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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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x    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934



For
the quarterly period ended September 30, 2003



OR



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



For the transition period from
 to



Commission File Number 1-7324



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| |  | Kansas Gas and Electric Company |  | 
| |  | ------------------------------- |  | 

(Exact name of registrant as specified in its charter)



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



P.O. BOX 208

Wichita, Kansas 67201

(316) 261-6611

|                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------
|(Address, including Zip code and telephone number, including area code, of registrants principal executive offices)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act.    Yes  x    No ̈



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



|Common Stock, No Par Value |  | 1,000 Shares                      
|-------------------------- |  | ----------------------------------
|(Class)                    |  | (Outstanding at November 10, 2003)



Registrant meets the
conditions of General Instruction H(1)(a) and (b) to Form 10-Q for certain wholly-owned subsidiaries and is therefore filing this form with a reduced disclosure format.



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                       |  | Page
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I. Financial Information |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  |     
|                              |  |                                                                                      
|                              |  | Consolidated Balance Sheets                                                           |  | 4   
|                              |  |                                                                                      
|                              |  | Consolidated Statements of Income and Comprehensive Income                            |  | 5-6 
|                              |  |                                                                                      
|                              |  | Consolidated Statements of Cash Flows                                                 |  | 7   
|                              |  |                                                                                      
|                              |  | Notes to Consolidated Financial Statements                                            |  | 8   
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14  
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 23  
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 23  
|                              | 
|PART II. Other Information    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 24  
|                              |  |                                                                                      
|Item 2.                       |  | Changes in Securities and Use of Proceeds                                             |  | 24  
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 24  
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 24  
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 24  
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                      |  | 24  
|                              | 
|Signature                     |  | 25                                                                                   



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FORWARD-LOOKING STATEMENTS



Certain matters discussed in this Form 10-Q are forward-looking statements. The Private Securities Litigation
Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like we believe, anticipate, target, expect, pro
forma, estimate, intend and words of similar meaning. Forward-looking statements describe our future plans, objectives, expectations or goals. Such statements address future events and conditions concerning:



| |  | capital expenditures,
| | - | ---------------------



| |  | earnings,
| | - | ---------



| |  | liquidity and capital resources,
| | - | --------------------------------



| |  | litigation,
| | - | -----------



| |  | accounting matters,
| | - | -------------------



| |  | possible corporate restructurings, acquisitions and dispositions,
| | - | -----------------------------------------------------------------



| |  | the sale of assets proposed in Westar Energy, Inc.s Debt Reduction and Restructuring Plan as approved by the Kansas Corporation Commission on July 25, 2003,
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | compliance with debt and other restrictive covenants,
| | - | -----------------------------------------------------



| |  | interest and dividends,
| | - | -----------------------



| |  | environmental matters,
| | - | ----------------------



| |  | nuclear operations, and
| | - | -----------------------



| |  | the overall economy of our service area.
| | - | ----------------------------------------



What happens in each case could vary materially from what we expect because of such things as:



| |  | electric utility deregulation or re-regulation,
| | - | -----------------------------------------------



| |  | regulated and competitive markets,
| | - | ----------------------------------



| |  | ongoing municipal, state and federal activities,
| | - | ------------------------------------------------



| |  | economic conditions,
| | - | --------------------



| |  | changes in accounting requirements and other accounting matters,
| | - | ----------------------------------------------------------------



| |  | changing weather,
| | - | -----------------



| |  | rate and other regulatory matters,
| | - | ----------------------------------



| |  | the impact of changes and downturns in the energy industry and the market for trading wholesale electricity,
| | - | ------------------------------------------------------------------------------------------------------------



| |  | the sale of Westar Energy, Inc.s interests in ONEOK, Inc.,
| | - | -----------------------------------------------------------



| |  | the proposed sale of Westar Energy, Inc.s interest in Protection One, Inc.,
| | - | ----------------------------------------------------------------------------



| |  | the impact on Westar Energy, Inc. of the federal grand jury subpoena by the United States Attorneys Office requesting certain information from Westar Energy, Inc.,
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the impact on Westar Energy, Inc. of the outcome of the investigation being conducted by the Federal Energy Regulatory Commission regarding power trades with Cleco Corporation and
its affiliates and other power marketing and transmission transactions,
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | political, legislative and regulatory developments,
| | - | ---------------------------------------------------



| |  | regulatory, legislative and judicial actions,
| | - | ---------------------------------------------



| |  | the impact of the purported shareholder and employee class action lawsuits filed against Westar Energy, Inc.,
| | - | -------------------------------------------------------------------------------------------------------------



| |  | the impact of changes in interest rates,
| | - | ----------------------------------------



| |  | homeland security considerations,
| | - | ---------------------------------



| |  | coal, natural gas and oil prices, and
| | - | -------------------------------------



| |  | other circumstances affecting anticipated operations, sales and costs.
| | - | ----------------------------------------------------------------------



These lists are not all-inclusive because it is not possible to predict all factors. This report should be read in its entirety and in conjunction with
our Annual Report on Form 10-K for the year ended December 31, 2002. No one section of the report deals with all aspects of the subject matter and additional information on some matters that could impact our operations and financial results may be
included in our Annual Report on Form 10-K for the year ended December 31, 2002. Any forward-looking statement speaks only as of the date such statement was made, and we are not obligated to update any forward-looking statement to reflect events or
circumstances after the date on which such statement was made except as required by applicable laws or regulations.



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KANSAS GAS AND ELECTRIC COMPANY



CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)



|                                                                    |  | September 30, 2003 |           |   | December 31, 2002
|------------------------------------------------------------------- |  | ------------------ | --------- | - | -----------------
|ASSETS                                                              |  |                    |           |   |                  
|                                                                    |  |                   
|CURRENT ASSETS:                                                     |  |                    |           |   |                  
|Cash and cash equivalents                                           |  | $                  | 7,948     |   |                  
|Restricted cash                                                     |  |                    | 140,152   |   |                  
|Accounts receivable, net                                            |  |                    | 84,339    |   |                  
|Inventories and supplies                                            |  |                    | 64,530    |   |                  
|Energy trading contracts                                            |  |                    | 12,331    |   |                  
|Prepaid expenses and other                                          |  |                    | 35,741    |   |                  
|                                                                    |  |                    |           |   |                  
|Total Current Assets                                                |  |                    | 345,041   |   |                  
|                                                                    |  |                    |           |   |                  
|PROPERTY, PLANT AND EQUIPMENT, NET                                  |  |                    | 2,365,767 |   |                  
|                                                                    |  |                    |           |   |                  
|OTHER ASSETS:                                                       |  |                    |           |   |                  
|Regulatory assets                                                   |  |                    | 305,605   |   |                  
|Energy trading contracts                                            |  |                    | 476       |   |                  
|Other                                                               |  |                    | 98,148    |   |                  
|                                                                    |  |                    |           |   |                  
|Total Other Assets                                                  |  |                    | 404,229   |   |                  
|                                                                    |  |                    |           |   |                  
|TOTAL ASSETS                                                        |  | $                  | 3,115,037 |   |                  
|                                                                    |  |                    |           |   |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                |  |                    |           |   |                  
|                                                                    |  |                   
|CURRENT LIABILITIES:                                                |  |                    |           |   |                  
|Current maturities of long-term debt                                |  | $                  | 135,000   |   |                  
|Accounts payable                                                    |  |                    | 37,054    |   |                  
|Payable to affiliates                                               |  |                    | 20,642    |   |                  
|Accrued liabilities                                                 |  |                    | 83,402    |   |                  
|Energy trading contracts                                            |  |                    | 8,516     |   |                  
|Deferred tax liability                                              |  |                    | 11,752    |   |                  
|Other                                                               |  |                    | 7,124     |   |                  
|                                                                    |  |                    |           |   |                  
|Total Current Liabilities                                           |  |                    | 303,490   |   |                  
|                                                                    |  |                    |           |   |                  
|LONG-TERM LIABILITIES:                                              |  |                    |           |   |                  
|Long-term debt, net                                                 |  |                    | 549,574   |   |                  
|Deferred income taxes and investment tax credits                    |  |                    | 712,773   |   |                  
|Deferred gain from sale-leaseback                                   |  |                    | 153,767   |   |                  
|Energy trading contracts                                            |  |                    | 604       |   |                  
|Other                                                               |  |                    | 289,425   |   |                  
|                                                                    |  |                    |           |   |                  
|Total Long-Term Liabilities                                         |  |                    | 1,706,143 |   |                  
|                                                                    |  |                    |           |   |                  
|COMMITMENTS AND CONTINGENCIES (Note 5)                              |  |                    |           |   |                  
|                                                                    |  |                   
|SHAREHOLDERS EQUITY:                                               |  |                    |           |   |                  
|Common stock, without par value; authorized and issued 1,000 shares |  |                    | 1,065,634 |   |                  
|Accumulated other comprehensive (loss) income, net                  |  |                    | (479      | ) |                  
|Retained earnings                                                   |  |                    | 40,249    |   |                  
|                                                                    |  |                    |           |   |                  
|Total Shareholders Equity                                          |  |                    | 1,105,404 |   |                  
|                                                                    |  |                    |           |   |                  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                          |  | $                  | 3,115,037 |   |                  
|                                                                    |  |                    |           |   |                  



