<PAGE>

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

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 2000

                                       OR

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

                          Commission File Number 1-2499

                       CORNERSTONE PROPANE PARTNERS, L.P.
             (Exact name of registrant as specified in its charter)

          DELAWARE                                             77-0439862
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)

432 WESTRIDGE DRIVE, WATSONVILLE, CALIFORNIA                       95076
(Address of principal executive offices)                         (Zip Code)

       Registrant's telephone number, including area code: (831) 724-1921

                                      NONE
                     (Former name, former address and former
                   fiscal year, if changed since last report)

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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X   No
                     ---     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 13, 2000: 16,865,691 - Common Units



<PAGE>




                       CORNERSTONE PROPANE PARTNERS, L.P.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      PAGE
                                                                                                      ----
<S>                                                                                                  <C>
Part I. Financial Information

Item 1


Financial Statements


Cornerstone Propane Partner's, L.P.


Consolidated Balance Sheets as of September 30, 2000 and 1999, and June 30, 2000                         1


Consolidated Statements of Operations for the Three Months Ended September 30, 2000 and 1999             2


Consolidated Statements of Partners' Capital for the Three Months Ended September 30, 2000 and 1999      3


Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2000 and 1999             4


Notes to Consolidated Financial Statements                                                               5


Item 2


Management's Discussion and Analysis of Financial Condition and Results of Operations of Cornerstone
Propane Partners, L.P.                                                                                   9


Item 3


Quantitative and Qualitative Disclosures About Market Risks                                             14


Part II. Other Information


Item 6


Exhibits and Reports on Form 8-K                                                                        15


Signature                                                                                               16
</TABLE>

                                                 i

<PAGE>


                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
                                   (Unaudited)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                            September 30,
                                                                  ----------------------------------      June 30,
                                                                       2000               1999              2000
                                                                  ----------------   ---------------   ---------------
<S>                                                               <C>                <C>               <C>
 Current assets:
         Cash and cash equivalents                                      $   8,940         $   7,722         $   7,737
         Trade receivables, net                                            61,598            62,989            54,434
         Inventories                                                       73,741            57,779            69,644
         Prepaid expenses                                                   3,038             1,275             2,783
         Other current assets                                               2,923             5,826             6,690
                                                                  ----------------   ---------------   ---------------
                Total current assets                                      150,240           135,591           141,288

 Property, plant, and equipment, net                                      338,192           341,412           346,690
 Goodwill, net                                                            322,655           317,990           324,640
 Other intangibles, net                                                    40,030            32,016            33,156
 Other assets                                                               5,790             4,428             5,436
                                                                  ----------------   ---------------   ---------------
                Total assets                                            $ 856,907         $ 831,437         $ 851,210
                                                                  ================   ===============   ===============

                        LIABILITIES AND PARTNERS' CAPITAL

 Current liabilities:
         Current portion of long-term debt                              $   8,721         $  11,256         $   9,671
         Trade accounts payable                                            72,109            63,328            60,050
         Accrued expenses                                                  26,246            36,664            23,175
                                                                  ----------------   ---------------   ---------------
                Total current liabilities                                 107,076           111,248            92,896

 Long-term debt, less current portion                                     490,521           417,252           478,618
 Due to related party                                                       5,266             5,352             1,393
 Other noncurrent liabilities                                              10,171             6,219            10,193
                                                                  ----------------   ---------------   ---------------
                Total liabilities                                         613,034           540,071           583,100
                                                                  ----------------   ---------------   ---------------

 Commitments and contingencies                                                  -                 -                 -

 Partners' capital
         Common Unitholders                                               158,914           200,683           176,961
         Subordinated Unitholders                                          80,577            84,917            86,163
         General partners                                                   4,968             6,007             5,546
         Accumulated other comprehensive income                              (586)             (241)             (560)
                                                                  ----------------   ---------------   ---------------
                Total partners' capital                                   243,873           291,366           268,110
                                                                  ----------------   ---------------   ---------------
                Total liabilities and partners' capital                 $ 856,907         $ 831,437         $ 851,210
                                                                  ================   ===============   ===============
</TABLE>

