<PAGE>

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

                                    FORM 10-Q

              [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended June 30, 2001

                                       OR

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

                   For the transition period from          to
                                                  --------    --------
                          Commission file number 1-7324

                         Kansas Gas and Electric Company
                         -------------------------------
             (Exact name of registrant as specified in its charter)


              Kansas                                           48-1093840
              ------                                           ----------
   (State or other jurisdiction                             (I.R.S. Employer
of incorporation or organization)                         Identification Number)

                                  P.O. Box 208
                              Wichita, Kansas 67201
                                 (316) 261-6611
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)

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

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
                                       ---     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

            Class                                Outstanding at August 8, 2001
            -----                                -----------------------------
 Common Stock (No par value)                              1,000 Shares


Registrant meets the conditions of General Instruction H(1)(a) and (b) to Form
10-Q and is therefore filing this form with a reduced disclosure format.
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                 Page
                                                                                                                 ----
PART I.  Financial Information
<S>                                                                                                             <C>
      Item 1.     Financial Statements
                  Consolidated Balance Sheets...............................................................       4
                  Consolidated Statements of Income.........................................................      5-6
                  Consolidated Statements of Cash Flows.....................................................       7
                  Notes to Consolidated Financial Statements................................................       8

      Item 2:     Management's Discussion and Analysis of Financial Condition and Results of Operations.....      13

      Item 3:     Quantitative and Qualitative Disclosures About Market Risk................................      18

PART II.  Other Information

      Item 1.     Legal Proceedings.........................................................................      19

      Item 2.     Changes in Securities and Use of Proceeds.................................................      19

      Item 3.     Defaults Upon Senior Securities...........................................................      19

      Item 4.     Submission of Matters to a Vote of Security Holders.......................................      19

      Item 5.     Other Information.........................................................................      19

      Item 6.     Exhibits and Reports on Form 8-K..........................................................      19

Signature...................................................................................................      20
</TABLE>



                                       2
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                           FORWARD-LOOKING STATEMENTS


            Certain matters discussed here and elsewhere in this Form 10-Q are
"forward-looking statements." The Private Securities Litigation Reform Act of
1995 has established that these statements qualify for safe harbors from
liability. Forward-looking statements may include words like we "believe,"
"anticipate," "expect" or words of similar meaning. Forward-looking statements
describe our future plans, objectives, expectations or goals. Such statements
address future events and conditions concerning capital expenditures, earnings,
litigation, rate and other regulatory matters, including the impact of the order
to reduce our rates issued on July 25, 2001, by the Kansas Corporation
Commission and the impact of the Kansas Corporation Commission's order issued
July 20, 2001 with respect to the proposed separation of Western Resources'
electric utility businesses (including us) from Westar Industries, possible
corporate restructurings, mergers, acquisitions, dispositions, liquidity and
capital resources, compliance with debt and other restrictive covenants, changes
in accounting requirements and other accounting matters, interest and dividends,
environmental matters, changing weather, nuclear operations and the overall
economy of our service area. What happens in each case could vary materially
from what we expect because of such things as electric utility deregulation,
ongoing municipal, state and federal activities, such as the Wichita
municipalization effort; future economic conditions; legislative and regulatory
developments; our competitive markets; the consummation of the acquisition of
the electric operations of Western Resources (including us) by Public Service
Company of New Mexico; and other circumstances affecting anticipated operations,
sales and costs. See Risk Factors in our Annual Report on Form 10-K for the year
ended December 31, 2000, for additional information on these and other matters
that may affect our business and financial results. Any forward-looking
statement speaks only as of the date such statement was made, and we do not
undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement was made.


                                       3
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                             June 30,   December 31,
                                                                               2001        2000
                                                                           ----------   ------------
                                                                           (Unaudited)
                                      ASSETS
<S>                                                                       <C>          <C>
CURRENT ASSETS:
     Cash and cash equivalents .........................................   $    3,031   $    7,101
     Accounts receivable, net ..........................................       74,062       87,921
     Receivable from affiliates ........................................       22,204       53,107
     Inventories and supplies, net .....................................       52,866       46,388
     Energy trading contracts ..........................................        8,606         --
     Prepaid expenses ..................................................       43,590       20,591
                                                                           ----------   ----------
            Total Current Assets .......................................      204,359      215,108
                                                                           ----------   ----------
PROPERTY, PLANT & EQUIPMENT, NET .......................................    2,435,781    2,450,061
                                                                           ----------   ----------
OTHER ASSETS:
     Regulatory assets .................................................      222,613      225,479
     Other .............................................................      110,343       97,925
                                                                           ----------   ----------
            Total Other Assets .........................................      332,956      323,404
                                                                           ----------   ----------
TOTAL ASSETS ...........................................................   $2,973,096   $2,988,573
                                                                           ==========   ==========
                        LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
     Accounts payable ..................................................   $   44,736   $   51,149
     Accrued liabilities ...............................................       30,055       28,245
     Energy trading contracts ..........................................       10,188         --
     Other .............................................................       43,840       32,809
                                                                           ----------   ----------
            Total Current Liabilities ..................................      128,819      112,203
                                                                           ----------   ----------
LONG-TERM LIABILITIES:
     Long-term debt, net ...............................................      684,298      684,366
     Deferred income taxes and investment tax credits ..................      724,803      736,436
     Deferred gain from sale-leaseback .................................      180,380      186,294
     Other .............................................................      174,658      160,061
                                                                           ----------   ----------
            Total Long-Term Liabilities ................................    1,764,139    1,767,157
                                                                           ----------   ----------

COMMITMENTS AND CONTINGENCIES (Note 5)

