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WESTERN RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business: Western Resources, Inc. (Western Resources, the company) is a publicly traded consumer services company. The company's primary business activities are providing electric generation, transmission and distribution services to approximately 636,000 customers in Kansas and providing monitored security services to approximately 1.5 million customers in North America and Europe. Rate regulated electric service is provided by KPL, a division of the company, and Kansas Gas and Electric Company (KGE), a wholly owned subsidiary. Monitored security services are provided by Protection One, Inc., a publicly traded, approximately 85%-owned subsidiary, and other wholly owned subsidiaries collectively referred to as Protection One Europe. In addition, through the company's 45% ownership interest in ONEOK, Inc., natural gas transmission and distribution services are provided to approximately 1.4 million customers in Oklahoma and Kansas. Westar Industries, Inc., the company's wholly owned subsidiary, owns the company's interests in Protection One, Protection One Europe, ONEOK and other non-utility businesses.

Principles of Consolidation: The company prepares its financial statements in conformity with accounting principles generally accepted in the United States. The accompanying Consolidated Financial Statements include the accounts of Western Resources and its wholly owned and majority owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Common stock investments that are not majority owned are accounted for using the equity method when the company's investment allows it the ability to exert significant influence.

Regulatory Accounting: The company currently applies accounting standards for its rate regulated electric business that recognize the economic effects of rate regulation in accordance with Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation," (SFAS 71) and, accordingly, has recorded regulatory assets and liabilities when required by a regulatory order or when it is probable, based on regulatory precedent, that future rates will allow for recovery of a regulatory asset.

Use of Management's Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: The company considers highly liquid collateralized debt instruments purchased with a maturity of three months or less to be cash equivalents.

Restricted Cash: Restricted cash consists of cash used to collateralize letters of credit and cash held in escrow.

Accounts Receivable: Receivables, which consist primarily of trade accounts receivable, were reduced by allowances for doubtful accounts of $45.8 million at December 31, 2000 and $35.8 million at December 31, 1999.

Available-for-sale Securities: The company classifies marketable equity and debt securities accounted for under the cost method as available-for-sale. These securities are reported at fair value based on quoted market prices. Cumulative, temporary unrealized gains and losses, net of the related tax effect, are reported as a separate component of shareholders' equity until realized. Current temporary changes in unrealized gains and losses are reported as a component of other comprehensive income. Realized gains and losses are included in earnings and are derived using the specific identification method.

The following table summarizes the company's investments in marketable securities as of December 31:

	Gross Unrealized
	Cost		Gains		Losses			Fair Value
	(In Thousands)
2000:
Equity securities	$	6,690	$	-	$	(2,744	)	$	3,946
Debt securities		-		-		-			-
Total	$	6,690	$	-	$	(2,744)	)	$	3,946
1999:
Equity securities	$	43,124	$	70,407	$	(1,628)	)	$	111,903
Debt securities		65,225		-		-			65,225
Total	$	108,349	$	70,407	$	(1,628)	)	$	177,128

Proceeds from the sales of equity and debt securities were $218.6 million in 2000 and $73.5 million in 1999. The gross realized gains from sales of equity and debt investments were $116.0 million in 2000 and $12.6 million in 1999. The gross realized losses from sales of equity and debt investments were $1.0 million in 2000 and $38.8 million in 1999.

Energy Trading Contracts: The company is involved in system hedging and trading activities primarily to minimize risk from commodity market fluctuations, capitalize on its market knowledge and enhance system reliability. In these activities, the company utilizes a variety of financial instruments, including forward contracts involving cash settlements or physical delivery of an energy commodity, options, swaps requiring payments (or receipt of payments) from counter-parties based on the differential between specified prices for the related commodity, and futures traded on electricity and natural gas.

The company accounts for transactions on either a settlement basis or using the mark-to-market method of accounting. On a settlement basis, the company recognizes the gains or losses on system hedging transactions as the power is delivered. Under the mark-to-market method of accounting, trading transactions are shown at fair value in the consolidated balance sheets as energy trading contracts assets - current and energy trading contracts liabilities-current. Long term energy trading contract assets and liabilities are included in other long term assets and other long term liabilities, respectively. The company reflects changes in fair value resulting in unrealized gains and losses from these transactions in energy sales. The company records the revenues and costs for all transactions in its consolidated statements of income when the contracts are settled. The company recognizes revenues in energy sales; costs are recorded in energy cost of sales.

The company values contracts in the trading portfolio using end-of-the-period market prices, utilizing the following factors (as applicable):

- closing exchange prices (that is, closing prices for standardized electricity products traded    on an organized exchange such as the New York Mercantile Exchange);
- broker dealer and over-the-counter price quotations;

Property, Plant and Equipment: Property, plant and equipment is stated at cost. For utility plant, cost includes contracted services, direct labor and materials, indirect charges for engineering, supervision, general and administrative costs and an allowance for funds used during construction (AFUDC). AFUDC represents the cost of borrowed funds used to finance construction projects. The AFUDC rate was 7.39% in 2000, 6.00% in 1999 and 6.00% in 1998. The cost of additions to utility plant and replacement units of property are capitalized. Interest capitalized into construction in progress was $9.4 million in 2000, $4.4 million in 1999 and $1.9 million in 1998.

Maintenance costs and replacement of minor items of property are charged to expense as incurred. Incremental costs incurred during scheduled Wolf Creek Generating Station refueling and maintenance outages are deferred and amortized monthly over the unit's operating cycle, normally about 18 months. When units of depreciable property are retired, the original cost and removal cost, less salvage value, are charged to accumulated depreciation.

In accordance with regulatory decisions made by the Kansas Corporation Commission (KCC), the acquisition premium of approximately $801 million resulting from the acquisition of KGE in 1992 is being amortized over 40 years. The acquisition premium is classified as electric plant in service. Accumulated amortization totaled $108.2 million as of December 31, 2000 and $88.1 million as of December 31, 1999.

Depreciation: Utility plant is depreciated on the straight-line method at rates approved by regulatory authorities. Utility plant is depreciated on an average annual composite basis using group rates that approximated 2.99% during 2000, 2.92% during 1999 and 2.88% during 1998. Nonutility property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the related assets. The company periodically evaluates its depreciation rates considering the past and expected future experience in the operation of its facilities.

Inventories and Supplies: Inventories and supplies for the company's utility business are stated at average cost. Monitored services' inventories, comprised of alarm systems and parts, are stated at the lower of average cost or market.

Nuclear Fuel: The cost of nuclear fuel in process of refinement, conversion, enrichment and fabrication is recorded as an asset at original cost and is amortized to cost of sales based upon the quantity of heat produced for the generation of electricity. The accumulated amortization of nuclear fuel in the reactor was $18.6 million at December 31, 2000 and $29.3 million at December 31, 1999.

Customer Accounts: Customer accounts are stated at cost. The cost includes amounts paid to dealers and the estimated fair value of accounts acquired in business acquisitions. Internal costs incurred in support of acquiring customer accounts are expensed as incurred.

Protection One and Protection One Europe historically amortized most customer accounts by using the straight-line method over a ten-year life. The choice of an amortization life was based on estimates and judgments about the amounts and timing of expected future revenues from these assets and average customer account life. Selected periods were determined because, in Protection One's and Protection One Europe's opinion, they would adequately match amortization cost with anticipated revenue.

Protection One and Protection One Europe conducted a comprehensive review of their amortization policy during the third quarter of 1999. This review was performed specifically to evaluate the historic amortization policy in light of the inherent declining revenue curve over the life of a pool of customer accounts and Protection One's historical attrition experience. After completing the review, Protection One identified three distinct pools, each of which has distinct attributes that effect differing attrition characteristics. The pools corresponded to Protection One's North America, Multifamily and Europe business segments. For the North America and Europe pools, the analyzed data indicated that Protection One can expect attrition to be greatest in years one through five of asset life and that a change from a straight-line to a declining balance (accelerated) method would more closely match future amortization cost with the estimated revenue stream from these assets. Protection One elected to change to that method, except for accounts acquired in the Westinghouse acquisition which are utilizing an accelerated method. No change was made in the method used for the Multifamily pool.

Protection One's and Protection One Europe's amortization rates consider the average estimated remaining life and historical and projected attrition rates. The amortization method for each customer pool is as follows:

Pool	Method
North America
Acquired Westinghouse customers	Eight-year 120% declining balance
Other customers	Ten-year 130% declining balance
Europe	Ten-year 125% declining balance
Multifamily	Ten-year straight-line

Adoption of the declining balance method effectively shortens the estimated expected average customer life for these customer pools, and does so in a way that does not make it possible to distinguish the effect of a change in method (straight-line to declining balance) from the change in estimated lives. In such cases, generally accepted accounting principles require that the effect of such a change be recognized in operations in the period of the change, rather than as a cumulative effect of a change in accounting principle. Protection One changed to the declining balance method in the third quarter of 1999 for Europe customers and the North America customers which had been amortized on a straight-line basis. Accordingly, the effect of the change in accounting principle increased Protection One's amortization expense reported in the third quarter of 1999 by approximately $40 million. Accumulated amortization would have been approximately $34 million higher through the end of the second quarter of 1999 if the declining balance method had historically been used.

In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," long-lived assets held and used by Protection One and Protection One Europe are evaluated for recoverability on a periodic basis or as circumstances warrant. An impairment would be recognized when the undiscounted expected future operating cash flows by customer pool derived from customer accounts is less than the carrying value of capitalized customer accounts and related goodwill.

Goodwill has been recorded in business acquisitions where the principal asset acquired was the recurring revenues from the acquired customer base. For purposes of the impairment analysis, goodwill has been considered directly related to the acquired customers.

Due to the high level of customer attrition experienced in 2000 and 1999, the decline in market value of Protection One's publicly traded equity and debt securities and because of recurring losses, Protection One and Protection One Europe performed an impairment test on their customer account assets and goodwill in both 2000 and 1999. These tests indicated that future estimated undiscounted cash flows exceeded the sum of the recorded balances for customer accounts and goodwill.

Goodwill: Goodwill represents the excess of the purchase price over the fair value of net assets acquired by Protection One and Protection One Europe. Protection One and Protection One Europe changed their estimates of goodwill life from 40 years to 20 years as of January 1, 2000. After that date, remaining goodwill, net of accumulated amortization, is being amortized over its remaining useful life based on a 20-year life. As a result of this change in estimate, goodwill amortization expense for the year ended December 31, 2000 increased by approximately $33.0 million.