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



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KANSAS GAS AND ELECTRIC COMPANY



CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)



|                                                                      |  | Three Months EndedSeptember 30, |        
|--------------------------------------------------------------------- |  | ------------------------------- | -------
|                                                                      |  | 2003                            |        
|SALES                                                                 |  | $                               | 207,261
|                                                                      |  |                                
|FUEL AND PURCHASED POWER                                              |  |                                 | 51,498 
|                                                                      |  |                                 |        
|GROSS PROFIT                                                          |  |                                 | 155,763
|                                                                      |  |                                 |        
|OPERATING EXPENSES:                                                   |  |                                 |        
|Operating and maintenance                                             |  |                                 | 56,007 
|Depreciation and amortization                                         |  |                                 | 22,601 
|Selling, general and administrative                                   |  |                                 | 19,086 
|                                                                      |  |                                 |        
|Total Operating Expenses                                              |  |                                 | 97,694 
|                                                                      |  |                                 |        
|INCOME FROM OPERATIONS                                                |  |                                 | 58,069 
|                                                                      |  |                                 |        
|OTHER INCOME (EXPENSES), NET                                          |  |                                 | 667    
|                                                                      |  |                                 |        
|INTEREST EXPENSE:                                                     |  |                                 |        
|Interest expense on long-term debt                                    |  |                                 | 11,028 
|Interest expense on short-term debt and other                         |  |                                 | 8,334  
|                                                                      |  |                                 |        
|Total Interest Expense                                                |  |                                 | 19,362 
|                                                                      |  |                                 |        
|EARNINGS BEFORE INCOME TAXES                                          |  |                                 | 39,374 
|                                                                      |  |                                
|Income tax expense                                                    |  |                                 | 10,451 
|                                                                      |  |                                 |        
|NET INCOME                                                            |  | $                               | 28,923 
|                                                                      |  |                                 |        
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                               |  |                                 |        
|Unrealized holding loss on cash flow hedges arising during the period |  | $                               | (1,261 
|Reclassification adjustment for gain included in net income           |  |                                 | (4,255 
|Income tax benefit (expense)                                          |  |                                 | 2,194  
|                                                                      |  |                                 |        
|Total other comprehensive loss, net of tax                            |  |                                 | (3,322 
|                                                                      |  |                                 |        
|COMPREHENSIVE INCOME                                                  |  | $                               | 25,601 
|                                                                      |  |                                 |        



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



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KANSAS GAS AND ELECTRIC COMPANY



CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)



|                                                                      |  | Nine Months EndedSeptember 30, |        
|--------------------------------------------------------------------- |  | ------------------------------ | -------
|                                                                      |  | 2003                           |        
|SALES                                                                 |  | $                              | 552,096
|                                                                      |  |                               
|FUEL AND PURCHASED POWER                                              |  |                                | 135,615
|                                                                      |  |                                |        
|GROSS PROFIT                                                          |  |                                | 416,481
|                                                                      |  |                                |        
|OPERATING EXPENSES:                                                   |  |                                |        
|Operating and maintenance                                             |  |                                | 167,702
|Depreciation and amortization                                         |  |                                | 67,935 
|Selling, general and administrative                                   |  |                                | 51,423 
|                                                                      |  |                                |        
|Total Operating Expenses                                              |  |                                | 287,060
|                                                                      |  |                                |        
|INCOME FROM OPERATIONS                                                |  |                                | 129,421
|                                                                      |  |                                |        
|OTHER INCOME (EXPENSES), NET                                          |  |                                | (3,262 
|                                                                      |  |                                |        
|INTEREST EXPENSE:                                                     |  |                                |        
|Interest expense on long-term debt                                    |  |                                | 32,987 
|Interest expense on short-term debt and other                         |  |                                | 9,855  
|                                                                      |  |                                |        
|Total Interest Expense                                                |  |                                | 42,842 
|                                                                      |  |                                |        
|EARNINGS BEFORE INCOME TAXES                                          |  |                                | 83,317 
|                                                                      |  |                               
|Income tax expense                                                    |  |                                | 21,386 
|                                                                      |  |                                |        
|NET INCOME                                                            |  | $                              | 61,931 
|                                                                      |  |                                |        
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                               |  |                                |        
|Unrealized holding gain on cash flow hedges arising during the period |  | $                              | 3,512  
|Reclassification adjustment for (gain) loss included in net income    |  |                                | (5,021 
|Income tax benefit (expense)                                          |  |                                | 600    
|                                                                      |  |                                |        
|Total other comprehensive (loss) gain, net of tax                     |  |                                | (909   
|                                                                      |  |                                |        
|COMPREHENSIVE INCOME                                                  |  | $                              | 61,022 
|                                                                      |  |                                |        



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



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KANSAS GAS AND ELECTRIC COMPANY



CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)



|                                                                                  |  | Nine Months Ended September 30, |        
|--------------------------------------------------------------------------------- |  | ------------------------------- | -------
|                                                                                  |  | 2003                            |        
|CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:                                   |  |                                 |        
|Net income                                                                        |  | $                               | 61,931 
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |        
|Depreciation and amortization                                                     |  |                                 | 67,935 
|Amortization of nuclear fuel                                                      |  |                                 | 10,616 
|Amortization of deferred gain from sale-leaseback                                 |  |                                 | (8,871 
|Net deferred taxes                                                                |  |                                 | (2,602 
|Net changes in energy trading assets and liabilities                              |  |                                 | (1,727 
|Loss on sale of property                                                          |  |                                 |       
|Changes in working capital items:                                                 |  |                                 |        
|Restricted cash                                                                   |  |                                 | 5,130  
|Accounts receivable, net                                                          |  |                                 | (13,490
|Inventories and supplies                                                          |  |                                 | 1,025  
|Prepaid expenses and other                                                        |  |                                 | (11,583
|Accounts payable                                                                  |  |                                 | 5,872  
|Accrued and other current liabilities                                             |  |                                 | 17,429 
|Changes in other, assets                                                          |  |                                 | (12,807
|Changes in other, liabilities                                                     |  |                                 | 22,953 
|                                                                                  |  |                                 |        
|Cash flows from operating activities                                              |  |                                 | 141,811
|                                                                                  |  |                                 |        
|CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:                                   |  |                                 |        
|Additions to property, plant and equipment, net                                   |  |                                 | (61,573
|Proceeds from disposition of property                                             |  |                                 |       
|                                                                                  |  |                                 |        
|Cash flows used in investing activities                                           |  |                                 | (61,573
|                                                                                  |  |                                 |        
|CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:                                   |  |                                 |        
|Funds in trust for debt repayment                                                 |  |                                 |       
|Advances from parent company, net                                                 |  |                                 | (3,435 
|Retirements of long-term debt                                                     |  |                                 | (5     
|Dividends to parent company                                                       |  |                                 | (75,000
|                                                                                  |  |                                 |        
|Cash flows used in financing activities                                           |  |                                 | (78,440
|                                                                                  |  |                                 |        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |  |                                 | 1,798  
|                                                                                  |  |                                
|CASH AND CASH EQUIVALENTS:                                                        |  |                                 |        
|Beginning of period                                                               |  |                                 | 6,150  
|                                                                                  |  |                                 |        
|End of period                                                                     |  | $                               | 7,948  
|                                                                                  |  |                                 |        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                                 |        
|CASH PAID FOR:                                                                    |  |                                 |        
|Interest on financing activities, net of amount capitalized                       |  | $                               | 24,047 



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



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KANSAS GAS AND ELECTRIC COMPANY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2003

(Unaudited)



1.
DESCRIPTION OF BUSINESS



Kansas Gas and Electric Company
is a rate-regulated electric utility incorporated in 1990 in the state of Kansas. Unless the context otherwise indicates, all references in this Form 10-Q to the company, KGE, we, us, our
or similar words are to Kansas Gas and Electric Company. We are a wholly owned subsidiary of Westar Energy, Inc. (Westar Energy) and we provide rate-regulated electric service, together with the electric utility operations of Westar Energy, using
the name Westar Energy. We provide electric generation, transmission and distribution services to approximately 302,000 customers in southeastern Kansas, including the Wichita metropolitan area.



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



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation



We prepare our consolidated financial statements in accordance with
generally accepted accounting principles (GAAP) for the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in
financial statements presented in accordance with GAAP have been condensed or omitted. You should read the accompanying consolidated financial statements and notes in conjunction with the consolidated financial statements and notes included in our
Annual Report on Form 10-K for the year ended December 31, 2002 (2002 Form 10-K).



Use of Managements Estimates



When we
prepare our consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date
of our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an on-going basis, including those related to bad debts, inventories, depreciation, revenue
recognition, investments, intangible assets, income taxes, decommissioning of Wolf Creek, asset retirement obligations, environmental issues, contingencies and litigation. Actual results may differ from those estimates under different assumptions or
conditions. In our opinion, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation of the financial statements, have been included. The results of operations for the three and nine months ended
September 30, 2003 are not necessarily indicative of the results to be expected for the full year.



Consolidation of Variable Interest Entities



In January 2003, the Financial Accounting Standards Board (FASB) issued Financial Interpretation Number (FIN) 46, Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51. This
interpretation provides guidance related to identifying variable interest entities (previously known generally as special purpose entities or SPEs) and determining whether such entities should be consolidated. Certain disclosures are required if it
is reasonably possible that a company will consolidate or disclose information about a variable interest entity. This interpretation must be applied immediately to variable interest entities created or obtained after January 31, 2003. For those
variable interest entities created or obtained on or before January 31, 2003, the provisions of FIN 46 must be applied by the fourth quarter of 2003. We are evaluating the impact this new pronouncement will have on our financial statements.



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Accounting for Energy Trading Contracts



In April 2003, FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends the accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities, and identifies which contracts
qualify as normal purchase/normal sale contracts. SFAS No. 149 also amends certain other existing pronouncements and requires contracts with comparable characteristics to be accounted for similarly. In particular, SFAS No. 149 clarifies
when a contract with an initial net investment meets the characteristics of a derivative and when a derivative that contains a financing component will require special reporting in the statement of cash flows. SFAS No. 149 was effective for
contracts entered into or modified after June 30, 2003. Adoption of SFAS No. 149 did not have a material effect on our results of operations, financial position or cash flows.



Reclassifications



We have reclassified certain amounts in prior years to conform with classifications used in the current year presentation.



3. RATE MATTERS AND REGULATION



KCC Orders and Westar Energys Debt Reduction and Restructuring Plan



On November 8, 2002, the Kansas Corporation Commission (KCC) issued an
order directing Westar Energy to file a financial plan and to address additional concerns regarding Westar Energys level of debt and the structure of Westar Energy. The KCC issued an order on December 23, 2002 providing further direction in
these matters. These orders led Westar Energy to file a Debt Reduction and Restructuring Plan (the Debt Reduction Plan) with the KCC on February 6, 2003.



On February 10, 2003, the KCC issued an order granting limited reconsideration of its December 23, 2002 order. The KCC also stated that the Debt Reduction
Plan appears to make a good-faith effort to address the concerns expressed in the KCCs prior orders and that the KCC needed additional time to review the Debt Reduction Plan before addressing other issues raised in Westar Energys
petition for reconsideration of the December 23, 2002 order.



On July 21, 2003, Westar Energy and Westar Industries, Inc. (Westar Industries), a wholly owned subsidiary of Westar Energy, entered into a Stipulation and Agreement (Stipulation) with the KCC staff and certain other intervenors in the
docket considering the Debt Reduction Plan. In the Stipulation, the parties to the Stipulation asked the KCC to issue an order approving the Debt Reduction Plan, subject to the terms and conditions of the Stipulation. The KCC issued an order
approving the Stipulation on July 25, 2003. The principal terms of the Stipulation are as follows:



| |  | Westar Energy agrees to fully implement the Debt Reduction Plan by December 31, 2004, unless prevented by events beyond its control, in which case the KCC may extend the deadline
for implementation upon a proper showing by Westar Energy.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Westar Energy commits to reduce its debt to a level consistent with investment grade bond ratings and to have a capital structure containing at least 40% common equity by December
31, 2004. This commitment replaces a requirement imposed in a previous KCC order that Westar Energy reduce utility debt to $1.67 billion by August 1, 2003.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | Westar Energy and we will file requests for a change in rates on May 1, 2005, based on a test year consisting of the 12 months ending December 31, 2004. Prior to May 1, 2005, Westar
Energy and we will not make a filing to increase our Kansas jurisdictional electric rates and the other parties to the Stipulation will not file a rate complaint or motion for Westar Energy and us to show cause why Westar Energys and our rates
should not be reduced.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Westar Energy and we will pay to our Kansas jurisdictional customers rebates of $10.5 million on May 1, 2005 and $10 million on January 1, 2006. Westar Energy and we will also pay a
rebate to customers of any amounts Westar Energy may recover from David C. Wittig, Westar Energys former president, chief executive officer and chairman, and Douglas T. Lake, Westar Energys former executive vice president and chief
strategic officer, for compensation totaling approximately $2.3 million paid to them that was included in electric rates during calendar years 1998 through 2002, net of costs Westar Energy incurs to recover the funds. See Note 10 for more
information about Westar Energys effort to recover compensation from Mr. Wittig and Mr. Lake.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Westar Industries was required to transfer to Westar Energy all of its stock in ONEOK, Inc. (ONEOK) and all of its cash in excess of $2 million within 30 days of the date of the
order.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Debt Reduction Plan and certain of
the related KCC orders discussed above are discussed in further detail in our 2002 Form 10-K.