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

                                       1
<PAGE>


                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Dollars in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                   For the three months ended
                                                                                         September 30,
                                                                               ----------------------------------
                                                                                    2000              1999
                                                                               ----------------  ----------------
<S>                                                                            <C>               <C>
 Revenues                                                                          $ 1,096,328         $ 556,527

 Cost of Sales                                                                       1,058,213           521,435
                                                                               ----------------  ----------------

         Gross profit                                                                   38,115            35,092
                                                                               ----------------  ----------------

 Expenses:
         Operating, general, and
         administrative                                                                 34,532            33,382
         Depreciation and amortization                                                  10,972             8,169
                                                                               ----------------  ----------------
                                                                                        45,504            41,551
                                                                               ----------------  ----------------

         Operating loss                                                                 (7,389)           (6,459)

 Other income                                                                            2,460                 -
 Interest expense                                                                        9,949             8,360
                                                                               ----------------  ----------------

         Loss before provision for
         income taxes                                                                  (14,878)          (14,819)

 Provision for income taxes                                                                 47                48
                                                                               ----------------  ----------------


         Loss before cumulative effect of adoption
            of accounting principle                                                    (14,925)          (14,867)
 Cumulative effect of adoption of accounting principle                                  (5,329)                -

                                                                               ----------------  ----------------
         Net loss                                                                  $   (20,254)        $ (14,867)
                                                                               ================  ================

         General partners' interest in
         net loss                                                                  $      (405)        $    (297)
                                                                               ================  ================
         Limited partners' interest in
         net loss                                                                  $   (19,849)        $ (14,570)
                                                                               ================  ================

         Loss per unit before cumulative effect of
         adoption of accounting principle                                          $     (0.62)        $   (0.62)
                                                                               ================  ================
         Cumulative effect per unit of adoption of accounting principle            $     (0.23)        $       -
                                                                               ================  ================
         Net loss per unit                                                         $     (0.85)        $   (0.62)
                                                                               ================  ================
 Weighted average number
         of units outstanding                                                           23,448            23,387
                                                                               ================  ================
</TABLE>

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

                                       2
<PAGE>


                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                           Thousands of Units                                               Other        Total
                                         -----------------------                              General   Comprehensive  Partners'
                                           Common     Subordinated  Common     Subordinated   Partners       Loss        Capital
---------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>           <C>         <C>           <C>        <C>           <C>
 Balance at June 30, 2000                   16,822        6,598     $176,961      $86,163      $ 5,546       $ (560)    $268,110

      Comprehensive net loss:
           Net loss                              -            -      (14,263)      (5,586)        (405)           -      (20,254)
           Other comprehensive loss              -            -            -            -            -          (26)         (26)

                                         ----------  -----------  -----------  -----------  -----------  -----------  -----------
           Net comprehensive loss                -            -      (14,263)      (5,586)        (405)         (26)     (20,280)

      Issuance of Common Units and
      General Partners' contribution             -            -          580            -           14            -          594

      Issuance of warrants
      in payment of fees                         -            -        4,740            -            -            -        4,740

      Quarterly distributions                    -            -       (9,104)           -         (187)           -       (9,291)
                                         ----------  -----------  -----------  -----------  -----------  -----------  -----------

 Balance at September 30, 2000              16,822        6,598     $158,914      $80,577      $ 4,968       $ (586)    $243,873
                                         ==========  ===========  ===========  ===========  ===========  ===========  ===========

 Balance at June 30, 1999                   16,789        6,598     $220,237      $89,029      $ 6,490       $ (229)    $315,527

      Comprehensive net loss:
           Net loss                              -            -      (10,458)      (4,112)        (297)           -      (14,867)
           Other comprehensive loss              -            -            -            -            -          (12)         (12)

                                         ----------  -----------  -----------  -----------  -----------  -----------  -----------
           Net comprehensive loss                -            -      (10,458)      (4,112)        (297)         (12)     (14,879)

      Financing costs                            -            -          (30)           -            -            -          (30)

      Quarterly distributions                    -            -       (9,066)           -         (186)           -       (9,252)
                                         ----------  -----------  -----------  -----------  -----------  -----------  -----------

 Balance at September 30, 1999              16,789        6,598     $200,683      $84,917      $ 6,007       $ (241)    $291,366
                                         ==========  ===========  ===========  ===========  ===========  ===========  ===========
</TABLE>

