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 ~~June~~September 30, 2004

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

For the transition period from to

Commission File Number 1-7324

Kansas Gas and Electric Company

(Exact name of registrant as specified in its charter)


Kansas		48-1093840
(State or other jurisdiction 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)

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 ¨ No x

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 ~~August~~November 14, 2004)

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.

TABLE OF CONTENTS

		~~Page~~	Page
PART I. Financial Information
Item 1.	~~Condensed Financial Statements (Unaudited)~~	Condensed Financial Statements (Unaudited)
	~~Consolidated Balance Sheets~~	4Consolidated Balance Sheets	4
	~~Consolidated Statements of Income and Comprehensive Income~~	~~5-6~~Consolidated Statements of Income and Comprehensive Income	5-6
	~~Consolidated Statements of Cash Flows~~	7Consolidated Statements of Cash Flows	7
	~~Condensed Notes to Consolidated Financial Statements~~	8Condensed Notes to Consolidated Financial Statements	8
Item 2.	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	13Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~	20Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	~~Controls and Procedures~~	20Controls and Procedures	21
PART II. Other Information
Item 1.	~~Legal Proceedings~~	22Legal Proceedings	22
Item 2.	~~Changes in Securities and Use of Proceeds~~	22Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	~~Defaults Upon Senior Securities~~	22Defaults Upon Senior Securities	22
Item 4.	~~Submission of Matters to a Vote of Security Holders~~	22Submission of Matters to a Vote of Security Holders	22
Item 5.	~~Other Information~~	22Other Information	22
Item 6.	~~Exhibits and Reports on Form 8-K~~	22Exhibits	22
Signature		23	23

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,

•

compliance with debt and other restrictive covenants,

•

interest rates,

•

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 and capital market conditions,

•

changes in accounting requirements and other accounting matters,

•

changing weather,

•

rates, cost recoveries and other regulatory matters,

•

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

•

the impact of “Hours of Service” legislation that was enacted in January 2004 on the number of hours during which employees may operate equipment,

•

the outcome of the notice of violation received by Westar Energy, Inc. on January 22, 2004 from the Environmental Protection Agency and other environmental matters,

• 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 energy marketing and transmission transactions,

•

political, legislative, judicial and regulatory developments,

•

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

•

the impact of changes in interest rates,

•

changes in, and the discount rate assumptions used for, Wolf Creek Nuclear Operating Corporation pension and other post-retirement benefit liability calculations, as well as actual and assumed investment returns on pension plan assets,

•

the impact of changing interest rates and other assumptions on our decommissioning liability for Wolf Creek Generating Station,

•

transmission reliability rules,

•

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, 2003. No one section of this 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, 2003. Any forward-looking statement speaks only as of the date such statement was made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made except as required by applicable laws or regulations.

PART I. Financial Information

ITEM 1. CONDENSED FINANCIAL STATEMENTS

KANSAS GAS AND ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	June 30,2004		December 31,2003
	September 30, 2004		December 31, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	84,~~553~~366	$	6,321
Accounts receivable, net		88105,~~476~~324		80,771
Inventories and supplies		6259,~~339~~515		66,930
Energy marketing contracts		41,~~096~~942		8,688
Deferred tax assets		34,~~515~~885		1,064
Prepaid expenses		4433,~~016~~434		24,657
Other		21,~~687~~727		1,457
Total Current Assets		~~213~~211,~~682~~193		189,888
PROPERTY, PLANT AND EQUIPMENT, NET		2,~~349~~338,~~340~~640		2,362,371
OTHER ASSETS:
Regulatory assets		~~327~~328,~~369~~824		316,670
Nuclear decommissioning trust		8384,~~543~~123		80,075
Other		4041,~~808~~351		31,225
Total Other Assets		~~451~~454,~~720~~298		427,970
TOTAL ASSETS	$	3,~~014~~004,~~742~~131	$	2,980,229
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	34,389	$	42,231
Current maturities of long-term debt	$	65,000	$	—
Payable to affiliates		83,745		81,380
Accounts payable		42,236		42,231
Accrued interest		6,564		8,246
Payable to affiliates		62,978		81,380
Accrued taxes		31,690		28,059
Accrued interest		6,940		8,246
LaCygne 2 lease		36,980		32,543
Accrued taxes		43,953		28,059
Energy marketing contracts		4,994		6,799
LaCygne 2 lease		27,632		32,543
Other		14,203		10,578
Energy marketing contracts		3,807		6,799
Total Current Liabilities		212,565		209,836
Other		15,458		10,578
Total Current Liabilities		268,004		209,836
LONG-TERM LIABILITIES:
Long-term debt, net		~~552~~487,~~414~~416		549,604
Deferred income taxes and investment tax credits		~~734~~733,~~714~~658		731,736
Deferred gain from sale-leaseback		~~144~~141,~~895~~938		150,810
Asset retirement obligation		8385,~~906~~512		80,695
Nuclear decommissioning		8384,~~543~~123		80,075
Other		~~112~~104,~~258~~085		91,895
Total Long-Term Liabilities		1,~~711~~636,~~730~~732		1,684,815
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDER’S EQUITY:
Common stock, no par value; authorized and issued 1,000 shares		1,065,634		1,065,634
Retained earnings		2433,~~813~~761		19,944
Total Shareholder’s Equity		1,~~090~~099,~~447~~395		1,085,578
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	3,~~014~~004,~~742~~131	$	2,980,229

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

KANSAS GAS AND ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Dollars in Thousands)

(Unaudited)

	Three Months EndedJune 30,
	Three Months Ended September 30,
	2004			2003
SALES	$	~~180~~202,~~335~~209		$	~~172~~207,~~165~~261
OPERATING EXPENSES:
Fuel and purchased power		3952,~~735~~726			4151,~~191~~498
Operating and maintenance		5857,~~402~~097			56,~~260~~007
Depreciation and amortization		2223,~~894~~009			22,~~989~~601
Selling, general and administrative		1618,~~334~~932			1619,~~737~~086
Total Operating Expenses		~~137~~151,~~365~~764			~~137~~149,~~177~~192
INCOME FROM OPERATIONS		4250,~~970~~445			3458,~~988~~069
OTHER INCOME (EXPENSE):
Other income		67,~~172~~113			15,~~075~~744
Other expense		(24,~~641~~404	)		(25,~~592~~077	)
Total Other Income (Expense)		3,531			(1,517	)
Total Other Income		2,709			667
Interest expense		86,~~519~~921			1119,~~717~~362
INCOME BEFORE INCOME TAXES		3746,~~982~~233			2139,~~754~~374
Income tax expense		1112,~~059~~285			510,~~770~~451
NET INCOME		2633,~~923~~948			1528,~~984~~923
OTHER COMPREHENSIVE INCOME, NET OF TAX:
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized holding gain on cash flow hedges		—			2,199
Unrealized holding loss on cash flow hedges arising during the period		—			(1,261	)
Adjustment for gains included in net income		—			(766	)
Adjustment for gain included in net income		—			(4,255	)
Income tax expense related to items of other comprehensive income		—			(570	)
Income tax benefit related to items of other comprehensive income		—			2,194
Total other comprehensive gain, net of tax		—			863
Total other comprehensive loss, net of tax		—			(3,322	)
COMPREHENSIVE INCOME	$	2633,~~923~~948		$	1625,~~847~~601

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

KANSAS GAS AND ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Dollars in Thousands)

(Unaudited)

	Six Months EndedJune 30,
	Nine Months Ended September 30,
	2004			2003
SALES	$	~~342~~544,~~426~~634		$	~~344~~552,~~835~~096
OPERATING EXPENSES:
Fuel and purchased power		94147,~~776~~502			84135,~~116~~615
Operating and maintenance		~~113~~170,~~366~~463			~~111~~167,~~695~~702
Depreciation and amortization		4568,~~647~~656			4567,~~335~~935
Selling, general and administrative		3453,~~077~~008			3251,~~337~~423
Total Operating Expenses		~~287~~439,~~866~~629			~~273~~422,~~483~~675
INCOME FROM OPERATIONS		54105,~~560~~005			71129,~~352~~421
OTHER INCOME (EXPENSE):
Other income		1219,~~162~~274			28,~~314~~058
Other expense		(611,~~893~~296	)		(611,~~243~~320	)
Total Other Income (Expense)		57,~~269~~978			(3,~~929~~262	)
Interest expense		1724,~~925~~846			2342,~~480~~842
INCOME BEFORE INCOME TAXES		4188,~~904~~137			4383,~~943~~317
Income tax expense		1224,~~035~~320			1021,~~935~~386
NET INCOME		2963,~~869~~817			3361,~~008~~931
OTHER COMPREHENSIVE INCOME, NET OF TAX:
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized holding gain on cash flow hedges		—			4,773
Unrealized holding gain on cash flow hedges arising during the period		—			3,512
Adjustment for gains included in net income		—			(766	)
Adjustment for gain included in net income		—			(5,021	)
Income tax expense related to items of other comprehensive income		—			(1,594	)
Income tax benefit related to items of other comprehensive income		—			600
Total other comprehensive gain, net of tax		—			2,413
Total other comprehensive loss, net of tax		—			(909	)
COMPREHENSIVE INCOME	$	2963,~~869~~817		$	3561,~~421~~022