SHAREHOLDER'S EQUITY:
     Common stock, without par value; authorized and issued 1,000 shares    1,065,634    1,065,634
     Retained earnings .................................................       14,504       43,579
                                                                           ----------   ----------

            Total Shareholder's Equity .................................    1,080,138    1,109,213
                                                                           ----------   ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY .............................   $2,973,096   $2,988,573
                                                                           ==========   ==========
</TABLE>

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

                                       4
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                        CONSOLIDATED STATEMENTS OF INCOME
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                             June 30,
                                                       2001         2000
                                                     ---------    ---------
<S>                                                  <C>          <C>
SALES ............................................   $ 165,965    $ 164,967
COST OF SALES ....................................      59,959       34,374
                                                     ---------    ---------
GROSS PROFIT .....................................     106,006      130,593
                                                     ---------    ---------
OPERATING EXPENSES:
     Operating and maintenance expense ...........      48,559       45,747
     Depreciation and amortization ...............      26,345       26,425
     Selling, general and administrative expense .      15,347       12,715
                                                     ---------    ---------

            Total Operating Expenses .............      90,251       84,887
                                                     ---------    ---------

INCOME FROM OPERATIONS ...........................      15,755       45,706

OTHER EXPENSE ....................................       1,639          629
                                                     ---------    ---------

EARNINGS BEFORE INTEREST AND TAXES ...............      14,116       45,077
                                                     ---------    ---------

INTEREST EXPENSE:
     Interest expense on long-term debt ..........      11,456       11,552
     Interest expense on short-term debt and other         874          829
                                                     ---------    ---------

            Total Interest Expense ...............      12,330       12,381
                                                     ---------    ---------

EARNINGS BEFORE INCOME TAXES .....................       1,786       32,696

     Income tax (benefit) expense ................      (1,142)       9,689
                                                     ---------    ---------

NET INCOME .......................................   $   2,928    $  23,007
                                                     =========    =========
</TABLE>

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


                                       5
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                        CONSOLIDATED STATEMENTS OF INCOME
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  Six Months Ended
                                                                      June 30,
                                                                  2001        2000
                                                               ---------    ---------
<S>                                                            <C>          <C>
SALES ......................................................   $ 329,958    $ 314,880
COST OF SALES ..............................................     111,952       72,070
                                                               ---------    ---------
GROSS PROFIT ...............................................     218,006      242,810
                                                               ---------    ---------
OPERATING EXPENSES:
     Operating and maintenance expense .....................     100,221       94,746
     Depreciation and amortization .........................      52,221       52,641
     Selling, general and administrative expense ...........      30,734       27,650
                                                               ---------    ---------

            Total Operating Expenses .......................     183,176      175,037
                                                               ---------    ---------

INCOME FROM OPERATIONS .....................................      34,830       67,773

OTHER EXPENSE ..............................................       3,753        1,884
                                                               ---------    ---------

EARNINGS BEFORE INTEREST AND TAXES .........................      31,077       65,889
                                                               ---------    ---------

INTEREST EXPENSE:
     Interest expense on long-term debt ....................      22,988       23,085
     Interest expense on short-term debt and other .........       1,777        1,656
                                                               ---------    ---------

            Total Interest Expense .........................      24,765       24,741
                                                               ---------    ---------

EARNINGS BEFORE INCOME TAXES ...............................       6,312       41,148

     Income tax (benefit) expense ..........................      (1,714)      12,173
                                                               ---------    ---------

NET INCOME BEFORE ACCOUNTING CHANGE ........................       8,026       28,975
Cumulative effect of accounting change, net of tax
  of $8,520 ................................................      12,898         --
                                                               ---------    ---------

NET INCOME .................................................   $  20,924    $  28,975
                                                               =========    =========
</TABLE>

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


                                       6
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                            Six Months Ended
                                                                                                  June 30,
                                                                                         ----------------------
                                                                                            2001        2000
                                                                                         ---------    ---------
<S>                                                                                      <C>          <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
     Net income ......................................................................   $  20,924    $  28,975
     Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization ...................................................      52,221       52,641
     Amortization of nuclear fuel ....................................................       8,367        8,479
     Amortization of deferred gain from sale-leaseback ...............................      (5,914)      (5,914)
     Changes in working capital items:
          Accounts receivable, net ...................................................      27,485       (6,850)
          Inventories and supplies, net ..............................................      (6,478)       2,905
          Prepaid expenses and other .................................................     (22,999)     (23,884)
          Accounts payable ...........................................................      (6,413)      15,733
          Accrued liabilities ........................................................       1,810        9,675
          Other current liabilities ..................................................      21,219       15,650
     Changes in other assets and liabilities .........................................     (36,166)       8,968
                                                                                         ---------    ---------

                      Cash flows from operating activities ...........................      54,056      106,378
                                                                                         ---------    ---------

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
     Additions to property, plant and equipment, net .................................     (36,611)     (49,652)
                                                                                         ---------    ---------

                      Cash flows used in investing activities ........................     (36,611)     (49,652)
                                                                                         ---------    ---------

 CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
     Proceeds from accounts receivable sale, net .....................................      (2,350)        --
     Retirements of long-term debt ...................................................         (68)        --
     Advances from (to) parent company, net ..........................................      30,903       (6,724)
     Dividends to parent company .....................................................     (50,000)     (50,000)
                                                                                         ---------    ---------

                      Cash flows used in financing activities ........................     (21,515)     (56,724)
                                                                                         ---------    ---------


 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................      (4,070)           2

CASH AND CASH EQUIVALENTS:
     Beginning of the period .........................................................       7,101           37
                                                                                         ---------    ---------
     End of the period ...............................................................   $   3,031    $      39
                                                                                         =========    =========


 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 CASH PAID FOR:
     Interest on financing activities, net of amount capitalized .....................   $  63,934    $  61,690
     Income taxes ....................................................................        --          6,000
</TABLE>

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


                                       7
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (Unaudited)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            Description of Business: Kansas Gas and Electric Company (KGE, the
company, we, us or our) is a rate-regulated electric utility and wholly owned
subsidiary of Western Resources, Inc. We are engaged principally in the
production, purchase, transmission, distribution and sale of electricity and
serve approximately 292,000 electric customers in southeastern Kansas. We have
no employees. All employees we utilize are provided by our parent, Western
Resources, which allocates costs to us.

