004 KLT Gas portfolio asset sales was partially offset by the loss from the wind
down operations of $0.6 million and $1.4 million for the three months ended and year to
date September 30, 2004, respectively. Additionally, the first quarter 2004 write down of
the KLT Gas portfolio to its estimated net realizable value reduced year to date September
30, 2004, earnings by $1.2 million. Year to date 2003 reflects a loss from discontinued
operations of $7.3 million, or $0.10 per share, and includes a loss of $5.5 million, or
$0.08 per share, related to an impairment on a Rocky Mountain project.

The following table summarizes the
discontinued operations through September 30, 2004.

|                                         
|-----------------------------------------
|                                         
|                                         
|                                         
|                                         
|(millions)                               
|Revenues                                 
|                                         
|Gain (loss) from discontinued operations 
|before income taxes                      
|Income taxes                             
|                                         
|Gain (loss) from discontinued operations,
|net of income taxes                      
|                                         

26

Assets and liabilities of the
discontinued operations are summarized in the following table.

|                                            
|--------------------------------------------
|
|                                            
|(millions)                                  
|Current assets                              
|Gas property and investments                
|Other nonutility property and investments   
|Accrued taxes                               
|Deferred income taxes                       
|                                            
|Total assets of discontinued operations     
|                                            
|Current liabilities                         
|Asset retirement obligations                
|                                            
|Total liabilities of discontinued operations
|                                            

8  DISPOSITION OF OWNERSHIP INTEREST IN R.S. ANDREWS ENTERPRISES, INC.

On June 13, 2003, HSS board of
directors approved a plan to dispose of its interest in residential services provider
RSAE. On June 30, 2003, HSS completed the disposition of its interest in RSAE. The
financial statements reflect RSAE as discontinued operations for all periods presented as
prescribed under SFAS No. 144. The following table summarizes the discontinued operations.

|                                                                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|                                                                                                                                                                                                              
|(millions)                                                                                                                                                                                                    
|Revenues                                                                                                                                                                                                      
|                                                                                                                                                                                                              
|Loss from operations before income taxes                                                                                                                                                                      
|Loss on disposal before income taxes                                                                                                                                                                          
|                                                                                                                                                                                                              
|Total loss on discontinued operations                                                                                                                                                                         
|before income taxes                                                                                                                                                                                           
|Income tax benefit (a)                                                                                                                                                                                        
|                                                                                                                                                                                                              
|Loss on discontinued operations, net                                                                                                                                                                          
|of income taxes                                                                                                                                                                                               
|                                                                                                                                                                                                              
|(a)  RSAE had continual losses and therefore did not recognize 
       tax benefits.  The tax benefit reflected is the tax effect of        Great Plains Energy's
        disposition of its interest in RSAE.

# 9.  ACQUISITION OF
ADDITIONAL INDIRECT INTEREST IN STRATEGIC ENERGY

Effective May 6, 2004, Great Plains
Energy, through IEC, completed its purchase of an additional 11.45% indirect interest in
Strategic Energy bringing Great Plains Energys indirect ownership interest in
Strategic Energy to just under 100%. The Company paid cash of $90.2 million, including
$1.4 million of transaction costs. In accordance with the purchase terms, the Company also
recorded a $0.9 million liability for 2004 fractional dividends to the previous owner for
its share of 2004 budgeted Strategic Energy dividends. The transaction costs and the
liability for fractional dividends are preliminary and subject to adjustment throughout
the remainder of the year. See Notes 11 and 13 for additional discussion of the
acquisition.

27

The purchase price allocation for the
net assets acquired is as follows:

|                                          
|------------------------------------------
|
|                                          
|(millions)                                
|Other non-utility property and investments
|Goodwill                                  
|Other deferred charges                    
|                                          
|Total assets                              
|Accounts payable                          
|Other deferred credits and liabilities    
|                                          
|Net assets acquired                       
|                                          

A third party valuation firm was
utilized in the determination of the purchase price allocation. Based on the valuation,
the acquired share of identifiable intangible assets and liabilities were recorded by IEC
at fair value as part of the purchase price allocation. The acquired share of the fair
value of the identifiable intangibles was a net asset of $19.6 million. The fair value of
acquired supply (intangible asset) and retail (intangible liability) contracts is being
amortized over approximately 28 months. Other intangible assets recorded that have finite
lives and are subject to amortization include customer relationships and asset information
systems, which are being amortized over 72 and 44 months, respectively. Net amortization
for the three months ended and year to date September 30, 2004, was $0.8 million and $1.4
million, respectively. A $0.7 million intangible asset for the Strategic Energy trade name
was also recorded and deemed to have an infinite life, and as such, is not being
amortized.

# 10.  PENSION PLANS AND
OTHER EMPLOYEE BENEFITS

The Company maintains defined benefit
pension plans for substantially all employees of KCP&L, Services and Wolf Creek
Nuclear Operating Company (WCNOC), including officers. Benefits under these plans reflect
the employees compensation, years of service and age at retirement.

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 health care and life insurance benefits are accrued during an
employees years of service and recovered through rates.

On December 8, 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act) was signed
into law. The Medicare Act, among other things, provides a federal subsidy beginning in
2006 to sponsors of retiree health care benefit plans. In the third quarter of 2004, the
Company adopted Financial Accounting Standards Board (FASB) Staff Position No. FAS 106-2,
Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003. The Company has determined the effects of
the Medicare Act will not have a material impact on its estimated health care costs or
participation rates. Because the Medicare Act is not deemed a significant
event, the effects of the Act will be incorporated in the next measurement of plan
assets and obligations as required by SFAS No. 106, Employers Accounting for
Postretirement Benefits Other than Pensions.

The following table provides the net
periodic benefit costs by component. These costs reflect total plan benefit costs prior to
the effects of capitalization and sharing with joint owners of power plants.

28

|                                  
|----------------------------------
|
|
|                                  
|(thousands)                       
|Service cost                      
|Interest cost                     
|Expected return on plan assets    
|Amortization of prior service cost
|Recognized net actuarial loss     
|Transition obligation             
|Amendment                         
|Net settlements                   
|                                  
|Net periodic benefit cost         
|                                  

|                                  
|----------------------------------
|
|
|                                  
|(thousands)                       
|Service cost                      
|Interest cost                     
|Expected return on plan assets    
|Amortization of prior service cost
|Recognized net actuarial loss     
|Transition obligation             
|Amendment                         
|Net settlements                   
|                                  
|Net periodic benefit cost         
|                                  

# 11.  RELATED PARTY
TRANSACTIONS AND RELATIONSHIPS

In May 2004, Great Plains Energy,
through IEC, completed its purchase from SE Holdings, L.L.C. (SE Holdings) of an
additional 11.45% indirect interest in Strategic Energy for $88.8 million, excluding
transaction costs. The purchase increased Great Plains Energys indirect ownership of
Strategic Energy to just under 100%. See Note 9 for additional information regarding the
purchase transaction. Richard Zomnir, Chief Executive Officer of Strategic Energy whose
successor was announced in October 2004, and certain other current and former employees of
Strategic Energy held direct or indirect interests in SE Holdings. Mr. Zomnir has
disclosed that he held an approximate 25% interest in SE Holdings. In connection with the
transaction, Mr. Zomnir and other direct and indirect owners of SE Holdings entered into
an agreement with IEC and Strategic Energy, providing for certain indemnification rights
related to the litigation described in Note 13.

SE Holdings continues to be a member
of Custom Energy Holdings, L.L.C. (Custom Energy Holdings) and is represented on the
Management Committees of Custom Energy Holdings and Strategic Energy. Custom Energy
Holdings business and affairs are controlled and managed by a three member
Management Committee composed of one representative designated by KLT Energy Services Inc.
(KLT Energy Services), one representative designated by IEC, and one representative
designated by SE Holdings. Certain actions (including amendment of Custom Energy
Holdings operating agreement, approval of actions in contravention of the operating
agreement, approval of a dissolution of Custom Energy Holdings, additional capital
contributions and assumption of recourse indebtedness) require the unanimous consent of
all the members of Custom Energy Holdings.

Strategic Energys business and
affairs are controlled and managed by a four member Management Committee composed of two
representatives designated by KLT Energy Services, one representative designated by IEC
and one representative designated by SE Holdings. Certain actions (including amendment of
Strategic Energys operating agreement, approval of actions in contravention of the
operating agreement, approval of transactions between Strategic Energy and affiliates of
its members,

29

approval of a dissolution of Strategic Energy, and assumption of recourse
indebtedness) require the unanimous consent of all the Management Committee members.

# 12.  COMMITMENTS AND
CONTINGENCIES

# Nuclear Liability and
Insurance

Liability Insurance The Price-Anderson Act currently
limits the combined public liability of nuclear reactor owners to $10.8 billion for claims
that could arise from a single nuclear incident. The owners of Wolf Creek, a nuclear
generating station, (Owners) carry the maximum available commercial insurance of $0.3
billion. Secondary Financial Protection, an assessment plan mandated by the Nuclear
Regulatory Commission (NRC), provides insurance for the $10.5 billion balance.

Under Secondary Financial Protection,
if there were a catastrophic nuclear incident involving any of the nations licensed
reactors, the Owners would be subject to a maximum retrospective assessment per incident
of up to $95.8 million plus up to an additional 5% surcharge for a total of $100.6 million
($47.3 million, KCP&Ls 47% share). The Owners are jointly and severally liable
for these charges, payable at a rate not to exceed $10 million ($5 million,
KCP&Ls 47% share) per incident per year, excluding applicable premium taxes. The
assessment, most recently revised in 2004, is subject to an inflation adjustment based on
the Consumer Price Index and renewal of the Price-Anderson Act by Congress.

Property, Decontamination, Premature Decommissioning and Extra Expense Insurance
The Owners also carry $2.8 billion
($1.3 billion, KCP&Ls 47% share) of property damage, decontamination and
premature decommissioning insurance for loss resulting from damage to the Wolf Creek
facilities. Nuclear Electric Insurance Limited (NEIL) provides this insurance.

In the event of an accident,
insurance proceeds must first be used for reactor stabilization and NRC mandated site
decontamination. 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.

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 about $26.0 million
($12.2 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 could have a material, adverse effect on its financial
condition, results of operations and cash flows.

Low-Level WasteThe 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
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

30

provided most of the pre-construction financing for this project.
KCP&Ls net investment in the Compact was $7.4 million at September 30, 2004, and
December 31, 2003.

Nebraska officials and residents in
the area of the proposed facility raised significant opposition to the project and made
attempts through litigation and proposed legislation in Nebraska to slow down or stop
development of the facility. On December 18, 1998, the application for a license to
construct this project was denied. After the license denial, WCNOC, the Compact Commission
(Commission) and others filed a lawsuit in federal court contending Nebraska officials
acted in bad faith while handling the license application. In September 2002, the U.S.
District Court Judge presiding over the Commissions federal bad faith
lawsuit against the State of Nebraska issued his decision in the case finding clear
evidence that the State of Nebraska acted in bad faith in processing the license
application for a low-level radioactive waste disposal site in Nebraska and rendered a
judgment on behalf of the Commission in the amount of $151.4 million against the state.
The state appealed this decision to the U.S. Court of Appeals for the Eighth Circuit. On
February 18, 2004, a three-judge panel of the appellate court unanimously affirmed the
trial courts decision in its entirety. On March 2, 2004, Nebraska filed a Petition
for Rehearing En Banc with the U.S. Court of Appeals for the Eighth Circuit. The court
denied Nebraskas petition on April 21, 2004. Nebraska subsequently sought U.S.
Supreme Court review of that decision. However, on August 9, 2004, Nebraska and the
Commission settled the case by Nebraska agreeing to pay the Commission either a one-time
amount of $140.5 million or four annual installments of $38.5 million each beginning on
August 1, 2005. All related litigation and appeals have been or will be dismissed. Upon
final payment, Nebraska will be relieved of its responsibility to host a disposal
facility. The Commission now will begin seeking long-term waste disposal capability in
another compact region. WCNOC intends to pursue with the Commission the possibility of
recovering from the settlement proceeds some of WCNOCs contributions to the Nebraska
facilitys pre-licensing effort. Based on the contribution of the respective
utilities in relation to the total settlement amount, management believes the settlement
proceeds would be sufficient to recover KCP&Ls $7.4 million net investment in
the Compact.

Nebraska is no longer a member of the
Compact by virtue of both the Commissions revocation of Nebraskas membership,
effective July 17, 2004, and Nebraskas withdrawal from the Compact, effective in
late August 2004. As part of the settlement of the bad faith litigation
mentioned above, Nebraska dismissed its challenge to the Commissions revocation of
Nebraskas Compact membership.

Wolf Creek continues to dispose of
its low-level radioactive waste at the reopened disposal facility at Barnwell, South
Carolina. South Carolina intends to gradually decrease the amount of waste it allows from
outside its compact until around 2008 when it intends to no longer accept waste from
generators outside its compact. Wolf Creek remains able to dispose of some of its
radioactive waste at a facility in Utah. Although management is unable to predict when a
permanent disposal facility for Wolf Creek low-level radioactive waste might become
available, this issue is not expected to affect continued operation of Wolf Creek.

Environmental MattersThe 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

31

compliance with governmental regulations and to detect contamination. Governmental bodies,
however, may impose additional or more restrictive environmental regulations that could
require substantial changes to operations or facilities at a significant cost. At
September 30, 2004, and December 31, 2003, KCP&L had $0.3 million and $1.8 million,
respectively, accrued for environmental remediation expenses. The remaining 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.

On April 15, 2004, the EPA issued to
KCP&L a notice of violation of Hawthorn No. 5 permit limits on sulfur dioxide
(SO2) emissions. SO2emissions from Hawthorn No. 5 exceeded the
applicable thirty-day rolling average emission limit on certain days in the third and
fourth quarters of 2003 and also exceeded the applicable 24-hour emission limit on one day
in the fourth quarter of 2003. These exceedances occurred while the unit was operating in
compliance with an exception protocol that had been accepted by the issuer of the air
permit. The equipment issues that caused these violations have been addressed by
KCP&L. In September 2004, KCP&L finalized a consent order with the EPA, agreeing
to pay a civil penalty and fund certain Kansas City metro environmental projects at an
aggregate cost of $0.4 million.

