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,
2008





or





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


EXCHANGE
ACT OF 1934





For the
transition period from _______ to _______





Exact
      name of registrant as specified in its charter,Commission
            
            state
      of incorporation, address of principal
            
            I.R.S.
      EmployerFile
      Number
            
            executive
      offices and telephone number
            
            Identification
      Number001-32206
            
            GREAT
      PLAINS ENERGY INCORPORATED
            
            43-1916803(A
      Missouri Corporation)1201
      Walnut StreetKansas
      City, Missouri 64106(816)
      556-2200www.greatplainsenergy.com000-51873
            
            KANSAS
      CITY POWER & LIGHT COMPANY
            
            44-0308720(A
      Missouri Corporation)1201
      Walnut StreetKansas
      City, Missouri 64106(816)
      556-2200www.kcpl.com








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities
  ExchangeAct
      of 1934 during the preceding 12 months (or for such shorter period that
      the registrant was required to file such reports), and (2) has
      beensubject
      to such filing requirements for the past 90 days.Great
      Plains Energy Incorporated
            Yes
            X
            No
            _
            
            Kansas
      City Power & Light Company
            Yes
            X
            No
            _Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller
      reportingcompany.  See
      definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the ExchangeAct.Great
      Plains Energy Incorporated
            Large
      accelerated filer
            X
            Accelerated
      filer
            _Non-accelerated
      filer
            _
            Smaller
      reporting company
            _Kansas
      City Power & Light Company
            Large
      accelerated filer
            _
            Accelerated
      filer
            _Non-accelerated
      filer
            X
            Smaller
      reporting company
            _Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).Great
      Plains Energy Incorporated
            Yes
            _
            No
            X
            
            Kansas
      City Power & Light Company
            Yes
            _
            No
            XOn
      November 3, 2008, Great Plains Energy Incorporated had 118,918,655 shares
      of common stock outstanding.  On November 3,
    2008,Kansas
      City Power & Light Company had one share of common stock outstanding,
      which was held by Great Plains Energy Incorporated.Kansas
      City Power & Light Company meets the conditions set forth in General
      Instruction (H)(1)(a) and (b) of Form 10-Q and istherefore
      filing this Form 10-Q with the reduced disclosure
  format.





This
combined Quarterly Report on Form 10-Q is being filed by Great Plains Energy
Incorporated (Great Plains Energy) and Kansas City Power & Light Company
(KCP&L).  KCP&L is a wholly owned subsidiary of Great Plains
Energy and represents a significant portion of its assets, liabilities,
revenues, expenses and operations.  Thus, all information contained in
this report relates to, and is filed by, Great Plains
Energy.  Information that is specifically identified in this report as
relating solely to Great Plains Energy, such as its financial statements and all
information relating to Great Plains Energy’s other operations, businesses and
subsidiaries, including KCP&L Greater Missouri Operations Company (GMO),
does not relate to, and is not filed by, KCP&L.  KCP&L makes
no representation as to that information.  Neither Great Plains Energy
nor its other subsidiaries have any obligation in respect of KCP&L’s debt
securities and holders of such securities should not consider Great Plains
Energy’s or its other subsidiaries’ financial resources or results of operations
in making a decision with respect to KCP&L’s debt
securities.  Similarly, KCP&L has no obligation in respect of
securities of Great Plains Energy or its other subsidiaries.




This
report should be read in its entirety.  No one section of the report
deals with all aspects of the subject matter.  It should be read in
conjunction with the consolidated financial statements and related notes and
with the management’s discussion and analysis included in the 2007 Form 10-K for
each of Great Plains Energy and KCP&L.




CAUTIONARY
STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION


Statements
made in this report that are not based on historical facts are forward-looking,
may involve risks and uncertainties, and are intended to be as of the date when
made.  Forward-looking statements include, but are not limited to, the
outcome of regulatory proceedings, cost estimates of the Comprehensive Energy
Plan and other matters affecting future operations.  In connection
with the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the registrants are providing a number of important factors that could
cause actual results to differ materially from the provided forward-looking
information.  These important factors include: future economic
conditions in the regional, national and international markets, including but
not limited to regional and national wholesale electricity markets; market
perception of the energy industry, Great Plains Energy, KCP&L and GMO;
changes in business strategy, operations or development plans; effects of
current or proposed state and federal legislative and regulatory actions or
developments, including, but not limited to, deregulation, re-regulation and
restructuring of the electric utility industry; decisions of regulators
regarding rates KCP&L and GMO can charge for electricity; adverse changes in
applicable laws, regulations, rules, principles or practices governing tax,
accounting and environmental matters including, but not limited to, air and
water quality; financial market conditions and performance including, but not
limited to, changes in interest rates and credit spreads and in availability and
cost of capital and the effects on pension plan assets and costs; credit
ratings; inflation rates; effectiveness of risk management policies and
procedures and the ability of counterparties to satisfy their contractual
commitments; impact of terrorist acts; increased competition including, but not
limited to, retail choice in the electric utility industry and the entry of new
competitors; ability to carry out marketing and sales plans; weather conditions
including weather-related damage; cost, availability, quality and deliverability
of fuel; ability to achieve generation planning goals and the occurrence and
duration of planned and unplanned generation outages; delays in the anticipated
in-service dates and cost increases of additional generating capacity and
environmental projects; nuclear operations; workforce risks, including
retirement compensation and benefits costs; the ability to successfully
integrate KCP&L and GMO operations and the timing and amount of resulting
synergy savings; and other risks and uncertainties.




This list
of factors is not all-inclusive because it is not possible to predict all
factors.  Part II Item 1A Risk Factors included in this report, which
updates and restates the risk factors included in the 2007 Form 10-K for each of
Great Plains Energy and KCP&L under Part I Item 1A, should be carefully read
for further understanding of potential risks for each of Great Plains Energy and
KCP&L.  Other sections of this report and other periodic reports
filed by each of Great Plains Energy and KCP&L with the Securities and
Exchange Commission (SEC) should also be read for more information regarding
risk factors.  Great Plains Energy and KCP&L undertake no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.


2


GLOSSARY
OF TERMS




The
following is a glossary of frequently used abbreviations or acronyms that are
found throughout this report.




Abbreviation or
      Acronym
            
            DefinitionAquila
      or GMO
            
            Aquila,
      Inc., a wholly owned subsidiary of Great Plains Energy as of July
      14,
              2008,
      which changed its name to KCP&L Greater Missouri
      Operations
              Company
      (GMO)ARO
            
            Asset
      Retirement ObligationBART
            
            Best
      available retrofit technologyBlack
      Hills
            
            Black
      Hills CorporationCAIR
            
            Clean
      Air Interstate RuleCAMR
            
            Clean
      Air Mercury RuleClean
      Air Act
            
            Clean
      Air Act Amendments of 1990CO2
            
            Carbon
      DioxideCollaboration
      Agreement
            
            Agreement
      among KCP&L, the Sierra Club and the Concerned
              Citizens
      of Platte CountyCompany
            
            Great
      Plains Energy Incorporated and its subsidiariesEBITDA
            
            Earnings
      before interest, income taxes, depreciation and
    amortizationECA
            
            Energy
      Cost AdjustmentEIRR
            
            Environmental
      Improvement Revenue RefundingEPA
            
            Environmental
      Protection AgencyEPS
            
            Earnings
      per common shareERISA
            
            Employee
      Retirement Income Security Act of 1974, as amendedFAC
            
            Fuel
      Adjustment ClauseFASB
            
            Financial
      Accounting Standards BoardFELINE
      PRIDESSM
            
            Flexible
      Equity Linked Preferred Increased Dividend Equity
    Securities,a
      service mark of Merrill Lynch & Co., Inc.FERC
            
            The
      Federal Energy Regulatory CommissionFIN
            
            Financial
      Accounting Standards Board InterpretationFSP
            
            Financial
      Accounting Standards Board Staff PositionFSS
            
            Forward
      Starting SwapsGAAP
            
            Generally
      Accepted Accounting PrinciplesGreat
      Plains Energy
            
            Great
      Plains Energy Incorporated and its subsidiariesHoldings
            
            DTI
      Holdings, Inc.HSS
            
            Home
      Service Solutions Inc., a wholly owned subsidiary of KLT
    Inc.IEC
            
            Innovative
      Energy Consultants Inc., a wholly owned subsidiary
              of
      Great Plains EnergyISO
            
            Independent
      System OperatorKCC
            
            The
      State Corporation Commission of the State of KansasKCP&L
            
            Kansas
      City Power & Light Company, a wholly owned subsidiary
              of
      Great Plains EnergyKDHE
            
            Kansas
      Department of Health and EnvironmentKLT
      Inc.
            
            KLT
      Inc., a wholly owned subsidiary of Great Plains EnergyKLT
      Investments
            
            KLT
      Investments Inc., a wholly owned subsidiary of KLT Inc.KLT
      Telecom
            
            KLT
      Telecom Inc., a wholly owned subsidiary of KLT Inc.KW
            
            KilowattkWh
            
            Kilowatt
      hourMAC
            
            Material
      Adverse Change


3


Abbreviation or
      Acronym
            
            DefinitionMD&A
            
            Management’s
      Discussion and Analysis of Financial Condition andResults
      of OperationsMDNR
            
            Missouri
      Department of Natural ResourcesMGP
            
            Manufactured
      gas plantMPS
      Merchant
            
            MPS
      Merchant Services, Inc., a wholly owned subsidiary of
  GMOMPSC
            
            Public
      Service Commission of the State of MissouriMW
            
            MegawattMWh
            
            Megawatt
      hourNOx
            
            Nitrogen
      OxideNPNS
            
            Normal
      Purchases and Normal SalesOCI
            
            Other
      Comprehensive IncomePCB
            
            Polychlorinated
      biphenylsPRB
            
            Powder
      River BasinQCA
            
            Quarterly
      Cost AdjustmentReceivables
      Company
            
            Kansas
      City Power & Light Receivables Company, a wholly owned
              subsidiary
      of KCP&LRTO
            
            Regional
      Transmission OrganizationSEC
            
            Securities
      and Exchange CommissionServices
            
            Great
      Plains Energy Services IncorporatedSFAS
            
            Statement
      of Financial Accounting StandardsSIP
            
            State
      Implementation PlanSO2
            
            Sulfur
      DioxideSTB
            
            Surface
      Transportation BoardStrategic
      Energy
            
            Strategic
      Energy, L.L.C., which, until its sale on June 2, 2008, was a
              subsidiary
      of KLT Energy ServicesT
      - Lock
            
            Treasury
      LockUnion
      Pacific
            
            Union
      Pacific Railroad CompanyWCNOC
            
            Wolf
      Creek Nuclear Operating CorporationWestar
            
            Westar
      Energy, Inc., a Kansas utility companyWolf
      Creek
            
            Wolf
      Creek Generating Station


4


PART
I - FINANCIAL INFORMATION


ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS


GREAT
      PLAINS ENERGYConsolidated
      Balance Sheets(Unaudited)September
      30
            December
      312008
            
            
            2007ASSETS
            (millions,
      except share amounts)Current
      AssetsCash
      and cash equivalents
            
            $
            24.3
            
            
            $
            24.0Funds
      on deposit
            
            
            13.9
            
            
            
            -Receivables,
      net
            
            
            313.1
            
            
            
            166.0Fuel
      inventories, at average cost
            
            
            71.2
            
            
            
            35.9Materials
      and supplies, at average cost
            
            
            98.3
            
            
            
            64.0Deferred
      refueling outage costs
            
            
            15.3
            
            
            
            6.5Refundable
      income taxes
            
            
            22.1
            
            
            
            16.0Deferred
      income taxes
            
            
            -
            
            
            
            3.6Assets
      held for sale (Note 5)
            
            
            29.6
            
            
            
            -Assets
      of discontinued operations
            
            
            -
            
            
            
            487.1Derivative
      instruments
            
            
            10.0
            
            
            
            0.7Prepaid
      expenses
            
            
            15.8
            
            
            
            11.0Total
            
            
            613.6
            
            
            
            814.8Nonutility
      Property and InvestmentsAffordable
      housing limited partnerships
            
            
            14.9
            
            
            
            17.3Nuclear
      decommissioning trust fund
            
            
            102.8
            
            
            
            110.5Other
            
            
            38.6
            
            
            
            7.5Total
            
            
            156.3
            
            
            
            135.3Utility
      Plant, at Original CostElectric
            
            
            7,835.9
            
            
            
            5,450.6Less-accumulated
      depreciation
            
            
            3,531.0
            
            
            
            2,596.9Net
      utility plant in service
            
            
            4,304.9
            
            
            
            2,853.7Construction
      work in progress
            
            
            1,417.7
            
            
            
            530.2Nuclear
      fuel, net of amortization of $106.3 and $120.2
            
            
            60.4
            
            
            
            60.6Total
            
            
            5,783.0
            
            
            
            3,444.5Deferred
      Charges and Other AssetsRegulatory
      assets
            
            
            561.7
            
            
            
            400.1Goodwill
            
            
            152.3
            
            
            
            -Derivative
      instruments
            
            
            22.7
            
            
            
            -Other
            
            
            40.1
            
            
            
            37.4Total
            
            
            776.8
            
            
            
            437.5Total
            
            $
            7,329.7
            
            
            $
            4,832.1The
      accompanying Notes to Consolidated Financial Statements are an integral
      part of these statements.


5


GREAT
      PLAINS ENERGYConsolidated
      Balance Sheets(Unaudited)September
      30
            December
      312008
            
            
            2007LIABILITIES
      AND CAPITALIZATION
            (millions,
      except share amounts)Current
      LiabilitiesNotes
      payable
            
            $
            37.0
            
            
            $
            42.0Commercial
      paper
            
            
            254.7
            
            
            
            365.8Current
      maturities of long-term debt
            
            
            2.7
            
            
            
            0.3Accounts
      payable
            
            
            326.9
            
            
            
            241.4Accrued
      taxes
            
            
            77.8
            
            
            
            19.5Accrued
      interest
            
            
            73.2
            
            
            
            16.6Accrued
      compensation and benefits
            
            
            36.2
            
            
            
            22.1Pension
      and post-retirement liability
            
            
            3.2
            
            
            
            1.3Liabilities
      of discontinued operations
            
            
            -
            
            
            
            253.4Deferred
      income taxes
            
            
            9.8
            
            
            
            -Derivative
      instruments
            
            
            56.3
            
            
            
            44.4Other
            
            
            42.5
            
            
            
            10.2Total
            
            
            920.3
            
            
            
            1,017.0Deferred
      Credits and Other LiabilitiesDeferred
      income taxes
            
            
            372.6
            
            
            
            608.0Deferred
      tax credits
            
            
            94.8
            
            
            
            27.0Asset
      retirement obligations
            
            
            124.5
            
            
            
            94.5Pension
      and post-retirement liability
            
            
            201.6
            
            
            
            157.2Regulatory
      liabilities
            
            
            211.6
            
            
            
            144.1Other
            
            
            115.5
            
            
            
            74.5Total
            
            
            1,120.6
            
            
            
            1,105.3CapitalizationCommon
      shareholders' equityCommon
      stock-150,000,000 shares authorized without par value119,000,686
      and 86,325,136 shares issued, stated value
            
            
            2,109.9
            
            
            
            1,065.9Retained
      earnings
            
            
            531.9
            
            
            
            506.9Treasury
      stock-121,570 and 90,929 shares, at cost
            
            
            (3.6
            )
            
            
            (2.8
            )Accumulated
      other comprehensive loss
            
            
            (22.1
            )
            
            
            (2.1
            )Total
            
            
            2,616.1
            
            
            
            1,567.9Cumulative
      preferred stock $100 par value3.80%
      - 100,000 shares issued
            
            
            10.0
            
            
            
            10.04.50%
      - 100,000 shares issued
            
            
            10.0
            
            
            
            10.04.20%
      - 70,000 shares issued
            
            
            7.0
            
            
            
            7.04.35%
      - 120,000 shares issued
            
            
            12.0
            
            
            
            12.0Total
            
            
            39.0
            
            
            
            39.0Long-term
      debt (Note 11)
            
            
            2,633.7
            
            
            
            1,102.9Total
            
            
            5,288.8
            
            
            
            2,709.8Commitments
      and Contingencies (Note 15)Total
            
            $
            7,329.7
            
            
            $
            4,832.1The
      accompanying Notes to Consolidated Financial Statements are an integral
      part of these statements.


6


GREAT PLAINS ENERGYConsolidated
      Statements of Income(Unaudited)Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            
            
            September
      302008
            
            
            2007
            
            
            2008
            
            
            2007Operating
      Revenues
            
            (millions,
      except per share amounts)Electric
      revenues
            
            $
            593.6
            
            
            $
            416.0
            
            
            $
            1,226.2
            
            
            $
            990.8Operating
      ExpensesFuel
            
            
            109.7
            
            
            
            75.6
            
            
            
            222.7
            
            
            
            186.2Purchased
      power
            
            
            69.3
            
            
            
            41.3
            
            
            
            138.3
            
            
            
            80.4Utility
      operating expenses
            
            
            109.9
            
            
            
            75.7
            
            
            
            262.2
            
            
            
            223.4Maintenance
            
            
            30.9
            
            
            
            19.6
            
            
            
            89.5
            
            
            
            72.6Depreciation
      and amortization
            
            
            65.4
            
            
            
            44.1
            
            
            
            166.4
            
            
            
            130.9General
      taxes
            
            
            37.4
            
            
            
            33.0
            
            
            
            96.2
            
            
            
            87.8Other
            
            
            1.4
            
            
            
            5.0
            
            
            
            10.6
            
            
            
            13.0Total
            
            
            424.0
            
            
            
            294.3
            
            
            
            985.9
            
            
            
            794.3Operating
      income
            
            
            169.6
            
            
            
            121.7
            
            
            
            240.3
            
            
            
            196.5Non-operating
      income
            
            
            7.6
            
            
            
            1.5
            
            
            
            22.5
            
            
            
            6.6Non-operating
      expenses
            
            
            (2.7
            )
            
            
            (1.1
            )
            
            
            (5.2
            )
            
            
            (4.7
            )Interest
      charges
            
            
            (23.6
            )
            
            
            (27.6
            )
            
            
            (75.6
            )
            
            
            (66.2
            )Income
      from continuing operations before income taxesand
      loss from equity investments
            
            
            150.9
            
            
            
            94.5
            
            
            
            182.0
            
            
            
            132.2Income
      taxes
            
            
            (45.9
            )
            
            
            (28.1
            )
            
            
            (68.4
            )
            
            
            (36.4
            )Loss
      from equity investments, net of income taxes
            
            
            (0.3
            )
            
            
            (0.4
            )
            
            
            (1.1
            )
            
            
            (1.1
            )Income
      from continuing operations
            
            
            104.7
            
            
            
            66.0
            
            
            
            112.5
            
            
            
            94.7Income
      (loss) from discontinued operations, net of income taxes (Note
      13)
            0.3
            
            
            
            (3.9
            )
            
            
            35.0
            
            
            
            16.4Net
      income
            
            
            105.0
            
            
            
            62.1
            
            
            
            147.5
            
            
            
            111.1Preferred
      stock dividend requirements
            
            
            0.4
            
            
            
            0.3
            
            
            
            1.2
            
            
            
            1.2Earnings
      available for common shareholders
            
            $
            104.6
            
            
            $
            61.8
            
            
            $
            146.3
            
            
            $
            109.9Average
      number of common shares outstanding
            
            
            113.8
            
            
            
            85.6
            
            
            
            95.3
            
            
            
            84.7Average
      number of diluted common shares outstanding
            
            
            113.9
            
            
            
            85.7
            
            
            
            95.3
            
            
            
            85.0Basic
      earnings (loss) per common shareContinuing
      operations
            
            $
            0.92
            
            
            $
            0.77
            
            
            $
            1.17
            
            
            $
            1.11Discontinued
      operations
            
            
            -
            
            
            
            (0.05
            )
            
            
            0.37
            
            
            
            0.19Basic
      earnings per common share
            
            $
            0.92
            
            
            $
            0.72
            
            
            $
            1.54
            
            
            $
            1.30Diluted
      earnings (loss) per common shareContinuing
      operations
            
            $
            0.92
            
            
            $
            0.77
            
            
            $
            1.17
            
            
            $
            1.10Discontinued
      operations
            
            
            -
            
            
            
            (0.05
            )
            
            
            0.37
            
            
            
            0.19Diluted
      earnings per common share
            
            $
            0.92
            
            
            $
            0.72
            
            
            $
            1.54
            
            
            $
            1.29Cash
      dividends per common share
            
            $
            0.415
            
            
            $
            0.415
            
            
            $
            1.245
            
            
            $
            1.245The
      accompanying Notes to Consolidated Financial Statements are an integral
      part of these statements.


7


GREAT
      PLAINS ENERGYConsolidated
      Statements of Cash Flows(Unaudited)Year
      to Date September 30
            
            2008
            
            
            2007Cash
      Flows from Operating Activities
            
            (millions)Net
      income
            
            $
            147.5
            
            
            $
            111.1Adjustments
      to reconcile income to net cash from operating activities:Depreciation
      and amortization
            
            
            169.7
            
            
            
            137.1Amortization
      of:Nuclear
      fuel
            
            
            10.0
            
            
            
            12.6Other
            
            
            2.2
            
            
            
            6.0Deferred
      income taxes, net
            
            
            27.4
            
            
            
            21.0Investment
      tax credit amortization
            
            
            (1.3
            )
            
            
            (1.1
            )Loss
      from equity investments, net of income taxes
            
            
            1.1
            
            
            
            1.1Fair
      value impacts from energy contracts - Strategic Energy
            
            
            (189.1
            )
            
            
            (20.5
            )Fair
      value impacts from interest rate hedging
            
            
            9.2
            
            
            
            9.0Loss
      on sale of Strategic Energy
            
            
            116.2
            
            
            
            -Other
      operating activities (Note 3)
            
            
            33.1
            
            
            
            (57.7
            )Net
      cash from operating activities
            
            
            326.0
            
            
            
            218.6Cash
      Flows from Investing ActivitiesUtility
      capital expenditures
            
            
            (702.3
            )
            
            
            (359.7
            )Allowance
      for borrowed funds used during construction
            
            
            (20.3
            )
            
            
            (10.6
            )Purchases
      of investments and nonutility property
            
            
            (0.8
            )
            
            
            (3.7
            )Change
      in restricted cash
            
            
            -
            
            
            
            (146.5
            )Proceeds
      from sale of Strategic Energy, net of cash sold
            
            
            216.4
            
            
            
            -Aquila
      acquisition, net cash received
            
            
            271.9
            
            
            
            -Purchases
      of nuclear decommissioning trust investments
            
            
            (35.1
            )
            
            
            (47.1
            )Proceeds
      from nuclear decommissioning trust investments
            
            
            32.4
            
            
            
            44.4Other
      investing activities
            
            
            (9.0
            )
            
            
            (11.5
            )Net
      cash from investing activities
            
            
            (246.8
            )
            
            
            (534.7
            )Cash
      Flows from Financing ActivitiesIssuance
      of common stock
            
            
            8.3
            
            
            
            8.1Issuance
      of long-term debt
            
            
            354.5
            
            
            
            495.6Issuance
      fees
            
            
            (4.5
            )
            
            
            (4.5
            )Repayment
      of long-term debt
            
            
            (169.2
            )
            
            
            (225.5
            )Net
      change in short-term borrowings
            
            
            (174.1
            )
            
            
            138.2Dividends
      paid
            
            
            (122.2
            )
            
            
            (108.3
            )Credit
      facility termination fees
            
            
            (12.5
            )
            
            
            -Equity
      forward settlement
            
            
            -
            
            
            
            (12.3
            )Other
      financing activities
            
            
            (2.3
            )
            
            
            (2.1
            )Net
      cash from financing activities
            
            
            (122.0
            )
            
            
            289.2Net
      Change in Cash and Cash Equivalents
            
            
            (42.8
            )
            
            
            (26.9
            )Cash and Cash Equivalents at
      Beginning of Year (includes $43.1million
      and $45.8 million of cash included in assets of
    discontinuedoperations
      in 2008 and 2007, respectively)
            
            
            67.1
            
            
            
            61.8Cash and Cash Equivalents at
      End of Period (includes $17.5 millionof
      cash included in assets of discontinued operations in
2007)
            
            $
            24.3
            
            
            $
            34.9The
      accompanying Notes to Consolidated Financial Statements are an integral
      part of these statements.


8


GREAT
      PLAINS ENERGYConsolidated
      Statements of Common Shareholders' Equity(Unaudited)Year
      to Date September 30
            
            2008
            
            
            2007Shares
            
            
            Amount
            
            
            Shares
            
            
            AmountCommon
      Stock
            
            (millions,
      except share amounts)Beginning
      balance
            
            
            86,325,136
            
            
            $
            1,065.9
            
            
            
            80,405,035
            
            
            $
            896.8Issuance
      of common stock
            
            
            32,587,486
            
            
            
            1,034.9
            
            
            
            5,490,170
            
            
            
            171.7Issuance
      of restricted common stock
            
            
            88,064
            
            
            
            2.3
            
            
            
            348,527
            
            
            
            11.1Equity
      compensation expense
            
            
            
            
            
            
            5.2
            
            
            
            
            
            
            
            1.3Equity
      forward settlement
            
            
            
            
            
            
            -
            
            
            
            
            
            
            
            (12.3
            )Unearned
      CompensationIssuance
      of restricted common stock
            
            
            
            
            
            
            (2.3
            )
            
            
            
            
            
            
            (11.1
            )Forfeiture
      of restricted common stock
            
            
            
            
            
            
            -
            
            
            
            
            
            
            
            0.2Compensation
      expense recognized
            
            
            
            
            
            
            4.2
            
            
            
            
            
            
            
            3.3Other
            
            
            
            
            
            
            (0.3
            )
            
            
            
            
            
            
            -Ending
      balance
            
            
            119,000,686
            
            
            
            2,109.9
            
            
            
            86,243,732
            
            
            
            1,061.0Retained
      EarningsBeginning
      balance
            
            
            
            
            
            
            506.9
            
            
            
            
            
            
            
            493.4Cumulative
      effect of a change in accounting principle (Note 12)
            
            
            
            -
            
            
            
            
            
            
            
            (0.9
            )Net
      income
            
            
            
            
            
            
            147.5
            
            
            
            
            
            
            
            111.1Dividends:Common
      stock
            
            
            
            
            
            
            (121.0
            )
            
            
            
            
            
            
            (107.1
            )Preferred
      stock - at required rates
            
            
            
            
            
            
            (1.2
            )
            
            
            
            
            
            
            (1.2
            )Performance
      shares
            
            
            
            
            
            
            (0.3
            )
            
            
            
            
            
            
            (0.4
            )Ending
      balance
            
            
            
            
            
            
            531.9
            
            
            
            
            
            
            
            494.9Treasury
      StockBeginning
      balance
            
            
            (90,929
            )
            
            
            (2.8
            )
            
            
            (53,499
            )
            
            
            (1.6
            )Treasury
      shares acquired
            
            
            (39,856
            )
            
            
            (1.1
            )
            
            
            (23,966
            )
            
            
            (0.8
            )Treasury
      shares reissued
            
            
            9,215
            
            
            
            0.3
            
            
            
            -
            
            
            
            -Ending
      balance
            
            
            (121,570
            )
            
            
            (3.6
            )
            
            
            (77,465
            )
            
            
            (2.4
            )Accumulated
      Other Comprehensive Income (Loss)Beginning
      balance
            
            
            
            
            
            
            (2.1
            )
            
            
            
            
            
            
            (46.7
            )Derivative hedging activity, net of tax
            
            
            
            
            
            
            (20.3
            )
            
            
            
            
            
            
            23.3Change in unrecognized
      pension expense, net of tax
            
            
            
            
            
            
            0.3
            
            
            
            
            
            
            
            0.1Ending
      balance
            
            
            
            
            
            
            (22.1
            )
            
            
            
            
            
            
            (23.3
            )Total
      Common Shareholders' Equity
            
            
            
            
            
            $
            2,616.1
            
            
            
            
            
            
            $
            1,530.2The
      accompanying Notes to Consolidated Financial Statements are an integral
      part of these statements.


9


GREAT PLAINS ENERGYConsolidated
      Statements of Comprehensive Income(Unaudited)Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            
            
            September
      302008
            
            
            2007
            
            
            2008
            
            
            2007(millions)Net
      income
            
            $
            105.0
            
            
            $
            62.1
            
            
            $
            147.5
            
            
            $
            111.1Other
      comprehensive incomeGain
      (loss) on derivative hedging instruments
            
            
            (9.0
            )
            
            
            (72.2
            )
            
            
            72.3
            
            
            
            (23.7
            )Income
      taxes
            
            
            3.5
            
            
            
            29.1
            
            
            
            (30.1
            )
            
            
            9.1Net
      gain (loss) on derivative hedging instruments
            
            
            (5.5
            )
            
            
            (43.1
            )
            
            
            42.2
            
            
            
            (14.6
            )Reclassification
      to expenses, net of tax (Note 20)
            
            
            (0.4
            )
            
            
            15.3
            
            
            
            (62.5
            )
            
            
            37.9Derivative
      hedging activity, net of tax
            
            
            (5.9
            )
            
            
            (27.8
            )
            
            
            (20.3
            )
            
            
            23.3Defined
      benefit pension plansAmortization
      of net gains included in net periodicbenefit
      costs
            
            
            -
            
            
            
            0.1
            
            
            
            0.2
            
            
            
            0.3Prior
      service costs arising during the period
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (0.4
            )Less:
      amortization of prior service costs included innet
      periodic benefit costs
            
            
            0.1
            
            
            
            -
            
            
            
            0.1
            
            
            
            0.1Income
      taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            0.1Net
      change in unrecognized pension expense
            
            
            0.1
            
            
            
            0.1
            
            
            
            0.3
            
            
            
            0.1Comprehensive
      income
            
            $
            99.2
            
            
            $
            34.4
            
            
            $
            127.5
            
            
            $
            134.5The
      accompanying Notes to Consolidated Financial Statements are an integral
      part of these statements.


10


KANSAS
      CITY POWER & LIGHT COMPANYConsolidated
      Balance Sheets(Unaudited)September
      30
            December
      312008
            
            
            2007ASSETS
            (millions,
      except share amounts)Current
      AssetsCash
      and cash equivalents
            
            $
            0.3
            
            
            $
            3.2Receivables,
      net
            
            
            208.3
            
            
            
            176.4Fuel
      inventories, at average cost
            
            
            41.4
            
            
            
            35.9Materials
      and supplies, at average cost
            
            
            67.4
            
            
            
            64.0Deferred
      refueling outage costs
            
            
            15.3
            
            
            
            6.5Refundable
      income taxes
            
            
            16.5
            
            
            
            16.6Deferred
      income taxes
            
            
            4.7
            
            
            
            3.4Prepaid
      expenses
            
            
            11.1
            
            
            
            10.4Derivative
      instruments
            
            
            0.1
            
            
            
            0.7Total
            
            
            365.1
            
            
            
            317.1Nonutility
      Property and InvestmentsNuclear
      decommissioning trust fund
            
            
            102.8
            
            
            
            110.5Other
            
            
            4.7
            
            
            
            6.2Total
            
            
            107.5
            
            
            
            116.7Utility
      Plant, at Original CostElectric
            
            
            5,614.5
            
            
            
            5,450.6Less-accumulated
      depreciation
            
            
            2,690.2
            
            
            
            2,596.9Net
      utility plant in service
            
            
            2,924.3
            
            
            
            2,853.7Construction
      work in progress
            
            
            974.1
            
            
            
            530.2Nuclear
      fuel, net of amortization of $106.3 and $120.2
            
            
            60.4
            
            
            
            60.6Total
            
            
            3,958.8
            
            
            
            3,444.5Deferred
      Charges and Other AssetsRegulatory
      assets
            
            
            368.2
            
            
            
            400.1Other
            
            
            53.5
            
            
            
            13.6Total
            
            
            421.7
            
            
            
            413.7Total
            
            $
            4,853.1
            
            
            $
            4,292.0The
      disclosures regarding KCP&L included in the accompanying Notes to
      Consolidated FinancialStatements
      are an integral part of these
statements.


11


KANSAS
      CITY POWER & LIGHT COMPANYConsolidated
      Balance Sheets(Unaudited)September
      30
            December
      312008
            
            
            2007LIABILITIES
      AND CAPITALIZATION
            (millions,
      except share amounts)Current
      LiabilitiesNotes
      payable to Great Plains Energy
            
            $
            -
            
            
            $
            0.6Commercial
      paper
            
            
            254.7
            
            
            
            365.8Accounts
      payable
            
            
            245.6
            
            
            
            243.4Accrued
      taxes
            
            
            57.2
            
            
            
            19.0Accrued
      interest
            
            
            22.1
            
            
            
            9.6Accrued
      compensation and benefits
            
            
            35.1
            
            
            
            21.6Pension
      and post-retirement liability
            
            
            2.2
            
            
            
            1.1Derivative
      instruments
            
            
            -
            
            
            
            28.0Other
            
            
            8.6
            
            
            
            8.7Total
            
            
            625.5
            
            
            
            697.8Deferred
      Credits and Other LiabilitiesDeferred
      income taxes
            
            
            638.2
            
            
            
            642.2Deferred
      tax credits
            
            
            88.9
            
            
            
            27.0Asset
      retirement obligations
            
            
            112.2
            
            
            
            94.5Pension
      and post-retirement liability
            
            
            165.0
            
            
            
            149.4Regulatory
      liabilities
            
            
            119.8
            
            
            
            144.1Other
            
            
            52.3
            
            
            
            54.2Total
            
            
            1,176.4
            
            
            
            1,111.4CapitalizationCommon
      shareholder's equityCommon
      stock-1,000 shares authorized without par value1
      share issued, stated value
            
            
            1,315.6
            
            
            
            1,115.6Retained
      earnings
            
            
            372.8
            
            
            
            371.3Accumulated
      other comprehensive loss
            
            
            (14.1
            )
            
            
            (7.5
            )Total
            
            
            1,674.3
            
            
            
            1,479.4Long-term
      debt (Note 11)
            
            
            1,376.9
            
            
            
            1,003.4Total
            
            
            3,051.2
            
            
            
            2,482.8Commitments
      and Contingencies (Note 15)Total
            
            $
            4,853.1
            
            
            $
            4,292.0The
      disclosures regarding KCP&L included in the accompanying Notes to
      Consolidated FinancialStatements
      are an integral part of these statements.


12


KANSAS CITY POWER & LIGHT
COMPANYConsolidated
      Statements of Income(Unaudited)Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            
            
            September
      302008
            
            
            2007
            
            
            2008
            
            
            2007Operating
      Revenues
            
            (millions)Electric
      revenues
            
            $
            423.7
            
            
            $
            416.0
            
            
            $
            1,056.3
            
            
            $
            990.8Operating
      ExpensesFuel
            
            
            79.6
            
            
            
            75.6
            
            
            
            192.6
            
            
            
            186.2Purchased
      power
            
            
            31.3
            
            
            
            41.3
            
            
            
            100.3
            
            
            
            80.4Operating
      expenses
            
            
            79.4
            
            
            
            75.7
            
            
            
            231.7
            
            
            
            223.4Maintenance
            
            
            21.3
            
            
            
            19.3
            
            
            
            78.1
            
            
            
            72.2Depreciation
      and amortization
            
            
            51.4
            
            
            
            44.1
            
            
            
            152.4
            
            
            
            130.9General
      taxes
            
            
            32.8
            
            
            
            33.0
            
            
            
            91.2
            
            
            
            87.3Other
            
            
            -
            
            
            
            -
            
            
            
            0.2
            
            
            
            0.2Total
            
            
            295.8
            
            
            
            289.0
            
            
            
            846.5
            
            
            
            780.6Operating
      income
            
            
            127.9
            
            
            
            127.0
            
            
            
            209.8
            
            
            
            210.2Non-operating
      income
            
            
            7.7
            
            
            
            1.3
            
            
            
            16.7
            
            
            
            6.0Non-operating
      expenses
            
            
            (1.2
            )
            
            
            (1.1
            )
            
            
            (3.7
            )
            
            
            (3.4
            )Interest
      charges
            
            
            (16.6
            )
            
            
            (17.1
            )
            
            
            (53.3
            )
            
            
            (52.0
            )Income
      before income taxes
            
            
            117.8
            
            
            
            110.1
            
            
            
            169.5
            
            
            
            160.8Income
      taxes
            
            
            (33.9
            )
            
            
            (33.5
            )
            
            
            (60.7
            )
            
            
            (45.7
            )Net
      income
            
            $
            83.9
            
            
            $
            76.6
            
            
            $
            108.8
            
            
            $
            115.1The
      disclosures regarding KCP&L included in the accompanying Notes to
      Consolidated Financial Statements are an integralpart
      of these statements.


13


KANSAS
      CITY POWER & LIGHT COMPANYConsolidated
      Statements of Cash Flows(Unaudited)Year
      to Date September 30
            
            2008
            
            
            2007Cash
      Flows from Operating Activities
            
            (millions)Net
      income
            
            $
            108.8
            
            
            $
            115.1Adjustments
      to reconcile income to net cash from operating activities:Depreciation
      and amortization
            
            
            152.4
            
            
            
            130.9Amortization
      of:Nuclear
      fuel
            
            
            10.0
            
            
            
            12.6Other
            
            
            7.6
            
            
            
            3.9Deferred
      income taxes, net
            
            
            (3.6
            )
            
            
            16.9Investment
      tax credit amortization
            
            
            (1.1
            )
            
            
            (1.1
            )Other
      operating activities (Note 3)
            
            
            24.5
            
            
            
            (14.6
            )Net
      cash from operating activities
            
            
            298.6
            
            
            
            263.7Cash
      Flows from Investing ActivitiesUtility
      capital expenditures
            
            
            (605.2
            )
            
            
            (359.7
            )Allowance
      for borrowed funds used during construction
            
            
            (15.9
            )
            
            
            (10.6
            )Change
      in restricted cash
            
            
            -
            
            
            
            (146.5
            )Purchases
      of nuclear decommissioning trust investments
            
            
            (35.1
            )
            
            
            (47.1
            )Proceeds
      from nuclear decommissioning trust investments
            
            
            32.4
            
            
            
            44.4Other
      investing activities
            
            
            (8.9
            )
            
            
            (4.6
            )Net
      cash from investing activities
            
            
            (632.7
            )
            
            
            (524.1
            )Cash
      Flows from Financing ActivitiesIssuance
      of long-term debt
            
            
            354.5
            
            
            
            396.1Issuance
      fees
            
            
            (4.2
            )
            
            
            (3.6
            )Repayment
      of long-term debt
            
            
            -
            
            
            
            (225.5
            )Net
      change in short-term borrowings
            
            
            (111.1
            )
            
            
            102.3Dividends
      paid to Great Plains Energy
            
            
            (108.0
            )
            
            
            (104.0
            )Equity
      contribution from Great Plains Energy
            
            
            200.0
            
            
            
            94.0Net
      cash from financing activities
            
            
            331.2
            
            
            
            259.3Net
      Change in Cash and Cash Equivalents
            
            
            (2.9
            )
            
            
            (1.1
            )Cash
      and Cash Equivalents at Beginning of Year
            
            
            3.2
            
            
            
            1.8Cash
      and Cash Equivalents at End of Period
            
            $
            0.3
            
            
            $
            0.7The
      disclosures regarding KCP&L included in the accompanying Notes to
      Consolidated Financial Statementsare
      an integral part of these
statements.


14


KANSAS
      CITY POWER & LIGHT COMPANYConsolidated
      Statements of Common Shareholder's Equity(Unaudited)Year
      to Date September 30
            
            2008
            
            
            2007Shares
            
            
            Amount
            
            
            Shares
            
            
            AmountCommon
      Stock
            (millions,
      except share amounts)Beginning
      balance
            
            
            1
            
            
            $
            1,115.6
            
            
            
            1
            
            
            $
            1,021.6Equity
      contribution from Great Plains Energy
            
            
            
            
            
            
            200.0
            
            
            
            
            
            
            
            94.0Ending
      balance
            
            
            1
            
            
            
            1,315.6
            
            
            
            1
            
            
            
            1,115.6Retained
      EarningsBeginning
      balance
            
            
            
            
            
            
            371.3
            
            
            
            
            
            
            
            354.8Cumulative
      effect of a change in accounting principle (Note 12)
            
            
            
            -
            
            
            
            
            
            
            
            (0.2
            )Net
      income
            
            
            
            
            
            
            108.8
            
            
            
            
            
            
            
            115.1Transfer
      of HSS to KLT Inc.
            