            We own 47% of Wolf Creek Nuclear Operating Corporation (WCNOC), the
operating company for Wolf Creek Generating Station (Wolf Creek). We record our
proportionate share of all transactions of WCNOC as we do other jointly owned
facilities.

            Principles of Consolidation: Our unaudited financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States (GAAP) for interim financial information and in accordance with
the instructions to Form 10-Q. Accordingly, certain information and footnote
disclosures normally included in financial statements presented in accordance
with GAAP have been condensed or omitted. These financial statements and notes
should be read in conjunction with the financial statements and the notes
included in our Annual Report on Form 10-K for the year ended December 31, 2000.
Our accounting and rates are subject to requirements of the Kansas Corporation
Commission (KCC) and the Federal Energy Regulatory Commission (FERC).

            Many items, including such things as the weather, operating costs,
market conditions and generation availability, can have a great impact on our
results for interim periods. Therefore, the results of interim periods do not
necessarily represent results to be expected for the full year. In our opinion,
all adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation of the financial statements, have been
included.

            Reclassifications: Certain amounts in prior years have been
reclassified to conform to classifications used in the current year
presentation.


2.  ACCOUNTING CHANGE

            Effective January 1, 2001, we adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS Nos. 137 and 138 (collectively, SFAS No.
133). Western Resources uses derivative instruments (primarily swaps, options
and futures) to manage the commodity price risk inherent in fossil fuel
purchases and electricity sales. We are allocated our proportionate share of the
benefits and costs of Western Resources' commodity price risk management program
based on fuel forecasts for Western Resources and us. These allocated benefits
and costs are recognized in the statements of income.

            Under SFAS No. 133, all derivative instruments are recorded on the
balance sheet as either an asset or liability measured at fair value. Energy
trading contracts representing unrealized gain positions are reported as assets;
energy trading contracts representing unrealized loss positions are reported as
liabilities. Cash flows from derivative instruments are presented in net cash
flow from operating activities.

            Prior to January 1, 2001, gains and losses on derivatives used for
managing commodity price risk were deferred until settlement. These derivatives
had not been designated as hedges under SFAS No. 133. Accordingly,

                                       8
<PAGE>

in the first quarter of 2001, we recognized a net unrealized gain of $12.9
million, net of $8.5 million tax, on these derivatives as a cumulative effect of
a change in accounting principle.

            After January 1, 2001, changes in fair value of all derivative
instruments used for managing commodity price risk are recognized currently as a
cost of sales. For the quarter ended June 30, 2001, we recognized a net
unrealized loss of $13.2 million, net of $8.7 million tax benefit, associated
with these derivative instruments. For the six months ended June 30, 2001, we
recognized a net unrealized loss of $12.8 million, net of $8.4 million tax
benefit (excluding the cumulative effect of a change in accounting principle
discussed above), associated with these derivative instruments. Accounting for
derivatives under SFAS No. 133 will increase volatility of our future earnings.


3.  RATE MATTERS AND REGULATION

            KCC Rate Case: On November 27, 2000, Western Resources and we filed
applications with the KCC for a change in retail rates. On July 25, 2001, the
KCC ordered an annual reduction in our electric rates of $41.2 million.
Effective the date of the order, we began to recognize a liability for amounts
currently being collected from customers that will be subject to refund, with
interest, pursuant to the order. The order requires that we make a filing for
rate design for all customer classes by September 20, 2001. On August 9, 2001,
we filed a petition with the KCC requesting reconsideration of the July 25, 2001
order. The petition specifically asks for the reconsideration of changes in
depreciation, reductions in rate base related to deferred income tax and a
deferred gain, and several other issues. We are unable to predict the outcome of
our petition for reconsideration.

            KCC Investigation: See Note 4 for discussion of an investigation by
the KCC of the separation of Western Resources' electric utility businesses
(including us) from its non-utility businesses and other aspects of Western
Resources' unregulated businesses.

            FERC Proceeding: In September 1999, the City of Wichita filed a
complaint with FERC against us alleging improper affiliate transactions between
Western Resources' KPL division and us. The City of Wichita asked that FERC
equalize the generation costs between KPL and us, in addition to other matters.
After hearings on the case, a FERC administrative law judge ruled in our favor
confirming that no change in rates was required. On December 13, 2000, the City
of Wichita filed a brief with FERC asking that the Commission overturn the
judge's decision. On January 5, 2001, we filed a brief opposing the City's
position. We anticipate a decision by FERC in 2001. A decision requiring
equalization of rates could have a material adverse effect on our results of
operations and financial position.


4.  PNM MERGER

            On November 8, 2000, Western Resources entered into an agreement
under which Public Service Company of New Mexico (PNM) is to acquire its
electric utility businesses (including us) in a stock-for-stock transaction.
Under the terms of the agreement, both PNM and Western Resources are to become
subsidiaries of a new holding company, subject to customary closing conditions
including regulatory and shareholder approvals. The split-off of Westar
Industries, a wholly owned subsidiary of Western Resources, to Western
Resources' shareholders immediately prior to closing is a condition to closing
the transaction. At the same time Western Resources entered into the agreement
with PNM, Westar Industries and Western Resources entered into an Asset
Allocation and Separation Agreement which, among other things, provides for the
split-off of Westar Industries and for a payable owed by Western Resources to
Westar Industries to be converted by Westar Industries into certain of Western
Resources' securities.