Current Status of the Debt Reduction Plan



Westar Energy has reduced its total debt by $613.4 million since December 31, 2002. The total reduction includes the decrease of utility debt by $554.7 million to $2.7 billion at September 30, 2003 from $3.2 billion
at December 31, 2002. This reduction resulted principally from using the proceeds from the sale of Westar Energys ONEOK stock. The remainder of the $613.4 million decrease results from a $58.7 million decrease that is included in the results
of discontinued operations on Westar Energys consolidated financial statements. Westar Energy may have to issue equity to achieve its commitment to have debt consistent with investment grade bond ratings and a capital structure consisting of
at least 40% common equity at December 31, 2004.



In August
2003, Westar Energy and we began recognizing the effect of the rebates that will be paid to customers in 2005 and 2006. Accordingly, as of September 30, 2003, we have recorded a liability of $0.7 million for revenue to be refunded. We will record a
liability of $1.0 million for revenue to be refunded each quarter through December 31, 2005. The amounts recorded are reported as a reduction to revenues.



Also in August 2003, Westar Industries transferred to Westar Energy all of its stock in ONEOK and all of its cash in excess of $2 million. Westar Energy
has continued to transfer cash in excess of $2 million in subsequent months. These transfers were intercompany transactions and did not result in any change to the amounts reported on Westar Energys consolidated financial statements. In
addition, in accordance with a KCC order, Westar Energy reclassified an intercompany receivable in the amount of $710.5 million from Westar Industries as an investment in Westar Industries. This intercompany transaction is eliminated in
consolidation and, therefore, has no impact on Westar Energys debt reduction.



4. INCOME TAXES



We record income tax expense
using the effective tax rate method. Under this method, we compute the tax related to year-to-date income at an estimated annual effective tax rate, excluding significant, unusual or extraordinary items. For the significant, unusual or extraordinary
items, we individually compute and recognize income tax expense when the transaction occurs. For the three months ended September 30, 2003, our effective income tax rate was 26.5% compared to 35.9% for the same period of 2002. For the nine months
ended September 30, 2003, our effective income tax rate was 25.7% compared to 21.6% for the same period of 2002.



10



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##### Table of Contents

5. COMMITMENTS AND CONTINGENCIES



EPA New Source Review



The Environmental Protection Agency (EPA) is conducting an enforcement initiative to determine whether modifications at a number of coal-fired power
plants owned by Westar Energy and us and other utilities are subject to New Source Review requirements or New Source Performance Standards under Section 114(a) of the Clean Air Act (Section 114). Jeffrey Energy Center, which is 20% owned by us, is
included in this initiative. This initiative focuses on whether expenditures at the plants were for routine maintenance or whether the expenditures were for substantial modifications or resulted in improved operations. The Clean Air Act requires
enhancement of emission controls when plant expenditures result in substantial modifications or improved operations.



The EPA requested information from Westar Energy under Section 114 regarding projects and maintenance activities that have been conducted at its
coal-fired plants (including Jeffrey Energy Center) since 1980. The EPA may assert that some of these projects violated the New Source Performance Standard and New Source Review requirements of the Clean Air Act. Westar Energy filed its response to
the initial information requests from the EPA on April 30, 2003 and submitted additional requested information June 16, 2003. Westar Energy is cooperating with this review but is unable to predict the outcome. If the EPA requires us to update our
emission controls at Jeffrey Energy Center, the costs could be material. Westar Energy and we believe these costs would qualify for recovery through rates, although we can give no assurance that the KCC would allow full recovery.



Nuclear Decommissioning Study



The KCC issued an order on April 16, 2003 approving the August 2002
decommissioning study for Wolf Creek as discussed in our 2002 Form 10-K. On June 2, 2003, we filed a funding schedule with the KCC to reflect the KCCs April 16, 2003 order. On October 13, 2003, the KCC approved the funding schedule as filed
without any change to our funding obligation.



6. ASSET RETIREMENT
OBLIGATIONS



In June 2001, FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 provides accounting requirements for the recognition and measurement of liabilities associated with the retirement of tangible long-lived assets. Under the standard, these
liabilities are recognized at fair value as incurred and capitalized and depreciated over the appropriate period as part of the cost of the related tangible long-lived assets. The adoption of SFAS No. 143 does not impact income. Any income effects
are offset by a regulatory asset created pursuant to SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. Retirement obligations associated with long-lived assets included within the scope of SFAS No. 143 are those for
which a legal obligation exists under enacted laws, statutes, written or oral contracts, including obligations arising under the doctrine of promissory estoppel.



We adopted SFAS No. 143 on January 1, 2003, which required us to recognize and estimate the liability for our 47% share of
the estimated cost to decommission Wolf Creek. SFAS No. 143 requires the recognition of the present value of the asset retirement obligation we incurred at the time Wolf Creek was placed in service in 1985. On January 1, 2003, we recorded an asset
retirement obligation of $74.7 million. In addition, we increased our property and equipment balance, net of accumulated depreciation, by $10.7 million. We also established a regulatory asset for $64.0 million, which represents the accretion of the
liability since 1985 and the increased depreciation expense associated with the increase in plant.



11



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##### Table of Contents

The following is a reconciliation of the asset retirement obligation, which is included in our
consolidated balance sheet in other long-term liabilities:



|                                      |  | As of September 30, 2003
|------------------------------------- |  | ------------------------
|                                      |  | (In Thousands)          
|Beginning asset retirement obligation |  | $                       
|Transition liability                  |  |                         
|Liabilities settled                   |  |                         
|Accretion expense                     |  |                         
|Estimated cash flows revisions        |  |                         
|                                      |  |                         
|Ending asset retirement obligation    |  | $                       
|                                      |  |                         



The following presents
pro forma asset retirement obligation information as if SFAS No. 143 had been adopted at January 1, 2002:



|                      |  | As of September 30, 2003 |        | As of December 31, 2002
|--------------------- |  | ------------------------ | ------ | -----------------------
|                      |  | (In Thousands)          
|Liabilities incurred: |  |                          |        |                        
|                      |  |                         
|Reported              |  | $                        | 79,207 |                        
|Pro forma             |  |                          | 79,207 |                        



7. LEGAL PROCEEDINGS



We are involved in various legal, environmental and
regulatory proceedings. We believe adequate provisions have been made and accordingly believe that the ultimate disposition of such matters will not have a material adverse effect on our overall financial position or results of operations. See also
Note 3 for discussion of KCC regulatory proceedings, Note 8 for discussion of the special committee investigation and Note 10 for information about potential liabilities to Mr. Wittig and Mr. Lake.



8. SPECIAL COMMITTEE INVESTIGATION



In September 2002, Westar Energys board of directors appointed a
special committee of directors to investigate management matters and matters that are the subject of a grand jury investigation and a Securities and Exchange Commission inquiry. The special committee retained counsel and other advisors. The special
committee completed its investigation and issued a report to Westar Energys board of directors on May 7, 2003 concerning the conclusions and recommendations reached as a result of the investigation. The investigation did not result in
adjustments to Westar Energys or our previously filed financial statements.