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

                                       3
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
                                                                                      Three Months Ended
                                                                                        September 30,
                                                                               --------------------------------
                                                                                    2000             1999
                                                                               ---------------  ---------------
<S>                                                                            <C>              <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
       Net loss                                                                      $(20,254)        $(14,867)
       Adjustments to reconcile net loss to net cash from
       operating activities:
            Depreciation and amortization                                              10,972            8,169
            (Gain) / loss on sale of assets                                              (873)             400
            Foreign currency translation                                                  (26)             (12)
            Cumulative effect of adoption of accounting principle                       5,329                -
            Gain in fair value of derivatives                                          (2,460)               -
            Changes in assets and liabilities, net of effect of acquisitions:
                 Trade receivables-net                                                 (7,164)         (33,814)
                 Inventories                                                           (4,097)         (15,007)
                 Prepaid expenses and other current assets                              3,512            3,097
                 Trade accounts payable and accrued expenses                           12,261           39,177
                                                                               ---------------  ---------------
                     Net cash from operating activities                                (2,800)         (12,857)
                                                                               ---------------  ---------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
       Expenditures for property, plant and equipment, net                               (977)          (4,346)
       Acquisitions, net of cash received                                                (181)         (10,136)
       Proceeds from sale of assets                                                     4,073                -
       Other investments                                                                 (354)            (460)
                                                                               ---------------  ---------------
                     Net cash from investing activities                                 2,561          (14,942)
                                                                               ---------------  ---------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
       Net change in Working Capital Facility                                          12,700           28,700
       Payments on purchase obligations                                                (1,424)          (1,498)
       Payments for debt financing                                                     (1,375)             (30)
       Advances from related parties                                                      818            8,372
       Issuance of Common Units                                                            14                -
       Partnership distributions                                                       (9,291)          (9,252)
                                                                               ---------------  ---------------
                     Net cash from financing activities                                 1,442           26,292
                                                                               ---------------  ---------------

 NET CHANGE IN CASH AND CASH EQUIVALENTS                                                1,203           (1,507)

 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                         7,737            9,229
                                                                               ---------------  ---------------

 CASH AND CASH EQUIVALENTS, END OF PERIOD                                            $  8,940         $  7,722
                                                                               ===============  ===============

 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Cash paid for interest                                                              $  6,856         $  6,566
                                                                               ===============  ===============

 NON-CASH INVESTING & FINANCING ACTIVITIES:
       Assets acquired in exchange for debt                                          $      -         $  2,415
                                                                               ===============  ===============
       Common Units issued in payment of debt                                        $    580         $     -
                                                                               ===============  ===============
       Warrants for Common Units issued in payment of fees                           $  4,740         $     -
                                                                               ===============  ===============
</TABLE>


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

                                       4
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000
                    (Dollars in thousands, except unit data)
                                   (Unaudited)

1.       BASIS OF PRESENTATION

These consolidated financial statements include the accounts of Cornerstone
Propane Partners, L.P. ("Cornerstone Partners") and its subsidiary, Cornerstone
Propane, L.P. (the "Operating Partnership"), and the Operating Partnership's
corporate subsidiaries collectively referred to as the "Partnership". All
material intercompany balances and transactions have been eliminated. Certain
1999 amounts in the accompanying consolidated financial statements have been
reclassified to conform to the 2000 presentation. These reclassifications had no
effect on net income or Partners' capital as previously reported.

The accompanying interim consolidated financial statements of the Partnership
are unaudited; however, in the opinion of management, all adjustments necessary
for a fair presentation of such consolidated financial statements have been
reflected in the interim periods presented. Such adjustments consisted only of
normal recurring items. The Partnership's business is seasonal and, accordingly,
interim results are not indicative of results for a full year. The significant
accounting policies and certain financial information, which are normally
included in financial statements prepared in accordance with generally, accepted
accounting principles, but which are not required for interim reporting
purposes, have been condensed or omitted. The accompanying consolidated
financial statements of the Partnership should be read in conjunction with the
consolidated financial statements and related notes included in the
Partnership's Annual Report on Form 10-K for the fiscal year ended June 30,
2000.