The carrying value of goodwill was included in the evaluations of recoverability of customer accounts. No reduction in the carrying value was necessary at December 31, 2000.

Amortization expense was $61.4 million, $31.6 million and $22.5 million for the years ended December 31, 2000, 1999 and 1998. Accumulated amortization was $118.6 million and $59.3 million at December 31, 2000 and 1999.

The Financial Accounting Standards Board (FASB) issued an exposure draft on February 14, 2001 which, if adopted as proposed, would establish a new accounting standard for the treatment of goodwill in a business combination. The new standard would continue to require recognition of goodwill as an asset in a business combination but would not permit amortization as currently required by APB Opinion No. 17, "Intangible Assets." The new standard would require that goodwill be separately tested for impairment using a fair-value based approach as opposed to an undiscounted cash flow approach which is required under current accounting standards. If goodwill is found to be impaired, the company would be required to record a non-cash charge against income. The impairment charge would be equal to the amount by which the carrying amount of the goodwill exceeds the fair value. Goodwill would no longer be amortized on a current basis as is required under current accounting standards. The exposure draft contemplates this standard to become effective on July 1, 2001, although this effective date is not certain. Furthermore, the proposed standard could be modified prior to its adoption.

If the new standard is adopted, any subsequent impairment test on the company's customer accounts would be performed on the customer accounts alone rather than in conjunction with goodwill utilizing an undiscounted cash flow test pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."

At December 31, 2000, the company had $976 million in goodwill attributable to acquisitions of businesses and $1,006 million for monitored services' customer accounts. These intangible assets together represented 25.5% of the book value of the company's total assets. The company recorded approximately $61.4 million in goodwill amortization expense in 2000. If the new standard becomes effective July 1, 2001 as proposed, the company believes it is probable that it would be required to record a non-cash impairment charge. The company cannot determine the amount at this time, but it believes the amount would be material and could be a substantial portion of its intangible assets. This impairment charge would have a material adverse effect on the company's operating results in the period recorded.

Regulatory Assets and Liabilities: Regulatory assets represent probable future revenue associated with certain costs that will be recovered from customers through the rate-making process. The company has recorded these regulatory assets in accordance with SFAS 71. If the company were required to terminate application of that statement for all of its regulated operations, the company would have to record the amounts of all regulatory assets and liabilities in its Consolidated Statements of Income at that time. The company's earnings would be reduced by the total amount in the table below, net of applicable income taxes. Regulatory assets reflected in the Consolidated Financial Statements are as follows:

	As of December 31,
	2000		1999
	(In Thousands)
Recoverable income taxes	$	187,308	$	218,239
Debt issuance costs		63,263		68,239
Deferred employee benefit costs		36,251		36,251
Deferred plant costs		29,921		30,306
Other regulatory assets		10,607		12,969
Total regulatory assets	$	327,350	$	366,004

- Recoverable income taxes: Recoverable income taxes represent amounts due from customers for accelerated tax benefits which have been previously flowed through to customers and are expected to be recovered in the future as the accelerated tax benefits reverse.

- Debt issuance costs: Debt reacquisition expenses are amortized over the remaining term of the reacquired debt or, if refinanced, the term of the new debt. Debt issuance costs are amortized over the term of the associated debt.

- Deferred employee benefit costs: Deferred employee benefit costs represent costs to be recovered by income generated through the company's Affordable Housing Tax Credit (AHTC) investment program as authorized by the KCC.

- Deferred plant costs: Costs related to the Wolf Creek nuclear generating facility.

The company expects to recover all of the above regulatory assets in rates charged to customers. A return is allowed on deferred plant costs and coal contract settlement costs and approximately $18.0 million of debt issuance costs.

Minority Interests: Minority interests represent the minority shareholders' proportionate share of the shareholders' equity and net loss of Protection One.

Revenue Recognition

Energy Sales Recognition: Energy sales are recognized as services are rendered and include estimated amounts for energy delivered but unbilled at the end of each year. Unbilled sales are recorded as a component of accounts receivable (net) and amounted to $44 million at December 31, 1999. During 2000, the company sold its energy related accounts receivable, including amounts related to unbilled sales.

Monitored Services Sales Recognition: Monitored services sales are recognized when security services are provided. Installation revenue, sales revenues on equipment upgrades and direct costs of installations and sales are deferred for residential customers with service contracts. For commercial customers and national account customers, revenue recognition is dependent upon each specific customer contract. In instances when the company sells the equipment outright, revenues and costs are recognized in the period incurred. In cases where there is no outright sale, revenues and direct costs are deferred and amortized.

Deferred installation revenues and system sales revenues will be recognized over the expected useful life of the customer, utilizing a 130% declining balance. Deferred costs in excess of deferred revenues will be recognized over the contract life. To the extent deferred costs are less than deferred revenues, such costs are recognized over the customers' estimated useful life, utilizing a 130% declining balance.

Deferred revenues also result from customers who are billed for monitoring, extended service protection and patrol and response services in advance of the period in which such services are provided, on a monthly, quarterly or annual basis.

Income Taxes: Deferred tax assets and liabilities are recognized for temporary differences in amounts recorded for financial reporting purposes and their respective tax bases. Investment tax credits previously deferred are being amortized to income over the life of the property which gave rise to the credits.

Foreign Currency Translation: The assets and liabilities of the company's foreign operations are generally translated into U.S. dollars at current exchange rates and revenues and expenses are translated at average exchange rates for the year.

Cash Surrender Value of Life Insurance: The following amounts related to corporate-owned life insurance policies (COLI) are recorded in other long-term assets on the Consolidated Balance Sheets at December 31:

	2000			1999
	(In Millions)
Cash surrender value of policies (a)	$	705.4		$	642.4
Borrowings against policies		(665.9	)		(608.3	)
COLI (net)	$	39.5		$	34.1

(a)	Cash surrender value of policies as presented represents the value of the policies as of the end of the respective policy years and not as of December 31, 2000 and 1999.

Income is recorded for increases in cash surrender value and net death proceeds. Interest incurred on amounts borrowed is offset against policy income. Income recognized from death proceeds is highly variable from period to period. Death benefits recognized as other income approximated $0.9 million in 2000, $1.4 million in 1999 and $13.7 million in 1998.

Cumulative Effect of Accounting Change: The company adopted Staff Accounting Bulletin No. 101, "Revenue Recognition" (SAB 101) in the fourth quarter of 2000 which had a retroactive effective date of January 1, 2000. The impact of this accounting change generally requires deferral of certain monitored services sales for installation revenues and direct sales-related expenses. Deferral of these revenues and costs is generally necessary when installation revenues have been received and a monitoring contract to provide future service is obtained. Historically, Protection One acquired a majority of its customers by acquisition or through an independent dealer program for its North American operations. Dealers billed and retained any installation revenues. In 2000, Protection One began an internal sales program. Because of these factors the impact of adopting SAB 101 for Protection One was not significant. Protection One Europe has a larger concentration of commercial customers where installation revenues and related costs had previously been recognized.

The cumulative effect of the change in accounting principle was approximately $3.8 million, net of tax benefits of $1.1 million and is related to changes in revenue recognition at Protection One Europe. Prior to the adoption of SAB 101, Protection One Europe recognized installation revenues and related expenses upon completion of the installation. Pro forma amounts and amounts per share, assuming the change in accounting principle was applied retroactively are as follows:

	2000				1999						1998
			Per Share					Per Share						Per Share
	Amount		Amount		Amount			Amount			Amount			Amount
	(In Thousands, Except Per Share Amounts)
Earnings available for
common stock before
extraordinary gain and
accounting change:
As reported	$	89,921	$	1.30	$	1,425		$	0.02		$	30,467		$	0.46
Pro forma effect of
accounting change		-		-		(2,800	)		(0.04	)		(1,010	)		(0.01	)
Pro forma	$	89,921	$	1.30	$	(1,375	)	$	(0.02	)	$	29,457		$	0.45
Earnings available for
common stock:
As reported	$	135,352	$	1.96	$	13,167		$	0.20		$	32,058		$	0.48
Pro forma effect of
accounting change		3,810		0.05		(2,800	)		(0.04	)		(1,010	)		(0.01	)
Pro forma	$	139,162	$	2.01	$	10,367		$	0.16		$	31,048		$	0.47

New Accounting Pronouncements: In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133, as amended, is effective for fiscal years beginning after June 15, 2000. SFAS 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 133 requires that changes in the derivatives' fair value be recognized currently in earnings unless specific hedge accounting criteria are met.

The company adopted SFAS 133 on January 1, 2001. The company has evaluated its commodity contracts, financial instruments and other contracts and determined that certain commodity contracts are derivative instruments. Under current GAAP, these contracts qualify as hedges. However, under SFAS 133, these contracts will not qualify as hedges. Accordingly, the instruments will be marked to market through earnings. The company estimates that the effect on its financial statements of adopting SFAS 133 on January 1, 2001, will be to increase pre-tax earnings for the first quarter of 2001 by approximately $31 million. Accounting for derivatives under SFAS 133 may increase volatility in future earnings.

Supplemental Cash Flow Information: Cash paid for interest and income taxes for each of the years ended December 31, are as follows:

	2000		1999		1998
	(In Thousands)
Interest on financing activities
(net of amount capitalized)	$	310,345	$	298,802	$	220,848
Income taxes		28,751		784		47,196

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

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2. PNM MERGER AND SPLIT-OFF OF WESTAR INDUSTRIES

On November 8, 2000, the company entered into an agreement under which Public Service Company of New Mexico (PNM) will acquire the electric utility businesses of the company in a stock-for-stock transaction. Under the terms of the agreement, both the company and PNM will become subsidiaries of a new holding company. Immediately prior to the consummation of this combination, the company will split-off its remaining interest in Westar Industries to its shareholders.

Westar Industries has filed a registration statement with the Securities and Exchange Commission (SEC) covering the proposed sale of a portion of its common stock through the exercise of non-transferable rights proposed to be distributed by Westar Industries to the company's shareholders.

The company and Westar Industries entered into an Asset Allocation and Separation Agreement at the same time the company entered into the merger agreement with PNM. Among other things, this agreement permits a receivable owed by the company to Westar Industries to be converted into certain securities of the company. At the closing of the merger, any of these securities then owned by Westar Industries will be converted into securities of PNM or the holding company to be formed by PNM.