            
            
            
            
            
            0.7
            
            
            
            
            
            
            
            -Dividends:Common
      stock held by Great Plains Energy
            
            
            
            
            
            
            (108.0
            )
            
            
            
            
            
            
            (104.0
            )Ending
      balance
            
            
            
            
            
            
            372.8
            
            
            
            
            
            
            
            365.7Accumulated
      Other Comprehensive Income (Loss)Beginning
      balance
            
            
            
            
            
            
            (7.5
            )
            
            
            
            
            
            
            6.7Derivative
      hedging activity, net of tax
            
            
            
            
            
            
            (6.6
            )
            
            
            
            
            
            
            2.3Ending
      balance
            
            
            
            
            
            
            (14.1
            )
            
            
            
            
            
            
            9.0Total
      Common Shareholder's Equity
            
            
            
            
            
            $
            1,674.3
            
            
            
            
            
            
            $
            1,490.3The
      disclosures regarding KCP&L included in the accompanying Notes to
      Consolidated Financial Statements are anintegral
      part of these statements.


15


KANSAS
      CITY POWER & LIGHT COMPANYConsolidated
      Statements of Comprehensive Income(Unaudited)Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            
            
            September
      302008
            
            
            2007
            
            
            2008
            
            
            2007(millions)Net
      income
            
            $
            83.9
            
            
            $
            76.6
            
            
            $
            108.8
            
            
            $
            115.1Other
      comprehensive income (loss)Gain
      (loss) on derivative hedging instruments
            
            
            (2.6
            )
            
            
            0.4
            
            
            
            (10.5
            )
            
            
            4.1Income
      taxes
            
            
            1.1
            
            
            
            (0.1
            )
            
            
            4.3
            
            
            
            (1.5
            )Net
      gain (loss) on derivative hedging instruments
            
            
            (1.5
            )
            
            
            0.3
            
            
            
            (6.2
            )
            
            
            2.6Reclassification
      to expenses, net of tax (Note 20)
            
            
            (0.5
            )
            
            
            (0.2
            )
            
            
            (0.4
            )
            
            
            (0.3
            )Derivative
      hedging activity, net of tax
            
            
            (2.0
            )
            
            
            0.1
            
            
            
            (6.6
            )
            
            
            2.3Comprehensive
      income
            
            $
            81.9
            
            
            $
            76.7
            
            
            $
            102.2
            
            
            $
            117.4The
      disclosures regarding KCP&L included in the accompanying Notes to
      Consolidated Financial Statementsare
      an integral part of these
statements.


16


GREAT
PLAINS ENERGY INCORPORATED
 KANSAS
CITY POWER & LIGHT COMPANY
 Notes
to 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” and “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 its consolidated subsidiaries.
  1.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
  Organization
 Great
Plains Energy, a Missouri corporation incorporated in 2001, is a public utility
holding company and does not own or operate any significant assets other than
the stock of its subsidiaries.  Great Plains Energy’s wholly owned
direct subsidiaries with operations or active subsidiaries are:
 ·
                KCP&L
      is an integrated, regulated electric utility that provides electricity to
      customers primarily in the states of Missouri and Kansas.  At
      the end of 2007, KCP&L had two wholly owned subsidiaries, Kansas City
      Power & Light Receivables Company (Receivables Company) and Home
      Service Solutions (HSS).  HSS has no active operations and
      effective January 2, 2008, its ownership was transferred to KLT
      Inc.
  ·
                KCP&L
      Greater Missouri Operations Company (GMO) is an integrated, regulated
      electric utility that primarily provides electricity to customers in the
      state of Missouri.  GMO also wholly owns MPS Merchant Services,
      Inc., (MPS Merchant), which has certain long-term natural gas contracts
      remaining from its former non-regulated trading
      operations.  Great Plains Energy acquired GMO on July 14,
      2008.  See Note 2 for additional
  information.
  ·
                Great
      Plains Energy Services Incorporated (Services) provides services at cost
      to Great Plains Energy and its subsidiaries.
  ·
                KLT
      Inc. is an intermediate holding company that primarily holds investments
      in affordable housing limited partnerships.  KLT Inc. also
      wholly owns KLT Gas, Inc., KLT Telecom Inc. and, effective January 2,
      2008, HSS, which have no active
operations.
  ·
                On
      June 2, 2008, Great Plains Energy completed the sale of Strategic Energy,
      L.L.C. (Strategic Energy).  See Note 13 for additional
      information.  Great Plains Energy indirectly owned 100% of
      Strategic Energy through its wholly owned subsidiaries KLT Inc. and
      Innovative Energy Consultants Inc. (IEC).  IEC did not own or
      operate any assets other than its indirect interest in Strategic
      Energy.  In July 2008, Great Plains Energy’s former wholly owned
      subsidiary, IEC, was merged into KLT
Inc.
 Great
Plains Energy’s sole reportable business segment is electric
utility.  Prior to September 30, 2008, Great Plains Energy’s electric
utility segment is the same as the previously reported KCP&L
segment.  KCP&L’s sole reportable business segment is KCP&L
for the periods presented.  See Note 19 for additional
information.
  Basic
and Diluted Earnings per Common Share Calculation
 To
determine basic EPS, preferred stock dividend requirements are deducted from
income from continuing operations and net income before dividing by the average
number of common shares outstanding.  The earnings (loss) per share
impact of discontinued operations is determined by dividing income (loss) from
discontinued operations, net of income taxes, by the average number of common
shares outstanding.  The effect of dilutive securities, calculated
using the treasury stock method, assumes the issuance of common shares
applicable to stock options, performance shares, restricted stock, a forward
sale agreement and FELINE PRIDESSM.
 17
 The
following table reconciles Great Plains Energy’s basic and diluted EPS from
continuing operations.
 Three
      Months Ended
              
              
              Year
      to DateSeptember
      30
              
              
              September
      302008
              
              
              2007
              
              
              2008
              
              
              2007Income
              
              (millions,
      except per share amounts)Income
      from continuing operations
              
              $
              104.7
              
              
              $
              66.0
              
              
              $
              112.5
              
              
              $
              94.7Less:
      preferred stock dividend requirements
              
              
              0.4
              
              
              
              0.3
              
              
              
              1.2
              
              
              
              1.2Income
      available to common shareholders
              
              $
              104.3
              
              
              $
              65.7
              
              
              $
              111.3
              
              
              $
              93.5Common
      Shares OutstandingAverage
      number of common shares outstanding
              
              
              113.8
              
              
              
              85.6
              
              
              
              95.3
              
              
              
              84.7Add:
      effect of dilutive securities
              
              
              0.1
              
              
              
              0.1
              
              
              
              -
              
              
              
              0.3Diluted
      average number of common shares outstanding
              
              
              113.9
              
              
              
              85.7
              
              
              
              95.3
              
              
              
              85.0Basic
      EPS from continuing operations
              
              $
              0.92
              
              
              $
              0.77
              
              
              $
              1.17
              
              
              $
              1.11Diluted
      EPS from continuing operations
              
              $
              0.92
              
              
              $
              0.77
              
              
              $
              1.17
              
              
              $
              1.10
  The
computation of diluted EPS for the three months ended September 30, 2008,
excludes anti-dilutive shares consisting of 314,511 performance shares, 458,796
restricted stock shares and 329,055 stock options.  The computation of
diluted EPS year to date September 30, 2008, excludes anti-dilutive shares
consisting of 364,217 performance shares, 518,159 restricted stock shares and
272,055 stock options.
  The
computation of diluted EPS for the three months ended and year to date September
30, 2007, excludes anti-dilutive shares consisting of 182,807 and 134,788
performance shares and 421,685 and 381,451 restricted stock shares,
respectively.  There were no anti-dilutive shares applicable to FELINE
PRIDES, stock options or a forward sale agreement.  FELINE PRIDES
settled in the first quarter of 2007 and the forward sale agreement settled in
the second quarter of 2007.
  Dividends
Declared
 In
October 2008, the Board of Directors declared a quarterly dividend of $0.415 per
share on Great Plains Energy’s common stock.  The common dividend is
payable December 19, 2008, to shareholders of record as of November 28,
2008.  The Board of Directors also declared regular quarterly
dividends on Great Plains Energy’s preferred stock, payable March 1, 2009, to
shareholders of record as of February 6, 2009.
 
 2.
              GMO  ACQUISITION
  On July 14, 2008, Great
Plains Energy closed its acquisition of GMO.  On October 17, 2008, GMO
changed its name from Aquila, Inc. to KCP&L Greater Missouri Operations
Company (GMO).  Prior GMO shareholders received $1.80 in cash plus
0.0856 of a share of Great Plains Energy common stock for each share of GMO
common stock.  The total purchase price of the acquisition was
approximately $1.7 billion.  Based on the market price of Great Plains
Energy common stock during the period including the two trading days before
through the two trading days after February 7, 2007, the date that Great Plains
Energy and Aquila announced the acquisition, the fair value of the 32.2 million
shares of Great Plains Energy common stock issued was approximately $1.0
billion.  Great Plains Energy paid approximately $0.7 billion of cash
consideration.  Immediately prior to Great Plains Energy’s acquisition
of GMO,
Black Hills Corporation (Black Hills) acquired Aquila’s electric utility assets
in Colorado and its gas utility assets in Colorado, Kansas, Nebraska and
Iowa.  Following the closing of the acquisition, Great Plains Energy
wholly owns GMO,
including its Missouri-based utility operations consisting of the Missouri
Public Service and St. Joseph Light & Power divisions.  GMO
is included in Great Plains Energy’s consolidated financial statements beginning
as of July 14, 2008.
  The
transaction received the final required regulatory approval order from the
Public Service Commission of the State of Missouri (MPSC) on July 1,
2008.  Certain parties have filed appeals and a motion to stay the
order with the Cole County, Missouri, circuit court.  The
order remains in effect unless reversed by the courts.
 18
 The MPSC
order approved the deferral of non-labor transition costs to be amortized over a
five-year period beginning with the first post-transaction rate cases to the
extent that synergy savings exceed amortization.  In the second
quarter of 2008, KCP&L deferred non-labor transition costs as a regulatory
asset pursuant to The State Corporation Commission of the State of Kansas (KCC)
order approving the Aquila acquisition to be amortized over a five-year period
beginning with rates expected to be effective in 2010.  At September
30, 2008, Great Plains Energy had $33.9 million of regulatory assets related to
non-labor transition costs, which included $20.7 million at KCP&L and $13.2
million at GMO.
  The
acquisition was accounted for under the purchase method of
accounting.  As a result, the assets and liabilities of Aquila were
recorded at their estimated fair values as of July 14, 2008.  The fair
values are preliminary and are subject to adjustment as additional information
is obtained,
but will be finalized within one year from the acquisition
date.  The following table shows the preliminary allocation of
the purchase price to the assets acquired and liabilities assumed at the date of
the acquisition.
 July
      142008Purchase
      Price Allocation
                
                (millions)Cash
                
                $
                677.7Common
      stock (32.2 million shares)
                
                
                1,026.1
                (a)Stock
      options (0.5 million options)
                
                
                2.7
                (b)Transaction
      costs
                
                
                34.6Total
      purchase price
                
                
                1,741.1Cash
      and cash equivalents
                
                
                949.6Receivables
      (net of $2.4 allowance for doubtful accounts)
                
                
                127.1Deferred
      income taxes
                
                
                497.0Other
      current assets
                
                
                131.6Utility
      plant, net
                
                
                1,641.0Nonutility
      property and investments
                
                
                131.3Regulatory
      assets
                
                
                193.9Other
      long-term assets
                
                
                79.4Total
      assets acquired
                
                
                3,750.9Current
      liabilities
                
                
                315.8Regulatory
      liabilities
                
                
                115.9Deferred
      income taxes
                
                
                252.4Long-term
      debt
                
                
                1,334.2Other
      long-term liabilities
                
                
                143.8Net
      assets acquired
                
                
                1,588.8Preliminary
      goodwill
                
                $
                152.3(a)The
      fair value is based on the average closing price of Great Plains Energy
      common stockof
      $31.88, the average during the period beginning two trading days before
      and ending twotrading
      days after February 7, 2007, the announcement of the acquisition, net of
      issuing costs.(b)The
      fair value is calculated by multiplying the stock options outstanding at
      July 14,2008,
      by the option exchange ratio of 0.1569, calculated as defined in the
      merger agreement.
 Great
Plains Energy recorded $152.3 million of preliminary goodwill, all of which is
included in the electric utility segment.  None of the goodwill is tax
deductible.  The
factors that contributed to a purchase price that resulted in goodwill were
strategic considerations and significant cost savings and synergies
including:
expanded regulated electric utility business; adjacent regulated electric
utility territories; increased GMO financial strength and flexibility; improved
reliability and customer service and disposition of non-strategic gas
operations.
 19
 In
connection with the acquisition of GMO,
Great Plains Energy recognized an intangible liability of approximately $25.9
million associated with the remaining natural gas contracts of MPS Merchant, its
non-regulated former wholesale energy trading operations, that do not qualify as
derivatives under Statement of Financial Accounting Standards (SFAS) No. 133,
“Accounting for Derivative Instruments and Hedging Activities”.  The
carrying amount of this intangible liability was approximately $26.2
million at September 30, 2008, and is reported as a component of other
liabilities on
Great Plains Energy’s consolidated balance sheet.  The balance will be
amortized into expense through March 31, 2017, based on
volumes of the underlying contracts.  Amortization for the
remainder of 2008 is estimated at $0.8
million and $4.4
million for each of 2009 and 2010.
  The
following table provides unaudited pro forma results of operations for Great
Plains Energy for the three months and year to date ended September 30, 2008, as
if the acquisition had occurred January 1, 2008.  The table also
provides unaudited pro forma results of operations for Great Plains Energy for
the three months and year to date September 30, 2007, as if the acquisition had
occurred January 1, 2007.  Pro forma results are not necessarily
indicative of the actual results that would have resulted had the acquisition
actually occurred on January 1, 2008 or
January 1, 2007.
 Three
      Months Ended
              
              Year
      to DateSeptember
      30
              
              September
      302008
              
              
              2007
              
              
              2008
              
              
              2007(millions,
      except per share amounts)Operating
      revenues
              
              $
              624.7
              
              
              $
              650.7
              
              
              $
              1,569.7
              
              
              $
              1,500.4Income
      from continuing operations
              
              $
              102.0
              
              
              $
              120.3
              
              
              $
              114.2
              
              
              $
              102.8Net
      income
              
              $
              102.3
              
              
              $
              116.4
              
              
              $
              149.2
              
              
              $
              119.2Earnings
      available for common shareholders
              
              $
              101.9
              
              
              $
              116.1
              
              
              $
              148.0
              
              
              $
              118.0Basic
      earnings per common share fromcontinuing
      operations
              
              $
              0.89
              
              
              $
              1.02
              
              
              $
              1.19
              
              
              $
              0.87Basic
      earnings per common share
              
              $
              0.89
              
              
              $
              0.99
              
              
              $
              1.56
              
              
              $
              1.01Diluted
      earnings per common share fromcontinuing
      operations
              
              $
              0.89
              
              
              $
              1.02
              
              
              $
              1.19
              
              
              $
              0.87Diluted
      earnings per common share
              
              $
              0.89
              
              
              $
              0.99
              
              
              $
              1.56
              
              
              $
              1.01
 20
 3.
              SUPPLEMENTAL
      CASH FLOW INFORMATION
  Great
      Plains Energy Other Operating ActivitiesYear
      to Date September 30
              
              2008
              
              
              2007Cash
      flows affected by changes in:
              
              (millions)Receivables
              
              $
              9.8
              
              
              $
              (136.3
              )Fuel
      inventories
              
              
              (0.9
              )
              
              
              (8.4
              )Materials
      and supplies
              
              
              (2.7
              )
              
              
              (3.5
              )Accounts
      payable
              
              
              (1.4
              )
              
              
              26.3Accrued
      taxes
              
              
              116.4
              
              
              
              59.2Accrued
      interest
              
              
              19.2
              
              
              
              7.1Deferred
      refueling outage costs
              
              
              (8.8
              )
              
              
              5.8Accrued
      plant maintenance costs
              
              
              1.2
              
              
              
              -Pension
      and post-retirement benefit obligations
              
              
              6.3
              
              
              
              16.8Allowance
      for equity funds used during construction
              
              
              (14.3
              )
              
              
              (0.6
              )Deferred
      acquisition costs
              
              
              (13.2
              )
              
              
              (12.1
              )T-Lock
      settlement
              
              
              (41.2
              )
              
              
              (4.5
              )Fuel
      adjustment clauses
              
              
              (5.6
              )
              
              
              -Proceeds
      from forward starting swaps
              
              
              -
              
              
              
              3.3Other
              
              
              (31.7
              )
              
              
              (10.8
              )Total
      other operating activities
              
              $
              33.1
              
              
              $
              (57.7
              )Cash
      paid during the period:Interest
              
              $
              50.9
              
              
              $
              58.6Income
      taxes
              
              $
              19.0
              
              
              $
              3.4Non-cash
      investing activities:Liabilities
      assumed for capital expenditures
              
              $
              73.5
              
              
              $
              52.5
  KCP&L
      Other Operating ActivitiesYear
      to Date September 30
              
              2008
              
              
              2007Cash
      flows affected by changes in:
              
              (millions)Receivables
              
              $
              9.5
              
              
              $
              (63.3
              )Fuel
      inventories
              
              
              (5.7
              )
              
              
              (8.4
              )Materials
      and supplies
              
              
              (3.4
              )
              
              
              (3.5
              )Accounts
      payable
              
              
              12.6
              
              
              
              (24.9
              )Accrued
      taxes
              
              
              102.1
              
              
              
              61.1Accrued
      interest
              
              
              12.5
              
              
              
              6.6Deferred
      refueling outage costs
              
              
              (8.8
              )
              
              
              5.8Pension
      and post-retirement benefit obligations
              
              
              -
              
              
              
              14.9Allowance
      for equity funds used during construction
              
              
              (14.3
              )
              
              
              (0.6
              )T-Lock
      settlement
              
              
              (41.2
              )
              
              
              -Kansas
      Energy Cost Adjustment
              
              
              (5.5
              )
              
              
              -Proceeds
      from forward starting swaps
              
              
              -
              
              
              
              3.3Other
              
              
              (33.3
              )
              
              
              (5.6
              )Total
      other operating activities
              
              $
              24.5
              
              
              $
              (14.6
              )Cash
      paid during the period:Interest
              
              $
              40.7
              
              
              $
              44.0Income
      taxes
              
              $
              4.0
              
              
              $
              7.5Non-cash
      investing activities:Liabilities
      assumed for capital expenditures
              
              $
              67.4
              
              
              $
              52.5 21
 Other
Significant Non-Cash Items
 On July
14, 2008, Great Plains Energy closed its acquisition of GMO.  The
total purchase price of the acquisition was approximately $1.7
billion.  The fair value of the 32.2 million shares of Great Plains
Energy common stock issued was approximately $1.0 billion.  Great
Plains Energy paid approximately $0.7 billion of cash
consideration.  See Note 2 for additional information.
  Year to
date September 30, 2008, KCP&L recorded a $15.6 million net increase in
Asset Retirement Obligation (ARO) with a corresponding increase in net utility
plant as a result of changes in cost estimates and timing used to compute the
present value of asbestos AROs for KCP&L’s generating stations and an update
to the cost estimates to decommission Wolf Creek Generating Station (Wolf
Creek).  This activity had no impact on Great Plains Energy’s or
KCP&L’s 2008 cash flows.  See Note 18 for additional
information.
  In
February 2007, Great Plains Energy issued 5.2 million shares of common stock in
satisfaction of the FELINE PRIDES stock purchase contracts and the redemption of
the $163.6 million FELINE PRIDES Senior Notes.
  4.
                RECEIVABLES
  Great
Plains Energy’s and KCP&L’s receivables are detailed in the following
table.
 September
      30
              December
      312008
              2007KCP&L
              
              (millions)Customer
      accounts receivable - billed
              
              $
              27.3
              
              
              $
              7.6Customer
      accounts receivable - unbilled
              
              
              45.8
              
              
              
              37.7Allowance
      for doubtful accounts
              
              
              (1.4
              )
              
              
              (1.2
              )Intercompany
      receivables
              
              
              37.3
              
              
              
              10.5Other
      receivables
              
              
              99.3
              
              
              
              121.8Total
              
              $
              208.3
              
              
              $
              176.4Great
      Plains EnergyCustomer
      accounts receivable - billed
              
              $
              98.1
              
              
              $
              7.6Customer
      accounts receivable - unbilled
              
              
              68.4
              
              
              
              37.7Allowance
      for doubtful accounts
              
              
              (4.0
              )
              
              
              (1.2
              )Other
      receivables
              
              
              187.9
              
              
              
              132.4Elimination
      of KCP&L intercompany receivables
              
              
              (37.3
              )
              
              
              (10.5
              )Total
              
              $
              313.1
              
              
              $
              166.0
 Great
Plains Energy’s and KCP&L’s other receivables at September 30, 2008, and
December 31, 2007, consisted primarily of receivables from partners in jointly
owned electric utility plants and wholesale sales
receivables.
 
 Sale
of Accounts Receivable – KCP&L
 KCP&L
sells all of its retail electric accounts receivable to its wholly owned
subsidiary, Receivables Company, which in turn sells an undivided percentage
ownership interest in the accounts receivable to Victory Receivables
Corporation, an independent outside investor.  In accordance with SFAS
No. 140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities,” the sales under these agreements qualify as a
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.  Accounts receivable sold by
Receivables Company to the outside investor under this revolving agreement
totaled $70.0 million at September 30, 2008 and 2007.  KCP&L sells
its receivables at a fixed price based upon the expected cost of funds and
charge-offs.  These costs comprise KCP&L’s loss on the sale of
accounts receivable.  KCP&L services the receivables and receives
an annual servicing fee of 2.5% of the outstanding principal amount of the
receivables sold to Receivables Company.  KCP&L does not recognize
a servicing asset or liability because management determined the
 22
 collection
agent fee earned by KCP&L approximates market value.  The
agreement was extended for one year in July 2008.
  Information
regarding KCP&L’s sale of accounts receivable to Receivables Company is
reflected in the following tables.
 Receivables
              
              
              ConsolidatedThree
      Months Ended September 30, 2008
              
              KCP&L
              
              
              Company
              
              
              KCP&L(millions)Receivables
      (sold) purchased
              
              $
              (372.6
              )
              
              $
              372.6
              
              
              $
              -Gain
      (loss) on sale of accounts receivable (a)
              
              
              (4.7
              )
              
              
              4.5
              
              
              
              (0.2
              )Servicing
      fees
              
              
              1.0
              
              
              
              (1.0
              )
              
              
              -Fees
      to outside investor
              
              
              -
              
              
              
              (0.6
              )
              
              
              (0.6
              )Cash
      flows during the periodCash
      from customers transferred to Receivables Company
              
              
              (363.8
              )
              
              
              363.8
              
              
              
              -Cash
      paid to KCP&L for receivables purchased
              
              
              359.3
              
              
              
              (359.3
              )
              
              
              -Servicing
      fees
              
              
              1.0
              
              
              
              (1.0
              )
              
              
              -Interest
      on intercompany note
              
              
              0.8
              
              
              
              (0.8
              )
              
              
              -
  Receivables
              
              
              ConsolidatedYear
      to Date September 30, 2008
              
              KCP&L
              
              
              Company
              
              
              KCP&L(millions)Receivables
      (sold) purchased
              
              $
              (896.2
              )
              
              $
              896.2
              
              
              $
              -Gain
      (loss) on sale of accounts receivable (a)
              
              
              (11.3
              )
              
              
              10.9
              
              
              
              (0.4
              )Servicing
      fees
              
              
              2.4
              
              
              
              (2.4
              )
              
              
              -Fees
      to outside investor
              
              
              -
              
              
              
              (1.9
              )
              
              
              (1.9
              )Cash
      flows during the periodCash
      from customers transferred to Receivables Company
              
              
              (873.9
              )
              
              
              873.9
              
              
              
              -Cash
      paid to KCP&L for receivables purchased
              
              
              863.0
              
              
              
              (863.0
              )
              
              
              -Servicing
      fees
              
              
              2.4
              
              
              
              (2.4
              )
              
              
              -Interest
      on intercompany note
              
              
              1.6
              
              
              
              (1.6
              )
              
              
              -
  Receivables
              
              
              ConsolidatedThree
      Months Ended September 30, 2007
              
              KCP&L
              
              
              Company
              
              
              KCP&L(millions)Receivables
      (sold) purchased
              
              $
              (364.8
              )
              
              $
              364.8
              
              
              $
              -Gain
      (loss) on sale of accounts receivable (a)
              
              
              (4.7
              )
              
              
              4.3
              
              
              
              (0.4
              )Servicing
      fees
              
              
              1.0
              
              
              
              (1.0
              )
              
              
              -Fees
      to outside investor
              
              
              -
              
              
              
              (1.0
              )
              
              
              (1.0
              )Cash
      flows during the periodCash
      from customers transferred to Receivables Company
              
              
              (342.6
              )
              
              
              342.6
              
              
              
              -Cash
      paid to KCP&L for receivables purchased
              
              
              338.3
              
              
              
              (338.3
              )
              
              
              -Servicing
      fees
              
              
              1.0
              
              
              
              (1.0
              )
              
              
              -Interest
      on intercompany note
              
              
              1.3
              
              
              
              (1.3
              )
              
              
              - 23
 Receivables
              
              
              ConsolidatedYear
      to Date September 30, 2007
              
              KCP&L
              
              
              Company
              
              
              KCP&L(millions)Receivables
      (sold) purchased
              
              $
              (857.0
              )
              
              $
              857.0
              
              
              $
              -Gain
      (loss) on sale of accounts receivable (a)
              
              
              (10.5
              )
              
              
              9.6
              
              
              
              (0.9
              )Servicing
      fees
              
              
              2.4
              
              
              
              (2.4
              )
              
              
              -Fees
      to outside investor
              
              
              -
              
              
              
              (3.0
              )
              
              
              (3.0
              )Cash
      flows during the periodCash
      from customers transferred to Receivables Company
              
              
              (815.0
              )
              
              
              815.0
              
              
              
              -Cash
      paid to KCP&L for receivables purchased
              
              
              805.3
              
              
              
              (805.3
              )
              
              
              -Servicing
      fees
              
              
              2.4
              
              
              
              (2.4
              )
              
              
              -Interest
      on intercompany note
              
              
              2.5
              
              
              
              (2.5
              )
              
              
              -(a)
              Any
      net gain (loss) is the result of the timing difference inherent in
      collecting receivables andover
      the life of the agreement will net to
zero.
   5.
              ASSETS
      HELD FOR SALE
  On July
14, 2008, Great Plains Energy closed its acquisition of GMO.  Great
Plains Energy acquired several real
estate properties that will not be used.  These real
estate properties are available for immediate sale in their present
condition.  Management believes it is probable
the sales
will be completed within one year and is taking available actions to make such
sales
probable.  The carrying amounts for these assets are presented at fair
value less estimated selling cost and are included in assets held for sale on
Great Plains Energy’s balance sheet.
 
 6.
              NUCLEAR
      PLANT
  KCP&L
owns 47% of Wolf Creek Nuclear Operating Corporation (WCNOC), the operating
company for Wolf Creek, its only nuclear generating unit.  Wolf Creek
is regulated by the Nuclear Regulatory Commission (NRC), with respect to
licensing, operations and safety-related requirements.
  Nuclear
Plant Decommissioning Costs
 The MPSC
and KCC require KCP&L and the other owners of Wolf Creek to submit an
updated decommissioning cost study every three years and to propose funding
levels.  The most recent study was submitted to the MPSC and KCC in
August 2008 and is the basis for the current cost of decommissioning estimates
in the following table.  KCP&L did not request an increase in
funding levels and estimated that the current annual contribution will be
adequate to cover the decommissioning costs of Wolf Creek.
 Total
              
              KCP&L'sStation
              
              47%
      Share(millions)Current
      cost of decommissioning (in 2008 dollars)
              
              $       594
              
              $       279Future
      cost of decommissioning (in 2045-2053 dollars) (a)
              
              3,335
              
              1,568Annual
      escalation factor
              
              4.40%Annual
      return on trust assets(b)
              
              6.48%(a)
              Total
      future cost over an eight year decommissioning period.(b)
              The
      6.48% rate of return is through 2025.  The rate then
      systematically decreasesthrough
      2053 to 2.82% based on the assumption that the fund's investment
      mixwill
      become increasingly more conservative as the decommissioning
      periodapproaches.
 24
 KCP&L
currently contributes approximately $3.7 million annually to a tax-qualified
trust fund to be used to decommission Wolf Creek.  Amounts funded are
charged to other operating expense and recovered in customers’
  Spent
Nuclear Fuel and Radioactive Waste
 Under the
Nuclear Waste Policy Act of 1982, the Department of Energy (DOE) is responsible
for the permanent disposal of spent nuclear fuel.  KCP&L pays the DOE a
quarterly fee of one-tenth of a cent for each kWh of net nuclear generation
delivered and sold for the future disposal of spent nuclear fuel.  These
disposal costs are charged to fuel expense.  On June 3, 2008, the DOE filed
with the NRC an application for authority to construct a national repository for
the disposal of spent nuclear fuel and high-level radioactive waste at Yucca
Mountain, Nevada.  On September 8, 2008, the NRC found the
application sufficiently complete to undergo a technical licensing review and
therefore docketed the application.  The DOE has indicated
that, assuming the NRC approves the application in the next three to four years,
the DOE could be ready to begin accepting spent nuclear fuel by 2020, but only
if Congress provides adequate funding for the project.  Management cannot
predict when this site may be available for Wolf Creek.  Under current
DOE policy, once a permanent site is available, the DOE will accept spent
nuclear fuel first from the owners with the older spent fuel.  Wolf
Creek has completed an on-site storage facility designed to hold all spent fuel
generated at the plant through 2025.  If the DOE meets its revised
timetable for accepting spent fuel for disposal by 2020, management expects that
the DOE could begin accepting some of Wolf Creek’s spent fuel by
2028.  Management can make no assurance that the DOE will meet its
revised timetable and will continue to monitor this activity.  See
Note 17 for a related legal proceeding.
  Low-Level
Radioactive Waste
 Wolf
Creek disposes of most of its low-level radioactive waste at an existing
third-party repository.  Effective July 1, 2008, the State of South
Carolina no longer accepts low-level radioactive waste at its disposal site at
Barnwell, South Carolina, except for waste from generators located in South
Carolina, Connecticut, and New Jersey, the three states that make up the
Atlantic Interstate Low-Level Radioactive Waste Management Compact.
 Management expects that another site in the state of Utah will remain
available to Wolf Creek.  Should disposal capability become
unavailable, management believes Wolf Creek will be able to store its low-level
radioactive waste in an on-site facility and that a temporary loss of low-level
radioactive waste disposal capability would not affect Wolf Creek’s continued
operation.
 25
 7.
              REGULATORY
      MATTERS
  Regulatory
Proceedings
 On
September 5, 2008, KCP&L filed requests for annual rate increases with the
MPSC and KCC and GMO filed requests for annual rate increases with the MPSC, with
new rates expected to be effective in the third quarter of
2009.  The following table summarizes the
requests.
 Annual
      Revenue IncreaseAdditional
              
              
              
              
              Return
              
              Rate-makingRate
      Jurisdiction (1)
              File
      Date
              Traditional
      (2)
              
              Amortization
              
              
              Total
      (3)
              
              on
      Equity
              
              Equity
      RatioGMO
      (MPS)
              9/5/2008
              
              $
              66.0
              
              
              $
              -
              
              
              $
              66.0
              
              
              
              10.75
              %
              
              
              53.82
              %GMO
      (L&P)
              9/5/2008
              
              
              17.1
              
              
              
              -
              
              
              
              17.1
              
              
              
              10.75
              %
              
              
              53.82
              %GMO
      (Steam)
              9/5/2008
              
              
              1.3
              
              
              
              -
              
              
              
              1.3
              
              
              
              10.75
              %
              
              
              53.82
              %KCP&L
      (MO)
              9/5/2008
              
              
              86.4
              
              
              
              15.1
              
              
              
              101.5
              
              
              
              10.75
              %
              
              
              53.82
              %KCP&L
      (KS)
              9/5/2008
              
              
              60.4
              
              
              
              11.2
              
              
              
              71.6
              
              
              
              10.75
              %
              
              
              55.39
              %Total
              
              
              $
              231.2
              
              
              $
              26.3
              
              
              $
              257.5
 (1)
      Rate Jurisdiction Areas:
 GMO
(MPS):  Represents the area served by GMO's Missouri Public Service
division
 GMO
(L&P):  Represents the area served by GMO's St. Joseph Light &
Power division
 GMO
(Steam):  Former St. Joseph Light & Power steam
customers
 KCP&L
(MO):  KCP&L Missouri customers
 KCP&L
(KS):  KCP&L Kansas customers
 (2)The
      amounts in this column reflect the revenue requirements calculated using
      the traditional rate case methodologies, which
                exclude additional amortization amounts tohelp maintain
      cash flow levels
 (3)Excludes amounts
      recovered through KCP&L’sKansasenergy
      cost adjustment and GMO’s fuel adjustment
    clause
 
 KCP&L’s
Comprehensive Energy Plan and Collaboration Agreement
 In the
second quarter of 2008, KCP&L completed a cost and schedule update for the
Iatan No. 1 environmental project and the Iatan No. 2 coal plant construction
project.  This updated assessment was driven by several factors,
including (a) the combined projects reaching a milestone of 70% - 75% of the
engineering work completed; (b) the integration of the Iatan No. 2 balance of
plant schedule and quantity estimates into the master schedule and budget; and
(c) continued challenging construction market trends, including rapidly
escalating costs for construction materials and services, the level of global
investment in power production facilities, the decline in the value of the U.S.
dollar, and constrained labor availability.
  The
results of this update were as follows:
  ·
              Based
      on the top end of the new estimate ranges, the combined increase in
      projected costs of the Iatan No. 1 environmental project and the
      new Iatan No. 2 unit is approximately
19%.
  ·
              Compared
      to the previous estimate of $837 million - $914 million provided in the
      2006 Form 10-K, KCP&L’s approximate 55% share of the total projected
      cost of Iatan No. 2 has increased to a range of $994 million - $1.051
      billion, with the top end of the range representing a 15% increase.Great Plains Energy’s total share of Iatan No. 2 is 73%, which consists of KCP&L’s 55% share and
      GMO’s 18% share.  Great
      Plains Energy’s 73% share of the total projected cost of Iatan No. 2
      is $1.321 billion - $1.397
billion.
 26
 
 ·
                The
      anticipated in-service date for Iatan No. 2 continues to be the summer of
      2010
 ·
              KCP&L’s
      70% share of the projected cost of the Iatan No. 1 environmental project
      has increased to a range of $330 million - $350 million.  This
      represents an increase of 33% compared to the top end of the previous
      range estimate of $255 million - $264 million for Iatan No. 1 included in
      the total amount for Environmental Retrofit Projects in KCP&L’s
      Comprehensive Energy Plan of $423 million - $443 million provided in the
      2006 Form 10-K.  Great
      Plains Energy’s total share of
      Iatan No. 1 is 88%,
      which consists of KCP&L’s70%
      share and GMO’s 18% share.  Great
      Plains Energy’s88%
      share of the total projected cost oftheIatan
      No.1
      environmental projectis
      $415 million - $440 million.
  ·
              The
      in-service date for the Iatan No. 1 environmental project is now expected
      to be February 2009 compared to the previous estimate of year-end
      2008.
  In the
Collaboration Agreement among KCP&L, the Sierra Club and the Concerned
Citizens of Platte County, KCP&L agreed to use its best efforts to install
emission control technologies to reduce emissions from the LaCygne Station prior
to the required compliance date under the Environmental Protection Agency (EPA)
best available retrofit technology rule (BART), but in no event later than June
1, 2015.  KCP&L further agreed to issue requests for proposal for
the equipment required to comply with BART by December 31, 2008, requesting that
construction commence by December 31, 2010.  KCP&L’s Comprehensive
Energy Plan includes a project to install the required emission control
technologies at LaCygne No. 1 for completion in 2009.  Demand for
environmental equipment has increased substantially leading to extremely long
lead times for equipment.  As a result, the LaCygne No. 1 project will
not be completed in 2009.  Since KCP&L must also install such
emission control technologies at LaCygne No. 2, management is evaluating the
possibility of combining the required environmental upgrades for both LaCygne
Nos. 1 and 2 into one project, but that determination has not yet been
made.
  KCP&L
agreed in the Collaboration Agreement to pursue increasing its wind generation
capacity by 100MW by the end of 2010.  KCP&L had entered into
agreements to acquire 100MW of wind generation for approximately $215
million.  In October
2008, KCP&L provided notice to terminate this contract;
however, management
is currently in
discussions with the developer to explore alternatives.  Also
in the Collaboration Agreement, KCP&L agreed to pursue an additional 300MW
of wind generation capacity by the end of 2012, all subject to regulatory
approval.
  The asset
management and customer programs included in KCP&L’s Comprehensive Energy
Plan are progressing on target.
  GMO
RTO Application
 GMO’s
application to join the Midwest Independent Transmission System Operator, Inc.
(MISO) Regional Transmission Organization (RTO) was
denied by the MPSC in
October 2008.  GMO expects to request MPSC authorization to
transfer functional control of its transmission system to the Southwest Power
Pool, Inc. (SPP), but there is no assurance regarding the outcome of the
expected request.
  KCP&L
Missouri 2006 Rate Case Appeal
 On
December 21, 2006, the MPSC issued an order approving an approximate $51 million
increase in annual revenues effective January 1, 2007.  Appeals of the
MPSC order were filed in February 2007 with the Circuit Court of Cole County,
Missouri, by the Office of Public Counsel, Praxair, Inc., and Trigen-Kansas City
Energy Corporation, seeking to set aside or remand the order to the
MPSC.  The court affirmed the MPSC’s decision in December 2007 and
that decision was appealed by Trigen-Kansas City Energy
Corporation.  Trigen-Kansas City Energy Corporation withdrew its
appeal on June 3, 2008.
 27
 Regulatory
Assets and Liabilities
 Great
Plains Energy’s and KCP&L’s regulatory assets and liabilities are detailed
in the following table.  Regulatory assets for which costs have been
incurred have been included (or are expected to be included, for costs incurred
subsequent to the most recently approved rate case) in KCP&L’s and GMO’s
rate base, thereby providing a return on invested costs.  Certain
regulatory assets do not result from cash expenditures and therefore do not
represent investments included in rate base or have offsetting liabilities that
reduce rate base.
 GMO
              
              
              Great
      Plains EnergySeptember
      30, 2008
              
              KCP&LRegulatory
      Assets
              
              (millions)Taxes
      recoverable through future rates
              
              $
              72.7
              
              
              
              $
              45.9
              
              
              
              $
              118.6Loss
      on reacquired debt
              
              
              5.8
              
              (a)
              
              
              0.4
              
              (a)
              
              
              6.2Cost
      of removal
              
              
              10.5
              
              
              
              
              -
              
              
              
              
              10.5Asset
      retirement obligations
              
              
              20.4
              
              
              
              
              11.9
              
              
              
              
              32.3SFAS
      No. 158 pension and post-retirement costs
              
              
              115.9
              
              (c)
              
              
              49.4
              
              (c)
              
              
              165.3Other
      pension and post-retirement costs
              
              
              78.9
              
              (d)
              
              
              20.1
              
              (d)
              
              
              99.0Environmental
      remediation
              
              
              -
              
              
              
              
              1.9
              
              (h)
              
              
              1.9Deferred
      customer programs
              
              
              21.4
              
              (e)
              
              
              -
              
              
              
              
              21.4Rate
      case expenses
              
              
              2.3
              
              (f)
              
              
              0.6
              
              (f)
              
              
              2.9Skill
      set realignment costs
              
              
              7.8
              
              (g)
              
              
              -
              
              
              
              
              7.8Under-recovery
      of energy costs
              
              
              5.5
              
              (h)
              
              
              35.9
              
              (h)
              
              
              41.4Acquisition
      transition non-labor costs
              
              
              20.7
              
              
              
              
              13.2
              
              
              
              
              33.9St.
      Joseph Light & Power acquisition
              
              
              -
              
              
              
              
              3.7
              
              (h)
              
              
              3.7Storm
      damage
              
              
              -
              
              
              
              
              6.8
              
              (h)
              
              
              6.8Other
              
              
              6.3
              
              (i)
              
              
              3.7
              
              (i)
              
              
              10.0Total
              
              $
              368.2
              
              
              
              $
              193.5
              
              
              
              $
              561.7Regulatory
      LiabilitiesEmission
      allowances
              
              $
              86.6
              
              
              
              $
              1.1
              
              
              
              $
              87.7Asset
      retirement obligations
              
              
              29.9
              
              
              
              
              -
              
              
              
              
              29.9Pension
              
              
              -
              
              
              
              
              25.9
              
              
              
              
              25.9Cost
      of removal
              
              
              -
              
              
              
              
              56.2
              
              (j)
              