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

KANSAS GAS AND ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Six Months EndedJune 30,
	Nine Months Ended September 30,
	2004			2003
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$	2963,~~869~~817		$	3361,~~008~~931
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4568,~~647~~656			4567,~~335~~935
Amortization of nuclear fuel		710,~~106~~631			710,~~070~~616
Amortization of deferred gain from sale-leaseback		(58,~~914~~871	)		(58,~~914~~871	)
Amortization of prepaid corporate owned life insurance		5,953			5,679
Amortization of prepaid corporate-owned life insurance		9,770			9,467
Net deferred taxes		21,~~641~~272			~~761~~450
Net changes in energy marketing assets and liabilities		3,~~145~~924			~~453~~(1,727	)
Changes in working capital items:
Restricted cash		—			5,130
Accounts receivable, net		(24,553	)		(33,167	)
Accounts receivable, net		(7,705	)		(17,981	)
Inventories and supplies		7,415			1,025
Inventories and supplies		4,591			(2,413	)
Prepaid expenses and other		(43,138	)		(47,352	)
Prepaid expenses and other		(43,747	)		(47,404	)
Accounts payable		(286	)		5,795
Accounts payable		(8,004	)		6,934
Payable to affiliates		(18,402	)		4,607
Payable to affiliates		2,365			12,088
Accrued and other current liabilities		10,691			15,196
Accrued and other current liabilities		6,880			14,065
Changes in other, assets		(887	)		1,193
Changes in other, assets		(1,603	)		(194	)
Changes in other, liabilities		(316	)		11,573
Changes in other, liabilities		737			996
Cash flows from operating activities		79,723			98,671
Cash flows from operating activities		41,961			57,613
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Additions to property, plant and equipment		(4360,~~066~~015	)		(4464,~~161~~698	)
Investment in corporate-owned life insurance		(19,658	)		(19,599	)
Cash flows used in investing activities		(6279,~~724~~673	)		(6384,~~760~~297	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds of long-term debt		321,540			—
Retirements of long-term debt		(329,138	)		(5	)
Funds in trust for debt repayments		—			5,130
Net borrowings against cash surrender value of corporate-owned life insurance		55,593			57,299
Dividends to parent company		(2550,000	)		(5075,000	)
Cash flows from financing activities		22,995			7,294
Cash flows used in financing activities		(2,005	)		(12,576	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		2,232			1,147
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(1,955	)		1,798
CASH AND CASH EQUIVALENTS:
Beginning of period		6,321			6,150
End of period	$	84,~~553~~366		$	7,~~297~~948
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest, net of amount capitalized	$	1724,~~195~~634		$	2127,~~953~~833

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

KANSAS GAS AND ELECTRIC COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE~~SEPTEMBER 30, 2004

(Unaudited)

1. DESCRIPTION OF BUSINESS

Kansas Gas and Electric Company is a 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” and 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 300,000 customers in south-central and southeastern Kansas, including the Wichita metropolitan area.

We own a 47% interest in the Wolf Creek Generating Station (Wolf Creek), a nuclear power plant located near Burlington, Kansas, and a 47% interest in Wolf Creek Nuclear Operating Corporation (WCNOC), the operating company for Wolf Creek.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

We prepare our condensed 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 and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 2003 (2003 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, valuation of commodity contracts, depreciation, unbilled revenue, valuation of our energy marketing portfolio, intangible assets, income taxes, our portion of WCNOC’s pension and other post-retirement benefits, our asset retirement obligations including decommissioning of Wolf Creek, environmental issues and litigation. Actual results may differ from those estimates under different assumptions or conditions. The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2004 are not necessarily indicative of the results to be expected for the full year.

Reclassifications

We have reclassified certain prior year amounts to conform with classifications used in the current-year presentation as necessary for a fair presentation of the financial statements.

Our previously filed consolidated statement of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2003 presented cash flow activity related to our corporate -owned life insurance (COLI) policies net in the Operating Activities section of our consolidated statement of cash flows. For the six months ended June 30, 2004, our consolidated statement of cash flows reports cash outflows associated with the portion of the premium payment that increases the cash surrender value of the COLI policies as an investing activity and the cash received from borrowings against the COLI policies as a financing activity. Accordingly, on our statement of cash flows for the six months ended June 30, 2003, we have decreased cash flows from operating activities by $37.7 million, increased cash flows used in investing activities by $19.6 million as it relates to cash outflows associated with the portion of the premium payment that increases the cash surrender value of the COLI policies, and increased cash flows from financing activities by $57.3 million as it relates to the cash received from borrowings against the COLI policies.

Activities section of our consolidated statement of cash flows. For the nine months ended September 30, 2004, our consolidated statement of cash flows reports cash outflows associated with the portion of the premium payment that increases the cash surrender value of the COLI policies as an investing activity and the cash received from borrowings against the COLI policies as a financing activity. Accordingly, on our statement of cash flows for the nine months ended September 30, 2003, we have decreased cash flows from operating activities by $37.7 million, increased cash flows used in investing activities by $19.6 million as it relates to cash outflows associated with the portion of the premium payment that increases the cash surrender value of the COLI policies, and decreased cash flows used in financing activities by $57.3 million as it relates to the cash received from borrowings against the COLI policies.

3. RATE MATTERS AND REGULATION — CURRENT STATUS OF THE DEBT REDUCTION PLAN

In August 2003, we began ratably recording a regulatory liability for rebates that will be paid to customers in 2005 and 2006. Accordingly, as of ~~June~~September 30, 2004, we have recorded a regulatory liability of $34.76 million for these rebates, which is included in ~~other~~ current liabilities on our consolidated balance ~~sheets~~sheet.

4. ACCOUNTS RECEIVABLE SALES PROGRAM

On July 28, 2000, Westar Energy and we entered into an agreement with WR Receivables Corporation, a wholly owned, bankruptcy-remote special purpose entity (SPE), to sell Westar Energy’s and our accounts receivable arising from the sale of electricity to the SPE. These transfers are accounted for as sales in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.” The SPE may sell up to $125 million of an undivided interest in our combined accounts receivable to a third-party conduit under various terms and conditions. The percentage ownership interest in receivables held by the third-party conduit will increase or decrease over time, depending on the characteristics of the SPE’s receivables, including delinquency rates and debtor concentrations. The agreement with the third-party conduit is renewable annually upon agreement by all parties. On July 21, 2004, the agreement was extended through July 19, 2005 on substantially similar terms.

The net SPE ~~receivable~~receivables ~~from~~represent ~~WR Receivables Corporation represents~~ our retained interests in the transferred receivables and is recorded at book value, net of allowances for bad debts. This approximates fair value due to the short-term nature of the receivable. The SPE receivable is included in accounts receivable, net, on our consolidated balance sheets. The interests that we hold are included in the table below:

	June 30,2004		December 31,2003
	September 30,2004		December 31,2003
	(In Thousands)
Undivided Interest — Retained, net	$	7796,~~436~~022	$	71,213
Undivided Interest — Third-party conduit, net		109,~~680~~029		9,186
SPE receivables, net	$	88105,~~116~~051	$	80,399

The outstanding balance of SPE receivables is net of $8090.0 million at ~~June~~September 30, 2004 and $80.0 million at December 31, 2003 in undivided ownership interests sold by the SPE to the third-party conduit.

The following table provides gross proceeds and repayments between the SPE and the third-party conduit. These amounts are provided for cash flow purposes and may not be reflective of accrual accounting. These items are recorded on the consolidated statements of cash flows in the ~~“Accounts~~accounts receivable, net”, line of cash flows from operating activities.