Discussed below are issues that may
require material expenditures to comply with environmental laws and regulations.
KCP&Ls expectation is that any such expenditures will be recovered through
rates.

Clean Air Legislation
Congress is currently debating
numerous bills that could make significant changes to the Clean Air Act Amendments of 1990
(Clean Air Act) including potential establishment of nationwide limits on power plant
emissions for several specific pollutants. Some of these bills address oxides of sulfur
and nitrogen (SOxand NOx), mercury and carbon dioxide
(CO2), while other bills address SOx, NOx and mercury,
and some legislative bills address CO2 by itself. There are various compliance
dates and compliance limits stipulated in the numerous legislative bills being debated.
These bills have the potential for a significant financial impact on KCP&L through the
installation of new pollution control equipment to achieve compliance if new nationwide
limits are enacted. The financial consequences to KCP&L cannot be accurately
determined until the final legislation is passed. However, KCP&L would seek recovery
of capital costs and expenses for such compliance through rates. KCP&L will continue
to monitor the progress of these bills.

EPA Phase II NOx SIP Call
On April 1, 2004, the Environmental
Protection Agency (EPA) issued final Phase II NOx State Implementation Plan
(SIP) Call regulation, which specifically excludes coal-fired power plants in the western
part of Missouri, including all of KCP&Ls Missouri coal-fired plants, from the
NOx SIP Call. The final Phase II NOx SIP Call was contained in the
April 21, 2004, Federal Register with an effective date of June 7, 2004. This action
completes the EPAs response to several decisions from the U.S. Court of Appeals for
the District of Columbia.

NOx and SO2 Regulations-Proposed Clean Air Interstate Rule
The EPA published a proposed
regulation in the January 30, 2004, Federal Register titled the Interstate Air Quality
Rule, which addresses SO2 and NOx emissions. This title was
subsequently changed to the Clean Air Interstate Rule (CAIR). A supplemental proposal for
the CAIR was published in the June 10, 2004, Federal Register. The proposed CAIR is
designed to reduce NOx and SO2emissions 65% and 70%, respectively,
below current levels in a two-phased program between 2010 and 2015.

If coal-fired plants in Missouri and
Kansas are required to implement reductions under the proposed CAIR, KCP&L would need
to incur significant capital costs, purchase power or purchase emission allowances.
Preliminary analysis of the proposed regulation indicates that selective catalytic
reduction

32

technology for NOx control and scrubbers for SO2 control
may be required for some of the KCP&L units. Currently, KCP&L estimates that
additional capital expenditures could range from $360 million to $520 million. The timing
of the installation of such control equipment is uncertain pending the final regulation
being issued. The final regulation is expected to contain specific compliance dates and
compliance levels, final determination of whether Kansas and/or Missouri are included (as
they are in the proposed rules), as well as the applicability of accumulated
SO2 allowances for future compliance. KCP&L is currently allocated between
39,000 and 52,000 tons of SO2 allowances per year to support its emissions of
approximately 50,000 tons per year. KCP&L has accumulated over 190,000 tons of
allocated SO2allowances; however, the disposition of such credits is subject
to regulatory approvals from both Kansas and Missouri. KCP&L continues to refine these
preliminary estimates and explore alternatives. The ultimate cost of these regulations, if
any, could be significantly different from the amounts estimated above. The CAIR is
scheduled to be finalized in December 2004. As discussed below, certain of the control
technology for SO2and NOxwill also aid in the control of mercury.
If mercury controls, as discussed below, are required to be implemented prior to the CAIR,
the above estimates could be reduced by $110 million.

In the May 5, 2004, Federal Register,
the EPA published proposed regulations on best available retrofit technology (BART) that
would amend its July 1999 regional haze regulations regarding emission controls for
industrial facilities emitting air pollutants that reduce visibility. The BART requirement
would direct state air quality agencies to identify whether emissions from sources subject
to BART are below limits set by the state, or whether retrofit measures are needed to
reduce the emissions below those limits. If the proposed BART regulations are adopted,
they will apply to KCP&L units Montrose No. 3, LaCygne No. 1, LaCygne No. 2 and Iatan.
Based on the results of the state air quality studies, KCP&L could be required to
achieve compliance by making capital expenditures that would be similar to those required
for the proposed CAIR. The EPA is scheduled to adopt final regulations by April 15, 2005;
however, if the proposed CAIR is adopted, management believes the EPA will reevaluate the
need for the proposed BART regulation.

Mercury Emissions
In July 2000, the National Research
Council published its findings of a study under the Clean Air Act, which stated that power
plants that burn fossil fuels, particularly coal, generate the greatest amount of mercury
emissions. As a result, in the January 30, 2004, and March 16, 2004, Federal Registers,
the EPA published proposed regulations for controlling mercury emissions from coal-fired
power plants that contained three options. Two of the options, the EPAs preferred
approaches, call for regulating mercury via emission trading regimes under section 111 or
section 112 of the Clean Air Act (cap and trade options), and the third option would
require utilities to install controls known as maximum achievable control technology
(MACT). The EPA is scheduled to issue final rules by March 2005.

Under either of the cap and trade
options, both of which would become applicable in 2010, the EPA would establish a
mechanism by which mercury emissions from new and existing coal-fired plants would be
capped at specified, nationwide levels. A first phase cap of 34 tons would become
effective on January 1, 2010, and a second phase cap of 15 tons would become effective on
January 1, 2018. Facilities would demonstrate compliance with the standard by holding one
allowance for each ounce of mercury emitted in any given year and allowances would be
readily transferable among all regulated facilities nationwide. Under the cap and trade
options, KCP&L would be able to purchase mercury allowances that would be available
nationwide or elect to install pollution control equipment to achieve compliance. While it
is expected that mercury allowances would be available for purchase at a reasonable price
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.
Therefore, capital expenditures may be required in the 2016-2018 timeframe to install
mercury pollution control equipment.

33

Under the MACT option, KCP&L
could incur capital expenses prior to the 2007-2008 timeframe when the regulation would be
applicable. This option would require compliance on a facility basis and therefore the
option of trading nationwide mercury allowances would not be available. The EPA stated in
the preamble that there are no adequately demonstrated control technologies specifically
designed to reduce mercury emissions from coal-fired plants. However, the EPA also stated
it is confident such technologies will be commercially available by 2007. There is
currently considerable debate at the EPA and within the utility industry whether the
installation of pollution control equipment for the control of NOx and
SO2 under the CAIR might simultaneously remove mercury to the specified MACT
regulatory levels, which is referred to as the co-benefit approach. If this approach is
correct, and if the CAIR became final and all of KCP&Ls units were subject to
the final regulation, KCP&L would not be required to install additional mercury
control equipment to achieve compliance with this regulation. However, if the co-benefit
approach is not correct, or if KCP&L units located in Missouri and/or Kansas were not
included in the final CAIR regulation, KCP&L would be required to install mercury
control equipment prior to 2007. If KCP&L were required to install mercury control
equipment on all of its coal-fired plants, it is anticipated that activated carbon
injection in conjunction with a baghouse would need to be installed at a projected cost to
KCP&L of approximately $190 million.

KCP&L is a participant in the
Department of Energy (DOE) project at the Sunflower Electric Holcomb plant to investigate
control technology options for mercury removal from coal-fired plants burning sub
bituminous coal.

Carbon Dioxide
At a December 1997 meeting in Kyoto,
Japan, delegates from 167 nations, including the U.S., agreed to a treaty (Kyoto Protocol)
that would require a 7% reduction in U.S. CO2 emissions below 1990 levels, a
nearly 30% cut from current levels. On March 28, 2001, the Bush administration announced
it will not negotiate implementation of the Kyoto Protocol and it will not send the Kyoto
Protocol to the U.S. Senate for ratification.

There are several bills being debated
in the U.S. Congress that address the CO2 issue, including establishing a
nationwide cap on CO2levels. There are various compliance dates and nationwide
caps stipulated in the numerous legislative bills being debated. These bills have the
potential for a significant financial impact on KCP&L in conjunction with achieving
compliance with the proposed new nationwide limits. However, the financial consequences to
KCP&L cannot be determined until final legislation is passed. KCP&L will continue
to monitor the progress of these bills.

On February 14, 2002, President Bush
unveiled his Clear Skies Initiative, which included a climate change policy. The climate
change policy 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. The administrations strategy is intended to
reduce the greenhouse gas intensity of the U.S. economy by 18% over the next 10 years.
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. will 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.

On December 19, 2002, Great Plains
Energy joined the Power Partners through Edison Electric Institute (EEI). Power Partners
is a voluntary program with the DOE under which utilities commit to

34

undertake measures to reduce, avoid or sequester CO2 emissions. Eventually, industry sectors and
individual companies are expected to enter into an umbrella memorandum of understanding
(MOU) that will set forth programs for industries and individual companies to reduce
greenhouse gas emissions.

On January 17, 2003, the EEI sent a
letter to numerous Administration officials, in which the EEI committed to work with the
government over the next decade to reduce the power sectors CO2 emissions
per kWh generated (carbon intensity) by the equivalent of 3 to 5% of the current level.

In the near future, Power Partners
plans to enter into a cooperative umbrella MOU with the DOE. This will contain supply and
demand-side actions as well as offset projects that will be undertaken to reduce the power
sectors CO2 emissions per kWh generated over the next decade consistent
with the EEI commitment. Once the MOU is completed, individual companies, including
KCP&L, will enter into agreements with the DOE that set forth quantitative, concrete
and specific activities to reduce, avoid or sequester greenhouse gases.

EPA New Source ReviewThe EPA is conducting an enforcement
initiative under Section 114(a) of the Clean Air Act to determine whether modifications at
selected coal-fired plants across the U.S. may have been subject to New Source Performance
Standards (NSPS) or New Source Review (NSR) requirements. After an operator has received a
Section 114 letter, the EPA requests data and reviews all expenditures at the plants to
determine if they were routine maintenance or whether the expenditures were for
substantial modifications or resulted in improved operations. If a plant, subject to a
Section 114 letter, is determined to have been subject to NSPS or NSR, the plant could be
required to install best available control technology or lowest achievable emission rate
technology. KCP&L has not received a Section 114 letter to date.

Air Particulate Matter and Ozone
In July 1997, the EPA revised ozone
and particulate matter air quality standards creating a new eight-hour ozone standard and
establishing a new standard for particulate matter less than 2.5 microns (PM-2.5) in
diameter. These standards were challenged in Federal court. However, the courts ultimately
denied all state, industry and environmental groups petitions for review and thus upheld
as valid the EPAs new eight-hour ozone and PM-2.5 National Ambient Air Quality
Standards (NAAQS). In so doing, the court held that the EPA acted consistently with the
Clean Air Act in setting the standards at the levels it chose and the EPAs actions
were reasonable and not arbitrary and capricious, and cited the deference given the
EPAs decision-making authority. The court stated that the extensive records
established for each rule supported the EPAs actions in both rulemakings. This
removed the last major hurdle to the EPAs implementation of stricter ambient air
quality standards for ozone and fine particles. On April 15, 2004, the EPA designated the
Kansas City area as unclassifiable with respect to the eight-hour ozone NAAQS based on
2003 ozone season data and in attainment with respect to the PM-2.5 NAAQS. However, the
EPA could review the 2004 ozone season data and reclassify the Kansas City area with
respect to the eight-hour ozone NAAQS as early as November 2004. On April 15, 2004, Kansas
recommended that the EPA designate all of Kansas as in attainment/unclassifiable with
respect to the PM-2.5 NAAQS.

Proposed Water Use Regulations
On February 16, 2004, the EPA
finalized the Phase II rule implementing Section 316(b) of the Clean Water Act
establishing standards for cooling water intake structures at existing facilities. The
final rule was published in the July 9, 2004, Federal Register with an effective date of
September 7, 2004. This final regulation is applicable 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 will be
required to complete a Section 316(b) comprehensive demonstration study on each of its
generating facilities intake structures within the next three and one

35

half years. Depending on the outcome of the comprehensive demonstration study, facilities may be
required to implement technological, operational or restoration measures to achieve
compliance. Overall, compliance is scheduled to be achieved between 2011 and 2014. Costs
of the required comprehensive demonstration study are expected to be $0.3 million to $0.5
million per facility and occur between 2004 and 2006. Until the Section 316(b)
comprehensive demonstration studies are completed, the impact of this final rule cannot be
quantified.

Southwest Power Pool
Regional Transmission OrganizationUnder the Federal Energy Regulatory
Commission (FERC) Order 2000, KCP&L, as an investor-owned utility, is strongly
encouraged to join a FERC approved Regional Transmission Organization (RTO). RTOs combine
transmission operations of utility businesses into regional organizations that schedule
transmission services and monitor the energy market to ensure regional transmission
reliability and non-discriminatory access. During February 2004, the Southwest Power Pool
(SPP), of which KCP&L is a member, obtained conditional approval from FERC as an RTO.
On October 1, 2004, FERC approved SPP as an RTO; however, the SPP RTO was ordered to take
certain additional actions including filing additional revisions to their Membership
Agreement and filing an executed Joint Operating Agreement between the SPP RTO and the
Midwest Independent System Operator (ISO) by December 2004.

KCP&L intends on participating in
the SPP RTO; however, state regulatory approvals are required. KCP&L anticipates
making the necessary applications to the Missouri Public Service Commission (MPSC) and the
State Corporation Commission of the State of Kansas (KCC), during the first quarter of
2005 upon completion of the regional cost/benefit analysis currently being conducted for
the SPP RTO. This cost/benefit analysis is being conducted under the direction of the SPP
Regional State Committee (composed of state commissions from the states where the SPP RTO
operates) and is expected to be completed in February 2005.