              
              56.2Other
              
              
              3.3
              
              
              
              
              8.6
              
              
              
              
              11.9Total
              
              $
              119.8
              
              
              
              $
              91.8
              
              
              
              $
              211.6 28
 KCP&L
      andDecember
      31, 2007
              
              Great
      Plains EnergyRegulatory
      Assets
              
              (millions)Taxes
      recoverable through future rates
              
              $
              66.5Loss
      on reacquired debt
              
              
              5.9
              (a)Change
      in depreciable life of Wolf Creek
              
              
              45.4
              (b)Cost
      of removal
              
              
              8.4Asset
      retirement obligations
              
              
              18.5SFAS
      No. 158 pension and post-retirement costs
              
              
              146.8
              (c)Other
      pension and post-retirement costs
              
              
              76.1Deferred
      customer programs
              
              
              11.6Rate
      case expenses
              
              
              3.2Skill
      set realignment costs
              
              
              8.9Other
              
              
              8.8Total
              
              $
              400.1Regulatory
      LiabilitiesEmission
      allowances
              
              $
              87.5Asset
      retirement obligations
              
              
              39.4Additional
      Wolf Creek amortization (Missouri)
              
              
              14.6
              (b)Other
              
              
              2.6Total
              
              $
              144.1
 (a)
              Amortized
      over the life of the related new debt issuances or the remaining lives of
      the old debt issuances if no new debt was
  issued.
 (b)
              Consistent
      with current ratemaking treatment in Missouri and Kansas, KCP&L
      reclassified the regulatory assets for change in depreciable life of Wolf
      Creek of $45.4 million (Missouri and Kansas) and the regulatory liability
      for additional Wolf Creek amortization (Missouri) of $14.6 million at
      December 31, 2007, to accumulated depreciation in the second quarter of
      2008.
 (c)
              KCP&L’s
      regulatory asset for SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans,” pension and
      post-retirement costs at September 30, 2008, is more than offset by
      related liabilities, not included in rate base.  GMO’s
      regulatory asset for SFAS No. 158 at September 30, 2008, includes $42.0
      million, net of related liabilities, not included in rate
      base.  This regulatory asset represents the difference between
      funding and expenses recognized for the pension and post-retirement plans,
      which will be amortized in accordance with SFAS No. 87, “Employers’
      Accounting for Pensions.”
 (d)
              KCP&L’s
      regulatory asset for other pension and post-retirement costs at September
      30, 2008, includes $52.1 million representing pension settlements and
      financial and regulatory accounting method differences not included in
      rate base.  The pension settlements, totaling $10.5 million, are
      being amortized over a five-year period, which began January 1,
      2008.  The accounting method difference will be eliminated over
      the life of the pension plans.  GMO’s regulatory asset for other
      pension and post-retirement costs at September 30, 2008, is in rate base
      and is amortized over various
periods.
 (e)
              $8.6
      million not included in rate base.
 (f)
              $1.4
      million not included in rate base and amortized over various periods at
      KCP&L.  $0.4 million not included in rate base and amortized
      over various periods at GMO.
 (g)
              $3.7
      million not included in rate base and amortized through
    2017.
 (h)
              Not
      included in rate base.
 (i)
              Certain
      insignificant items are not included in rate base and amortized over
      various periods.
 (j)
              Estimated
      cumulative net provision for future removal
  costs.
 29
 8.
              PENSION
      PLANS AND OTHER EMPLOYEE BENEFITS
  Pension
Plans and Other Employee Benefits
 The
Company maintains defined benefit pension plans for substantially all active and
inactive employees, including officers, of KCP&L, GMO, Services and WCNOC
and incurs significant costs in providing the plans.  Pension benefits
under these plans reflect the employees’ compensation, years of service and age
at retirement.
  Year to
date September 30, 2008, the Company contributed $21.7 million to the plans and
expects to contribute an additional $7.7 million to satisfy the funding
requirements ofEmployee
Retirement Income Security Act of 1974, as amended(ERISA)and the
2007 MPSC and KCC rate orders.  In addition, the Company plans to make
a voluntary contribution in the fourth quarter of 2008 ofapproximately$18.0
million to maintain the funded status of the qualified benefit plans.  The
contributions
will be paid by KCP&L.
  KCP&L
and GMO record pension expense in accordance with rate orders from the MPSC and
KCC that allow the difference between pension costs under SFAS No. 87 and SFAS
No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits,” and pension costs for
ratemaking to be recognized as a regulatory asset or liability.
  In
addition to providing pension benefits, the Company provides certain
post-retirement health care and life insurance benefits for substantially all
retired employees of KCP&L, GMO, Services and WCNOC.  The cost of
post-retirement benefits charged to KCP&L are accrued during an employee's
years of service and recovered through rates.
  As a
result of the GMO acquisition on July 14, 2008, the Company’s 2008 pension and
post-retirement expenses under SFAS No. 87 and SFAS No. 106, “Employers’
Accounting for Post-retirement Benefits Other Than Pensions,” are expected
to increase $2.4 million and $1.1 million, respectively.  The
following table provides the changes in the funded status of the plans and the
regulatory assets and liabilities at the date of acquisition.
 Pension 
      Benefit
              Other
                Benefits(millions)Projected
      benefit obligation
              
              $
              194.4
              
              
              $
              38.9Fair
      value of plan assets
              
              
              168.1
              
              
              
              15.5Funded
      status
              
              
              (26.3
              )
              
              
              (23.4
              )Regulatory
      assets
              
              
              51.3
              
              
              
              14.9Regulatory
      liabilities
              
              
              32.3
              
              
              
              -
 Current
and former employees of GMO’s Colorado electric and Colorado, Iowa, Kansas and
Nebraska gas utility operations that were acquired by Black Hills participated
in GMO’s qualified pension plan, non-qualified Supplemental Executive Retirement
Plan (SERP) and other post-retirement benefit plan.  Under the asset
purchase agreements, Black Hills assumed the accrued pension obligations owed to
the current and former employees of the operations they
acquired.  After closing, approximately $107.5
million of qualified benefit plan assets were transferred to a comparable plan
established by Black Hills in accordance with the terms of the asset purchase
agreements based on an estimate of 95% of the amount required to be transferred
under applicable ERISA regulations.  The determination of the final
plan asset transfer is expected to be completed by plan actuaries prior to
December 31, 2008.  The $168.1 million fair value of plan assets in
the table above is after reflecting the Company’s best estimate of the total
transfer.  The Company expects to make a voluntary contribution of
approximately $12 million to the qualified defined benefit plan after the
completion of the final plan asset transfer to maintain
the funded status of the plan.
 30
 Under the
terms of the GMO acquisition, Great Plains Energy funded $19.1 million to a
rabbi trust associated with the SERP.  Approximately $1.6 million of
the assets of this rabbi trust were transferred to a comparable plan established
by Black Hills.
  The
following tables provide the components of net periodic benefit costs prior to
the effects of capitalization and sharing with joint-owners of power
plants.
  Great
      Plains EnergyPension
      Benefits
              
              
              Other
      BenefitsThree
      Months Ended September 30
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Components
      of net periodic benefit costs
              
              (millions)Service
      cost
              
              $
              5.8
              
              
              $
              4.6
              
              
              $
              0.5
              
              
              $
              0.3Interest
      cost
              
              
              10.7
              
              
              
              7.5
              
              
              
              1.7
              
              
              
              1.0Expected
      return on plan assets
              
              
              (11.0
              )
              
              
              (7.4
              )
              
              
              (0.3
              )
              
              
              (0.1
              )Prior
      service cost
              
              
              1.3
              
              
              
              1.1
              
              
              
              0.9
              
              
              
              0.7Recognized
      net actuarial loss
              
              
              8.1
              
              
              
              8.8
              
              
              
              0.1
              
              
              
              0.1Transition
      obligation
              
              
              -
              
              
              
              -
              
              
              
              0.3
              
              
              
              0.3Net
      periodic benefit costs beforeregulatory
      adjustment
              
              
              14.9
              
              
              
              14.6
              
              
              
              3.2
              
              
              
              2.3Regulatory
      adjustment
              
              
              (0.8
              )
              
              
              (2.1
              )
              
              
              (0.1
              )
              
              
              -Net
      periodic benefit costs
              
              $
              14.1
              
              
              $
              12.5
              
              
              $
              3.1
              
              
              $
              2.3
   Great
      Plains EnergyPension
      Benefits
              
              
              Other
      BenefitsYear
      to Date September 30
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Components
      of net periodic benefit costs
              
              (millions)Service
      cost
              
              $
              14.8
              
              
              $
              13.8
              
              
              $
              1.3
              
              
              $
              0.8Interest
      cost
              
              
              26.6
              
              
              
              22.4
              
              
              
              3.9
              
              
              
              2.8Expected
      return on plan assets
              
              
              (27.1
              )
              
              
              (22.2
              )
              
              
              (0.7
              )
              
              
              (0.5
              )Prior
      service cost
              
              
              3.4
              
              
              
              3.3
              
              
              
              2.3
              
              
              
              1.4Recognized
      net actuarial loss
              
              
              24.2
              
              
              
              26.5
              
              
              
              0.4
              
              
              
              0.4Transition
      obligation
              
              
              -
              
              
              
              -
              
              
              
              0.9
              
              
              
              0.9Settlement
      charge
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              0.3Net
      periodic benefit costs beforeregulatory
      adjustment
              
              
              41.9
              
              
              
              43.8
              
              
              
              8.1
              
              
              
              6.1Regulatory
      adjustment
              
              
              (3.1
              )
              
              
              (6.3
              )
              
              
              (0.1
              )
              
              
              -Net
      periodic benefit costs
              
              $
              38.8
              
              
              $
              37.5
              
              
              $
              8.0
              
              
              $
              6.1 31
 KCP&LPension
      Benefits
              
              
              Other
      BenefitsThree
      Months Ended September 30
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Components
      of net periodic benefit costs
              
              (millions)Service
      cost
              
              $
              5.7
              
              
              $
              4.5
              
              
              $
              0.3
              
              
              $
              0.3Interest
      cost
              
              
              10.3
              
              
              
              7.4
              
              
              
              1.3
              
              
              
              1.0Expected
      return on plan assets
              
              
              (10.5
              )
              
              
              (7.3
              )
              
              
              (0.2
              )
              
              
              (0.1
              )Prior
      service cost
              
              
              1.3
              
              
              
              1.1
              
              
              
              0.6
              
              
              
              0.7Recognized
      net actuarial loss
              
              
              8.0
              
              
              
              8.7
              
              
              
              0.1
              
              
              
              0.1Transition
      obligation
              
              
              -
              
              
              
              -
              
              
              
              0.3
              
              
              
              0.3Net
      periodic benefit costs beforeregulatory
      adjustment
              
              
              14.8
              
              
              
              14.4
              
              
              
              2.4
              
              
              
              2.3Regulatory
      adjustment
              
              
              (2.4
              )
              
              
              (2.1
              )
              
              
              (0.1
              )
              
              
              -Net
      periodic benefit costs
              
              $
              12.4
              
              
              $
              12.3
              
              
              $
              2.3
              
              
              $
              2.3
  KCP&LPension
      Benefits
              
              
              Other
      BenefitsYear
      to Date September 30
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Components
      of net periodic benefit costs
              
              (millions)Service
      cost
              
              $
              14.6
              
              
              $
              13.6
              
              
              $
              1.1
              
              
              $
              0.8Interest
      cost
              
              
              26.0
              
              
              
              22.1
              
              
              
              3.5
              
              
              
              2.8Expected
      return on plan assets
              
              
              (26.4
              )
              
              
              (21.9
              )
              
              
              (0.6
              )
              
              
              (0.5
              )Prior
      service cost
              
              
              3.4
              
              
              
              3.2
              
              
              
              2.0
              
              
              
              1.4Recognized
      net actuarial loss
              
              
              23.9
              
              
              
              26.1
              
              
              
              0.4
              
              
              
              0.4Transition
      obligation
              
              
              -
              
              
              
              -
              
              
              
              0.9
              
              
              
              0.9Settlement
      charge
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              0.3Net
      periodic benefit costs beforeregulatory
      adjustment
              
              
              41.5
              
              
              
              43.1
              
              
              
              7.3
              
              
              
              6.1Regulatory
      adjustment
              
              
              (4.6
              )
              
              
              (6.3
              )
              
              
              (0.1
              )
              
              
              -Net
      periodic benefit costs
              
              $
              36.9
              
              
              $
              36.8
              
              
              $
              7.2
              
              
              $
              6.1 32
 9.
              EQUITY
      COMPENSATION
  Great
Plains Energy’s Long-Term Incentive Plan is an equity compensation plan approved
by Great Plains Energy’s shareholders.  The Long-Term Incentive Plan
permits the grant of restricted stock, stock options, limited stock appreciation
rights, director shares, director deferred share units and performance shares to
directors, officers and other employees of Great Plains Energy and
KCP&L.  Forfeiture rates are based on historical forfeitures and
future expectations and are reevaluated annually.  The following table
summarizes Great Plains Energy’s and KCP&L’s equity compensation expense and
associated income tax benefits.
 Three
      Months Ended
              
              Year
      to DateSeptember
      30
              
              September
      302008
              
              
              2007
              
              
              2008
              
              
              2007Great
      Plains Energy
              
              (millions)Compensation
      expense
              
              $
              2.0
              
              
              $
              2.1
              
              
              $
              6.9
              
              
              $
              4.7Income
      tax benefits
              
              
              0.6
              
              
              
              0.8
              
              
              
              2.1
              
              
              
              1.8KCP&LCompensation
      expense
              
              
              1.7
              
              
              
              1.4
              
              
              
              4.7
              
              
              
              3.1Income
      tax benefits
              
              
              0.5
              
              
              
              0.6
              
              
              
              1.6
              
              
              
              1.2
  Performance
Shares
 Performance
share activity year to date September 30, 2008, is summarized in the following
table.  Performance adjustment represents the number of shares of
common stock related to performance shares ultimately issued that can vary from
the number of performance shares initially granted depending on Great Plains
Energy’s performance, based on external measures, over stated performance
periods.
 Performance
              
              Grant
      DateShares
              
              Fair
      Value*Beginning
      balance
              
              
              309,689
              
              
              $
              30.34Performance
      adjustment
              
              
              (71,616
              )Granted
              
              
              129,296
              
              
              
              26.22Issued
              
              
              (49,709
              )
              
              
              31.28Forfeited
              
              
              (3,149
              )
              
              
              32.87Ending
      balance
              
              
              314,511
              
              
              
              28.47*  weighted-average
  At
September 30, 2008, the remaining weighted-average contractual term was 1.4
years.  The weighted-average grant-date fair value of shares granted
for the three months ended and year to date September 30, 2008 was
$26.22.  The weighted-average grant-date fair value of shares granted
year to date September 30, 2007 was $32.00.  At September 30, 2008,
there was $3.9 million of total unrecognized compensation expense, net of
forfeiture rates, related to performance shares granted under the Long-Term
Incentive Plan, which will be recognized over the remaining weighted-average
contractual term.  The total fair value of shares of common stock related
to performance shares issued was $1.6 million year to date September 30, 2008,
and $1.3 million for the same period in 2007.
 33
 Restricted
Stock
 Restricted
stock activity year to date September 30, 2008, is summarized in the following
table.
 Nonvested
              Grant
      DateRestricted
      stock
              Fair
      Value*Beginning
      balance
              
              446,882
              
              
              $
              31.38Granted
      and issued
              
              88,064
              
              
              
              26.09Vested
              
              (71,602
              )
              
              
              30.15Forfeited
              
              (4,548
              )
              
              
              32.87Ending
      balance
              
              458,796
              
              
              
              30.54*  weighted-average
  At
September 30, 2008, the remaining weighted-average contractual term was 1.2
years.  The weighted-average grant-date fair value of shares granted
for the three months ended and year to date September 30, 2008, was $25.72 and
$26.09, respectively.  The weighted-average grant-date fair value of
shares granted for the three months ended and year to date September 30, 2007,
was $27.76 and $31.93, respectively.  At September 30, 2008, there was
$5.3 million of total unrecognized compensation expense, net of forfeiture
rates, related to nonvested restricted stock granted under the Long-Term
Incentive Plan, which will be recognized over the remaining weighted-average
contractual term.  The total fair value of shares vested for the three
months ended and year to date September 30, 2008, was zero and $2.2 million,
respectively and $0.3 million year to date September 30, 2007.
  Stock
Options
 Stock
option activity year to date September 30, 2008, is summarized in the following
table.  All stock
options are fully vested at September 30, 2008.
 ExerciseStock
      Options
              
              Shares
              
              
              Price*Beginning
      balance
              
              
              109,472
              
              
              $
              25.52GMO
      acquisition
              
              
              465,901
              
              
              
              96.04Exercised
              
              
              (9,356
              )
              
              
              21.46Forfeited
      or expired
              
              
              (22,651
              )
              
              
              203.91Outstanding
      and exercisable at September 30
              
              
              543,366
              
              
              
              78.62*  weighted-average
  The
weighted-average grant-date fair value of options exercised for the three months
and year to date September 30, 2008, was $21.46 per share.  The
aggregate intrinsic value of options exercised was insignificant.  The
following table summarizes all outstanding and exercisable stock options as of
September 30, 2008.
  Outstanding
      and Exercisable OptionsWeighted
      AverageRemaining
              
              WeightedExercise
              
              Number
      of
              
              Contractual
      Life
              
              AveragePrice
      Range
              
              Shares
              
              in
      Years
              
              Exercise
      Price$9.21
      - $11.64
              
              66,778
              
              1.2
              
              $  11.54$23.91
      - 27.73
              
              257,005
              
              3.2
              
              24.60$121.90
      - 181.11
              
              181,413
              
              0.9
              
              149.68$221.82
      - 251.86
              
              38,170
              
              2.6
              
              221.97Total
              
              543,366
              
              2.2
 34
 At
September 30, 2008, the aggregate intrinsic value of in the money outstanding
and exercisable options was $0.7 million.
  Director Deferred Share
Units
 Non-employee
directors receive shares of Great Plains Energy’s common stock as part of their
annual retainer.  Each director may elect to defer receipt of their
shares until the end of January in the year after they leave Great Plains
Energy’s Board of Directors.  Prior to 2008, there were no shares of
Great Plains Energy common stock issued to non-employee directors under Great
Plains Energy’s Long-Term Incentive Plan.  At September 30, 2008,
there were 7,428 shares of director deferred share units outstanding at a
weighted-average grant-date fair value of $28.13 per share.  The total
fair value of shares of director deferred share units issued was insignificant
and $0.2 million for the three months ended and year to date September 30, 2008,
respectively.
  10.
              SHORT-TERM
      BORROWINGS AND SHORT-TERM BANK LINES OF
CREDIT
  Great
Plains Energy’s $400 Million Revolving Credit Facility
 Great
Plains Energy’s $400 million revolving credit facility with a group of banks
expires in May 2011.  A default by Great Plains Energy or any of its
significant subsidiaries on other indebtedness totaling more than $25.0 million
is a default under the facility.  Under the terms of this agreement,
Great Plains Energy is required to maintain a consolidated indebtedness to
consolidated capitalization ratio, as defined in the agreement, not greater than
0.65 to 1.00 at all times.  At September 30, 2008, Great Plains Energy
was in compliance with this covenant.  At September 30, 2008, Great
Plains Energy had $20.0 million of outstanding cash borrowings with a
weighted-average interest rate of 3.64% and had issued letters of credit
totaling $48.0 million under the credit facility.  At December 31,
2007, Great Plains Energy had $42.0 million of outstanding cash borrowings with
a weighted-average interest rate of 5.44% and had issued letters of credit
totaling $98.6 million under the credit facility.
  KCP&L’s
$600 Million Revolving Credit Facility
 KCP&L’s
$600 million revolving credit facility with a group of banks to provide support
for its issuance of commercial paper and other general corporate purposes
expires in May 2011.  A default by KCP&L on other indebtedness
totaling more than $25.0 million is a default under the
facility.  Under the terms of the agreement, KCP&L is required to
maintain a consolidated indebtedness to consolidated capitalization ratio, as
defined in the agreement, not greater than 0.65 to 1.00 at all
times.  At September 30, 2008, KCP&L was in compliance with this
covenant.  At September 30, 2008, KCP&L had $254.7 million of
commercial paper outstanding, at a weighted-average interest rate of 5.10%,
$11.9 million of letters of credit outstanding and no outstanding cash
borrowings under the facility.  At December 31, 2007, KCP&L had
$365.8 million of commercial paper outstanding, at a weighted-average interest
rate of 5.92%, $11.9 million of letters of credit outstanding and no outstanding
cash borrowings under the facility.
  GMO’s
$400 Million Revolving Credit Facility
 In
September 2008, GMO entered into a new $400 million revolving credit facility
with a group of banks that expires in September 2011.  A default by
GMO or any of its significant subsidiaries on other indebtedness totaling more
than $25.0 million is a default under the facility.  Under the terms
of this agreement, GMO is required to maintain a consolidated indebtedness to
consolidated capitalization ratio, as defined in the agreement, not greater than
0.65 to 1.00 at all times.  At September 30, 2008, GMO was in
compliance with this covenant.  At September 30, 2008, GMO had no
outstanding cash borrowings and no letters of credit outstanding under the
credit facility.
  GMO’s
$65 Million Revolving Credit Facility
 GMO’s $65
million revolving credit facility expires in April 2009.  Borrowings
under this facility are secured by the accounts receivable generated by GMO’s
regulated utility operations.  A default by GMO on other indebtedness
totaling more than $40.0 million is a default under the
facility.  Under the terms of this agreement, GMO is required to
maintain a consolidated indebtedness to consolidated capitalization ratio, as
defined in the agreement, not greater than 75% from October 1, 2007 through
September 30, 2008, and not greater than 70%
 35
 from
October 1, 2008, until the termination of the agreement.  GMO is
required to maintain a ratio of EBITDA to interest expense for the period
October 1, 2007, through September 30, 2008, greater than 1.4 to 1.0 and October
1, 2008 to the termination of the agreement, greater than 1.6 to
1.0.  At September 30, 2008, GMO was in compliance with these
covenants.  At September 30, 2008, GMO had $17.0 million of
outstanding cash borrowings with a weighted-average interest rate of
5.0%.
 36
 11.
              LONG-TERM
      DEBT
  Great
Plains Energy’s and KCP&L’s long-term debt is detailed in the following
table.
 September
      30
              
              December
      31Year
      Due
              
              
              2008
              
              2007KCP&L
              
              
              
              
              (millions)General
      Mortgage Bonds4.90%*
      EIRR bonds
              
              2012-2035
              
              
              $
              158.8
              
              
              $
              158.8Senior
      Notes6.50%
              
              2011
              
              
              
              150.0
              
              
              
              150.05.85%
              
              2017
              
              
              
              250.0
              
              
              
              250.06.375%
              
              2018
              
              
              
              350.0
              
              
              
              -6.05%
              
              2035
              
              
              
              250.0
              
              
              
              250.0Unamortized
      discount
              
              
              
              
              
              (1.8
              )
              
              
              (1.9
              )EIRR
      bonds4.65%
      Series 2005
              
              2035
              
              
              
              50.0
              
              
              
              50.05.125%
      Series 2007A-1
              
              2035
              
              
              
              63.3
              
              
              
              -5.00%
      Series 2007A-2
              
              2035
              
              
              
              10.0
              
              
              
              -4.75%
      Series 2007A
              
              
              
              
              
              -
              
              
              
              73.35.375%
      Series 2007B
              
              2035
              
              
              
              73.2
              
              
              
              73.24.90%
      Series 2008
              
              2038
              
              
              
              23.4
              
              
              
              -Total
      KCP&L
              
              
              
              
              
              1,376.9
              
              
              
              1,003.4GMOFirst
      Mortgage Bonds9.44%
      Series
              
              2009-2021
              
              
              
              14.6
              
              
              
              -Pollution
      Control Bonds5.85%
      SJLP Pollution Control
              
              2013
              
              
              
              5.6
              
              
              
              -4.02%
      Wamego Series 1996
              
              2026
              
              
              
              7.3
              
              
              
              -5.553%
      State Environmental 1993
              
              2028
              
              
              
              5.0
              
              
              
              -Senior
      Notes7.625%
      Series
              
              2009
              
              
              
              68.5
              
              
              
              -7.95%
      Series
              
              2011
              
              
              
              137.3
              
              
              
              -7.75%
      Series
              
              2011
              
              
              
              197.0
              
              
              
              -11.875%
      Series
              
              2012
              
              
              
              500.0
              
              
              
              -8.27%
      Series
              
              2021
              
              
              
              80.9
              
              
              
              -Fair
      Value Adjustment
              
              
              
              
              
              126.0
              
              
              
              -Medium
      Term Notes7.16%
      Series
              
              2013
              
              
              
              6.0
              
              
              
              -7.33%
      Series
              
              2023
              
              
              
              3.0
              
              
              
              -7.17%
      Series
              
              2023
              
              
              
              7.0
              
              
              
              -Other
              
              2009
              
              
              
              1.5
              
              
              
              -Current
      maturities
              
              
              
              
              
              (2.4
              )
              
              
              -Total
      GMO
              
              
              
              
              
              1,157.3
              
              
              
              -Other
      Great Plains Energy6.875%
      Senior Notes
              
              2017
              
              
              
              100.0
              
              
              
              100.0Unamortized
      discount
              
              
              
              
              
              (0.5
              )
              
              
              (0.5
              )7.74%
      Affordable Housing Notes
              
              2008
              
              
              
              0.3
              
              
              
              0.3Current
      maturities
              
              
              
              
              
              (0.3
              )
              
              
              (0.3
              )Total
      Great Plains Energy excluding current maturities
              
              
              $
              2,633.7
              
              
              $
              1,102.9* Weighted-average
      interest rates at September 30, 2008. 37
 The fair
value adjustment for GMO represents the $133.3 million adjustment, net of
current period amortization of $7.3 million, to record GMO’s debt related to the
11.875% series and 7.75% series Senior Notes that are not reflected in rates as
of the acquisition date at estimated fair value.  The increase in the
fair value of the debt will be amortized as a reduction to interest expense over
the remaining life of the individual debt issues.  Amortization for
the remainder of 2008, 2009 and 2010 is estimated at $8.3 million, $32.9 million
and $34.6 million, respectively.
  In March
and April 2008, KCP&L remarketed several series of EIRR bonds that were
auction rate securities, i.e. the interest rates were periodically reset through
an auction process.
  In March
2008, KCP&L remarketed the following:
  ·
              secured
      Series 1992 EIRR bonds maturing in 2017 totaling $31.0 million at a fixed
      rate of 5.25% through March 31,
2013,
  ·
              secured
      Series 1993A EIRR bonds maturing in 2023 totaling $40.0 million at a fixed
      rate of 5.25% through March 31, 2013,
and
  ·
              unsecured
      Series 2007B EIRR bonds maturing in 2035 totaling $73.2 million at a fixed
      rate of 5.375% through March 31,
2013.
  In April
2008, KCP&L remarketed the following:
  ·
              secured
      Series 1993B EIRR bonds maturing in 2023 totaling $39.5 million at a fixed
      rate of 5.00% through March 31, 2011,
and
  ·
              unsecured
      Series 2007A EIRR bonds maturing in 2035 into two series: Series 2007A-1
      totaling $63.3 million at a fixed rate of 5.125% through March 31, 2011
      and Series 2007A-2 totaling $10.0 million at a fixed rate of 5.00% through
      March 31, 2010.
  After
these remarketing activities, none of KCP&L’s EIRR bonds remain in auction
rate mode.
  In March
2008, KCP&L issued $350.0 million of 6.375% unsecured Senior Notes, maturing
in 2018.  As a result of amortizing the loss recognized in other
comprehensive income (OCI) on KCP&L’s 2007 T-Locks, the effective interest
rate on KCP&L’s $350.0 million of 6.375% Senior Notes is 7.49%.
  In May
2008, KCP&L’s Series 2008 EIRR bonds totaling $23.4 million maturing in 2038
were issued.  Proceeds of the bonds will be used to pay for a portion
of the costs at the Iatan Nos. 1 and 2 projects included in KCP&L’s
Comprehensive Energy Plan.  The proceeds were deposited with a
trustee, and will be used to reimburse KCP&L for qualifying
expenditures.  KCP&L recorded a $15.9 million short-term
receivable and a $7.5 million long-term receivable for the proceeds that were
deposited with the trustee.The bonds
have an initial long-term interest rate of 4.90% until June 30,
2013.  At the end of the initial long-term interest rate period, the
bonds are subject to mandatory tender; however, KCP&L is not obligated to
pay the purchase price of the bonds on the mandatory tender date.  If
the bonds are not successfully remarketed, the bonds will bear interest at a
daily rate equal to 10% per annum until all the bonds are successfully
remarketed.
 38
 Amortization
of Debt Expense
 Great
Plains Energy’s and KCP&L’s amortization of debt expense is detailed in the
following table.
 Three
      Months Ended
              
              
              Year
      to DateSeptember
      30
              
              
              September
      302008
              
              2007
              
              
              2008
              
              
              2007(millions)KCP&L
              
              $
              0.4
              
              $
              0.5
              
              
              $
              1.2
              
              
              $
              1.3Other
      Great Plains Energy
              
              
              0.3
              
              
              0.1
              
              
              
              0.6
              
              
              
              0.8Total
      Great Plains Energy
              
              $
              0.7
              
              $
              0.6
              
              
              $
              1.8
              
              
              $
              2.1
  12.
              TAXES
  Components
of income tax expense (benefit) are detailed in the following
tables.
 Three
      Months Ended
              
              Year
      to DateSeptember
      30
              
              September
      30Great
      Plains Energy
              
              2008
              
              2007
              
              
              2008
              
              2007Current
      income taxes
              
              (millions)Federal
              
              $
              30.3
              
              $
              16.7
              
              
              $
              10.6
              
              $
              23.8State
              
              
              (5.3
              )
              
              4.9
              
              
              
              1.0
              
              
              4.5Total
              
              
              25.0
              
              
              21.6
              
              
              
              11.6
              
              
              28.3Deferred
      income taxesFederal
              
              
              3.5
              
              
              5.8
              
              
              
              (13.1
              )
              
              19.1State
              
              
              9.3
              
              
              (2.2
              )
              
              
              40.5
              
              
              1.7Total
              
              
              12.8
              
              
              3.6
              
              
              
              27.4
              
              
              20.8Noncurrent
      income taxesFederal
              
              
              (1.7
              )
              
              (0.8
              )
              
              
              (0.4
              )
              
              (1.8
              )State
              
              
              (1.0
              )
              
              (0.5
              )
              
              
              (0.7
              )
              
              (0.1
              )Total
              
              
              (2.7
              )
              
              (1.3
              )
              
              
              (1.1
              )
              
              (1.9
              )Investment
      tax creditDeferral
              
              
              11.5
              
              
              -
              
              
              
              63.0
              
              
              -Amortization
              
              
              (0.6
              )
              
              (0.4
              )
              
              
              (1.3
              )
              
              (1.1
              )Total
              
              
              10.9
              
              
              (0.4
              )
              
              
              61.7
              
              
              (1.1
              )Total
      income tax expense
              
              
              46.0
              
              
              23.5
              
              
              
              99.6
              
              
              46.1Less:  taxes
      on discontinued operationsCurrent
      tax expense
              
              
              0.1
              
              
              3.3
              
              
              
              25.8
              
              
              (1.9
              )Deferred
      tax expense (benefit)
              
              
              -
              
              
              (7.9
              )
              
              
              4.5
              
              
              11.6Noncurrent
      income tax expense
              
              
              -
              
              
              -
              
              
              
              0.9
              
              
              -Income
      taxes on continuing operations
              
              $
              45.9
              
              $
              28.1
              
              
              $
              68.4
              
              $
              36.4 39
 Three
      Months Ended
              
              Year
      to DateSeptember
      30
              
              September
      30KCP&L
              
              2008
              
              2007
              
              
              2008
              
              2007Current
      income taxes
              
              (millions)Federal
              
              $
              37.7
              
              $
              14.9
              
              
              $
              3.1
              
              $
              27.3State
              
              
              1.6
              
              
              2.9
              
              
              
              1.9
              
              
              4.7Total
              
              
              39.3
              
              
              17.8
              
              
              
              5.0
              
              
              32.0Deferred
      income taxesFederal
              
              
              (15.8
              )
              
              15.9
              
              
              
              (37.4
              )
              
              15.1State
              
              
              2.6
              
              
              1.8
              
              
              
              33.8
              
              
              1.8Total
              
              
              (13.2
              )
              
              17.7
              
              
              
              (3.6
              )
              
              16.9Noncurrent
      income taxesFederal
              
              
              (2.9
              )
              
              (1.1
              )
              
              
              (2.3
              )
              
              (2.1
              )State
              
              
              (0.4
              )
              
              (0.5
              )
              
              
              (0.3
              )
              
              -Total
              
              
              (3.3
              )
              
              (1.6
              )
              
              
              (2.6
              )
              
              (2.1
              )Investment
      tax creditDeferral
              
              
              11.5
              
              
              -
              
              
              
              63.0
              
              
              -Amortization
              
              
              (0.4
              )
              
              (0.4
              )
              
              
              (1.1
              )
              
              (1.1
              )Total
              
              
              11.1
              
              
              (0.4
              )
              
              
              61.9
              
              
              (1.1
              )Total
              
              $
              33.9
              
              $
              33.5
              
              
              $
              60.7
              
              $
              45.7
  Income
Tax Expense (Benefit) and Effective Income Tax Rates
 Income
tax expense (benefit) and the effective income tax rates reflected in the
financial statements and the reasons for their differences from the statutory
federal rates are detailed in the following tables.
  Great
      Plains Energy
              
              Income
      Tax Expense
              
              
              Income
      Tax RateThree
      Months Ended September 30
              
              2008
              
              
              2007
              
              
              2008
              
              2007(millions)Federal
      statutory income tax
              
              $
              52.7
              
              
              $
              32.9
              
              
              
              35.0
              %
              
              
              35.0
              %Differences
      between book and taxdepreciation
      not normalized
              
              
              (1.2
              )
              
              
              0.8
              
              
              
              (0.8
              )
              
              
              0.8Amortization
      of investment tax credits
              
              
              (0.6
              )
              
              
              (0.4
              )
              
              
              (0.4
              )
              
              
              (0.4
              )Federal
      income tax credits
              
              
              (2.1
              )
              
              
              (3.1
              )
              
              
              (1.4
              )
              
              
              (3.3
              )State
      income taxes
              
              
              2.0
              
              
              
              2.3
              
              
              
              1.3
              
              
              
              2.5Changes
      in uncertain tax positions, net
              
              
              0.8
              
              
              
              -
              
              
              
              0.6
              
              
              
              0.1GMO transaction
      costs
              
              
              (1.6
              )
              
              
              (2.9
              )
              
              
              (1.0
              )
              
              
              (3.1
              )Other
              
              
              (4.1
              )
              
              
              (1.5
              )
              
              
              (2.8
              )
              
              
              (1.8
              )Total
              
              $
              45.9
              
              
              $
              28.1
              
              
              
              30.5
              %
              
              
              29.8
              % 40
 Great
      Plains Energy
              
              Income
      Tax Expense
              
              
              Income
      Tax RateYear
      to Date September 30
              
              2008
              
              
              2007
              
              
              2008
              
              2007(millions)Federal
      statutory income tax
              
              $
              63.3
              
              
              $
              45.9
              
              
              
              35.0
              %
              
              
              35.0
              %Differences
      between book and taxdepreciation
      not normalized
              
              
              (2.5
              )
              
              
              2.5
              
              
              
              (1.4
              )
              
              
              1.9Amortization
      of investment tax credits
              
              
              (1.3
              )
              
              
              (1.1
              )
              
              
              (0.7
              )
              
              
              (0.8
              )Federal
      income tax credits
              
              
              (7.1
              )
              
              
              (6.9
              )
              
              
              (3.9
              )
              
              
              (5.3
              )State
      income taxes
              
              
              2.9
              
              
              
              1.6
              
              
              
              1.6
              
              
              
              1.2Rate
      change on deferred taxes
              
              
              19.3
              
              
              
              -
              
              
              
              10.7
              
              
              
              -Changes
      in uncertain tax positions, net
              
              
              0.2
              
              
              
              0.2
              
              
              
              0.1
              
              
              
              0.2GMO transaction
      costs
              
              
              (1.9
              )
              
              
              (2.9
              )
              
              
              (1.0
              )
              
              
              (2.2
              )Other
              
              
              (4.5
              )
              
              
              (2.9
              )
              
              
              (2.6
              )
              
              
              (2.3
              )Total
              
              $
              68.4
              
              
              $
              36.4
              
              
              
              37.8
              %
              
              
              27.7
              %
  KCP&L
              
              Income
      Tax Expense
              
              
              Income
      Tax RateThree
      Months Ended September 30
              
              2008
              
              
              2007
              
              
              2008
              
              2007(millions)Federal
      statutory income tax
              
              $
              41.2
              
              
              $
              38.6
              
              
              
              35.0
              %
              
              
              35.0
              %Differences
      between book and taxdepreciation
      not normalized
              
              
              (1.7
              )
              
              
              0.8
              
              
              
              (1.4
              )
              
              
              0.7Amortization
      of investment tax credits
              
              
              (0.4
              )
              
              
              (0.4
              )
              
              
              (0.3
              )
              
              
              (0.3
              )Federal
      income tax credits
              
              
              (1.9
              )
              
              
              (2.6
              )
              
              
              (1.6
              )
              
              
              (2.3
              )State
      income taxes
              
              
              2.6
              
              
              
              3.3
              
              
              
              2.2
              
              
              
              3.0Changes
      in uncertain tax positions, net
              
              
              0.1
              
              
              
              (0.3
              )
              
              
              0.1
              
              
              
              (0.2
              )Parent
      company tax benefits (a)
              
              
              (1.5
              )
              
              
              (4.4
              )
              
              
              (1.3
              )
              
              
              (4.0
              )Other
              
              
              (4.5
              )
              
              
              (1.5
              )
              
              
              (3.9
              )
              
              
              (1.5
              )Total
              
              $
              33.9
              
              
              $
              33.5
              
              
              
              28.8
              %
              
              
              30.4
              %
  KCP&L
              
              Income
      Tax Expense
              
              
              Income
      Tax RateYear
      to Date September 30
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007(millions)Federal
      statutory income tax
              
              $
              59.3
              
              
              $
              56.3
              
              
              
              35.0
              %
              
              
              35.0
              %Differences
      between book and taxdepreciation
      not normalized
              
              
              (3.0
              )
              
              
              2.5
              
              
              
              (1.8
              )
              
              
              1.6Amortization
      of investment tax credits
              
              
              (1.1
              )
              
              
              (1.1
              )
              
              
              (0.6
              )
              
              
              (0.7
              )Federal
      income tax credits
              
              
              (6.8
              )
              
              
              (5.7
              )
              
              
              (4.0
              )
              
              
              (3.5
              )State
      income taxes
              
              
              3.9
              
              
              
              4.6
              
              
              
              2.3
              
              
              
              2.9Rate
      change on deferred taxes
              
              
              20.3
              
              
              
              -
              
              
              
              12.0
              
              
              
              -Changes
      in uncertain tax positions, net
              
              
              (0.5
              )
              
              
              (0.1
              )
              
              
              (0.3
              )
              
              
              (0.1
              )Parent
      company tax benefits (a)
              
              
              (6.7
              )
              
              
              (7.6
              )
              
              
              (3.9
              )
              
              
              (4.7
              )Other
              
              
              (4.7
              )
              
              
              (3.2
              )
              
              
              (2.9
              )
              
              
              (2.1
              )Total
              
              $
              60.7
              
              
              $
              45.7
              
              
              