            On May 8, 2001, the KCC opened an investigation of the separation
of Western Resources' electric utility businesses (including us) from its non-
utility businesses and other aspects of its unregulated businesses. The order
opening the investigation indicated that the investigation would focus on
whether the separation and other transactions involving Western Resources'
unregulated businesses are consistent with its obligation to provide efficient
and sufficient electric service at just and reasonable rates to its electric
utility customers. The KCC staff was directed to investigate, among other
matters, the basis for and the effect of the Asset Allocation and Separation
Agreement and the payable owed by Western Resources to Westar Industries, the
split-off of Westar Industries, the effect of business difficulties faced by
Western Resources' unregulated businesses and whether they should continue to be
affiliated with Western Resources' electric utility business, and Western
Resources present and prospective capital structures. On May 22, 2001, the KCC
issued an order nullifying the Asset Allocation and Separation Agreement as not
having been filed with and approved by the KCC, prohibiting Western Resources
and Wastar Industries from taking any action to complete a rights offering for
common stock of Westar Industries, which was to be a first step in the
separation, and scheduling a hearing to consider whether to make the order
permanent.

                                       9
<PAGE>

            On July 20, 2001, the KCC issued an order that, among other things,
(1) confirmed its May 22, 2001 order prohibiting Western Resources and Westar
Industries from taking any action to complete the proposed rights offering and
nullifying the Asset Allocation and Separation Agreement; (2) directed Western
Resources and Westar Industries not to take any action or enter into any
agreement not related to normal utility operations that would directly or
indirectly increase the share of debt in Western Resources' capital structure
applicable to its electric utility operations, which has the effect of
prohibiting Western Resources from borrowing to make a loan or capital
contribution to Westar Industries; and (3) directed Western Resources to present
a plan by October 18, 2001, consistent with parameters established by the KCC's
order, to restore financial health, achieve a balanced capital structure and
protect ratepayers from the risks of Western Resources' non-utility businesses.
In its order, the Commission also acknowledged that Western Resources is
presently operating efficiently and at a reasonable cost and stated that it was
not disapproving the PNM transaction or a split-off of Westar Industries.
Western Resources has filed a petition for general reconsideration of the order.

            On July 26, 2001, PNM and Western Resources issued a joint press
release announcing their belief that, if recent orders issued by the KCC remain
in effect, the proposed transaction would be difficult to complete as currently
structured and that they intend to meet to discuss possible modifications to the
transaction that will make it possible to obtain necessary regulatory approvals.
On August 13, 2001, PNM issued a press release announcing that Western Resources
had discontinued discussions with PNM about possible modifications to the
proposed transaction and advising Western Resources that PNM believes the KCC
order reducing Western Resources rates would have a material adverse effect on
the financial condition of the proposed combined companies and could result in
the failure of a significant condition to the transaction. PNM's press release
acknowledged that Western Resources disagreed with PNM's characterization of the
impact of the KCC's rate order.  Western Resources has advised PNM that it also
disagrees strongly with PNM's characterization of its discussions about possible
modifications to the transaction.

            While Western Resources is attempting to proceed with the PNM
transaction, it is unable to predict the outcome of these matters or their
impact on Western Resources' strategic plans, including the PNM/split-off
transaction, financial condition or results of operations. No assurance can be
given as to whether or when the PNM transaction or a split-off may occur.


5.  COMMITMENTS AND CONTINGENCIES

            Manufactured Gas Sites: We have been associated with three former
manufactured gas sites located in Kansas that may contain coal tar and other
potentially harmful materials. We and the Kansas Department of Health and
Environment entered into a consent agreement governing all future work at these
sites. The terms of the consent agreement will allow us to investigate these
sites and set remediation priorities based on the results of the investigations
and risk analyses. As of June 30, 2001, the costs incurred for preliminary site
investigation and risk assessment have not been material.

            Asset Retirement Obligations: At the end of June 2001, the Financial
Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." The standard requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When it is initially recorded, we will capitalize the estimated asset
retirement obligation by increasing the carrying amount of the related
long-lived asset. The liability will be accreted to its present value each
period, and the capitalized cost will be depreciated over the life of the asset.
The standard is effective for fiscal years beginning after June 15, 2002, with
earlier adoption encouraged. We are reviewing what impact this pronouncement
will have on current accounting practices, including nuclear power plant
decommissioning and our results of operations.

            Additional Information: For additional information regarding
Commitments and Contingencies, see Note 8 of the Notes to Consolidated Financial
Statements in our Annual Report on Form 10-K for the year ended December 31,
2000.


6.  INCOME TAXES

            We have recorded income tax benefits and expenses for the interim
periods using the effective tax rate


                                       10
<PAGE>

method. Under this method, we compute the tax related to year-to-date income,
except for significant unusual or extraordinary items, at an estimated annual
effective tax rate. We individually compute and recognize, when the transaction
occurs, income tax expense related to significant unusual, extraordinary items.
Our effective income tax rate for the three and six months ended June 30, 2001,
was a tax benefit of 64% and 27%, respectively, compared to a tax expense of 30%
for each of the similar periods of 2000.

            The difference between our effective tax rate and the statutory rate
is primarily attributable to the tax benefit of excluding from taxable income,
in accordance with IRS rules, the income from corporate-owned life insurance and
certain expenses for depreciation, amortization and state income taxes.