9. RELATED PARTY TRANSACTIONS



Our cash
management function, including cash receipts and disbursements, is performed by Westar Energy. An intercompany account is used to record net receipts and disbursements between KGE and Westar Energy and between KGE and WR Receivables Corporation. The
net amount payable to affiliates was approximately $20.6 million at September 30, 2003 and $24.1 million at December 31, 2002 as reflected in our consolidated balance sheets.



Westar Energy provides all employees we use. Certain operating expenses have been allocated to us from Westar Energy. These
expenses are allocated, depending on the nature of the expense, based on allocation studies, net investment, number of customers, and/or other appropriate factors. We believe such allocation procedures are reasonable.



12



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##### Table of Contents

We have declared and paid dividends to Westar Energy for the three and nine months ended September 30,
2003 of $25.0 million and $75.0 million, respectively.



10. POTENTIAL
LIABILITIES TO DAVID C. WITTIG AND DOUGLAS T. LAKE



On
June 13, 2003, Westar Energy filed a demand for arbitration with the American Arbitration Association asserting claims against Mr. Wittig and Mr. Lake arising out of their previous employment with Westar Energy. Among other things, Westar Energy is
seeking to recover compensation and benefits previously paid to Mr. Wittig and Mr. Lake and to avoid compensation and other benefits Mr. Wittig and Mr. Lake claim to be owed to them as a result of their previous employment with Westar Energy. See
Note 19 of the Notes to Consolidated Financial Statements in our 2002 Form 10-K, Potential Liabilities to David C. Wittig and Douglas T. Lake, for additional information about Westar Energys potential liabilities to Mr. Wittig and
Mr. Lake. Westar Energy is unable to predict the outcome of the arbitration.



We reported in Note 19 of the Notes to Consolidated Financial Statements, Potential Liabilities to David C. Wittig and Douglas T. Lake, in our 2002 Form 10-K that Westar Energy would be required to record
additional compensation expense of approximately $4.4 million to Mr. Wittig and Mr. Lake if stock performance requirements for some restricted share unit awards were to be satisfied. These stock performance requirements will be satisfied if the
closing share price of Westar Energys common stock remains at or above $19.78 for any period of 20 consecutive trading days. The closing price of Westar Energys common stock was $19.86 per share on October 27, 2003 and has continued to
close above $19.78 per share through November 7, 2003. In addition, the amount of Westar Energys obligation to Mr. Wittig related to a split dollar life insurance agreement is adjusted at the end of each quarter based on the total return to
Westar Energys shareholders from the date of that agreement. The total return considers the change in stock price and accumulated dividends. Westar Energy would be required to accrue an additional expense related to the split dollar life
insurance agreement if the closing price of its common stock exceeds $20.87 at December 31, 2003.



11. SALE OF ACCOUNTS RECEIVABLE



On July 28, 2000, Westar Energy and we entered into an agreement to sell all of our accounts receivable arising from the sale of electricity to WR Receivables Corporation, a special purpose entity. The agreement is annually renewable upon
agreement by all parties. On July 23, 2003, the term of the agreement was extended through July 21, 2004. For additional information, see Note 4 of the Notes to Consolidated Financial Statements in our 2002 Form 10-K, Accounts
Receivable.



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##### Table of Contents

KANSAS GAS AND ELECTRIC COMPANY



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



INTRODUCTION



The following Managements Discussion and Analysis of Financial
Condition and Results of Operations updates the information provided in our 2002 Form 10-K, and should be read in conjunction with that report. In this section, we discuss our general financial condition, significant changes and operating results.
We explain:



| |  | what factors impact our business,
| | - | ---------------------------------



| |  | what our earnings and costs were for the three and nine months ended September 30, 2003 and 2002,
| | - | -------------------------------------------------------------------------------------------------



| |  | why these earnings and costs differ from period to period,
| | - | ----------------------------------------------------------



| |  | how our earnings and costs affect our overall financial condition, and
| | - | ----------------------------------------------------------------------



| |  | any other items that particularly affect our financial condition or earnings.
| | - | -----------------------------------------------------------------------------



SUMMARY OF SIGNIFICANT ITEMS



KCC Orders and Westar Energys Debt Reduction and Restructuring Plan



On November 8, 2002, the KCC issued an order directing Westar Energy to file a financial plan and to address additional
concerns regarding Westar Energys level of debt and the structure of Westar Energy. The KCC issued an order on December 23, 2002 providing further direction in these matters. These orders led Westar Energy to file a Debt Reduction and
Restructuring Plan (the Debt Reduction Plan) with the KCC on February 6, 2003.



On February 10, 2003, the KCC issued an order granting limited reconsideration of its December 23, 2002 order. The KCC also stated that the Debt Reduction Plan appears to make a good-faith effort to address the
concerns expressed in the KCCs prior orders and that the KCC needed additional time to review the Debt Reduction Plan before addressing other issues raised in Westar Energys petition for reconsideration of the December 23, 2002 order.



On July 21, 2003, Westar Energy and Westar Industries entered
into the Stipulation with the KCC staff and certain other intervenors in the docket considering the Debt Reduction Plan. In the Stipulation, the parties to the Stipulation asked the KCC to issue an order approving the Debt Reduction Plan, subject to
the terms and conditions of the Stipulation. The KCC issued an order approving the Stipulation on July 25, 2003. The principal terms of the Stipulation are as follows:



| |  | Westar Energy agrees to fully implement the Debt Reduction Plan by December 31, 2004, unless prevented by events beyond its control, in which case the KCC may extend the deadline
for implementation upon a proper showing by Westar Energy.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Westar Energy commits to reduce its debt to a level consistent with investment grade bond ratings and to have a capital structure containing at least 40% common equity by December
31, 2004. This commitment replaces a requirement imposed in a previous KCC order that Westar Energy reduce utility debt to $1.67 billion by August 1, 2003.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Westar Energy and we will file requests for a change in rates on May 1, 2005, based on a test year consisting of the 12 months ending December 31, 2004. Prior to May 1, 2005, Westar
Energy and we will not make a filing to increase our Kansas jurisdictional electric rates and the other parties to the Stipulation will not file a rate complaint or motion for Westar Energy and us to show cause why Westar Energys and our rates
should not be reduced.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | Westar Energy and we will pay to our Kansas jurisdictional customers rebates of $10.5 million on May 1, 2005 and $10 million on January 1, 2006. Westar Energy may and we will also
pay a rebate to customers of any amounts Westar Energy may recover from David C. Wittig, Westar Energys former president, chief executive officer and chairman, and Douglas T. Lake, Westar Energys former executive vice president and chief
strategic officer, for compensation totaling approximately $2.3 million paid to them that was included in electric rates during calendar years 1998 through 2002, net of costs Westar Energy incurs to recover the funds. See Note 10 for more
information about Westar Energys effort to recover compensation from Mr. Wittig and Mr. Lake.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Westar Industries was required to transfer to Westar Energy all of its stock in ONEOK, Inc. (ONEOK) and all of its cash in excess of $2 million within 30 days of the date of the
order.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Debt Reduction Plan and certain of
the related KCC orders discussed above are discussed in further detail in our 2002 Form 10-K.