# 13.  LEGAL PROCEEDINGS

Strategic EnergyOn March 23, 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 and Strategic Energy in the Court of Common Pleas of Allegheny County,
Pennsylvania. Mr. Haberstroh claims that he acquired an equity interest in Partners under
the terms of his employment agreement and that through a series of transactions, Mr.
Haberstrohs equity interest became an equity interest in SE Holdings. In 2001, Mr.
Haberstrohs employment was terminated and SE Holdings redeemed his equity interest.
Mr. Haberstroh is seeking the loss of his non-equity compensation (including salary, bonus
and benefits) and equity compensation and associated distributions (his equity interest in
SE Holdings).

Strategic Energy has filed a
counterclaim against Mr. Haberstroh for breach of contract. SE Holdings, and its direct
and indirect owners, have agreed to indemnify Strategic Energy and Innovative Energy
Consultants Inc. against any judgment or settlement of Mr. Haberstrohs claim that
relates to his equity interest in SE Holdings, up to a maximum amount of approximately $8
million.

See Note 11 for further information
regarding related party transactions.

KLT GasOn July 28, 2004, KLT Gas received a
Notice and Demand for Arbitration Pursuant to Joint Operating Agreement from SWEPI LP
doing business as Shell Western E&P and formerly known as Shell Western E&P Inc.
(Shell). Prior to an October 2004 sale (with a July 1, 2004, effective date) of KLT
Gas working interests in certain oil and gas leases in Duval County, Texas to Shell,
KLT Gas had a 50% working interest in the leases. Shell held the other 50% working
interest and was the operator of

36

the properties under a joint operating agreement, as
amended (JOA). Three groups of current or past lessors filed suit against Shell in Duval
County, Texas, alleging various claims against Shell. Additionally, Shell has been party
to ongoing proceedings before the Texas Railroad Commission relating to a well drilled on
acreage adjacent to the properties of Shell and KLT Gas mentioned above. Through
arbitration, Shell is seeking recovery from KLT Gas of 50% of the fees and costs incurred
in the three lawsuits and the Texas Railroad Commission proceedings and settlement
proceeds paid with respect to the three lawsuits, which Shell asserts is a total amount of
not less than $5.4 million for KLT Gas share. Shell is also seeking a declaration
that the fees and costs incurred and settlement proceeds paid, including any fees and
costs incurred in the future, are reimbursable expenses under the JOA. Shell is seeking a
ruling compelling KLT Gas to pay Shell immediately all sums deemed to be due pursuant to
the arbitration. On August 17, 2004, KLT Gas submitted its notice of defense generally
asserting that there is no contractual basis or implied duty for reimbursement or
contribution regarding the settlements and there is no contractual basis for reimbursement
or contribution regarding the Texas Railroad Commission proceedings. KLT Gas also asserted
counterclaims based upon misrepresentations and promissory estoppel, gross negligence in
imprudent operations, full accounting under the JOA and offset. KLT Gas and its counsel
continue to evaluate KLT Gas rights and obligations under the JOA as well as other
possible counterclaims that KLT Gas may have against Shell; however, it is too early to
predict the ultimate outcome of this demand for arbitration.

Hawthorn No. 5 Subrogation 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 Hawthorn No. 5 boiler explosion. KCP&L and
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 have been dismissed from the suit and various other defendants have settled
with KCP&L, resulting in KCP&L receiving $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 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 have
appealed this case to the Court of Appeals for the Western District of Missouri.

37

# 14.  ASSET RETIREMENT
OBLIGATIONS

As a result of the sale of the KLT
Gas portfolio discussed in Note 7, ARO related to the KLT Gas portfolio of $1.7 million
have been assumed by the new owners. The following table shows the effect on Great Plains
Energy of the new owners assuming the related KLT Gas ARO. The $0.1 million ARO related to
the remaining KLT Gas portfolio is still reflected in the table; however, it is included
in discontinued operations on the consolidated balance sheet.

|                                               
|-----------------------------------------------
|
|                                               
|(millions)                                     
|Asset retirement obligation beginning of period
|Accretion                                      
|                                               
|Asset retirement obligation end of period      
|                                               
|Great Plains Energy                            
|Asset retirement obligation beginning of period
|Assumed by new owners of assets                
|Accretion                                      
|                                               
|Asset retirement obligation end of period      
|                                               

# 15.  SEGMENT AND RELATED
INFORMATION

Great Plains EnergyGreat 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. In February 2004, the Company announced its plan to sell the KLT Gas portfolio
and exit the gas business. As a result, KLT Gas financial results are reported as
discontinued operations and KLT Gas is no longer considered a reportable segment. The two
reportable business segments are: (1) KCP&L, an integrated, regulated electric
utility, which provides reliable, affordable electricity to customers; and (2) Strategic
Energy, a competitive electricity supplier, which operates in several electricity markets
offering retail choice. Other includes the operations of HSS, GPP, Services,
all KLT Inc. operations other than Strategic Energy, unallocated corporate charges and
intercompany eliminations, which are immaterial. The summary of significant accounting
policies applies to all of the reportable segments. Segment performance is evaluated based
on net income.

The tables below reflect summarized
financial information concerning Great Plains Energys reportable segments. Prior
year information has been restated to conform to the current presentation.

|                            
|----------------------------
|
|                            
|(millions)                  
|Operating revenues          
|Depreciation                
|Interest charges            
|Income taxes                
|Loss from equity investments
|Discontinued operations     
|Net income (loss)           
|                            

38

|                            
|----------------------------
|
|                            
|(millions)                  
|Operating revenues          
|Depreciation                
|Interest charges            
|Income taxes                
|Loss from equity investments
|Discontinued operations     
|Net income (loss)           
|                            

|                            
|----------------------------
|
|                            
|(millions)                  
|Operating revenues          
|Depreciation                
|Interest charges            
|Income taxes                
|Loss from equity investments
|Discontinued operations     
|Net income (loss)           
|                            

|                            
|----------------------------
|
|                            
|(millions)                  
|Operating revenues          
|Depreciation                
|Interest charges            
|Income taxes                
|Loss from equity investments
|Discontinued operations     
|Net income                  
|                            

|                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|                                                                                                                                                                  
|(millions)                                                                                                                                                        
|Assets                                                                                                                                                            
|Capital and investment expenditures (a)                                                                                                                           
|                                                                                                                                                                  
|December 31, 2003                                                                                                                                                 
|Assets                                                                                                                                                            
|Capital and investment expenditures (a) (b)                                                                                                                       
|                                                                                                                                                                  
|(a) Capital and investment expenditures reflect year to date amounts for the periods presented.                                                                   
|(b) At December 31, 2003, KLT Gas discontinued operations had $19.4 million in capital and 
              investment expenditures not included in the table above.

39

Consolidated KCP<he following tables reflect
summarized financial information concerning consolidated KCP&Ls reportable
segment. Other includes the operations of HSS and intercompany eliminations, which are
immaterial.

|                  
|------------------
|
|                  
|(millions)        
|Operating revenues
|Depreciation      
|Interest charges  
|Income taxes      
|Net income (loss) 
|                  

|                  
|------------------
|
|                  
|(millions)        
|Operating revenues
|Depreciation      
|Interest charges  
|Income taxes      
|Net income (loss) 
|                  

|                  
|------------------
|
|                  
|(millions)        
|Operating revenues
|Depreciation      
|Interest charges  
|Income taxes      
|Net income (loss) 
|                  

|                       
|-----------------------
|
|                       
|(millions)             
|Operating revenues     
|Depreciation           
|Interest charges       
|Income taxes           
|Discontinued operations
|Net income (loss)      
|                       

|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|
|                                                                                                     
|(millions)                                                                                           
|Assets                                                                                               
|Capital and investment expenditures (a)                                                              
|                                                                                                     
|December 31, 2003                                                                                    
|Assets                                                                                               
|Capital and investment expenditures (a)                                                              
|                                                                                                     
|(a) Capital and investment expenditures reflect year to date amounts for the       periods presented.

40

# 16.  DERIVATIVE FINANCIAL
INSTRUMENTS

The Companys activities expose
it 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 its operating results. The
Companys risk management activities, including the use of derivatives, are subject
to the management, direction and control of internal risk management committees. The
Companys interest rate risk management strategy uses derivative instruments to
adjust the Companys liability portfolio to optimize the mix of fixed and floating
rate debt within an established range. The Company maintains commodity-price risk
management strategies that use derivative instruments to reduce the effects of
fluctuations on purchased power expense caused by commodity price volatility. Derivative instruments measured at fair
value are recorded on the balance sheet as an asset or liability. Changes in the fair
value are recognized currently in earnings unless specific hedge accounting criteria are
met.

Interest Rate Risk Management
In 2002, KCP&L remarketed its
1998 Series A, B, and D EIRR bonds totaling $146.5 million to a 5-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 earnings. The fair value of the swap was an
asset of $2.1 million and $3.3 million at September 30, 2004, and December 31, 2003,
respectively.

Commodity Risk Management KCP&Ls risk management
policy is to use derivative hedge instruments to mitigate its exposure to market price
fluctuations on a portion of its projected gas purchases to meet generation requirements
for retail and firm wholesale sales. These hedging instruments are designated as cash flow
hedges. The fair market values of these instruments are recorded as current assets or
current liabilities with an offsetting entry to other comprehensive income (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. When the gas is purchased, the amounts in OCI are reclassified to the
consolidated income statement.

Strategic Energy maintains a
commodity-price risk management strategy that uses forward physical energy purchases and
derivative instruments to reduce the effects of fluctuations on purchased power expense caused by commodity-price
volatility. Strategic Energy seeks to match customers projected demand with fixed
price purchases to serve retail customers. 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. Certain forward fixed price
purchases and swap agreements are designated as cash flow hedges resulting in changes in
the hedge value being recorded as OCI. To the extent that the hedges are not effective,
the ineffective portion of the changes in fair market value is recorded currently in
purchased power. Purchased power for the three months ended and year to date September 30,
2004, includes a $5.1 million gain due to ineffectiveness of the cash flow hedges.
Strategic Energy also enters into economic hedges that do not qualify as accounting
hedges. The changes in the fair value of these derivative instruments recorded into
earnings as a component of purchased power were a $0.7 million loss and a $1.1 million
gain for the three months ended September 30, 2004 and 2003, respectively, and a $1.2
million loss and a $1.1 million gain year to date September 30, 2004 and 2003,
respectively.

41

The amounts recorded in accumulated
other comprehensive income (AOCI) related to the cash flow hedges are summarized in the
following tables:

|Activity for the three months ended September 30, 2004
|------------------------------------------------------
|                                                      
|
|                                                      
|(millions)                                            
|Current assets                                        
|Other deferred charges                                
|Other current liabilities                             
|Deferred income taxes                                 
|Other deferred credits                                
|                                                      
|Total                                                 
|                                                      
|Consolidated KCP&L                                    
|Other current assets                                  
|Deferred income taxes                                 
|                                                      
|Total                                                 
|                                                      

|Activity for the three months ended September 30, 2003
|------------------------------------------------------
|                                                      
|
|                                                      
|(millions)                                            
|Other current assets                                  
|Other deferred charges                                
|Other current liabilities                             
|Deferred income taxes                                 
|Other deferred credits                                
|                                                      
|Total                                                 
|                                                      
|Consolidated KCP&L                                    
|Other current assets                                  
|Deferred income taxes                                 
|                                                      
|Total                                                 
|                                                      

|Activity for the year to date September 30, 2004
|------------------------------------------------
|                                                
|
|                                                
|(millions)                                      
|Current assets                                  
|Other deferred charges                          
|Other current liabilities                       
|Deferred income taxes                           
|Other deferred credits                          
|                                                
|Total                                           
|                                                
|Consolidated KCP&L                              
|Other current assets                            
|Deferred income taxes                           
|                                                
|Total                                           
|                                                

42

|Activity for the year to date September 30, 2003
|------------------------------------------------
|                                                
|
|                                                
|(millions)                                      
|Other current assets                            
|Other deferred charges                          
|Other current liabilities                       
|Deferred income taxes                           
|Other deferred credits                          
|                                                
|Total                                           
|                                                
|Consolidated KCP&L                              
|Other current assets                            
|Deferred income taxes                           
|                                                
|Total                                           
|                                                

|Reclassified to earnings for the three months ended September 30
|----------------------------------------------------------------
|                                                                
|
|
|                                                                
|(millions)                                                      
|Fuel expense                                                    
|Purchased power expense                                         
|Minority interest                                               
|Income taxes                                                    
|                                                                
|OCI                                                             
|                                                                

|Reclassified to earnings for the year to date September 30
|----------------------------------------------------------
|                                                          
|
|
|                                                          
|(millions)                                                
|Fuel expense                                              
|Purchased power expense                                   
|Minority interest                                         
|Income taxes                                              
|                                                          
|OCI                                                       
|                                                          

43

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

The Managements Discussion and
Analysis of Financial Condition and Results of Operations that follow are 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. It should be read in conjunction with the accompanying
consolidated financial statements and related notes and with the managements
discussion and analysis included in the companies 2003 Form 10-K.

Losses in the prior period related to
the operations of KLT Gas have been reclassified and are presented as discontinued
operations due to the February 2004 decision to sell the KLT Gas portfolio and exit the
gas business. Losses in the prior year to date period related to the operations of RSAE
are presented as discontinued operations due to the June 2003 disposition of RSAE.

Great Plains Energy
Great Plains Energy does not own or
operate any significant assets other than the stock of its subsidiaries. Great Plains
Energys direct subsidiaries are KCP&L, KLT Inc., GPP, IEC and Services.