	Six Months EndedJune 30,
	Nine Months Ended September 30,
	2004			~~2003~~	2003
	(In Thousands)
Proceeds from the sale of an undivided interest from the third-party conduit	$	—40,000		$	—$	—
Repayments to the conduit for net collection of its receivable		—(30,000	)		~~(10,000~~	)(10,000	)
SPE proceeds and repayments, net	$	—10,000		$	~~(10,000~~$	)(10,000	)

5. INCOME TAXES

We recorded income tax expense of approximately $1112.13 million for the three months ended ~~June~~September 30, 2004 as compared to $510.85 million for the same period of 2003. We recorded income tax expense of approximately $1224.03 million for the ~~six~~nine months ended ~~June~~September 30, 2004 as compared to ~~expense of approximately~~ $1021.94 million for the same period of 2003. Under the effective tax rate method, we compute the tax related to year-to-date income, except for significant, unusual or extraordinary items, at an estimated annual effective tax rate. We individually compute and recognize, when the transaction occurs, income tax expense related to significant, unusual or extraordinary items.

6. COMMITMENTS AND CONTINGENCIES — EPA NEW SOURCE REVIEW

The United States Environmental Protection Agency (EPA) is conducting investigations nationwide to determine whether modifications at coal-fired power plants are subject to New Source Review requirements or New Source Performance Standards under Section 114(a) of the Clean Air Act (Section 114). These investigations focus on whether projects at coal-fired plants were routine maintenance or whether the projects were substantial modifications that could have reasonably been expected to result in a significant net increase in emissions. The Clean Air Act requires companies to obtain permits and, if necessary, install control equipment to remove emissions when making a major modification or a change in operation if either is expected to cause a significant net increase in emissions.

The EPA has requested information from Westar Energy under Section 114 regarding projects and maintenance activities that have been conducted since 1980 at the three coal-fired plants it operates. On January 22, 2004, the EPA notified Westar Energy that certain projects completed at Jeffrey Energy Center violated pre-construction permitting requirements of the Clean Air Act.

Westar Energy is in discussions with the EPA concerning this matter in an attempt to reach a settlement ~~agreement~~. WeWestar ~~expect~~Energy expects that any settlement with the EPA could require Westar Energy and us to update or install emissions controls at Jeffrey Energy Center over an agreed upon number of years. Additionally, Westar ~~Energy~~ Energy might be required to update or install emissions controls at its other coal-fired plants, pay fines or penalties, or take other remedial action. Together, these costs could be material. The EPA may refer the matter to the United States Department of Justice for it to consider whether to pursue an enforcement action. We believe that costs related to updating or installing emissions controls would qualify for recovery through rates. IfIt is possible that Westar Energy ismay ~~assessed~~be assessed a penalty as a result of the EPA’s allegation,. ~~the~~The penalty could be material and may not be recovered in rates. We anticipate that a portion of any of these potential costs would be allocated to us.

7. LEGAL PROCEEDINGS

We are involved in various legal, environmental and regulatory proceedings. We believe that adequate provisions have been made and accordingly believe that the ultimate disposition of such matters will not have a material adverse effect on our consolidated financial position or results of operations. See also Note 6 for a discussion of alleged violations of the Clean Air Act.

8. ~~RELATED~~LONG-TERM ~~PARTY~~DEBT ~~TRANSACTIONS~~

~~Our~~During ~~cash~~the ~~management~~nine ~~function,~~months ~~including~~ended ~~cash~~September receipts and disbursements, is performed by Westar Energy. An intercompany account is used to record receipts and disbursements between Westar Energy and us and between WR Receivables Corporation and us. The net amount payable to affiliates was approximately $83.7 million at June 30, 2004, ~~and~~we ~~approximately~~refinanced ~~$81.4~~a ~~million~~portion atof ~~December~~our ~~31,~~debt ~~2003~~ as ~~reflected~~follows: ~~on our consolidated balance sheets.~~


Long-term Debt Refinancing:	Balance as of December 31, 2003		Securities Redeemed			Securities Issued		Balance as of September 30, 2004
	(In Thousands)
Pollution control bond series:
7.00% due 2031	$	327,500	$	(327,500	)	$	—	$	—
5.30% due 2031		—		—			108,600		108,600
2.65% due 2031 and putable 2006		—		—			100,000		100,000
5.30% due 2031		—		—			18,900		18,900
Variable rate due 2031		—		—			100,000		100,000

	$	327,500	$	(327,500	)	$	327,500	$	327,500

9. SHORT-TERM DEBT

On March 12, 2004, Westar Energy entered into a new revolving credit facility. The credit facility matures on March 12, 2007 and will be used as a source of short-term liquidity. It allows Westar Energy borrowings up to an aggregate limit of $300.0 million, including letters of credit up to a maximum aggregate amount of $50.0 million. At September 30, 2004, Westar Energy had no outstanding borrowings and $10.7 million of letters of credit outstanding under the revolving credit facility. All borrowings under the revolving credit facility are secured by our first mortgage bonds.

10. RELATED PARTY TRANSACTIONS

Our cash management function, including cash receipts and disbursements, is performed by Westar Energy. An intercompany account is used to record receipts and disbursements between Westar Energy and us and between WR Receivables Corporation and us. The net amount payable to affiliates was approximately $63.0 million at September 30, 2004 and approximately $81.4 million at December 31, 2003 as reflected on 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.

We declared and paid dividends ~~to Westar Energy for the three months ended June 30, 2003~~ of $25.0 million. Noto ~~dividends~~Westar ~~were~~Energy ~~paid~~for ~~during~~ the three months ended ~~June~~September 30, 2004 and 2003. We declared and paid dividends to Westar Energy for the ~~six~~nine months ended ~~June~~September 30, 2004 of $2550.0 million and for the ~~six~~nine months ended ~~June~~September 30, 2003, we paid dividends of $5075.0 million.

9As we reported in our 2003 Form 10-K, Westar Energy maintained shared services agreements with ONEOK, Inc. ~~REFINANCING~~(ONEOK) ~~AND~~pursuant ~~REDEMPTION~~to OFwhich ~~DEBT~~Westar Energy and ONEOK provided customer service functions to each other, including meter reading, customer billing and call center operations. ONEOK notified Westar Energy of its decision to terminate portions of this shared services agreement. Major items that were terminated in September 2004 included electric service orders, call center functions, bill processing and remittance processing. In addition to joint meter reading, Westar Energy and ONEOK plan to continue to share some facilities and a mobile communications system.

Long-term Debt

We refinanced a portion of our debt as follows:

Long-term Debt Refinancing:	Balance as of December 31, 2003		Securities Redeemed			Securities Issued		Balance as of June 30, 2004
	(In Thousands)
Pollution control bond series:
7.00% due 2031 (a)	$	327,500	$	(327,500	)	$	—	$	—
5.30% due 2031 (b)		—		—			108,600		108,600
2.65% due 2031 and putable 2006 (b)		—		—			100,000		100,000
5.30% due 2031 (b)		—		—			18,900		18,900
Variable due 2031 (b)		—		—			100,000		100,000
Total	$	327,500	$	(327,500	)	$	327,500	$	327,500

(a) Redeemed on June 10, 2004

(b) Issued on June 10, 2004

Short-term Debt

On March 12, 2004, Westar Energy entered into a new revolving credit facility. The new revolving credit facility replaced a $150.0 million revolving credit facility Westar Energy entered into in 2002. The new credit facility matures on March 12, 2007 and will be used as a source of short-term liquidity. It allows Westar Energy borrowings up to an aggregate limit of $300.0 million, including letters of credit up to a maximum aggregate amount of $50 million. At June 30, 2004, Westar Energy had no outstanding borrowings and $4.7 million of letters of credit outstanding under the revolving credit facility. Prior to the closing of the new facility, Westar Energy repaid, with cash on hand, $1.0 million outstanding under the prior credit facility. All borrowings under the revolving credit facility are secured by our first mortgage bonds.

1011. INTERIM PENSION AND POST-RETIREMENT BENEFIT DISCLOSURE

The following table summarizes the net periodic costs for our 47% interest of the WCNOC pension and post-retirement benefit plans.