              35.8
              %
              
              
              28.4
              %(a)The
      tax sharing between Great Plains Energy and its subsidiaries was modified
      on July 14, 2008.  As part of the newagreement,
      parent company tax benefits are no longer allocated to KCP&L
      or other subsidiaries. 41
 SFAS No. 109, “Accounting for Income
Taxes,” requires companies to adjust deferred tax assets and liabilities to
reflect tax rates that are anticipated to be in effect when timing differences
reverse.  Due to the sale of Strategic Energy during the second
quarter of 2008, the composite tax rate for the companies is expected to
increase as a result of the change in composition of states that Great Plains
Energy conducts business.  Therefore, deferred tax assets and
liabilities have been adjusted to reflect the expected increase in the composite
tax rate.  The impact of the increase in the composite tax rate on
deferred tax assets and liabilities resulted in tax expense for Great Plains
Energy and KCP&L of $19.3 million and $20.3 million, respectively, year to
date September 30, 2008.
  Uncertain Tax
Positions
 Great
Plains Energy and KCP&L recognize tax benefits in accordance with Financial
Accounting Standards Board Interpretation (FIN) No. 48, “Accounting for
Uncertainty in Income Taxes,” an interpretation of SFAS No. 109, “Accounting for
Income Taxes.”  FIN No. 48 establishes a “more-likely-than-not”
recognition threshold that must be met before a tax benefit can be recognized in
the financial statements.  Upon adoption of FIN No. 48 on January 1,
2007, Great Plains Energy recognized an $18.8 million increase in the liability
for unrecognized tax benefits.  This increase was offset by a $0.9
million decrease to the January 1, 2007, balance of retained earnings, a $17.9
million decrease in deferred taxes, a $4.0 million decrease in accrued taxes and
a $4.0 million increase in accrued interest.  KCP&L recognized a
$19.8 million increase in the liability for unrecognized tax benefits that was
offset by a $0.2 million decrease to the January 1, 2007, balance of retained
earnings, a $15.7 million decrease in deferred taxes and a $3.9 million decrease
in accrued taxes.
  At
September 30, 2008 and December 31, 2007, Great Plains Energy had $105.9 million
and $21.9 million, respectively, of liabilities related to unrecognized tax
benefits.  Of this amount, $3.4 million and $3.6 million at September
30, 2008, and December 31, 2007, respectively, are expected to impact the
effective tax rate if recognized.  Unrecognized tax benefits of $85.3
million acquired with GMO are expected to impact goodwill if
recognized within one year from theJuly 14,
2008, acquisitiondate.  The
$84.0 million increase in unrecognized tax benefits is primarily due to an
increase of $86.2 million for unrecognized tax benefits acquired in
the acquisition of GMO offset by a decrease of $8.5 million for unrecognized tax
benefits due to Joint Committee approval on July 31, 2008, of the Federal audit
for the 2000-2003 tax years.
  At
September 30, 2008, and December 31, 2007, KCP&L had $17.1 million and $19.6
million, respectively, of liabilities related to unrecognized tax
benefits.  Of this amount, $1.3 million is expected to impact the
effective tax rate if recognized at September 30, 2008, and December 31,
2007.  The $2.5 million decrease in unrecognized tax benefits is
primarily due to a decrease of $7.4 million of unrecognized tax benefits due to
Joint Committee approval of the Great Plains Energy Federal audit for the
2000-2003 tax years.
  The
following table reflects the activity for Great Plains Energy and KCP&L
related to the liability for unrecognized tax positions.
 Great
      PlainsEnergy
              KCP&L(millions)Balance
      at January 1, 2008
              
              $
              21.9
              
              
              $
              19.6Additions
      for current year tax positions
              
              
              4.4
              
              
              
              2.8Additions
      for prior year tax positions
              
              
              2.6
              
              
              
              2.6Additions
      for GMO prior year tax positions
              
              
              86.2
              
              
              
              -Reductions
      for prior year tax positions
              
              
              (0.7
              )
              
              
              (0.5
              )Settlements
              
              
              (8.5
              )
              
              
              (7.4
              )Balance
      at September 30, 2008
              
              $
              105.9
              
              
              $
              17.1 42
 For the
three months ended September 30, 2008, Great Plains Energy and KCP&L
recognized a reduction of interest expense of $8.2 million and $2.3 million,
respectively, related to unrecognized tax benefits.  Year to date
September 30, 2008, Great Plains Energy and KCP&L recognized a reduction of
$6.8 million and $1.8 million, respectively, of interest expense related to
unrecognized tax benefits.  The reduction in interest expense for both
Great Plains Energy and KCP&L is related to the Joint Committee approval of
the Great Plains Energy Federal audit for the 2000-2003 tax years.  At
September 30, 2008, and December 31, 2007, accrued interest related to
unrecognized tax benefits for Great Plains Energy was $1.9 million and $8.4
million, respectively.  KCP&L had accrued interest related to
unrecognized tax benefits of $1.6 million and $3.4 million, respectively, at
September 30, 2008 and December 31, 2007.  Amounts accrued for
penalties with respect to unrecognized tax benefits are
insignificant.
  The IRS
is currently auditing Great Plains Energy and its subsidiaries for the 2004 tax
year and GMO and its subsidiaries for the 2003-2004 tax years.  It is
reasonably possible that a settlement may be reached for both audits within the
next twelve months.  If settled, the estimated amount of unrecognized
tax benefits to be recognized is $86 million to $89 million for Great Plains
Energy and $2 million to $3 million for KCP&L.
  Advanced
Coal Credit
 On April
28, 2008, KCP&L was notified that its application filed in 2007 for $125.0
million in advanced coal investment tax credits (ITC) was approved by the
IRS.  The credit is based on the amount of expenses incurred on the
construction of Iatan No. 2.  Additionally,
in order to meet the advanced clean coal standards and avoid forfeiture and/or
the recapture of tax credits in the future, KCP&L must meet or exceed
certain environmental performance standards for at least five years once the
plant is placed in service.  As a result, Great Plains Energy
and KCP&L recognized federal tax benefits related to costs incurred to date
on the plant of $11.5 million and $63.0 million for the three months and year to
date September 30, 2008, respectively.  However, tax laws require the
companies to reduce income tax expense for ratemaking and financial statement
purposes ratably over the life of the plant.  Therefore, Great Plains
Energy and KCP&L concurrently recognized deferred ITC expense of $11.5
million and $63.0 million for the three months ended and year to date September
30, 2008, respectively.  Great Plains Energy and KCP&L will
recognize the tax benefits of the ITC over the life of the plant once it is
placed in service.
  13.
              DISCONTINUED
      OPERATIONS - SALE OF STRATEGIC
ENERGY
  In 2007,
Great Plains Energy retained a financial advisor to assist in a review of
strategic and structural alternatives for its Strategic Energy
subsidiary.  In April 2008, the Board of Directors approved
management’s recommendation to sell Strategic Energy and Great Plains Energy
entered into an agreement with Direct Energy Services, LLC (Direct Energy), a
subsidiary of Centrica plc, under which Direct Energy acquired all of Great
Plains Energy’s interest in Strategic Energy.  On June 2, 2008, Great
Plains Energy completed the sale of Strategic Energy and received gross cash
proceeds of $305.3 million, including the base purchase price of $300.0 million
plus an estimated working capital adjustment of $5.3 million, which was subject
to final adjustment pursuant to the terms of the purchase
agreement.  The final working capital adjustment was completed in
September 2008, resulting in an additional $2.4 million to Great Plains
Energy.  In accordance with SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets,” Strategic Energy is reported as
discontinued operations for the periods presented.
  Under the
terms of the purchase agreement with Direct Energy, Great Plains Energy
indemnifies Direct Energy for various matters, including: breaches of
representations, warranties and covenants; funds advanced by Strategic Energy to
certain of its channel partners if such funds become uncollectible before
December 2, 2009 (approximately $8 million, excluding commission offsets); and
losses associated with litigation and other certain claims to the
extent such losses exceed
$7.5 million in the aggregate.  Great Plains Energy reserved $2.0
million in the third quarter of 2008 with respect to the indemnification
obligations.
 43
 The
following table summarizes the income (loss) from Strategic Energy’s
discontinued operations.
 Three
      Months Ended
              
              
              Year
      to DateSeptember
      30
              
              
              September
      302008
              
              
              2007
              
              
              2008
              
              
              2007(millions)Revenues
              
              $
              -
              
              
              $
              576.0
              
              
              $
              667.4
              
              
              $
              1,470.1Income
      (loss) from operations before income taxes (a)
              
              $
              -
              
              
              $
              (8.5
              )
              
              $
              182.4
              
              
              $
              26.1Income
      (loss) on disposal before income taxes
              
              
              0.4
              
              
              
              -
              
              
              
              (116.2
              )
              
              
              -Total
      income (loss) on discontinued operationsbefore
      income taxes
              
              
              0.4
              
              
              
              (8.5
              )
              
              
              66.2
              
              
              
              26.1Income
      taxes
              
              
              (0.1
              )
              
              
              4.6
              
              
              
              (31.2
              )
              
              
              (9.7
              )Income
      (loss) from discontinued operations,net
      of income taxes
              
              $
              0.3
              
              
              $
              (3.9
              )
              
              $
              35.0
              
              
              $
              16.4(a)
      Year
      to date September 30, 2008, amount includes $189.1 million, of unrealized
      net gains related to derivativecontracts.
  The
following table provides additional information regarding the net cash proceeds
and loss on sale of Strategic Energy.
 Sale
      of Strategic Energy(millions)Net
      cash proceeds
              
              
              
              
              
              
              
              $
              273.1Income
      taxes on sale
              
              
              
              
              
              
              
              
              34.6Gross
      cash proceeds
              
              
              
              
              
              
              
              
              307.7Net
      assets of discontinued operations at December 31, 2007
              
              $
              233.7Intercompany
      liabilities not in discontinued operations
              
              
              (3.0
              )Income
      taxes on parent included in discontinued operations
              
              
              6.2Book
      value of investment in Strategic Energy at December 31,
    2007
              
              
              
              
              
              $
              236.9Increase
      (decrease) to book value:Net
      income (a)
              
              
              
              
              
              
              187.8Change
      in OCI
              
              
              
              
              
              
              (14.2
              )Equity
      contribution from parent
              
              
              
              
              
              
              14.4Distributions
      to parent
              
              
              
              
              
              
              (3.0
              )Book
      value of investment in Strategic Energy at June 2, 2008
              
              
              
              
              
              
              
              
              
              
              421.9Reserve
      for indemnification obligations
              
              
              
              
              
              
              
              
              
              
              2.0Loss
      on disposal before income taxes
              
              
              
              
              
              
              
              
              
              $
              (116.2
              )(a)
      Amount
      includes $189.1 million of unrealized net gains related to derivatives
      contracts.  44
 Strategic
Energy’s assets and liabilities of discontinued operations are summarized in the
following table.
 December
      312007Assets
              
              (millions)Cash
              
              $
              43.1Restricted
      cash
              
              
              0.7Receivables,
      net
              
              
              261.4Deferred
      income taxes
              
              
              16.2Derivative
      instruments
              
              
              52.7Nonutility
      property
              
              
              6.8Goodwill
              
              
              88.1Other
              
              
              18.1Total
      assets of discontinued operations
              
              $
              487.1LiabilitiesAccounts
      payable
              
              $
              165.1Accrued
      taxes
              
              
              10.8Derivative
      instruments
              
              
              38.2Deferred
      income taxes
              
              
              16.8Other
              
              
              22.5Total
      liabilities of discontinued operations
              
              $
              253.4Net
      assets of discontinued operations
              
              $
              233.7
 
 14.
              RELATED
      PARTY TRANSACTIONS AND
RELATIONSHIPS
  KCP&L
receives various support and administrative services from
Services.  These services are billed to KCP&L at cost, based on
payroll and other expenses, incurred by Services for the benefit of
KCP&L.  These costs totaled $2.7 million and $10.2 million for the
three months ended and year to date September 30, 2008, respectively, and $3.6
million and $11.4 million for the same periods in 2007.  These costs
consisted primarily of employee compensation, benefits and fees associated with
various professional services.  KCP&L employees manage GMO’s
business and operate its facilities at cost.  These costs totaled
$23.0 million for the three months ended and year to date September 30,
2008.  Additionally, KCP&L and GMO engage in wholesale electricity
transactions with each other.  At December 31, 2007, KCP&L’s
balance sheet reflects a note payable from HSS to Great Plains Energy of $0.6
million.  The following table summarizes KCP&L’s intercompany
receivables and payables.
 September
      30
                December
      312008
                2007(millions)Receivable
      from GMO
                
                $
                37.9
                
                
                $
                -Receivable
      from Great Plains Energy
                
                
                -
                
                
                
                10.5Payable
      to MPS Merchant
                
                
                3.0
                
                
                
                -Payable
      to Services
                
                
                0.6
                
                
                
                1.8Deferred
      credits - other - payable to Services
                
                
                0.9
                
                
                
                1.5 45
 15.
              COMMITMENTS
      AND CONTINGENCIES
  Environmental
Matters
 The
Company is subject to regulation by federal, state and local authorities with
regard to air quality and other environmental matters primarily through
KCP&L’s and GMO’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 KCP&L and
Great Plains Energy.  KCP&L and GMO seek to use current
environmental technology.  KCP&L and GMO conduct environmental
audits designed to ensure compliance with governmental regulations.
  Environmental-related
legislation is continually introduced and such legislation typically includes
various compliance dates and compliance limits.  It is possible that
legislation could be enacted at the federal or state level to address global
climate change, including efforts to reduce and control the emission of
greenhouse gases, such as CO2, which are
created in the combustion of fossil fuels.  In addition, there could
be national and/or state mandates to produce a set percentage of electricity
from renewable forms of energy, such as wind.  The probability and
impact of such legislation cannot be reasonably estimated at this time,
including the cost to install new equipment to achieve compliance, but such
legislation could have the potential for a significant financial and operational
impact on KCP&L and GMO.  KCP&L and GMO would seek recovery of
capital costs and expenses for such compliance through rate increases; however,
there can be no assurance that such rate increases would be
granted.
  The
following tables contain
current estimates of Great Plains Energy’s and KCP&L’s capital expenditures
(exclusive of allowance for funds used during construction and property taxes)
to comply with the Clean Air Interstate Rule (CAIR) as it existed before the
July 2008 court order vacating the rule, and BART, including accelerated
environmental upgrade expenditures outlined in KCP&L’s Comprehensive Energy
Plan.  As discussed below, CAIR has been vacated and the matter
remanded to the Environmental Protection Agency (EPA).  It is not
possible to project what rules the EPA may issue as a result of this remand, or
the costs associated with such rules.  The actual cost of compliance
with these future rules, and for BART, may be significantly different from the
cost estimates provided in the following tables.  The following tables
do not reflect any costs for complying with other future laws or regulations,
including potential regulations regarding mercury.  The allocation
between states is based on location of the facilities and has no bearing as to
recovery in jurisdictional rates.
  Great
      Plains EnergyClean
      Air Estimated Environmental Expenditures(a)
              
              Missouri
              Kansas
              Total(millions)CAIR
              
              $658
              -
              870
              $
              -
              
              $658
              -
              870Incremental
      BART
              
              
              -
              
              567
              -
              691
              567
              -
              691
              (b)Less:
      expenditures through September 30, 2008
              
              
              (271)
              
              
              -
              
              
              (271)Estimated
      remaining required environmental expenditures
              
              $387
              -
              599
              $567
              -
              691
              $954
              -
              1,290 46
 KCP&LClean
      Air Estimated Environmental Expenditures(c)
              
              Missouri
              Kansas
              Total(millions)CAIR
              
              $478
              -
              661
              $
              -
              
              $478
              -
              661
              (d)Incremental
      BART
              
              
              -
              
              538
              -
              657
              538
              -
              657
              (b)Less:
      expenditures through September 30, 2008
              
              
              (219)
              
              
              -
              
              
              (219)Estimated
      remaining required environmental expenditures
              
              $259
              -
              442
              $538
              -
              657
              $797
              -
              1,099(a)
              The
      amounts include KCP&L's and GMO's portion of the cost of projects at
      jointly-owned units.(b)
              Reflects
      an estimated $261 million to $318 million associated with the LaCygne No.
      1 baghouse and scrubber project includedin
      the Comprehensive Energy Plan.(c)
              The
      amounts include KCP&L's portion of the cost of projects at
      jointly-owned units.(d)
              Changes
      from the 2007 Form 10-K reflect a change in assumptions related to the
      type of equipment that may be installed at theMontrose
      Station and updated estimates for Iatan No.
1.
  The
tables do not reflect potential costs relating to additional wind generation,
energy efficiency and other CO2 emission
offsets contemplated by the Collaboration Agreement.  Potential costs
relating to the additional wind generation and energy efficiency investments
that are subject to regulatory approval cannot be reasonably estimated at this
time.  Also, the potential costs relating to the additional offset of
approximately 711,000 tons of CO2 emissions
by the end of 2012 under the Collaboration Agreement cannot be reasonably
estimated at this time.  KCP&L will evaluate the available
operational and capital resource alternatives, and will select the most
cost-effective mix of actions to achieve this additional offset.  The
potential capital costs of the Collaboration Agreement provisions relating to
NOx,
sulfuric acid mist, SO2 and
particulate emission limits at Iatan and LaCygne generating stations are within
the overall estimated capital cost ranges disclosed above.  KCP&L
expects to seek recovery of the costs associated with the Collaboration
Agreement through rate increases; however, there can be no assurance that such
rate increases would be granted.
  New
Source Review
 The Clean
Air Act requires companies to obtain permits and, if necessary, install control
equipment to reduce emissions when making a major modification or a change in
operation if either is expected to cause a significant net increase in regulated
emissions.  The Sierra Club and Concerned Citizens of Platte County
have claimed that modifications were made to Iatan No. 1, prior
tothe
Comprehensive Energy Planproject, in violation of Clean Air Act regulations.  Although
KCP&L has entered into a Collaboration Agreement with those parties that
provide, among other things, for the release of such claims, the Collaboration
Agreement does not bind any other entity.  In 2007, KCP&L became
aware of subpoenas issued by a Federal grand jury to certain third parties
seeking documents relating to capital projects at Iatan No. 1.  In May
2008, a subpoena requesting documents was received by
KCP&L.  KCP&L continues to produce documents in response to
the subpoena.  The ultimate outcome of these grand jury activities
cannot presently be determined, nor can the costs and other liabilities that
could potentially result from a negative outcome presently be reasonably
estimated.  There is no assurance these costs, if any, could be
recovered in rates and failure to recover such costs could have a significant
adverse effect on Great Plains Energy’s and KCP&L’s results of operations,
financial position and cash flows.
  In
January 2004, Westar Energy, Inc. (Westar) received a notification from the EPA
alleging that it had violated new source review requirements and Kansas
environmental regulations by making modifications to the Jeffrey Energy Center
without obtaining the proper permits.  The Jeffrey Energy Center is a
coal-fired plant located in Kansas that is 92% owned by Westar and operated
exclusively by Westar.  GMO has an 8% interest in the Jeffrey Energy
Center and is generally responsible for this portion of its operating costs and
capital expenditures.  At this time, no settlement has been reached
with the EPA; however, it is possible that Westar could be subject to an
enforcement action by the EPA and be required to make significant capital
expenditures to install additional pollution controls at the Jeffrey Energy
Center.  The ultimate outcome of this notice of violation cannot
presently be determined, nor can the costs and other liabilities that could
potentially result from a negative outcome
 47
 presently
be reasonably estimated.  There is no assurance these costs, if any,
could be recovered in rates and failure to recover such costs could have a
significant adverse effect on Great Plains Energy’s results of operations,
financial position and cash flows.
  Clean
Air Interstate Rule
 The EPA’s
recently vacated CAIR required reductions in SO2 and
NOx
emissions in 28 states, including Missouri.  The reduction in both
SO2
and NOx emissions
would have been accomplished through establishment of permanent statewide caps
for NOx effective
January 1, 2009, and SO2 effective
January 1, 2010.  More restrictive caps would have been effective
January 1, 2015.  KCP&L’s and GMO’s fossil fuel-fired plants
located in Missouri were subject to CAIR, while their fossil fuel-fired plants
in Kansas were not.
  On July
11, 2008, the D.C. Circuit Court of Appeals vacated CAIR in its entirety and
remanded the matter to the EPA to promulgate a new rule that is consistent with
its opinion.  The Court has not issued its mandate, and CAIR is still
in effect until that occurs.  On September 24, 2008, the EPA and
others sought rehearing of the Court’s decision.
 
 On remand
to the EPA, CAIR could be revised to reflect the Court’s decision, which could
result in a rule that requires greater emission reductions, imposes an earlier
compliance deadline, changes or eliminates the NOx fuel
factor adjustment, includes additional states (including Kansas), does not allow
for emissions reductions to be obtained through interstate allowance trading, or
the use of the Acid Rain Program SO2
allowances, or imposes other requirements not yet known, any of which could
significantly increase the compliance costs noted in the preceding
tables.  Great Plains Energy and KCP&L cannot predict the outcome
of any remand of CAIR to the EPA.
 
 KCP&L
and GMO expected to meet the emissions reductions required by CAIR at their
Missouri plants through a combination of pollution control capital projects and
the purchase of emission allowances as needed.  CAIR established a
market-based cap-and-trade program with an emission allowance
allocation.  Facilities would have demonstrated compliance with CAIR
by holding sufficient allowances for each ton of SO2 and
NOx
emitted in any given year.  KCP&L and GMO would also have been
allowed to utilize unused SO2 emission
allowances that they had either accumulated during previous years of the Acid
Rain Program or purchased to meet the more stringent CAIR
requirements.  At September 30, 2008, KCP&L had accumulated unused
SO2
emission allowances sufficient to support just over 94,000 tons of SO2 emissions
under the provisions of the Acid Rain program, which are recorded in inventory
at zero cost.  KCP&L is permitted to sell excess SO2 emission
allowances in accordance with KCP&L’s Comprehensive Energy Plan as approved
by the MPSC and KCC.  At September 30, 2008, GMO had accumulated
unused SO2 emission
allowances sufficient to support just over 23,000 tons of SO2 emissions,
which it has received under the Acid Rain Program orpurchasedandarerecorded in inventory at average cost.
 
 Analysis
of the CAIR rule indicated that NOx and
SO2
control might have been required for KCP&L’s Montrose Station and GMO’s
Sibley and Lake Road Stations in Missouri, in addition to the environmental
upgrades at Iatan No. 1 included in the Comprehensive Energy
Plan.  NOx and
SO2
control for KCP&L’s Montrose Station and GMO’s Sibley and Lake Road Stations
could have been achieved under CAIR through a combination of pollution control
equipment and the use or purchase of emission allowances as
needed.  As required by the Collaboration Agreement, a study will be
completed in 2008 to assess potential future use of Montrose Station, including
without limitation, retiring, re-powering and upgrading the
units.  Some of the control technology for SO2 and
NOx
could also aid in the control of mercury.
 48
 The
estimated required environmental expenditures presented in the tables above do
not reflect any amounts for compliance with a revised or replaced CAIR because
management cannot predict the outcome of further legislative, judicial or
regulatory actions or their financial or operational effects on KCP&L and
GMO.  However, such actions could have a significant effect on Great
Plains Energy’s and KCP&L’s results of operations, financial position and
cash flows.
  Best
Available Retrofit Technology Rule
 The EPA
BART rule directs state air quality agencies to identify whether
visibility-reducing emissions from sources subject to BART are below limits set
by the state or whether retrofit measures are needed to reduce
emissions.  BART applies to specific eligible facilities including
KCP&L’s LaCygne Nos. 1 and 2 in Kansas, KCP&L’s Iatan No. 1, which GMO hasaninterest, and
Montrose No. 3 in Missouri, GMO’s Sibley Unit No. 3 and Lake Road Unit No.
6 in Missouri and Westar’s Jeffrey
Unit Nos. 1 and 2 in Kansas, which GMO has an
interest.  Initially, in Missouri, compliance with CAIR would
have been compliance with BART for individual sources.  Depending on
how the EPA responds to the July 11, 2008, D.C. Circuit Court of Appeals
decision vacating CAIR, the timing of installation of environmental control
equipment and the availability of SO2emission allowances, the estimated required environmental expenditures
presented in the table above could shift from CAIR to incremental BART for
Missouri.  Neither Missouri nor Kansas has received EPA approval for
their BART plans.  In the Collaboration Agreement, KCP&L agreed to
seek a consent agreement, which it has done, with the Kansas Department of
Health and Environment (KDHE) incorporating limits for stack particulate matter
emissions, as well as limits for NOx
and SO2
emissions at its LaCygne Station that will be below the presumptive limits under
BART.  KCP&L further agreed to use its best efforts to install
emission control technologies to reduce those emissions from the LaCygne Station
prior to the required compliance date under BART, but in no event later than
June 1, 2015.  KCP&L further agreed to issue requests for proposal
for the equipment required to comply with BART by December 31, 2008, requesting
that construction commence by December 31, 2010.
  Mercury
Emissions
 The EPA
Clean Air Mercury Rule (CAMR) regulated mercury emissions from coal-fired power
plants located in 48 states, including Kansas and Missouri, under the Clean Air
Act.  In February 2008, a court vacated and remanded CAMR back to the
EPA.  In March 2008, the court issued its mandate.  As a
result, the rule is effectively void.  In May 2008, petitions for
rehearing of the matter by the full court were denied.  Petitions for
review by the Supreme Court have been filed.  If all appeals are
denied, it is likely that the EPA will develop maximum achievable control
technology (MACT) standards for mercury emissions.  These MACT
standards, if adopted, could impact both KCP&L’s and GMO’s new and existing
facilities.  The estimated required environmental expenditures
presented in the tables above do not reflect any amounts for compliance with the
vacated CAMR or possible MACT standards because management cannot predict the
outcome of further judicial or regulatory actions or their financial or
operations effects on Great Plains Energy and KCP&L.  However,
such actions could have a significant effect on Great Plains Energy’s and
KCP&L’s results of operations, financial position and cash
flows.
  Greenhouse
Gases
 Many
bills concerning greenhouse gases, including CO2,are
being debated at the federal and state levels, with various compliance dates and
reduction strategies.  While legislation at both the federal and state
levels has been introduced, it is difficult to predict when or if the
legislation will be enacted.  The U.S. Supreme Court has determined
that the EPA has statutory authority to regulate CO2from
new motor vehicles if the EPA forms a judgment that such emissions contribute to
climate change.  If the EPA forms such a judgment, it may ultimately
regulate other sources of CO2,
which may include KCP&L and GMO facilities.  In July 2008, the EPA
issued an advance notice of proposed rule making seeking public comment on the
benefits and ramifications of regulating greenhouse gases under the Clean Air
Act.  The Kansas legislature passed several bills that would
have regulated CO2
and mercury emissions from new coal-fired power plants, which were vetoed by the
governor and not overridden.  The KDHE has indicated that it intends
to engage industries and stakeholders to establish goals for reducing CO2
emissions and strategies to achieve those goals.  In the November 2008
Missouri general election,
 49
 an
initiative was
passed to require at least two percent of the electricity generated by
Missouri investor-owned utilities (including KCP&L and GMO) to come from
renewable resources, such as wind, solar, biomass and hydropower by 2011 and
that fifteen percent come from such sources by 2021.  Approximately
two percent of KCP&L’s 2008 generation is expected to come from wind
generation.
  Greenhouse
gas regulation has the potential for a significant financial and operational
impact on KCP&L and GMO in connection with achieving compliance with limits
that may be established.  However, the financial and operational
consequences to Great Plains Energy and KCP&L cannot be determined until
final legislation is passed or regulations enacted.  Management will
continue to monitor the progress of bills and regulations.  As
previously discussed, KCP&L has entered into a Collaboration Agreement that
includes various provisions regarding wind generation, energy efficiency and
other CO2offsets.
  Ozone
 In June
2007, monitor data indicated that the Kansas City area violated the primary
eight-hour ozone national ambient air quality standard
(NAAQS).  Missouri and Kansas have implemented the responses
established in the maintenance plans for control of ozone.  The
responses in both states do not require additional controls at KCP&L’s and
GMO’s generation facilities beyond the currently proposed controls for CAIR and
BART.  The EPA has various options over and above the implementation
of the maintenance plans for control of ozone to address a confirmed
violation.  These options include, but are not limited to, designating
the area “non-attainment” and requiring a new regulatory plan to reduce
emissions or leaving the designation unchanged, but still requiring a new
regulatory plan.  At this time, management is unable to predict how
the EPA will respond or how that response will impact KCP&L’s and GMO’s
operations.  However, the EPA’s response could have a significant
effect on Great Plains Energy's and KCP&L's results of operations, financial
position and cash flows.
  On March
12, 2008, the EPA significantly strengthened its NAAQS for ground-level
ozone.  The EPA is revising the primary eight-hour ozone standard,
designed to protect public health, to a level of 0.075 parts per million
(ppm).  The EPA is also strengthening the secondary eight-hour ozone
standard to the level of 0.075 ppm making it identical to the revised primary
standard.  The previous primary and secondary standards, set in 1997,
were effectively 0.084 ppm.
  By March
2009, states are required to make recommendations for areas to be designated
attainment and nonattainment.  The Missouri Department of Natural
Resources (MDNR) and KDHE have issued draft determinations that the
Kansas City area is a nonattainment area.  By March 2010, the EPA will
make final designations of attainment and nonattainment areas.  By
2013, states must submit state implementation plans outlining how states will
reduce ozone to meet the standards in nonattainment areas.  Although
the impact on KCP&L’s and GMO’s operations will not be known until after the
final nonattainment designations and the state implementation plans are
submitted, the impact could have a significant effect on Great Plains Energy’s
and KCP&L’s results of operations, financial position and cash
flows.
  Sulfuric
Acid Mist BACT Analysis – Iatan Station
 As a
requirement of the Iatan Station air permit and the Collaboration Agreement,
KCP&L submitted a best available control technology (BACT) analysis for
sulfuric acid mist to MDNR in June 2007.  MDNR conducted its own BACT
analysis and determined the final emission limit in October
2008.  Management
believesfinal emission limit is achievable based on emission
guarantees associated with the currently proposed emission control equipment for
Iatan Nos. 1 and 2.
  Water
Use Regulations
 The Clean
Water Act (Act) establishes standards for cooling water intake
structures.  The EPA had previously issued regulations pursuant to
Section 316(b) of the Act regarding cooling water intake
structures.  Subsequent to an appellate court ruling, the EPA
suspended the regulations and is engaged in further rulemaking on this
matter.  In April 2008, the Supreme Court agreed to hear an appeal on
the issue of whether the Act authorized the EPA to
 50
 compare
costs with benefits in determining the best technology available for minimizing
adverse environmental impact at cooling water intake structures.  At
this time, management is unable to predict the outcome of this proceeding, how
the EPA will respond or how that response will impact KCP&L’s and GMO’s
operations.
  KCP&L
holds a permit from the MDNR covering water discharge from its Hawthorn
Station.  The permit authorizes KCP&L, among other things, to
withdraw water from the Missouri river for cooling purposes and return the
heated water to the Missouri river.  KCP&L has applied for a
renewal of this permit and the EPA has submitted an interim objection letter
regarding the allowable amount of heat that can be contained in the returned
water.  Until this matter is resolved, KCP&L continues to operate
under its current permit.  KCP&L cannot predict the outcome of
this matter; however, while less significant outcomes are possible, this matter
may require KCP&L to reduce its generation at Hawthorn Station, install
cooling towers or both, any of which could have a significant impact on
KCP&L.  The outcome could also affect the terms of water permit
renewals at KCP&L’s Iatan and Montrose Stations and at GMO’s Sibley and Lake
Road Stations.
  Environmental
Remediation
 Some
federal and state laws authorize the EPA and other agencies to issue orders
compelling potentially responsible parties to clean up sites that are determined
to present an actual or potential threat to human health or the
environment.  GMO is named as a potentially responsible party at two
disposal sites for polychlorinated biphenyls (PCBs), and retains some
environmental liability for several operations and investments no longer
owned.  In addition, GMO also owns, or has acquired liabilities from
companies that once owned or operated former manufactured gas plant (MGP) sites,
which are subject to the supervision of the EPA and various state environmental
agencies.
  At
September 30, 2008, and December 31, 2007, KCP&L had $0.3 million accrued
for environmental remediation expenses.  The accrual covers ground
water monitoring at one site.  Great Plains Energy had
$0.5 million accrued for environmental remediation expenses, which includes the
$0.3 million at KCP&L, and additional potential remediation and ground water
monitoring at two GMO sites.  The amounts accrued were established on
an undiscounted basis and Great Plains Energy and KCP&L do not currently
have an estimated time frame over which the accrued amounts may be
paid.
  In
addition to the $0.5 million accrual above, at September 30, 2008, Great
Plains Energy had $1.9 million accrued for
future investigation and remediation on GMO
identified MGP sites, PCB sites and retained liabilities.  This
estimate was based upon review of the potential costs associated with conducting
investigative and remedial actions at identified sites, as well as the
likelihood of whether such actions will be necessary.  There are also
additional costs that are considered to be less likely but still “reasonably
possible” to be incurred at these sites.  Based upon the results of
studies at these sites and knowledge and review of potential remedial actions,
it is reasonably possible that these additional costs could exceed the estimate
by approximately $1.3 million.  This estimate could change materially
after further investigation.  It could also be affected by the actions
of environmental agencies and the financial viability of other responsible
parties.
  GMO has
pursued recovery from insurance carriers and other potentially responsible
parties.  As a result of a settlement, approximately $2.1 million less
an annual deductible is available to recover MGP qualified remediation
expenses.  GMO would seek recovery of additional remediation costs and
expenses through rate increases; however, there can be no assurance that such
rate increases would be granted.
 51
 Contractual
Commitments
 The
following tables update selected items from Great Plains Energy’s and
KCP&L’s contractual commitments in the 2007 Form 10-K to reflect significant
changes,
including Great Plains Energy’s acquisition of GMO.
  Great
      Plains EnergyRemainder
      of2008
              2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              After
      2012
              
              TotalLease
      commitments
              
              (millions)Operating
      lease
              
              $
              6.3
              
              
              $
              21.2
              
              
              $
              14.7
              
              
              $
              13.2
              
              
              $
              12.7
              
              
              $
              85.0
              
              
              $
              153.1Capital
      lease
              
              
              -
              
              
              
              0.2
              
              
              
              0.3
              
              
              
              0.3
              
              
              
              0.3
              
              
              
              5.4
              
              
              
              6.5Purchase
      commitmentsFuel
              
              
              62.3
              
              
              
              156.7
              
              
              
              122.6
              
              
              
              46.1
              
              
              
              26.9
              
              
              
              198.7
              
              
              
              613.3Purchased
      capacity
              
              
              26.6
              
              
              
              32.7
              
              
              
              29.5
              
              
              
              19.8
              
              
              
              14.1
              
              
              
              24.7
              
              
              
              147.4Comprehensive
      Energy Plan
              
              
              230.3
              
              
              
              345.1
              
              
              
              59.2
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              634.6Non-regulated
      natural gastransportation
              
              
              1.4
              
              
              
              5.5
              
              
              
              5.5
              
              
              
              5.0
              
              
              
              2.6
              
              
              
              10.9
              
              
              
              30.9Total
      contractual commitments
              
              $
              326.9
              
              
              $
              561.4
              
              
              $
              231.8
              
              
              $
              84.4
              
              
              $
              56.6
              
              
              $
              324.7
              
              
              $
              1,585.8
  KCP&LRemainder
      of2008
              2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              After
      2012
              
              Total(millions)Fuel
              
              $
              43.2
              
              
              $
              114.3
              
              
              $
              85.6
              
              
              $
              33.4
              
              
              $
              15.6
              
              
              $
              198.7
              
              
              $
              490.8Comprehensive
      Energy Plan
              
              
              230.3
              
              
              
              345.1
              
              
              
              59.2
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              634.6Total
      contractual commitments
              
              $
              273.5
              
              
              $
              459.4
              
              
              $
              144.8
              
              
              $
              33.4
              
              
              $
              15.6
              
              
              $
              198.7
              
              
              $
              1,125.4
 Great
Plains Energy has sublease income of $0.7 million for the years 2009-2012 and
$0.9 million in total thereafter.  Operating lease commitments include
rail cars to serve jointly-owned generating units where KCP&L is the
managing partner.  KCP&L will be reimbursed by the other owners
for approximately $1.8 million per year ($20.6 million total) of the amounts
included in the table above.
 
 Fuel
commitments consist of commitments for nuclear fuel, coal, coal transportation
and natural gas.  Comprehensive Energy Plan represents contractual
commitments for projects included in KCP&L’s Comprehensive Energy Plan
including jointly owned units.  KCP&L expects to be reimbursed by
other owners, including GMO, for their respective share of Iatan No. 2 and
environmental retrofit costs included in the Comprehensive Energy Plan
contractual commitments.  Non-regulated natural gas transportation
consists of MPS Merchant’s commitments.
 
 In October 2008, Great
Plains Energy entered into an
operating lease to move its corporate headquarters in the third quarter
of 2009.  The lease has a 23-year term, ending in September 2032, with
an estimated
average annual minimum
lease obligation of approximately $3.7 million.  This
leasewillreplacetheexistingcorporate
headquarters operatinglease
expiring September 2009,with
minimumannuallease
obligations of approximately $4.0 million.
 