Great Plains Energy
Business OverviewAs a diversified energy company,
Great Plains Energys reportable business segments include:

| |  | KCP&L, an integrated, regulated electric utility, which provides reliable, affordable
electricity to customers in the states of Missouri and Kansas and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Strategic Energy, which provides competitive electricity supply services by entering into
contracts with its customers to supply electricity, operates in several electricity
markets offering retail choice, including California, Maryland, Massachusetts, Michigan,
New Jersey, New York, Ohio, Pennsylvania and Texas.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Strategic Planning and
IntentOver the first six months of 2004,
the Company engaged in a comprehensive strategic planning process to map its view of the
future of the electric industry, and ultimately the Company, over the next five to ten
years. This inclusive process drew on the creativity and skills of employees, outside
experts and community leaders.

The strategic planning process sought
to enhance the disciplined growth of the Company and build upon the strong foundation of
KCP&L and Strategic Energy. This platform for growth provides a balanced mix of
regulated earnings from the utility operations of KCP&L and the potential continued
growth of Strategic Energy as it expands its presence in competitive retail markets.

In July 2004, Great Plains Energy
unveiled six key elements to its long-range strategic intent.

| |  | KCP&L will expand and diversify
its regulated supply portfolio to include new coal and wind generation.
|- |  | -------------------------------------------------------------------------------------------------------

| |  | KCP&L will accelerate its investments in improving the environmental performance of
its fleet, helping to protect its communitys quality of life and preparing for an
uncertain future of potentially more stringent regulations.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

44

| |  | KCP&L will adopt new delivery technology to enhance the reliability and efficiency of
its delivery system. This technology will allow KCP&L to transform the delivery grid
from a one-way to a two-way system. Customers will serve as both consumers and virtual
suppliers of electricity through distributed generation and various demand response
programs.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Great Plains Energy will continue to profitably grow its competitive supply business,
expanding into new markets, and creating new offerings when economical, and further
cementing its reputation as the premium energy retailer from the standpoint of customer
focus and value added.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Great Plains Energy will collaborate even more closely with customers, communities, and
regulators to take a broader view in anticipating and meeting their energy needs.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Great Plains Energy will continue to manage its business to achieve disciplined growth,
and strong operating performance, and deliver strong returns to its shareholders.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In initiating the Companys
strategic intent, KCP&L held a series of public forums during June and July 2004 in
Missouri and Kansas to discuss how to meet the areas growing need for electricity
and cleaner air. After receiving input through the public forums, KCP&L is currently
discussing with Kansas and Missouri state regulators a proposed plan including:

- accelerated environmental investments of $300 million to $350 million for selected existing plants,
- investment in up to 200 megawatts of wind generation,
- building and owning up to 500 megawatts of an 800 to 900 megawatt regulated coal fired plant at the Iatan site in Missouri
              and
- development of technologies and pilot programs to help customers conserve energy.

The proposal has the potential to add
approximately $1.3 billion in rate-based investment for KCP&L over the next 10 years.

Critical Accounting
PoliciesThe preparation of financial
statements in conformity with Generally Accepted Accounting Principles requires management
to make estimates and assumptions that affect reported amounts and related disclosures.
Management considers an accounting estimate to be critical if it requires assumptions to
be made when the ultimate outcome was highly uncertain at the time the estimate was made
and changes in the estimate or different reasonable estimates could have a material impact
on the results of operations and financial condition. The discussion below is intended to
update the discussion of critical accounting policies included in the companies 2003
Form 10-K.

SFAS No. 144  Write
Down of KLT Gas PortfolioLong-lived assets are periodically
reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable as prescribed under SFAS No. 144.

In February 2004, the Great Plains
Energy Board of Directors approved managements recommendation to sell the KLT Gas
portfolio and exit the gas business. The Company evaluated this business and determined
the amount of capital and the length of time required for development of reserves and
production combined with the earnings volatility of the exploration process are no longer
compatible with the Companys strategic vision. As a result of this decision, the
Company wrote down

45

the KLT Gas portfolio to its estimated net realizable value in the
first quarter of 2004. The $1.9 million write down reduced earnings by $1.2 million year
to date September 30, 2004, and is included in Gain (Loss) from discontinued operations,
net of income taxes in Great Plains Energys consolidated statement of income.

Related Party
TransactionsIn May 2004, Great Plains Energy,
through IEC, completed the purchase from SE Holdings of an additional 11.45% indirect
interest in Strategic Energy for $88.8 million, excluding transaction costs. The purchase
increased Great Plains Energys indirect ownership of Strategic Energy to just under
100%. Richard Zomnir, Chief Executive Officer of Strategic Energy whose successor was
announced in October 2004, and certain other current and former employees of Strategic
Energy held direct or indirect interests in SE Holdings. Mr. Zomnir has disclosed that he
held an approximate 25% interest in SE Holdings. In connection with the transaction, Mr.
Zomnir and other direct and indirect owners of SE Holdings entered into an agreement with
IEC and Strategic Energy, providing for certain indemnification rights related to the
litigation described in Note 13. SE Holdings continues to be a member of Custom Energy
Holdings and be represented on the Management Committees of Custom Energy Holdings and
Strategic Energy.

Great Plains Energy
Results of Operations

|                                   
|-----------------------------------
|
|
|
|                                   
|(millions)                         
|Operating revenues                 
|Fuel                               
|Purchased power - KCP&L            
|Purchased power - Strategic Energy 
|Other operating expenses           
|Depreciation                       
|Gain on property                   
|                                   
|Operating income                   
|Loss from equity investments       
|Non-operating income (expenses)    
|Interest charges                   
|Income taxes                       
|Discontinued operations            
|                                   
|Net income                         
|Preferred dividends                
|                                   
|Earnings available for common stock
|                                   

46

Three months ended
September 30, 2004, compared to September 30, 2003Great Plains Energys earnings
for the three months ended September 30, 2004, detailed in the table below, decreased to
$75.5 million, or $1.02 per share, from $83.4 million, or $1.20 per share, compared to the
same period of 2003. The issuance of 5.0 million shares in June 2004 diluted the three
months ended 2004 EPS.

|                                 
|---------------------------------
|
|
|                                 
|
|                                 
|(millions)                       
|KCP&L                            
|Subsidiary operations            
|                                 
|Consolidated KCP&L               
|Strategic Energy                 
|Other non-regulated operations   
|Discontinued operations (KLT Gas)
|                                 
|Total                            
|                                 

KCP&Ls earnings decreased
$14.7 million for the three months ended September 30, 2004, compared to the same period
of 2003. KCP&Ls operating revenues decreased $26.8 million primarily due to an
8% decrease in retail MWh sales mostly due to cooler summer weather. This decrease was
partially offset by decreased income tax expense due to a $4.5 million allocation of tax
benefits from holding company losses pursuant to the Companys intercompany tax
allocation agreement. Additionally, 2003 earnings were positively affected by the Hawthorn
No. 5 litigation settlements. See Consolidated KCP&L Results of Operations for
additional information.

Strategic Energys earnings
increased $2.6 million for the three months ended September 30, 2004, compared to the same
period of 2003. A $2.3 million allocation of tax benefits from holding company losses
pursuant to the Companys intercompany tax allocation agreement was partially offset
by a decrease in gross margin and increased operating expenses. Gross margin per MWh
(revenues less purchased power divided by MWhs delivered) declined to approximately $5.60
compared to $7.30 in the same period last year and operating expenses, driven mainly by
higher staffing levels, increased 22%. See Strategic Energy Results of Operations for
additional information.

Other non-regulated operations loss
for the three months ended September 30, 2004, includes a $6.8 million impact related to
the allocation of tax benefits from holding company losses pursuant to the Companys
intercompany tax allocation agreement. KLT Investments Inc. (KLT Investments), included in
other non-regulated operations, had earnings of $1.1 million compared to a loss of $2.1
million in 2003 (including after tax reductions of $2.9 million and $5.2 million,
respectively, in its affordable housing investment).

Discontinued operations (KLT Gas) for
the three months ended September 30, 2004, includes an $8.6 million gain on the sale of
the majority of the KLT Gas portfolio. The three months ended September 30, 2003, loss of
$0.4 million has been reclassified and presented as discontinued operations.

47

Year to date September
30, 2004, compared to September 30, 2003Great Plains Energys earnings
year to date September 30, 2004, detailed in the table below, decreased to $143.6 million,
or $2.02 per share, from $148.0 million, or $2.14 per share, compared to the same period
of 2003. The issuance of 5.0 million shares in June 2004 diluted year to date 2004 EPS.

|                                 
|---------------------------------
|
|
|                                 
|
|                                 
|(millions)                       
|KCP&L                            
|Subsidiary operations            
|Discontinued operations (RSAE)   
|                                 
|Consolidated KCP&L               
|Strategic Energy                 
|Other non-regulated operations   
|Discontinued operations (KLT Gas)
|                                 
|Total                            
|                                 

KCP&Ls earnings increased
$3.8 million year to date September 30, 2004, compared to the same period of 2003.
KCP&Ls operating revenues increased $12.7 million due to a 13% increase in
wholesale MWh sales partially offset by a 1% decrease in retail MWh sales. A decrease in
income tax expense due to a $4.5 million allocation of tax benefits from holding company
losses pursuant to the Companys intercompany tax allocation agreement also
contributed to the earnings increase. In 2003, earnings were positively affected by the
Hawthorn No. 5 litigation settlements.

Strategic Energys earnings
increased $1.8 million year to date September 30, 2004, compared to the same period of
2003. MWhs delivered increased 25%, but the effect on earnings was mostly offset by the
gross margin per MWh (revenues less purchased power divided by MWhs delivered) decreasing
18% to $6.15 year to date September 30, 2004. A decrease in income tax expense due to a
$2.3 million allocation of tax benefits from holding company losses pursuant to the
Companys intercompany tax allocation agreement also contributed to the increase in
earnings. Operating expenses, driven mainly by higher staffing levels, increased 26%
partially offsetting the increase in earnings.

Other non-regulated operations loss
year to date September 30, 2004, includes a $6.8 million impact related to the allocation
of tax benefits from holding company losses pursuant to the Companys intercompany
tax allocation agreement. KLT Investments, included in other non-regulated operations, had
earnings of $7.5 million compared to earnings of $4.1 million in 2003 (including after tax
reductions of $4.6 million and $6.8 million, respectively, in its affordable housing
investment). Other non-regulated operations earnings year to date September 30, 2003,
included $25.9 million for the effects of the June 2003 confirmation of the restructuring
plan of DTI Holdings, Inc., Digital Teleport, Inc., and Digital Teleport of Virginia, Inc.
and sale of substantially all of the assets of Digital Teleport, Inc. to a subsidiary of
CenturyTel, Inc.

Discontinued operations (KLT Gas)
year to date September 30, 2004, includes an $8.6 million gain on the sale of the majority
of the KLT Gas portfolio during the third quarter of 2004. This gain was partially offset
by year to date losses of $1.4 million from the wind down operations and the first quarter
2004 write down of the KLT Gas portfolio to its estimated net realizable value, which
reduced earnings by $1.2 million. The year to date September 30, 2003, loss of $7.3
million includes a loss of $5.5 million related to an impairment on a Rocky Mountain
project, which has been reclassified and presented as discontinued operations.

48

Consolidated KCP<he following discussion of
consolidated KCP&Ls results of operations include KCP&L, an integrated
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 integrated electric
utility.

Consolidated KCP&L
Business OverviewAs an integrated, regulated electric
utility, KCP&L 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 served over 490,000 customers as of September 30, 2004.
KCP&L has continued to experience modest load growth annually through increased
customer usage and additional customers. Rates charged for electricity are below the
national average.

Under the FERC Order 2000, KCP&L,
as an investor-owned utility, is strongly encouraged to join a FERC approved RTO. RTOs
combine transmission operations of utility businesses into regional organizations that
schedule transmission services and monitor the energy market to ensure regional
transmission reliability and non-discriminatory access. During February 2004, the SPP, of
which KCP&L is a member, obtained conditional approval from FERC as an RTO. On October
1, 2004, FERC approved SPP as an RTO; however, the SPP RTO was ordered to take certain
additional actions including filing additional revisions to their Membership Agreement and
filing an executed Joint Operating Agreement between the SPP RTO and the Midwest ISO by
December 2004.

KCP&L intends on participating in
the SPP RTO; however, state regulatory approvals are required. KCP&L anticipates
making the necessary applications to the MPSC and the KCC, during the first quarter of
2005 upon completion of the regional cost/benefit analysis currently being conducted for
the SPP RTO. This cost/benefit analysis is being conducted under the direction of the SPP
Regional State Committee (composed of state commissions from the states where the SPP RTO
operates) and is expected to be completed in February 2005.

KCP&L has a wholly-owned
subsidiary, HSS, which holds a residential services investment, Worry Free. Worry Free is
no longer actively pursuing new customers and management does not anticipate any
significant additional capital investments in Worry Free.

49

Consolidated KCP&L
Results of Operations The following table summarizes
consolidated KCP&Ls comparative results of operations, which includes KCP&L,
an integrated electric utility, and HSS.

|                               
|-------------------------------
|
|
|
|                               
|(millions)                     
|Operating revenues             
|Fuel                           
|Purchased power                
|Other operating expenses       
|Depreciation                   
|Gain on property               
|                               
|Operating income               
|Non-operating income (expenses)
|Interest charges               
|Income taxes                   
|Discontinued operations        
|                               
|Net income                     
|                               

Consolidated KCP&Ls income
from continuing operations for the three months ended September 30, 2004, compared to the
same period of 2003, decreased $14.6 million. Consolidated KCP&Ls operating
revenues decreased $27.0 million for the three months ended September 30, 2004, compared
to the same period of 2003, primarily due to an 8% decrease in KCP&Ls retail MWh
sales mostly due to cooler summer weather.

Consolidated KCP&Ls income
from continuing operations increased $3.8 million year to date September 30, 2004,
compared to the same period of 2003. Consolidated KCP&Ls operating revenues
increased $12.2 million year to date September 30, 2004, compared to the same period of
2003, primarily due to a 13% increase in KCP&Ls wholesale MWh sales and a 7%
increase in the average wholesale market price. The increase was partially offset by a
decrease in retail MWh sales and increased operating expenses including pensions and
outside services.