2.       DISTRIBUTIONS OF AVAILABLE CASH

The Partnership will make distributions to its partners with respect to each
fiscal quarter of the Partnership within 45 days after the end of each fiscal
quarter in an aggregate amount equal to its Available Cash for such quarter. The
Partnership will distribute 100% of its Available Cash (98% to Unitholders and
2% to the General Partners) until the Minimum Quarterly Distribution ("MQD") of
$.54 per unit for such quarter has been met. The MQD will be subject to the
payment of incentive distributions in the event Available Cash exceeds the MQD
of $.54 on all units. During the Subordination Period, to the extent there is
sufficient Available Cash, the holders of Common Units have the right to receive
the MQD, plus any arrearages, prior to the distribution of Available Cash to
holders of Subordinated Units. Subordinated Units do not accrue arrearages with
respect to distributions for any quarter.

On October 27, 2000, the MQD for the three month period from July 1, 2000 to
September 30, 2000 was declared in the amount of $9,294, representing in the
aggregate, distributions to the Common Unitholders and General Partners at $.54
per common unit. This distribution will be paid on November 15, 2000. No
distributions have been declared and subsequently paid on the Subordinated Units
for the period from October 1, 1997 to September 30, 2000.

3.       NET INCOME PER UNIT

Net income per unit is computed by dividing net income, after considering the
General Partners' 2% interest, by the weighted average number of Common and
Subordinated Units outstanding during the period.

                                       5
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000
                    (Dollars in thousands, except unit data)
                                   (Unaudited)


4.       DERIVATIVES AND HEDGING

The Partnership utilizes commodity futures contracts and other financial
derivatives to reduce its exposure to unfavorable changes in commodity prices.
On July 1, 2000, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement. Companies must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. The Partnership has elected not to adopt the detailed hedging
match requirements of FAS 133 and not to treat any of its forward purchase,
commodity hedge or inventory positions as hedges under this pronouncement. As
such any increases or decreases in inventory and contract values, compared to
quarter end market prices, are reported as gains or losses in the Partnership's
financial statements. The Partnership will review this decision in light of the
activities of its competitors and any future guidance issued by the Financial
Accounting Standards Board.

At July 1, 2000, recognition of the Partnership's derivatives resulted in a loss
of $5.3 million, which has been recognized in the accompanying financial
statements as the cumulative effect of adopting SFAS No.133.

As of September 30, 2000, the Partnership's liability for derivatives decreased
by $2.4 million which is recognized as a gain in other income in the
consolidated financial statements.

5.       SEGMENT AND RELATED INFORMATION

For the purpose of providing segment information, the Partnership's two
principal business segments are its retail and Coast Energy Group ("CEG")
operations. The retail segment includes propane sales, principally to end-users;
repair and maintenance of propane heating systems and appliances; and the sale
of propane-related supplies, appliances, and other equipment. These transactions
are accounted for as one business segment internally and share the same customer
base. CEG provides supply, marketing, and distribution services to other
resellers of propane and end-users. Principal products are propane, other
natural gas liquids, crude oil, and natural gas. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies in the annual report on Form 10-K. Intra-company
transactions between segments are recorded approximately at market value at the
transaction date.

                                       6
<PAGE>


                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000
                    (Dollars in thousands, except unit data)
                                   (Unaudited)

The segments are evaluated internally using earnings before interest, taxes,
depreciation, and amortization ("EBITDA"). Depreciation, amortization, interest
and some operating, general, and administrative expenses are not specifically
tracked by business segment, and are therefore included in the "Other" category
in the following tables:

<TABLE>
<CAPTION>
                                           Three Months Ended September 30, 2000
-----------------------------------------------------------------------------------------------------------------------
                                                Retail                CEG               Other               Total
                                           -----------------   -----------------  -----------------   -----------------
<S>                                        <C>                 <C>                <C>                 <C>
 Revenues                                          $ 64,705         $ 1,031,623          $       -         $ 1,096,328

 Cost of sales                                       35,268           1,022,945                  -           1,058,213
                                           -----------------   -----------------  -----------------   -----------------

       Gross profit                                  29,437               8,678                  -              38,115

 Operating, general, and
 administrative expenses                             24,048               7,761              2,723              34,532
                                           -----------------   -----------------  -----------------   -----------------