	Pension Benefits						Post-~~retirementBenefits~~retirement Benefits
Three Months Ended June 30,	2004			2003			2004		2003
Three Months Ended September 30,	2004			2003			2004		2003
	(In Thousands)
Components of Net Periodic Cost:
Service cost	$	643		$	~~621~~636		$	5859	$	5654
Interest cost		824			~~714~~732			8889		7472
Expected return on plan assets		(695	)		(~~601~~616	)		—		—
Amortization of:
Transition obligation, net		14			14			15		1514
Prior service costs		8			8			—		—
Loss		201			~~147~~151			35		25
Net periodic cost	$	995		$	~~903~~925		$	~~196~~198	$	~~170~~165
	Pension Benefits						Post-retirementBenefits
Six Months Ended June 30,	2004			2003			2004		2003
	(In Thousands)
Components of Net Periodic Cost:
Service cost	$	1,263		$	1,269		$	120	$	109
Interest cost		1,619			1,459			175		145
Expected return on plan assets		(1,365	)		(1,228	)		—		—
Amortization of:
Transition obligation, net		28			29			30		29
Prior service costs		15			16			—		—
Loss		396			300			71		49
Net periodic cost	$	1,956		$	1,845		$	396	$	332


	Pension Benefits						Post-retirement Benefits
Nine Months Ended September 30,	2004			2003			2004		2003
	(In Thousands)
Components of Net Periodic Cost:
Service cost	$	1,906		$	1,905		$	179	$	163
Interest cost		2,443			2,191			264		217
Expected return on plan assets		(2,060	)		(1,844	)		—		—
Amortization of:
Transition obligation, net		42			43			45		43
Prior service costs		23			24			—		—
Loss		597			451			106		74

Net periodic cost	$	2,951		$	2,770		$	594	$	497

In December 2003, the United States Congress passed and the President signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act). The Medicare Act introduced a prescription drug benefit under Medicare as well as a federal subsidy beginning in 2006. This subsidy will be paid to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare. WCNOC believes its retiree health care benefits plan is at least actuarially equivalent to Medicare and is eligible for the federal subsidy. We elected to defer the recognition of the effects of the Medicare Act on our consolidated financial statements until final authoritative guidance on the subsidy was issued by the Financial Accounting Standards Board (FASB). The final guidance under FASB Staff Position (FSP) Financing Accounting Standards (FAS) No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003,” was issued on May 19, 2004. We adopted the guidance in the third quarter of 2004. The impact of FSP No. 106-2 is not material.


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

INTRODUCTION

We are a regulated electric utility in Kansas and a wholly owned subsidiary of Westar Energy. We provide rate-regulated electric service, together with the electric utility operations of Westar Energy, using the name Westar Energy. We produce, transmit and sell electricity at retail in Kansas under the regulation of the KCC and at wholesale in a multi-state region in the central United States and under the regulation of the Federal Energy Regulatory Commission (FERC).

Our goals are to improve our business by improving customer service, continuing to expand our wholesale sales, improving our credit quality, and improving our relationships with regulators, ~~employees~~ and other interested parties.

Key factors affecting our business in any given period include the weather, the economic well-being of our service territory, performance of our physical plant, conditions in the markets for fuel and wholesale electricity, impacts of regulation and the effects of public policy initiatives.

As you read Management’s Discussion and Analysis, please refer to our condensed consolidated financial statements and the accompanying notes, which contain our operating results.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of financial conditions and results of operations are based on our condensed consolidated financial statements, which have been prepared in conformity with GAAP. Note 2 of the Notes to Consolidated Financial Statements, “Summary of Significant Accounting Policies,” contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions by management. The policies highlighted in our 2003 Form 10-K have an impact on our reported results that may be material due to the levels of judgment and subjectivity necessary to account for uncertain matters or susceptibility of matters subject to change.

Since December 31, 2003, we have not experienced any significant changes in our critical accounting estimates. For additional information on our critical accounting estimates, see our 2003 Form 10-K.

OPERATING RESULTS

We evaluate operating results based on income from operations. We have various classifications of sales, defined as follows:

Retail: Sales of energy made to ~~customers for ultimate consumption, as defined in our retail tariffs. Retail sales include our~~ residential, commercial and industrial customers.

Other retail: ~~Includes~~Sales of energy for lighting public ~~street~~streets and ~~highway~~highways, ~~lighting~~ net of revenues reserved for rebates ~~to be paid to customers in 2005 and 2006~~.

Tariff-based wholesale: Includes the sales of electricity to electric cooperatives, municipalities and other electric utilities, the rate for which is generally based on cost as prescribed by FERC tariffs, and changes in valuations of contracts that have yet to settle.

Market-based wholesale: Includes sales of electricity to other wholesale customers, the rate for which is based on prevailing market rates as allowed by our FERC approved market-based tariff, and changes in valuations of contracts that have yet to settle.

~~Market-based~~Energy ~~wholesale~~marketing: Includes ~~sales~~(1) offinancially ~~electricity~~settled toproducts ~~other~~and ~~wholesale~~physical ~~customers,~~transactions ~~the~~sourced outside ~~rate~~our ~~for which~~control isarea; ~~based~~and on(2) ~~prevailing~~changes ~~market~~in ~~rates~~valuations asfor ~~allowed~~contracts bythat ~~our~~have ~~FERC~~yet ~~approved~~to ~~market-based~~settle ~~tariff~~that ~~and~~may ~~changes~~not be recorded either in ~~valuations~~cost ~~that~~of ~~have~~fuel ~~yet~~or totariff- ~~settle~~or market-based wholesale revenues.

~~Energy~~Network ~~marketing~~integration: ~~Includes~~Reflects ~~(1)~~a ~~market-based~~network ~~energy~~transmission ~~transactions~~tariff ~~unrelated~~with ~~to our generation or~~ the ~~needs of our regulated customers; (2)~~ ~~financially~~Southwest ~~settled~~Power ~~products~~Pool ~~and physical transactions sourced outside our control area; and~~ (3SPP) ~~changes~~as described in ~~valuations~~more ~~for~~detail ~~contracts that have yet to settle that may not be recorded either~~ in ~~cost~~our of2003 ~~fuel~~Form ~~or tariff~~10- ~~or market-based wholesale revenues~~K.

~~Network integration~~Other: ~~Reflects~~Includes amiscellaneous ~~regional transmission organization network transmission tariff with the Southwest Power Pool (SPP) as described in more detail in our 2003 Form 10-K~~revenues.

~~Other:~~Regulated ~~Includes~~electric ~~miscellaneous~~utility ~~electric~~sales ~~revenues~~are significantly impacted by, among other factors, rate regulation, customer conservation efforts, wholesale demand, the overall economy of our service area, the weather and competitive forces. Our wholesale sales are impacted by, among other factors, demand, cost of fuel and purchased power, price volatility and available generation capacity.

~~Regulated~~Three ~~electric~~Months ~~utility~~Ended ~~sales~~September ~~are significantly impacted by~~30, ~~among~~2004 ~~other~~Compared ~~factors,~~to ~~rate~~Three ~~regulation,~~Months ~~customer~~Ended ~~conservation~~September ~~efforts~~30, ~~wholesale~~2003: ~~demand,~~Below ~~the overall~~we ~~economy~~discuss of our operating ~~service~~results ~~area,~~for the ~~weather~~three ~~and~~months ~~competitive~~ended ~~forces.~~September ~~Our~~30, ~~wholesale~~2004 ~~sales~~as ~~are~~compared ~~impacted~~to ~~by,~~the ~~among~~results ~~other~~for ~~factors,~~the ~~demand~~three ~~inside~~months ~~and~~ended ~~outside~~September ~~our~~30, ~~service~~2003. ~~territory,~~Changes ~~the~~in ~~cost~~results of ~~fuel~~operations ~~and~~are ~~purchased~~as ~~power,~~follows: ~~price volatility and available generation capacity.~~

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003: Below we discuss our operating results for the three months ended June 30, 2004 as compared to the results for the three months ended June 30, 2003. Changes in results of operations are as follows:


	Three Months Ended September 30,
	2004			2003		Change			% Change
	(In Thousands)
SALES:
Residential	$	76,264		$	83,583	$	(7,319	)	(8.8	)
Commercial		52,428			50,957		1,471		2.9
Industrial		40,504			40,937		(433	)	(1.1	)
Other retail		238			566		(328	)	(58.0	)

Total Retail Sales		169,434			176,043		(6,609	)	(3.8	)
Tariff-based wholesale		7,300			8,301		(1,001	)	(12.1	)
Market-based wholesale		15,127			9,292		5,835		62.8
Energy marketing		(2,117	)		1,726		(3,843	)	(222.7	)
Network integration (a)		7,820			7,479		341		4.6
Other		4,645			4,420		225		5.1

Total Sales		202,209			207,261		(5,052	)	(2.4	)

OPERATING EXPENSES:
Fuel used for generation (b)		45,037			43,994		1,043		2.4
Purchased power		7,689			7,504		185		2.5
Operating and maintenance		57,097			56,007		1,090		1.9
Depreciation and amortization		23,009			22,601		408		1.8
Selling, general and administrative		18,932			19,086		(154	)	(0.8	)

Total Operating Expenses		151,764			149,192		2,572		1.7

INCOME FROM OPERATIONS	$	50,445		$	58,069	$	(7,624	)	(13.1	)