On February 28, 2001, Westar Industries converted $350 million of the receivable into approximately 14.4 million shares of the company's common stock pursuant to the Asset Allocation and Separation Agreement. These shares represent approximately 16.9% of the company's outstanding common stock including these shares in outstanding shares. There are no voting rights with respect to these shares as long as Westar Industries is a majority owned subsidiary of the company.

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3. RATE MATTERS AND REGULATION

KCC Rate Proceedings: On November 27, 2000, the company and KGE filed applications with the KCC for a change in retail rates which included a cost allocation study and separate cost of service studies for the company's KPL division and KGE. The company requested an annual rate increase totaling approximately $151 million. The company and KGE also provided revenue requirements on a combined company basis on December 28, 2000. The company anticipates a ruling by the KCC in July 2001 but is unable to predict its outcome.

FERC Proceeding: In September 1999, the City of Wichita filed a complaint with the Federal Energy Regulatory Commission (FERC) against the company alleging improper affiliate transactions between the company's KPL division and KGE, a wholly owned subsidiary of the company. The City of Wichita asked that FERC equalize the generation costs between KPL and KGE, in addition to other matters. A hearing on the case was held at FERC on October 11 and 12, 2000 and on November 9, 2000 a FERC administrative law judge ruled in favor of the company that no change in rates was required. On December 13, 2000, the City of Wichita filed a brief with FERC asking that the Commission overturn the judge's decision. On January 5, 2001, the company filed a brief opposing the City's position. The company anticipates a decision by FERC in the second quarter of 2001.

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4. SALE OF ACCOUNTS RECEIVABLE

On July 28, 2000, the company and KGE entered into an agreement to sell, on an ongoing basis, all of their accounts receivable arising from the sale of electricity, to WR Receivables Corporation, a special purpose entity wholly owned by the company. The agreement expires on July 26, 2001, and is annually renewable upon agreement by both parties. The special purpose entity has sold and, subject to certain conditions, may from time to time sell, up to $125 million (and upon request, subject to certain conditions, up to $175 million) of an undivided fractional ownership interest in the pool of receivables to a third-party, multi-seller receivables funding entity affiliated with a lender. The company's retained interests in the receivables sold are recorded at cost which approximates fair value. The company has received net proceeds of $115.0 million as of December 31, 2000.

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5. SHORT-TERM DEBT

The company has an arrangement with certain banks to provide a revolving credit facility on a committed basis totaling $500 million. The facility is secured by first mortgage bonds of the company and KGE and matures on March 17, 2003. The company also has arrangements with certain banks to provide unsecured short-term lines of credit on a committed basis totaling approximately $12.0 million. As of December 31, 2000, borrowings on these facilities were $35.0 million.

The agreements provide the company with the ability to borrow at different market-based interest rates. The company pays commitment or facility fees in support of these lines of credit. Under the terms of the agreements, the company is required, among other restrictions, to maintain a total debt to total capitalization ratio of not greater than 65% at all times. The company is in compliance with all restrictions.

Information regarding the company's short-term borrowings, comprised of borrowings under the credit agreements, bank loans and commercial paper, is as follows:

	As of December 31,
	2000			1999
	(Dollars in Thousands)
Borrowings outstanding at year end:
Credit agreement	$	35,000		$	50,000
Bank loans		-			120,000
Commercial paper notes		-			535,421
Total		$35,000			$705,421
Weighted average interest rate on debt outstanding at year end
(including fees)		8.11	%		6.96	%
Weighted average short-term debt
outstanding during the year	$	402,845		$	455,184
Weighted daily average interest
rates during the year (including fees)		7.92	%		5.76	%
Unused lines of credit supporting
commercial paper notes	$	-		$	1,021,000

The company's interest expense on short-term debt and other was $63.1 million in 2000, $57.7 million in 1999 and $55.3 million in 1998.

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6. LONG-TERM DEBT

Long-term debt outstanding is as follows at December 31:

	2000			1999
	(In Thousands)
Western Resources
First mortgage bond series:
8 7/8% due 2000	$	-		$	$75,000
7 1/4% due 2002		100,000			100,000
8 1/2% due 2022		125,000			125,000
7.65% due 2023		100,000			100,000
		325,000			400,000
Pollution control bond series:
Variable due 2032, 4.70% at December 31, 2000		45,000			45,000
Variable due 2032, 4.62% at December 31, 2000		30,500			30,500
6% due 2033		58,410			58,420
		133,910			133,920
6 7/8% unsecured senior notes due 2004		370,000			370,000
7 1/8% unsecured senior notes due 2009		150,000			150,000
6.80% unsecured senior notes due 2018		28,977			29,783
6.25% unsecured senior notes due 2018, putable/callable 2003		400,000			400,000
Senior secured term loan		600,000			-
Other long-term agreements		16,889			21,895
		1,565,866			971,678
KGE
First mortgage bond series:
7.60% due 2003		135,000			135,000
6 1/2% due 2005		65,000			65,000
6.20% due 2006		100,000			100,000
		300,000			300,000
Pollution control bond series:
5.10% due 2023		13,623			13,653
Variable due 2027, 4.60% at December 31, 2000		21,940			21,940
7.0% due 2031		327,500			327,500
Variable due 2032, 4.60% at December 31, 2000		14,500			14,500
Variable due 2032, 4.60% at December 31, 2000		10,000			10,000
		387,563			387,593
Protection One
Convertible senior subordinated notes due 2003, fixed rate 6.75%		23,785			53,950
Senior subordinated discount notes due 2005, effective rate of 11.8%		42,887			87,038
Senior unsecured notes due 2005, fixed rate 7.375%		204,650			250,000
Senior subordinated notes due 2009, fixed rate 8.125% (1)		255,740			341,415
Other		267			2,033
		527,329			734,436
Protection One Europe
CET recourse financing agreements, average effective rate 15%		33,512			60,838
Unamortized debt premium		13,541			13,726
Less:
Unamortized debt discount		(7,047	)		(7,458	)
Long-term debt due within one year		(41,825	)		(111,667	)
Long-term debt (net)	$	3,237,849		$	2,883,066

(1)	The rate is currently 8.625% and will continue at that rate until an exchange offer related to the offering is completed.

Debt discount and expenses are being amortized over the remaining lives of each issue.

The amount of the company's first mortgage bonds authorized by its Mortgage and Deed of Trust, dated July 1, 1939, as supplemented, is unlimited. The amount of KGE's first mortgage bonds authorized by the KGE Mortgage and Deed of Trust, dated April 1, 1940, as supplemented, is limited to a maximum of $2 billion. First mortgage bonds are secured by the utility assets of the company and KGE. Amounts of additional bonds which may be issued are subject to property, earnings and certain restrictive provisions of each mortgage.

The company's unsecured debt represents general obligations that are not secured by any of the company's properties or assets. Any unsecured debt will be subordinated to all secured debt of the company, including the first mortgage bonds. The notes are structurally subordinated to all secured and unsecured debt of the company's subsidiaries.

On June 28, 2000, the company entered into a $600 million, multi-year term loan that replaced two revolving credit facilities which matured on June 30, 2000. The net proceeds of the term loan were used to retire short-term debt. The term loan is secured by first mortgage bonds of the company and KGE and has a maturity date of March 17, 2003.

Maturities of the term loan through March 17, 2003, are as follows:

Year		Principal Amount (In Thousands)
2001	$	9,000
2002		6,000
2003		585,000
	$	600,000

The terms of the loan contain requirements for maintaining certain consolidated leverage ratios, interest coverage ratios and consolidated debt to capital ratios. The company is in compliance with all of these requirements.

Interest on the term loan is payable on the expiration date of each borrowing under the facility or quarterly if the term of the borrowing is greater than three months. The weighted average interest rate, including amortization of fees, on the term loan for the year ending December 31, 2000, was 10.28%.

In 1998, Protection One issued $350 million of Unsecured Senior Subordinated Notes. The notes are redeemable at Protection One's option, in whole or in part, at a predefined price. Protection One did not complete a required exchange offer during 1999. As a result, the interest rate on these notes has been 8.625% since June 1999. If the exchange offer is completed, the interest rate will revert back to 8.125%. Interest on these notes is payable semi-annually on January 15 and July 15.

In 1998, Protection One issued $250 million of Senior Unsecured Notes. Interest is payable semi-annually on February 15 and August 15. The notes are redeemable at Protection One's option, in whole or in part, at a predefined price.

In 1995, Protection One issued $166 million of Unsecured Senior Subordinated Discount Notes with a fixed interest rate of 13.625%. Interest payments began in 1999 and are payable semi-annually on June 30 and December 31. In connection with the acquisition of Protection One in 1997, these notes were restated to fair value reflecting a current market yield of approximately 6.4% through June 30, 2000, the first full call date of the notes. Since the notes were not called on that date the current market yield was adjusted to 11.8% as of July 1, 2000. The 1997 revaluation resulted in bond premium being recorded to reflect the increase in value of the notes as a result of the decline in interest rates since the note issuance. This revaluation had no impact on the expected cash flow to existing noteholders. As of June 30, 2000, the notes became redeemable at Protection One's option, at a specified redemption price.

In 1998, Protection One redeemed unsecured senior subordinated discount notes with a book value of $69.4 million and recorded an extraordinary gain on the extinguishment of $1.6 million, net of tax.

In 1996, Protection One issued $103.5 million of Convertible Senior Subordinated Notes. Interest is payable semi-annually on March 15 and September 15. The notes are convertible at any time at a conversion price of $11.19 per share. The notes are redeemable, at Protection One's option, at a specified redemption price, beginning September 19, 1999.

In 1999, Westar Industries purchased Protection One bonds on the open market at amounts less than the carrying amount of the debt. The company recognized an extraordinary gain of $13.4 million, net of tax, at December 31, 1999, related to the retirement of this debt.

During 2000, Westar Industries purchased various issues of Protection One bonds on the open market at amounts less than the carrying amount of the debt. The company recognized an extraordinary gain of $49.2 million, net of tax, at December 31, 2000, related to the retirement of this debt.

Protection One Europe has recognized as a financing transaction cash received through the sale of security equipment and future cash flows to be received under security equipment operating lease agreements with customers to a third-party financing company.