       EBITDA                                         5,389                 917             (2,723)              3,583

 Non-allocated expenses                                   -                   -             23,837              23,837
                                           -----------------   -----------------  -----------------   -----------------

       Net income (loss)                           $  5,389         $       917          $ (26,560)        $   (20,254)
                                           =================   =================  =================   =================
</TABLE>

<TABLE>
<CAPTION>
                                           Three Months Ended September 30, 1999
-----------------------------------------------------------------------------------------------------------------------
                                                Retail                CEG               Other               Total
                                           -----------------   -----------------  -----------------   -----------------
<S>                                        <C>                 <C>                <C>                 <C>
 Revenues                                          $ 53,019         $   503,508          $       -         $   556,527

 Cost of sales                                       25,035             496,400                  -             521,435
                                           -----------------   -----------------  -----------------   -----------------

       Gross profit                                  27,984               7,108                  -              35,092

 Operating, general, and
 administrative expenses                             24,428               5,756              3,198              33,382
                                           -----------------   -----------------  -----------------   -----------------

       EBITDA                                         3,556               1,352             (3,198)              1,710

 Non-allocated expenses                                   -                   -             16,577              16,577
                                           -----------------   -----------------  -----------------   -----------------

       Net income (loss)                           $  3,556         $     1,352          $ (19,775)        $   (14,867)
                                           =================   =================  =================   =================
</TABLE>


                                       7
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000
                    (Dollars in thousands, except unit data)
                                   (Unaudited)


5.  SEGMENT AND RELATED INFORMATION (CONT.)

<TABLE>
<CAPTION>
                                          As of September 30, 2000
-----------------------------------------------------------------------------------------------------------
                                          Retail             CEG              Other             Total
                                     ----------------  ----------------  ----------------  ----------------
<S>                                  <C>               <C>               <C>               <C>
 Identifiable assets                       $ 323,306          $ 99,061         $  51,164         $ 473,531  (a)
 General corporate assets                          -                 -           383,376           383,376
                                     ----------------  ----------------  ----------------  ----------------
       Total assets                        $ 323,306          $ 99,061         $ 434,540         $ 856,907
                                     ================  ================  ================  ================
</TABLE>
<TABLE>
<CAPTION>
                                          As of September 30, 1999
-----------------------------------------------------------------------------------------------------------
                                          Retail             CEG              Other             Total
                                     ----------------  ----------------  ----------------  ----------------
<S>                                  <C>               <C>               <C>               <C>
 Identifiable assets                       $ 302,795          $ 79,318         $  80,067         $ 462,180  (a)
 General corporate assets                          -                 -           369,257           369,257
                                     ----------------  ----------------  ----------------  ----------------
       Total assets                        $ 302,795          $ 79,318         $ 449,324         $ 831,437
                                     ================  ================  ================  ================
</TABLE>

       (a) - identifiable assets for the retail and CEG segments include
           accounts receivable, inventories, and property, plant and equipment,
           net of accumulated depreciation.


EBITDA consists of net income before interest, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to cash flow,
and it is not a measure of performance or financial condition under generally
accepted accounting principles, but it provides additional information for
evaluating the Partnership's ability to distribute the Minimum Quarterly
Distribution and to service and incur indebtedness. Cash flows in accordance
with generally accepted accounting principles consist of cash flows from
operating, investing and financing activities; cash flows from operating
activities reflect net income (including charges for interest and income taxes,
which are not reflected in EBITDA), adjusted for noncash charges or income
(which are reflected in EBITDA) and changes in operating assets and liabilities
(which are not reflected in EBITDA). Further, cash flows from investing and
financing activities are not included in EBITDA.


                                       8
<PAGE>




                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

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


The following discussion of the historical financial condition and results of
operations for the Partnership should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q.

GENERAL

The Partnership is a Delaware limited partnership initially formed to own and
operate the propane business and assets of SYN Inc., Empire Energy Corporation
and CGI Holdings, Inc. The Partnership's management believes that it is the
fifth largest retail marketer of propane in the United States, serving more than
480,000 residential, commercial, industrial and agricultural customers from
approximately 270 customer service centers in 34 states. The Partnership's two
principal business segments are its retail and Coast Energy Group ("CEG")
operations. The retail segment includes propane sales, principally to end-users;
repair and maintenance of propane heating systems and appliances; and the sale
of propane-related supplies, appliances and other equipment. CEG provides
supply, marketing, and distribution services to other resellers of propane and
end-users. Principal products are propane, other natural gas liquids, crude oil,
and natural gas.