7.  SEGMENTS OF BUSINESS

            We have segmented our business according to differences in products
and services, production processes and management responsibility. Based on this
approach, we have identified two reportable segments: Electric Operations and
Nuclear Generation.

            Electric Operations involve the production, transmission and
distribution of electric power for sale to approximately 292,000 retail and
wholesale customers in Kansas. Nuclear Generation represents our 47% ownership
in the Wolf Creek nuclear generating facility. This segment has only internal
sales because it provides all of its power to its co-owners.

            The accounting policies of the segments are the same as those
described in the summary of significant accounting policies in our Annual Report
on Form 10-K for the year ended December 31, 2000. We evaluate segment
performance based on earnings before interest and taxes (EBIT).



Three Months Ended June 30, 2001:
---------------------------------

<TABLE>
<CAPTION>
                                            Electric     Nuclear   Eliminating
                                           Operations  Generation     Items     Total
                                           ----------  ----------  -----------  -----
                                                         (In Thousands)
<S>                                         <C>        <C>         <C>         <C>
External sales ..........................   $165,965   $   --      $   --      $165,965
Internal sales ..........................       --       29,421     (29,421)       --
Earnings (loss) before interest and taxes     17,112     (2,996)       --        14,116
Interest expense ........................                                        12,330
Earnings before income taxes ............                                         1,786
</TABLE>


Three Months Ended June 30, 2000:
---------------------------------

<TABLE>
<CAPTION>
                                            Electric     Nuclear   Eliminating
                                           Operations  Generation     Items     Total
                                           ----------  ----------  -----------  -----
                                                         (In Thousands)
<S>                                         <C>        <C>         <C>         <C>
External sales ..........................   $164,967   $   --      $   --      $164,967
Internal sales ..........................       --       29,313     (29,313)       --
Earnings (loss) before interest and taxes     47,935     (2,858)       --        45,077
Interest expense ........................                                        12,381
Earnings before income taxes ............                                        32,696
</TABLE>


                                       11
<PAGE>

Six Months Ended June 30, 2001:
-------------------------------

<TABLE>
<CAPTION>
                                             Electric         Nuclear   Eliminating
                                           Operations(a)    Generation     Items     Total
                                           -------------    ----------  -----------  -----
                                                           (In Thousands)
<S>                                         <C>             <C>         <C>         <C>
External sales ..........................   $329,958        $   --      $   --      $329,958
Internal sales ..........................       --            58,363     (58,363)       --
Earnings (loss) before interest and taxes
and cumulative effect of accounting
change ..................................     39,767          (8,690)       --        31,077
Interest expense ........................                                             24,765
Earnings before income taxes ............                                              6,312
</TABLE>


Six Months Ended June 30, 2000:
-------------------------------

<TABLE>
<CAPTION>
                                            Electric     Nuclear   Eliminating
                                           Operations  Generation     Items     Total
                                           ----------  ----------  -----------  -----
                                                         (In Thousands)
<S>                                         <C>        <C>         <C>         <C>
External sales ..........................   $314,880   $   --      $   --      $314,880
Internal sales ..........................       --       58,793     (58,793)       --
Earnings (loss) before interest and taxes     74,093     (8,204)       --        65,889
Interest expense ........................                                        24,741
Earnings before income taxes ............                                        41,148
</TABLE>


(a)   EBIT shown above for Electric Operations does not include the unrecognized
      gain on derivatives reported as a cumulative effect of a change in
      accounting principle. If the effect had been included, EBIT for the
      Electric Operations segment for the six months ended June 30, 2001 would
      have been $61,185.

                                       12
<PAGE>

KANSAS GAS AND ELECTRIC COMPANY

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         ------------------------------------------------------------
         AND RESULTS OF OPERATIONS
         -------------------------

INTRODUCTION

            The following Management's Discussion and Analysis of Financial
Condition and Results of Operations updates the information provided in our
Annual Report on Form 10-K for the year ended December 31, 2000, and should be
read in conjunction with that report. In this section we discuss our general
financial condition, significant changes and operating results. We explain:

            -     What factors impact our business
            -     What our earnings and costs were for the three and six months
                  ended June 30, 2001 and 2000
            -     Why these earnings and costs differed from period to period
            -     How our earnings and costs affect our overall financial
                  condition
            -     Any other items that particularly affect our financial
                  condition or earnings


SUMMARY OF SIGNIFICANT ITEMS

            KCC Rate Case: On November 27, 2000, Western Resources and we filed
applications with the KCC for a change in retail rates. On July 25, 2001, the
KCC ordered an annual reduction in our electric rates of $41.2 million.
Effective the date of the order, we began to recognize a liability for amounts
currently being collected from customers that will be subject to refund, with
interest, pursuant to the order. The order requires that we make a filing for
rate design for all customer classes by September 20, 2001. On August 9, 2001,
we filed a petition with the KCC requesting reconsideration of the July 25, 2001
order. The petition specifically asks for the reconsideration of changes in
depreciation, reductions in rate base related to deferred income tax and a
deferred gain, and several other issues. We are unable to predict the outcome of
our petition for reconsideration.

            We are currently evaluating the impact of the July 25, 2001 order,
including provisions relating to certain accounting matters which, among other
things, contemplate depreciation rates that effectively extend the estimated
lives of our primary electric generation assets. The reduction of our annual
rates by $41.2 million will reduce our cash flow. We are evaluating whether this
reduction in cash flow will require steps to reduce our capital needs or
operating expenses. The impact of the order on our net income has not yet been
determined.