Current Status of the Debt Reduction Plan



Westar Energy has reduced its total debt by $613.4 million since December 31, 2002. The total reduction includes the decrease of utility debt by $554.7 million to $2.7 billion at September 30, 2003 from $3.2 billion
at December 31, 2002. This reduction resulted principally from using the proceeds from the sale of Westar Energys ONEOK stock. The remainder of the $613.4 million decrease results from a $58.7 million decrease that is included in the results
of discontinued operations on Westar Energys consolidated financial statements. Westar Energy may have to issue equity to achieve its commitment to have debt consistent with investment grade bond ratings and a capital structure consisting of
at least 40% common equity at December 31, 2004.



In August
2003, Westar Energy and we began recognizing the effect of the rebates that will be paid to customers in 2005 and 2006. Accordingly, as of September 30, 2003, we have recorded a liability of $0.7 million for revenue to be refunded. We will record a
liability of $1.0 million for revenue to be refunded each quarter through December 31, 2005. The amounts recorded are reported as a reduction to revenues.



Also in August 2003, Westar Industries transferred to Westar Energy all of its stock in ONEOK and all of its cash in excess of $2 million. Westar Energy
has continued to transfer cash in excess of $2 million in subsequent months. These transfers were intercompany transactions and did not result in any change to the amounts reported on Westar Energys consolidated financial statements. In
addition, in accordance with a KCC order, Westar Energy reclassified an intercompany receivable in the amount of $710.5 million from Westar Industries as an investment in Westar Industries. This intercompany transaction is eliminated in
consolidation and, therefore, has no impact on Westar Energys debt reduction.



CRITICAL ACCOUNTING POLICIES



Since December
31, 2002, no significant changes have occurred in our critical accounting policies. For additional information on our critical accounting policies, see our 2002 Form 10-K.



15



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##### Table of Contents

OPERATING RESULTS



Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002: Significant changes in specific line items comprising the
results of operations are as follows:



|                                    |  | Three Months Ended September 30, |        
|----------------------------------- |  | -------------------------------- | -------
|                                    |  | 2003                             |        
|                                    |  | (Dollars in Thousands)           |        
|SALES:                              |  |                                  |        
|Residential                         |  | $                                | 83,583 
|Commercial                          |  |                                  | 50,957 
|Industrial                          |  |                                  | 40,937 
|                                    |  |                                  |        
|Subtotal                            |  |                                  | 175,477
|Network Integration (a)             |  |                                  | 7,480  
|Other (b)                           |  |                                  | 4,985  
|                                    |  |                                  |        
|Total retail                        |  |                                  | 187,942
|Wholesale and Interchange           |  |                                  | 19,319 
|                                    |  |                                  |        
|Total Sales                         |  |                                  | 207,261
|                                    |  |                                  |        
|FUEL AND PURCHASED POWER:           |  |                                  |        
|Fuel used for generation            |  |                                  | 43,671 
|Purchased power                     |  |                                  | 7,504  
|Dispatch expense to parent          |  |                                  | 323    
|                                    |  |                                  |        
|Total Fuel and Purchased Power      |  |                                  | 51,498 
|                                    |  |                                  |        
|GROSS PROFIT                        |  |                                  | 155,763
|                                    |  |                                  |        
|OPERATING EXPENSES:                 |  |                                  |        
|Operating and maintenance           |  |                                  | 56,007 
|Depreciation and amortization       |  |                                  | 22,601 
|Selling, general and administrative |  |                                  | 19,086 
|                                    |  |                                  |        
|Total Operating Expenses            |  |                                  | 97,694 
|                                    |  |                                  |        
|INCOME FROM OPERATIONS              |  | $                                | 58,069 
|                                    |  |                                  |        

| | 
| | 

| | (a) | Network Integration: Reflects a network transmission tariff that requires us to pay to the Southwest Power Pool (SPP) all expenses associated with transporting power. The
expense for the three months ended September 30, 2003 and 2002 was $8.5 million. The SPP then pays us for transmitting power to the point of delivery into our retail distribution system. These receipts from the SPP are reflected in revenues in the
network integration classification. | 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

| | (b) | Other: Includes public street and highway lighting, miscellaneous electric revenues and revenues to be refunded. | 
| | --- | ---------------------------------------------------------------------------------------------------------------- | 



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##### Table of Contents

The following table reflects changes in electric sales volumes, as measured by thousands of megawatt
hours (MWh) of electricity, for the three months ended September 30, 2003 and 2002. No sales volumes are shown for network integration because this activity is unrelated to electricity we generate.



|                          |  | Three Months Ended September 30, | 
|------------------------- |  | -------------------------------- | 
|                          |  | 2003                             | 
|                          |  | (Thousands of MWh)               | 
|Residential               |  | 1,019                            | 
|Commercial                |  | 796                              | 
|Industrial                |  | 902                              | 
|Other                     |  | 11                               | 
|                          |  |                                  | 
|Total retail              |  | 2,728                            | 
|Wholesale and Interchange |  | 508                              | 
|                          |  |                                  | 
|Total                     |  | 3,236                            | 
|                          |  |                                  | 



Retail sales declined
as a result of less favorable weather than last year and adjustments to property taxes and the billing surcharge which was implemented in 2001 and settled in 2002. Wholesale and interchange sales also declined because the availability of several of
our operating units was lower in 2003 compared to 2002.



Purchased power increased since we purchased more power from other sources than we did during the same period of 2002 because it was more economical to purchase power than to operate our peaking units. Partially offsetting this increase was
a reduction of costs associated with the dispatching of electric power.



Operating expenses increased due to higher maintenance costs and increased selling, general and administrative expenses, which was largely the result of higher bad debt expense.



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##### Table of Contents

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002: Significant
changes in specific line items comprising the results of operations are as follows:



|                                    |  | Nine Months Ended September 30, |        
|----------------------------------- |  | ------------------------------- | -------
|                                    |  | 2003                            |        
|                                    |  | (Dollars in Thousands)          |        
|SALES:                              |  |                                 |        
|Residential                         |  | $                               | 177,712
|Commercial                          |  |                                 | 130,016
|Industrial                          |  |                                 | 116,046
|                                    |  |                                 |        
|Subtotal                            |  |                                 | 423,774
|Network Integration (a)             |  |                                 | 22,348 
|Other (b)                           |  |                                 | 17,182 
|                                    |  |                                 |        
|Total retail                        |  |                                 | 463,304
|Wholesale and Interchange           |  |                                 | 88,792 
|                                    |  |                                 |        
|Total Sales                         |  |                                 | 552,096
|                                    |  |                                 |        
|FUEL AND PURCHASED POWER:           |  |                                 |        
|Fuel used for generation            |  |                                 | 105,461
|Purchased power                     |  |                                 | 16,419 
|Dispatch expense to parent          |  |                                 | 13,735 
|                                    |  |                                 |        
|Total Fuel and Purchased Power      |  |                                 | 135,615
|                                    |  |                                 |        
|GROSS PROFIT                        |  |                                 | 416,481
|                                    |  |                                 |        
|OPERATING EXPENSES:                 |  |                                 |        
|Operating and maintenance           |  |                                 | 167,702
|Depreciation and amortization       |  |                                 | 67,935 
|Selling, general and administrative |  |                                 | 51,423 
|                                    |  |                                 |        
|Total Operating Expenses            |  |                                 | 287,060
|                                    |  |                                 |        
|INCOME FROM OPERATIONS              |  | $                               | 129,421
|                                    |  |                                 |        

| | 
| | 

| | (a) | Network Integration: Reflects a network transmission tariff that requires us to pay to the Southwest Power Pool (SPP) all expenses associated with transporting power. The
expense for the nine months ended September 30, 2003 was $24.6 million compared to $24.7 million for the same period of 2002. The SPP then pays us for transmitting power to the point of delivery into our retail distribution system. These receipts
from the SPP are reflected in revenues in the network integration classification. | 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

| | (b) | Other: Includes public street and highway lighting, miscellaneous electric revenues and revenues to be refunded. | 
| | --- | ---------------------------------------------------------------------------------------------------------------- | 