Because a substantial portion of the Partnership's retail propane is used in the
weather-sensitive residential markets, the temperatures in the Partnership's
area of operations, particularly during the six-month peak heating season
(October through March), have a significant effect on the financial performance
of the Partnership. In any given area, warmer-than-normal temperatures will tend
to result in reduced propane use, while sustained colder-than-normal
temperatures will tend to result in greater propane use. Therefore, information
on normal temperatures is used by the Partnership in understanding how
historical results of operations are affected by temperatures that are colder or
warmer than normal and in preparing forecasts of future operations, which are
based on the assumption that normal weather will prevail in each of the
Partnership's regions.

Gross profit margins are not only affected by weather patterns but also by
changes in customer mix and underlying product costs. For example, sales to
residential customers ordinarily generate higher margins than sales to other
customer groups, such as commercial or agricultural customers. In addition,
gross profit margins vary by geographic region. Accordingly, profit margins
could vary significantly from year to year in a period of identical sales
volumes. Gross margins can also be impacted by significant increases in
underlying product costs, that may not in all instances be passed along to
customers in the form of higher selling prices.


                                       9
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

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


ANALYSIS OF HISTORICAL RESULTS OF OPERATIONS - THREE MONTH PERIOD ENDED
SEPTEMBER 30

The following discussion compares the results of operations and other data of
the Partnership for the three-month period ended September 30, 2000, to the
three-month period ended September 30, 1999.

VOLUME. During the three months ended September 30, 2000, the Partnership sold
45.9 million retail propane gallons, a decrease of 0.5 million gallons or 1.1%
from the 46.4 million retail propane gallons sold during the three months ended
September 30, 1999. Retail sales volumes were negatively impacted for the
quarter ended September 30, 2000 by weather patterns and temperatures that were
significantly warmer than normal and warmer than prior year conditions.
Acquisitions of propane businesses since September 30, 1999 accounted for 0.4
million retail gallons sold during the three months ended September 30, 2000.

REVENUES. Revenues increased by $539.8 million or 97.0% to $1,096.3 million for
the three months ended September 30, 2000, as compared to $556.5 million for the
three months ended September 30, 1999. This increase was primarily attributable
to an increase in CEG revenues of $528.1 million or 104.9% to $1,031.6 million
for the three months ended September 30, 2000, as compared to $503.5 million for
the three months ended September 30, 1999. This increase was due primarily to
CEG base business growth, acquisitions and higher product costs, partially
offset by warmer weather conditions. The revenues for the retail business
increased by $11.7 million or 22.1% to $64.7 million for the three months ended
September 30, 2000, as compared to $53.0 million for the three months ended
September 30, 1999. This reflects primarily the increase in propane selling
prices in response to product cost increases noted below, combined with
increased revenue from business acquisitions and non-weather sensitive sales,
offset by the decrease in weather related sales volumes described above.

COST OF PRODUCT SOLD. Cost of product sold increased by $536.8 million or 103.0%
to $1,058.2 million for the three months ended September 30, 2000, as compared
to $521.4 million for the three months ended September 30, 1999. The increase in
cost of product sold was primarily due to the increased CEG sales described
above, combined with higher propane cost per gallon. As a percentage of
revenues, cost of product sold increased to 96.5% for the three months ended
September 30, 2000, as compared to 93.7% for the three months ended September
30, 1999, due primarily to the increase in CEG's activities.

GROSS PROFIT. Gross profit increased $3.0 million or 8.5% to $38.1 million for
the three months ended September 30, 2000, compared to $35.1 million for the
three months ended September 30, 1999. Gross profit on retail propane increased
$1.4 million or 5.0% to $29.4 million for the three months ended September 30,
2000, compared to $28.0 million for the three months ended September 30, 1999.
Retail gross margin per gallon for the three months ended September 30, 2000 was
6.1% better than last year. This was attributable to increasing propane margins
in selected retail markets and increased revenues from additional services.
CEG's gross profit increased $1.6 million or 22.5% to $8.7 million for the three
months ended September 30, 2000, compared to $7.1 million for the three months
ended September 30, 1999 due to base business growth and acquisitions, partially
offset by losses incurred in natural gas activities. As a percentage of
revenues, gross profit decreased to 3.5% for the three months ended September
30, 2000, as compared to 6.3% for the three months ended September 30, 1999.
This is due to a higher mix of CEG sales, which have lower gross margins as a
percent of sales. Gross profit increases from retail businesses acquired since
September 30, 1999 was $0.5 million for the three