Maturities of long-term debt through 2005 are as follows:

Year		Principal Amount (In Thousands)
2001	$	41,825
2002		116,705
2003		747,207
2004		370,617
2005		313,007
Thereafter		1,683,819
	$	3,273,180

The company's interest expense on long-term debt was $226.4 million in 2000, $236.4 million in 1999 and $170.9 million in 1998.

Protection One's debt instruments contain financial and operating covenants which may restrict its ability to incur additional debt, pay dividends, make loans or advances and sell assets. At December 31, 2000, Protection One was in compliance with all financial covenants governing its debt securities.

The indentures governing all of Protection One's debt securities require that Protection One offer to repurchase the securities in certain circumstances following a change of control.

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7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value as set forth in Statement of Financial Accounting Standards No. 107 "Disclosures about Fair Value of Financial Instruments."

Cash and cash equivalents, short-term borrowings and variable-rate debt are carried at cost which approximates fair value and are not included in the table below. The decommissioning trust is recorded at fair value and is based on the quoted market prices at December 31, 2000 and 1999. The fair value of fixed-rate debt and other mandatorily redeemable securities is estimated based on quoted market prices for the same or similar issues or on the current rates offered for instruments of the same remaining maturities and redemption provisions. The estimated fair values of contracts related to commodities have been determined using quoted market prices of the same or similar securities.

The recorded amounts of accounts receivable and other current financial instruments approximate fair value.

The fair value estimates presented herein are based on information available at December 31, 2000 and 1999. These fair value estimates have not been comprehensively revalued for the purpose of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

The carrying values and estimated fair values of the company's financial instruments are as follows:

	Carrying Value				Fair Value
	As of December 31,
	2000		1999		2000		1999
	(In Thousands)
Decommissioning trust	$	64,222	$	58,286	$	64,222	$	58,286
Fixed-rate debt, net of current maturities		3,109,415		2,743,057		2,809,711		2,350,880
Other mandatorily redeemable securities		220,000		220,000		182,232		187,950

The tables below present the estimated fair value of contracts not settled at December 31, 2000.

The notional volumes and estimated fair values of the company's forward contracts and options for electricity positions are as follows at December 31:

	2000			1999
	Notional Volumes (MWH's)	Estimated Fair Value		Notional Volumes (MWH's)	Estimated Fair Value
	(Dollars in Thousands)
Forward contracts:
Purchased	3,581,500	$	264,488	1,137,600	$	33,021
Sold	3,713,248		269,731	1,088,800		32,395
Options:
Purchased	647,600	$	12,606	944,800	$	5,524
Sold	387,200		11,976	754,200		8,458

The notional volumes and estimated fair values of the company's forward contract and options for gas positions are as follows at December 31:

	2000			1999
	Notional Volumes (MWH's)	Estimated Fair Value		Notional Volumes (MWH's)	Estimated Fair Value
	(Dollars in Thousands)
Forward contracts:
Purchased	73,859,179	$	283,453	13,010,000	$	31,002
Sold	50,614,417		174,441	500,000		1,108
Options:
Purchased	39,171,500	$	21,887	6,000,000	$	971
Sold	30,140,000		21,196	4,000,000		615

Under mark-to-market accounting, energy trading contracts with third parties are reflected at fair market value, net of reserves, with resulting unrealized gains and losses recorded as energy trading contract assets and liabilities. These assets and liabilities are affected by the actual timing of settlements related to these contracts and current period changes resulting primarily from newly originated transactions and the impact of price movements. These changes are recognized as revenues in the consolidated statements of income in the period the changes occur. As of December 31, 2000, the company had gross mark-to-market gains (asset position) and losses (liability position) on these energy trading contracts as follows:

	2000		1999
	(In Thousands)
Current Assets - energy trading contracts	$	185,364	$	16,370
Other Assets - other		15,883		-
	$	201,247	$	16,370
Current Liabilities - energy trading contracts	$	191,673	$	15,182
Long-term liabilities - other		1,096		-
	$	192,769	$	15,182
Net mark-to-market gains	$	8,478	$	1,188

These net mark-to-market gains have been recognized in revenue. Included within these assets and liabilities is an unrealized gain of $31 million which will be recognized through revenue in 2001 as a cumulative effect of an accounting change upon adoption of SFAS 133.

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8. MONITORED SERVICES BUSINESS

In 1999, Protection One sold the assets which comprised its Mobile Services Group. Cash proceeds of this sale approximated $20 million and Protection One recorded a pre-tax gain of approximately $17 million. This gain is reflected in other income (expense) - other on the statement of income.

Protection One acquired a significant number of security companies in 1998. All companies acquired have been accounted for using the purchase method. The principal assets acquired in the acquisitions are customer accounts. The excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill. The results of operations of each acquisition have been included in the consolidated results of operations of Protection One from the date of the acquisition.

The following table presents the unaudited pro forma financial information considering Protection One's monitored services acquisitions in 1998. The table assumes acquisitions in 1998 occurred as of January 1, 1998.

Year Ended December 31,	1998
	(Unaudited) (In Thousands, Except Per Share Data)
Sales	$	2,175,089
Earnings available for common stock	$	21,449
Earnings per share	$	0.33

The unaudited pro forma financial information is not necessarily indicative of the results of operations had the entities been combined for the entire period nor do they purport to be indicative of results which will be obtained in the future.

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9. MARKETABLE SECURITIES

During the fourth quarter of 1999, the company decided to sell its remaining marketable security investments in paging industry companies. These securities were classified as available-for-sale; therefore, changes in market value were historically reported as a component of other comprehensive income.

The market value for these securities declined during the last six to nine months of 1999. The company determined that the decline in value of these securities was other than temporary and a charge to earnings for the decline in value was required at December 31, 1999. Therefore, a non-cash charge of $76.2 million was recorded in the fourth quarter of 1999 and is presented separately in the accompanying Consolidated Statements of Income.

In February 2000, a paging company whose securities were included in the securities discussed in the paragraph above at December 31, 1999, made an announcement that significantly increased the market value of paging company securities generally in the public markets. During the first quarter of 2000, the remainder of these paging securities were sold and a gain of $24.9 million was realized.

During 2000, the company sold its equity investment in a gas compression company and realized a pre-tax gain of $91.1 million.

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10. CUSTOMER ACCOUNTS

The following is a rollforward of the investment in customer accounts (at cost) for the following years:

	December 31,
	2000			1999
	(In Thousands)
Beginning customer accounts, net	$	1,122,585		$	1,009,084
Acquisition of customer accounts		54,993			337,464
Amortization of customer accounts		(163,297	)		(185,974	)
Non-cash charges against purchase holdbacks		(8,776	)		(37,989	)
Ending customer accounts, net	$	1,005,505		$	1,122,585

Accumulated amortization of the investment in customer accounts at December 31, 2000 and 1999 was $493.4 million and $330.7 million.

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11. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

The company's investments which are accounted for by the equity method are as follows:

	Ownership at December 31,	Investment at December 31,				Equity Earnings, Year Ended December 31
	2000	2000		1999		2000		1999
	(Dollars in Thousands)
ONEOK (a)	45%	$	591,173	$	590,109	$	8,213	$	6,945
Affordable Housing Tax Credit limited
partnerships (b)	13% to 29%		69,364		79,460		10,066		5,615
Paradigm Direct (c)	-		-		35,385		3,006		1,254
International companies and joint ventures (d)	9% to 50%		13,514		18,724		4,799		-

(a)	The company also received approximately $40 million and $41 million of preferred and common dividends in 2000 and 1999.
(b)	Investment is aggregated. Individual investments are not material. Based on an order received by the KCC, equity earnings from these investments are used to offset costs associated with post-retirement and post- employment benefits offered to the company's employees.
(c)	The company sold this investment on December 15, 2000.
(d)	Investment is aggregated. Individual investments are not material.

The following summarized unaudited financial information for the company's investment in ONEOK is as follows:

	For the Year Ended December 31,
	2000		1999
	(In Thousands)
Income Statement:
Revenues	$	6,642,858	$	2,064,726
Gross profit		797,132		632,350
Net income		145,607		106,873

At December 31, 2000, the company's ownership interest in ONEOK is comprised of approximately 2.2 million common shares and approximately 19.9 million convertible preferred shares. If all the preferred shares were converted, the company would then own approximately 45% of ONEOK's common shares outstanding.

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12. EMPLOYEE BENEFIT PLANS

Pension: The company maintains qualified noncontributory defined benefit pension plans covering substantially all utility employees. Pension benefits are based on years of service and the employee's compensation during the five highest paid consecutive years out of ten before retirement. The company's policy is to fund pension costs accrued, subject to limitations set by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. The company also maintains a non-qualified Executive Salary Continuation Program for the benefit of certain management employees, including executive officers.

Postretirement Benefits: The company accrues the cost of postretirement benefits, primarily medical benefit costs, during the years an employee provides service.

The following tables summarize the status of the company's pension and other postretirement benefit plans:

	Pension Benefits						Postretirement Benefits
December 31,	2000			1999			2000			1999
	(Dollars in Thousands)
Change in Benefit Obligation:
Benefit obligation, beginning of year	$	350,749		$	392,057		$	79,287		$	87,519
Service cost		7,964			8,949			1,344			1,609
Interest cost		26,901			26,487			7,158			5,854
Plan participants' contributions		-			-			1,130			784
Benefits paid		(20,337	)		(21,961	)		(6,476	)		(6,990	)
Assumption changes		19,350			(49,499	)		5,038			(9,458	)
Actuarial losses (gains)		(2,491	)		(4,608	)		15,049			(31	)
Acquisitions		-			(676	)		-			-
Curtailments, settlements and special term      benefits		1,267			-			-			-
Benefit obligation, end of year	$	383,403		$	350,749		$	102,530		$	79,287
Change in Plan Assets:
Fair value of plan assets, beginning of year	$	506,995		$	441,531		$	261		$	173
Actual return on plan assets		1,448			85,079			17			10
Acquisitions		-			-			-			-
Employer contribution		1,927			2,882			5,177			6,284
Plan participants' contributions		-			-			1,109			784
Benefits paid		(20,197	)		(22,497	)		(6,170	)		(6,990	)
Fair value of plan assets, end of year	$	490,173		$	506,995		$	394		$	261
Funded status	$	106,770		$	156,246		$	(102,136	)	$	(79,026	)
Unrecognized net (gain)/loss		(141,443	)		(205,338	)		11,904			(7,733	)
Unrecognized transition obligation, net		174			209			48,183			52,171
Unrecognized prior service cost		29,538			32,854			(3,264	)		(3,730	)
Accrued postretirement benefit costs		$(4,961	)	$	(16,029	)	$	(45,313	)	$	(38,318	)
Actuarial Assumptions:
Discount rate		7.25-7.75%			7.75%			7.25-7.75%			7.75%
Expected rate of return		9.00-9.25%			9.00%			9.00-9.25%			9.00%
Compensation increase rate		4.25-5.00%			4.50%			4.50-5.00%			4.50%
Components of net periodic (benefit) cost:
Service cost	$	7,972		$	8,949		$	1,344		$	1,610
Interest cost		26,977			26,487			7,157			5,854
Expected return on plan assets		(39,143	)		(34,393	)		(24)			(16	)
Amortization of unrecognized transition      obligation, net		35			34			3,988			3,987
Amortization of unrecognized prior service costs		3,316			3,455			(466	)		(466	)
Amortization of (gain)/loss, net		(9,427	)		(3,477	)		457			129
Other		9			-			-			-
Net periodic (benefit) cost	$	(10,261	)	$	1,055		$	12,456		$	11,098