The
following table reflects changes in electric sales volumes, as measured by thousands of megawatt hours (MWh) of electricity, for the nine months ended September 30, 2003 and 2002. No sales volumes are shown for network integration because this
activity is unrelated to electricity we generate.



|                          |  | Nine Months Ended September 30, | 
|------------------------- |  | ------------------------------- | 
|                          |  | 2003                            | 
|                          |  | (Thousands of MWh)              | 
|Residential               |  | 2,268                           | 
|Commercial                |  | 2,054                           | 
|Industrial                |  | 2,597                           | 
|Other                     |  | 33                              | 
|                          |  |                                 | 
|Total retail              |  | 6,952                           | 
|Wholesale and Interchange |  | 2,429                           | 
|                          |  |                                 | 
|Total                     |  | 9,381                           | 
|                          |  |                                 | 



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##### Table of Contents

Temperatures in our service territory were cooler in 2003 than they were in 2002, which resulted in a
decline in retail sales compared to the same period in 2002. Offsetting this decline was an increase in wholesale and interchange sales. Higher prices in the wholesale energy market led directly to the increase in total sales.



Purchased power increased and fossil fuel costs were slightly higher. This
increase was partially offset with the decrease in costs associated with the dispatching of electric power. These fluctuations were primarily the result of the scheduled Wolf Creek refueling outage in the second quarter of 2002, which caused us to
use more expensive sources of generation during the 2002 period.



Total operating expenses decreased primarily as a result of a decrease in selling, general and administrative expenses. The 2002 selling, general and administrative expenses were higher due to the severance charges that were allocated to us
during the first quarter of 2002. Maintenance expenses increased due to longer outages at several of our generating units as compared to 2002. Depreciation and amortization expense was less because the depreciation rates decreased in April 2002 as
prescribed by the KCC.



LIQUIDITY AND CAPITAL RESOURCES



Overview



Westar Energy believes it will have sufficient cash to fund future operations of its business (including us), debt
reductions, including the rebates to customers Westar Energy and we are required to make in 2005 and 2006, and the payment of Westar Energy dividends, from a combination of cash on hand, cash flow, proceeds from the sales of its non-utility and
non-core assets, available borrowings under its revolving credit facility and access to capital markets. Uncertainties affecting its ability to meet these requirements include, among others, the factors affecting sales described above, economic
conditions, including the impact of inflation on operating expenses, regulatory actions, Westar Energys ability to implement the Debt Reduction Plan and compliance with future environmental regulations.



Most of our cash requirements consist of capital expenditures and maintenance
costs designed to improve and maintain facilities that provide electric service and to meet customer service requirements. Our ability to provide the cash or debt to fund our capital expenditures depends on many things, including available
resources, our financial condition and current market conditions.



Our internally generated cash is generally sufficient to fund operations and debt service payments. We do not maintain independent short-term credit facilities and rely on Westar Energy for short-term cash needs. If Westar Energy is unable
to borrow under its credit facilities, we could have a short-term liquidity issue that could require us to obtain a credit facility for our short-term cash needs, which could result in higher borrowing costs.



Capital Resources



Westar Energys Debt Reduction Plan provides for a systematic disposal of its non-utility and non-core assets and the
potential issuance of Westar Energy equity securities. The proceeds of these transactions will be used to reduce debt. Westar Energy may reduce its and our debt pursuant to terms stated in the debt agreements or through open market purchases or
tender offers.



Cash Flows from Operating Activities



Our primary source of operating cash flows is from our electric utility
operations. Cash flows from operating activities increased $88.5 million, to $141.8 million in 2003 from $53.3 million in 2002. This increase is mostly attributable to the increase in utility gross margin for 2003 compared to 2002 and the $72.3
million increase in changes in working capital items.



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##### Table of Contents

Cash Flows used in Financing Activities



During 2002, we received advances from Westar Energy of $128.9 million, of which $135.0 million was deposited with a trustee
for the retirement of first mortgage bonds due December 15, 2003. In 2003, we paid $75.0 million of dividends to Westar Energy.



Contractual Obligations



Since December 31, 2002, there have been no material changes in our contractual obligations for operations in the ordinary course of business. For
additional information on our contractual obligations, see our 2002 Form 10-K.



Sale of Accounts Receivable



On July 28, 2000,
Westar Energy and we entered into an agreement to sell all of our accounts receivable arising from the sale of electricity to WR Receivables Corporation, a special purpose entity (SPE). We account for this transfer as a sale in accordance with SFAS
No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. The agreement is annually renewable upon agreement by all parties. On July 23, 2003, the term of the agreement was extended through
July 21, 2004. For additional information, see Note 4 of the Notes to Consolidated Financial Statements in our 2002 Form 10-K, Accounts Receivable.



We record administrative expense on the undivided interest owned by the conduit, which was $0.6 million and $1.9 million for
the three and nine months ended September 30, 2003, respectively, compared to $0.4 million and $0.9 million for the same periods of 2002. These expenses are included in other income (expense) in our consolidated statements of income.



The outstanding balance of SPE receivables was $78.3 at September 30, 2003
and $48.2 million at December 31, 2002, which is net of an undivided interest of $100 million and $110 million, respectively, in receivables sold by the SPE to the conduit. Our retained interest in the SPEs receivables is reported at fair
value and is subordinate to, and provides credit enhancement for, the conduits ownership interest in the SPEs receivables. Our retained interest is available to the conduit to pay any fees or expenses due to the conduit and to absorb all
credit losses incurred on any of the SPEs receivables. The retained interest is included in accounts receivable, net, in our consolidated balance sheets.



Consolidation of Variable Interest Entities



In January 2003, the FASB issued FIN 46, which provides guidance related to identifying variable interest entities (previously known generally as special
purpose entities or SPEs) and determining whether such entities should be consolidated. Certain disclosures are required if it is reasonably possible that a company will consolidate or disclose information about a variable interest entity. This
interpretation must be applied immediately to variable interest entities created or obtained after January 31, 2003. For those variable interest entities created or obtained on or before January 31, 2003, the provisions of FIN 46 must be applied by
the fourth quarter of 2003. We are evaluating the impact this new pronouncement will have on our financial statements.



OTHER INFORMATION



Related Party Transactions



Our cash management function, including cash receipts and disbursements, is performed by Westar Energy. An intercompany account is used to record net receipts and disbursements between KGE and Westar Energy and between KGE and WR
Receivables Corporation. The net amount payable to affiliates approximated $20.6 million at September 30, 2003 and $24.1 million at December 31, 2002 as reflected in our consolidated balance sheets.



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Westar Energy provides all employees we use. Certain operating expenses have been allocated to us from
Westar Energy. These expenses are allocated, depending on the nature of the expense, based on allocation studies, net investment, number of customers, and/or other appropriate factors. We believe such allocation procedures are reasonable.



We have declared and paid dividends to Westar Energy for the
three and nine months ended September 30, 2003 of $25.0 million and $75.0 million, respectively.