ACCOUNTING CHANGE

            Effective January 1, 2001, we adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS Nos. 137 and
138 (collectively, SFAS No. 133). Western Resources uses derivative instruments
(primarily swaps, options and futures) to manage the commodity price risk
inherent in fossil fuel purchases and electricity sales. We are allocated our
proportionate share of the benefits and costs of Western Resources' commodity
price risk management program based on fuel forecasts for Western Resources and
us. These allocated benefits and costs are recognized in the statement of
income.

            Under SFAS No. 133, all derivative instruments are recorded on the
balance sheet as either an asset or liability measured at fair value. Energy
trading contracts representing unrealized gain positions are reported as assets;
energy trading contracts representing unrealized loss positions are reported as
liabilities. Cash flows from derivative instruments are presented in net cash
flow from operating activities.

            Prior to January 1, 2001, gains and losses on derivatives used for
managing commodity price risk were deferred until settlement. These derivatives
had not been designated as hedges under SFAS No. 133. Accordingly, in the first
quarter of 2001, we recognized a net unrealized gain of $12.9 million, net of
$8.5 million tax, on these derivatives as a cumulative effect of a change in
accounting principle.

                                       13
<PAGE>

            After January 1, 2001, changes in fair value of all derivative
instruments used for managing commodity price risk are recognized currently as a
cost of sales. For the quarter ended June 30, 2001, we recognized a net
unrealized loss of $13.2 million, net of $8.7 million tax benefit, associated
with these derivative instruments. For the six months ended June 30, 2001, we
recognized a net unrealized loss of $12.8 million, net of $8.4 million tax
benefit (excluding the cumulative effect of a change in accounting principle
discussed above), associated with these derivative instruments. Accounting for
derivatives under SFAS No. 133 will increase volatility of our future earnings.


OPERATING RESULTS

            The following discussion explains significant changes in operating
results for the three and six months ended June 30, 2001 and 2000.

General

            Net income decreased $20.1 million and $8.1 million, respectively,
for the three and six month periods ended June 30, 2001 from the same periods in
the prior year. The decrease for the six months ended June 30, 2001, resulted
principally from a decrease in wholesale market demand and higher purchase
power, fuel and maintenance costs. We purchased more power at higher prices
because weather conditions resulted in increased retail demand and because
planned maintenance outages at our generating facilities reduced our available
power. The change in the three months ended June 30, 2001 resulted principally
from our performance of the derivatives portfolio as discussed in Note 2 of the
Notes to Consolidated Financial Statements, a decrease in wholesale market
demand and higher purchase power and maintenance costs.

Sales

            The following tables reflect the changes in electric sales volumes,
as measured by megawatt hours (MWh), for the three and six months ended June 30,
2001 from the comparable periods of 2000.

Three Months Ended June 30,

<TABLE>
<CAPTION>
                                             2001         2000        % Change
                                             ----         ----        --------
                                            (Thousands of MWh)
                        <S>                 <C>          <C>          <C>
                        Residential .....     671          653          2.8
                        Commercial ......     621          614          1.1
                        Industrial ......     903          904         (0.1)
                        Other ...........      11           10         10.0
                                            -----        -----
                             Total retail   2,206        2,181          1.1
                        Wholesale .......     554          669        (17.2)
                                            -----        -----
                             Total ......   2,760        2,850         (3.2)
                                            =====        =====
</TABLE>


Six Months Ended June 30,

<TABLE>
<CAPTION>
                                             2001         2000         % Change
                                             ----         ----         --------
                                            (Thousands of MWh)
                        <S>                 <C>          <C>           <C>
                        Residential .....   1,309        1,240          5.6
                        Commercial ......   1,199        1,169          2.6
                        Industrial ......   1,734        1,723          0.6
                        Other ...........      22           22          --
                                            -----        -----
                             Total retail   4,264        4,154          2.6
                        Wholesale .......   1,279        1,379         (7.3)
                                            -----        -----
                             Total ......   5,543        5,533          0.2
                                            =====        =====
</TABLE>

                                       14
<PAGE>

Business Segments

            Our business is segmented according to differences in products and
services, production processes and management responsibility. Based on this
approach, we have identified two reportable segments: Electric Operations and
Nuclear Generation.


            The following table reflects key information for our business
segments:

<TABLE>
<CAPTION>
                                                           Three Months Ended       Six Months Ended
                                                                June 30,                June 30,
                                                           ------------------       ----------------
                                                            2001       2000          2001       2000
                                                           -------   --------       ------     ------
                                                             (In Thousands)           (In Thousands)
            <S>                                          <C>         <C>          <C>          <C>
            Electric Operations:
               External sales........................... $ 165,965   $ 164,967    $ 329,958    $ 314,880
               EBIT (a) ................................    17,112      47,935       39,767       74,093

            Nuclear Generation (b):
               Internal sales........................... $  29,421   $  29,313    $  58,363    $  58,793
               EBIT ....................................    (2,996)     (2,858)      (8,690)      (8,204)
</TABLE>

      ---------
      (a)   EBIT shown above for Electric Operations does not include the
            unrecognized gain on derivatives reported as a cumulative effect of
            a change in accounting principle. If the effect had been included,
            EBIT for the Electric Operations segment for the six months ended
            June 30, 2001 would have been $61,185.
      (b)   Nuclear Generation amounts represent our 47% share of Wolf Creek's
            operating results.


                                       15
<PAGE>

            Electric Operations

            Three Months Ended June 30, 2001, Compared to Three Months Ended
June 30, 2000: External sales increased less than 1% primarily due to lower
wholesale and interchange sales. External sales consist of the power produced
and purchased for sale to wholesale and retail customers. Retail sales increased
approximately $3.1 million, or 2%, due in part to warmer weather than in 2000,
while wholesale and interchange sales decreased $3.6 million, or 16%. The
decrease in wholesale sales was primarily due to changes in market demand and
reduced available power resulting from scheduled maintenance outages on
generating units.