Income tax expense decreased for the
three months ended and year to date September 30, 2004, compared to the same period of
2003, primarily due to lower taxable income and a $4.5 million allocation of tax benefits
from holding company losses pursuant to the Companys intercompany tax allocation
agreement. For the three months ended and year to date September 30, 2003, KCP&L
earnings were positively affected by the Hawthorn No. 5 litigation settlements discussed
below.

As described in the 2003 Form 10-K,
KCP&L filed suit against multiple defendants who are alleged to have responsibility
for the 1999 Hawthorn No. 5-boiler explosion. KCP&L and its primary insurance company
have entered into a subrogation allocation agreement under which recoveries in this suit
are generally allocated 55% to the primary insurance company and 45% to KCP&L. Various
defendants have settled with KCP&L in this litigation, resulting in KCP&L
recording $2.4 million and $34.1 million year to date September 30, 2004, and 2003,
respectively, under the terms of the subrogation allocation agreement. A portion of the
settlement, $1.2 million and $16.4 million year to date September 30, 2004, and 2003,
respectively, was recorded as a recovery of capital expenditures.

50

The following table summarizes the
income statement impact of the Hawthorn No. 5 litigation.

|                  
|------------------
|
|
|
|                  
|(millions)        
|Wholesale revenues
|Fuel              
|Purchased power   
|                  
|Operating income  
|Income taxes      
|                  
|Net income        
|                  

Discontinued operations reflect an $8.7
million loss year to date September 30, 2003, as a result of the June 2003 disposition of
HSS interest in RSAE.

# Consolidated KCP&L
Sales Revenues and MWh Sales

|                           
|---------------------------
|
|
|
|                           
|Retail revenues            
|Residential                
|Commercial                 
|Industrial                 
|Other retail revenues      
|                           
|Total retail               
|Wholesale revenues         
|Other revenues             
|                           
|KCP&L electric revenues    
|Subsidiary revenues        
|                           
|Consolidated KCP&L revenues
|                           

|                        
|------------------------
|
|
|
|                        
|Retail MWh sales        
|Residential             
|Commercial              
|Industrial              
|Other retail MWh sales  
|                        
|Total retail            
|Wholesale MWh sales     
|                        
|KCP&L electric MWh sales
|                        

Retail revenues decreased by $26.7
million for the three months ended and $13.4 million year to date September 30, 2004,
compared to the same periods of 2003, primarily due to the cooler summer weather in 2004.
Weather most significantly affects residential customers usage patterns. Residential
usage per customer decreased 19% and 6%, respectively, for the three months ended and year
to date September 30, 2004, compared to the same periods of 2003. Less than 1% of revenues
include an automatic fuel adjustment provision.

51

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. KCP&Ls MWhs
generated are utilized to serve its retail customer demand with any remaining MWhs
available to sell into the wholesale market. The wholesale sales are generally on an
hourly or day ahead basis and subject to the effects of fluctuations caused by energy
price volatility.

Wholesale revenues were relatively
unchanged for the three months ended September 30, 2004, compared to the same period of
2003 and increased $24.5 million year to date. KCP&Ls coal fleet equivalent
availability factor increased to 84% year to date September 30, 2004, compared to 80% for
the same period of 2003, contributing to an increased volume of MWh available to sell.
Wholesale MWh sales increased 4% and 13%, respectively, for the three months ended and
year to date September 30, 2004, compared to the same periods of 2003. Average market
prices per MWh increased 7% year to date September 30, 2004, compared to the same period
of 2003, primarily due to the packaging of generation and transmission service to provide
a delivered product and expanded marketing efforts. The MWh increase for the three months
ended September 30, 2004, was partially offset by a 4% decrease in the average market
prices per MWh for the same period, primarily due to the cooler summer weather.
Additionally, as discussed above, wholesale revenues were affected by the partial
settlements of the Hawthorn No. 5 litigation.

KCP&L Fuel and
Purchased Power The fuel cost per MWh generated and
the purchased power cost per MWh have a significant impact on the results of operations
for KCP&L. Generation fuel mix can change the fuel cost per MWh generated
substantially. Nuclear fuel costs per MWh generated remain substantially less than the
cost of coal per MWh generated. Coal has a significantly lower cost per MWh generated than
natural gas and oil. KCP&L expects to utilize its natural gas-fired peaking generating
capacity more often to serve expected growth in retail customer demand, which will
increase natural gas consumption. High natural gas and fuel oil costs are also influencing
the price of coal and coal transportation costs, which are also expected to increase. The
anticipated increase in delivered coal prices is expected to affect most utilities;
therefore, the increase is not expected to materially erode KCP&Ls position as a
low cost regional electricity generator. Fossil plants averaged over 75% of total
generation and the nuclear plant the remainder over the last three years. Replacement
power costs for planned Wolf Creek outages are accrued evenly over the units
operating cycle. KCP&L expects its cost of nuclear fuel to remain relatively stable
through the year 2009. The cost per MWh for purchased power is still significantly higher
than the fuel 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, availability and cost of purchased power and the requirements of other
electric systems to provide reliable power economically.

Fuel expense increased $0.8 million
for the three months ended September 30, 2004, compared to the same period of 2003,
primarily due to the $3.9 million in Hawthorn No. 5 litigation recoveries that reduced
fuel expense for the three months ended September 30, 2003. MWhs generated decreased 3%
due to the cooler summer weather, which decreased MWh usage for retail customers. Fuel
expense increased $9.2 million year to date September 30, 2004, compared to the same
period of 2003 primarily due to a 5% increase in MWhs generated in 2004 and higher coal
and natural gas costs. The increase was partially offset by a decrease in retail customer
demand in the third quarter of 2004 primarily due to cooler summer weather and the net
effect of the Hawthorn No. 5 partial litigation settlements discussed above.

Purchased power expense increased
$3.7 million for the three months ended and $1.6 million year to date September 30, 2004,
compared to the same periods of 2003, primarily due to the $11.2 million in Hawthorn No. 5
litigation recoveries that reduced purchased power expense in 2003. MWhs purchased
decreased 45% and 25%, respectively, for the three months ended and year to date September
30,

52

2004, compared to the same periods of 2003, primarily due to lower retail customer
demand in the three months ended and higher coal fleet equivalent availability factors
year to date 2004. KCP&Ls coal fleet equivalent availability factor increased to
84% year to date September 30, 2004, compared to 80% for the same period of 2003,
contributing to decreased MWhs purchased. The decrease in MWhs purchased was partially
offset by purchased power price increasing 6% year to date September 30, 2004, compared to
the same periods of 2003, primarily due to higher natural gas market prices and increased
demand in the market area earlier in 2004.

Consolidated KCP&L Other
Operating Expenses (including operating, maintenance and general taxes)Consolidated KCP&Ls other operating expenses increased $3.2 million for the
three months ended September 30, 2004, compared to the same period of 2003 primarily due
to the following:

- increased pension expense of $1.0 million primarily due to lower discount rates, the
amortization of investment losses from prior years and plan settlement losses,
- increased outside services of $3.2 million including costs associated with Sarbanes-Oxley compliance,
- increased transmission expenses including $0.7 million primarily related to increased SPP administration, and
- partially offsetting the increases were lower distribution expenses of $0.5 million
primarily due to improved supply chain management.

Consolidated KCP&Ls other
operating expenses increased $12.7 million year to date September 30, 2004, compared to
the same period of 2003 primarily due to the following:

- increased pension expense of $2.9 million primarily due to lower discount rates, the
amortization of investment losses from prior years and plan settlement losses,
- increased property taxes of $2.5 million primarily due to increases in assessed property valuations and mill levies,
- increased outside services of $4.4 million including costs associated with Sarbanes-Oxley compliance,
- increased transmission and distribution expenses including $1.8 million primarily due to
additional transmission services provided to wholesale customers, which resulted in
increased wholesale MWh sales, $2.3 million related to SPP administration and $0.6 million
in storm related expenses,
- increased employee benefits including $1.3 million in higher medical costs, and
- partially offsetting the increases were lower production maintenance expense of $2.3
million primarily due to differences in timing and scope of outages and $0.8 million in
lower gross receipts taxes as a result of lower retail revenues.

Consolidated KCP&L
Depreciation Consolidated KCP&Ls
depreciation expense increased $1.5 million for the three months ended and $3.9 million
year to date September 30, 2004, compared to the same periods of 2003. The increases are
primarily due to the consolidation of the Lease Trust, as described in the 2003 Form 10-K,
which began in the fourth quarter of 2003.

53

Consolidated KCP&L
Income Taxes Consolidated KCP&Ls income
taxes decreased $19.0 million for the three months ended and $11.6 million year to date
September 30, 2004, compared to the same periods of 2003. The decrease in income tax
expense for both periods reflects lower taxable income and a $4.5 million allocation of
tax benefits from holding company losses pursuant to the Companys intercompany tax
allocation agreement.

On October 22, 2004, the American
Jobs Creation Act of 2004 (AJCA) became law. Most significantly, the AJCA contains a
provision that allows for a tax deduction of 9% (3% for 2005-2006; 6% for 2007-2009; 9%
thereafter) of qualified production activities income. Income from electric generation
activities is included in the definition of qualified production activities. Because of
its electric generation activities, KCP&L expects to be impacted by the AJCA; however,
KCP&L is not able to quantify the impact of the new legislation until detailed IRS and
regulatory guidance has been provided.

Wolf Creek Wolf Creek, a nuclear unit, is 20% of
KCP&Ls base load generating capacity and 14% of KCP&Ls total
generating capacity. Wolf Creeks operating performance has remained strong over the
last three years, contributing an average of approximately 25% of KCP&Ls annual
MWh generation while operating at an average capacity of 92%. Wolf Creek has the lowest
fuel cost per MWh generated of any of KCP&Ls generating units.

KCP&L accrues the incremental
operating, maintenance and replacement power costs for planned outages evenly over the
units operating cycle, normally 18 months. As actual outage expenses are incurred,
the refueling liability and related deferred tax asset are reduced. The next outage is
scheduled for the spring of 2005 and is estimated to be a 32-day outage.

On August 9, 2004, Nebraska and the
Compact Commission entered into a settlement ending all related litigation in regards to
development of a low-level radioactive waste disposal facility in Nebraska. See Note 12 to
the consolidated financial statements for additional information. KCP&L and the other
owners of Wolf Creek now will begin seeking long-term waste disposal capability in another
compact region.

Ownership and operation of a nuclear
generating unit exposes KCP&L to risks regarding decommissioning costs at the end of
the units life and to potential retrospective assessments and property losses in
excess of insurance coverage. These risks are more fully discussed in the related sections
of Note 12 to the consolidated financial statements.

Strategic Energy

Strategic Energy
Business OverviewStrategic Energy provides competitive
electricity supply services by entering into contracts with its customers to supply
electricity. In return, Strategic Energy receives an ongoing management fee, which is
included in the contracted sales price for the electricity. 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 is operationally
ready to enter into the Connecticut market, but does not anticipate doing so before the
end of 2004 due to high wholesale power costs. Strategic Energy also provides strategic
planning and consulting services in the natural gas and electricity markets.

Great Plains Energy owns just under
100% of the indirect interest in Strategic Energy after IECs May 6, 2004, purchase
of an additional 11.45% indirect interest. The Company paid cash of $90.2 million,
including $1.4 million of transaction costs. See Note 9 for additional information about
the acquisition.

54

In the normal course of business,
Great Plains Energy provides financial or performance assurance to third parties on behalf
of Strategic Energy in the form of guarantees to those third parties. Additionally, Great
Plains Energy provides guarantees and indemnities supporting letters of credit and surety
bonds obtained by Strategic Energy. These agreements are entered into primarily to support
or enhance the creditworthiness otherwise attributed to Strategic Energy on a stand-alone
basis, thereby facilitating the extension of sufficient credit to accomplish Strategic
Energys intended business purposes.

At September 30, 2004, Strategic
Energy provided competitive electricity supply to over 54,000 commercial, institutional
and small manufacturing accounts. Strategic Energys customer base is very diverse
serving over 8,200 customers at September 30, 2004, including numerous Fortune 500
companies, smaller companies and governmental entities. Based solely on current signed
contracts and expected usage, Strategic Energy has forecasted future MWh commitments
(backlog) of 4.9 million for the remainder of 2004, 13.7 million for 2005 and 4.1 million
for 2006. Strategic Energy expects to deliver additional MWhs in these years through
growth in existing markets, retention of existing customers and expansion into new
markets. Strategic Energy made modest progress on building backlog in the three months
ended September 30, 2004, due primarily to the difficult current environment in the
competitive supply business. Higher wholesale energy prices have reduced savings available
to customers in some markets compared to prevailing utility rates, which have created more
customer price sensitivity and reduced average contract lengths and the rate of backlog
growth. At September 30, 2004, the combination of MWhs delivered and backlog for 2004 was
approximately 20.1 million MWhs, compared to 19.3 million MWhs at June 30, 2004. At
September 30, 2004, backlog for 2005 was approximately 13.7 million MWhs compared to 12.8
million MWhs at June 30, 2004.

Strategic Energy maintains a
commodity-price risk management strategy that uses forward physical energy purchases and
derivative instruments to reduce the effects of fluctuations on purchased power expense caused by
commodity-price volatility. As a result of supplying electricity to retail customers under fixed rate
contracts, Strategic Energys policy is to match customers demand with fixed
price purchases. Strategic Energy uses derivative instruments to limit the unfavorable
effect that price increases will have on electricity purchases. These instruments
effectively fix the future purchase price of electricity, protecting Strategic Energy from
price volatility.

On October 28, 2004, the Company
announced the appointment of Shahid Malik as President and Chief Executive Officer of
Strategic Energy effective November 10, 2004. Mr. Malik succeeds Rick Zomnir who, as
previously announced, will resign.