For measurement purposes, an annual health care cost growth rate of 6.0% was assumed for 2000 decreasing to 5% in 2001 and thereafter. The health care cost trend rate has a significant effect on the projected benefit obligation. Increasing the trend rate by 1% each year would increase the present value of the accumulated projected benefit obligation by $2.5 million and the aggregate of the service and interest cost components by $0.2 million. A 1% decrease in the trend rate would decrease the present value of the accumulated projected benefit obligation by $2.3 million and the aggregate of the service and interest cost components by $0.2 million.

Savings Plans: The company maintains savings plans in which substantially all employees participate, with the exception of Protection One and Protection One Europe employees. The company matches employees' contributions up to specified maximum limits. The company's contribution to the plans are deposited with a trustee and are invested in one or more funds, including the company stock fund. The company's contributions were $3.9 million for 2000, $3.7 million for 1999 and $3.8 million for 1998.

In 1999, the company established a qualified employee stock purchase plan, the terms of which allow for full-time non-union employees to participate in the purchase of designated shares of the company's common stock at no more than a 15% discounted price. Western Resources' employees purchased 249,050 shares in 2000, pursuant to this plan, at an average price per share of $13.9984. In 1999, employees purchased 72,698 shares at an average price per share of $14.4234. A total of 1,250,000 shares of common stock have been reserved for issuance under this program.

Protection One also maintains a savings plan. Contributions, made at Protection One's election, are allocated among participants based upon the respective contributions made by the participants through salary reductions during the year. Protection One's matching contributions may be made in Protection One common stock, in cash or in a combination of both stock and cash. Protection One's matching cash contribution to the plan was approximately $0.7 million for 2000, $0.9 million for 1999 and $1.0 million for 1998.

Protection One maintains a qualified employee stock purchase plan that allows eligible employees to acquire shares of Protection One common stock at periodic intervals through their accumulated payroll deductions. A total of 2,650,000 shares of common stock have been reserved for issuance in this program and a total of 422,133 shares have been issued including the issuance of 145,523 shares in January 2001.

Stock Based Compensation Plans: The company, excluding Protection One and Protection One Europe, has a long-term incentive and share award plan (LTISA Plan), which is a stock-based compensation plan. The LTISA Plan was implemented as a means to attract, retain and motivate employees and board members (Plan Participants). Under the LTISA Plan, the company may grant awards in the form of stock options, dividend equivalents, share appreciation rights, restricted shares, restricted share units (RSUs), performance shares and performance share units to Plan Participants. Up to five million shares of common stock may be granted under the LTISA Plan.

During 2000, 710,352 RSUs were granted to a broad-based group of over 900 non-union employees. Each RSU represents a right to receive one share of the company's common stock at the end of the restricted period. In addition, in 2000, current non-union employees were offered the opportunity to exchange their stock options for RSUs of approximately equal economic value. As a result, 2,246,865 stock options were canceled in 2000 in exchange for 614,741 RSUs. The grant of restricted stock is shown as a separate component of shareholders' equity. Unearned compensation is being amortized to expense over the vesting period. This compensation expense is shown as a separate component of shareholders' equity. The company granted a total of 152,000 restricted shares in 1999 and 136,500 in 1998.

Another component of the LTISA Plan is the Executive Stock for Compensation program where eligible employees are entitled to receive RSUs in lieu of cash compensation at the end of a deferral period. In 2000, 95,000 RSUs were deferred, representing $1.3 million in cash compensation. In 1999, 35,000 RSUs were deferred, representing $0.7 million of cash compensation. Dividend equivalents accrue on the deferred RSUs. Dividend equivalents are the right to receive cash equal to the value of dividends paid on the company's common stock.

Stock options and restricted shares under the LTISA plan are as follows:

	As of December 31,
	2000				1999				1998
	Shares (Thousands)		Weighted- Average Exercise Price		Shares (Thousands)		Weighted- Average Exercise Price		Shares (Thousands)	Weighted- Average Exercise Price
Outstanding, beginning of year	2,418.6		$	34.139	1,590.7		$	36.106	665.4	$	30.282
Granted	1,953.1			15.513	981.6			30.613	925.3		40.293
Exercised	(0.5	)		15.625	-			-	-		-
Forfeited	(2,265.6	)		28.827	(153.7)	)		31.985	-		-
Outstanding, end of year	2,105.6		$	22.583	2,418.6		$	34.139	1,590.7	$	36.106
Weighted-average fair value of awards granted during the year			$	11.28			$	8.22		$	9.12

Stock options and restricted shares issued and outstanding at December 31, 2000 are as follows:

	Range of Exercise Price	Number Issued and Outstanding	Weighted- Average Contractual Life in Years	Weighted- Average Exercie Price
Options:
2000	$15.3125	17,690	10.0	$15.3125
1999	27.8125-32.125	51,305	9.0	29.7357
1998	38.625-43.125	222,720	8.0	40.986
1997	30.750	137,740	7.0	30.750
1996	29.250	68,870	5.7	29.250
		498,325
Restricted shares:
2000	15.3125-19.875	1,319,083	6.3	15.6079
1999	27.813-32.125	151,783	8.0	29.7587
1998	38.625	136,500	7.0	38.625
		1,607,366
Total issued		2,105,691

An equal amount of dividend equivalents is issued to recipients of stock options and RSUs. The weighted-average grant-date fair value of the dividend equivalent was $4.62 in 2000 and $3.28 in 1999. The value of each dividend equivalent is calculated by accumulating dividends that would have been paid or payable on a share of company common stock. The dividend equivalents, with respect to stock options, expire after nine years from date of grant.

The fair value of stock options and dividend equivalents were estimated on the date of grant using the Black-Scholes option-pricing model. The model assumed the following at December 31:

	2000		1999
Dividend yield	6.32	%	6.25	%
Expected stock price volatility	16.42	%	16.56	%
Risk-free interest rate	5.79	%	6.05	%

Protection One Stock Warrants and Options: Protection One has outstanding stock warrants and options which were considered reissued and exercisable upon the company's acquisition of Protection One on November 24, 1997. The 1997 Long-Term Incentive Plan (the LTIP), approved by the Protection One stockholders on November 24, 1997, provides for the award of incentive stock options to directors, officers and employees. Under the LTIP, 4.2 million shares are reserved for issuance. The LTIP provides for the granting of options that qualify as incentive stock options under the Internal Revenue Code and options that do not so qualify.

Options issued since 1997 have a term of 10 years and vest ratably over 3 years.

A summary of warrant and option activity for Protection One from December 31, 1998, through December 31, 2000, is as follows:

Stock options and warrants of Protection One issued and outstanding at December 31, 2000, are as follows:

	Range of Exercise Price	Number Issued and Outstanding	Weighted- Average Contractual Life in Years	Weighted- Average Exercie Price
Exercisable:
Fiscal 1995	$6.375-$6.500	100,800	4.0	$6.491
Fiscal 1996	8.000-10.313	248,400	5.0	8.022
Fiscal 1996	13.750-15.500	99,000	5.0	14.947
Fiscal 1997	9.500	110,500	6.0	9.500
Fiscal 1997	15.000	37,500	6.0	15.000
Fiscal 1997	14.268	50,000	1.0	14.268
Fiscal 1998	11.000	671,835	7.0	11.000
Fiscal 1998	8.5625	23,833	7.0	8.5625
Fiscal 1999	8.9275	248,297	8.0	8.9275
Fiscal 1999	5.250-6.125	56,222	8.0	6.028
Fiscal 2000	1.438	5,000	9.0	1.438
1993 Warrants	0.167	428,400	3.0	0.167
1995 Note Warrants	3.890	780,837	4.0	3.890
		2,860,624
Not Exercisable:
1998 options	$11.000	112,165	7.0	$11.000
1998 options	8.5625	11,917	7.0	8.5625
1999 options	8.9275	410,403	8.0	8.9275
1999 options	5.250-6.125	112,444	8.0	6.028
2000 options	1.313-1.438	896,980	9.0	1.436
		1,543,909
	Total outstanding	4,404,533

The weighted average fair value of options granted by Protection One during 2000, 1999 and 1998 estimated on the date of grant were $1.13, $5.41 and $6.87. The fair value was calculated using the following assumptions:

	Year Ended December 31,
	2000	1999	1998
Dividend yield	-%	-%	-%
Expected stock price volatility	92.97%	64.06%	61.72%
Risk free interest rate	4.87%	6.76%	5.50%
Expected option life	6 years	6 years	6 years

Effect of Stock-Based Compensation on Earnings Per Share: The company accounts for both the company's and Protection One's plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and the related interpretations. Had compensation expense been determined pursuant to Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation," the company would have recognized additional compensation costs during 2000, 1999 and 1998 as shown in the table below.

Year Ended December 31,	2000	1999	1998
	(In Thousands, Except Per Share Amounts)
Earnings available for common stock:
As reported	$135,352	$13,167	$32,058
Pro forma	134,274	10,699	42,640
Basic and diluted earnings per common share:
As reported	$1.96	$0.20	$0.48
Pro forma	1.95	0.16	0.65

Split Dollar Life Insurance Program: The company has established a split dollar life insurance program for the benefit of the company and certain of its executives. Under the program, the company has purchased life insurance policies on which the executive's beneficiary is entitled to a death benefit in an amount equal to the face amount of the policy reduced by the greater of (i) all premiums paid by the company or (ii) the cash surrender value of the policy, which amount, at the death of the executive, will be returned to the company. The company retains an equity interest in the death benefit and cash surrender value of the policy to secure this repayment obligation.