Termination of Shared Services Agreement



Westar Energy owns an investment in ONEOK and maintains shared services agreements with ONEOK pursuant to which Westar Energy and ONEOK provide customer service functions to each other, including meter reading,
customer billing and call center operations. ONEOK gave Westar Energy notice of termination of the shared services agreement effective December 2003. We expect the termination to occur in September 2004. Following termination, Westar Energy will
allocate to us our portion of the expenses for providing these services internally. We expect the termination of this agreement to increase our annual costs for these services by approximately $4 million to $5 million.



Hedging Activities



During the third quarter of 2001, Westar Energy entered into hedging relationships to manage commodity price risk associated
with future natural gas purchases to protect us and our customers from adverse price fluctuations in the natural gas market. Initially, Westar Energy entered into futures and swap contracts with terms extending through July 2004 to hedge price risk
for a portion of anticipated natural gas fuel requirements for generation facilities. Westar Energy designated these hedging relationships as cash flow hedges in accordance with SFAS No. 133.



In 2002, due to the increased availability of coal units and because we began
burning more oil as use of oil became more economically favorable than gas, we did not burn our forecasted amount of natural gas. In September 2002, we determined that we had over-hedged approximately 8,280,000 MMBtu for the remaining period of the
hedge. As a result of the discontinuance of this portion of the cash flow hedge, we recognized a gain in earnings of $2.8 million. As of September 30, 2003, we forecasted a notional volume of 2,100,000 MMBtu for the remainder of the hedged period
through July 2004. Our use of hedge accounting is contingent on burning sufficient quantities of natural gas to meet our forecasts. If we fail to meet those forecasts, we could lose our ability to use hedge accounting, which could result in greater
volatility to our results of operations due to fluctuating natural gas prices. We operate our system in the most economical manner and will continue to do so by using the pricing systems available to us.



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The following table summarizes the effects the natural gas hedge had on our financial position and
results of operations for the three and nine months ended September 30, 2003:



|                                                                    |  | Natural Gas Hedge (a)  |          
|------------------------------------------------------------------- |  | ---------------------- | ---------
|                                                                    |  | (Dollars in Thousands) |          
|As of September 30, 2003:                                           |  |                        |          
|Fair value of derivative instruments:                               |  |                        |          
|Current                                                             |  | $                      | 1,963    
|Long-term                                                           |  |                        |         
|                                                                    |  |                        |          
|Total                                                               |  | $                      | 1,963    
|                                                                    |  |                        |          
|Three Months Ended September 30, 2003:                              |  |                        |          
|                                                                    | 
|Change in amounts in accumulated other comprehensive income         |  | $                      | (1,261   
|Adjustment for gain included in net income                          |  |                        | (4,255   
|Estimated income tax expense                                        |  |                        | 2,194    
|                                                                    |  |                        |          
|Net Comprehensive Gain                                              |  | $                      | (3,322   
|                                                                    |  |                        |          
|Nine Months Ended September 30, 2003:                               |  |                        |          
|                                                                    | 
|Change in amounts in accumulated other comprehensive income         |  | $                      | 3,512    
|Adjustment for gain included in net income                          |  |                        | (5,021   
|Estimated income tax expense                                        |  |                        | 600      
|                                                                    |  |                        |          
|Net Comprehensive Gain                                              |  | $                      | (909     
|                                                                    |  |                        |          
|Anticipated reclassifications to earnings in the next 12 months (b) |  | $                      | 1,963    
|                                                                    | 
|Duration of hedge designation as of September 30, 2003              |  |                        | 10 months
|                                                                   
|                                                                   
|                                                                   

| | (a) | Natural gas hedge assets and liabilities are classified in the balance sheets as energy trading contracts. Due to the volatility of gas commodity prices, it is probable that gas
prices will increase and decrease over the remaining 10 months that these relationships are in place. | 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

| | (b) | The actual amounts that will be reclassified to earnings could vary materially from this estimated amount due to changes in market conditions. | 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------- | 



Fair Value of Energy
Trading Contracts



The tables below show fair value of
energy trading contracts outstanding for the nine months ended September 30, 2003, their sources and maturity periods:



|                                                                       |  | Fair Value of Contracts
|---------------------------------------------------------------------- |  | -----------------------
|                                                                       |  | (In Thousands)         
|Net fair value of contracts outstanding at the beginning of the period |  | $                      
|Less contracts realized or otherwise settled during the period         |  |                        
|Plus fair value of new contracts entered into during the period        |  |                        
|                                                                       |  |                        
|Fair value of contracts outstanding at the end of the period           |  | $                      
|                                                                       |  |                        



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These contracts were valued through market exchanges and, where necessary, broker quotes and industry
publications, which we believe represent the fair value of the financial instruments. The sources of the fair values of the financial instruments related to these contracts are summarized in the following table:



|                                                                       |  | Fair Value of Contracts at End of Period
|---------------------------------------------------------------------- |  | ----------------------------------------
|Sources of Fair Value                                                  |  | Total Fair Value                        
|                                                                       |  | (In Thousands)                          
|Prices actively quoted (futures)                                       |  | $                                       
|Prices provided by other external sources (swaps and forwards)         |  |                                         
|Prices based on the Black Option Pricing model (options and other) (a) |  |                                         
|                                                                       |  |                                         
|Total fair value of contracts outstanding                              |  | $                                       
|                                                                       |  |                                         

---

|(a) | The Black Option Pricing model is a variant of the Black-Scholes Option Pricing model.
|--- | --------------------------------------------------------------------------------------



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We have not experienced any significant changes in our exposure to market risk since December 31, 2002. For additional information on our market risk, see
our 2002 Form 10-K, Item 7A. Quantitative and Qualitative Disclosures About Market Risk.



ITEM 4. CONTROLS AND PROCEDURES



As of September 30, 2003 our management, including our principal executive officer and principal financial and accounting officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. These controls and procedures were designed to ensure that material information relating to the company is communicated to the principal executive officer and the principal
financial and accounting officer. Based upon that evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective, in all material respects, with respect
to the recording, processing, summarizing and reporting, within the time periods specified in the SECs rules and forms, of information required to be disclosed by us in the reports that we file or submit under the Exchange Act.



No changes in our internal controls identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect internal controls.



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KANSAS GAS AND ELECTRIC COMPANY



PART II. Other Information



ITEM 1. LEGAL PROCEEDINGS



Information on our legal proceedings is set forth in Notes 3, 7, 8 and 10 of the Notes to Consolidated Financial Statements, Rate Matters and Regulation, Legal Proceedings, Special Committee Investigation
and Potential Liabilities to David C. Wittig and Douglas T. Lake, respectively, which are incorporated herein by reference.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



None



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None



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



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



ITEM 5. OTHER INFORMATION



None



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) | Exhibits:
| | --- | ---------



|31(a) |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the period ended September 30,
2003                                       
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|31(b) |  | Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the period ended September 30,
2003                                      
|      | 
|32(a) |  | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the quarter ended September 30, 2003 (furnished and not to be
considered filed as part of the Form 10-Q)



| | (b) | Reports on Form 8-K filed during the three months ended September 30, 2003: None
| | --- | --------------------------------------------------------------------------------



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SIGNATURE



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



|      |  |                   |  | KANSAS GAS AND ELECTRIC COMPANY
|----- |  | ----------------- |  | -------------------------------
|      |  |                   |  |                                
|Date: |  | November 10, 2003 |  |                                
|      |  |                   |  |                                
|      |  |                   |  |                                



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