Strategic Energy
Supplier Concentration and Credit Risk Credit risk represents the loss that
Strategic Energy could incur if a counterparty failed to perform under its contractual
obligations. To reduce its credit exposure, Strategic Energy enters into payment netting
agreements with certain counterparties that permit Strategic Energy to offset receivables
and payables with such counterparties. Strategic Energy further reduces credit risk with
certain counterparties by entering into agreements that enable Strategic Energy to
terminate the transaction or modify collateral thresholds upon the occurrence of
credit-related events.

Based on guidelines set by its
Exposure Management Committee, Strategic Energy monitors its counterparty credit risk by
evaluating the credit quality and performance of its suppliers on a routine basis. Among
other things, Strategic Energy monitors counterparty credit ratings, liquidity and results
of operations. As a result of these evaluations, Strategic Energy may, among other things,
establish counterparty credit limits and adjust the amount of collateral required from its
suppliers.

Strategic Energy enters into forward
contracts with multiple suppliers. At September 30, 2004, Strategic Energys five
largest suppliers under forward supply contracts represented 68% of the total future
committed purchases. Strategic Energys five largest suppliers, or their guarantors,
are rated

55

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. Strategic Energys results of operations could also be affected, in a given
period, if it was required to make a payment upon termination of a supplier contract to
the extent that the contracted price with the supplier exceeded the market value of the
contract at the time of termination.

The following table provides
information on Strategic Energys credit exposure, net of collateral, as of September
30, 2004. It further delineates the exposure by the credit rating of counterparties and
provides guidance on the concentration of credit risk and an indication of the maturity of
the credit risk by credit rating of the counterparties.

|                    
|--------------------
|
|
|
|
|
|                    
|External rating     
|Investment Grade    
|Non-Investment Grade
|Internal rating     
|Investment Grade    
|Non-Investment Grade
|                    
|Total               
|                    

|                    
|--------------------
|
|                    
|
|
|
|                    
|External rating     
|Investment Grade    
|Non-Investment Grade
|Internal rating     
|Investment Grade    
|Non-Investment Grade
|                    
|Total               
|                    

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 Standard & Poors
rating of BBB- or a Moodys rating of Baa3. 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, guarantees and letters of 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.

56

Strategic Energys total
exposure before credit collateral at September 30, 2004, increased $99.4 million from
December 31, 2003, primarily due to the increase in wholesale electricity prices. At
September 30, 2004, Strategic Energy had exposure before collateral to non-investment
grade counterparties totaling $38.2 million, of which 76% is scheduled to mature in less
than two years. In addition, Strategic Energy held collateral totaling $30.0 million
limiting its exposure to these non-investment grade counterparties to $8.2 million.

Strategic Energy is continuing to
pursue a strategy of contracting with national and regional counterparties that have
direct supplies and assets in the region of demand. Strategic Energy is also continuing to
manage its counterparty portfolio through strict margining, collateral requirements and
contract based netting of credit exposures against payable balances.

Strategic Energy Results
of Operations The following table summarizes
Strategic Energys comparative results of operations.

|                               
|-------------------------------
|
|
|
|                               
|(millions)                     
|Operating revenues             
|Purchased power                
|Other operating expenses       
|Depreciation                   
|                               
|Operating income               
|Non-operating income (expenses)
|Interest charges               
|Income taxes                   
|                               
|Net income                     
|                               

Strategic Energys net income
increased $2.6 million for the three months ended and $1.8 million year to date September
30, 2004, compared to the same periods of 2003. Retail MWhs delivered increased 27% and
25%, respectively, for the three months ended and year to date September 30, 2004,
compared to the same periods of 2003. Additionally, income tax expense was reduced for the
three months ended and year to date September 30, 2004, due to a $2.3 million allocation
of tax benefits from the holding company losses pursuant to the Companys
intercompany tax allocation agreement. The effect of these increases was mostly offset in
both periods by overall declines in gross margin per MWh (revenues less purchased power
divided by MWhs delivered) of 24% to $5.60 for the three months ended and 18% to $6.15
year to date. The decline in gross margin is primarily due to the roll-off of older,
higher margin contracts, price discounts driven by a more competitive market and
persistently higher commodity prices, and increased tax reserves, partially offset by the
change in fair value of derivatives. A continuing environment of higher and less volatile
energy prices and flat to higher forward electricity prices continue to impact the average
gross margins. In this environment, average margins for new customers are expected to be
in the $3.00-$5.00 range. The projected average gross margin for the year at the lower end
of the $6.20 - $6.50 range is achievable.

57

Strategic Energy
Operating Revenues Operating revenues from Strategic
Energy increased $81.0 million for the three months ended and $229.6 million year to date
September 30, 2004, compared to the same periods in 2003, as shown in the following table.

|                        
|------------------------
|
|
|
|                        
|                        
|Electric - Retail       
|Electric - Wholesale    
|Other                   
|                        
|Total Operating Revenues
|                        

At September 30, 2004, Strategic
Energys customer accounts totaled over 54,000, a 24% increase from September 30,
2003. Strategic Energy may provide periodic billing credits to its customers resulting
from its competitive electricity supply efforts. The amounts credited back to the customer
are treated as a reduction of retail electric revenues when determined to be payable.

Retail electric revenues increased
$85.1 million for the three months ended and $238.2 million year to date September 30,
2004, compared to the same periods of 2003, primarily due to increased retail MWhs
delivered. MWhs delivered increased 27% to 5.7 million for the three months ended and 25%
to 15.2 million year to date, compared to same periods of 2003. The increased MWhs
delivered resulted primarily from strong sales efforts in customer retention as well as
signing new customers primarily in Michigan and Texas where Strategic Energy continued to
experience favorable conditions for growth. Several factors can contribute to changes in
the average retail price per MWh, including the underlying electricity price, the nature
and type of products offered and the mix of sales by geographic market. Average retail
revenues per MWh increased by 1% for the three months ended and 5% year to date, compared
to the same periods of 2003, primarily due to a higher underlying electricity price that
was driven by higher natural gas prices and partially offset by price discounts driven by
a more competitive market and persistently higher commodity prices.

Strategic Energy
Purchased PowerStrategic Energy primarily purchases
power under long term forward physical delivery contracts to supply electricity to its
retail energy customers based on projected usage. Strategic Energy sells any excess retail
supply of electricity back into the wholesale market. The proceeds from the sale of excess
supply of electricity are recorded as a reduction of purchased power. The amount of excess
retail supply sales that reduced purchased power was $63.5 million for the three months
ended and $187.9 million year to date September 30, 2004, compared to $46.9 million and
$117.6 million, respectively, for the same periods of 2003.

Strategic Energy utilizes derivatives
including forward physical delivery contracts in the procurement of electricity. Changes
in the fair value of derivative instruments that do not qualify for hedge accounting and
ineffectiveness experienced on cash flow hedges, reduced purchased power expense by $4.4
million and $3.9 million, respectively, for the three months ended and year to date
September 30, 2004, compared to $1.1 million for the three months ended and year to date
September 30, 2003.

As previously discussed, Strategic
Energy operates in several retail choice electricity markets. The cost of supplying
electricity to retail customers can vary widely by geographic market. This variability can
be affected by many factors including, among other items, geographic differences in the
cost per MWh of purchased power and capacity charges due to regional purchased power
availability and requirements of other electricity providers and differences in
transmission charges.

58

Purchased power expense increased $82.0 million for the three months
ended and $227.8 million year to date September 30, 2004, compared to the same periods of
2003, primarily due to increases in MWhs delivered as discussed above. Additionally,
average prices per retail MWh purchased increased 4% for the three months ended and 8%
year to date, primarily due to the effect of the persistent environment of relatively high
natural gas prices, increased competition, increased seasonal supply costs on certain
contracts and increased tax reserves, partially offset by the change in fair value of
derivative instruments.

Strategic Energy Other
Operating ExpensesStrategic Energys other
operating expenses increased $2.4 million for the three months ended and $7.7 million year
to date September 30, 2004, compared to the same periods of 2003. Strategic Energy
experienced increased operating expenses driven mainly by higher staffing levels, compared
to the same periods of 2003. Higher consulting, bad debt and general tax expenses also
contributed to the year to date increase.

Strategic Energy Income
Taxes Strategic Energys income taxes
decreased $4.6 million for the three months ended and $5.5 million year to date September
30, 2004, compared to the same periods of 2003. The decrease in income tax expense for
both periods reflects lower taxable income and a $2.3 million allocation of tax benefits
from holding company losses pursuant to the Companys intercompany tax allocation
agreement.

Other Non Regulated
Activities

Investment in Affordable
Housing Limited Partnerships  KLT Investments KLT Investments earnings for
the three months ended September 30, 2004, totaled $1.1 million compared to a loss of $2.1
million for the three months ended September 30, 2003 (including after tax reductions of
$2.9 million and $5.2 million, respectively, in its affordable housing investment). KLT
Investments accrued tax credits of $4.6 million and $4.8 million for the three months
ended September 30, 2004 and 2003, respectively. Earnings year to date September 30, 2004,
totaled $7.5 million compared to earnings of $4.1 million year to date September 30, 2003
(including after tax reductions of $4.6 million and $6.8 million, respectively, in its
affordable housing investment). KLT Investments earnings include accrued tax credits
of $13.7 million and $14.3 million year to date September 30, 2004 and 2003, respectively.

At September 30, 2004, KLT
Investments had $42.5 million in affordable housing limited partnerships. Approximately
63% 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 the sales of the properties. For most
investments, tax credits are received over ten years. KLT Investments tax credits
are estimated to be $16 million, $10 million and $6 million for 2005 through 2007,
respectively, and continue to decline through 2009. 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, $26.0 million exceed this 5% level but were made before May 19, 1995.
KLT Investments 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. Estimated
residual values are based on studies performed by an independent firm. Based on the latest
comparison, KLT Investments reduced its investments in affordable housing limited
partnerships by $4.7 million and $7.4 million for the three months ended and year to date
September

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30, 2004, respectively, compared to $8.5 million and $11.0 million for the three
months ended and year to date September 30, 2003, respectively. Pretax reductions in
affordable housing investments are estimated to be $0.1 million, $10 million and $3
million for the remainder of 2004, 2005 and 2006, respectively. 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. The properties
underlying the partnership investment are subject to certain risks inherent in real estate
ownership and management. Even after these estimated reductions, earnings from the
investments in affordable housing are expected to be positive for the years 2004 through
2006.

DTI BankruptcyOn December 31, 2001, a subsidiary of
KLT Telecom, DTI Holdings, Inc. and its subsidiaries, Digital Teleport, Inc. and Digital
Teleport of Virginia, Inc., filed separate voluntary petitions in the Bankruptcy Court for
the Eastern District of Missouri for reorganization under Chapter 11 of the U.S.
Bankruptcy Code, which cases have been procedurally consolidated. DTI Holdings and its two
subsidiaries are collectively called DTI.

In December 2002, Digital Teleport
entered into an agreement to sell substantially all of its assets (Asset Sale) to
CenturyTel Fiber Company II, LLC, a nominee of CenturyTel, Inc. The Asset Sale was
approved by the Bankruptcy Court on February 13, 2003, and closed on June 6, 2003.

The Company recorded a net gain of
$25.9 million or $0.37 per share during the second quarter of 2003 related to the DTI
bankruptcy. The impact on year to date September 30, 2003, net income was primarily due to
the net effect of the Chapter 11 plan confirmation and the resulting distribution, the
reversal of a $15.8 million tax valuation allowance, and the reversal of $5 million debtor
in possession financing previously reserved.

Note 9 to the consolidated financial
statements in the companies 2003 Form 10-K should be read for further discussion of
the DTI bankruptcy.

KLT Gas Discontinued
Operations

KLT Gas Business
Overview, Plan to Exit the Gas Exploration and Development Business and Results of
OperationsIn February 2004, the Great Plains
Energy Board of Directors approved managements recommendation to sell the KLT Gas
portfolio and exit the gas business. The Company evaluated this business and determined
the amount of capital and the length of time required for development of reserves and
production, combined with the earnings volatility of the exploration process, are no
longer compatible with the Companys strategic vision.

In the third quarter of 2004, KLT Gas
completed the sale of the majority of the KLT Gas portfolio for $19.6 million cash, net of
$1.2 million transaction costs. The gain on the third quarter sales totaled $8.6 million,
or $0.12 per share. In October 2004, KLT Gas completed the sale of the remaining
significant KLT Gas portfolio at a sales price of $4 million for an after tax gain of
approximately $2 million, or $0.02 per share.

The impact of the gain from the third
quarter 2004 KLT Gas portfolio asset sales was partially offset by the loss from the wind
down operations of $0.6 million and $1.4 million for the three months ended and year to
date September 30, 2004, respectively. Additionally, the first quarter 2004 write down of
the KLT Gas portfolio to its estimated net realizable value reduced year to date September
30, 2004, earnings by $1.2 million. Year to date 2003 reflects a loss from discontinued
operations of $7.3 million, or $0.10 per share, and includes a loss of $5.5 million, or
$0.08 per share, related to an impairment on

60

a Rocky Mountain project. Management
estimates the remaining impact of the wind down will not be material to the Companys
2004 earnings.