Subject to certain conditions, each executive may transfer to the company their interest in the death benefit based on a predetermined formula, beginning no earlier than the first day of the calendar year following retirement or three years from the date of the policy. The liability associated with this program was $19.1 million as of December 31, 2000, and $31.9 million as of December 31, 1999. The obligations under this program can increase and decrease based on the company's total return to shareholders and payments to plan participants. This liability decreased approximately $12.8 million in 2000 due primarily to payments to plan participants and $10.5 million in 1999 based on the company's total return to shareholders. There was no change in the liability in 1998. Under current tax rules, payments to active employees in exchange for their interest in the death benefits may not be fully deductible by the company for income tax purposes.

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13. COMMON STOCK, PREFERRED STOCK AND OTHER MANDATORILY REDEEMABLE SECURITIES

The company's Restated Articles of Incorporation, as amended, provide for 150,000,000 authorized shares of common stock. At December 31, 2000, 70,082,314 shares were issued and outstanding.

The company has a Direct Stock Purchase Plan (DSPP). Shares issued under the DSPP may be either original issue shares or shares purchased on the open market. During 2000, a total of 3,220,657 shares were purchased from the company made up of 1,440,000 treasury and 1,780,657 original issue shares. These shares were for DSPP, ESPP, 401K match and other stock based plans operated under the 1996 Long-term Incentive and Share Award Plan. Of the total shares purchased from the company in 2000, 2,750,457 were for the DSPP made up of 1,021,443 treasury and 1,729,014 original issue shares. During 2000 an additional 6,000,000 shares were registered to the DSPP. At December 31, 2000, 6,020,734 shares were available under the DSPP registration statement.

In 1999, the company purchased 900,000 shares of common stock at an average price of $17.55 per share. The purchased shares were purchased with short-term debt and available funds. These purchased shares are shown as $15.8 million in treasury stock on the accompanying Consolidated Balance Sheet. In 2000, the company purchased 540,000 shares of common stock at an average price of $17.01. All of these shares were reissued during the year.

Preferred Stock Not Subject to Mandatory Redemption: The cumulative preferred stock is redeemable in whole or in part on 30 to 60 days notice at the option of the company.

Rate	Principal Outstanding	Call Price	Premium	Total Amount to Redeem
4.500%	$13,857,600	108.00%	$1,108,608	$14,966,208
4.250%	6,000,000	101.50%	90,000	6,090,000
5.000%	5,000,000	102.00%	100,000	5,100,000
	$24,857,600		$1,298,608	$26,156,208

The provisions in the company's Articles of Incorporation contain restrictions on the payment of dividends or the making of other distributions on the company's common stock while any preferred shares remain outstanding unless certain capitalization ratios and other conditions are met.

Other Mandatorily Redeemable Securities: On December 14, 1995, Western Resources Capital I, a wholly owned trust, issued 4.0 million preferred securities of 7-7/8% Cumulative Quarterly Income Preferred Securities, Series A, for $100 million. The trust interests are redeemable at the option of Western Resources Capital I on or after December 11, 2000, at $25 per preferred security plus accrued interest and unpaid dividends. Holders of the securities are entitled to receive distributions at an annual rate of 7-7/8% of the liquidation preference value of $25. Distributions are payable quarterly and are tax deductible by the company. These distributions are recorded as interest expense. The sole asset of the trust is $103 million principal amount of 7-7/8% Deferrable Interest Subordinated Debentures, Series A due December 11, 2025.

On July 31, 1996, Western Resources Capital II, a wholly owned trust, of which the sole asset is subordinated debentures of the company, sold in a public offering, 4.8 million shares of 8-1/2% Cumulative Quarterly Income Preferred Securities, Series B, for $120 million. The trust interests are redeemable at the option of Western Resources Capital II, on or after July 31, 2001, at $25 per preferred security plus accumulated and unpaid distributions. Holders of the securities are entitled to receive distributions at an annual rate of 8-1/2% of the liquidation preference value of $25. Distributions are payable quarterly and are tax deductible by the company. These distributions are recorded as interest expense. The sole asset of the trust is $124 million principal amount of 8-1/2% Deferrable Interest Subordinated Debentures, Series B due July 31, 2036.

In addition to the company's obligations under the Subordinated Debentures discussed above, the company has agreed to guarantee, on a subordinated basis, payment of distributions on the preferred securities. These undertakings constitute a full and unconditional guarantee by the company of the trust's obligations under the preferred securities.

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14. COMMITMENTS AND CONTINGENCIES

Efforts by Wichita to Equalize Electric Rates: In September 1999, the City of Wichita filed a complaint with FERC against KGE, alleging improper affiliate transactions between KGE and Western Resources' KPL division. The City of Wichita asked that FERC equalize the generation costs between KGE and KPL, in addition to other matters. On November 9, 2000, a FERC administrative law judge ruled in the company's favor that no change in rates was required. On December 13, 2000, the City of Wichita filed a brief with FERC asking that the Commission overturn the judge's decision. The company anticipates a decision by FERC in the second quarter of 2001. A decision requiring equalization of rates could have a material adverse effect on the company's operations and financial position.

Municipalization Efforts by Wichita: In December 1999, the City Council of Wichita, Kansas, authorized the hiring of an outside consultant to determine the feasibility of creating a municipal electric utility to replace KGE as the supplier of electricity in Wichita. The feasibility study was released in February 2001 and estimates that the City of Wichita would be required to pay KGE $145 million for its stranded costs if the City were to municipalize. However, the company estimates the amount to be substantially greater. In order to municipalize KGE's Wichita electric facilities, the City of Wichita would be required to purchase KGE's facilities or build a separate independent system and arrange for its own power supply. These costs are in addition to the stranded costs for which the city would be required to reimburse the company. On February 2, 2001, the City of Wichita announced its intention to proceed with its attempt to municipalize KGE's retail electric utility business in Wichita. KGE will oppose municipalization efforts by the City of Wichita. Should the city be successful in its municipalization efforts without providing the company adequate compensation for its assets and lost revenues, the adverse effect on the operations and financial position of the company could be material.

KGE's franchise with the City of Wichita to provide retail electric service expires in March 2002. There can be no assurance that this franchise can be successfully renegotiated with terms similar, or as favorable, as those in the current franchise. Under Kansas law, KGE will continue to have the right to serve the customers in Wichita following the expiration of the franchise, assuming the system is not municipalized. Customers within the Wichita metropolitan area account for approximately 25% of the company's total energy sales .

Purchase Orders and Contracts: As part of its ongoing operations and construction program, the company has commitments under purchase orders and contracts which have an unexpended balance of approximately $154.2 million at December 31, 2000.

Manufactured Gas Sites: The company has been associated with 15 former manufactured gas sites located in Kansas which may contain coal tar and other potentially harmful materials. The company and the Kansas Department of Health and Environment (KDHE) entered into a consent agreement governing all future work at the 15 sites. The terms of the consent agreement will allow the company to investigate these sites and set remediation priorities based on the results of the investigations and risk analysis. At December 31, 2000, the costs incurred for preliminary site investigation and risk assessment have been minimal. In accordance with the terms of the strategic alliance with ONEOK, ownership of twelve of these sites and the responsibility for clean-up of these sites were transferred to ONEOK. The ONEOK agreement limits the company's future liability associated with these sites to an immaterial amount. The company's investment earnings from ONEOK could be impacted by these costs.

Superfund Sites: In December 1999, the company was identified as one of more than 1,000 potentially responsible parties at an EPA Superfund site in Kansas City, Kansas (Kansas City site). The company has previously been associated with other Superfund sites for which the company's liability has been classified as de minimis and any potential obligations have been settled at minimal cost. Since 1993, the company has settled Superfund obligations at three sites for a total of $141,300. No Superfund obligations have been settled since 1994. The company's obligation, if any, at the Kansas City site is expected to be limited based upon previous experience and the limited nature of the company's business transactions with the previous owners of the site. In the opinion of the company's management, the resolution of this matter is not expected to have a material impact on the company's financial position or results of operations.

Clean Air Act: The company must comply with the provisions of The Clean Air Act Amendments of 1990 that require a two-phase reduction in certain emissions. The company has installed continuous monitoring and reporting equipment to meet the acid rain requirements. Material capital expenditures have not been required to meet Phase II sulfur dioxide and nitrogen oxide requirements.

Decommissioning: The company accrues decommissioning costs over the expected life of the Wolf Creek generating facility. The accrual is based on estimated unrecovered decommissioning costs which consider inflation over the remaining estimated life of the generating facility and are net of expected earnings on amounts recovered from customers and deposited in an external trust fund.

On September 1, 1999, Wolf Creek submitted the 1999 Decommissioning Cost Study to the KCC for approval. The KCC approved the 1999 Decommissioning Cost Study on April 26, 2000. Based on the study, the company's share of Wolf Creek's decommissioning costs, under the immediate dismantlement method, is estimated to be approximately $631 million during the period 2025 through 2034, or approximately $221 million in 1999 dollars. These costs include decontamination, dismantling and site restoration and were calculated using an assumed inflation rate of 3.6% over the remaining service life from 1999 of 26 years. The actual decommissioning costs may vary from the estimates because of changes in the assumed dates of decommissioning, changes in regulatory requirements, changes in technology and changes in costs of labor, materials and equipment. On May 26, 2000, the company filed an application with the KCC requesting approval of the funding of the company's decommissioning trust on this basis. Approval was granted by the KCC on September 20, 2000.

Decommissioning costs are currently being charged to operating expense in accordance with the prior KCC orders. Electric rates charged to customers provide for recovery of these decommissioning costs over the life of Wolf Creek. Amounts expensed approximated $4.0 million in 2000 and will increase annually to $5.5 million in 2024. These amounts are deposited in an external trust fund. The average after-tax expected return on trust assets is 5.8%.

The company's investment in the decommissioning fund, including reinvested earnings approximated $64.2 million at December 31, 2000 and $58.3 million at December 31, 1999. Trust fund earnings accumulate in the fund balance and increase the recorded decommissioning liability.