	Three Months Ended June 30,
	2004			2003		Change			% Change
	(In Thousands)
SALES:
Residential	$	49,951		$	47,231	$	2,720		5.8
Commercial		44,854			42,537		2,317		5.4
Industrial		39,349			38,787		562		1.4
Other retail		231			1,220		(989	)	(81.1	)
Total Retail Sales		134,385			129,775		4,610		3.6
Tariff-based wholesale		5,043			4,312		731		17.0
Market-based wholesale		28,760			23,945		4,815		20.1
Energy marketing		(288	)		1,832		(2,120	)	(115.7	)
Network integration (a)		7,732			7,413		319		4.3
Other		4,703			4,888		(185	)	(3.8	)
Total Sales		180,335			172,165		8,170		4.7
OPERATING EXPENSES:
Fuel used for generation (b)		33,051			35,982		(2,931	)	(8.1	)
Purchased power (c)		6,684			5,209		1,475		28.3
Operating and maintenance		58,402			56,260		2,142		3.8
Depreciation and amortization		22,894			22,989		(95	)	(0.4	)
Selling, general and administrative		16,334			16,737		(403	)	(2.4	)
Total Operating Expenses		137,365			137,177		188		0.1
INCOME FROM OPERATIONS	$	42,970		$	34,988	$	7,982		22.8

(a)

Network integration expense: For the three months ended September 30, 2004, our transmission costs were approximately $8.3 million. This amount, less approximately $0.5 million that was retained by the SPP as administration cost, was returned to us as revenues. For the three months ended September 30, 2003, our transmission costs were approximately $8.5 million with an administration cost of approximately $1.0 million retained by the SPP.

(a) Network integration corresponding expense: For the three months ended June 30, 2004, our transmission costs were approximately $8.4 million. This amount, less approximately $0.6 million that was retained by the SPP as administration cost, was returned to us as revenues. For the three months ended June 30, 2003, our transmission costs were approximately $8.0 million with an administration cost of approximately $0.6 million retained by the SPP.

(b)	Fuel used for generation: Includes cost of fuel burned, changes in fair value of fuel contracts and allocated net dispatch costs, which are net changes or benefits related to energy transactions allocated to us by our parent.

The following table reflects changes in electric sales volumes, as measured by thousands of megawatt hours (MWh) of electricity. No sales volumes are shown for energy marketing, or network integration, or other. Energy marketing activities are unrelated to the electricity we generate.

	Three Months Ended June 30,
	Three Months Ended September 30,
	2004	2003	Change		% Change
	(Thousands of MWh)
Residential	~~648~~923	~~604~~1,019	44(96	)	7(9.34	)
Commercial	~~716~~806	~~672~~796	4410		61.53
Industrial	~~896~~895	~~869~~902	27(7	)	3(0.18	)
Other retail	11	11	—		—
Total Retail	2,~~271~~635	2,~~156~~728	~~115~~(93	)	5.(3.4	)
Tariff-based wholesale	~~104~~138	96175	8(37	)	8(21.31	)
Market-based wholesale	~~855~~452	~~786~~333	69119		835.87
Other	12	39	(27	)	(69.2	)
Total	3,225	3,236	(11	)	(0.3	)
Total	3,242	3,077	165		5.4

~~Residential~~Our retail and ~~commercial~~tariff-based ~~sales~~wholesale ~~and~~customers ~~sales~~used ~~volumes~~less ~~increased~~energy ~~due~~and toour ~~warmer~~sales ~~weather~~decreased inbecause ~~May~~of ~~2004~~cooler ~~as compared to May 2003~~weather. ~~Total~~When ~~retail~~measured ~~sales~~by ~~increased~~cooling ~~correspondingly~~degree ~~but~~days, ~~were partially offset by~~ the ~~accrual~~weather during the three months ended ~~June~~September 30, 2004 ofwas ~~rebates~~20% cooler than the same period last year and ~~totaling~~17% ~~$1.0~~below ~~million~~normal. ~~The~~We ~~rebates~~measure ~~are~~cooling todegree bedays ~~paid~~at toa ~~customers~~weather instation ~~2005~~we ~~and~~believe ~~2006~~to ~~pursuant~~be togenerally ~~the~~reflective ~~July~~of ~~25,~~conditions ~~2003~~in ~~KCC~~our ~~order~~service territory.

Market-based wholesale sales ~~and~~increased due to increased sales volumes ~~increased~~and ~~due~~an ~~primarily~~approximate to20% ~~favorable~~increase ~~market~~in ~~opportunities~~the average price per MWh. ~~Energy~~As ~~marketing~~a ~~sales~~result ~~decreased~~of inthe milder weather, at certain times during the three months ended ~~June~~September 30, 2004, aswe ~~compared~~had additional low-cost energy production available for sale that was not needed to ~~the~~serve ~~same~~our ~~period~~retail and tariff-based wholesale customers. Increased sales volumes accounted for approximately $4.0 million of ~~2003~~the ~~due~~increased tomarket-based ~~favorable~~wholesale ~~changes~~sales inand ~~2003~~higher asaverage ~~compared~~market toprices ~~2004~~accounted for $1.8 million of the increase. Changes in the ~~values~~fair value of ~~positions~~energy ~~receiving~~marketing ~~mark-~~contracts are recognized as an increase or decrease to~~-market~~ ~~accounting~~sales ~~treatment~~pursuant into ~~accordance~~the ~~with~~provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS Nos. 137, 138 and 149 (collectively, SFAS No. 133). We had unfavorable changes in 2004 as compared to the favorable changes in 2003 in the settlement and the fair value of remaining positions receiving mark-to-market accounting treatment.

Two components comprise our fuel cost: actual fuel burned at the generating units we own and allocated net dispatch costs, which are costs allocated to us by Westar Energy. ~~The~~Fuel expense ~~for~~declined ~~actual~~because ~~fuel~~we ~~burned~~used atapproximately ~~our generating units increased $~~2~~.0 million. Increases in the unit cost of fuel caused 69~~% ofless ~~the increase in~~ fuel ~~expense~~for generation due ~~primarily~~ to ~~an increase in~~ the ~~average~~lower ~~price~~demand ofcaused ~~oil.~~by ~~Increases in~~ the ~~quantity~~cooler ~~of fuel we used account for the remainder of the increase in fuel expense~~weather. ~~This~~However, ~~was due primarily to~~ an increase in the ~~amount of coal we used in one of our base load coal units reflecting the timing of scheduled maintenance activities between the two periods. The decline in the~~ allocated net dispatch costs more than offset the ~~increase~~decrease in the cost of fuel and caused the net ~~decrease~~increase for fuel used for generation reported in the table above.

~~Purchased~~Operating ~~power~~and maintenance expense increased due primarily to ~~higher average market prices during the three months ended June 30, 2004. The average market price~~ increased ~~approximately~~planned ~~32%~~and ~~compared~~unplanned togenerating ~~the~~unit ~~2003~~maintenance ~~period~~during ~~while~~ the ~~actual~~third ~~volume~~quarter of ~~purchases decreased slightly~~2004.

Operating and maintenance expenses increased primarily as a result of the timing of maintenance outages at various generating units and increased customer service expense associated with maintenance of our distribution system. While generating units typically have planned maintenance outages, the timing of outages varies from year to year. This can cause maintenance expense to vary during a three month period as compared to the same period in the prior year. During the three months ended June 30, 2004, increased maintenance of our generating units accounted for 65% of the increase in operating and maintenance expenses. The increase in customer service expenses accounted for 30% of the increase in total operating and maintenance expenses. Customer service expenses increased due primarily to increased staffing levels and higher costs associated with the termination of portions of the ONEOK shared services agreement as discussed in Note 18, “Related Party Transactions – Termination of Shared Services Agreement” in our 2003 Form 10-K.