 16.
              GUARANTEES
  In the
normal course of business, Great Plains Energy and certain of its subsidiaries
enter into various agreements providing financial or performance assurance to
third parties on behalf of certain subsidiaries.  Such agreements
include, for example, guarantees and indemnification of letters of
credit.  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.
 52
 The
majority of these agreements guarantee the Company’s own future performance, so
a liability for the fair value of the obligation is not recorded.  At
September 30, 2008, Great Plains Energy has provided $1,126.0 million of credit
support for certain subsidiaries as follows:
  ·
              Great
      Plains Energy direct guarantees to GMO counterparties totaling $57.0
      million, which expire in 2009,
  ·
              Great
      Plains Energy letters of credit totaling $4.0
      millionto
      KCP&L counterparties, which expire in
  2009,
  ·
              Great
      Plains Energy letters of credit totaling $44.0
      millionto
      GMO counterparties, which expire in 2009,
  and
  ·
              Great
      Plains Energy guarantee of GMO long-term debt totaling $1,021.0 million,
      which includes debt with maturity dates ranging from
      2009-2021.
  At
September 30, 2008, KCP&L had guaranteed, with a maximum potential of $1.9
million, energy savings under an agreement with a customer that expires over the
next two years.  A subcontractor would indemnify KCP&L for any
payments made by KCP&L under this guarantee.  This guarantee was
entered into before December 31, 2002; therefore, a liability was not recorded
in accordance with FIN No. 45, “Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Guarantees of Indebtedness of
Others.”
  17.
              LEGAL
      PROCEEDINGS
  Kansas
City Power & Light Company v. Union Pacific Railroad Company
 In
October 2005, KCP&L filed a rate complaint case with the Surface
Transportation Board (STB) charging that Union Pacific Railroad Company’s (Union
Pacific) rates for transporting coal from the Powder River Basin (PRB) in
Wyoming to KCP&L’s Montrose Station are unreasonably high.  Prior
to the end of 2005, the rates were established under a contract with Union
Pacific.  Efforts to extend the term of the contract were unsuccessful
and Union Pacific is the only service for coal transportation from the PRB to
Montrose Station.  KCP&L charged that Union Pacific possesses
market dominance over the traffic and requested the STB prescribe maximum
reasonable rates.
  On May
16, 2008, the STB found that the rates Union Pacific charged on coal movement
from the PRB to KCP&L’s Montrose Station exceeded the maximum reasonable
rate of 180% of variable costs.  Consequently, the STB prescribed a
maximum reasonable rate of 180% of variable costs until the end of
2015.  Additionally, the STB ordered reparations to be paid, with
interest, for coal deliveries made from January 1, 2006 through the date a new
rate is established.  In the third quarter of 2008, KCP&L received
approximately $3 million for reparations and interest for 2006 coal
deliveries.  Reparations for subsequent periods cannot be calculated
at this time because actual costs for the period have not been
finalized.  Union Pacific did not appeal the decision.
  KCP&L
Hawthorn No. 5 Litigation
 KCP&L
received reimbursement for the 1999 Hawthorn No. 5 boiler explosion under a
property damage insurance policy with Travelers Property Casualty Company of
America (Travelers).  Travelers filed suit in the U.S. District Court
for the Eastern District of Missouri in November 2005, against National Union
Fire Insurance Company of Pittsburgh, Pennsylvania, (National Union) and
KCP&L was added as a defendant in June 2006.  The case was
subsequently transferred to the U.S. District Court for the Western District of
Missouri.  Travelers sought recovery of $10 million that KCP&L
recovered through subrogation litigation.  On July 24, 2008, the
Court held that Travelers is not entitled to any recovery
from KCP&L.  Travelers has the right to appeal this
decision, although no appeal has been filed at this time.
  KCP&L
Emergis Technologies, Inc.
 In March
2006, Emergis Technologies, Inc. f/k/a BCE Emergis Technologies, Inc. (Emergis)
filed suit against KCP&L in U.S. District Court for the Western District of
Missouri, alleging infringement of a patent, entitled “Electronic Invoicing and
Payment System” and seeking unspecified monetary damages and injunctive
 53
 relief.  This
patent relates to automated electronic bill presentment and payment systems,
particularly those involving Internet billing and collection.  In
March 2006, KCP&L filed a response and denied infringing the
patent.  KCP&L counterclaimed for a declaration that the patent is
invalid and not infringed.  The parties filed a joint stipulation of
dismissal and the court ordered the case dismissed in February
2008.
 KCP&L
Spent Nuclear Fuel and Radioactive Waste
 In 2004,
KCP&L and the other two Wolf Creek owners filed suit against the United
States in the U.S. Court of Federal Claims seeking an unspecified amount of
monetary damages resulting from the government’s failure to begin accepting
spent nuclear fuel for disposal in January 1998, as the government was required
to do by the Nuclear Waste Policy Act of 1982.  Approximately
sixty-five other similar cases were filed with that court, a few of which have
settled.  To date, the court has rendered final decisions in several
of the cases, most of which are on appeal now.  The Wolf Creek case is
on a court-ordered stay until further order of the court to allow for some of
the earlier cases to be decided first by an appellate court.  Another
Federal appellate court has already determined that the government breached its
obligation to begin accepting spent fuel for disposal.  The questions
now before the court in the pending cases are whether and to what extent the
utilities are entitled to monetary damages for that breach.
  Weinstein
v. KLT Telecom
 Richard
D. Weinstein (Weinstein) filed suit against KLT Telecom Inc. (KLT Telecom) in
September 2003 in the Circuit Court of St. Louis County,
Missouri.  KLT Telecom acquired a controlling interest in DTI
Holdings, Inc. (Holdings) in February 2001 through the purchase of approximately
two-thirds of the Holdings stock held by Weinstein.  In connection
with that purchase, KLT Telecom entered into a put option in favor of Weinstein,
which granted Weinstein an option to sell to KLT Telecom his remaining shares of
Holdings stock.  The put option provided for an aggregate exercise
price for the remaining shares equal to their fair market value with an
aggregate floor amount of $15 million and was exercisable between September 1,
2003, and August 31, 2005.  In June 2003, the stock of Holdings was
cancelled and extinguished pursuant to the joint Chapter 11 plan confirmed by
the Bankruptcy Court.  In September 2003, Weinstein delivered a notice
of exercise of his claimed rights under the put option.  KLT Telecom
rejected the notice of exercise, and Weinstein filed suit alleging breach of
contract.  Weinstein sought damages of at least $15 million, plus
statutory interest.  In March 2008, the parties settled this matter
for an amount less than the $15 million reserve recorded in 2001 and Great
Plains Energy released the remaining reserve resulting in $3.4 million of
after-tax income.
  GMO
Price Reporting Litigation
 In
response to complaints of manipulation of the California energy market, in 2002
FERC issued an order requiring net sellers of power in the California markets
from October 2, 2000, through June 20, 2001, at prices above a FERC
determined competitive market clearing price to make refunds to net purchasers
of power in the California market during that time period.  Because
MPS Merchant was a net purchaser of power during the refund period it has
received approximately $8.1 million in refunds.  However, various
parties appealed the FERC order to the United States Court of Appeals for the
Ninth Circuit seeking review of a number of issues, including changing the
refund period to include periods prior to October 2, 2000.  On
August 2, 2006, the U.S. Court of Appeals for the Ninth Circuit issued an order
finding, among other things, that FERC did not provide a sufficient
justification for refusing to exercise its remedial authority under the Federal
Power Act to determine whether market participants violated FERC-approved
tariffs during the period prior to October 2, 2000, and imposing a remedy for
any such violations.  The court remanded the matter to FERC to
determine whether tariff violations occurred and, if so, the appropriate
remedy.  In March 2008, FERC issued an order declining to order
refunds for the period prior to October 2, 2000.  That order has been
appealed to the U.S. Court of Appeals for the Ninth Circuit.  In
addition, FERC initiated a docket, generally referred to as the Pacific
Northwest refund proceeding, to determine if any refunds were warranted related
to the potential impact of the California market issues on buyers in the Pacific
Northwest between December 25, 2000, and June 20, 2001.  The City of
Seattle has claimed that MPS Merchant Services owes the city a $4.1 million
refund.  The ultimate outcome of these matters cannot be
predicted.
 54
 On
October 6, 2006, the MPSC filed suit in the Circuit Court of Jackson County,
Missouri against 18 companies, including GMO and MPS Merchant Services, Inc.,
alleging that the companies manipulated natural gas prices
  GMO
South Harper Peaking Facility
 GMO
constructed a 315 MW natural gas power plant and related substation in an
unincorporated area of Cass County, Missouri.  Cass County and local
residents filed suit claiming that county approval was required to construct the
project.  In April 2008, GMO entered into an agreement with Cass
County pursuant to which it filed and Cass County approved a land use
application for the South Harper facilities.  GMO entered into a final
settlement agreement with the members of StopAquila.org, an unincorporated
association of approximately 100 individuals who opposed the facilities, and has
settled all seven of the original private lawsuits filed by Cass County
residents alleging that the facilities constitute a public and private
nuisance.  In August 2008, a law took effect that grants the MPSC the
authority to retroactively approve the development and construction of the South
Harper facilities.  GMO has filed an application with the MPSC, which
is pending decision.
  GMO
Coal Supply Litigation
 In the
spring of 2005, one of GMO’s coal suppliers, C.W. Mining, terminated a long
term, fixed price coal supply agreement allegedly because of a force majeure
event.  GMO incurred significant costs procuring replacement coal and
disputed that the supplier was entitled to terminate the
contract.  GMO filed a lawsuit against the supplier in federal court
in Salt Lake City and the trial was held in February 2007.  On October
29, 2007, the United States District Court for the District of Utah, Central
Division held that C.W. Mining's performance under the coal contract was not
excused by a force majeure event and awarded GMO $24.8 million in
damages.  The judgment is pending appeal in the 10th Circuit
and oral arguments took place in September 2008.  In order to preserve
and recover on its claim, on January 8, 2008, GMO participated in the filing of
an involuntary Chapter 11 bankruptcy petition against C.W. Mining in the United
States Bankruptcy Court in Salt Lake City, Utah.  In September 2008,
the Bankruptcy Court granted GMO’s motions for partial summary judgment,
effectively putting C.W. Mining into bankruptcy.  In July 2008,
parties affiliated with C.W. Mining filed suit against GMO, alleging that GMO’s
efforts to collect on its judgment constituted conversion, abuse of process,
intentional interference with economic relations and civil conspiracy, asserting
$217 million in damages and requesting punitive damages.  In October
2008, the plaintiffs dismissed this suit without prejudice.  GMO
expects that 95% of any damages GMO collects, in excess of legal expenses, as a
result of this litigation will flow through its fuel adjustment clause for the
benefit of its Missouri customers.
  Everest
Minority Shareholder Litigation
 Minority
shareholders of a former subsidiary of GMO brought suit against GMO in Circuit
Court in St. Charles County, Missouri, asserting that they are entitled to put
their shares to GMO for approximately $5 million because the subsidiary failed
to obtain 30,000 customers by the end of 2004.  Under the put
agreement, if there was a dispute regarding the customer count, it was to be
resolved by an audit firm.  GMO has paid $2.3 million to the minority
shareholders under related market-based put provisions.  The audit
firm issued a report stating that the customer count was
met.  Discovery in this case is continuing.
  18.
              ASSET
      RETIREMENT OBLIGATIONS
  In the
third quarter of 2008, KCP&L recorded a $1.6 million reduction to its ARO to
decommission Wolf Creek, which reflects a 2008 update to the decommissioning
study cost estimates.  To estimate the ARO reduction, KCP&L used a
credit-adjusted risk free rate of 6.33%.
 55
 Asbestos
abatement activity has occurred on certain generating units at KCP&L’s
Hawthorn Station resulting in a revision in timing used in computing the
original present value of the asbestos ARO.  With the five-year
asbestos
  In
addition, management identified an additional asbestos ARO.  The
wiring used in generating stations includes asbestos insulation, which would
require special handling if disturbed.  Due to the inability to
reasonably estimate the quantities or the amount of disturbance that will be
necessary during dismantlement at the end of the life of the plant, a fair value
of the obligation cannot be reasonably estimated at this
time.  Management will continue to monitor the obligation and will
recognize a liability in the period in which sufficient information becomes
available to reasonably estimate its fair value.
  GMO has
AROs related to asbestos in certain plants and buildings, an ash pond and
landfill, removal of storage tanks and transformers containing PCBs, as well as
communication towers.
  The
following tables summarize the change in Great Plains Energy’s and KCP&L’s
AROs.
  Great
      Plains EnergySeptember
      30
              December
      312008
              2007(millions)Beginning
      balance
              
              $
              94.5
              
              
              $
              91.8Additions
              
              
              17.2
              
              
              
              -Adjustments
              
              
              (1.6
              )
              
              
              -GMO
      acquisition
              
              
              12.1
              
              
              
              -Settlements
              
              
              (2.6
              )
              
              
              (1.1
              )Accretion
              
              
              4.9
              
              
              
              3.8Ending
      balance
              
              $
              124.5
              
              
              $
              94.5
  KCP&LSeptember
      30
              December
      312008
              2007(millions)Beginning
      balance
              
              $
              94.5
              
              
              $
              91.8Additions
              
              
              17.2
              
              
              
              -Adjustments
              
              
              (1.6
              )
              
              
              -Settlements
              
              
              (2.6
              )
              
              
              (1.1
              )Accretion
              
              
              4.7
              
              
              
              3.8Ending
      balance
              
              $
              112.2
              
              
              $
              94.5
 56
 19.
                SEGMENTS
      AND RELATED INFORMATION
  Great
Plains Energy
 Great
Plains Energy has one reportable segment based on its method of internal
reporting which generally segregates reportable segments based on products and
services, management responsibility and regulation.  The one
reportable business segment is electric utility, consisting of KCP&L and
GMO’s regulated utility operations.
  The
following tables reflect summarized financial information concerning Great
Plains Energy’s reportable segment.  Prior year information has been
recast to reflect Strategic Energy as discontinued operations.
 Three
      Months Ended
              Electric
      Utility
              
              Great
      PlainsSeptember
      30, 2008
              Other
              Energy(millions)Operating
      revenues
              
              $
              593.6
              
              
              $
              -
              
              
              $
              593.6Depreciation
      and amortization
              
              
              (65.4
              )
              
              
              -
              
              
              
              (65.4
              )Interest
      charges
              
              
              (27.0
              )
              
              
              3.4
              
              
              
              (23.6
              )Income
      taxes
              
              
              (46.0
              )
              
              
              0.1
              
              
              
              (45.9
              )Loss
      from equity investments
              
              
              -
              
              
              
              (0.3
              )
              
              
              (0.3
              )Discontinued
      operations
              
              
              -
              
              
              
              0.3
              
              
              
              0.3Net
      income
              
              
              102.5
              
              
              
              2.5
              
              
              
              105.0
  Year
      to Date
              Electric
      Utility
              
              Great
      PlainsSeptember
      30, 2008
              Other
              Energy(millions)Operating
      revenues
              
              $
              1,226.2
              
              
              $
              -
              
              
              $
              1,226.2Depreciation
      and amortization
              
              
              (166.4
              )
              
              
              -
              
              
              
              (166.4
              )Interest
      charges
              
              
              (63.7
              )
              
              
              (11.9
              )
              
              
              (75.6
              )Income
      taxes
              
              
              (72.8
              )
              
              
              4.4
              
              
              
              (68.4
              )Loss
      from equity investments
              
              
              -
              
              
              
              (1.1
              )
              
              
              (1.1
              )Discontinued
      operations
              
              
              -
              
              
              
              35.0
              
              
              
              35.0Net
      income
              
              
              127.4
              
              
              
              20.1
              
              
              
              147.5 57
 Three
      Months Ended
              Electric
      Utility
              
              Great
      PlainsSeptember
      30, 2007
              Other
              Energy(millions)Operating
      revenues
              
              $
              416.0
              
              
              $
              -
              
              
              $
              416.0Depreciation
      and amortization
              
              
              (44.1
              )
              
              
              -
              
              
              
              (44.1
              )Interest
      charges
              
              
              (17.1
              )
              
              
              (10.5
              )
              
              
              (27.6
              )Income
      taxes
              
              
              (33.5
              )
              
              
              5.4
              
              
              
              (28.1
              )Loss
      from equity investments
              
              
              -
              
              
              
              (0.4
              )
              
              
              (0.4
              )Discontinued
      operations
              
              
              -
              
              
              
              (3.9
              )
              
              
              (3.9
              )Net
      income (loss)
              
              
              76.5
              
              
              
              (14.4
              )
              
              
              62.1
  Year
      to Date
              Electric
      Utility
              
              Great
      PlainsSeptember
      30, 2007
              Other
              Energy(millions)Operating
      revenues
              
              $
              990.8
              
              
              $
              -
              
              
              $
              990.8Depreciation
      and amortization
              
              
              (130.9
              )
              
              
              -
              
              
              
              (130.9
              )Interest
      charges
              
              
              (52.0
              )
              
              
              (14.2
              )
              
              
              (66.2
              )Income
      taxes
              
              
              (45.7
              )
              
              
              9.3
              
              
              
              (36.4
              )Loss
      from equity investments
              
              
              -
              
              
              
              (1.1
              )
              
              
              (1.1
              )Discontinued
      operations
              
              
              -
              
              
              
              16.4
              
              
              
              16.4Net
      income (loss)
              
              
              115.1
              
              
              
              (4.0
              )
              
              
              111.1
  Electric
      Utility
              
              
              Great
      PlainsOther
              Eliminations
              EnergySeptember
      30, 2008
              
              (millions)Assets
      (a)
              
              $
              9,254.9
              
              
              $
              157.5
              
              
              $
              (2,082.7
              )
              
              $
              7,329.7Capital
      expenditures (b)
              
              
              702.3
              
              
              
              0.8
              
              
              
              -
              
              
              
              703.1December
      31, 2007Assets
      (a)
              
              $
              4,290.7
              
              
              $
              551.2
              
              
              $
              (9.8
              )
              
              $
              4,832.1Capital
      expenditures (b)
              
              
              511.5
              
              
              
              4.4
              
              
              
              -
              
              
              
              515.9(a)Other includes assets of discontinued
operations.(b)Capital expenditures reflect year to date amounts for the periods
      presented. 58
 KCP&L
 For all
periods in 2008, KCP&L has one reportable
segment, KCP&L, which is the same as the KCP&L registrant financial
statements for all periods in 2008.  The following tables
reflect summarized financial information concerning KCP&L’s reportable
segment for 2007.  For the periods prior to the January 2, 2008,
transfer of HSS to KLT Inc., other included HSS and intercompany
eliminations.  Intercompany eliminations include insignificant amounts
of intercompany financing-related activities.
 Three
      Months Ended
              
              
              
              
              
              
              ConsolidatedSeptember
      30, 2007
              
              KCP&L
              
              
              Other
              
              KCP&L(millions)Operating
      revenues
              
              $
              416.0
              
              
              $
              -
              
              
              $
              416.0Depreciation
      and amortization
              
              
              (44.1
              )
              
              
              -
              
              
              
              (44.1
              )Interest
      charges
              
              
              (17.1
              )
              
              
              -
              
              
              
              (17.1
              )Income
      taxes
              
              
              (33.5
              )
              
              
              -
              
              
              
              (33.5
              )Net
      income
              
              
              76.5
              
              
              
              0.1
              
              
              
              76.6
  Year
      to Date
              
              
              
              
              
              
              ConsolidatedSeptember
      30, 2007
              
              KCP&L
              
              
              Other
              
              KCP&L(millions)Operating
      revenues
              
              $
              990.8
              
              
              $
              -
              
              
              $
              990.8Depreciation
      and amortization
              
              
              (130.9
              )
              
              
              -
              
              
              
              (130.9
              )Interest
      charges
              
              
              (52.0
              )
              
              
              -
              
              
              
              (52.0
              )Income
      taxes
              
              
              (45.7
              )
              
              
              -
              
              
              
              (45.7
              )Net
      income
              
              
              115.1
              
              
              
              -
              
              
              
              115.1
  20.
              DERIVATIVE
      INSTRUMENTS
  The
Company is exposed to a variety of market risks including interest rates and
commodity prices.  Management has established risk management policies
and strategies to reduce the potentially adverse effects that the volatility of
the markets may have on the Company’s operating results.  The risk
management activities, including the use of derivative instruments, are subject
to the management, direction and control of internal risk management
committees.  Management’s interest rate risk management strategy uses
derivative instruments to adjust the Company’s liability portfolio to optimize
the mix of fixed and floating rate debt within an established
range.  In addition, the Company uses derivative instruments to hedge
against future interest rate fluctuations on anticipated debt
issuances.  Management maintains commodity price risk management
strategies that use derivative instruments to reduce the effects of fluctuations
in fuel expense caused by commodity price volatility.  Counterparties
to commodity derivatives and interest rate swap agreements expose the Company to
credit loss in the event of nonperformance.  This credit loss is
limited to the cost of replacing these contracts at current market
rates.  Derivative instruments, excluding those instruments that
qualify for the NPNS election, which are accounted for by accrual accounting,
are recorded on the balance sheet at fair value as an asset or
liability.  Changes in the fair value of derivative instruments are
recognized currently in net income unless specific hedge accounting criteria are
met, except GMO utility operations hedges that are recorded to a regulatory
asset or liability consistent with MPSC regulatory orders, as discussed
below.
  Interest
Rate Risk Management
 Forward
Starting Swaps
 In July
2007, Great Plains Energy entered into three Forward Starting Swaps (FSS), with
a total notional amount of $250.0 million, to hedge against interest rate
fluctuations on future issuances of long-term debt.  The FSS were
 59
 designed
to effectively remove most of the interest rate uncertainty and, to the extent
that swap spreads correlate with credit spreads, some degree of credit spread
uncertainty with respect to the debt to be issued, thereby enabling Great Plains
Energy to predict with greater assurance its future interest costs on that
debt.  The FSS were originally for anticipated financing related to
the GMO acquisition and treated as an economic hedge.  Due to a change
in financing plans, during the second quarter of 2008, Great Plains Energy
redesignated the FSS from an economic hedge (non-hedging derivative) to a cash
flow hedge.  Prior to the redesignation, the change in the fair value
of the FSS increased interest expense by $9.2 million year to date June 30,
2008.  Subsequent to the redesignation, the FSS are accounted for as
cash flow hedges and the fair value is recorded as a current asset or liability
with an offsetting entry to OCI, to the extent the hedges are effective, until
the forecasted transaction occurs.  No ineffectiveness has been
recorded on the FSS since June 30, 2008.  The pre-tax gain or loss on
the FSS recorded to OCI will be reclassified to interest expense over the life
of the future debt issuance.
  Treasury
Locks
 In 2007,
Great Plains Energy entered into three T-Locks, with a notional amount of $350.0
million, to hedge against interest rate fluctuations on the U.S. Treasury rate
component on future issuances of long-term debt.  Following a change
in financing plans, Great Plains Energy assigned the T-Locks to
KCP&L.  In the first quarter of 2008, KCP&L issued $350.0
million 10-year long-term debt and the T-Locks settled simultaneously with the
issuance of this long-term fixed rate debt.  The T-Locks were
accounted for as cash flow hedges and KCP&L’s interest expense year to date
September 30, 2008, includes a loss of $0.7 million due to ineffectiveness of
the cash flow hedge.  A pre-tax loss of $39.1 million was recorded to
OCI and is being reclassified to interest expense over the life of the 10-year
debt.  For the three months ended and year to date September 30, 2008,
$1.0 million and $2.2 million, respectively, of the loss has been reclassified
from OCI to interest expense.  At September 30, 2008, KCP&L had
$36.9 million recorded in accumulated OCI for the T-Locks.
  In 2006,
Great Plains Energy entered into a T-Lock to hedge against interest rate
fluctuations on an anticipated $100.0 million 10-year long-term debt
issuance.  In the first quarter of 2007, Great Plains Energy allowed
the T-Lock to expire while the terms of the debt offering were re-evaluated and
the resulting $0.1 million loss was recorded to interest expense as cash flow
ineffectiveness.
  Commodity
Risk Management
 KCP&L’s
risk management policy is to use derivative instruments to mitigate its exposure
to market price fluctuations on a portion of its projected natural gas purchases
to meet generation requirements for retail and firm wholesale
sales.  At September 30, 2008, KCP&L has hedged 12% of its 2009
projected natural gas usage for retail load and firm MWh sales, primarily by
utilizing fixed forward physical contracts and financial
instruments.  The fair values of these instruments are recorded as
current assets or current liabilities with an offsetting entry to OCI for the
effective portion of the hedge.  To the extent the hedges are not
effective, the ineffective portion of the change in fair market value is
recorded currently in fuel expense.
  GMO’s
price risk policy is to use derivative instruments to mitigate price exposure to
natural gas price volatility in the market.  This program extends
multiple years and the mark-to-market value of the portfolio relates to
financial contracts that will settle against actual purchases of natural gas and
purchased power in 2008 through 2010.  As of September 30, 2008,
GMO had financial contracts in place to hedge approximately 32% and 31% of the
expected on-peak natural gas and natural gas equivalent purchased power price
exposure for 2008 and 2009, respectively.  In connection with GMO’s
2005 Missouri electric rate case, it was agreed that these contracts would be
recognized into the cost of sales when they settle.  The settlement
cost is a component of the energy cost included in GMO’s Missouri fuel
adjustment clause.  A regulatory asset has been recordedto
reflect the change in the timing of recognition authorized by the
MPSC.  To the extent that recovery of actual costs incurred is
allowed, amounts will not impact earnings, but will impact cash flows due to the
timing of the recovery mechanism.
  MPS
Merchant manages the daily delivery of its remaining contractual commitments to
reduce its exposure to changes in market prices.  Within the trading
portfolio, MPS Merchant takes certain positions to hedge physical
 60
 sale or
purchase contracts.  MPS Merchant continues to use all forms of
financial instruments, including futures, forwards and swaps to help hedge its
remaining portfolio.  MPS Merchant records trading energy contracts,
both physical and financial, at fair value in accordance with SFAS No.
133.  Changes in fair value are recorded in the consolidated
statements of income in non-operating income
and on the consolidated balance sheets in derivative assets or
liabilities.
  The
notional and recorded fair values of the companies’ open positions for
derivative instruments are summarized in the following table.  The
fair values of these derivatives are recorded on the consolidated balance
sheets.
 September
      30
              
              
              December
      312008
              
              
              2007Notional
              
              
              
              
              
              NotionalContract
              
              
              Fair
              
              
              Contract
              
              
              FairAmount
              
              
              Value
              
              
              Amount
              
              
              ValueGreat
      Plains Energy
              
              (millions)Swap
      contractsCash
      flow hedges
              
              $
              0.7
              
              
              $
              -
              
              
              $
              5.5
              
              
              $
              0.7Non-hedging
      derivatives
              
              
              42.8
              
              
              
              (2.4
              )
              
              
              -
              
              
              
              -Forward
      contractsCash
      flow hedges
              
              
              0.3
              
              
              
              0.1
              
              
              
              1.4
              
              
              
              -Non-hedging
      derivatives
              
              
              387.8
              
              
              
              11.0
              
              
              
              -
              
              
              
              -Option
      contractsNon-hedging
      derivatives
              
              
              37.0
              
              
              
              2.5
              
              
              
              -
              
              
              
              -Anticipated
      debt issuanceForward
      starting swap
              
              
              250.0
              
              
              
              (34.8
              )
              
              
              -
              
              
              
              -Treasury
      lock
              
              
              -
              
              
              
              -
              
              
              
              350.0
              
              
              
              (28.0
              )Non-hedging
      derivatives
              
              
              -
              
              
              
              -
              
              
              
              250.0
              
              
              
              (16.4
              )KCP&LSwap
      contractsCash
      flow hedges
              
              
              0.7
              
              
              
              -
              
              
              
              5.5
              
              
              
              0.7Forward
      contractsCash
      flow hedges
              
              
              0.3
              
              
              
              0.1
              
              
              
              1.4
              
              
              
              -Anticipated
      debt issuanceTreasury
      lock
              
              
              -
              
              
              
              -
              
              
              
              350.0
              
              
              
              (28.0
              )
 The
amounts recorded in accumulated OCI related to the cash flow hedges are
summarized in the following table.
 Great
      Plains Energy
              
              
              KCP&LSeptember
      30
              
              December
      31
              
              September
      30
              
              December
      312008
              
              2007
              
              2008
              
              2007(millions)Current
      assets
              
              $
              13.8
              
              
              $
              14.6
              
              
              $
              13.8
              
              
              $
              14.6Current
      liabilities
              
              
              (50.1
              )
              
              
              (31.0
              )
              
              
              (36.9
              )
              
              
              (26.6
              )Deferred
      income taxes
              
              
              14.1
              
              
              
              6.2
              
              
              
              9.0
              
              
              
              4.5Assets
      of discontinued operations
              
              
              -
              
              
              
              31.0
              
              
              
              -
              
              
              
              -Liabilities
      of discontinued operations
              
              
              -
              
              
              
              (16.9
              )
              
              
              -
              
              
              
              -Deferred
      income taxes, included in assetsand
      liabilities of discontinued operations
              
              
              -
              
              
              
              (5.8
              )
              
              
              -
              
              
              
              -Total
              
              $
              (22.2
              )
              
              $
              (1.9
              )
              
              $
              (14.1
              )
              
              $
              (7.5
              )
 61
 Great
Plains Energy’s accumulated OCI in the table above at September 30, 2008,
includes $3.8 million that is expected to be reclassified to expenses over the
next twelve months.  KCP&L’s accumulated OCI includes $3.3 million
that is expected to be reclassified to expense over the next twelve
months.
 Three
      Months Ended
              
              
              Year
      to DateSeptember
      30
              
              
              September
      302008
              
              
              2007
              
              
              2008
              
              
              2007Great
      Plains Energy
              
              (millions)Fuel
      expense
              
              $
              (1.6
              )
              
              $
              -
              
              
              $
              (2.3
              )
              
              $
              -Interest
      expense
              
              
              0.9
              
              
              
              (0.2
              )
              
              
              2.0
              
              
              
              (0.4
              )Income
      taxes
              
              
              0.3
              
              
              
              0.1
              
              
              
              0.1
              
              
              
              0.2Income
      (loss) from discontinued operationsPurchased
      power expense
              
              
              -
              
              
              
              26.1
              
              
              
              (106.1
              )
              
              
              64.4Income
      taxes
              
              
              -
              
              
              
              (10.7
              )
              
              
              43.8
              
              
              
              (26.3
              )OCI
              
              $
              (0.4
              )
              
              $
              15.3
              
              
              $
              (62.5
              )
              
              $
              37.9KCP&LFuel
      expense
              
              $
              (1.6
              )
              
              $
              -
              
              
              $
              (2.3
              )
              
              $
              -Interest
      expense
              
              
              0.8
              
              
              
              (0.3
              )
              
              
              1.6
              
              
              
              (0.5
              )Income
      taxes
              
              
              0.3
              
              
              
              0.1
              
              
              
              0.3
              
              
              
              0.2OCI
              
              $
              (0.5
              )
              
              $
              (0.2
              )
              
              $
              (0.4
              )
              
              $
              (0.3
              )
  21.
              FAIR
      VALUE MEASUREMENTS
  Great
Plains Energy and KCP&L adopted SFAS No. 157, “Fair Value Measurements”
effective January 1, 2008.  This statement defines fair value,
establishes a framework for measuring fair value in Generally Accepted
Accounting Principles (GAAP) and expands disclosures about fair value
measurements.  The statement does not require any new fair value
measurements but provides guidance on how to measure fair value when
required.  SFAS No. 157 also emphasizes that fair value is a
market-based measurement, not an entity-specific measurement, and sets out a
fair value hierarchy with the highest priority being quoted prices in active
markets.
  SFAS No.
157 defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  SFAS No. 157 establishes a fair
value hierarchy, which prioritizes the inputs to valuation techniques used to
measure fair value into three broad categories, giving the highest priority to
quoted prices in active markets for identical assets or liabilities and lowest
priority to unobservable inputs.  A definition of the various levels,
as well as discussion of the various Company measurements within the levels is
as follows:
  Level 1 –
Unadjusted quoted prices for identical assets or liabilities in active markets
that the Company has access to at the measurement date.  Assets
categorized within this level consist of Great Plains Energy’s various
non-exchange traded derivative instruments traded in over-the-counter markets
and equity and certain U.S. Treasury securities that are actively traded within
KCP&L’s decommissioning trust fund.
  Level 2 –
Market-based inputs for assets or liabilities that are observable (either
directly or indirectly) or inputs that are not observable but are corroborated
by market data.  Assets and liabilities categorized within this level
consist of KCP&L’s and Great Plains Energy’s various non-exchange traded
derivative instruments traded in over-the-counter markets and debt securities
and certain U.S. Agency securities within KCP&L’s decommissioning trust
fund.
 62
 Level 3 –
Unobservable inputs, reflecting the Company’s own assumptions about the
assumptions market participants would use in pricing the asset or
liability.  Assets categorized within this level consist of Great
Plains Energy’s various non-exchange traded derivative instruments traded in
over-the-counter markets and mortgage-backed securities within KCP&L’s
decommissioning trust fund for which sufficiently observable market data is not
available to corroborate the valuation inputs.
  The
following table includes Great Plains Energy’s and KCP&L’s balances of
financial assets and liabilities measured at fair value on a recurring basis at
September 30, 2008.
 Fair
      Value Measurements UsingDescription
                September
      30 2008
                
                FIN
      39
                  Netting(c)
                Quoted
      Prices in Active Markets for Identical Assets
                  (Level
      1)
                
                
                Significant
      Other Observable Inputs
                  (Level
      2)
                
                
                Significant
      Unobservable Inputs
                  (Level
      3)KCP&L
                
                (millions)AssetsDerivative
      instruments (a)
                
                $
                0.1
                
                
                $
                -
                
                $
                -
                
                
                $
                0.1
                
                
                $
                -Nuclear
      decommissioning trust (b)
                
                
                102.8
                
                
                
                -
                
                
                58.3
                
                
                
                36.3
                
                
                
                8.2Total
                
                $
                102.9
                
                
                $
                -
                
                $
                58.3
                
                
                $
                36.4
                
                
                $
                8.2Other
      Great Plains EnergyAssetsDerivative
      instruments (a)
                
                $
                32.6
                
                
                $
                (3.4
                )
                $
                5.4
                
                
                $
                24.7
                
                
                $
                5.9Total
                
                
                32.6
                
                
                
                (3.4
                )
                
                5.4
                
                
                
                24.7
                
                
                
                5.9LiabilitiesDerivative
      instruments (a)
                
                
                56.3
                
                
                
                (3.4
                )
                
                4.1
                
                
                
                55.6
                
                
                
                -Total
                
                $
                56.3
                
                
                $
                (3.4
                )
                $
                4.1
                
                
                $
                55.6
                
                
                $
                -Great
      Plains EnergyAssetsDerivative
      instruments (a)
                
                $
                32.7
                
                
                $
                (3.4
                )
                $
                5.4
                
                
                $
                24.8
                
                
                $
                5.9Nuclear
      decommissioning trust (b)
                
                
                102.8
                
                
                
                -
                
                
                58.3
                
                
                
                36.3
                
                
                
                8.2Total
                
                
                135.5
                
                
                
                (3.4
                )
                
                63.7
                
                
                
                61.1
                
                
                
                14.1LiabilitiesDerivative
      instruments (a)
                
                
                56.3
                
                
                
                (3.4
                )
                
                4.1
                
                
                
                55.6
                
                
                
                -Total
                
                $
                56.3
                
                
                $
                (3.4
                )
                $
                4.1
                
                
                $
                55.6
                
                
                $
                -(a)
      The
      fair value of derivative instruments is estimated using market quotes, net
      of estimated credit risk.  Upon adoption
      ofSFAS
      No. 157, the Company's own credit risk has been incorporated into the
      valuation of derivative
      liabilities.  This had noimpact
      to Great Plains Energy or KCP&L.(b)
      Fair
      value isbased on quoted market prices of the
      investments held by the fund.(c)Represents the
      difference between derivative contracts in an asset or liability position
      presented on a net basis bycounterparty in the consolidated financial statements as a master netting
      agreement exists between the company andderivative counterparty.
 63
 The
following tables reconcile the beginning and ending balances for all level 3
assets and liabilities, net measured at fair value on a recurring basis for the
three months ended and year to date September 30, 2008.
 Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)OtherGreat
              
              
              GreatPlains
              
              
              PlainsKCP&L
              
              Energy
              
              
              EnergyNuclearDecommissioning
              
              DerivativeDescription
              Trust
              
              Instruments
              
              
              Total(millions)Balance
      July 1, 2008
              
              $
              8.9
              
              
              $
              -
              
              
              $
              8.9GMO
      acquisition July 14, 2008
              
              
              -
              
              
              
              6.6
              
              
              
              6.6Total
      realized/unrealized gains or (losses)Included
      in regulatory liability
              
              
              (0.2
              )
              
              
              -
              
              
              
              (0.2
              )Included
      in non-operating income
              
              
              -
              
              
              
              (2.1
              )
              
              
              (2.1
              )Purchase,
      issuances, and settlements
              
              
              (0.5
              )
              
              
              1.4
              
              
              
              0.9Balance
      September 30, 2008
              
              $
              8.2
              
              
              
              5.9
              
              
              
              14.1Total
      unrealized gains and (losses) included in non-operatingincome
      relating to assets and liabilities still on theconsolidated
      balance sheet at September 30, 2008
              
              $
              -
              
              
              $
              (2.1
              )
              
              $
              (2.1
              )
  Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)OtherGreat
                
                
                GreatPlains
                
                
                PlainsKCP&L
                
                Energy
                
                
                EnergyNuclearDecommissioning
                
                DerivativeDescription
                Trust
                
                Instruments
                
                
                Total(millions)Balance
      January 1, 2008
                
                $
                6.5
                
                
                $
                22.4
                
                
                $
                28.9GMO
      acquisition July 14, 2008
                
                
                -
                
                
                
                6.6
                
                
                
                6.6Total
      realized/unrealized gains or (losses)Included
      in regulatory liability
                
                
                (0.4
                )
                
                
                -
                
                
                
                (0.4
                )Included
      in non-operating income
                
                
                -
                
                
                
                (2.1
                )
                
                
                (2.1
                )Purchase,
      issuances, and settlements
                
                
                (1.6
                )
                
                
                1.4
                
                
                
                (0.2
                )Transfers
      in and/or out of Level 3
                
                
                3.7
                
                
                
                (16.4
                )
                
                
                (12.7
                )Discontinued
      operations
                
                
                -
                
                
                
                (6.0
                )
                
                
                (6.0
                )Balance
      September 30, 2008
                
                $
                8.2
                
                
                
                5.9
                
                
                
                14.1Total
      unrealized gains and (losses) included in non-operatingincome
      relating to assets and liabilities still on theconsolidated
      balance sheet at September 30, 2008
                
                $
                -
                
                
                $
                (2.1
                )
                
                $
                (2.1
                )
 64
 KCP&L’s
level 3 activity consists of mortgage-backed securities held by KCP&L’s
decommissioning trust fund.  Other Great Plains Energy’s level 3
activity consists almost entirely of forward physical derivative
instruments held by MPS Merchant.
  SFAS No.
157 is not yet effective for the Company’s nonfinancial assets and liabilities
measured at fair value on a nonrecurring basis, such as AROs, reporting units
and long-lived asset groups measured at fair value for impairment testing,
nonfinancial assets and liabilities measured at fair value in a business
combination and not measured at fair value in subsequent periods.  The
effective date for these measurements has been delayed by Financial Accounting
Standards Board (FASB) Staff Position (FSP) SFAS No. 157-2, “Effective Date of
FASB Statement No. 157,” to January 1, 2009, and interim periods within that
fiscal year.  Management is currently evaluating the impact of
adoption to those nonfinancial assets and liabilities delayed by FSP FAS No.
157-2 and has not yet determined the impact on Great Plains Energy's and
KCP&L's financial statements.
  In
January 2008, the FASB proposed FSP SFAS No. 157-c, “Measuring Liabilities under
FASB Statement No. 157” to amend the standard to clarify the principles on fair
value measurement of liabilities.  Management is currently evaluating
the impact of the proposed FSP with a final FSP expected in the fourth quarter
of 2008.
  In
October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active,” to clarify the
application of fair value measurement in an inactive market and was effective
upon issuance.  Management has evaluated the FSP and determined there
is no significant impact to the Company’s fair value measurement
processes.
  22.
              NEW
      ACCOUNTING STANDARDS
  SFAS
No. 141(R)
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement significantly changes how business
combinations are accounted for in current practice.  Changes to
current practice include, among other things, requiring all assets acquired and
liabilities assumed in a business combination to be measured at fair value in
accordance with SFAS No. 157 as of the acquisition date, an acquirer to expense
transaction costs and equity securities issued as consideration in a business
combination be recorded at fair value as of the acquisition date.  The
provisions of this statement are effective for Great Plains Energy and KCP&L
prospectively for business combinations occurring on or after January 1, 2009,
except it requires the prospective application of the provisions related to
income taxes to business combinations occurring in 2008.  As SFAS No.
141(R) provisions related to income taxes are effective for the GMO
acquisition, any adjustments to GMO’s deferred tax assets and uncertain tax
position balances that occur after the measurement period, which is limited to a
maximum of one year from the acquisition date, will be recorded as a component
of income tax expense as required by the standard.


65


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




GREAT
PLAINS ENERGY INCORPORATED




EXECUTIVE
SUMMARY




Description
of Business


Great
Plains Energy is a public utility holding company and does not own or operate
any significant assets other than the stock of its
subsidiaries.  Great Plains Energy’s direct subsidiaries are
KCP&L, GMO, KLT Inc. and Services.  In July 2008, Great Plains
Energy’s former wholly owned subsidiary, IEC, was merged into KLT
Inc.  On July 14, 2008, Great Plains Energy closed its acquisition of
GMO.  See Note 2 to the consolidated financial statements for
additional information.  Great Plains Energy’s sole reportable
business segment is electric utility for the periods presented.  Prior
to September 30, 2008, Great Plains Energy’s electric utility segment is the
same as the previously reported KCP&L segment.




Electric
Utility


Electric
utility consists of KCP&L, a regulated utility, and GMO’s regulated utility
operations, which include its Missouri Public Service and St. Joseph Light &
Power divisions.  Electric utility has approximately 6,000 MWs of
generating capacity and engages in the generation, transmission, distribution
and sale of electricity to over 820,000 customers in the states of Missouri and
Kansas.  Electric utility’s retail electricity rates are below the
national average.




Earnings
Overview


Great
Plains Energy had earnings of $104.6 million, or $0.92 per share for the three
months ended September 30, 2008, including income of $0.3 million from the
discontinued operations of Strategic Energy.  For the same period in
2007, earnings were $61.8 million, or $0.72 per share, including a loss of $3.9
million or $0.05 per share from the discontinued operations of Strategic
Energy.  The acquisition of GMO increased earnings $17.4
million.  Compared to the third quarter a year ago, earnings in the third
quarter of 2008 also increased due to higher wholesale revenues and lower
purchased power expense resulting from mild weather reducing retail load
requirements and new KCP&L retail rates effective January 1, 2008.
 These favorable impacts were partially offset by higher fuel expense
resulting from higher coal and coal transportation costs and increased
depreciation and amortization expense.




Great
Plains Energy’s earnings year to date September 30, 2008, were $146.3 million,
or $1.54 per share, including income from discontinued operations of $35.0
million or $0.37 per share.  For the same period in 2007, earnings
were $109.9 million, or $1.29 per diluted share, including income from
discontinued operations of $16.4 million or $0.19 per share.  The
acquisition of GMO increased earnings $17.4 million.  This increase
was partially offset by increased income taxes primarily from an increase in
deferred tax balances as a result of an increase in the composite tax
rate.  Additionally, higher purchased power expense, due to higher
prices and plant outages in the first half of the year, and increased
depreciation and amortization expense offset by increased revenues due to new
KCP&L retail rates also impacted year to date results.




Economy
and Financial Markets


Electric
utilityis
currently experiencing load growth that is less than historically experienced as
a result of the slowing economy.  Load growth consists of higher usage
per customer and the addition of new customers.  If the current
economic downturn continues or worsens, overall electricity MWh sales may
continue to decline and/or bad debt expense may increase, which could materially
affect Great Plains Energy’s results of operations, financial position and cash
flows.  Additionally, continuing instability in the capital markets
could adversely affect Great Plains Energy’s access to and cost of needed
capital.


66


STRATEGIC
FOCUS




GMO
Acquisition


On July
14, 2008, Great Plains Energy closed its acquisition of GMO.  On
October 17, 2008, GMO changed its name from Aquila, Inc. to KCP&L Greater
Missouri Operations Company (GMO).  Prior GMO shareholders received
$1.80 in cash plus 0.0856 of a share of Great Plains Energy common stock for
each share of GMO common stock.  The total purchase price of the
acquisition was approximately $1.7 billion.  Immediately prior to
Great Plains Energy’s acquisition of GMO, Black Hills acquired GMO’s electric
utility assets in Colorado and its gas utility assets in Colorado, Kansas,
Nebraska and Iowa.  See Note 2 to the consolidated financial
statements for additional information.