            Cost of sales increased $25.6 million primarily due to a $21.9
million non-cash mark-to-market adjustment on fuel derivatives as prescribed by
SFAS 133 and a $2.2 million increase in purchased power expense caused by higher
market prices for purchased power. Operating expenses increased $5.4 million, or
6%, compared to the second quarter of 2000, primarily due to an increase in
maintenance expenses associated with several planned outages for maintenance on
our generating stations and higher general and administrative expenses. As a
result of these increases, EBIT decreased $30.8 million. Excluding the
mark-to-market adjustment on fuel derivatives, EBIT would have decreased $8.9
million.

            Six Months Ended June 30, 2001, Compared to Six Months Ended June
30, 2000: External sales increased $15.1 million, or 5%. Wholesale and
interchange volumes were down 7%, but market prices were higher. Cost of sales
was $39.9 million higher primarily due a $21.2 million non-cash mark-to-market
adjustment on fuel derivatives as prescribed by SFAS 133, a $2.9 million
increase in fuel expense and a $15.8 million increase in purchased power and
transmission expense related to replacing power not available as a result of the
planned maintenance outages at certain of our generating plants. Gross profit
decreased $24.8 million, or 10%. Operating expense increased $8.1 million, or
5%, because of higher maintenance expenses associated with the planned outages
and increased general and administrative expenses. As a result of the higher
cost of sales and operating expenses discussed above, EBIT decreased $34.3
million. Excluding the mark-to-market adjustment on fuel derivatives, EBIT would
have decreased $13.1 million.

            Nuclear Generation

            Nuclear Generation has only internal sales because it provides all
of its power to its co-owners: Kansas City Power and Light Company, Kansas
Electric Power Cooperative, Inc., and us. We own 47% of Wolf Creek Nuclear
Operating Corporation, the operating company for Wolf Creek Generating Station
(Wolf Creek). Internal sales are priced at the internal transfer price that
Nuclear Generation charges to Electric Operations. Internal sales and EBIT did
not materially change for the three and six months ended June 30, 2001, compared
to the same periods in 2000, because there were no major Wolf Creek refueling
outages in either period. EBIT is negative because internal sales are less than
Wolf Creek's costs.

LIQUIDITY AND CAPITAL RESOURCES

            Our internally generated cash is generally sufficient to fund our
operations and debt service payments. We do not maintain independent short-term
credit facilities and rely on Western Resources for our short-term cash needs.
If Western Resources was not able to borrow under its credit facilities or sell
its long-term debt or equity securities, we could have a short-term liquidity
issue that could require us to obtain a credit facility for our short-term cash
needs.

            Future Cash Requirements: Our business requires significant capital
investments. See our Annual Report on Form 10-K for the year ended December 31,
2000 for additional information about anticipated capital expenditures for years
2001 through 2003. The KCC's order reducing our annual rates by $41.2 million
and the combined rates of Western Resources and us by $22.7 million will also
reduce Western Resources' and our annual cash flow. We and Western Resources are
evaluating whether these reductions in cash flow will, among other things,
require steps to reduce our currently planned capital needs or operating
expenses or increase our cost of financing in the future.

            Credit Ratings: Standard & Poor's (S&P), Fitch Investors Service
(Fitch) and Moody's Investors Service (Moody's) are independent credit-rating
agencies that rate Western Resources' and our debt securities. These ratings

                                       16
<PAGE>

indicate the agencies' assessment of our ability to pay interest and principal
on these securities. On July 25, 2001, S&P revised its CreditWatch listing on
the ratings of Western Resources' and us to "developing" from "positive".

            As of July 25, 2001, ratings with these agencies are as follows:

                                    Western
                                   Resources          Western            KGE
                                   Mortgage          Resources        Mortgage
                                     Bond            Unsecured          Bond
                                    Rating             Debt            Rating
                                   --------          ---------        ----------
S&P..................                BBB-                BB-             BB+
Fitch................                BB+                 BB              BB+
Moody's..............                Ba1                 Ba2             Ba1

OTHER INFORMATION

            KCC Investigation: See Note 4 of the Notes to the Consolidated
Financial Statements for discussion of an investigation by the KCC of the
separation of Western Resources' electric utility businesses (including us) from
its non-utility businesses and other aspects of Western Resources' unregulated
businesses.

            FERC Proceeding: In September 1999, the City of Wichita filed a
complaint with FERC against us alleging improper affiliate transactions between
Western Resources' KPL division and us. The City of Wichita asked that FERC
equalize the generation costs between KPL and us, in addition to other matters.
After hearings on the case, a FERC administrative law judge ruled in our favor
confirming that no change in rates was required. On December 13, 2000, the City
of Wichita filed a brief with FERC asking that the Commission overturn the
judge's decision. On January 5, 2001, we filed a brief opposing the City's
position. We anticipate a decision by FERC in 2001. A decision requiring
equalization of rates could have a material adverse effect on our results of
operations and financial position.

            PNM Merger: On November 8, 2000, Western Resources entered into an
agreement under which Public Service Company of New Mexico (PNM) is to acquire
its electric utility businesses (including us) in a stock-for-stock transaction.
Under the terms of the agreement, both PNM and Western Resources are to become
subsidiaries of a new holding company, subject to customary closing conditions
including regulatory and shareholder approvals. The split-off of Westar
Industries, a wholly owned subsidiary of Western Resources, to Western
Resources' shareholders immediately prior to closing is a condition to closing
the transaction. At the same time Western Resources entered into the agreement
with PNM, Westar Industries and Western Resources entered into an Asset
Allocation and Separation Agreement which, among other things, provides for the
split-off of Westar Industries and for a payable owed by Western Resources to
Westar Industries to be converted by Westar Industries into certain of Western
Resources' securities.