~~Six~~Nine Months Ended ~~June~~September 30, 2004 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2003: Below we discuss our operating results for the ~~six~~nine months ended ~~June~~September 30, 2004 as compared to the results for the ~~six~~nine months ended ~~June~~September 30, 2003. Changes in results of operations are as follows:

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2004			~~2003~~	2003		~~Change~~	Change			~~% Change~~	% Change
	(In Thousands)
SALES:
Residential	$	97173,~~484~~748		$	~~94,128~~$	177,712	$	~~3,356~~$	(3,964	)	~~3.6~~	(2.2	)
Commercial		82134,~~166~~594			~~79,058~~	130,016		~~3,108~~	4,578		~~3.9~~	3.5
Industrial		76116,~~286~~790			~~75,109~~	116,046		~~1,177~~	744		~~1.6~~	0.6
Other retail		~~481~~719			~~2,433~~	2,998		~~(1,952~~	)(2,279	)	~~(80.2~~	)(76.0	)
Total Retail Sales		~~256~~425,~~417~~851			~~250,728~~	426,772		~~5,689~~	(921	)	~~2.3~~	(0.2	)
Tariff-based wholesale		917,~~842~~141			~~9,096~~	17,397		~~746~~	(256	)	~~8.2~~	(1.5	)
Market-based wholesale		5065,~~673~~800			~~58,269~~	67,561		~~(7,596~~	)(1,761	)	~~(13.0~~	)(2.6	)
Energy marketing		~~684~~(1,433	)		~~2,107~~	3,834		~~(1,423~~	)(5,267	)	~~(67.5~~	)(137.4	)
Network integration (a)		1523,~~519~~339			~~14,868~~	22,348		~~651~~	991		~~4.4~~	4.4
Other		913,~~291~~936			~~9,767~~	14,184		~~(476~~	)(248	)	~~(4.9~~	)(1.7	)
Total Sales		~~342~~544,~~426~~634			~~344,835~~	552,096		~~(2,409~~	)(7,462	)	~~(0.7~~	)(1.4	)
OPERATING EXPENSES:
Fuel used for generation (b)		78123,~~361~~398			~~75,201~~	119,196		~~3,160~~	4,202		~~4.2~~	3.5
Purchased power (c)		16,415			8,915			7,500			84.1
Purchased power		24,104				16,419			7,685			46.8
Operating and maintenance		~~113~~170,~~366~~463			~~111,695~~	167,702		~~1,671~~	2,761		~~1.5~~	1.6
Depreciation and amortization		4568,~~647~~656			~~45,335~~	67,935		~~312~~	721		~~0.7~~	1.1
Selling, general and administrative		3453,~~077~~008			~~32,337~~	51,423		~~1,740~~	1,585		~~5.4~~	3.1
Total Operating Expenses		~~287~~439,~~866~~629			~~273,483~~	422,675		~~14,383~~	16,954		~~5.3~~	4.0
INCOME FROM OPERATIONS	$	54105,~~560~~005		$	~~71,352~~$	129,421	$	~~(16,792~~$	)(24,416	)	~~(23.5~~	)(18.9	)

(a) Network integration ~~corresponding~~ expense: For the ~~six~~nine months ended ~~June~~September 30, 2004, our transmission costs were approximately $1625.70 million. This amount, less approximately $1.27 million that was retained by the SPP as administration cost, was returned to us as revenues. For the ~~six~~nine months ended ~~June~~September 30, 2003, our transmission costs were approximately $1624.16 million with an administration cost of approximately $12.3 million retained by the SPP.

(b)	Fuel used for generation: Includes cost of fuel burned, changes in fair value of fuel contracts and allocated net dispatch costs, which are net changes or benefits related to energy transactions allocated to us by our parent.

The following table reflects changes in electric sales volumes, as measured by thousands of MWh of electricity. No sales volumes are shown for energy marketing or network integration. Energy marketing activities are unrelated to the electricity we generate.

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2004	2003	Change		% Change
	(Thousands of MWh)
Residential	12,~~298~~221	12,~~249~~268	49(47	)	3(2.91	)
Commercial	12,~~316~~122	12,~~258~~054	5868		43.63
Industrial	12,~~741~~636	12,~~695~~597	4639		21.75
Other retail	2233	2233	—		—
Total Retail	47,~~377~~012	46,~~224~~952	~~153~~60		30.69
Tariff-based wholesale	~~204~~342	~~208~~383	(441	)	(110.97	)
Market-based wholesale	12,~~575~~027	12,~~713~~046	(~~138~~19	)	(80.19	)
Other	26	98	(72	)	(73.5	)
Total	9,381	9,381	—		—
Total	6,182	6,243	(61	)	(1.0	)

~~Residential~~Our retail and ~~commercial~~tariff-based ~~sales~~wholesale customers used less energy and our sales ~~volumes~~decreased ~~increased~~because ~~due~~of tocooler ~~warmer~~weather. When measured by cooling degree days, the weather induring ~~May~~the nine months ended September 30, 2004 aswas ~~compared~~5% tocooler ~~May~~than ~~2003.~~the ~~Total~~same ~~retail~~period ~~sales~~last ~~increased~~year ~~correspondingly~~and 9% ~~but~~below ~~were~~normal. ~~partially~~We ~~offset~~measure bycooling ~~the~~degree ~~accrual~~days ~~during~~at ~~the~~a ~~six~~weather ~~months~~station ~~ended~~we ~~June~~believe ~~30,~~to ~~2004~~be generally reflective of ~~rebates totaling~~conditions $2in our service territory.0 ~~million~~The ~~that~~accrual ~~are~~for rebates to be paid to customers in 2005 and 2006 pursuant to the July 25, 2003 KCC order also reduced retail sales. During the nine months ended September 30, 2004, we accrued $3.0 million as compared to $0.6 million accrued during the same period of 2003.

Market-based wholesale sales decreased due primarily to less favorable market opportunities. Energy marketing sales decreased in the six months ended June 30, 2004 as compared to the same period of 2003 due to favorable changes in 2003 in the values of positions receiving mark-to-market accounting treatment in accordance with SFAS No. 133.

~~The~~Market-based ~~expense~~wholesale ~~for~~sales ~~actual~~decreased ~~fuel burned at our generating units increased $10.5 million. Increases in the unit cost of fuel caused 65% of the increase in fuel expense~~ due primarily to an ~~increase~~approximate 2% decrease in the average price per ofMWh ~~oil.~~and ~~Increases~~decreased insales ~~the~~volumes. ~~quantity~~Lower ofaverage ~~fuel~~market weprices ~~used~~accounted ~~account~~ for ~~the~~approximately ~~remaining~~$1.2 ~~35%~~million of the ~~increase~~decreased inmarket-based ~~fuel~~wholesale ~~expense.~~sales ~~This was due primarily to an increase in the amount of coal we used at one of our base load coal units~~ and ~~because~~decreased wesales ~~used~~volumes ~~more~~accounted ~~oil~~for ~~during the 2004 period than we did during the 2003~~$0.6 Wemillion ~~experienced~~of ~~unplanned outages or reduced operating capability at various times throughout~~ the ~~six months ended June 30, 2004 at Jeffrey Energy Center~~decrease. ~~The average availability factor for Jeffrey~~ Energy ~~Center~~marketing ~~was~~sales decreased ~~82%~~due ~~during~~to ~~the~~unfavorable ~~six~~changes ~~months~~in ~~ended June 30,~~ 2004 as compared to ~~91% during~~ the ~~six~~favorable ~~months~~changes ~~ended~~in ~~June 30,~~ 2003. ~~This~~in ~~decreased~~ the ~~coal~~ ~~use~~settlement ~~at Jeffrey Energy Center~~ and ~~consequently reduced~~ the ~~cost~~fair ofvalue ~~coal used. However, we consumed more coal and oil at other generating facilities to compensate for the loss~~ of ~~energy~~remaining ~~from~~positions ~~Jeffrey~~receiving ~~Energy Center. While the average cost of coal remained relatively constant from period~~ mark-to-market ~~period,~~accounting ~~the average cost of oil was substantially higher~~treatment. ~~The decline in the allocated net dispatch costs partially offset the increase in the cost of fuel.~~

~~Purchased~~The ~~power~~ expense ~~increased~~for ~~due~~actual ~~primarily~~fuel toburned aat ~~91%~~our ~~increase~~generating inunits ~~volumes~~increased $11.0 ~~purchased~~million ~~during~~because ~~the~~we ~~six~~used ~~months~~approximately ~~ended~~3% ~~June~~more ~~30,~~fuel ~~2004~~for asgeneration ~~compared~~at toan ~~the~~8% ~~same~~higher ~~period~~average ~~of 2003~~cost. WeIncreases ~~purchased~~in ~~more~~the ~~power~~cost ~~from~~of ~~other~~fuel ~~sources~~used ~~when~~for itgeneration ~~was~~accounted ~~more~~for ~~economical~~approximately to$8.1 ~~purchase~~million ~~power~~of ~~than~~the toincrease ~~operate~~in ~~our~~fuel ~~generating units~~expense. WeIncreases ~~also~~in ~~purchased~~the ~~more~~amount ~~power~~of ~~during~~fuel burned accounted for approximately $2.9 million of the ~~first~~increase. ~~quarter~~A decline of ~~2004~~$6.0 ~~due~~million in net dispatch costs allocated to us by Westar Energy partially offset the ~~unplanned~~increase ~~outages~~in atfuel expense. At Jeffrey Energy Center., ~~Market~~one ~~prices~~of ~~were~~our ~~approximately~~largest coal-fired ~~23%~~base-load ~~higher~~units, inthe average availability factor was 85% during the ~~six~~nine months ended ~~June~~September 30, 2004 ~~than~~compared into 92% during the ~~same~~nine ~~period~~months ofended September 30, 2003. To compensate for the loss of energy, we relied more heavily on some of our more expensive units that use natural gas or oil.

