INTRODUCTION

We are the largest electric utility in Kansas. We produce, transmit and sell electricity at retail in Kansas and at wholesale in a multi-state region in the central United States under the regulation of the KCC and the FERC.

In Management's Discussion and Analysis, we discuss our general financial condition, significant changes that occurred during 2009 and our operating results for the three months ended March 31, 2009 and 2008. As you read Management's Discussion and Analysis, please refer to our condensed consolidated financial statements and the accompanying notes, which contain our operating results.

SUMMARY OF SIGNIFICANT ITEMS

Decrease in Net Income

Net income decreased $17.0 million, or 28%, compared to last year. Settlements with the IRS occurring in the first quarters of both 2009 and 2008 accounted for $6.4 million of this decrease.

During the first quarter of 2008, we reached a settlement with the IRS for years 1995 through 2002 regarding issues principally related to the method used to capitalize overheads to electric plant. This settlement resulted in a first quarter 2008 net earnings benefit from continuing operations of approximately $39.4 million, including interest. This settlement also reduced our assessment of uncertain tax liabilities; therefore, we reversed $17.8 million of accrued interest related to uncertain tax liabilities in the first quarter of 2008.

In January 2009, we reached a settlement with the IRS for years 2003 and 2004 associated with the re-characterization of a portion of the loss we incurred on the sale of Protection One from a capital loss to an ordinary loss. This settlement resulted in a first quarter 2009 non-cash net earnings benefit from discontinued operations of approximately $33.0 million, or $0.30 per share, net of the amounts due to Protection One pursuant to the agreement related to the sale of Protection One.

Retail sales decreased 319,000 megawatt hours (MWh), or 7%, this quarter compared to the same period in 2008. As a result of prevailing economic conditions, certain of our industrial and commercial customers have reduced their demand for electricity. Additionally, because 2008 was a leap year, we had one day less of sales. Notwithstanding decreased retail MWh sales, retail revenues increased $22.6 million, or 8%, during the three months ended March 31, 2009, compared to the same period last year. This increase is due principally to our having increased our prices in accordance with regulatory authority.

Despite increased retail revenues and lower fuel and purchased power expense, net income decreased due principally to increases in our other operating expenses. Depreciation expense increased due primarily to the addition of generating plant, pollution control equipment, wind generation and transmission facilities in the past year. In addition, we experienced higher pension expense and increased maintenance costs at our power plants and for our distribution system.

Increases in Prices

On January 21, 2009, the KCC issued an order approving a $130.0 million annual increase in our retail prices. The new prices became effective on February 3, 2009.

On March 6, 2009, the KCC issued an order allowing us to adjust our TDC to include updated transmission costs that are attributable to the retail portion of our transmission service. This change went into effect on March 13, 2009, and will increase our estimated annual retail revenues by $31.8 million.

Reduction in Planned Capital Expenditures

Due to the continued volatility in the capital markets and higher capital costs generally, we have reduced our anticipated capital expenditures for 2010 and 2011 by $366.8 million and $134.1 million, respectively, from what we reported in our 2008 Form 10-K. See "-Future Cash Requirements" below for additional information.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with GAAP. Note 2 of the Notes to Condensed Consolidated Financial Statements, "Summary of Significant Accounting Policies," contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions by management. The policies highlighted in our 2008 Form 10-K have an impact on our reported results that may be material due to the levels of judgment and subjectivity necessary to account for uncertain matters or their susceptibility to change.

From December 31, 2008 through March 31, 2009, we have not experienced any significant changes in our critical accounting estimates. For additional information, see our 2008 Form 10-K.

OPERATING RESULTS

We evaluate operating results based on earnings per share. We have various classifications of sales, defined as follows:

Retail: Sales of energy made to residential, commercial and industrial customers.

Other retail: Sales of energy for lighting public streets and highways, net of revenue subject to refund.

Wholesale: Sales of energy to electric cooperatives, municipalities and other electric utilities, the prices for which are generally either based on cost or based on prevailing market prices as prescribed by FERC authority. This category also includes changes in valuations of contracts for the sale of such energy that have yet to settle. Margins realized from these sales serve to lower our retail prices.

Energy marketing: Includes: (i) transactions based on market prices generally unrelated to the production of our generating assets; (ii) financially settled products and physical transactions sourced outside our control area; (iii) fees we earn for marketing services that we provide for third parties; and
(iv) changes in valuations of contracts related to such transactions that have yet to settle.

Transmission: Reflects transmission revenues, including those based on a tariff with the SPP.

Other: Miscellaneous electric revenues including ancillary service revenues and rent from electric property leased to others.