KCP&L’s
Comprehensive Energy Plan


In the
second quarter of 2008, KCP&L completed a cost and schedule update for the
Iatan No. 1 environmental project and the Iatan No. 2 coal plant construction
project.  This updated assessment was driven by several factors,
including (a) the combined projects reaching a milestone of 70% - 75% of the
engineering work completed; (b) the integration of the Iatan No. 2 balance of
plant schedule and quantity estimates into the master schedule and budget; and
(c) continued challenging construction market trends, including rapidly
escalating costs for construction materials and services, the level of global
investment in power production facilities, the decline in the value of the U.S.
dollar, and constrained labor availability.




The
results of this update were as follows:




·
            Based
      on the top end of the new estimate ranges, the combined increase in
      projected costs of the Iatan No. 1 environmental project and the new Iatan
      No. 2 unit is approximately 19%.




·
            Compared
      to the previous estimate of $837 million - $914 million provided in the
      2006 Form 10-K, KCP&L’s approximate 55% share of the total projected
      cost of Iatan No. 2 has increased to a range of $994 million - $1.051
      billion, with the top end of the range representing a 15%
      increase.  Great Plains Energy’s total share of Iatan No. 2 is
      73%, which consists of KCP&L’s 55% share and GMO’s 18%
      share.  Great Plains Energy’s 73% share of the total projected
      cost of Iatan No. 2 is $1.321 billion - $1.397
  billion.




·
            The
      anticipated in-service date for Iatan No. 2 continues to be the summer of
      2010.




·
            KCP&L’s
      70% share of the projected cost of the Iatan No. 1 environmental project
      has increased to a range of $330 million - $350 million.  This
      represents an increase of 33% compared to the top end of the previous
      range estimate of $255 million - $264 million for Iatan No. 1 included in
      the total amount for Environmental Retrofit Projects in KCP&L’s
      Comprehensive Energy Plan of $423 million - $443 million provided in the
      2006 Form 10- K.  Great Plains Energy’s total share of Iatan No.
      1 is 88%, which consists of KCP&L’s 70% share and GMO’s 18%
      share.  Great Plains Energy’s 88% share of the total projected
      cost of the Iatan No. 1 environmental project is $415 million - $440
      million.




·
            The
      in-service date for the Iatan No. 1 environmental project is now expected
      to be February 2009 compared to the previous estimate of year-end
      2008.


67


In the
Collaboration Agreement among KCP&L, the Sierra Club and the Concerned
Citizens of Platte County, KCP&L agreed to use its best efforts to install
emission control technologies to reduce emissions from the LaCygne Station prior
to the required compliance date under the Environmental Protection Agency (EPA)
best available retrofit technology rule (BART), but in no event later than June
1, 2015.  KCP&L further agreed to issue requests for proposal for
the equipment required to comply with BART by December 31, 2008, requesting that
construction commence by December 31, 2010.  KCP&L’s Comprehensive
Energy Plan includes a project to install the required emission control
technologies at LaCygne No. 1 for completion in 2009.  Demand for
environmental equipment has increased substantially leading to extremely long
lead times for equipment.  As a result, the LaCygne No. 1 project will
not be completed in 2009.  Since KCP&L must also install such
emission control technologies at LaCygne No. 2, management is evaluating the
possibility of combining the required environmental upgrades for both LaCygne
Nos. 1 and 2 into one project, but that determination has not yet been
made.




KCP&L
agreed in the Collaboration Agreement to pursue increasing its wind generation
capacity by 100MW by the end of 2010.  KCP&L had entered into
agreements to acquire 100MW of wind generation for approximately $215
million.  In October 2008, KCP&L provided notice to terminate this
contract; however, management is currently in discussions with the developer to
explore alternatives.  Also in the Collaboration Agreement, KCP&L
agreed to pursue an additional 300MW of wind generation capacity by the end of
2012, all subject to regulatory approval.




The asset
management and customer programs included in KCP&L’s Comprehensive Energy
Plan are progressing on target.




Discontinued
Operations – Sale of Strategic Energy


In 2007,
Great Plains Energy retained a financial advisor to assist in a review of
strategic and structural alternatives for its Strategic Energy
subsidiary.  In April 2008, the Board of Directors approved
management’s recommendation to sell Strategic Energy and Great Plains Energy
entered into an agreement with Direct Energy Services, LLC (Direct Energy), a
subsidiary of Centrica plc, under which Direct Energy acquired all of Great
Plains Energy’s interest in Strategic Energy.  On June 2, 2008, Great
Plains Energy completed the sale of Strategic Energy.  In accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets,” Strategic Energy is reported as discontinued operations for the periods
presented.  See Note 13 to the consolidated financial statements for
additional information.


68


REGULATORY
PROCEEDINGS




KCP&L
filed requests for annual rate increases with the MPSC and KCC in the third
quarter of 2008 which include the Iatan No. 1 environmental project in rate base
and seek recovery of overall increased costs of service.  GMO filed
requests for annual rate increases with the MPSC in the third quarter of 2008
which include the Iatan No. 1 environmental project and other capital additions
in rate base and seek recovery of overall increased costs of
service.  The new rates are expected to be effective in the third
quarter of 2009.  The following table details the rate increases
requested by both KCP&L and GMO by jurisdiction.


Annual
      Revenue IncreaseAdditional
            
            
            
            
            Return
            
            Rate-makingRate
      Jurisdiction (1)
            File
      Date
            Traditional
      (2)
            
            Amortization
            
            
            Total
      (3)
            
            on
      Equity
            
            Equity
      RatioGMO
      (MPS)
            9/5/2008
            
            $
            66.0
            
            
            $
            -
            
            
            $
            66.0
            
            
            
            10.75
            %
            
            
            53.82
            %GMO
      (L&P)
            9/5/2008
            
            
            17.1
            
            
            
            -
            
            
            
            17.1
            
            
            
            10.75
            %
            
            
            53.82
            %GMO
      (Steam)
            9/5/2008
            
            
            1.3
            
            
            
            -
            
            
            
            1.3
            
            
            
            10.75
            %
            
            
            53.82
            %KCP&L
      (MO)
            9/5/2008
            
            
            86.4
            
            
            
            15.1
            
            
            
            101.5
            
            
            
            10.75
            %
            
            
            53.82
            %KCP&L
      (KS)
            9/5/2008
            
            
            60.4
            
            
            
            11.2
            
            
            
            71.6
            
            
            
            10.75
            %
            
            
            55.39
            %Total
            
            
            $
            231.2
            
            
            $
            26.3
            
            
            $
            257.5


(1)
      Rate Jurisdiction Areas:


GMO
(MPS):  Represents the area served by GMO's Missouri Public Service
division


GMO
(L&P):  Represents the area served by GMO's St. Joseph Light &
Power division


GMO
(Steam):  Former St. Joseph Light & Power steam
customers


KCP&L
(MO):  KCP&L Missouri customers


KCP&L
(KS):  KCP&L Kansas customers


(2)The
      amounts in this column reflect the revenue requirements calculated using
      the traditional rate case methodologies, which
              exclude additional amortization amounts tohelp maintain
      cash flow levels


(3)Excludes amounts
      recovered through KCP&L’sKansasenergy
      cost adjustment and GMO’s fuel adjustment
    clause


RELATED
PARTY TRANSACTIONS
  See Note
14 to the consolidated financial statements for information regarding related
party transactions.
 69
 GREAT
PLAINS ENERGY RESULTS OF OPERATIONS
  The
following table summarizes Great Plains Energy’s comparative results of
operations.  GMO’s results of operations are only included from the
date of the acquisition, July 14, 2008, through September 30,
2008.  GMO is not included for any period prior to July 14,
2008.


Three
      Months Ended
            Year
      to DateSeptember
      30
            September
      302008
            2007
            2008
            2007(millions)Operating
      revenues
            $
            593.6
            
            $
            416.0
            
            $
            1,226.2
            
            $
            990.8Fuel
            
            (109.7
            )
            
            (75.6
            )
            
            (222.7
            )
            
            (186.2
            )Purchased
      power
            
            (69.3
            )
            
            (41.3
            )
            
            (138.3
            )
            
            (80.4
            )Other
      operating expenses
            
            (179.6
            )
            
            (133.3
            )
            
            (458.5
            )
            
            (396.8
            )Depreciation
      and amortization
            
            (65.4
            )
            
            (44.1
            )
            
            (166.4
            )
            
            (130.9
            )Operating
      income
            
            169.6
            
            
            121.7
            
            
            240.3
            
            
            196.5Non-operating
      income and expenses
            
            4.9
            
            
            0.4
            
            
            17.3
            
            
            1.9Interest
      charges
            
            (23.6
            )
            
            (27.6
            )
            
            (75.6
            )
            
            (66.2
            )Income
      taxes
            
            (45.9
            )
            
            (28.1
            )
            
            (68.4
            )
            
            (36.4
            )Loss
      from equity investments
            
            (0.3
            )
            
            (0.4
            )
            
            (1.1
            )
            
            (1.1
            )Income
      from continuing operations
            
            104.7
            
            
            66.0
            
            
            112.5
            
            
            94.7Income
      (loss) from discontinued operations
            
            0.3
            
            
            (3.9
            )
            
            35.0
            
            
            16.4Net
      income
            
            105.0
            
            
            62.1
            
            
            147.5
            
            
            111.1Preferred
      dividends
            
            (0.4
            )
            
            (0.3
            )
            
            (1.2
            )
            
            (1.2
            )Earnings
      available for common shareholders
            $
            104.6
            
            $
            61.8
            
            $
            146.3
            
            $
            109.9


Three
Months Ended September 30, 2008 Compared to September 30, 2007
 Great
Plains Energy’s earnings available for common shareholders for the three months
ended September 30, 2008, increased to $104.6 million, or $0.92 per share from
earnings of $61.8 million, or $0.72 per share, for the same period in
2007.
  Electric
utility’s net income increased $26.0 million for the three months ended
September 30, 2008, compared to the same period in 2007.  The
acquisition of GMO increased net income $18.6 million.  The remaining
increase was due to increased wholesale revenues and decreased purchased power
expense resulting from mild weather reducing retail load requirements and new
KCP&L retail rates effective January 1, 2008.  These favorable
impacts were partially offset by increased fuel expense resulting from higher
coal and coal transportation costs and increased depreciation and amortization
expense.
  Great
Plains Energy’s corporate and other activities recognized income from continuing
operations of $2.2 million for the three months ended September 30, 2008,
compared to a loss of $10.5 million for the same period in 2007 primarily due to
the reversal of $3.6 million of after-tax interest expense related to
unrecognized tax benefits and a $3.8 million after-tax favorable impact from the
deferral of 2007 merger transition costs to a regulatory asset in the third
quarter of 2008.  Additionally, in 2007 there was a $5.6 million
after-tax loss for the fair value of FSS.  These increases were
partially offset by $1.6 million of increased interest expense related to Great
Plains Energy’s $100.0 million Senior Notes issued in September
2007.
 70
 Year
to Date September 30, 2008 Compared to September 30, 2007
 Great
Plains Energy’s earnings available for common shareholders year to date
September 30, 2008, increased to $146.3 million, or $1.54 per share from $109.9
million, or $1.29 per diluted share, for the same period in 2007.
  Electric
utility’s net income increased $12.3 million year to date September 30, 2008,
compared to the same period in 2007.  The acquisition of GMO increased
net income $18.6 million.  Increased revenues due to new KCP&L
retail rates and litigation settlement proceeds also impacted year to date
results.  These increases were partially offset by increased income
taxes primarily from an increase in deferred tax balances as a result of an
increase in the composite tax rate, higher purchased power expense, due to
higher prices and plant outages in the first half of the year, and increased
depreciation and amortization expense.
  Great
Plains Energy’s corporate and other activities loss from continuing operations
decreased $5.5 million year to date September 30, 2008, compared to the same
period in 2007 primarily due to $3.4 million of after-tax income related to the
release of a legal reserve described in Note 17 to the consolidated financial
statements, the reversal of $3.6 million of after-tax interest expense related
to unrecognized tax benefits and the $3.8 million after-tax favorable impact
from the deferral of 2007 merger transition costs to a regulatory asset in the
third quarter of 2008.  These favorable impacts were partially offset
by $5.2 million of increased interest expense related to Great Plains Energy’s
$100.0 million Senior Notes issued in September 2007.
  ELECTRIC
UTILITY RESULTS OF OPERATIONS


Three
      Months Ended
            Year
      to DateSeptember
      30
            September
      302008
            2007
            2008
            2007(millions)Operating
      revenues
            $
            593.6
            
            $
            416.0
            
            $
            1,226.2
            
            $
            990.8Fuel
            
            (109.7
            )
            
            (75.6
            )
            
            (222.7
            )
            
            (186.2
            )Purchased
      power
            
            (70.3
            )
            
            (41.3
            )
            
            (139.3
            )
            
            (80.4
            )Other
      operating expenses
            
            (179.4
            )
            
            (128.1
            )
            
            (447.1
            )
            
            (383.0
            )Depreciation
      and amortization
            
            (65.4
            )
            
            (44.1
            )
            
            (166.4
            )
            
            (130.9
            )Operating
      income
            
            168.8
            
            
            126.9
            
            
            250.7
            
            
            210.3Non-operating
      income and expenses
            
            6.7
            
            
            0.2
            
            
            13.2
            
            
            2.5Interest
      charges
            
            (27.0
            )
            
            (17.1
            )
            
            (63.7
            )
            
            (52.0
            )Income
      taxes
            
            (46.0
            )
            
            (33.5
            )
            
            (72.8
            )
            
            (45.7
            )Net
      income
            $
            102.5
            
            $
            76.5
            
            $
            127.4
            
            $
            115.1 Electric
utility’s residential customers’ usage is significantly affected by
weather.  Bulk power sales, the major component of wholesale sales,
vary with system requirements, generating unit and purchased power availability,
fuel costs and requirements of other electric systems.  Electric
utility’s retail revenues contain certain fuel recovery mechanisms as
follows:
  ·
              KCP&L’s
      Kansas retail rates effective January 1, 2008, contain an Energy Cost
      Adjustment (ECA) tariff.  The ECA tariff reflects the projected
      annual amount of fuel, purchased power, emission allowances, transmission
      costs and asset-based off-system sales margin.  These projected
      amounts are subject to quarterly re-forecasts.  Any difference
      between the ECA revenue collected and the actual ECA amounts for a given
      year (which may be positive or negative) is recorded as an increase to or
      reduction of retail revenues and deferred as a regulatory asset or
      liability to be recovered from or refunded to Kansas retail customers over
      twelve months beginning April 1 of the succeeding
  year.
  71
 
 ·
                GMO’s
      electric retail rates contain a Fuel Adjustment Clause
      (FAC).  The FAC allows for the pass through of 95% of variable
      fuel and purchased power costs over/under a base fuel
      rate.  Interest is calculated
      and deferred monthly based on the accumulated over/under recovered
      balance.  FAC rate approval is requested every six months for a
      12 month recovery period of the over/under amount compared to base
      rates.  The FAC cycle consists of an accumulation period of six
      months beginning in June and December.  The next cycle begins at
      the end of the six month period of over/under accruals from the previous
      cycle.  Any over/under collection during the recovery period
      caused by discrepancies between the amounts of estimated and actual kWh
      sales is included in the next recovery period.  The FAC is
      recorded as an increase to or reduction of retail revenues and deferred as
      a regulatory asset or liability to be recovered from or refunded to retail
      customers.  The FAC is subject to prudence reviews initiated by
      the MPSC staff no less frequently than at 18 month
      intervals.
  ·
              GMO’s
      steam rates contain a Quarterly Cost Adjustment (QCA) that allows for the
      recovery of or payment for 80% of the difference between actual fuel costs
      and a base fuel cost amount.  The QCA is recorded as an increase
      to or reduction of other revenues and deferred as a regulatory asset or
      liability to be recovered from or refunded to GMO’s steam
      customers.
  KCP&L’s
Missouri retail rates do not contain a similar adjustment mechanism, meaning
that changes in costs will not be reflected in rates until new rates are
authorized by the MPSC.  This regulatory lag between the time costs
change and when they are reflected in rates applies to all costs, other than
those included in fuel recovery mechanisms.  In a rising cost
environment, such as exists currently, regulatory lag may have an adverse impact
on Great Plains Energy’s results of operations.
  Generation
fuel mix can substantially change the fuel cost per MWh
generated.  Generation fuel mix can be significantly impacted by
planned and unplanned plant outages.  Nuclear fuel cost per MWh
generated is substantially less than the cost of coal per MWh generated, which
is significantly lower than the cost of natural gas and oil per MWh
generated.  The cost per MWh for purchased power is generally
significantly higher than the cost per MWh of coal and nuclear
generation.  Electric utility continually evaluates its system
requirements, the availability of generating units, its demand-side management
and efficiency programs, availability and cost of fuel supply and purchased
power, and the requirements of other electric systems to provide reliable power
economically.
 72
 Electric
Utility Sales Revenues and MWh Sales


Three
      Months Ended
              
              
              Year
      to DateSeptember
      30
              %
              
              September
      30
              %2008
              2007
              Change
              
              2008
              2007
              ChangeRetail
      revenues
              (millions)
              
              
              (millions)Residential
              $
              243.3
              
              $
              160.0
              
              
              52
              
              $
              448.7
              
              $
              348.8
              
              
              29Commercial
              
              215.5
              
              
              157.8
              
              
              37
              
              
              459.0
              
              
              386.1
              
              
              19Industrial
              
              49.0
              
              
              31.7
              
              
              55
              
              
              102.7
              
              
              83.4
              
              
              23Other
      retail revenues
              
              3.9
              
              
              2.4
              
              
              57
              
              
              9.0
              
              
              7.3
              
              
              23Fuel
      recovery mechanism under (over) recovery
              
              (6.5
              )
              
              -
              
              NA
              
              
              10.8
              
              
              -
              
              NATotal
      retail
              
              505.2
              
              
              351.9
              
              
              44
              
              
              1,030.2
              
              
              825.6
              
              
              25Wholesale
      revenues
              
              77.9
              
              
              59.3
              
              
              31
              
              
              175.7
              
              
              152.0
              
              
              16Other
      revenues
              
              10.5
              
              
              4.8
              
              
              123
              
              
              20.3
              
              
              13.2
              
              
              54Total
      revenues
              $
              593.6
              
              $
              416.0
              
              
              43
              
              $
              1,226.2
              
              $
              990.8
              
              
              24


Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            %
            
            September
      30
            %2008
            2007
            Change
            
            2008
            2007
            ChangeRetail
      MWh sales
            (thousands)
            
            
            (thousands)Residential
            
            2,459
            
            
            1,840
            
            
            34
            
            
            5,020
            
            
            4,367
            
            
            15Commercial
            
            2,818
            
            
            2,242
            
            
            26
            
            
            6,563
            
            
            5,905
            
            
            11Industrial
            
            855
            
            
            602
            
            
            42
            
            
            1,882
            
            
            1,657
            
            
            14Other
      retail MWh sales
            
            27
            
            
            19
            
            
            30
            
            
            62
            
            
            67
            
            
            (8
            )Total
      retail
            
            6,159
            
            
            4,703
            
            
            31
            
            
            13,527
            
            
            11,996
            
            
            13Wholesale
      MWh sales
            
            1,756
            
            
            1,438
            
            
            22
            
            
            3,839
            
            
            3,686
            
            
            4Electric
      MWh sales
            
            7,915
            
            
            6,141
            
            
            29
            
            
            17,366
            
            
            15,682
            
            
            11 Retail
revenues increased $153.3 million for the three months ended September 30, 2008,
compared to the same period in 2007.  The acquisition of GMO increased
retail revenue $159.0 million and new retail rates effective January 1, 2008, at
KCP&L also increased retail revenue.  These increases were
partially offset by a decrease at KCP&L due to unfavorable weather in 2008,
with a 30% decrease in cooling degree days compared to the same period in
2007.  Retail revenues increased $204.6 million year to date September
30, 2008, compared to the same period in 2007 due to the acquisition of GMO and
an increase at KCP&L primarily due to the new retail rates effective January
1, 2008, partially offset by unfavorable weather in 2008, with a 26% decrease in
cooling degree days.
  Wholesale
revenues increased $18.6 million for the three months ended September 30, 2008,
compared to the same period in 2007.  The acquisition of GMO increased
wholesale revenues $5.5 million.  The remaining increase at KCP&L
was due to a 13% increase in wholesale MWh sales as a result of reduced retail
load due to unfavorable weather and increased MWhs generated and a 13% increase
in the average market price per MWh to $47.77, primarily due to higher natural
gas prices.  Wholesale revenues increased $23.7 million year to date
September 30, 2008, compared to the same period in 2007 due to the acquisition
of GMO and an increase at KCP&L due to a 15% increase in the average market
price per MWh to $48.35, primarily due to higher natural gas prices, and a 1%
increase in wholesale MWh sales.
 73
 Electric
Utility Fuel and Purchased Power


Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            %
            
            September
      30
            %2008
            2007
            Change
            
            2008
            2007
            ChangeNet
      MWhs Generated by Fuel Type
            (thousands)
            
            
            (thousands)Coal
            
            5,683
            
            
            4,232
            
            
            34
            
            
            12,718
            
            
            10,829
            
            
            17Nuclear
            
            1,215
            
            
            1,215
            
            
            -
            
            
            2,759
            
            
            3,638
            
            
            (24
            )Natural
      gas and oil
            
            229
            
            
            280
            
            
            (18
            )
            
            283
            
            
            524
            
            
            (46
            )Wind
            
            93
            
            
            74
            
            
            25
            
            
            308
            
            
            211
            
            
            46Total
      Generation
            
            7,220
            
            
            5,801
            
            
            24
            
            
            16,068
            
            
            15,202
            
            
            6 KCP&L’s
coal base load equivalent availability factor for the three months ended and
year to date September 30, 2008, increased to 92% and 81%, respectively, from
89% and 78% for the same periods in 2007.  GMO’s coal base load
equivalent availability factor for the three months ended September 30, 2008,
was 94%.
 
 KCP&L’s
nuclear unit, Wolf Creek, accounts for approximately 15% of electric utility’s
base load capacity.  Wolf Creek’s latest refueling outage began on
March 20, 2008, and there were several increases in work scope during the outage
that extended the restart until May 14, 2008.  A primary driver of the
work scope increases was modifications to piping systems associated with the
emergency core cooling systems.  As a result of the outage, the
capacity and equivalent availability factor for Wolf Creek decreased to 77% year
to date September 30, 2008, compared to 100% for the same period in
2007.
  Fuel
expense increased $34.1 million for the three months ended September 30, 2008,
compared to the same period in 2007.  The acquisition of GMO increased
fuel expense $30.1 million.  The remaining increase at KCP&L was
primarily due to higher coal and coal transportation costs partially offset by
less natural gas in the fuel mix, which has a higher cost compared to other fuel
types.  Fuel expense increased $36.5 million year to date September
30, 2008, compared to the same period in 2007 due to the acquisition of GMO and
an increase at KCP&L primarily due to higher coal and coal transportation
costs partially offset by decreased MWhs generated and less natural gas in the
fuel mix, which has a higher cost compared to other fuel types.
  Purchased
power expense increased $29.0 million for the three months ended September 30,
2008, compared to the same period in 2007.  The acquisition of GMO
increased purchased power expense $39.0 million.  This increase was
partially offset by a 47% decrease in MWh purchases at KCP&L primarily due
to milder weather which reduced retail load requirements and higher MWhs
generated.  This decrease was partially offset by a 69% increase in
the average price per MWh as a result of higher natural gas
prices.  Purchased power expense increased $58.9 million year to date
September 30, 2008, compared to the same period in 2007 due to the acquisition
of GMO and an increase at KCP&L due to a 49% increase in the average price
per MWh as a result of higher natural gas prices and a 10% increase in MWh
purchases due to the impact of plant outages in the first half of the
year.  These year to date increases were partially offset by $6.5
million in recoveries from a litigation settlement regarding a 2005 transformer
failure.
 74
 Electric
Utility Other Operating Expenses (including utility operating
expenses, maintenance and general taxes)
 Electric
utility’s other operating expenses increased $51.3 million for the three months
ended September 30, 2008, compared to the same period in 2007.  The
acquisition of GMO increased other operating expenses $45.9
million.  Electric utility’s other operating expenses increased $63.9
million year to date September 30, 2008, compared to the same period in 2007
primarily due to the following:
  ·
              the
      acquisition of GMO,
  ·
              increased
      property tax expense of $2.3 million due to higher assessments and higher
      mill levies,
  ·
              increased
      plant operations and maintenance expense of $6.4 million due to plant
      outages,
  ·
              increased
      storm restoration expenses of $2.5 million
and
  ·
              increased
      employee benefit expenses of $3.6 million primarily due to post-retirement
      health benefits.
  Electric
Utility Depreciation and Amortization
 Electric
utility’s depreciation and amortization increased $21.3 million and $35.5
million, respectively, for the three months ended and year to date September 30,
2008, compared to the same periods in 2007.  The acquisition of GMO
increased depreciation and amortization $14.0 million.  The remaining
increase at KCP&L was due to additional amortization pursuant to rate case
orders of $5.4 million and $16.3 million, respectively, for the three months
ended and year to date September 30, 2008, compared to the same periods in 2007,
combined with normal depreciation activity for capital additions.
  Electric
Utility Non-Operating Income and Expenses
 Electric
utility’s non-operating income and expenses increased $6.5 million and $10.7
million, respectively, for the three months ended and year to date September 30,
2008, compared to the same periods in 2007 primarily due to an increase in the
allowance for funds used during construction resulting from a higher
construction work in progress balance due to Comprehensive Energy Plan
projects.
  Electric
Utility Interest Charges
 Electric
utility’s interest charges increased $9.9 million and $11.7 million,
respectively, for the three months ended and year to date September 30, 2008,
compared to the same periods in 2007 primarily due to the acquisition of
GMO.
  Electric
Utility Income Taxes
 Electric
utility’s income taxes increased $12.5 million for the three months ended
September 30, 2008, compared to the same period in 2007.  The
acquisition of GMO increased income taxes $12.1 million.  Electric
utility’s income tax expense increased $27.1 million year to date September 30,
2008, compared to the same period in 2007 due to the acquisition of GMO and an
increase at KCP&L primarily due to an increase in deferred tax balances of
$20.3 million as a result of an increase in the composite tax rate reflecting
the sale of Strategic Energy, partially offset by increased wind
credits.  See Note 12 to the consolidated financial statements for a
reconciliation of effective income tax rates for the comparative
periods.
 75
 GREAT
PLAINS ENERGY SIGNIFICANT BALANCE SHEET CHANGES (September 30, 2008
compared to December 31, 2007)
  The
following table summarizes significant balance sheet changes due to the
acquisition of GMO.


Total
            Acquisition
            RemainingChange
            of
      GMO
            ChangeAssets
            (millions)Cash
      and cash equivalents
            $
            0.3
            
            $
            10.4
            
            $
            (10.1
            )Funds
      on deposit
            
            13.9
            
            
            13.9
            
            
            -Receivables,
      net
            
            147.1
            
            
            139.6
            
            
            7.5Fuel
      inventories, at average cost
            
            35.3
            
            
            29.9
            
            
            5.4Materials
      and supplies, at average cost
            
            34.3
            
            
            31.0
            
            
            3.3Refundable
      income taxes
            
            6.1
            
            
            12.2
            
            
            (6.1
            )Assets
      held for sale
            
            29.6
            
            
            25.0
            
            
            4.6Derivative
      instruments - current
            
            9.3
            
            
            9.9
            
            
            (0.6
            )Other
      nonutility property and investments
            
            31.1
            
            
            31.5
            
            
            (0.4
            )Net
      utility plant in service
            
            1,451.2
            
            
            1,385.2
            
            
            66.0Construction
      work in progress
            
            887.5
            
            
            443.6
            
            
            443.9Regulatory
      assets
            
            161.6
            
            
            193.6
            
            
            (32.0
            )Goodwill
            
            152.3
            
            
            152.3
            
            
            -Derivative
      instruments - long-term
            
            22.7
            
            
            22.7
            
            
            -Other
      deferred charges and other assets
            
            2.7
            
            
            (16.0
            )
            
            18.7LiabilitiesNotes
      payable
            
            (5.0
            )
            
            17.0
            
            
            (22.0
            )Accounts
      payable
            
            85.5
            
            
            84.1
            
            
            1.4Accrued
      taxes
            
            58.3
            
            
            19.8
            
            
            38.5Accrued
      interest
            
            56.6
            
            
            50.8
            
            
            5.8Deferred
      income taxes
            
            9.8
            
            
            16.5
            
            
            (6.7
            )Derivative
      instruments - current
            
            11.9
            
            
            21.4
            
            
            (9.5
            )Other
      current liabilities
            
            32.3
            
            
            31.0
            
            
            1.3Deferred
      income taxes
            
            (235.4
            )
            
            (230.6
            )
            
            (4.8
            )Deferred
      tax credits
            
            67.8
            
            
            5.8
            
            
            62.0Asset
      retirement obligations
            
            30.0
            
            
            12.2
            
            
            17.8Pension
      and post-retirement liability
            
            44.4
            
            
            28.2
            
            
            16.2Regulatory
      liabilities
            
            67.5
            
            
            91.8
            
            
            (24.3
            )Other
      deferred credits and other liabilities
            
            41.0
            
            
            56.3
            
            
            (15.3
            )Long-term
      debt
            
            1,530.8
            
            
            1,157.3
            
            
            373.5 The
following are significant balance sheet changes in addition to the acquisition
of GMO.
  ·
              Great
      Plains Energy’s fuel inventories increased $5.4 million at KCP&L
      primarily due to increased coal and coal transportation
    costs.
  ·
              Great
      Plains Energy’s construction work in progress increased
      $443.9 million at KCP&L primarily due to a $388.4 million
      increase related to KCP&L’s Comprehensive Energy Plan, including
      $272.9 million related to the construction of Iatan No. 2 and $115.5
      million for environmental upgrades.
  ·
              Great
      Plains Energy’s commercial paper decreased $111.1 million primarily due to
      the use of proceeds from the issuance of $350.0 million of unsecured
      Senior Notes at KCP&L offset by a $41.2 million payment to settle
      KCP&L’s T-Lock and additional borrowings to support expenditures
      related to the Comprehensive Energy
Plan.
  76
 
 ·
                Great
      Plains Energy’s accrued taxes increased $38.5 million due primarily to an
      increase in property tax accruals at KCP&L and the timing of tax
      payments.
 ·
              Great
      Plains Energy’s accrued interest increased $5.8 million primarily due to
      the issuance of KCP&L’s $350.0 million of 6.375% Senior Notes in March
      2008 and to the timing of interest payments at KCP&L.  These
      increases were partially offset by the reversal of $6.8 million of accrued
      interest related to unrecognized tax benefits.  See Note 12 to
      the consolidated financial statements for further information on
      unrecognized tax benefits.
  ·
              Great
      Plains Energy’s derivative instruments – current liabilities decreased
      $9.5 million primarily due to a decrease of $28.0 million at KCP&L
      related to the settlement of a T-Lock simultaneously with the issuance of
      $350.0 million of 6.375% Senior Notes in March 2008, partially offset by a
      $18.3 million increase in the fair value of Great Plains Energy’s
      FSS.
  ·
              Great
      Plains Energy’s deferred tax credits increased $62.0 million due to
      recognition of $63.0 million of advanced coal credits.  See Note
      12 to the consolidated financial statements for additional information on
      the advanced coal credits.
  ·
              Great
      Plains Energy’s asset retirement obligations increased $17.8 million
      primarily due to KCP&L recording $17.2 million of additional asset
      retirement obligations as a result of changes in cost estimates and timing
      used in computing the present value of certain asbestos
      AROs.  See Note 18 to the consolidated financial statements for
      additional information.
  ·
              Great
      Plains Energy’s regulatory liabilities decreased $24.3 million at
      KCP&L primarily due to a reclassification to accumulated depreciation,
      consistent with ratemaking treatment, of the regulatory liability for
      additional Wolf Creek amortization (Missouri) of $14.6
      million.
  ·
              Great
      Plains Energy’s other – deferred credits and other liabilities decreased
      $15.3 million due to the payment against and release of a legal
      reserve.
  ·
              Great
      Plains Energy’s long-term debt increased $373.5 million due to KCP&L’s
      issuance of $350.0 million of 6.375% Senior Notes in March 2008 and $23.4
      million of Series 2008 EIRR bonds in May
2008.
 77
 KCP&L
RESULTS OF OPERATIONS
  The
following discussion of KCP&L results of operations includes KCP&L, an
integrated, regulated electric utility and for 2007 includes HSS, formerly an
unregulated subsidiary of KCP&L, which was transferred from KCP&L to KLT
Inc. on January 2, 2008.  In the discussion that follows, references
to KCP&L reflect only the operations of the utility.
 
 The
following table summarizes KCP&L’s comparative results of
operations.


Three
      Months Ended
            Year
      to DateSeptember
      30
            September
      302008
            2007
            2008
            2007(millions)Operating
      revenues
            $
            423.7
            
            $
            416.0
            
            $
            1,056.3
            
            $
            990.8Fuel
            
            (79.6
            )
            
            (75.6
            )
            
            (192.6
            )
            
            (186.2
            )Purchased
      power
            
            (31.3
            )
            
            (41.3
            )
            
            (100.3
            )
            
            (80.4
            )Other
      operating expenses
            
            (133.5
            )
            
            (128.0
            )
            
            (401.2
            )
            
            (383.1
            )Depreciation
      and amortization
            
            (51.4
            )
            
            (44.1
            )
            
            (152.4
            )
            
            (130.9
            )Operating
      income
            
            127.9
            
            
            127.0
            
            
            209.8
            
            
            210.2Non-operating
      income and expenses
            
            6.5
            
            
            0.2
            
            
            13.0
            
            
            2.6Interest
      charges
            
            (16.6
            )
            
            (17.1
            )
            
            (53.3
            )
            
            (52.0
            )Income
      taxes
            
            (33.9
            )
            
            (33.5
            )
            
            (60.7
            )
            
            (45.7
            )Net
      income
            $
            83.9
            
            $
            76.6
            
            $
            108.8
            
            $
            115.1  KCP&L
Sales Revenues and MWh Sales


Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            %
            
            September
      30
            %2008
            2007
            Change
            
            2008
            2007
            ChangeRetail
      revenues
            (millions)
            
            
            (millions)Residential
            $
            163.4
            
            $
            160.0
            
            
            3
            
            $
            368.8
            
            $
            348.8
            
            
            6Commercial
            
            160.5
            
            
            157.8
            
            
            6
            
            
            404.0
            
            
            386.1
            
            
            5Industrial
            
            31.4
            
            
            31.7
            
            
            5
            
            
            85.1
            
            
            83.4
            
            
            2Other
      retail revenues
            
            2.7
            
            
            2.4
            
            
            12
            
            
            7.8
            
            
            7.3
            
            
            7Kansas
      ECA under (over) recovery
            
            (11.8
            )
            
            -
            
            NA
            
            
            5.5
            
            
            -
            
            NATotal
      retail
            
            346.2
            
            
            351.9
            
            
            (2
            )
            
            871.2
            
            
            825.6
            
            
            6Wholesale
      revenues
            
            72.4
            
            
            59.3
            
            
            22
            
            
            170.2
            
            
            152.0
            
            
            12Other
      revenues
            
            5.1
            
            
            4.8
            
            
            10
            
            
            14.9
            
            
            13.2
            
            
            13KCP&L
      revenues
            $
            423.7
            
            $
            416.0
            
            
            2
            
            $
            1,056.3
            
            $
            990.8
            
            
            7 78


Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            %
            
            September
      30
            
            %2008
            2007
            Change
            
            2008
            2007
            
            ChangeRetail
      MWh sales
            (thousands)
            
            
            (thousands)Residential
            
            1,634
            
            
            1,840
            
            
            (11
            )
            
            4,195
            
            
            4,367
            
            
            (4
            )Commercial
            
            2,082
            
            
            2,242
            
            
            (7
            )
            
            5,827
            
            
            5,905
            
            
            (1
            )Industrial
            
            542
            
            
            602
            
            
            (10
            )
            
            1,569
            
            
            1,657
            
            
            (5
            )Other
      retail MWh sales
            
            22
            
            
            19
            
            
            7
            
            
            57
            
            
            67
            
            
            (15
            )Total
      retail
            
            4,280
            
            
            4,703
            
            
            (9
            )
            
            11,648
            
            
            11,996
            
            
            (3
            )Wholesale
      MWh sales
            
            1,630
            
            
            1,438
            
            
            13
            
            
            3,713
            
            
            3,686
            
            
            1KCP&L
      electric MWh sales
            
            5,910
            
            
            6,141
            
            
            (4
            )
            
            15,361
            
            
            15,682
            
            
            (2
            ) Retail
revenues decreased $5.7 million for the three months ended September 30, 2008,
compared to the same period in 2007 primarily due to unfavorable weather in
2008, with a 30% decrease in cooling degree days, partially offset by new retail
rates effective January 1, 2008.  Retail revenues increased $45.6
million year to date September 30, 2008, compared to the same period in 2007
primarily due to new retail rates effective January 1, 2008, partially offset by
unfavorable weather in 2008, with a 26% decrease in cooling degree
days.
  Wholesale
revenues increased $13.1 million for the three months ended September 30, 2008,
compared to the same period in 2007 due to a 13% increase in wholesale MWh sales
as a result of reduced retail load due to unfavorable weather and increased MWhs
generated and a 13% increase in the average market price per MWh to $47.77,
primarily due to higher natural gas prices.  Wholesale revenues
increased $18.2 million year to date September 30, 2008, compared to the same
period in 2007 due to a 15% increase in the average market price per MWh to
$48.35, primarily due to higher natural gas prices, and a 1% increase in
wholesale MWh sales.
  KCP&L
Fuel and Purchased Power


Three
      Months Ended
            
            
            Year
      to DateSeptember
      30
            %
            
            September
      30
            %2008
            2007
            Change
            
            2008
            2007
            ChangeNet
      MWhs Generated by Fuel Type
            (thousands)
            
            
            (thousands)Coal
            
            4,340
            
            
            4,232
            
            
            3
            
            
            11,375
            
            
            10,829
            
            
            5Nuclear
            
            1,215
            
            
            1,215
            
            
            -
            
            
            2,759
            
            
            3,638
            
            
            (24
            )Natural
      gas and oil
            
            172
            
            
            280
            
            
            (38
            )
            
            226
            
            
            524
            
            
            (57
            )Wind
            
            93
            
            
            74
            
            
            25
            
            
            308
            
            
            211
            
            
            46Total
      Generation
            
            5,820
            
            
            5,801
            
            
            -
            
            
            14,668
            
            
            15,202
            
            
            (4
            ) KCP&L’s
coal base load equivalent availability factor for the three months ended and
year to date September 30, 2008, increased to 92% and 81%, respectively, from
89% and 78% for the same periods in 2007.
 