                                       10
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

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


months ended September 30, 2000. Gross profit increases from businesses acquired
in the CEG division was $2.3 million for the three months ended September 30,
2000.

CASH OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES. Cash operating, general and
administrative expenses increased by $1.1 million or 3.3% to $34.5 million for
the three months ended September 30, 2000, as compared to $33.4 million for the
three months ended September 30, 1999. CEG's operating expenses increased $2.0
million primarily due to acquisitions. Partially offsetting these increases were
decreased cash operating expenses in the retail and administrative areas of $0.9
million due to cost reduction initiatives. As a percentage of revenues,
operating, general and administrative expenses decreased to 3.1% for the three
months ended September 30, 2000, as compared to 6.0% for the three months ended
September 30, 1999, due to a combination of decreased operating expenses and an
increase in CEG revenues.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $2.8
million or 34.1% to $11.0 million for the three months ended September 30, 2000,
as compared to $8.2 million for the three months ended September 30, 1999. This
increase was primarily due to the additional amortization and depreciation
expense associated with acquired businesses.

INTEREST EXPENSE. Interest expense increased by $1.5 million or 17.9% to $9.9
million for the three months ended September 30, 2000, as compared to $8.4
million for the three months ended September 30, 1999. The increase was due
principally to borrowings related to acquisitions and to a lesser extent, higher
working capital borrowings as a result of higher product costs and higher
interest rates.


                                       11
<PAGE>


                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

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


LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. Cash used by operating activities during the three month
period ended September 30, 2000 was $2.8 million. Cash flow from operations
included a net loss of $20.2 million and non-cash charges of $12.9 million for
the period, comprised of depreciation and amortization expense, the gain on sale
of assets and the net loss in the fair value of derivatives. The impact of
working capital changes increased cash flow by approximately $4.5 million.

INVESTING ACTIVITIES. Cash provided by investment activities for the three month
period ended September 30, 2000 totaled $2.6 million, which was principally
related to the sales of several Partnership retail service centers in the
Southeastern United States, net of purchases of plant and equipment. The sale of
selected retail service centers reflects the Partnership's continuing focus on
the rationalization of under-performing operations.

FINANCING ACTIVITIES. Cash provided by financing activities was $1.4 million for
the three months ended September 30, 2000, which reflects an increase of $12.7
million in the partnership's working capital facility, net of payments on
long-term debt and financing costs of $2.8 million. Cash distributions paid to
Unitholders for the period totaled $9.3 million and advances from related
parties totaled $0.8 million.

FINANCING AND SOURCES OF LIQUIDITY

The Partnership's obligations under its Senior Note Agreements and Bank Credit
Agreement are secured by a security interest in the Operating Partnership's
inventory, accounts receivable and certain customer storage tanks. The Senior
Note and Bank Credit Agreements contain various terms and covenants including
financial ratio covenants with respect to debt and interest coverage and
limitations, among others, on the ability of the Partnership and its
subsidiaries to incur additional indebtedness, create liens, make investments
and loans, and enter into mergers, consolidations or sales of all or
substantially all assets. These ratios are incurrence tests to be met in order
for the Partnership to incur additional ratable secured debt. In addition, other
financial ratios must be met for the Partnership to pay the Minimum Quarterly
Distribution ("MQD") without approval of the Senior Note holders. At September
30, 2000, the Partnership's financial ratios were outside of the incurrence test
thresholds; therefore the Partnership is currently precluded from borrowing
additional parity senior secured debt for acquisitions until these financial
ratios are back within the thresholds stated in the agreements. The Partnership
does not anticipate consummating any significant acquisitions until after the
upcoming heating season to better assess national heating degree day patterns
and their potential impact on retail sales volumes. The Partnership's financial
ratios meet all requirements with respect to its ability to make its MQD
payments.