Purchased power expense increased due primarily to a 56% increase in volumes purchased during the nine months ended September 30, 2004 as compared to the same period of 2003. At times, it was more economical to purchase power than to operate our available generating units. This is due to the unavailability or reduced operating capability of our units or the availability of economically priced power due to cooler weather in our region.

LIQUIDITY AND CAPITAL RESOURCES

Overview

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

We expect our internally generated cash, advances from our parent and availability of cash through our parent’s credit facilities to be 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 problem that could require us to obtain a credit facility for our short-term cash needs and that could result in higher borrowing costs.

~~Capital~~On ~~Resources~~March 12, 2004, Westar Energy entered into a new revolving credit facility. The credit facility matures on March 12, 2007 and will be used as a source of short-term liquidity. It allows Westar Energy borrowings up to an aggregate limit of $300.0 million, including letters of credit up to a maximum aggregate amount of $50.0 million. At September 30, 2004, Westar Energy had no outstanding borrowings and $10.7 million of letters of credit outstanding under the revolving credit facility. All borrowings under the revolving credit facility are secured by our first mortgage bonds.

~~On March 12, 2004, Westar Energy entered into a new revolving credit~~Future ~~facility.~~Cash ~~The~~Requirements new revolving credit facility replaced a $150.0 million revolving credit facility Westar Energy entered into in 2002. The new credit facility matures on March 12, 2007 and will be used as a source of short-term liquidity. It allows Westar Energy borrowings up to an aggregate limit of $300.0 million, including letters of credit up to a maximum aggregate amount of $50 million. At June 30, 2004, Westar Energy had no outstanding borrowings and $4.7 million of letters of credit outstanding under the revolving credit facility. Prior to the closing of the new facility, Westar Energy repaid, with cash on hand, $1.0 million outstanding under the prior credit facility. All borrowings under the revolving credit facility are secured by our first mortgage bonds. As of August 3, 2004, Westar Energy had $19.0 million of borrowings outstanding under the credit facility.

We own a 50% undivided interest in the LaCygne 1 generating unit and are the lessee of a 50% undivided interest in the LaCygne 2 generating unit, both of which are operated by Kansas City Power & Light Company (KCPL). KCPL has informed us that environmental-related equipment may be installed on these units. KCPL anticipates that costs will be incurred beginning in 2005 and continuing through the completion of installation in 2007. We expect that costs related to updating or installing emissions controls will be material. We believe that these costs would qualify for recovery through rates.

Refinancing of Long-term Debt

WeDuring the nine months ended September 30, 2004, we refinanced a portion of our debt as follows:

Long-term Debt Refinancing:	Balance as of December 31, 2003		Securities Redeemed			Securities Issued		Balance as of ~~June~~September 30, 2004
	(In Thousands)
Pollution control bond series:
7.00% due 2031 (a)	$	327,500	$	(327,500	)	$	—	$	—
7.00% due 2031	$	327,500	$	(327,500	)	$	—	$	—
5.30% due 2031 (b)		—		—			108,600		108,600
5.30% due 2031		—		—			108,600		108,600
2.65% due 2031 and putable 2006 (b)		—		—			100,000		100,000
2.65% due 2031 and putable 2006		—		—			100,000		100,000
5.30% due 2031 (b)		—		—			18,900		18,900
5.30% due 2031		—		—			18,900		18,900
Variable rate due 2031 (b)		—		—			100,000		100,000
Variable rate due 2031		—		—			100,000		100,000
Total	$	327,500	$	(327,500	)	$	327,500	$	327,500
	$	327,500	$	(327,500	)	$	327,500	$	327,500

(a) Redeemed on June 10, 2004

(b) Issued on June 10, 2004

Credit Ratings

On July 22, 2004, Standard & Poor’s Ratings Group improved its ratings on our first mortgage bonds to BBB from BB+. On April 14, 2004, Moody’s Investors Service (Moody’s) affirmed its ratings for Westar Energy’s and our first mortgage bonds and unsecured debt and changed its outlook of our credit ratings to positive from negative. Moody’s also raised the speculative liquidity rating it assigned to Westar Energy to SGL-2 from SGL-3, reflecting its view that Westar Energy has “good” liquidity. Since March 1, 2004, Fitch Investors Service has not changed its ratings for Westar Energy’s or our first mortgage bonds or Westar Energy’s unsecured debt. For additional information on our credit ratings, see our 2003 Form 10-K, “Liquidity and Capital Resources — Credit Ratings.”

OFF-BALANCE SHEET ARRANGEMENTS — ACCOUNTS RECEIVABLE SALES PROGRAM

On July 28, 2000, Westar Energy and we entered into an agreement with WR Receivables Corporation, a wholly owned, bankruptcy-remote SPE, to sell Westar Energy’s and our accounts receivable arising from the sale of electricity to the SPE. These transfers are accounted for as sales in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.” The SPE may sell up to $125 million of an undivided interest in our combined accounts receivable to a third-party conduit under various terms and conditions. The percentage ownership interest in receivables held by the third-party conduit will increase or decrease over time, depending on the characteristics of the SPE’s receivables, including delinquency rates and debtor concentrations. The agreement with the third-party conduit is renewable annually upon agreement by all parties. On July 21, 2004, the agreement was extended through July 19, 2005 on substantially similar terms.

	June 30,2004		December 31,2003
	September 30, 2004		December 31, 2003
	(In Thousands)
Undivided Interest — Retained, net	$	7796,~~436~~022	$	71,213
Undivided Interest — Third-party conduit, net		109,~~680~~029		9,186
SPE receivables, net	$	88105,~~116~~051	$	80,399

	Six Months EndedJune 30,
	Nine Months Ended September 30,
	2004			~~2003~~	2003
	(In Thousands)
Proceeds from the sale of an undivided interest from the third-party conduit	$	—40,000		$	—$	—
Repayments to the conduit for net collection of its receivable		—(30,000	)		~~(10,000~~	)(10,000	)
SPE proceeds and repayments, net	$	—10,000		$	~~(10,000~~$	)(10,000	)

CONTRACTUAL CASH OBLIGATIONS

Since December 31, 2003, we have not experienced any material changes in our contractual obligations. For additional information regarding our contractual obligations, see our 2003 Form 10-K.

OTHER INFORMATION

Public Utility Holding Company Act of 1935

Westar Energy is a holding company under the Public Utility Holding Company Act of 1935 (1935 Act) as a result of its ownership of us and Westar Generating, Inc., which is also a wholly-owned subsidiary of Westar Energy. Currently, Westar Energy claims an exemption from registration under the 1935 Act based on its operations being conducted “predominantly” within the state of Kansas. Following a recent decision by the Securities and Exchange Commission (SEC) with respect to its interpretation of the criteria that must be satisfied to claim a “predominantly” intrastate exemption. Westar Energy has been asked by the SEC to provide information regarding its eligibility for an exemption from registration and has responded to the SEC’s requests.

As a result of the amount of sales of wholesale electricity outside of the state of Kansas by Westar Energy’s energy marketing operations, it is possible that the SEC could question its eligibility for an exemption from registration under the 1935 Act. In that event, Westar Energy would evaluate its options, including filing an application for exemption and asking the SEC to formally consider that request, becoming a registered holding company, restructuring its operations in a manner that would allow it to maintain eligibility to claim an exemption or restructuring its organizational structure to consolidate all utility operations into one entity so that Westar Energy is no longer a utility holding company.

In the event Westar Energy elects to register, the 1935 Act and related regulations issued by the SEC would govern its activities and the activities of its subsidiaries with respect to the acquisition, issuance and sale of securities, acquisition and sale of utility assets, certain transactions among affiliates, engaging in business activities not directly related to the utility or energy business and other matters. We are unable to predict the outcome of this inquiry, however, we believe that Westar Energy becoming a registered holding company under the 1935 Act or taking steps, together with us, to reorganize its corporate structure to avoid registration would not have a material impact on our consolidated financial position, results of operations or cash flows.

Radioactive Waste Disposal

The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated that the various states, individually or through interstate compacts, develop alternative low-level radioactive waste disposal facilities. The states of Kansas, Nebraska, Arkansas,

Louisiana and Oklahoma formed the Central Interstate Low-Level Radioactive Waste Compact (Compact), and the Compact Commission, which is responsible for causing a new disposal facility to be developed within one of the member states. The Compact Commission selected Nebraska as the host state for the disposal facility. WCNOC and the owners of the other five nuclear units in the Compact provided most of the pre-construction financing for this project. Our net investment in the Compact is approximately $7.4 million.