Regulated electric utility sales are significantly impacted by such things as rate regulation, customer conservation efforts, wholesale demand, the economy of our service area and competitive forces. Changing weather affects the amount of electricity our customers use. Hot summer temperatures and cold winter temperatures prompt more demand, especially among our residential customers. Mild weather serves to reduce customer demand. Our wholesale sales are impacted by, among other factors, demand, cost and availability of fuel and purchased power, price volatility, available generation capacity and transmission availability.

Three Months Ended March 31, 2009, Compared to Three Months Ended March 31, 2008

Below we discuss our operating results for the three months ended March 31,
2009, compared to the results for the three months ended March 31, 2008. Changes
in results of operations shown in the table immediately below are further
explained in the descriptions that follow.



                                                              Three Months Ended March 31,
                                                     2009           2008         Change       % Change
                                                        (In Thousands, Except Per Share Amounts)
SALES:
Residential                                       $   120,654     $ 108,225     $  12,429         11.5
Commercial                                            107,287        95,909        11,378         11.9
Industrial                                             63,805        64,079          (274 )       (0.4 )
Other retail                                           (1,085 )        (117 )        (968 )     (827.4 )

Total Retail Sales                                    290,661       268,096        22,565          8.4
Wholesale                                              85,744       103,179       (17,435 )      (16.9 )
Energy marketing                                       13,382         2,956        10,426        352.7
Transmission (a)                                       26,897        26,209           688          2.6
Other                                                   5,083         6,387        (1,304 )      (20.4 )

Total Sales                                           421,767       406,827        14,940          3.7

OPERATING EXPENSES:
Fuel and purchased power                              140,644       146,449        (5,805 )       (4.0 )
Operating and maintenance                             122,167       116,018         6,149          5.3
Depreciation and amortization                          58,214        48,896         9,318         19.1
Selling, general and administrative                    47,982        41,656         6,326         15.2

Total Operating Expenses                              369,007       353,019        15,988          4.5

INCOME FROM OPERATIONS                                 52,760        53,808        (1,048 )       (1.9 )

OTHER INCOME (EXPENSE):
Investment loss                                          (792 )      (1,704 )         912         53.5
Other income                                            3,257         5,817        (2,560 )      (44.0 )
Other expense                                          (4,561 )      (4,335 )        (226 )       (5.2 )

Total Other Expense                                    (2,096 )        (222 )      (1,874 )     (844.1 )

Interest expense                                       35,077        10,690        24,387        228.1

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES                                                  15,587        42,896       (27,309 )      (63.7 )
Income tax expense (benefit)                            4,401       (18,240 )      22,641        124.1

INCOME FROM CONTINUING OPERATIONS                      11,186        61,136       (49,950 )      (81.7 )
Results of discontinued operations, net of tax         32,978            -         32,978           (b )

NET INCOME                                             44,164        61,136       (16,972 )      (27.8 )
Preferred dividends                                       242           242            -            -

NET INCOME ATTRIBUTABLE TO COMMON STOCK           $    43,922     $  60,894     $ (16,972 )      (27.9 )

BASIC EARNINGS PER SHARE                          $      0.40     $    0.62     $   (0.22 )      (35.5 )

(a) Transmission: Includes an SPP network transmission tariff. For the three months ended March 31, 2009, our SPP network transmission costs were $20.7 million. This amount, less $3.9 million retained by the SPP as administration cost, was returned to us as revenue. For the three months ended March 31, 2008, our SPP network transmission costs were $22.4 million with an administration cost of $3.0 million retained by the SPP.

(b) Change greater than 1000%.

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

                                     Three Months Ended March 31,
                                  2009    2008    Change     % Change
                                          (Thousands of MWh)
                   Residential    1,518   1,590      (72 )       (4.5 )
                   Commercial     1,612   1,665      (53 )       (3.2 )
                   Industrial     1,202   1,394     (192 )      (13.8 )
                   Other retail      21      23       (2 )       (8.7 )

                   Total Retail   4,353   4,672     (319 )       (6.8 )
                   Wholesale      2,682   2,572      110          4.3

                   Total          7,035   7,244     (209 )       (2.9 )

                                                    2009                2008              Change            % Change
                                                    (Sales In Thousands of Dollars, Volumes in Thousands of MWh)
Residential sales                             $        120,654     $      108,225     $        12,429             11.5
Residential sales volumes                                1,518              1,590                 (72 )           (4.5 )

Commercial sales                                       107,287             95,909              11,378             11.9
Commercial sales volumes                                 1,612              1,665                 (53 )           (3.2 )

Industrial sales                                        63,805             64,079                (274 )           (0.4 )
Industrial sales volumes                                 1,202              1,394                (192 )          (13.8 )