The FASB is reviewing the accounting for closure and removal costs, including decommissioning of nuclear power plants. The FASB has issued an Exposure Draft "Accounting for Obligations Associated with the Retirement of Long-Lived Assets." The FASB expects to issue a final statement of financial accounting standard in the second quarter of 2001. The proposed Exposure Draft contains an effective date of fiscal years beginning after June 15, 2001. However, the ultimate effective date has not been finalized. If current accounting practices for nuclear power plant decommissioning are changed, the following could occur:

- The company's annual decommissioning expense could be higher than in 2000
- The estimated cost for decommissioning could be recorded as a liability (rather than as    accumulated depreciation)
- The increased costs could be recorded as additional investment in the Wolf Creek plant

The company does not believe that such changes, if required, would adversely affect its operating results due to its current ability to recover decommissioning costs through rates.

Nuclear Insurance: The Price-Anderson Act limits the combined public liability of the owners of nuclear power plants to $9.5 billion for a single nuclear incident. If this liability limitation is insufficient, the United States Congress will consider taking whatever action is necessary to compensate the public for valid claims. The Wolf Creek owners (Owners) have purchased the maximum available private insurance of $200 million. The remaining balance is provided by an assessment plan mandated by the Nuclear Regulatory Commission (NRC). Under this plan, the Owners are jointly and severally subject to a retrospective assessment of up to $88.1 million in the event there is a major nuclear incident involving any of the nation's licensed reactors. This assessment is subject to an inflation adjustment based on the Consumer Price Index and applicable premium taxes. There is a limitation of $10 million in retrospective assessments per incident, per year.

The Owners carry decontamination liability, premature decommissioning liability and property damage insurance for Wolf Creek totaling approximately $2.8 billion ($1.3 billion, company's share). This insurance is provided by Nuclear Electric Insurance Limited (NEIL). In the event of an accident, insurance proceeds must first be used for reactor stabilization and site decontamination in accordance with a plan mandated by the NRC. The company's share of any remaining proceeds can be used to pay for property damage or decontamination expenses or, if certain requirements are met including decommissioning the plant, toward a shortfall in the decommissioning trust fund.

The Owners also carry additional insurance with NEIL to cover costs of replacement power and other extra expenses incurred during a prolonged outage resulting from accidental property damage at Wolf Creek. If losses incurred at any of the nuclear plants insured under the NEIL policies exceed premiums, reserves and other NEIL resources, the company may be subject to retrospective assessments under the current policies of approximately $5.3 million per year.

Although the company maintains various insurance policies to provide coverage for potential losses and liabilities resulting from an accident or an extended outage, the company's insurance coverage may not be adequate to cover the costs that could result from a catastrophic accident or extended outage at Wolf Creek. Any substantial losses not covered by insurance, to the extent not recoverable through rates, would have a material adverse effect on the company's financial condition and results of operations.

Fuel Commitments: To supply a portion of the fuel requirements for its generating plants, the company has entered into various commitments to obtain nuclear fuel and coal. Some of these contracts contain provisions for price escalation and minimum purchase commitments. At December 31, 2000, WCNOC's nuclear fuel commitments (company's share) were approximately $7.3 million for uranium concentrates expiring in 2003, $1.1 million for conversion expiring in 2003, $16.1 million for enrichment expiring at various times through 2003 and $61.3 million for fabrication through 2025.

At December 31, 2000, the company's coal and transportation contract commitments in 2000 dollars under the remaining terms of the contracts were approximately $1.52 billion. The largest contract expires in 2020, with the remaining contracts expiring at various times through 2013.

At December 31, 2000, the company's natural gas transportation commitments in 2000 dollars under the remaining terms of the contracts were approximately $61.5 million. The natural gas transportation contracts provide firm service to several of the company's gas burning facilities and expire at various times through 2010, except for one contract which expires in 2016.

Energy Act: As part of the 1992 Energy Policy Act, a special assessment is being collected from utilities for an uranium enrichment decontamination and decommissioning fund. The company's portion of the assessment for Wolf Creek is approximately $9.6 million, payable over 15 years. Such costs are recovered through the ratemaking process.

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15. LEGAL PROCEEDINGS

The SEC commenced a private investigation in 1997 relating to, among other things, the timeliness and adequacy of disclosure filings with the SEC by the company with respect to securities of ADT Ltd. The company is cooperating with the SEC staff in this investigation.

The company, its subsidiary Westar Industries, Protection One, its subsidiary Protection One Alarm Monitoring, Inc. (Monitoring), and certain present and former officers and directors of Protection One are defendants in a purported class action litigation pending in the United States District Court for the Central District of California, "Alec Garbini, et al v. Protection One, Inc., et al," No. CV 99-3755 DT (RCx). Pursuant to an Order dated August 2, 1999, four pending purported class actions were consolidated into a single action. On February 27, 2001, plaintiffs filed a Third Consolidated Amended Class Action Complaint ("Amended Complaint"). Plaintiffs purport to bring the action on behalf of a class consisting of all purchasers of publicly traded securities of Protection One, including common stock and notes, during the period of February 10, 1998 through February 2, 2001. The Amended Complaint asserts claims under Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 against Protection One, Monitoring, and certain present and former officers and directors of Protection One based on allegations that various statements concerning Protection One's financial results and operations for 1997, 1998, 1999 and the first three quarters of 2000 were false and misleading and not in compliance with generally accepted accounting principles. Plaintiffs allege, among other things, that former employees of Protection One have reported that Protection One lacked adequate internal accounting controls and that certain accounting information was unsupported or manipulated by management in order to avoid disclosure of accurate information. The Amended Complaint further asserts claims against the company and Westar Industries as controlling persons under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. A claim is also asserted under Section 11 of the Securities Act of 1933 against Protection One's auditor, Arthur Andersen LLP. The Amended Complaint seeks an unspecified amount of compensatory damages and an award of fees and expenses, including attorneys' fees. Defendants have until April 9, 2001 to respond to the Amended Complaint. The company and Protection One intend to vigorously defend against all the claims asserted in the Amended Complaint. The company and Protection One cannot predict the impact of this litigation which could be material.

The company and its subsidiaries are involved in various other legal, environmental and regulatory proceedings. Management believes that adequate provision has been made and accordingly believes that the ultimate disposition of such matters will not have a material adverse effect upon the company's overall financial position or results of operations. See also Note 3 for discussion of regulatory proceedings and FERC proceedings including the City of Wichita and Note 14 for discussion of the City of Wichita municipalization efforts.

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16. LEASES

At December 31, 2000, the company had leases covering various property and equipment.

Rental payments for operating leases and estimated rental commitments are as follows:

Year Ended December 31,		Leases
		(In Thousands)
Rental payments:
1998	$	70,796
1999		71,771
2000		71,232
Future commitments:
2001		$71,280
2002		67,033
2003		62,270
2004		54,647
2005		55,931
Thereafter		558,754
Total future commitments	$	869,915

In 1987, KGE sold and leased back its 50% undivided interest in the La Cygne 2 generating unit. The La Cygne 2 lease has an initial term of 29 years, with various options to renew the lease or repurchase the 50% undivided interest. KGE remains responsible for its share of operation and maintenance costs and other related operating costs of La Cygne 2. The lease is an operating lease for financial reporting purposes. The company recognized a gain on the sale which was deferred and is being amortized over the initial lease term.

In 1992, the company deferred costs associated with the refinancing of the secured facility bonds of the Trustee and owner of La Cygne 2. These costs are being amortized over the life of the lease and are included in operating expense.

Future minimum annual lease payments, included in the table above, required under the La Cygne 2 lease agreement are approximately $34.6 million for each year through 2002, $39.4 million in 2003, $34.6 million in 2004, $38.0 million in 2005, and $464.6 million over the remainder of the lease. KGE's lease expense, net of amortization of the deferred gain and refinancing costs, was approximately $28.9 million annually for 2000, 1999 and 1998.

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17. INTERNATIONAL POWER DEVELOPMENT COSTS

During the fourth quarter of 1998, management decided to exit the international power development business. This business had been conducted by the company's wholly owned subsidiary, The Wing Group. The company recorded a $98.9 million charge to income in the fourth quarter of 1998 as a result of exiting this business.

During 1999, the company terminated the employment of all employees, closed offices, discontinued all development activities, and terminated all other matters related to the activity of The Wing Group in accordance with the terms of the exit plan. These activities were substantially completed by December 31, 1999. The actual costs incurred during 1999 to complete the exit plan approximated $16.9 million, which was $5.6 million less than the amount estimated at December 31, 1998. This was accounted for as a change in estimate in 1999.

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18. INCOME TAXES

Income tax expense (benefit) is composed of the following components at December 31:

	2000			1999			1998
	(In Thousands)
Currently payable:
Federal	$	18,600		$	13,907		$	52,993
State		10,131			9,622			10,881
Deferred:
Federal		13,790			(43,090	)		(46,869	)
State		9,585			(6,582	)		(4,185	)
Amortization of investment tax credits		(6,045	)		(6,054	)		(6,065	)
Total income tax expense (benefit)	$	46,061		$	(32,197	)	$	6,755

Under SFAS No. 109, "Accounting for Income Taxes," temporary differences gave rise to deferred tax assets and deferred tax liabilities as follows at December 31:

	2000		1999
	(In Thousands)
Deferred tax assets:
Deferred gain on sale-leaseback	$	82,013	$	87,220
Monitored services deferred tax assets		101,101		59,171
Other		119,344		131,976
Total deferred tax assets	$	302,458	$	278,367
Deferred tax liabilities:
Accelerated depreciation and other	$	609,396	$	614,309
Acquisition premium		275,159		283,157
Deferred future income taxes		188,006		218,937
Other		58,158		40,508
Total deferred tax liabilities	$	1,130,719	$	1,156,911
Investment tax credits	$	91,546	$	97,591
Accumulated deferred income taxes, net	$	919,807	$	976,135

In accordance with various rate orders, the company has not yet collected through rates certain accelerated tax deductions which have been passed on to customers. As management believes it is probable that the net future increases in income taxes payable will be recovered from customers, it has recorded a regulatory asset for these amounts. These assets also are a temporary difference for which deferred income tax liabilities have been provided. This liability is classified above as deferred future income taxes.