On July 28, 2004, KLT Gas received a
Notice and Demand for Arbitration Pursuant to Joint Operating Agreement from SWEPI LP
doing business as Shell Western E&P and formerly known as Shell Western E&P Inc.
(Shell). Prior to an October 2004 sale (with a July 1, 2004, effective date) of KLT
Gas working interests in certain oil and gas leases in Duval County, Texas to Shell,
KLT Gas had a 50% working interest in the leases. Shell held the other 50% working
interest and was the operator of the properties under a joint operating agreement, as
amended (JOA). Three groups of current or past lessors filed suit against Shell in Duval
County, Texas, alleging various claims against Shell. Additionally, Shell has been party
to ongoing proceedings before the Texas Railroad Commission relating to a well drilled on
acreage adjacent to the properties of Shell and KLT Gas mentioned above. Through
arbitration, Shell is seeking recovery from KLT Gas of 50% of the fees and costs incurred
in the three lawsuits and the Texas Railroad Commission proceedings and settlement
proceeds paid with respect to the three lawsuits, which Shell asserts is a total amount of
not less than $5.4 million for KLT Gas share. Shell is also seeking a declaration
that the fees and costs incurred and settlement proceeds paid, including any fees and
costs incurred in the future, are reimbursable expenses under the JOA. Shell is seeking a
ruling compelling KLT Gas to pay Shell immediately all sums deemed to be due pursuant to
the arbitration. On August 17, 2004, KLT Gas submitted its notice of defense generally
asserting that there is no contractual basis or implied duty for reimbursement or
contribution regarding the settlements and there is no contractual basis for reimbursement
or contribution regarding the Texas Railroad Commission proceedings. KLT Gas also asserted
counterclaims based upon misrepresentations and promissory estoppel, gross negligence in
imprudent operations, full accounting under the JOA and offset. KLT Gas and its counsel
continue to evaluate KLT Gas rights and obligations under the JOA as well as other
possible counterclaims that KLT Gas may have against Shell; however, it is too early to
predict the ultimate outcome of this demand for arbitration.

Great Plains Energy and
Consolidated KCP&L

Significant Balance
Sheet ChangesSeptember 30, 2004 compared to December 31, 2003

- Great Plains Energys restricted cash and supplier collateral decreased $9.3 million
due to a reduction in the collateral provided from suppliers to cover portions of credit
exposure as a result of lower market exposure with counterparties posting cash and one
counterparty is now posting a letter of credit rather than cash.
- Great Plains Energys receivables increased $32.2 million due to a $46.0 million
increase in Strategic Energys receivables primarily due to the combination of
seasonal increases in customer usage and an increase in the price per MWh sold partially
offset by a $17.2 million decrease in consolidated KCP&Ls receivables.
Consolidated KCP&Ls receivables decreased primarily due to KCP&Ls
receipt of $30.8 million for the Hawthorn No. 5 insurance recovery offset by seasonal
increases due to summer rates and higher customer usage.
- Great Plains Energys assets of discontinued operations decreased $11.1 million due
to the sale of the majority of the KLT Gas portfolio in the third quarter of 2004.
- Great Plains Energys other current assets increased $9.4 million primarily due to
the increase in the fair value of Strategic Energys derivatives as a result of
market prices for power.
- Great Plains Energys affordable housing limited partnerships decreased $10.2 million
primarily due to a reduction in the valuation of the properties held by KLT Investments,
Inc.

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- Great Plains Energys goodwill increased by $60.8 million due to the purchase of the
additional indirect interest in Strategic Energy in May 2004.
- Great Plains Energys other deferred charges increased $34.6 million primarily due to
$39.8 million in intangible assets, net of amortization, recorded as a result of the
purchase of the additional indirect interest in Strategic Energy in May 2004.
- Great Plains Energys notes
payable decreased $87.0 million due to the net repayments of short-term borrowings.
- Great Plains Energys and consolidated KCP&Ls current maturities of
long-term debt decreased $56.1 million and $54.5 million, respectively, primarily due to
retirement of consolidated KCP&Ls medium term notes.
- Great Plains Energys and consolidated KCP&Ls EIRR bonds classified as
current decreased $43.4 million due to scheduled remarketings of EIRR bonds. The new terms
changed the classification of certain EIRR bonds to long-term debt.
- Great Plains Energys accounts payable increased $4.9 million primarily due to a
$18.0 million increase in Strategic Energys accounts payable due to increased power
purchases for the summer season and increased market prices for power offset by a $12.5
million decrease in consolidated KCP&Ls accounts payable (excluding intercompany
payables) primarily due to the timing of cash payments.
- Great Plains Energys accrued taxes increased $82.0 million primarily due to a $49.0
million net increase as a result of the accrual of 2004 income taxes and refunds received
in 2004 offset by the payment of 2003 income taxes accrued at December 31, 2003.
Consolidated KCP&Ls accrued taxes increased $63.4 million primarily due to a
property tax accrual increase of $26.2 million and a $25.9 million net increase as a
result of the accrual of 2004 income taxes offset by the payment of 2003 income taxes
accrued at December 31, 2003.
- Great Plains Energys accrued payroll and vacations decreased $8.1 million primarily
due to the 2004 payout of employee related expenses accrued at December 31, 2003.
- Great Plains Energys other deferred credits and liabilities increased $16.7 million
primarily due to a $21.7 million intangible liability, net of amortization, partially
offset by a $9.0 million reduction in minority interest recorded as a result of the
purchase of the additional indirect interest in Strategic Energy in May 2004. An
additional increase of $8.2 million was due to the recording of the FELINE PRIDES
long-term forward contract fee, partially offset by a $3.9 million decrease in
consolidated KCP&Ls other deferred credits and liabilities. Consolidated
KCP&Ls decrease was primarily due to a $3.3 million decrease in minority
interest, which was the result of losses at KCP&Ls Lease Trust.
- Great Plains Energys common stock increased $151.9 million due to the issuance of
five million shares of common stock in June 2004 and the issuance of shares for purchases
under the Dividend Reinvestment and Direct Stock Purchase Plan plans. Consolidated
KCP&Ls common stock increased $150.0 million due to an equity contribution from
Great Plains Energy.
- Great Plains Energys capital stock premium and expense increased $25.2 million
primarily due to recording $19.6 million of FELINE PRIDES purchase contract adjustment
fair value, allocated fees and expenses. Additionally, the June 2004 common stock issuance
costs totaled $5.6 million.

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- Great Plains Energys long-term debt increased $50.2 million primarily due to Great
Plains Energys issuance of $163.6 million of FELINE PRIDES senior notes mostly
offset by a $110.9 million decrease in consolidated KCP&Ls long-term debt.
Consolidated KCP&Ls long-term debt decreased primarily due to the July 2004
redemption of KCP&Ls $154.6 million 8.3% Junior Subordinated Deferred Interest
Bonds partially offset by the change in classification of $43.4 million in EIRR bonds due
to scheduled remarketings.

Capital Requirements and
LiquidityGreat 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 sale of its securities.

Great Plains Energys capital
requirements are principally comprised of KCP&Ls utility construction and other
capital expenditures, debt maturities, the pension benefit plan funding requirements
discussed below and credit support provided to Strategic Energy. Additional cash and
capital requirements for the companies are discussed below.

Great Plains Energys liquid
resources at September 30, 2004, included cash flows from operations of subsidiaries,
$138.9 million of cash and cash equivalents on hand and $488.4 million of unused bank
lines of credit. The unused lines consisted of $150.0 million from KCP&Ls
short-term bank lines of credit, $56.4 million from Strategic Energys revolving
credit facility, and $282.0 million from Great Plains Energys revolving credit
facilities. See the Debt Agreements section below for more information on these
agreements.

Cash Flows From
Operations Great Plains Energy and consolidated
KCP&L generated positive cash flows from operating activities for the periods
presented. The decrease in cash flows from operating activities for Great Plains Energy
year to date September 30, 2004, compared to the same period in 2003 was primarily due to
a $26.4 million decrease in income from continuing operations primarily due to a $25.9
million net gain related to the DTI bankruptcy recorded during 2003. Consolidated
KCP&Ls cash flows from operations increased year to date September 30, 2004,
compared to the same period in 2003 partially due to a $3.9 million increase in
consolidated KCP&Ls income from continuing operations and the changes in working
capital detailed in Note 4 to the consolidated financial statements. Also, the timing of
the Wolf Creek outage affects the refueling outage accrual, deferred income taxes and
amortization of nuclear fuel.

Investing ActivitiesGreat 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. Great Plains Energys and consolidated KCP&Ls utility capital
expenditures increased $28.1 million year to date September 30, 2004, compared to the same
period in 2003 primarily due to the buyout of KCP&Ls operating lease for
vehicles and heavy equipment in the first quarter of 2004 for $28.4 million. This increase
was offset by an additional $28.0 million in insurance recoveries and litigation
settlements related to Hawthorn No. 5. Additionally, Great Plains Energy paid $90.2
million to acquire an additional indirect interest in Strategic Energy during 2004.

Financing ActivitiesThe change in Great Plains
Energys cash flows from financing activities year to date September 30, 2004,
compared to the same period in 2003 reflects Great Plains Energys June 2004 gross
proceeds of $150.0 million from the issuance of five million shares of common stock at $30
per share and $163.6

63

million from the issuance of FELINE PRIDES. Fees related to these
issuances were $10.2 million. Great Plains Energy used the proceeds to repay short-term
borrowings and to make a $150.0 million equity contribution to KCP&L. Additionally,
year to date September 30, 2004, Great Plains Energy issued $1.9 million of common stock
under its Dividend Reinvestment and Direct Stock Purchase Plan. In July 2004, KCP&L
redeemed $154.6 million of 8.3% Junior Subordinated Deferred Interest Bonds from KCPL
Financing I. KCPL Financing I used those proceeds to redeem the $4.6 million common
securities held by KCP&L and the $150.0 million of 8.3% Trust Preferred Securities.
See Note 6 for additional information. KCP&L also retired $54.5 million of its
medium-term notes at maturity during the third quarter of 2004.

Consolidated KCP&Ls cash
flows from financing activities year to date September 30, 2003, reflects the first
quarter 2003 equity infusion of $100.0 million from Great Plains Energy to KCP&L and
KCP&Ls subsequent redemption of $104.0 million of medium-term notes. Great
Plains Energy essentially funded the infusion with proceeds from its $151.8 million common
stock offering in late 2002; however, prior to the infusion, Great Plains Energy used the
offering proceeds to repay short-term borrowings in late 2002 and then re-borrowed in
early 2003 to make the equity infusion into KCP&L at the time of redemption. An
additional $20.0 million of KCP&Ls medium-term notes were retired during the
second quarter of 2003.

KCP&L expects to meet day-to-day
operating requirements including interest payments, construction requirements (excluding
new generating capacity and environmental compliance on existing generating units) and
dividends to Great Plains Energy with internally generated funds. However, it 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 operating requirements including interest payments, credit support fees,
capital expenditures and dividends to its indirect interest holders with internally
generated funds. However, it 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, commodity-price volatility and the effects of counterparty non-performance.

Great Plains Energy filed a
registration statement, which became effective in April 2004, for the issuance of an
aggregate amount up to $500.0 million of any combination of senior debt securities,
subordinated debt securities, trust preferred securities and related guarantees, common
stock, warrants, stock purchase contracts or stock purchase units. The prospectus filed
with this registration statement also included $148.2 million of securities remaining
available to be offered under a prior registration statement providing for an aggregate
amount of availability of $648.2 million. In June 2004, Great Plains Energy issued $150.0
million of common stock and $163.6 million of FELINE PRIDES. After these issuances, $171.0
million remains available under this registration statement, which reflects the effect of
the $163.6 million stock purchase contract component of FELINE PRIDES.

As a registered public utility
holding company, Great Plains Energy must receive authorization from the SEC under the 35
Act to issue securities. Great Plains Energy was authorized to issue up to $1.2 billion of
debt and equity through December 31, 2005. Great Plains Energy has utilized $979.8 million
of this amount through September 30, 2004, which is a $479.1 million increase from the
amount of $500.7 million detailed in the 2003 Form 10-K due to the $150.0 million common
stock issuance and the $163.6 million of FELINE PRIDES (with a $163.6 million stock
purchase contract component) in

64

June 2004. Additionally, Great Plains Energy issued $1.9
million of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan
during the third quarter of 2004.

Under its current SEC authorization,
Great Plains Energy cannot issue securities other than common stock unless (i) the
security to be issued, if rated, is rated investment grade by one nationally recognized
statistical rating organization, (ii) all of its outstanding securities that are rated
(except for its preferred stock) are rated investment grade, and (iii) it has maintained
common equity as a percentage of consolidated capitalization (as reflected on its
consolidated balance sheets as of the end of each quarter) of at least 30%. Great Plains
Energy was in compliance with these conditions as of September 30, 2004.

KCP&L may issue equity and
long-term debt only with the authorization of the MPSC. In June 2004, the MPSC authorized
KCP&L to issue up to $600 million of long-term debt through March 31, 2006. The
authorization contains the following conditions, among others: (i) no more than $150.0
million of the authorized debt can be used for purposes other than refinancing existing
securities and (ii) the proceeds of the authorized debt must be used exclusively for the
benefit of KCP&Ls regulated operations.

Issuances of short-term debt by
KCP&L are subject to SEC authorization under the 35 Act. Under the current
authorization, KCP&L may issue and have outstanding at any one time up to $500 million
of short-term debt. Under this authorization, KCP&L cannot issue short term debt
(other than commercial paper or short-term bank facilities) unless (i) the short-term debt
to be issued, if rated, is rated investment grade by one nationally recognized statistical
rating organization, (ii) all of its outstanding securities that are rated are rated
investment grade, (iii) all of the outstanding rated securities of Great Plains Energy
(except preferred stock) are rated investment grade, and (iv) Great Plains Energy and
KCP&L have maintained common equity as a percentage of consolidated capitalization (as
reflected on their consolidated balance sheets as of the end of each quarter) of at least
30%. KCP&L was in compliance with these conditions as of September 30, 2004.

KCP&L has entered into a
revolving agreement to sell all of its right, title and interest in the majority of its
customer accounts receivable to Receivables Company, which in turn sells most of the
receivables to outside investors. KCP&L expects to renew the agreement when it expires
in January 2005. See Note 5 to the consolidated financial statements.