Other retail sales                                      (1,085 )             (117 )              (968 )         (827.4 )
Other retail sales volumes                                  21                 23                  (2 )           (8.7 )

Total retail sales                                     290,661            268,096              22,565              8.4
Total retail sales volumes                               4,353              4,672                (319 )           (6.8 )

Retail sales increased due principally to increases in our retail prices as discussed in "-Increases in Prices" above. Partially offsetting the effects of the price increases was a 7% decrease in total retail MWh sales. Industrial MWh sales decreased 14% due principally to the effects of a weaker economy, which served to reduce industrial demand for electricity. However, price increases mitigated this impact, leaving the industrial revenues virtually unchanged. Residential MWh sales decreased 5% attributable principally to warmer weather and one less day of sales compared to last year, which was a leap year. As measured by heating degree days, the weather during 2009 was 13% warmer than during 2008. Also contributing to the increase in retail sales was the recovery of $16.4 million in higher fuel and purchased power costs.

                                                   2009               2008              Change            % Change
                                                   (Sales In Thousands of Dollars, Volumes in Thousands of MWh)
Wholesale sales                               $        85,744    $      103,179    $        (17,435 )          (16.9 )
Wholesale sales volumes                                 2,682             2,572                 110              4.3

Wholesale sales decreased due principally to a 15% lower average market price for these sales compared to the same period last year. Partially offsetting the lower average market price was a 4% increase in MWh sales.

Energy marketing increased due primarily to our having settled forward contracts for the sale of electricity on favorable terms.

Fuel and purchased power expense decreased for the three months ended March 31, 2009, when compared to the same period last year. The decrease in fuel and purchased power expense is a result of our having produced and purchased fewer MWh and lower fuel and purchased power prices. During this period last year, scheduled maintenance outages at some of our plants resulted in us purchasing more power from other sources. During the period ended March 31, 2009, we purchased 23% less power due primarily to Wolf Creek not having had a scheduled maintenance outage. This, in addition to a 39% decrease in the average price of purchased power, resulted in a $17.8 million decrease in purchased power expense.

Operating and maintenance expense increased due primarily to higher maintenance costs of $4.9 million for our power plants and electrical distribution system. La Cygne Station had a scheduled maintenance outage in 2009 resulting in a $1.6 million increase in operating and maintenance expense. In addition, effective with the recovery of storm costs in our prices in accordance with regulatory authority, we expensed $1.4 million of storm costs that was previously deferred.

We completed a number of large construction projects in the past year. As a result, depreciation and amortization expense increased primarily to reflect the addition of generating plant, pollution control equipment, wind generation and transmission facilities.

The increase in selling, general and administrative expense was due primarily to a $5.1 million increase in pension and other employee benefit costs. The increase in pension costs was attributable primarily to lower than expected investment returns on pension assets during 2008.

Other income decreased due principally to our having recorded $2.6 million of equity AFUDC for the three months ended March 31, 2009, compared to recording $5.4 million of equity AFUDC for the same period last year. The decrease in equity AFUDC was attributable to the completion of several large construction projects in the past year.

Last year we reversed $17.8 million of accrued interest associated with uncertain tax liabilities, which significantly reduced interest expense. We did not record such a reversal for the three months ended March 31, 2009, and as a result, our interest expense is much higher this year. Absent this reversal, interest expense increased $6.6 million compared to last year due principally to interest on additional debt issued in 2008 to fund capital investments.

Last year we recognized $28.7 million of previously unrecognized tax benefits associated with uncertain tax liabilities. We did not recognize similar tax benefits this year in continuing operations, and as a result, report much higher income tax expense.

FINANCIAL CONDITION

Below we discuss significant balance sheet changes as of March 31, 2009, compared to December 31, 2008.

The fair market value of net energy marketing contracts decreased $46.8 million to $3.5 million at March 31, 2009. This was due primarily to decreases in coal prices which resulted in unfavorable changes in the market value of a fuel supply contract that was outstanding the entire period.

We have more borrowed under the Westar Energy revolving credit facility, resulting in short-term debt that was $83.6 million higher than at December 31, 2008. The funds were used primarily for capital investments.

Obligations under capital leases decreased $8.8 million due primarily to our having made a scheduled payment related to our 8% leasehold interest in Jeffrey Energy Center.

Other long-term liabilities decreased $33.7 million due primarily to a decrease in our FIN 48 liability and related accrued interest upon settlement of an IRS examination. See Note 5 of the Notes to Condensed Consolidated Financial Statements, "Taxes."