 KCP&L’s
nuclear unit, Wolf Creek, accounts for approximately 20% of KCP&L’s base
load capacity.  Wolf Creek’s latest refueling outage began on March
20, 2008, and there were several increases in work scope during the outage that
extended the restart until May 14, 2008.  A primary driver of the work
scope increases was modifications to piping systems associated with the
emergency core cooling systems.  As a result of the outage, the
capacity and equivalent availability factor for Wolf Creek decreased to 77% year
to date September 30, 2008, compared to 100% for the same period in
2007.
 79
 Fuel
expense increased $4.0 million for the three months ended and $6.4 million year
to date September 30, 2008, compared to the same periods in 2007 primarily due
to higher coal and coal transportation costs mostly offset by decreased MWhs
generated and less natural gas in the fuel mix, which has a higher cost compared
to other fuel types.
  Purchased
power expense decreased $10.0 million for the three months ended September 30,
2008, compared to the same period in 2007 due to a 47% decrease in MWh purchases
as a result of milder weather reducing retail load requirements and increased
MWhs generated.  This decrease was partially offset by a 69% increase
in the average price per MWh as a result of higher natural gas
prices.  Purchased power expense increased $19.9 million year to date
September 30, 2008, compared to the same period in 2007 due to a 10% increase in
MWh purchases due to the impact of plant outages in the first half of the
year.  Additionally, the average price per MWh increased 49% as a
result of higher natural gas prices.  These year to date increases
were partially offset by $6.5 million in recoveries from a litigation settlement
regarding a 2005 transformer failure.
  KCP&L
Depreciation and Amortization
 KCP&L’s
depreciation and amortization increased $7.3 million and $21.5 million for the
three months ended and year to date September 30, 2008, respectively, compared
to the same periods in 2007 due to additional amortization pursuant to rate case
orders of $5.4 million for the three months ended and $16.3 million year to date
September 30, 2008, combined with normal depreciation activity for capital
additions.
  KCP&L
Non-operating Income and Expenses
 KCP&L’s
non-operating income and expenses increased $6.3 million and $10.4 million for
the three months ended and year to date September 30, 2008, respectively,
compared to the same periods in 2007 primarily due to an increase in the
allowance for funds used during construction resulting from a higher
construction work in progress balance due to Comprehensive Energy Plan
projects.
  KCP&L
Income Taxes
 KCP&L’s
income taxes increased $15.0 million year to date September 30, 2008, compared
to the same period in 2007 primarily due to an increase in deferred tax balances
of $20.3 million as a result of an increase in the composite tax rate reflecting
the sale of Strategic Energy, partially offset by increased wind
credits.  See Note 12 to the consolidated financial statements for a
reconciliation of effective income tax rates for the comparative
periods.
  KCP&L
Significant Balance Sheet Changes (September 30, 2008 compared to December
31, 2007)
  ·
              KCP&L’s
      receivables increased $31.9 million primarily due to a $27.6 million
      increase in customer receivables due to new retail rates and higher summer
      usage and a $37.3 million increase in intercompany receivables, primarily
      from GMO.  These increases were partially offset by the
      repayment of a $10.5 million intercompany receivable from Great Plains
      Energy and a $20.2 million decrease in receivables from joint owners
      primarily related to Comprehensive Energy Plan
    projects.
  ·
              KCP&L’s
      fuel inventories increased $5.5 million primarily due to increased coal
      inventory quantities resulting from plant outages as well as increased
      coal and coal transportation costs.
  ·
              KCP&L’s
      construction work in progress increased $443.9 million primarily due
      to a $388.4 million increase related to KCP&L’s Comprehensive Energy
      Plan, including $272.9 million related to the construction of Iatan No. 2
      and $115.5 million for environmental
upgrades.
  ·
              KCP&L’s
      other – deferred charges and other assets increased $39.9 million
      primarily due to $23.5 million for payments owed to KCP&L by GMO
      related to Comprehensive Energy Plan projects and a $7.5 million long-term
      receivable related to the proceeds from KCP&L’s Series 2008 EIRR bonds
      issued in May 2008 that were deposited with a
  trustee.
  80
 
 ·
                KCP&L’s
      commercial paper decreased $111.1 million primarily due to the use of
      proceeds from the issuance of $350.0 million of unsecured Senior Notes at
      KCP&L offset by a $41.2 million payment to settle
      KCP&L’s T-Lock and additional borrowings to support expenditures
      related to the Comprehensive Energy
Plan.
  ·
              KCP&L’s
      accrued taxes increased $38.2 million primarily due to an increase in
      property tax accruals at KCP&L and the timing of tax
      payments.
  ·
              KCP&L’s
      accrued interest increased $12.5 million primarily due to the issuance of
      KCP&L’s $350.0 million of 6.375% Senior Notes in March 2008 and to the
      timing of interest payments at
KCP&L.
  ·
              KCP&L’s
      derivative instruments – current liabilities decreased $28.0 million due
      to the settlement of a T-Lock simultaneously with the issuance of $350.0
      million of 6.375% Senior Notes in March
2008.
  ·
              KCP&L’s
      deferred tax credits increased $61.9 million due to recognition of $63.0
      million of advanced coal credits.  See Note 12 to the
      consolidated financial statements for additional information on the
      advanced coal credits.
  ·
              KCP&L’s
      asset retirement obligations increased $17.7 million primarily due to
      changes in cost estimates and timing used in computing the present value
      of certain asbestos AROs.  See Note 18 to the consolidated
      financial statements for additional
information.
  ·
              KCP&L’s
      pension and post-retirement liability – long-term increased $15.6 million
      primarily due to an increase in the number of employees after the
      acquisition of GMO.  GMO has no employees of its
      own.  KCP&L employees operate and manage GMO’s properties,
      and KCP&L charges GMO for the cost of these services, including
      pension and post-retirement
expenses.
  ·
              KCP&L’s
      regulatory liabilities decreased $24.3 million primarily due to a
      reclassification to accumulated depreciation, consistent with ratemaking
      treatment, for the regulatory liability for additional Wolf Creek
      amortization (Missouri) of $14.6
million.
  ·
              KCP&L’s
      long-term debt increased $373.5 million due to KCP&L’s issuance of
      $350.0 million of 6.375% Senior Notes in March 2008 and $23.4 million of
      Series 2008 EIRR bonds in May 2008.
  CAPITAL
REQUIREMENTS AND LIQUIDITY
  Great
Plains Energy operates through its subsidiaries and has no material assets other
than the stock of its subsidiaries.  Great Plains Energy’s ability to
make payments on its debt securities and its ability to pay dividends is
dependent on its receipt of dividends or other distributions from its
subsidiaries and proceeds from the issuance of its securities.
  Great
Plains Energy’s capital requirements are principally comprised of debt
maturities and electric utility’s utility construction and other capital
expenditures.  These items as well as additional cash and capital
requirements are discussed below.
  Great
Plains Energy's liquid resources at September 30, 2008, consisted of $24.3
million of cash and cash equivalents on hand and $1,113.4 million of unused bank
lines of credit.  The unused lines consisted of $333.4 million from
KCP&L's revolving credit facility, $448.0 million from GMO’s credit
facilities and $332.0 million from Great Plains Energy's revolving credit
facility.  See Note 10 to the consolidated financial statements for
more information on these agreements.
  Great
Plains Energy expects to meet day-to-day cash flow requirements including
interest payments, construction requirements (excluding KCP&L’s
Comprehensive Energy Plan), dividends and pension benefit plan funding
requirements, discussed below, with internally generated funds.  Great
Plains Energy may 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 environmental
regulations and the availability of generating units.  The funds Great
Plains Energy needs to retire maturing debt will be provided from operations,
 81
 the
issuance of long and short-term debt and/or the issuance of equity or
equity-linked instruments.  In addition, Great Plains Energy may issue
debt, equity and/or equity-linked instruments to finance growth or take
advantage of new opportunities.
  KCP&L
currently expects to fund its Comprehensive Energy Plan from a combination of
internal and external sources including, but not limited to, contributions from
rate increases, capital contributions to KCP&L from Great Plains Energy's
security issuances and new short and long-term debt financing.
  KCP&L’s
primary means of short-term financing is the issuance of commercial
paper.  KCP&L has continued to have uninterrupted access to the
commercial paper market, but at higher interest rates than historically, despite
recent pressure in that market and the money and capital markets
generally.  Great Plains Energy presently believes it has the
necessary liquidity to effectively conduct business operations for an extended
period if market disruptions persist.  However, continuing instability
in the capital markets could adversely affect Great Plains Energy’s access and
cost of needed capital.
 
 Cash
Flows from Operating Activities
 Great
Plains Energy generated positive cash flows from operating activities for the
periods presented.  The timing of the Wolf Creek outage affects the
deferred refueling outage costs, deferred income taxes and amortization of
nuclear fuel.  Other changes in working capital detailed in Note 3 to
the consolidated financial statements also impacted operating cash
flows.  The individual components of working capital vary with normal
business cycles and operations.  Additionally, KCP&L’s payment of
$41.2 million to settle T-Locks upon the issuance of $350.0 million of 6.375%
Senior Notes impacted operating cash flows.
  Cash
Flows from Investing Activities
 Great
Plains Energy’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 utility capital expenditures increased $342.6 million year to
date September 30, 2008, compared to the same period in 2007.  The
acquisition of GMO increased utility capital expenditures $97.1 million and
KCP&L’s utility capital expenditures increased due to an increase in
KCP&L’s cash utility expenditures of $225.6 million related to KCP&L’s
Comprehensive Energy Plan.
  On June
2, 2008, Great Plains Energy completed the sale of Strategic Energy and received
gross cash proceeds of $305.3 million.  At the time of the sale
Strategic Energy had $88.9 million of cash resulting in proceeds from sale of
Strategic Energy, net of cash sold of $216.4 million.
  On July
14, 2008, Great Plains Energy closed its acquisition of GMO.  Great
Plains Energy paid cash consideration of $0.7 billion.  At the time of
the acquisition, GMO had approximately $1.0 billion of cash from the sale of its
electric utility assets in Colorado and its gas utility assets in Colorado,
Kansas, Nebraska and Iowa to Black Hills.
  Cash
Flows from Financing Activities
 Great
Plains Energy’s cash flows from financing activities year to date September 30,
2008, reflect KCP&L’s issuance of $350.0 million of 6.375% unsecured Senior
Notes that mature in 2018, with the proceeds used to repay short-term
borrowings.  KCP&L has incurred additional short-term borrowings
year to date September 30, 2008, to support expenditures related to
Comprehensive Energy Plan projects.  GMO repaid $169.0 million on a
credit agreement that was terminated in the third quarter of
2008.  Additionally, GMO terminated various other credit agreements
and paid $12.5 million of termination fees.
 82
 Great
Plains Energy’s cash flows from financing activities year to date September 30,
2007, reflect KCP&L’s repayment of its 6.00% Senior Notes; an issuance, at a
discount, of $250.0 million of 6.05% Senior Notes that mature in 2035; an
issuance, at a discount, of $100.0 million of 6.875% Senior Notes that mature in
2017; an increase in short-term borrowings; and the $12.3 million settlement of
an equity forward contract at Great Plains Energy.
  Financing
Authorization
 Under
stipulations with the MPSC and KCC, Great Plains Energy and KCP&L maintain
common equity at not less than 30% and 35%, respectively, of total
capitalization.  KCP&L’s long-term financing activities are
subject to the authorization of the MPSC.  In 2005, the MPSC
authorized KCP&L to issue up to $635.0 million of long-term debt and enter
into interest rate hedging instruments in connection with such debt through
December 31, 2009.  In February 2008, KCP&L received authorization
from the MPSC to increase the $635.0 million authorization to $1.4 billion
through December 31, 2009.  KCP&L utilized $850.0 million of this
amount with the issuance of its 6.05% unsecured Senior Notes maturing in 2035,
its 5.85% unsecured Senior Notes maturing in 2017 and its 6.375% unsecured
Senior Notes maturing in 2018, leaving $550.0 million of authorization
remaining.
  In
December 2007, FERC authorized KCP&L to have outstanding at any time up to a
total of $800.0 million in short-term debt instruments through December
2009.  The authorization is subject to four restrictions: (i) proceeds
of debt backed by utility assets must be used for utility purposes; (ii) if any
utility assets that secure authorized debt are divested or spun off, the debt
must follow the assets and also be divested or spun off; (iii) if any proceeds
of the authorized debt are used for non-utility purposes, the debt must follow
the non-utility assets (specifically, if the non-utility assets are divested or
spun off, then a proportionate share of the debt must follow the divested or
spun off non-utility assets); and (iv) if utility assets financed by the
authorized short-term debt are divested or spun off to another entity, a
proportionate share of the debt must also be divested or spun off.  At
September 30, 2008, there was $545.3 million available under this
authorization.  In October 2008, KCP&L filed an application with
FERC to increase this authorization to $1.1 billion.  The increased
limit will enable KCP&L to meet its capital and operating needs through the
short-term debt market in the event it is uneconomic or extremely difficult to
access the capital markets.  In the application, KCP&L requested
authorization to participate in the Great Plains Energy money
pool.  The money pool is an internal financing arrangement in which
funds deposited into the money pool could be lent on a short-term basis to
KCP&L and GMO.
  GMO has
$500.0 million of FERC short-term debt authorization.  At September
30, 2008, there was $483.0 million available under this
authorization.
  Significant
Financing Activities
 KCP&L
has an effective shelf registration statement providing for the sale of
investment grade notes and general mortgage bonds that became effective in
January 2008.  There is currently $550.0 million of capacity under
this registration statement.  This is intended to preserve KCP&L’s
flexibility to access the debt capital markets.
  In 2007,
Great Plains Energy entered into three T-Locks with a notional amount of $350.0
million, to hedge against interest rate fluctuations on the U.S. Treasury rate
component on future issuances of long-term debt.  Following a change
in financing plans, Great Plains Energy assigned the T-Locks to
KCP&L.  In March 2008, KCP&L issued $350.0 million of 6.375%
unsecured Senior Notes, maturing in 2018.  KCP&L settled the
T-Locks simultaneously with the issuance of its $350.0 million 10-year long-term
debt and paid $41.2 million in cash for the settlement.
 83
 In March
and April 2008, KCP&L remarketed several series of EIRR bonds that were
auction rate securities, i.e. the interest rates were periodically reset through
an auction process.
  In March
2008, KCP&L remarketed the following:
  ·
              secured
      Series 1992 EIRR bonds maturing in 2017 totaling $31.0 million at a fixed
      rate of 5.25% through March 31,
2013,
  ·
              secured
      Series 1993A EIRR bonds maturing in 2023 totaling $40.0 million at a fixed
      rate of 5.25% through March 31, 2013,
and
  ·
              unsecured
      Series 2007B EIRR bonds maturing in 2035 totaling $73.2 million at a fixed
      rate of 5.375% through March 31,
2013.
  In April
2008, KCP&L remarketed the following:
  ·
              secured
      Series 1993B EIRR bonds maturing in 2023 totaling $39.5 million at a fixed
      rate of 5.00% through March 31, 2011,
and
  ·
              unsecured
      Series 2007A EIRR bonds maturing in 2035 into two series: Series 2007A-1
      totaling $63.3 million at a fixed rate of 5.125% through March 31, 2011
      and Series 2007A-2 totaling $10.0 million at a fixed rate of 5.00% through
      March 31, 2010.
  After
these remarketing activities, none of KCP&L’s EIRR bonds remain in auction
rate mode.
  In May
2008, KCP&L’s Series 2008 EIRR bonds totaling $23.4 million maturing in 2038
were issued.  Proceeds of the bonds will be used to pay for a portion
of the costs at the Iatan Nos. 1 and 2 projects included in KCP&L’s
Comprehensive Energy Plan.  The proceeds were deposited with a
trustee, and will be used to reimburse KCP&L for qualifying
expenditures.  KCP&L recorded a $15.9 million short-term
receivable and a $7.5 million long-term receivable for the proceeds that were
deposited with the trustee.  The bonds have an initial long-term
interest rate of 4.90% until June 30, 2013.  At the end of the initial
long-term interest rate period, the bonds are subject to mandatory tender;
however, KCP&L is not obligated to pay the purchase price of the bonds on
the mandatory tender date.  If the bonds are not successfully
remarketed, the bonds will bear an interest at a daily rate equal to 10% per
annum until all the bonds are successfully remarketed.
  On August
14, 2008, Great Plains Energy entered into a Sales Agency Financing Agreement
with BNY Mellon Capital Markets, LLC (BNYMCM).  Under the terms of the
agreement, Great Plains Energy may offer and sell up to 8,000,000 shares of its
common stock from time to time through BNYMCM, as agent, for a period of no more
than three years.  The Company will pay BNYMCM a commission equal to
1% of the sales price of all shares sold under the agreement.  As of
September 30, 2008, no shares had been sold through BNYMCM.
  Debt
Agreements
 See Note
10 to the consolidated financial statements for discussion of Great Plains
Energy’s and KCP&L’s revolving credit facilities.
 84
 Projected
Utility Capital Expenditures
 Utility
capital expenditures projected for the next three years, excluding allowance for
funds used during construction, are detailed in the following
table.


Remainder
      of2008
                2009
                2010Base
      utility construction expenditures
                (millions)Generating
      facilities
                $
                31.4
                
                $
                107.8
                
                $
                133.0Distribution
      and transmission facilities
                
                69.3
                
                
                204.7
                
                
                281.5General
      facilities
                
                17.5
                
                
                44.9
                
                
                35.7Total
      base utility construction expenditures
                
                118.2
                
                
                357.4
                
                
                450.2Comprehensive
      Energy Plan capital expendituresIatan
      No. 2 (KCP&L Share)
                
                65.3
                
                
                291.2
                
                
                120.4Environmental
                
                46.3
                
                
                48.4
                
                
                43.3Customer
      programs & asset management
                
                4.3
                
                
                12.2
                
                
                7.6Total
      Comprehensive Energy Plan capital expenditures
                
                115.9
                
                
                351.8
                
                
                171.3Nuclear
      fuel
                
                7.4
                
                
                17.5
                
                
                32.0Iatan
      No. 2 (GMO Share)
                
                21.0
                
                
                94.9
                
                
                39.6Other
      environmental
                
                27.8
                
                
                27.2
                
                
                49.7Customer
      programs & asset management
                
                -
                
                
                0.4
                
                
                0.7Total
      utility capital expenditures
                $
                290.3
                
                $
                849.2
                
                $
                743.5
 Utility
capital expenditure plans are subject to continual review and change and
includes utility capital expenditures related to KCP&L’s Comprehensive
Energy Plan for environmental investments and new capacity.
  Pensions
 The
Company maintains qualified defined benefit plans for substantially all active
and inactive employees, including officers, of KCP&L, GMO, Services and
WCNOC and incurs significant costs in providing the plans, with the majority
incurred by KCP&L.  Year to date September 30, 2008, the Company
contributed $21.7 million to the plans and expects to contribute an additional
$7.7 million to satisfy the funding requirements of ERISA and the 2007 MPSC and
KCC rate orders.  In addition, the Company plans to make a voluntary
contribution in the fourth quarter of 2008 of $18.0 million to maintain the
funded status of the qualified benefit plans.  The contributions will
be paid by KCP&L whom management believes has adequate access to capital
resources through cash flows from operations or through existing lines of credit
to support the funding requirements.  All plans meet the funding
requirements of ERISA and additional contributions may be made if deemed
financially advantageous.
  With the
GMO acquisition on July 14, 2008, under the terms of the purchase agreement,
Black Hills assumed the pension obligation and a portion of the plan assets
related to the current and former employees of GMO’s Colorado electric and
Colorado, Iowa, Kansas and Nebraska gas utility operations.  The final
transfer of plan assets is expected to be complete prior to December 31, 2008,
at which time the Company expects to make a voluntary contribution of
approximately $12 million to sustain the funded status of the plan.
  In
addition, the Company provides post-retirement health and life insurance
benefits for certain retired employees and expects to make benefit contributions
of $10.5 million under the provisions of these plans in 2008, with the majority
paid by KCP&L.
 85
 Credit
Ratings
 At
September 30, 2008, the major credit rating agencies rated Great Plains
Energy’s, KCP&L’s and GMO’s securities as detailed in the following
table.


Moody's
              
              StandardInvestors
      Service
              
              &
      Poor'sGreat
      Plains EnergyOutlook
              Negative
              
              StableCorporate
      Credit Rating
              -
              
              BBBPreferred
      Stock
              Ba1
              
              BB+Senior
      Unsecured Debt
              Baa2
              
              BBB-KCP&LOutlook
              Negative
              
              StableSenior
      Secured Debt
              A2
              
              BBBSenior
      Unsecured Debt
              A3
              
              BBBCommercial
      Paper
              P-2
              
              A-2GMOOutlook
              Negative
              
              StableSenior
      Secured Debt*
              Baa2
              
              BBB+Senior
      Unsecured Debt*
              Baa2
              
              BBB*reflects
      Great Plains Energy guarantee
  A
securities rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time by the assigning rating
agency.  Great Plains Energy and KCP&L view maintenance of strong
credit ratings as extremely important and to that end an active and ongoing
dialogue is maintained with the agencies with respect to results of operations,
financial position and future prospects.  While a decrease in these
credit ratings would not cause any acceleration of Great Plains Energy’s,
KCP&L’s or GMO’s debt, it could increase interest charges under Great Plains
Energy’s 6.875% Senior Notes due 2017, GMO’s 11.875% Senior Notes due 2012,
GMO’s 7.95% Senior Notes due 2011 and Great Plains Energy’s, KCP&L’s and
GMO’s revolving credit agreements.  A decrease in credit ratings could
also have an adverse impact on Great Plains Energy’s, KCP&L’s  and
GMO’s access to capital, the cost of funds, the amounts of collateral required
under power supply agreements and Great Plains Energy’s ability to provide
credit support for its subsidiaries.
  The MPSC
approval of the GMO acquisition is conditioned on the requirement that any
post-acquisition financial effects of a credit downgrade of Great Plains Energy,
KCP&L or GMO occurring as a result of the acquisition would be borne by
shareholders and not utility customers.  The Company has agreed to not
seek rate recovery of GMO interest costs in excess of equivalent
investment-grade debt.
 86
 Supplemental
Capital Requirements and Liquidity Information
 The
following tables update selected items from Great Plains Energy’s and
KCP&L’s contractual commitments in the 2007 Form 10-K to reflect significant
changes, including the July 14, 2008, acquisition of GMO.
  Great
      Plains EnergyRemainder
      of2008
              2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              After
      2012
              
              TotalLease
      commitments
              
              (millions)Operating
      lease
              
              $
              6.3
              
              
              $
              21.2
              
              
              $
              14.7
              
              
              $
              13.2
              
              
              $
              12.7
              
              
              $
              85.0
              
              
              $
              153.1Capital
      lease
              
              
              -
              
              
              
              0.2
              
              
              
              0.3
              
              
              
              0.3
              
              
              
              0.3
              
              
              
              5.4
              
              
              
              6.5Purchase
      commitmentsFuel
              
              
              62.3
              
              
              
              156.7
              
              
              
              122.6
              
              
              
              46.1
              
              
              
              26.9
              
              
              
              198.7
              
              
              
              613.3Purchased
      capacity
              
              
              26.6
              
              
              
              32.7
              
              
              
              29.5
              
              
              
              19.8
              
              
              
              14.1
              
              
              
              24.7
              
              
              
              147.4Comprehensive
      Energy Plan
              
              
              230.3
              
              
              
              345.1
              
              
              
              59.2
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              634.6Non-regulated
      natural gastransportation
              
              
              1.4
              
              
              
              5.5
              
              
              
              5.5
              
              
              
              5.0
              
              
              
              2.6
              
              
              
              10.9
              
              
              
              30.9Total
      contractual commitments
              
              $
              326.9
              
              
              $
              561.4
              
              
              $
              231.8
              
              
              $
              84.4
              
              
              $
              56.6
              
              
              $
              324.7
              
              
              $
              1,585.8
 KCP&LRemainder
      of2008
              2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              After
      2012
              
              Total(millions)Fuel
              
              $
              43.2
              
              
              $
              114.3
              
              
              $
              85.6
              
              
              $
              33.4
              
              
              $
              15.6
              
              
              $
              198.7
              
              
              $
              490.8Comprehensive
      Energy Plan
              
              
              230.3
              
              
              
              345.1
              
              
              
              59.2
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              634.6Total
      contractual commitments
              
              $
              273.5
              
              
              $
              459.4
              
              
              $
              144.8
              
              
              $
              33.4
              
              
              $
              15.6
              
              
              $
              198.7
              
              
              $
              1,125.4
 Fuel
commitments consist of commitments for nuclear fuel, coal, coal transportation
costs and natural gas.  Comprehensive Energy Plan represents
contractual commitments for projects included in KCP&L’s Comprehensive
Energy Plan including jointly owned units.  KCP&L expects to be
reimbursed by other owners, including GMO, for their respective share of Iatan
No. 2 and environmental retrofit costs included in the Comprehensive Energy Plan
contractual commitments.  Non-regulated natural gas transportation
consists of MPS Merchant’s commitments.
  In
October 2008, Great Plains Energy entered into an operating lease to move its
corporate headquarters in the third quarter of 2009.  The lease has a
23-year term, ending in September 2032, with an estimated average annual minimum
lease obligation of approximately $3.7 million.  This lease will
replace the existing corporate headquarters operating lease expiring September
2009, with minimum annual lease obligations of approximately $4.0
million.
 
 Off-Balance
Sheet Arrangements
 In the
normal course of business, Great Plains Energy and certain of its subsidiaries
enter into various agreements providing financial or performance assurance to
third parties on behalf of certain subsidiaries.  Such agreements
include, for example, guarantees, stand-by letters of credit and surety
bonds.  These agreements are entered into primarily to support or
enhance the creditworthiness otherwise attributed to a subsidiary on a
stand-alone basis, thereby facilitating the extension of sufficient credit to
accomplish the subsidiaries’ intended business purposes.  KCP&L’s
guarantees were relatively unchanged at September 30, 2008, compared to December
31, 2007.
  In July
2008, Great Plains Energy issued guarantees relating to approximately $1 billion
of GMO’s outstanding long-term debt.  These guarantees collectively
cover substantially all of GMO’s outstanding long-term debt.  The
 87
 guarantees
provide Great Plains Energy’s unconditional guarantee, as a primary obligor, of
the payment and performance of GMO’s obligations.
  The
following GMO credit facilities are guaranteed by Great Plains
Energy.
  ·
              $65
      million revolving line of credit dated April 22, 2005, with Union Bank of
      California, expiring April 22, 2009.  This facility is secured
      by the accounts receivable from GMO’s Missouri regulated utility
      operations.
  ·
              $400
      million revolving line of credit dated September 23, 2008, with a group of
      banks, expiring September 23, 2011.
  None of
the guaranteed obligations are subject to default or prepayment as a result of
downgrading of GMO securities, although such a downgrading has in the past, and
could in the future, increase interest charges under GMO’s revolving lines of
credit and GMO’s 11.875% Senior Notes due 2012 and 7.95% Senior Notes due
2011.
  At
September 30, 2008, GMO had issued letters of credit totaling $57.1 million as
credit support to certain counterparties.
  New
Accounting Standards
 See Note
22 to the consolidated financial statements for information regarding new
accounting standards.
  ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  Great
Plains Energy and 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 KCP&L also face risks that are either
non-financial or non-quantifiable.  Such risks principally include
business, legal, regulatory, operational and credit risks and are discussed
elsewhere in this document as well as in the 2007 Form 10-K and therefore are
not represented here.
  Great
Plains Energy and KCP&L interim period disclosures about market risk
included in quarterly reports on Form 10-Q address material changes, if any,
from the most recently filed annual report on Form 10-K.  Therefore,
these interim period disclosures should be read in connection with Item
7A.  Quantitative and Qualitative Disclosures About Market Risk,
included in the 2007 Form 10-K of each of Great Plains Energy and KCP&L,
incorporated herein by reference.
  With the
acquisition of GMO, Great Plains Energy is exposed to market risk for GMO’s
utility operations and MPS Merchant as well as credit risk for MPS
Merchant.  The following is a discussion of the GMO market risk and
credit risk exposure.  There has been no material change to market
risk or credit risk exposure disclosures in the 2007 Form 10-K of Great Plains
Energy and KCP&L.
  Market
Risk – Utility Operations
 In the
GMO regulated electric operations in 2008, approximately 65% of the power sold
was generated and GMO purchased the remaining 35% through long-term contracts or
in the open market.  GMO has a fuel adjustment clause that allows GMO
to adjust rates based on 95% of the cost of increases or decreases in purchased
power and variable fuel costs.
 
 Several
measures have been taken to mitigate the commodity price risk exposure in the
GMO electric operations.  One of these measures is contracting for a
diverse supply of coal to meet 100% of native load fuel requirements of
coal-fired generation in 2008 and 65% in 2009, respectively.  The
price risk associated with natural gas and on-peak spot market purchased power
requirements is also mitigated through a hedging plan using NYMEX futures
contracts and options.  This is a multi-year hedging
plan.  As of September 30, 2008, GMO had financial
 88
 contracts
in place to hedge approximately 32% and 31% of the expected on-peak natural gas
and natural gas equivalent purchased power price exposure for 2008 and 2009,
respectively.  The mark-to-market value of these contracts at
September 30, 2008, was a liability of $2.4 million.
 Additional
factors that affect commodity price exposure include the quantity and
availability of fuel used for generation and the quantity of electricity
customers consume.  Quantities of fossil fuel used for generation vary
from year to year based on the availability, price and deliverability of a given
fuel type as well as planned and scheduled outages at our facilities that use
fossil fuels. Customers' electricity usage could also vary from year to year
based on the weather or other factors.
 
 Market
Risk – MPS Merchant
 MPS
Merchant is exposed to market risk, including changes in commodity
prices.  To manage the volatility relating to these exposures, MPS
Merchant enters into various derivative transactions in accordance with the risk
management policy.  The trading portfolios consist of natural gas
contracts that are settled by the delivery of the commodity or
cash.  These contracts take many forms, including futures, forwards,
swaps and options.  With the winding down of the trading portfolio,
most positions have been hedged to limit exposure to the above
risks.
 
 Certain
Trading Activities
 Great
Plains Energy engages in price risk management activities for both trading and
non-trading activities.  Transactions carried out in connection with
trading activities that are derivatives under SFAS No. 133 are accounted
for under the mark-to-market method of accounting.  Under SFAS No. 133,
energy commodity trading contracts, including physical transactions (mainly gas)
and financial instruments, are recorded at fair value.  As part of the
valuation of the portfolio, Great Plains Energy values the credit risks
associated with the financial condition of counterparties and the time
value of money.  Quoted market prices from published sources or
comparable transactions in liquid markets are used to value the
contracts.  If actively quoted market prices are not available,
brokers are contracted or other external sources or comparable transactions are
used to obtain current values of the contracts.  In addition, the
market prices or fair values used in determining the value of the portfolio are
best estimates utilizing information such as historical volatility, time value,
counterparty credit and the potential impact on market prices of liquidating the
positions in an orderly manner over a reasonable period of time under current
market conditions.  When market prices are not readily available or
determinable, certain contracts are recorded at fair value using an alternative
approach such as model pricing.
 
 Credit
Risk Exposure
 During
regular business operations, Great Plains Energy conducts business with a broad
range of entities and a wide variety of end users, energy merchants, producers
and financial institutions.  Credit risk is measured by the loss that
would be recorded if counterparties failed to perform pursuant to the terms of
the contractual obligations less the value of any collateral held.
  The
following table provides information on MPS Merchant credit exposure to
suppliers at September 30, 2008.


CreditRating
            ExposureExternal
      rating
            (millions)Investment
      grade
            $
            5.1Non-investment
      grade
            
            -No
      external rating
            
            42.3Total
            $
            47.4


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.


89


Investment
grade counterparties are those with a minimum senior unsecured debt rating of
BBB- from Standard & Poor’s or Baa3 from Moody’s Investors
Service.


ITEM 4.  CONTROLS AND
PROCEDURES




Disclosure
Controls and Procedures


Great
Plains Energy carried out evaluations of its disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended).  These evaluations were conducted under the
supervision, and with the participation, of the Company’s management, including
the chief executive officer, chief financial officer, and the Company’s
disclosure committee.





Based
upon these evaluations, the chief executive officer and chief financial officer
of Great Plains Energy have concluded as of the end of the period covered by
this report that the disclosure controls and procedures of Great Plains Energy
are functioning effectively to provide reasonable assurance that: (i) the
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms; and (ii) the information required to be disclosed by the
Company in the reports that it files or submits under the Securities Exchange
Act of 1934, as amended, is accumulated and communicated to their respective
management, including the principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required
disclosure.




Changes
in Internal Control Over Financial Reporting


There has
been no change in Great Plains Energy’s internal control over financial
reporting (ICFR) that occurred during the quarterly period ended September 30,
2008, that has materially affected, or is reasonably likely to materially
affect, its ICFR, except for the following matter.




Due to
the acquisition of GMO, the design of the ICFR structure for Great Plains Energy
has changed to incorporate non-integrated GMO internal control activities, as
well as design changes to incorporate GMO transactions for all integrated
processes.  Due to the timing of the acquisition, certain
non-integrated GMO processes and controls in addition to transactions specific
to financial reporting for GMO may be excluded from Great Plains Energy
management’s assessment of internal control over financial reporting at December
31, 2008.  Great Plains Energy will continue to evaluate the control
environment as integration activities continue throughout 2008.




ITEM
4T.  CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures


KCP&L
carried out evaluations of its disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended).  These evaluations were conducted under the supervision, and
with the participation, of KCP&L’s management, including the chief executive
officer and chief financial officer, and KCP&L’s disclosure
committee.




Based
upon these evaluations, the chief executive officer and chief financial officer
of KCP&L have concluded as of the end of the period covered by this report
that the disclosure controls and procedures of KCP&L are functioning
effectively to provide reasonable assurance that: (i) the information required
to be disclosed by KCP&L in the reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms; and
(ii) the information required to be disclosed by KCP&L in the reports that
it files or submits under the Securities Exchange Act of 1934, as amended, is
accumulated and communicated to their respective management, including the
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.


90


Changes
in Internal Control Over Financial Reporting


There has
been no change in KCP&L’s internal control over financial reporting that
occurred during the quarterly period ended September 30, 2008, that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting except for the following matter.




Due to
the acquisition of GMO, the design of the ICFR structure for KCP&L has
changed to incorporate GMO transactions for all integrated
processes.  KCP&L will continue to evaluate the control
environment as integration activities continue throughout 2008.




PART
II –OTHER
INFORMATION




ITEM
1.  LEGAL PROCEEDINGS




Other
Proceedings


The
companies are parties to various lawsuits and regulatory proceedings in the
ordinary course of their respective businesses.  For information
regarding material lawsuits and proceedings, see Notes 2, 7, 15 and 17 to the
consolidated financial statements.  Such descriptions are incorporated
herein by reference.




ITEM
1A.  RISK FACTORS




Changes
in Risk Factors Resulting from the Sale of Strategic Energy


On June
2, 2008, Great Plains Energy completed the sale of Strategic Energy to Direct
Energy.  As a result, the Strategic Energy-specific risk factors
identified below, as well as all references to Strategic Energy in the risk
factors contained in Item 1A. Risk Factors in the 2007 Form 10-K, as modified by
Part II, Item 1A. Risk Factors in the 10-Q for the quarter ended March 31, 2008,
are no longer applicable.  These specific risk factors
are:




·
            The
      ability of Strategic Energy to compete in states offering retail choice
      may be materially affected by state regulations and host public utility
      rates.


·
            The
      announced review of alternatives for Strategic Energy may cause business
      uncertainties, which could adversely affect Great Plains Energy’s results
      of operation.


·
            Strategic
      Energy operates in competitive retail electricity markets, which could
      impact financial results.


·
            Strategic
      Energy supplier and customer credit risk may adversely affect financial
      results.





Changes
in Risk Factors Resulting from the Acquisition of GMO


On July
14, 2008, Great Plains Energy closed its acquisition of GMO.  As a
result, the risk factors of Great Plains Energy now reflect risks associated
with the ownership and operations of GMO.  Many of these risks are
similar to those of KCP&L, Great Plains Energy’s other regulated public
utility, with the exception of the following risk factor, which is discussed in
more detail below.




·
            Great
      Plains Energy has guaranteed substantially all of the outstanding debt of
      GMO, and payments under these guarantees may adversely affect Great Plains
      Energy’s liquidity.





Updated
and Restated Risk Factors


The
Strategic Energy sale and the GMO acquisition have resulted in numerous changes
to Great Plains Energy’s risk factors, as summarized above.  Given the
extent of the changes to the risk factors as presented in Item 1A. Risk Factors
in the 2007 Form 10-K, as modified by Part II, Item 1A. Risk Factors in the Form
10-Q for the quarter ended March 31, 2008, Great Plains Energy and KCP&L
updated and restated these risk factors in their entirety in Part II, Item 1A.
Risk Factors in the Form 10-Q for the quarter ended June 30,
2008.  SEC rules require any changes in the risk factors as presented
in Form 10-K to be included in each succeeding Form 10-Q.  These
updated and restated risk factors are therefore presented below, with
substantive changes to the following risk factors:


91


·
            Complex
      utility and environmental regulation could adversely affect Great Plains
      Energy’s and KCP&L’s results of operations, financial position and
      cash flows.  Changes were made to name certain regulatory
      bodies.


·
            Financial
      market disruptions and declines in the credit ratings of Great Plains
      Energy, KCP&L or GMO may increase financing costs or limit access to
      the credit markets, which may adversely affect liquidity and
      results.  Changes were made to reflect the current conditions in
      the credit and capital markets.


·
            Great
      Plains Energy has guaranteed substantially all of the outstanding debt of
      GMO and payments under these guarantees may adversely affect Great Plains
      Energy’s liquidity.  Changes were made to reflect the Great
      Plains Energy guarantee of a recent GMO revolving credit
      agreement.


·
            The
      inability of Great Plains Energy’s subsidiaries to provide sufficient
      dividends to allow Great Plains Energy to pay dividends to its
      shareholders and meet its financial obligations would have an adverse
      effect on Great Plains Energy’s ability to meet its
      obligations.  Changes were made to reflect the termination
      during the quarter of GMO credit facilities that contained covenants
      restricting its ability to pay
dividends.


·
            Changes
      in customer demand, due to sustained financial market disruptions or
      downturns or sluggishness in the economy, and weather conditions may
      adversely affect KCP&L’s and Great Plains Energy’s business and
      financial results.  Changes were made to reflect the current
      economic conditions and to reference impacts of financial market
      disruptions on customer demand.


·
            Operations
      risks may adversely affect the Company’s business and financial
      results.  Changes were made to reflect the exclusion of
      insurance coverage for transmission and distribution systems and the
      extent of business continuity insurance
  coverage.


·
            The
      cost and schedule of construction projects may materially
      change.  Changes were made to reference other KCP&L and GMO
      construction projects.


·
            Market
      performance, increased retirements and changes in retirement plan
      regulations could significantly impact retirement plan funding
      requirements and associated cash needs and expenses.  Changes
      were made to reflect current market conditions and the scope of GMO’s
      continuing pension and benefit plan
obligations.


·
            Participation
      in regional transmission organizations (RTOs) could increase costs, reduce
      revenues, and reduce KCP&L’s and GMO’s control over their transmission
      assets.  Changes were made to reflect the denial of GMO’s
      application to join the Midwest Independent System Operator (MISO)
      RTO.





Additionally,
the following risk factor has been added:





·
            A
      sustained decline in Great Plains Energy’s stock price below book value
      may result in goodwill impairments that could adversely affect Great
      Plains Energy’s results of operations and financial position, as well as
      credit facility covenants.





Actual
results in future periods for Great Plains Energy and KCP&L could differ
materially from historical results and the forward-looking statements contained
in this report.  The companies’ business is influenced by many factors
that are difficult to predict, involve uncertainties that may materially affect
actual results and are often beyond the companies’
control.  Additional risks and uncertainties not presently known or
that the companies’ management currently believes to be immaterial may also
adversely affect the companies.  The information presented below
updates and restates the risk factors described in the 2007 Form 10-K, as
modified in the Form 10-Qs for the quarters ended March 31, 2008, and June 30,
2008, of each of Great Plains Energy and KCP&L.  This information,
as well as the other information included in this report and in the other
documents filed with the SEC, should be carefully considered before making an
investment in the securities of Great Plains Energy and
KCP&L.  Risk factors of KCP&L and GMO are also risk factors
for Great Plains Energy.


92


Complex
utility and environmental regulation could adversely affect Great Plains
Energy’s and KCP&L’s results of operations, financial position and cash
flows.


KCP&L
and GMO are subject to, or affected by, extensive federal and state utility
regulation, including, by the MPSC, KCC, FERC, NRC, SPP and the North American
Electric Reliability Corporation.  They must also comply with
environmental legislation and associated regulations.  In the
Company’s business planning and management of operations, it must address the
effects of existing and proposed regulation on its businesses and changes in the
regulatory framework, including initiatives by federal and state legislatures,
regional transmission organizations, utility regulators and taxing
authorities.  Failure of KCP&L or GMO to obtain adequate rates or
regulatory approvals, in a timely manner, adoption of new regulations by federal
or state agencies, or changes to current regulations and interpretations of such
regulations may materially affect Great Plains Energy’s and KCP&L’s business
and results of operations, financial position and cash flows.





The
outcome of retail rate proceedings could have a material impact on the business
and is largely outside the Company’s control.


The rates
that KCP&L and GMO are allowed to charge their customers are the single most
important item influencing their results of operations, financial position and
cash flows.  These rates are subject to the determination, in large
part, of governmental entities outside of KCP&L and GMO’s control, including
the MPSC, KCC (for KCP&L) and FERC.  KCP&L and GMO are also
exposed to cost-recovery shortfalls due to the inherent lag in the rate-setting
process, especially during periods of significant cost
inflation.




As a part
of the Missouri and Kansas stipulations approved by the MPSC and KCC in 2005,
KCP&L began implementation of its Comprehensive Energy
Plan.  Under the Comprehensive Energy Plan, KCP&L agreed to
undertake certain projects, including building and owning a portion of Iatan No.
2, installing a new wind-powered generating facility, installing environmental
upgrades to certain existing plants, infrastructure improvements and demand
management, distributed generation, and customer efficiency and affordability
programs.  In March 2007, KCP&L entered into a Collaboration
Agreement with the Sierra Club and Concerned Citizens of Platte County that
provides for increases in KCP&L’s wind generation capacity and energy
efficiency initiatives, reductions in certain emission permit levels at its
Iatan and LaCygne generating stations, and projects to offset certain carbon
dioxide emissions.  Most, but not all, of these commitments are
conditioned on regulatory approval.