In December 1998, the Nebraska agencies responsible for considering the developer’s license application denied the application. The license applicant sought a hearing on the license denial, but a United States District Court indefinitely delayed proceedings related to the hearing. Most of the utilities that had provided the project’s pre-construction financing (including WCNOC) filed a federal court lawsuit contending Nebraska officials acted in bad faith while handling the license application. In September 2002, the court entered a $151.4 million judgment, about one-third of which constitutes prejudgment interest, in favor of the Compact Commission and against Nebraska, finding that Nebraska had acted in bad faith in handling the license application. On Nebraska’s appeal, the 8th Circuit, United States Court of Appeals, upheld the District Court’s decision in February 2004. Nebraska sought United States Supreme Court review of the decision. In August 2004, Nebraska and the Compact Commission settled the case under terms whereby Nebraska would pay the Compact Commission either a one-time amount of $140.5 million or four annual installments of $38.5 million beginning in August 2005. The parties agreed to dismiss all pending litigation and appeals relating to this matter. Once Nebraska makes its final payment, it will be relieved of its responsibility to host a disposal facility. Meanwhile, the Compact Commission will pursue other strategies for providing disposal capability for waste generators in the Compact region.

Nebraska no longer is a member of the Compact as a result of its notice of voluntary withdrawal given in 1999 and the Compact Commission’s 2003 revocation of the state’s membership, both of which became effective in late summer 2004.

City of Wichita Franchise

On February 10, 2004, the Wichita City Council approved a 10-year renewal of the franchise agreement pursuant to which we provide retail electric service within the city of Wichita. The new 10-year franchise agreement is on terms that we believe to be reasonably similar to those previously in effect.

Southwest Power Pool

Since we provide electric service together with the electric utility operations of Westar Energy, using the name “Westar Energy,” we are a member of the SPP through Westar Energy’s membership and do not have a separate KGE membership. On ~~February~~October 101, 2004, the FERC granted ~~SPP’s~~ ~~application seeking~~ regional transmission organization (RTO) status ~~subject~~ to the SPP ~~fulfilling certain specified requirements~~. OnWestar ~~March~~Energy ~~16,~~is ~~2004,~~now ~~the~~a ~~SPP~~member ~~board~~ of ~~directors approved going forward with meeting~~ the ~~conditions listed in the order. One condition in the order requires approval from the~~ SPP ~~membership of modification to the SPP bylaws that would allow it to switch from a membership board of directors to an independent board of directors~~RTO. ~~This~~Since ~~change has been approved~~we byprovide ~~the~~electric ~~SPP~~service ~~membership~~together ~~and~~with the ~~SPP~~electric ~~has~~utility ~~moved~~operations ~~to an independent board~~ of ~~directors.~~Westar ~~The~~Energy, ~~SPP~~we ~~made~~are a ~~compliance~~member ~~filing~~of ~~with~~ the ~~FERC on May 3, 2004. This filing outlines how the~~ SPP ~~has~~through ~~met~~Westar ~~the~~Energy’s ~~conditions~~membership ~~listed in the FERC order~~ and ~~requested~~do ~~the~~not ~~FERC grant~~have ~~RTO~~a ~~status~~separate toKGE ~~the SPP~~membership. ~~On July 2, 2004, the FERC replied to the SPP requesting additional actions needed to grant RTO status. The SPP has 30 days to reply or request an extension.~~

Fair Value of Energy Marketing Contracts

The tables below show the fair value of energy marketing contracts that were outstanding at ~~June~~September 30, 2004, their sources and maturity periods:

	Fair Value ofContracts
	Fair Value of Contracts
	(In Thousands)
Net fair value of contracts outstanding at the beginning of the period	$	2,014
Less contracts realized or otherwise settled during the period		2,471
Contracts outstanding at the beginning of the period that were realized or otherwise settled during the period		(1,760	)
Plus fair value of new contracts entered into during the period		(674	)
Changes in fair value of contracts outstanding at the beginning and end of the period		(1,123	)
Fair value of contracts outstanding at the end of the period	$	(1,131	)
Fair value of new contracts entered into during the period		(1,041	)
Fair value of contracts outstanding at the end of the period	$	(1,910	)

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			Maturity Less Than 1 Year			Maturity 1-3 Years			Maturity 4-5 Years
	(In Thousands)
Prices actively quoted (futures)	$	(512	)	$	(512	)	$	—		$	—
Prices provided by other external sources (swaps and forwards)	$	(1,981	)	$	(1,936	)	$	(67	)	$	22
Prices provided by other external sources (swaps and forwards)		(743	)		(510	)		(233	)		—
Prices based on the Black Option Pricing model (options and other) (a)		71			71			—			—
Prices based on the Black Option Pricing model (options and other) (a)		124			124			—			—
Total fair value of contracts outstanding	$	(1,910	)	$	(1,865	)	$	(67	)	$	22
Total fair value of contracts outstanding	$	(1,131	)	$	(898	)	$	(233	)	$	—
(a) The Black Option Pricing model is a variant of the Black-Scholes Option Pricing model.

(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 are exposed to market risk, including market changes, changes in commodity prices and interest rates. ~~Since~~From December 31, 2003, ~~our~~to ~~variable~~September ~~rate~~30, ~~debt~~2004, ~~increased~~there ~~$100.0~~have ~~million.~~been Ano ~~100~~significant ~~basis~~changes ~~point change~~ in ~~each of~~ our ~~variable~~exposure ~~rate~~to ~~debt~~market ~~series’~~risk ~~benchmark~~except ~~rate,~~as ~~used~~related to ~~set~~interest ~~the~~rates ~~rate~~as ~~for~~discussed ~~such~~below. ~~series,~~For ~~would~~additional ~~impact~~information ~~net income~~ on ~~an annualized basis by approximately $1.5 million. This represents an increase in~~ our ~~exposure~~market ~~to interest rate~~ risk, onsee anour ~~annualized~~2003 ~~basis~~Form ~~by approximately $1.0 million~~10-K, ~~from~~“Item $07A.5 ~~million~~Quantitative atand ~~December~~Qualitative Disclosures ~~31,~~About ~~2003~~Market Risk.”

~~For~~Interest ~~additional~~Rate ~~information~~Exposure ~~on our market risk, see our 2003 Form 10-K, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”~~

From December 31, 2003 to September 30, 2004, our variable rate debt and current maturities of fixed rate debt increased $165.0 million. A 100 basis point change in interest rates applicable to each of these instruments would impact net income on an annualized basis by approximately $2.0 million. This represents an increase in our exposure to interest rate risk on an annualized basis of approximately $1.5 million, from $0.5 million at December 31, 2003.

ITEM 4. CONTROLS AND PROCEDURES

We are a wholly owned subsidiary of Westar Energy and all evaluations of our controls and procedures were conducted in conjunction with those undertaken by Westar Energy. Under the supervision and with the participation of Westar Energy’s management, and including our president and our principal financial and accounting officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. These controls and procedures are designed to ensure that material information relating to the company is communicated to our president and our principal financial and accounting officer. Based on that evaluation, our president and our principal financial and accounting officer concluded that, as of ~~June~~September 30, 2004, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

20There were no changes in our internal controls over financial reporting during the three months ended September 30, 2004 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

There were no changes in our internal controls over financial reporting during the three months ended June 30, 2004 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

KANSAS GAS AND ELECTRIC COMPANY

PART II. Other Information

ITEM 1. 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 upon our consolidated financial position or results of operations. See also Note 6 of the Notes to Consolidated Financial Statements, “Commitments and Contingencies — EPA New Source Review.” The Notes to Consolidated Financial Statements are incorporated herein by reference.

ITEM 2. ~~CHANGES~~UNREGISTERED INSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

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, 2004

31	(b)	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the period ended September 30, 2004

32		Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the quarter ended September 30, 2004 (furnished and not to be considered filed as part of the Form 10-Q)

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 June 30, 2004
31	(b)	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the period ended June 30, 2004
32		Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 certifying the quarterly report provided for the quarter ended June 30, 2004 (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 June 30, 2004: None

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	~~KANSAS GAS AND ELECTRIC COMPANY~~
Date:	~~August~~November 48, 2004	By:	~~By:~~/s/ Mark A. Ruelle	~~/s/ Mark A. Ruelle~~
			Mark A. Ruelle, Vice President and Treasurer	~~Mark A. Ruelle, Vice President and Treasurer~~

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Filing Compare · KANSAS GAS & ELECTRIC CO /KS/