            On May 8, 2001, the KCC opened an investigation of the separation
of Western Resources' electric utility businesses (including us) from its non-
utility businesses and other aspects of its unregulated businesses. The order
opening the investigation indicated that the investigation would focus on
whether the separation and other transactions involving Western Resources'
unregulated businesses are consistent with its obligation to provide efficient
and sufficient electric service at just and reasonable rates to its electric
utility customers. The KCC staff was directed to investigate, among other
matters, the basis for and the effect of the Asset Allocation and Separation
Agreement and the payable owed by Western Resources to Westar Industries, the
split-off of Westar Industries, the effect of business difficulties faced by
Western Resources' unregulated businesses and whether they should continue to be
affiliated with Western Resources' electric utility business, and Western
Resources present and prospective capital structures. On May 22, 2001, the KCC
issued an order nullifying the Asset Allocation and Separation Agreement as not
having been filed with and approved by the KCC, prohibiting Western Resources
and Westar Industries from taking any action to complete a rights offering for
common stock of Westar Industries, which was to be a first step in the
separation, and scheduling a hearing to consider whether to make the order
permanent.


                                       17
<PAGE>

            On July 20, 2001, the KCC issued an order that, among other things,
(1) confirmed its May 22, 2001 order prohibiting Western Resources and Westar
Industries from taking any action to complete the proposed rights offering and
nullifying the Asset Allocation and Separation Agreement; (2) directed Western
Resources and Westar Industries not to take any action or enter into any
agreement not related to normal utility operations that would directly or
indirectly increase the share of debt in Western Resources' capital structure
applicable to its utility operations, which has the effect of prohibiting
Western Resources from borrowing to make a loan or capital contribution to
Westar Industries; and (3) directed Western Resources to present a plan by
October 18, 2001, consistent with parameters established by the KCC's order, to
restore financial health, achieve a balanced capital structure and protect
ratepayers from the risks of Western Resources' non-utility businesses. In its
order, the Commission also acknowledged that Western Resources is presently
operating efficiently and at a reasonable cost and stated that it was not
disapproving the PNM transaction or a split-off of Westar Industries. Western
Resources has filed a petition for general reconsideration of the order.

            On July 26, 2001, PNM and Western Resources issued a joint press
release announcing their belief that, if recent orders issued by the KCC remain
in effect, the proposed transaction would be difficult to complete as currently
structured and that they intend to meet to discuss possible modifications to the
transaction that will make it possible to obtain necessary regulatory approvals.
On August 13, 2001, PNM issued a press release announcing that Western Resources
had discontinued discussions with PNM about possible modifications to the
proposed transaction and advising Western Resources that PNM believes the KCC
order reducing Western Resources rates would have a material adverse effect on
the financial condition of the proposed combined companies and could result in
the failure of a significant condition to the transaction. PNM's press release
acknowledged that Western Resources disagreed with PNM's characterization of the
impact of the KCC's rate order.  Western Resources has advised PNM that it also
disagrees strongly with PNM's characterization of its discussions about possible
modifications to the transaction.

            While Western Resources is attempting to proceed with the PNM
transaction, it is unable to predict the outcome of these matters or their
impact on Western Resources' strategic plans, including the PNM/split-off
transaction, financial condition or results of operations. No assurance can be
given as to whether or when the PNM transaction or a split-off may occur.

            Market Risk: We have not experienced any significant changes in our
exposure to market risk since December 31, 2000. For additional information on
our market risk, see our Annual Report on Form 10-K for the year ended December
31, 2000.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

            Information relating to market risk disclosure is set forth in Other
Information of Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.


                                       18
<PAGE>

                         KANSAS GAS AND ELECTRIC COMPANY

                            Part II Other Information


Item 1.  Legal Proceedings
         -----------------

            See Note 3 of the Notes to Consolidated Financial Statements for a
discussion of proceedings before the KCC and FERC proceedings involving the City
of Wichita. The Notes to the Consolidated Financial Statements are incorporated
herein by reference.

            We are involved in various other legal, environmental and regulatory
proceedings. We believe that adequate provision has been made and accordingly
believe that the ultimate disposition of such matters will not have a material
adverse effect upon our overall financial position or results of operations.

Item 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------

            Information required by Item 2 is omitted pursuant to General
Instruction H(2)(b) to Form 10-Q.

Item 3.  Defaults Upon Senior Securities
         -------------------------------

            Information required by Item 3 is omitted pursuant to General
Instruction H(2)(b) to Form 10-Q.

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

            Information required by Item 4 is omitted pursuant to General
Instruction H(2)(b) to Form 10-Q.

Item 5.  Other Information
         -----------------

            None

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

      (a)   Exhibits:

      99.1 - Order on Rate Applications from The Corporation Commission of the
      State of Kansas in the Matter of the Application of Kansas Gas and
      Electric Company for the Approval to Make Certain Changes in its Charges
      for Electric Service

      99.2 - Press release issued August 13, 2001 by PNM announcing that talks
      to modify Western Resources' transaction with PNM have been discontinued.

      99.3 - Press release issued August 13, 2001 by Western Resources
      responding to PNM's announcement of discontinued talks.

      (b)   Reports on Form 8-K filed during the three months ended June 30,
            2001: None.


                                       19
<PAGE>

                                    SIGNATURE

            Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   KANSAS GAS AND ELECTRIC COMPANY


      Date:  August 14, 2001       By:  /s/ Richard D. Terrill
             ---------------            ----------------------------------------
                                             Richard D. Terrill
                                          Secretary, Treasurer and
                                             General Counsel



                                       20