On November 20, 1998, the Partnership refinanced its then existing Bank Credit
Facility under the terms of a new Bank Refunding Credit Agreement (the "Credit
Agreement"). The Credit Agreement was subsequently amended effective June 30,
2000 to provide greater flexibility with respect to the financial covenants
under the original Credit Agreement. In connection with this amendment,
Northwestern Corporation ("Northwestern," the Parent of the Managing General
Partner) provided a guaranty of up to $47.0 million of Partnership obligations
under the Credit Agreement, in return for a commitment fee of 6.50% per annum of
the outstanding amount guaranteed. The Partnership also issued a warrant to
Northwestern for 381,875 Partnership common units at an exercise price of $0.10
per unit, and may issue additional warrants under

                                       12
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

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


certain circumstances. Any advances under the guaranty bear an advance fee of
3% of the amount advanced and interest at LIBOR plus a designated spread
until the date of repayment, initially 9% per year, with certain penalty
provisions in the event of non-payment by the Partnership. This guaranty
amount may be increased up to $70.0 million under certain circumstances. The
Partnership has also agreed to indemnify Northwestern against liabilities
arising out of this arrangement. The Partnership incurred other fees and
expenses related to the amendment of the Credit Agreement unrelated to the
arrangements with Northwestern.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
relating to the Partnership's future business expectations and predictions and
financial condition and results of operations. These forward-looking statements
involve certain risks and uncertainties. The Partnership's actual future
performance will be affected by a number of factors, risks, and uncertainties,
including, without limitation: the impact of weather conditions on the demand
for propane; fluctuations in the unit cost of propane; the ability of the
Partnership to compete with other suppliers of propane and other energy sources;
the ability of the Partnership to retain and acquire customers; the
Partnership's ability to implement its expansion strategy and to integrate
acquired businesses successfully; the impact of energy efficiency and technology
advances on the demand for propane; the ability of management to continue to
control expenses; the impact of regulatory developments on the Partnership's
business; and the impact of legal proceedings on the Partnership's business. All
subsequent written and oral forward-looking statements attributable to the
Partnership or persons acting on its behalf are expressly qualified in their
entirety by such cautionary statements. The Partnership undertakes no obligation
to publicly release any revision to these forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.

                                       13
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                                     ITEM 3:
                          QUANTITATIVE AND QUALITATIVE
                         DISCLOSURES ABOUT MARKET RISKS


MARKET RISK

The Partnership has limited exposure to technology risk, credit risk, interest
rate risk, foreign currency risk, and commodity price risk. In the normal course
of business, the Partnership employs various strategies and procedures to manage
its exposure to changes in interest rates, fluctuations in the value of foreign
currencies, and changes in commodity prices. The Partnership's exposure to any
of these risks is not materially different than as disclosed in the
Partnership's Annual Report on 10-K for the year ended June 30, 2000.


                                       14
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY


PART II. OTHER INFORMATION


Item 6: Exhibits and Reports on Form 8-K


a)                Exhibits


                  An exhibit index is attached at the end of this report and is
                  incorporated herein by reference.

b)                Reports on Form 8-K:

                  None


                                       15
<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                                    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.


                  Cornerstone Propane Partners, L.P.
                                    (Registrant)

                  By:               Cornerstone Propane GP, Inc.
                                    as Managing General Partner

                  By:               /s/ Ronald J. Goedde
                                    ---------------------------------
                  Name:             Ronald J. Goedde
                  Title:            Executive Vice President
                                    and Chief Financial Officer

                  By:               /s/ Richard D. Nye
                                    ---------------------------------
                  Name:             Richard D. Nye
                  Title:            Vice President Finance
                                    & Administration

                  Date:             November 13, 2000




                                       16
<PAGE>

                                  EXHIBIT INDEX



<TABLE>
<CAPTION>
Exhibits           Description
<S>               <C>
4.3                Warrant and Registration Rights Agreement between Cornerstone Propane Partners, L.P. and
                   Northwestern Corporation, dated June 30, 2000

4.4                Letter Agreement between the Registrant and Northwestern Corporation dated June 28,
                   2000, relating to compensation under Guaranty Agreement

27                 Financial Data Schedule
</TABLE>

                                       17