LIQUIDITY AND CAPITAL RESOURCES

Overview

Available sources of funds to operate our business include internally generated cash, Westar Energy's revolving credit facility and access to capital markets. In the latter part of 2008 and continuing into 2009, capital markets have experienced unprecedented volatility. As a result, capital has been more costly and more difficult to obtain. In light of this volatility and the unpredictability of how long these capital market conditions will persist, we have reduced or delayed construction spending and other capital outlays in order to manage liquidity. See "- Future Cash Requirements" below for additional information. Uncertainties affecting our ability to meet cash requirements include, among others, factors affecting sales described in "- Operating Results" above, economic conditions, regulatory actions, compliance with environmental regulations and conditions in the capital markets.

Capital Resources

As of April 29, 2009, Westar Energy had a $730.0 million revolving credit facility under which $283.3 million had been borrowed and an additional $22.7 million of letters of credit had been issued. In addition, we had $18.3 million in cash and cash equivalents as of the same date.

Cash Flows from Operating Activities

Operating activities provided $103.1 million of cash in the three months ended March 31, 2009, compared with cash provided from operating activities of $10.7 million in the same period of 2008. During the three months ended March 31, 2008, we paid $53.2 million to restore our electrical system which was severely damaged by an ice storm in December 2007. We did not make similar payments during the three months ended March 31, 2009. Also contributing to the increase was our having paid $31.6 million less for fuel and purchased power and our having received a $9.2 million net income tax refund this year.

Cash Flows used in Investing Activities

Investing activities used $150.9 million of cash in the three months ended March 31, 2009, compared with $183.5 million during the same period of 2008. We spent $151.9 million in the three months ended March 31, 2009, and $182.9 million in the same period of 2008 on additions to utility property, plant and equipment. This decrease is due primarily to our having spent less for environmental and generation projects.

Cash Flows from Financing Activities

Financing activities in the three months ended March 31, 2009, provided $44.3 million of cash compared with $173.1 million in the same period of 2008. In the three months ended March 31, 2009, proceeds from short-term debt provided $83.6 million and we used cash to pay $29.8 million in dividends. In the three months ended March 31, 2008, short-term debt provided $149.4 million, proceeds from the issuance of common stock provided $52.4 million and we used cash to pay $23.5 million in dividends. The decrease in cash provided from financing activities is due principally to our having completed environmental and generation projects in 2008 which required substantial amounts of capital.

Future Cash Requirements

Due to the continued volatility in the capital markets and higher capital costs generally, we have reduced our anticipated capital expenditures for 2010 and 2011 by $366.8 million and $134.1 million, respectively, from what we reported in our 2008 Form 10-K. Our current plans anticipate capital expenditures for 2009 through 2011 as shown in the following table. We expect to meet these cash needs with internally generated cash flow, borrowings under Westar Energy's revolving credit facility and through the issuance of securities in the capital markets.

                                            2009        2010        2011
                                                   (In Thousands)
             Generation:
             Replacements and other       $ 113,700   $  82,600   $  86,900
             Additional capacity             39,200      12,300      10,200
             Wind generation                  2,200          -           -
             Environmental                   83,900     127,900     357,700
             Nuclear fuel                    23,000      30,100      24,400
             Transmission (a)               132,500     214,800     163,400
             Distribution:
             Replacements and other          47,800      53,700      52,600
             New customers                   51,300      53,900      56,300
             Other                            7,700      20,200      21,400

             Total capital expenditures   $ 501,300   $ 595,500   $ 772,900

(a) Includes $9,000 in 2010 and $26,100 in 2011 for expenditures related to Prairie Wind Transmission.

Debt Covenants

Some of our debt instruments contain restrictions that require us to maintain leverage ratios as defined in the credit agreements. We calculate these ratios in accordance with our credit agreements. These ratios are used solely to determine compliance with our various debt covenants. We were in compliance with these covenants as of March 31, 2009.

Credit Ratings

Moody's Investors Service (Moody's), Standard & Poor's Ratings Group (S&P) and Fitch Investors Service (Fitch) are independent credit-rating agencies that rate our debt securities. These ratings indicate each agency's assessment of our ability to pay interest and principal when due on our securities.

On April 28, 2009, S&P changed its rating outlook for Westar Energy and KGE debt securities from stable to positive. As of April 29, 2009, our ratings with the agencies and the outlooks for these ratings are as shown in the table below.

                             Westar
                             Energy      KGE
                             First      First      Westar
                            Mortgage   Mortgage    Energy
                              Bond       Bond     Unsecured    Rating
                             Rating     Rating      Debt      Outlook
                  Moody's     Baa2       Baa2       Baa3      Stable
. . .