A
reduction or rejection by the MPSC or KCC of rate increase requests reflecting
the costs of projects under the Comprehensive Energy Plan or Collaboration
Agreement, or other costs and expenses, could lead to lowered credit ratings,
reduced access to capital markets, increased financing costs, lower flexibility
due to constrained financial resources and increased collateral security
requirements, which could materially and adversely affect KCP&L’s and Great
Plains Energy’s results of operations, financial position, and cash
flows.  In response to competitive, economic, political, legislative
and regulatory pressures, KCP&L and GMO may be subject to rate moratoriums,
rate refunds, limits on rate increases or rate reductions, including phase-in
plans designed to spread the impact of rate increases over an extended period of
time for the benefit of customers.  Any or all of these could have a
significant adverse effect on KCP&L’s and Great Plains Energy’s results of
operations, financial position and cash flows.




Regulatory
requirements regarding utility operations may increase costs and may expose
KCP&L and GMO to compliance penalties.


The MPSC
and KCC have the authority to implement utility operational standards and
requirements, such as vegetation management standards, facilities inspection
requirements, and quality of service standards.  KCP&L agreed to
quality of service standards in Kansas in connection with the GMO
acquisition.  The costs of new or modified operational standards and
requirements could have an adverse effect on KCP&L and Great Plains Energy’s
results of operations, financial position and cash flows as a result of
increased operations, maintenance and capital expenditures for new facilities,
or to repair or improve existing facilities.  Failure to meet quality
of service, operational or other standards and requirements could expose
KCP&L or GMO to penalties or other adverse rate consequences.


93


Financial
market disruptions and declines in the credit ratings of Great Plains Energy,
KCP&L or GMO may increase financing costs or limit access to the credit
markets, which may adversely affect liquidity and results.


KCP&L’s
capital requirements are expected to be substantial over the next several
years.  The acquisition of GMO has further increased the Company’s
overall capital requirements, and the capital requirements of GMO over the next
several years are expected to be substantial as it implements generation and
environmental projects.  The Company relies on access to short-term money
markets, revolving credit facilities provided by financial institutions and
long-term capital markets as significant sources of liquidity for capital
requirements not satisfied by cash flows from operations.  The Company
also relies on bank-provided credit facilities for credit support, such as
letters of credit, to support operations.  The amount of credit support
required for KCP&L and GMO operations varies with a number of factors,
including the amount and price of wholesale power purchased or
sold.




Great
Plains Energy, KCP&L, GMO and certain of their securities are rated by
Moody's Investors Service and Standard & Poor's.  These
ratings impact the companies’ cost of funds and Great Plains Energy’s ability to
provide credit support for its subsidiaries.  The interest rates on a
substantial portion of Great Plains Energy’s and GMO’s debt are subject to
increase as their respective credit ratings decrease.  The Company has
agreed to not seek rate recovery of GMO interest costs in excess of equivalent
investment-grade debt, and the MPSC approval of the GMO acquisition is
conditioned on the requirement that any post-acquisition financial effects of a
credit downgrade of Great Plains Energy, KCP&L or GMO occurring as a result
of the acquisition would be borne by shareholders and not utility
customers.  The amount of collateral or other credit support required
under power supply agreements is also dependent on credit
ratings.




The
capital and credit markets have been experiencing levels of volatility and
disruption unprecedented in recent years.  If current levels of market
disruption and volatility continue or worsen, or if there is a decrease in Great
Plains Energy’s, KCP&L’s or GMO’s credit ratings, there can be no assurance
that the companies would not experience an adverse effect on their access to
capital, their cost or dilutive effect of funds, the amount of collateral or
other credit support obligations required to be posted with contractual
counterparties, KCP&L’s or GMO’s rate recovery of costs, or Great Plains
Energy’s ability to provide credit support for its subsidiaries which would
adversely affect Great Plains Energy’s and KCP&L’s results of operations,
financial position and cash flows.  Market disruption and volatility
could have an impact on Great Plains Energy’s, KCP&L’s or GMO’s lenders,
suppliers and other counterparties or on KCP&L’s and GMO’s customers,
causing them to fail to meet their obligations.




A
sustained decline in Great Plains Energy’s stock price below book value may
result in goodwill impairments that could adversely affect Great Plains Energy’s
results of operations and financial position, as well as credit facility
covenants.


The GMO
acquisition resulted in Great Plain Energy recording approximately $152 million
in goodwill.  Accounting rules require goodwill to be tested for
impairment annually and when an event occurs indicating that it is possible that
an impairment exists.  The Company’s annual impairment testing is
conducted in September.  Subsequent to the annual testing, the
financial market disruptions and volatility have resulted in Great Plains
Energy’s stock price being below book value.  If the stock price
continues to be below book value, the accounting rules may require Great Plains
Energy to conduct another goodwill impairment test.  There is no
assurance that the results of this additional test will not require Great Plains
Energy to recognize an impairment of goodwill.  An impairment of GMO
acquisition goodwill may adversely affect Great Plains Energy’s results of
operations and financial position, and could result in a breach of the debt to
total capitalization covenants in Great Plains Energy’s and GMO’s revolving
credit agreements.


94


Great
Plains Energy has guaranteed substantially all of the outstanding debt of GMO
and payments under these guarantees may adversely affect Great Plains Energy’s
liquidity.


In
connection with the GMO acquisition, Great Plains Energy issued its guarantees
of substantially all of the outstanding debt of GMO, and has guaranteed a $400
million revolving credit facility that was entered into by GMO subsequent to the
acquisition.  The guarantees were a factor in GMO receiving
investment-grade ratings; however, the guarantees obligate Great Plains Energy
directly to pay amounts owed by GMO to the holders of the guaranteed debt in the
event GMO defaults on its payment obligations.  Any guarantee payments
could adversely affect Great Plains Energy’s liquidity.




Only
a portion of the costs associated with the GMO acquisition will be recovered
through utility rates, and the expected non-utility cost benefits of the GMO
transaction may not be realized, which could adversely affect Great Plains
Energy’s business and results of operations, financial position and cash
flows.


The MPSC
order approving the GMO transaction provides that the transaction costs will not
be recovered through utility rates, and that transition costs (estimated in the
pending rate cases to be approximately $59 million) will be recoverable through
utility rates only to the extent the costs are offset by benefits resulting from
the acquisition.




The
Company expects to achieve various benefits, including cost savings and
operating efficiencies in connection with the
acquisition.  Approximately half of the total estimated cost savings
over the first five years following the GMO acquisition are expected to
come from reductions in GMO’s corporate overhead and other costs that are not
being recovered, and are not expected to be recovered, through GMO’s Missouri
utility rates.  If the Company is not able to eliminate these
non-Missouri utility costs as anticipated, its results of operations, financial
position and cash flows will be negatively impacted.




The
benefits of integrating KCP&L’s and GMO’s utility businesses may be less
than expected, which could adversely affect the Company’s business, regulatory
treatment and results of operations, financial position and cash
flows.


The
Company also expects to achieve synergies through the integration of KCP&L
and GMO utility operations.  This integration poses significant
challenges due to the size and complexity of each organization.  The
Company has dedicated substantial efforts and resources since the proposed
transaction was announced to plan for an efficient and successful integration of
utility operations.  The Company believes that it will have the
necessary employees to successfully operate the integrated utility operations,
and that it will achieve the anticipated benefits.  However, there is
no assurance that the utility operations integration will be completed
successfully or in a timely manner, or result in the anticipated
benefits.  Failure to achieve the anticipated cost reductions or
customer service levels could result in adverse regulatory actions and could
negatively affect Great Plains Energy’s and KCP&L’s results of operations,
financial position and cash flows.




As
a service provider to GMO, KCP&L may have exposure to GMO’s financial
performance and operations.


GMO has
no employees of its own.  KCP&L employees operate and manage GMO’s
properties, and KCP&L charges GMO for the cost of these
services.  These arrangements may pose risks to KCP&L, including
possible claims arising from actions of KCP&L employees in operating GMO’s
properties and providing other services to GMO.  KCP&L’s claims
for reimbursement for services provided to GMO are unsecured and rank equally
with other unsecured obligations of GMO.  KCP&L’s ability to be
reimbursed for the costs incurred for the benefit of GMO depends on the
financial ability of GMO to make such payments.




The
Company is subject to current and potential environmental laws and the
incurrence of environmental liabilities, any or all of which may adversely
affect the Company’s business and financial results.


The
Company is subject to regulation by federal, state and local authorities with
regard to air quality and other environmental matters, primarily through
KCP&L and GMO’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


95


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’s and KCP&L’s results of operations, financial position and cash
flows.




There is
also a risk of new environmental laws and regulations, and judicial
interpretations of environmental laws and regulations, affecting KCP&L and
GMO’s operations.  In particular, various stakeholders, including
legislators, regulators, shareholders and non-governmental organizations, as
well as utilities and other companies in many business sectors, are considering
ways to address climate change.  These include regulation of carbon
dioxide and other greenhouse gas emissions and efforts to encourage or mandate
the use of renewable resources, energy efficiency and demand response
management.  Federal and/or state legislation or regulation to reduce
greenhouse gas emissions may be enacted in the near future.  The
Kansas Department of Health and Environment has indicated that it intends to
engage industries and stakeholders to establish goals for reducing CO2 emissions
and strategies to achieve those goals.  KCP&L’s current generation
capacity is primarily coal-fired, and is estimated to produce about one ton of
CO2per MWh, or approximately 17 million tons per year.  GMO’s
current generation capacity also is primarily coal-fired, and is estimated to
produce approximately 6 million tons of CO2per
year.  Efforts to reduce greenhouse gas emissions may cause KCP&L
and GMO to incur material costs to reduce the greenhouse gas emissions from
their operations (through additional environmental control equipment, retiring
and replacing existing generation, or selecting more costly generation
alternatives), procure emission allowance credits, or incur taxes, fees or other
governmental impositions on account of such emissions.  Rules
governing emissions of mercury, nitrous oxides and sulfur dioxides are also in a
state of flux.  Rules issued by the Environmental Protection Agency
(EPA) regarding these emissions were reversed by the courts, and it is unclear
what standards will be imposed in the future, or when KCP&L and GMO may have
to comply with any new standards.  KCP&L’s and GMO’s projected
capital expenditures for environmental compliance are subject to significant
uncertainties, including the timing of implementation of new or modified
environmental requirements, the emissions limits imposed by these requirements
and the types and costs of the compliance alternatives selected by KCP&L and
GMO.  As a result, costs to comply with environmental requirements
cannot be estimated with certainty, and actual costs could be significantly
different than the projections.  Other new environmental laws and
regulations affecting KCP&L and GMO’s operations may be adopted, and new
interpretations of existing laws and regulations could be adopted or become
applicable to KCP&L and GMO or their facilities, any of which may adversely
affect the Company’s business and substantially increase its environmental
expenditures in the future.




New
facilities, or modifications of existing facilities, may require new
environmental permits or amendments to existing permits.  Delays in
the environmental permitting process, denials of permit applications, conditions
imposed in permits and the associated uncertainty may materially affect the cost
and timing of the environmental retrofit projects included in the Comprehensive
Energy Plan, among other projects, and thus materially affect the Company’s
results of operations, financial position and cash flows.




Under
current law, KCP&L and GMO are also generally responsible for any on-site
liabilities associated with the environmental condition of their facilities,
including those that they have previously owned or operated, regardless of
whether the liabilities arose before, during or after the time they owned or
operated the facilities.  KCP&L and GMO may not be able to recover
all of their costs for environmental expenditures through rates in the
future.  The incurrence of material environmental costs or
liabilities, without related rate recovery, could have a material adverse effect
on KCP&L or Great Plains Energy’s results of operations, financial position
and cash flows.  See the notes to the consolidated financial
statements for additional information regarding environmental
matters.




The
Federal Clean Air Act requires companies to obtain permits and, if necessary,
install control equipment to reduce emissions when making a major modification
or a change in operation of an existing facility if either is expected to cause
a significant net increase in regulated emissions.  The Sierra Club
and Concerned Citizens of Platte County have claimed that modifications were
made to Iatan No. 1 in violation of Clean Air Act


96


regulations.  Although
KCP&L has entered into a Collaboration Agreement with those parties that
provides, among other things, for the release of such claims, the Collaboration
Agreement does not bind any other entity.  KCP&L is aware of subpoenas
issued by a Federal grand jury to certain third parties seeking documents
relating to capital projects at Iatan Unit No. 1.  In May 2008,
KCP&L received a subpoena requiring the production of
documents.  KCP&L has produced, and continues to produce,
documents in response to the subpoena.  KCP&L believes that it is
in compliance in all material respects with all relevant laws and regulations;
however, the ultimate outcome of these grand jury activities cannot presently be
determined, nor can the liability that could potentially result from a negative
outcome presently be reasonably estimated.  There is no assurance
these costs, if any, could be recovered in rates.





The
inability of Great Plains Energy’s subsidiaries to provide sufficient dividends
to allow Great Plains Energy to pay dividends to its shareholders and meet its
financial obligations would have an adverse effect.


Great
Plains Energy is a holding company with no significant operations of its
own.  The primary source of funds for payment of dividends to its
shareholders and its financial obligations is dividends paid to it by its
subsidiaries, particularly KCP&L and GMO.  KCP&L has committed
to its state regulatory commissions to maintain a 35% equity to total
capitalization ratio, and KCP&L and GMO have similar covenants in their
revolving credit facilities.  The ability of Great Plains Energy’s
subsidiaries to pay dividends or make other distributions, and accordingly Great
Plains Energy’s ability to pay dividends on its common stock and meet its
financial obligations, principally depends on the actual and projected earnings
and cash flow, capital requirements and general financial position of its
subsidiaries, as well as on regulatory factors, financial covenants, general
business conditions and other matters.




Changes
in customer demand, due to sustained financial market disruptions or downturns
or sluggishness in the economy, and weather conditions may adversely affect
KCP&L’s and Great Plains Energy’s business and financial
results.


The
results of operations, financial position and cash flows of KCP&L and Great
Plains Energy can be materially affected by changes in weather and customer
demand.  KCP&L and GMO estimate customer demand based on
historical trends, to procure fuel and purchased power.  Sustained
downturns or sluggishness in the economy generally affects the markets in which
KCP&L and GMO operate.  If the current financial market
disruptions or economic downturn continue or worsen, overall electricity sales
may decline and/or bad debt expense may increase, which could materially affect
KCP&L’s and Great Plains Energy’s results of operations, financial position
and cash flows.




Weather
conditions directly influence the demand for electricity and natural gas and
affect the price of energy commodities.  KCP&L and GMO are
significantly impacted by seasonality, with approximately one-third of their
retail electric revenues recorded in the third quarter.  In addition,
severe weather, including but not limited to tornados, snow, rain and ice storms
can be destructive causing outages and property damage that can potentially
result in additional expenses and lower revenues.  Some of KCP&L’s
and GMO’s stations use water from the Missouri River for cooling
purposes.  Low water and flow levels, which have been experienced in
recent years, can increase maintenance costs at these stations and, if these
levels were to get low enough, could cause modifications to plant
operations.




The
use of derivative contracts in the normal course of business could result in
financial losses that could negatively impact Great Plains Energy’s and
KCP&L’s results of operations, financial position and cash
flows.


Great
Plains Energy, KCP&L and GMO use derivative instruments, such as swaps,
options, futures and forwards, to manage commodity and financial
risks.  Financial losses could be recognized as a result of volatility
in the market values of these contracts, if a counterparty fails to perform, or
if the underlying transactions which the derivative instruments are intended to
hedge fail to materialize.  In the absence of actively quoted market
prices and pricing information from external sources, the valuation of these
financial instruments can involve management’s judgment or use of
estimates.  As a result, changes in the underlying assumptions or use
of alternative valuation methods could affect the reported fair value of these
contracts.


97


Changes
in commodity prices could have an adverse effect on Great Plains Energy’s and
KCP&L’s business and financial condition.


KCP&L
and GMO engage in the wholesale and retail marketing of electricity and are
exposed to risks associated with the price of electricity.  KCP&L
and GMO generate, purchase and sell electricity in the retail and wholesale
markets.  To the extent that exposure to the price of electricity is
not hedged, Great Plains Energy and KCP&L could experience losses associated
with the changing market price for electricity.




Increases
in fuel and transportation prices could have an adverse impact on KCP&L and
Great Plains Energy’s costs.


KCP&L’s
Kansas retail rates contain an energy cost adjustment (ECA)
mechanism.  KCP&L’s Missouri retail rates do not contain a similar
provision.  KCP&L’s Missouri retail rates reflect a set level of
non-firm wholesale electric sales margin.  KCP&L will not recover
any shortfall in non-firm wholesale electric sales margin, but any amount above
the level reflected in Missouri retail rates will be returned to retail
customers in a future rate case.  GMO’s electric rates contain a fuel
adjustment clause mechanism under which 95% of the variance in fuel costs from
the amount provided in base rates is passed along to GMO’s
customers.  GMO’s steam rates contain a quarterly cost adjustment that
allows for the recovery of or payment for 80% of the difference between actual
fuel costs and a base fuel cost amount.  This exposes KCP&L and
GMO to risk from changes in the market prices of coal, natural gas, nuclear fuel
and purchased power.  Changes in KCP&L’s or GMO’s fuel mix due to
electricity demand, plant availability, transportation issues, fuel prices, fuel
availability and other factors can also adversely affect KCP&L’s or GMO’s
fuel and purchased power costs.




KCP&L
and GMO do not hedge their respective entire exposure from fuel and
transportation price volatility.  Forward prices for coal have
increased, principally due to international demand, and management expects
prices will continue to increase.  Management also expects cost of
nuclear fuel to increase significantly from 2009 through
2018.  Consequently, KCP&L’s and Great Plains Energy’s results of
operations, financial position and cash flows may be materially impacted by
changes in these prices until increased costs are recovered in Missouri retail
rates.




Wholesale
electricity prices affect costs and revenues, creating earnings
volatility.


The
levels of KCP&L and GMO wholesale sales depend on the wholesale market
price, transmission availability and the availability of generation for
wholesale sales, among other factors.  A substantial portion of
wholesale sales are made in the spot market, and thus KCP&L and GMO have
immediate exposure to wholesale price changes.  KCP&L and GMO are
also exposed to price risk because at times they purchase power to meet
customers’ needs.  The cost of these purchases may be affected by the
timing of customer demand and/or unavailability of KCP&L and GMO’s
lower-priced generating units.  Wholesale power prices can be volatile
and generally increase in times of high regional demand and high natural gas
prices.  While an allocated portion of wholesale purchases and sales
are reflected in KCP&L’s Kansas ECA, KCP&L’s Missouri rates are set on
an estimated amount of wholesale sales and purchases.  KCP&L will
not recover any shortfall in non-firm wholesale electric sales margin, but any
amount above the level reflected in Missouri retail rates will be returned to
retail customers in a future rate case.  GMO’s Missouri fuel
adjustment clause passes along to its customers only 95% of the variance in
purchased power costs from the amount provided in base
rates.  Declines in wholesale market price or availability of
generation or transmission constraints in the wholesale markets could reduce
KCP&L’s and GMO's wholesale sales.  Increases in the amounts or
prices of power purchased by KCP&L or GMO to serve their retail customers
could increase costs over the levels reflected in their rates.  These
events could adversely affect KCP&L and Great Plains Energy’s results of
operations, financial position and cash flows.




Operations
risks may adversely affect the Company’s business and financial
results.


The
operation of KCP&L’s and GMO’s electric generation, transmission and
distribution systems involves many risks, including breakdown or failure of
equipment, processes and personnel performance; operating limitations that may
be imposed by equipment conditions, environmental or other regulatory
requirements; fuel supply or


98


fuel
transportation reductions or interruptions; transmission scheduling constraints;
and catastrophic events such as fires, explosions, severe weather or other
similar occurrences.  An equipment outage or constraint
can:




·
            in
      the case of generation equipment, directly affect operating costs,
      increase purchased power needs and costs and reduce wholesale sales
      opportunities;


·
            in
      the case of transmission equipment, affect operating costs, require
      changes in the source of generation and affect wholesale sales
      opportunities; and


·
            in
      the case of distribution systems, affect revenues and operating costs and
      the companies’ ability to meet regulatory service metrics and customer
      expectations.





With the
exception of Hawthorn No. 5, which was substantially rebuilt in 2001, all of
KCP&L’s coal-fired generating units and its nuclear generating unit were
constructed prior to 1986.  All of GMO’s coal-fired generating units
were constructed prior to 1984.  The age of these generating units
increases the risk of unplanned outages and higher maintenance
expense.  Training, preventive maintenance and other programs have
been implemented, but there is no assurance that these programs will prevent or
minimize future breakdowns or failures of KCP&L or GMO generation
facilities.




KCP&L
and GMO currently have general liability and property insurance in place to
cover its facilities in amounts that management considers
appropriate.  These policies, however, do not cover KCP&L’s or
GMO’s transmission or distribution systems, and the cost of repairing damage to
these systems may adversely affect Great Plains Energy’s or KCP&L’s results
of operations, financial position and cash flows.  Such policies are
subject to certain limits and deductibles and generally do not include business
interruption coverage.  Insurance coverage may not be available in the
future at current costs or on commercially reasonable terms, and the insurance
proceeds received for any loss of, or any damage to, any of KCP&L or GMO’s
facilities may not be sufficient to restore the loss or damage.




These and
other operating events may reduce KCP&L’s and Great Plains Energy’s
revenues, increase their costs, or both, and may materially affect KCP&L’s
and Great Plains Energy’s results of operations, financial position and cash
flows.




The
cost and schedule of construction projects may materially change.


KCP&L’s
Comprehensive Energy Plan includes the construction of Iatan No. 2, an estimated
850 MW coal-fired generating plant, and environmental retrofits at its existing
Iatan No. 1 and LaCygne No. 1 coal-fired units.  GMO also has ownership
interests in the Iatan units, and its acquisition by Great Plains Energy exposes
the Company to greater risks associated with the ongoing Iatan construction
projects.  There are risks that actual costs may exceed current
estimates, delays may occur in obtaining permits and materials, suppliers and
contractors may not perform as required under their contracts, there may be
inadequate availability or increased cost of qualified craft labor, the scope
and timing of projects may change, and other events beyond KCP&L’s control
may occur that may materially affect the schedule, budget and performance of
these projects.




The
construction projects contemplated in the Comprehensive Energy Plan rely upon
the supply of a significant percentage of materials from overseas
sources.  This global procurement subjects the delivery of procured
material to issues beyond what would be expected if such material were supplied
from sources within the United States.  These risks include, but are
not limited to, delays in clearing customs, ocean transportation, currency
exchange rates and potential civil unrest in sourcing countries, among
others.




The
demand for environmental projects, similar to those in the Comprehensive Energy
Plan, has increased substantially with many utilities in the United States
starting similar projects to address changing environmental
regulations.  This demand has constrained labor and material resources
for such projects, and there is a risk that such constraints may
increase.


99


These and
other risks could materially increase the estimated costs of these construction
projects, delay the in-service dates of these projects, adversely affect the
performance of the projects, and/or require KCP&L or GMO to purchase
additional electricity to supply their respective retail customers until the
projects are completed.  KCP&L and GMO are not permitted to start
recovering the costs of these projects until they are completed and put into
service.  Thus, these risks may materially affect KCP&L’s and
Great Plains Energy’s results of operations, financial position and cash
flows.




KCP&L’s
and GMO’s businesses are capital intensive, and require significant capital
investments to maintain existing facilities and add new facilities in addition
to the Comprehensive Energy Plan projects.  The risks associated with
the Comprehensive Energy Plan projects apply as well to all KCP&L and GMO
construction activities.




Failure
of one or more generation plant co-owners to pay their share of construction,
operations and maintenance costs could increase KCP&L’s costs and capital
requirements.


KCP&L
owns 47% of Wolf Creek, 50% of LaCygne Station, 70% of Iatan No. 1 and 55% of
Iatan No. 2.  GMO owns 18% of both Iatan units and 8% of Jeffrey
Energy Center.  The remaining portions of these facilities are owned
by other utilities that are contractually obligated to pay their proportionate
share of capital and other costs and, in the case of Iatan No. 2, construction
costs.




While the
ownership agreements provide that a defaulting co-owner’s share of the
electricity generated can be sold by the non-defaulting co-owners, there is no
assurance that the revenues received will recover the increased costs borne by
the non-defaulting co-owners.  The Iatan No. 2 co-owners have provided
financial assurances related to their respective construction cost obligations,
but there is a risk that such assurances may not be sufficient in the event of a
co-owner default.  During the construction period, the Iatan No. 2
agreements provide for re-allocations of part or all of a defaulting co-owner’s
share of the facility to the non-defaulting owners, which would increase the
capital requirements, operations and maintenance costs of the non-defaulting
owners.  Occurrence of these or other events could materially increase
KCP&L and Great Plains Energy’s costs and capital requirements.




An
aging workforce and increasing demand for skilled craft labor poses operational
and planning challenges.


Through
2011, approximately 22% of KCP&L employees (who manage both KCP&L and
GMO operations) will be eligible to retire with full pension benefits.
 This is a general industry issue, which has increased the demand for and
cost of skilled craft labor for both companies and
contractors.  KCP&L and GMO use contractors for a substantial
portion of their construction and maintenance work.  Failure to hire
and adequately train replacement employees, including the transfer of
significant internal historical knowledge and expertise to the new employees, or
the future availability and cost of contract labor may adversely affect the
ability to manage and operate KCP&L’s and Great Plains Energy’s
businesses.




Market
performance, increased retirements and changes in retirement plan regulations
could significantly impact retirement plan funding requirements and associated
cash needs and expenses.


Substantially
all of KCP&L’s employees participate in defined benefit and post-retirement
plans.  If employees retire when they become eligible for retirement
through 2011, or if these plans experience adverse market returns on investments
(as has been the case during the 2008 period), or if interest rates materially
fall, KCP&L contributions to the plans could rise substantially over
historical levels.  In addition, assumptions related to future costs,
returns on investments, interest rates and other actuarial assumptions,
including projected retirements, have a significant impact on KCP&L’s
results of operations, financial position and cash flows.  GMO’s
former employees in its Missouri utility operations and certain other operations
have accrued benefits in GMO’s defined benefit and post-retirement plans, and
GMO faces risks and uncertainties regarding these accrued benefits similar to
those of KCP&L.


100


The
Pension Protection Act of 2006 alters the manner in which pension plan assets
and liabilities are valued for purposes of calculating required pension
contributions and changes the timing of required contributions to underfunded
plans.  The funding rules, which became effective in 2008, could
significantly affect the Company’s funding requirements.  In addition,
the Financial Accounting Standards Board (FASB) has a project to reconsider the
accounting for expense recognition related to pensions and other post-retirement
benefits, which may result in accelerated expense.




KCP&L
is exposed to risks associated with the ownership and operation of a nuclear
generating unit, which could result in an adverse effect on the Company’s and
KCP&L’s business and financial results.


KCP&L
owns 47% (548 MW) of Wolf Creek.  The Nuclear Regulatory Commission
(NRC) has broad authority under federal law to impose licensing and
safety-related requirements for the operation of nuclear generation facilities,
including Wolf Creek.  In the event of non-compliance, the NRC has the
authority to impose fines, shut down the facilities, or both, depending upon its
assessment of the severity of the situation, until compliance is
achieved.  Any revised safety requirements promulgated by the NRC
could result in substantial capital expenditures at Wolf Creek.




Wolf
Creek has the lowest fuel cost per MWh of any of KCP&L's generating
units.  Although not expected, an extended outage of Wolf Creek,
whether resulting from NRC action, an incident at the plant or otherwise, could
have a substantial adverse effect on KCP&L's results of operations,
financial position and cash flows in the event KCP&L incurs higher
replacement power and other costs that are not recovered through
rates.  If a long-term outage occurred, the state regulatory
commissions could reduce rates by excluding the Wolf Creek investment from rate
base.




Ownership
and operation of a nuclear generating unit exposes KCP&L to risks regarding
decommissioning costs at the end of the unit's life.  KCP&L
contributes annually to a tax-qualified trust fund to be used to decommission
Wolf Creek.  The funding level assumes a projected level of return on
trust assets.  If the actual return on trust assets is below the
anticipated level, KCP&L could be responsible for the balance of funds
required; however, should this happen, management believes a rate increase would
be allowed ensuring full recovery of decommissioning costs over the remaining
life of the unit.




KCP&L
is also exposed to other risks associated with the ownership and operation of a
nuclear generating unit, including, but not limited to, potential liability
associated with the potential harmful effects on the environment and human
health resulting from the operation of a nuclear generating unit and the
storage, handling and disposal of radioactive materials, and to potential
retrospective assessments and losses in excess of insurance
coverage.




Participation
in regional transmission organizations (RTOs) could increase costs, reduce
revenues, and reduce KCP&L’s and GMO’s control over their transmission
assets.


Functional
control of the KCP&L transmission system was transferred to the Southwest
Power Pool, Inc. (SPP) during the third quarter of
2006.  KCP&L may be required to incur expenses or expand its
transmission system, for which it would seek recovery for through rates,
according to decisions made by the SPP rather than according to its internal
planning process.  In addition, there is uncertainty regarding the
impact of ongoing RTO developments at FERC.




GMO’s
application to join the MISO RTO has been denied by the MPSC.  It
expects to request MPSC authorization to transfer functional control of its
transmission system to the SPP, but there is no assurance regarding the outcome
of this request.  GMO will face risks and uncertainties regarding its
participation in an RTO similar to those that KCP&L faces.


101


The
outcome of legal proceedings cannot be predicted.  An adverse finding
could have a material adverse effect on Great Plains Energy’s and KCP&L’s
financial condition.


Great
Plains Energy, KCP&L and GMO are party to various material litigation and
regulatory matters arising out of their business operations.  The
ultimate outcome of these matters cannot presently be determined, nor, in many
cases, can the liability that could potentially result from a negative outcome
in each case presently be reasonably estimated.  The liability that
Great Plains Energy, KCP&L and GMO may ultimately incur with respect to any
of these cases in the event of a negative outcome may be in excess of amounts
currently reserved and insured against with respect to such matters and, as a
result, these matters may have a material adverse effect on Great Plains
Energy’s and KCP&L’s results of operations, financial position and cash
flows.




ITEM 2.  UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




None.




ITEM
3.  DEFAULTS UPON SENIOR SECURITIES




None.




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




None.




ITEM
5.  OTHER INFORMATION




None.


102


ITEM
6.  EXHIBITS




Great
Plains Energy Documents




Exhibit
              Number
            Notes
            Description of
      Document4.1.1
            1,2
            Bond
      Indenture, Mortgage, Deed of Trust, Security Agreement and Fixture Filing,
      dated as of August 31, 2005, between Aquila, Inc. and Union Bank of
      California, N.A., as trustee and securities intermediary
      (Exhibit 10.2 to Form 8-K filed by Aquila, Inc. on
      September 6, 2005).4.1.2
            1,2
            First
      Supplemental Bond Indenture, Mortgage, Deed of Trust, Security Agreement
      and Fixture Filing, dated as of August 31, 2005, between the Company
      and Union Bank of California, N.A., as trustee and securities
      intermediary (Exhibit 10.3 to Form 8-K filed by Aquila, Inc. on
      September 6, 2005).4.1.3
            1
            Indenture,
      dated as of August 24, 2001, between Aquila, Inc. and BankOne Trust
      Company, N.A., as Trustee (Exhibit 4(d) to Registration Statement on
      Form S-3 (File No. 333-68400) filed by Aquila, Inc. on
      August 27, 2001).4.1.4
            1
            Second
      Supplemental Indenture, dated as of July 3, 2002, between Aquila, Inc. and
      BankOne Trust Company, N.A., as Trustee related to 11.875% Senior Notes
      due July 1, 2012. (Exhibit 4(c) to Form S-4 (File No. 333-100204) filed by
      Aquila, Inc. on September 30, 2002).10.1.1
            1
            Financing
      Agreement dated as of April 22, 2005, among Aquila, Inc., the lenders
      from time to time party thereto, and Union Bank of California, N.A.,
      as agent (Exhibit 10.1 to Form 8-K filed by Aquila, Inc. on
      April 26, 2005).


10.1.2
            1
            Amendment
      No. 2 to Financing Agreement dated December 9, 2006, by and
      between Aquila, Inc., the lenders from time to time party thereto, and
      Union Bank of California, N.A., as agent (Exhibit 10.1 to
      Form 8-K filed by Aquila, Inc. on December 11,
      2006).10.1.3
            
            Amendment
      to Financing Agreement dated June 2, 2008, by and among Aquila, Inc., the
      lenders from time to time party thereto, and Union Bank of California,
      N.A., as agent.10.1.4
            1
            Guaranty
      dated as of July 14, 2008, between Great Plains Energy Incorporated and
      Union Bank of California, N.A., related to Financing Agreement dated as of
      April 22, 2005, as amended, among Aquila, Inc., the lenders from time to
      time party thereto, and Union Bank of California, N.A. as Agent. (Exhibit
      10.1 to Form 8-K filed July 18, 2008).10.1.5
            1,2
            $300
      Million Credit Agreement, dated as of August 31, 2005, among Aquila,
      Inc., the banks and other lenders party thereto, and Union Bank of
      California, N.A., as issuing bank, administrative agent, and sole
      lead arranger (Exhibit 10.1 to Form 8-K filed by Aquila, Inc. on
      September 6, 2005).10.1.6
            2
            Amendment
      to $300 Million Credit Agreement, dated June 2, 2008, among Aquila, Inc.,
      the banks and other lenders party thereto, and Union Bank of
      California, N.A., as issuing bank, administrative agent, and sole
      lead arranger.


103


Exhibit
              Number
            Notes
            Description
      of Document10.1.7
            1,2
            Guaranty
      dated as of July 14, 2008, between Great Plains Energy Incorporated and
      Union Bank of California, N.A., related to Credit Agreement dated as of
      August 31, 2005, as amended, among Aquila, Inc., the banks named therein,
      and Union Bank of California, N.A., as Administrative Agent. (Exhibit 10.2
      to Form 8-K filed July 18, 2008).10.1.8
            1
            Guaranty
      dated as of July 15, 2008, issued by Great Plains Energy Incorporated in
      favor of Union Bank of California, N.A., as successor trustee, and the
      holders of the Aquila, Inc., 11.875% Senior Notes due July 1, 2012.
      (Exhibit 10.3 to Form 8-K filed July 18, 2008).10.1.9
            1
            Guaranty
      dated as of July 15, 2008, issued by Great Plains Energy Incorporated in
      favor of Union Bank of California, N.A., as successor trustee, and the
      holders of the Aquila, Inc., 7.75% Senior Notes due June 15, 2011.
      (Exhibit 10.4 to Form 8-K filed July 18, 2008).10.1.10
            1
            Guaranty
      dated as of July 15, 2008, issued by Great Plains Energy Incorporated in
      favor of Union Bank of California, N.A., as successor trustee, and the
      holders of the Aquila, Inc., 7.95% Senior Notes due February 1, 2011.
      (Exhibit 10.5 to Form 8-K filed July 18, 2008).10.1.11
            1
            Guaranty
      dated as of July 15, 2008, issued by Great Plains Energy Incorporated in
      favor of Union Bank of California, N.A., as successor trustee, and the
      holders of the Aquila, Inc., 8.27% Senior Notes due November 15, 2021.
      (Exhibit 10.6 to Form 8-K filed July 18,
2008).


10.1.12
            1
            Guaranty
      dated as of July 15, 2008, issued by Great Plains Energy Incorporated in
      favor of Union Bank of California, N.A., as successor trustee, and the
      holders of the Aquila, Inc., 7.625% Senior Notes due November 15, 2009.
      (Exhibit 10.7 to Form 8-K filed July 18, 2008).10.1.13
            1,3
            $110
      million Revolving Credit Agreement among Aquila, Inc., the lenders and
      Credit Suisse First Boston dated September 20, 2004
      (Exhibit 10.1 to Form 8-K filed by Aquila, Inc. on
      September 21, 2004).10.1.14
            1,4
            $180
      Million Credit Agreement dated as of April 13, 2005, among Aquila,
      Inc., the lenders, Citicorp USA, Inc., as issuing bank and
      administrative agent, and Union Bank of California, N.A., as paying
      agent (Exhibit 10.1 to Form 8-K filed by Aquila, Inc. on
      April 18, 2005).10.1.15
            1
            Credit
      Agreement dated as of September 23, 2008, among Aquila, Inc., as the
      Borrower, Great Plains Energy Incorporated, as the Guarantor, certain
      lenders, Bank of America, N.A., as Administrative Agent, Union Bank of
      California, N.A., as Syndication Agent and BNP Paribas, JPMorgan Chase
      Bank, N.A. and The Royal Bank of Scotland plc as Co-Documentation Agents,
      Banc of America Securities LLC and Union Bank of California, N.A., as
      Joint Lead Arrangers and Joint Book Managers. (Exhibit 10.1 to Form 8-K
      filed on September 23, 2008).10.1.16
            1,5
            Letter
      regarding enhanced supplemental retirement and severance benefit for
      William H. Downey, dated August 5, 2008 (Exhibit 10.1.23 to Form 10-Q for
      the quarter ended June 30, 2008).


104


Exhibit
              Number
            Notes
            Description of
      Document10.1.17
            1,5
            Aquila, Inc.
      2002 Omnibus Incentive Compensation Plan (Exhibit 10.3 to
      Form 10-Q for the quarter ended September 30, 2002 filed by
      Aquila, Inc.).12.1
            
            Computation
      of Ratio of Earnings to Fixed Charges.31.1.a
            
            Rule
      13a-14(a)/15d-14(a) Certifications of Michael J.
  Chesser.31.1.b
            
            Rule
      13a-14(a)/15d-14(a) Certifications of Terry Bassham.32.1
            
            Section
      1350 Certifications.







Note
1:  Filed with the SEC as exhibits to prior SEC filings and are
incorporated herein by reference and made a part hereof.  The SEC
filing and the exhibit number of the documents so filed, and incorporated herein
by reference, are stated in parenthesis in the description of such
exhibit.




Note
2:  The Credit Agreement was terminated as of September 16, 2008, as
reported on Form 8-K filed on September 17, 2008.




Note
3:  The Credit Agreement was terminated as of July 17, 2008, as
reported by Aquila, Inc., on Form 8-K filed on July 14, 2008.




Note
4:  The Credit Agreement was terminated as of September 22, 2008, as
reported on Form 8-K filed on September 23, 2008.




Note
5:  Indicates management contract or compensatory plan or
arrangement.




Copies of
any of the exhibits filed with the SEC in connection with this document may be
obtained from Great Plains Energy upon written request.




Great
Plains Energy agrees to furnish to the SEC upon request any instrument with
respect to long-term debt as to which the total amount of securities authorized
does not exceed 10% of total assets of Great Plains Energy and its subsidiaries
on a consolidated basis.


105


KCP&L
Documents




Exhibit
              Number
            Notes
            Description of
      Document10.2.1
            1
            Amendment
      No. 2 dated as of July 11, 2008, among Kansas City Power & Light
      Receivables Company, Kansas City Power & Light Company, The Bank of
      Tokyo-Mitsubishi UFJ, Ltd., New York Branch and Victory Receivables
      Corporation to the Receivables Sale Agreement dated as of July 1, 2005.
      (Exhibit 10.2.1 to Form 10-Q for the quarter ended June 30,
      2008).10.2.2
            
            Joint
      Operating Agreement between Kansas City Power & Light Company and
      Aquila, Inc., dated as of October 10, 2008.12.2
            
            Computation
      of Ratio of Earnings to Fixed Charges.31.2.a
            
            Rule
      13a-14(a)/15d-14(a) Certifications of Michael J.
  Chesser.31.2.b
            
            Rule
      13a-14(a)/15d-14(a) Certifications of Terry Bassham.32.2
            
            Section
      1350 Certifications.







Note
1:Filed with the
SEC as exhibits to prior SEC filings and are incorporated herein by reference
and made a part hereof.  The SEC filings and the exhibit number of the
documents so filed, and incorporated herein by reference, are stated in
parenthesis in the description of such exhibit.




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




KCP&L
agrees to furnish to the SEC upon request any instrument with respect to
long-term debt as to which the total amount of securities authorized does not
exceed 10% of total assets of KCP&L and its subsidiaries on a consolidated
basis.


106


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 INCORPORATEDDated:  November
      7, 2008
            By:  /s/Michael J.
      Chesser(Michael
      J. Chesser)(Chief
      Executive Officer)Dated:  November
      7, 2008
            By:  /s/Lori A.
      Wright(Lori
      A. Wright)(Principal
      Accounting Officer)










KANSAS
      CITY POWER & LIGHT COMPANYDated:  November
      7, 2008
            By:  /s/ Michael J.
      Chesser(Michael
      J. Chesser)(Chief
      Executive Officer)Dated:  November
      7, 2008
            By:  /s/Lori A.
      Wright(Lori
      A. Wright)(Principal
      Accounting Officer)

















107