Debt Agreements During the first quarter of 2004,
Great Plains Energy syndicated a $150.0 million 364-day revolving credit facility and a
$150.0 million three-year revolving credit facility with a group of banks. These
facilities replaced a $225.0 million revolving credit facility with a group of banks. The
existing facilities contain a Material Adverse Change (MAC) clause that requires Great
Plains Energy to represent, prior to receiving funding, that no MAC has occurred. The
clause does, however, permit the Company to access the facility even in the event of a MAC
in order to repay maturing commercial paper. Available liquidity under this facility is
not impacted by a decline in credit ratings unless the downgrade occurs in the context of
a merger, consolidation or sale. A default by Great Plains Energy or any of its
significant subsidiaries of other indebtedness totaling more than $25.0 million is a
default under these bank lines. Under the terms of these agreements, Great Plains Energy
is required to maintain a consolidated indebtedness to consolidated capitalization ratio
not greater than 0.65 to 1.0 at all times and an interest coverage ratio greater than 2.25
to 1.0, as those ratios are defined in the agreement. At September 30, 2004, the Company
was in compliance with these covenants. At September 30, 2004, Great Plains Energy had no
outstanding borrowings under these lines and had issued letters of credit totaling $18.0
million under the three-year revolving credit facility as credit support for Strategic
Energy. During the fourth quarter of 2004 Great Plains Energy plans to syndicate a
five-year $450.0 million revolving credit facility with a group of banks to replace the
existing credit facilities.

65

During the third quarter of 2004,
Strategic Energy syndicated a $125.0 million three-year revolving credit facility with a
group of banks. Great Plains Energy has guaranteed $25.0 million of this facility. This
facility replaced a $95.0 million revolving credit facility with a group of banks. The
existing facility contains a MAC clause that requires Strategic Energy to represent, prior
to receiving funding, that no MAC has occurred. A default by Strategic Energy of 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 $62.5 million, a maximum funded indebtedness to EBITDA
ratio of 2.25 to 1.00, 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 are defined in the
agreement. 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 September 30, 2004,
Strategic Energy was in compliance with these covenants. At September 30, 2004, $68.6
million in letters of credit had been issued and there were no borrowings under the
agreement, leaving $56.4 million of capacity available for loans and additional letters of
credit.

KCP&Ls primary sources of
liquidity are cash flows from operations and bilateral credit lines totaling $150.0
million with seven banks as of September 30, 2004. KCP&L uses these lines to provide
support for its issuance of commercial paper. These bank facilities are each for a 364-day
term and mature at various times throughout the year. The facilities can be extended for
one year under their term out provisions. Including the October 2004 increase, KCP&L
has MAC clauses in three agreements covering $85.0 million of available bilateral credit
lines. These three facilities require KCP&L to represent, prior to receiving funding,
that no MAC has occurred. Under these agreements, KCP&L is able to access the
facilities even in the event of a MAC in order to redeem maturing commercial paper.
KCP&Ls available liquidity under these facilities is not impacted by a decline
in credit ratings unless the downgrade occurs in the context of a merger, consolidation or
sale. A default by KCP&L on other indebtedness is a default under these bank line
agreements. Under the terms of certain bank line agreements, KCP&L is required to
maintain a consolidated indebtedness to consolidated capitalization ratio, as defined in
the agreements, not greater than 0.65 to 1.0 at all times. At September 30, 2004,
KCP&L was in compliance with these covenants and KCP&L had no outstanding
borrowings under these lines. During the fourth quarter of 2004 KCP&L plans to
syndicate a five-year $250.0 million revolving credit facility with a group of banks to
replace the existing bilateral credit lines.

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 September 30, 2004, KLT Investments had $6.4 million in
outstanding notes, including current maturities.

Under stipulations with the MPSC and
the KCC, Great Plains Energy and KCP&L maintain common equity at not less than 30% and
35%, respectively, of total capitalization. Pursuant to an SEC order, Great Plains
Energys and KCP&Ls authorization to issue securities is conditioned on
maintaining a consolidated common equity capitalization of at least 30% and complying with
other conditions described above.

PensionsThe Company maintains defined benefit
plans for substantially all of its employees of KCP&L, Services and WCNOC and incurs
significant costs in providing the plans, with the majority incurred by KCP&L.

66

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.

The Company expects to contribute
$39.1 million to the plans in 2004, of which $4.1 million is required to meet the minimum
funding requirements of ERISA. During 2004, the Company has contributed $38.4 million
including $31.9 million contributed by KCP&L. KCP&L is required to fund the
remaining $0.7 million before year-end.

Participants in the plans may request
a lump-sum cash payment upon termination of their employment. A change in payment
assumptions 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.

Supplemental Capital
Requirements and Liquidity InformationKCP&Ls long-term debt at
September 30, 2004, compared to December 31, 2003, decreased due to the July 2004 early
redemption of $154.6 million 8.3% Junior Subordinated Deferred Interest Debentures and the
retirement of $54.5 million of medium-term notes at maturity. Great Plains Energys
long-term debt at September 30, 2004, compared to December 31, 2003, decreased due to the
decrease in KCP&Ls long-term debt partially offset by a $163.6 million increase
due to the issuance of FELINE PRIDES. Additionally, Great Plains Energy has a contractual
obligation of $14.5 million for the present value of the contract adjustment payments
related to the FELINE PRIDES. Consolidated KCP&Ls contractual obligations were
relatively unchanged at September 30, 2004, compared to December 31, 2003.

Off-Balance Sheet
ArrangementsIn 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.

As a registered public utility
holding company system, Great Plains Energy must receive authorization from the SEC, under
the 35 Act, to issue guarantees on behalf of its subsidiaries. Under its current SEC
authorization, guarantees cannot be issued unless (i) all of its outstanding securities
that are rated (except for its preferred stock) are rated investment grade and (ii) it has
maintained common equity as a percentage of consolidated capitalization (as reflected on
its consolidated balance sheets as of the end of each quarter) of at least 30%. Great
Plains Energy was in compliance with these conditions as of September 30, 2004. Great
Plains Energy is currently authorized to issue up to $600 million for guarantees on behalf
of its subsidiaries and the nonutility subsidiaries have $300 million of authorization for
guarantees they can issue on behalf of other nonutility subsidiaries. The nonutility
subsidiaries cannot issue guarantees unless Great Plains Energy is in compliance with its
conditions to issue guarantees. Great Plains Energys guarantees provided on behalf
of Strategic Energy for its power purchases and regulatory requirements decreased $34.1
million to $125.7 million at September 30, 2004, compared to $159.8 million at December
31, 2003. Consolidated KCP&Ls guarantees were relatively unchanged at September
30, 2004, compared to December 31, 2003.

67

KCPL Financing I, a trust, had issued
$150.0 million of preferred securities. In connection with the issuance of the preferred
securities, KCP&L issued a preferred securities guarantee, which guaranteed the
payment of any accrued and unpaid distributions, the redemption price and payments upon
dissolution, winding-up or termination of the trust, all to the extent that the trust had
funds available therefore. KCPL Financing I redeemed the $150.0 million of preferred
securities in July 2004. There were no accrued and unpaid distributions at that time.

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,
which 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
Great Plains Energy and consolidated KCP&L.

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. Governmental bodies;
however, may impose additional or more restrictive environmental regulations that could
require substantial changes to operations or facilities at a significant cost. See Note 12
to the consolidated financial statements.

# 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,
operational and credit risks and are not represented in the following analysis.

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 our 2003
Form 10-K, incorporated herein by reference. Even after considering generally higher
commodity prices in the year to date 2004 compared to 2003, Great Plains Energy and
consolidated KCP&Ls risk management strategies have been effective resulting in
no material changes in Great Plains Energys or consolidated KCP&Ls market
risk since December 31, 2003.

# ITEM 4. 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). 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 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

68

provide reasonable assurance that 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.

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 September 30, 2004, 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

Hawthorn No. 5 LitigationKCP&L filed suit against National
Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union) and Travelers
Indemnity Company of Illinois (Travelers) in Missouri state court on June 14, 2002, which
was removed to the U.S. District Court for the Western District of Missouri. In 1999,
there was a boiler explosion at KCP&L Hawthorn No. 5 generating unit, which was
subsequently reconstructed and returned to service. National Union and Reliance National
Insurance Company (Reliance), primary carriers, had issued a $200 million primary
insurance policy and Travelers had issued a $100 million secondary insurance policy
covering Hawthorn No. 5. A dispute arose between KCP&L and these two insurance
companies regarding the amount payable under these insurance policies for the
reconstruction of Hawthorn No. 5 and replacement power expenses, and KCP&L filed suit
against the carriers. Prior to the second quarter, National Union and Reliance had
collectively paid approximately $169 million under their primary insurance policy. In the
second quarter, KCP&L received an additional $30.8 million from National Union,
representing the remaining amount of the primary insurance policy less the deductible.
National Union and Reliance have subrogation rights in the litigation described in the
next paragraph. In the continuing case against Travelers, the trial judge ruled that the
question of whether the cost of the replacement boiler was of like kind and quality
compared to the destroyed boiler, and thus covered by the Travelers policy, was a
factual question for the jury to decide. The trial judge also ruled that the cost of
replacement air quality control equipment is not recoverable under the insurance policy
with Travelers, but that the cost was similarly a factual question for the jury. Finally,
the judge ruled that the amounts received by KCP&L from the subrogation litigation
could not be used to offset Travelers liability under its insurance policy with
KCP&L. KCP&L cannot predict the jurys verdict on these and other issues in
the lawsuit, or their effect on the remaining $85 million of KCP&Ls current
proof of loss of approximately $285 million. Trial of this case is scheduled to begin in
January 2005.

KCP&L also filed suit on April 3,
2001, in Jackson County, Missouri Circuit Court against multiple defendants who are
alleged to have responsibility for the Hawthorn No. 5 boiler explosion. KCP&L and
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 have been dismissed from the suit and various other defendants have settled
with KCP&L, resulting in KCP&L receiving $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 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 have
appealed this case to the Court of Appeals for the Western District of Missouri.

69

Hawthorn No. 5 Notice of
ViolationOn April 15, 2004, the EPA issued to
KCP&L a notice of violation of Hawthorn No. 5 permit limits on SO2
emissions. SO2emissions from Hawthorn No. 5 exceeded the applicable thirty-day
rolling average emission limit on certain days in the third and fourth quarters of 2003
and also exceeded the applicable 24-hour emission limit on one day in the fourth quarter
of 2003. These exceedances occurred while the unit was operating in compliance with an
exception protocol that had been accepted by the issuer of the air permit. Equipment
issues that caused these violations have been addressed by KCP&L.

KCP&L and the EPA have entered
into a Consent Agreement and Final Order (Agreement) that resolves the notice of
violation. Without admitting or denying the factual allegations and legal conclusions in
the Agreement, KCP&L agreed to pay a civil penalty of $0.1 million and to make grants
totaling $0.3 million for certain supplemental environmental projects in the Kansas City
metropolitan area.

# ITEM 2. CHANGES IN
SECURITIES AND USE OF PROCEEDS

Purchases of Great Plains Energy
common stock were made during the quarter by or for the Great Plains Energy Incorporated
Long-Term Incentive Plan, which is an equity compensation plan approved by the
shareholders providing for grants by the Compensation Committee of the Board of Directors
of stock options, restricted stock, performance shares and other stock-based awards.

The following table provides
information regarding these purchases of Great Plains Energy common stock during the
quarter.

|                                                                                                                                                           
|-----------------------------------------------------------------------------------------------------------------------------------------------------------
|
|                                                                                                                                                           
|Total Number of                                                                                                                                            
|Shares (or Units)                                                                                                                                          
|Purchased as                                                                                                                                               
|Total Number of                                                                                                                                            
|Shares (or Units)                                                                                                                                          
|Month                                                                                                                                                      
|                                                                                                                                                           
|July 1  31                                                                                                                                                
|August 1  31                                                                                                                                              
|September 1  30                                                                                                                                           
|                                                                                                                                                           
|Total                                                                                                                                                      
|                                                                                                                                                           
|(1)      The Great Plains Energy Long-Term Incentive Plan became effective on May 5, 1992.  The aggregate number of shares of common
         stock        
|available for awards under this plan is not more than three million.  Awards may be granted under this plan until
         May 5, 2012.  The shares in this
|column represent the aggregate number of securities remaining available for future
         issuance under the Great Plains Energy Long-Term Incentive     
|Plan.                                                                                                                                                      

# ITEM 3. DEFAULTS UPON
SENIOR SECURITIES.

There are no matters reportable under
this Item 3 for the quarter.

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

There are no matters reportable under
this Item 4 for the quarter.

# ITEM 5. OTHER
INFORMATION.

There are no matters reportable under
this Item 5 for the quarter.

70

# ITEM 6. EXHIBITS

# EXHIBITS

# Great Plains Energy Documents

|       |                        
|------ | -----------------------
|Number | Description of Document
|10.1.a | *                      
|10.1.b | *                      
|10.1.c |                        
|12.1   |                        
|31.1.a |                        
|31.1.b |                        
|32.1   |                        

*  Filed as exhibits to a prior
Quarterly Report on Form 10-Q and incorporated by reference and made a part hereof.  The
exhibit number and report reference 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 Securities and Exchange Commission in connection with this document may be
obtained from Great Plains Energy upon written request.

71

KCP&L Documents

|       |                        
|------ | -----------------------
|Number | Description of Document
|10.2   |                        
|12.2   |                        
|31.2.a |                        
|31.2.b |                        
|32.2   |                        

Copies of any of the exhibits filed
with the Securities and Exchange Commission in connection with this document may be
obtained from KCP&L upon written request.

72

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:  November 5, 2004 | By: /s/Michael J. Chesser       
|                         | (Michael J. Chesser)            
|                         | (Chief Executive Officer)       
|Dated:  November 5, 2004 | By: /s/Lori A. Wright           
|                         | (Lori A. Wright)                
|                         | (Principal Accounting Officer)  

|                         | KANSAS CITY POWER
& LIGHT COMPANY
|------------------------ | ---------------------------------
|Dated:  November 5, 2004 | By:  /s/William H. Downey        
|                         | (William H. Downey)              
|                         | (Chief Executive Officer)        
|Dated:  November 5, 2004 | By: /s/Lori A. Wright            
|                         | (Lori A. Wright)                 
|                         | (Principal Accounting Officer)   

73