The effective income tax rates set forth below are computed by dividing total federal and state income taxes by the sum of such taxes and net income. The difference between the effective tax rates and the federal statutory income tax rates are as follows:

	For the Year Ended December 31,
	2000		1999		1998
Effective income tax rate	33.6	%	(108.6	%)	16.6	%
Effect of:
State income taxes	(9.4	)	(7.1	)	(7.3	)
Amortization of investment tax credits	4.4		20.4		14.9
Corporate-owned life insurance policies	8.4		28.0		22.4
Affordable housing tax credits	7.8		31.3		3.1
Accelerated depreciation flow through     and amortization, net	(4.9	)	(12.2	)	(4.4	)
Adjustment to tax provision	-		4.3		(16.9	)
Dividends received deduction	7.1		34.3		23.9
Amortization of goodwill	(13.0	)	(19.3	)	(17.0	)
Other	1.0		(6.1	)	(0.3	)
Statutory federal income tax rate	35.0	%	(35.0	%)	35.0	%

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19. RELATED PARTY TRANSACTIONS

The company and ONEOK have shared services agreements in which facilities, utility field work, information technology, customer support, bill processing, and human resources services are provided to and billed to one another. Payments for these services are based on various hourly charges, negotiated fees and out-of-pocket expenses. ONEOK paid the company $5.0 million in 2000 and $5.6 million in 1999, net of what the company owed ONEOK, for services.

In 1999, the company sold 984,000 shares of ONEOK stock to ONEOK as a result of ONEOK's repurchase program. The company reduced its investment in ONEOK for proceeds received from this sale. All such shares were required to be sold to ONEOK in accordance with a shareholder agreement between the company and ONEOK. The company's ownership interest remains at approximately 45% as of December 31, 2000.

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20. PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant and equipment at December 31:

	2000	1999
	(In Thousands)
Electric plant in service	$5,987,920	$5,769,401
Less - accumulated depreciation	2,274,940	2,141,037
	3,712,980	3,628,364
Construction work in progress	189,853	170,061
Nuclear fuel (net)	30,791	28,013
Net utility plant	3,933,624	3,826,438
Non-utility plant in service	113,040	92,872
Less - accumulated depreciation	53,226	29,866
Net property, plant and equipment	$3,993,438	$3,889,444

The company's depreciation expense on property, plant and equipment was $201.7 million in 2000, $186.1 million in 1999 and $168.9 million in 1998.

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21. JOINT OWNERSHIP OF UTILITY PLANTS

		Company's Ownership at December 31, 2000
		In-Service Dates	Invest- ment	Accumulated Depreciation	Net (MW)	Per- cent
		(Dollars in Thousands)
La Cygne 1	(a)	Jun 1973	$182,794	$115,903	344.0	50
Jeffrey 1	(b)	Jul 1978	305,838	144,009	625.0	84
Jeffrey 2	(b)	May 1980	297,979	133,701	622.0	84
Jeffrey 3	(b)	May 1983	410,926	175,482	623.0	84
Jeffrey wind 1	(b)	May 1999	828	58	0.6	84
Jeffrey wind 2	(b)	May 1999	828	57	0.6	84
Wolf Creek	(c)	Sep 1985	1,381,656	491,978	550.0	47

(a)	Jointly owned with Kansas City Power & Light Company (KCPL)
(b)	Jointly owned with UtiliCorp United Inc.
(c)	Jointly owned with KCPL and Kansas Electric Power Cooperative, Inc.

Amounts and capacity presented above represent the company's share. The company's share of operating expenses of the plants in service above, as well as such expenses for a 50% undivided interest in La Cygne 2 (representing 337 MW capacity) sold and leased back to KGE in 1987, are included in operating expenses on the Consolidated Statements of Income. The company's share of other transactions associated with the plants is included in the appropriate classification in the company's Consolidated Financial Statements.

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22. SEGMENTS OF BUSINESS

In 1998, the company adopted SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." This statement requires the company to define and report the company's business segments based on how management currently evaluates its business. Management has segmented its business based on differences in products and services, production processes, and management responsibility. Based on this approach, the company has identified four reportable segments: Fossil Generation, Nuclear Generation, Power Delivery and Monitored Services.

The first three segments comprise the company's electric utility business. Fossil Generation produces power for sale internally to the Power Delivery segment and externally to wholesale customers. A component of the company's Fossil Generation segment is power marketing which attempts to minimize market fluctuation risk associated with fuel and purchased power requirements and enhance system reliability. Nuclear Generation represents the company's 47% ownership in the Wolf Creek nuclear generating facility. This segment has only internal sales because it provides all of its power to its co-owners. The Power Delivery segment consists of the transmission and distribution of power to the company's retail customers in Kansas and the customer service provided to these customers and the transportation of wholesale energy. Monitored Services represents the company's security alarm monitoring business in North America, the United Kingdom and continental Europe. Other represents the company's non- utility operations and natural gas investment.

The accounting policies of the segments are substantially the same as those described in the summary of significant accounting policies. The company evaluates segment performance based on earnings before interest and taxes (EBIT). Unusual items, such as charges to income, may be excluded from segment performance depending on the nature of the charge or income. The company's ONEOK investment, marketable securities investments and other equity method investments do not represent operating segments of the company. The company has no single external customer from which it receives ten percent or more of its revenues.

Year Ended December 31, 2000:
		Fossil Generation		Nuclear Generation			Power Delivery		Monitored Services			Other(a)			Eliminating/ Reconciling Items (b)			Total
	(In Thousands)
External sales	$	705,536	$	-		$	1,123,590	$	537,859		$	1,484		$	7		$	2,368,476
Internal sales		572,533		107,770			291,927		-			-			(972,230	)		-
Depreciation and amortization		60,331		40,052			75,419		248,414			2,116			37			426,369
Earnings before interest and taxes		202,744		(24,323	)		171,872		(91,370	)		189,289			(21,533	)		426,679
Interest expense																		289,568
Earnings before income taxes																		137,111
Identifiable assets		1,664,300		1,068,228			1,899,951		2,139,748			994,983			(2	)		7,767,208
Year Ended December 31, 1999:
		Fossil Generation		Nuclear Generation			Power Delivery		Monitored Services			Other(c)			Eliminating/ Reconciling Items (b)			Total
	(In Thousands)
External sales	$	365,311	$	-		$	1,064,385	$	599,105		$	1,284		$	2		$	2,030,087
Internal sales		546,683		108,445			293,522		-			-			(948,650)			-
Depreciation and amortization		55,320		39,629			71,717		235,465			1,448			90			403,669
Earnings before interest and taxes		219,087		(25,214	)		145,603		(20,675	)		(28,088	)		(26,252)	)		264,461
Interest expense																		294,104
Earnings/(loss) before income taxes																		(29,643	)
Identifiable assets		1,476,716		1,083,344			1,783,937		2,539,921			1,165,145			(59,171	)		7,989,892
Year Ended December 31, 1998:
		Fossil Generation		Nuclear Generation			Power Delivery		Monitored Services			Other(d)			Eliminating/ Reconciling Items (b)			Total
	(In Thousands)
External sales	$	525,974	$	-		$	1,085,711	$	421,095		$	1,342		$	(68	)	$	2,034,054
Internal sales		517,363		117,517			66,492		-			-			(701,372	)		-
Depreciation and amortization		53,132		39,583			68,297		125,103			2,010			-			288,125
Earnings before interest and taxes		144,357		(20,920	)		196,398		34,438			(99,608	)		12,268			266,933
Interest expense																		226,120
Earnings before income taxes																		40,813
Identifiable assets		1,360,102		1,121,509			1,788,943		2,489,667			1,269,013			(99,458	)		7,929,776

(a)	EBIT includes the gain on the sale of the company's investment in a gas compression company of $91.1 million and the gain on the sale of other marketable securities of $24.9 million.
(b)	Identifiable assets includes eliminating and reclassing balances to consolidate the monitored services business.
(c)	EBIT includes investment earnings of $36.0 million, an impairment of marketable securities of $76.2 million and the write-off of deferred costs of $17.6 million.
(d)	EBIT includes investment earnings of $21.7 million and the write-off of international power development costs of $98.9 million.

Geographic Information: Prior to 1998, the company did not have international sales or international property, plant and equipment. The company's sales and property, plant and equipment are as follows:

	For the Year Ended December 31,
	2000	1999	1998
	(In Thousands)
External sales:
North America operations	$2,262,381	$1,867,081	$1,990,329
International operations	106,095	163,006	43,725
Total	$2,368,476	$2,030,087	$2,034,054
	As of December 31,
	2000	1999	1998
	(In Thousands)
Property, plant and equipment, net:
North America operations	$3,985,331	$3,881,294	$3,792,645
International operations	8,107	8,150	7,271
Total	$3,993,438	$3,889,444	$3,799,916

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23. QUARTERLY RESULTS (UNAUDITED)

The amounts in the table are unaudited but, in the opinion of management, contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of such periods. The electric business of the company is seasonal in nature and, in the opinion of management, comparisons between the quarters of a year do not give a true indication of overall trends and changes in operations.

	First	Second	Third	Fourth
	(In Thousands, Except Per Share Amounts)
2000
Sales	$481,699	$546,607	$759,562	$580,608
Gross profit	306,760	331,889	395,534	298,461
Net income before extraordinary gain and accounting change	39,801	23,565	53,991	(26,307	)
Net income	54,483	40,912	60,707	(19,621	)
Earnings per share available for common stock before extraordinary gain and accounting change
Basic	$0.58	$0.34	$0.78	$(0.40	)
Diluted	$0.58	$0.34	$0.77	$(0.39	)
Cash dividend per common share	$0.535	$0.30	$0.30	$0.30
Market price per common share:
High	$18.313	$17.813	$21.953	$25.875
Low	$15.313	$14.688	$15.375	$20.438
1999
Sales	$460,582	$476,142	$646,740	$446,623
Gross profit	312,655	324,407	424,581	309,498
Net income before extraordinary gain and accounting change	19,980	17,722	53,203	(88,351	)
Net income	19,980	17,722	53,203	(76,609	)
Basic and fully diluted earnings per share available for common stock before extraordinary gain	$0.30	$0.26	$0.78	$(1.32	)
Cash dividend per common share	$0.535	$0.535	$0.535	$0.535
Market price per common share:
High	$33.875	$29.375	$27.125	$23.8125
Low	$26.6875	$23.75	$20.375	$16.8125

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