Annual Reports

  • 10-K (Feb 21, 2018)
  • 10-K (Feb 23, 2017)
  • 10-K (Feb 24, 2016)
  • 10-K (Feb 25, 2015)
  • 10-K (Feb 26, 2014)
  • 10-K (Feb 28, 2013)

 
Quarterly Reports

 
8-K

 
Other

Great Plains Energy 10-K 2014
GXP-12/31/2013-10K
 
 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2013

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

For the transition period from _______to_______

 
 
Exact name of registrant as specified in its charter,
 
 
Commission
 
state of incorporation, address of principal
 
I.R.S. Employer
File Number
 
executive offices and telephone number
 
Identification Number
 
 
 
 
 
001-32206
 
GREAT PLAINS ENERGY INCORPORATED
 
43-1916803
 
 
(A Missouri Corporation)
 
 
 
 
1200 Main Street
 
 
 
 
Kansas City, Missouri  64105
 
 
 
 
(816) 556-2200
 
 
 
 
 
 
 
000-51873
 
KANSAS CITY POWER & LIGHT COMPANY
 
44-0308720
 
 
(A Missouri Corporation)
 
 
 
 
1200 Main Street
 
 
 
 
Kansas City, Missouri  64105
 
 
 
 
(816) 556-2200
 
 
Each of the following classes or series of securities registered pursuant to Section 12(b) of the Act is registered on the New York Stock Exchange:
 
 
 
 
 
 
 
 
Registrant
 
Title of each class
 
 
 
 
Great Plains Energy Incorporated
 
Cumulative Preferred Stock par value $100 per share
 
3.80%
 
 
 
 
Cumulative Preferred Stock par value $100 per share
 
4.50%
 
 
 
 
Cumulative Preferred Stock par value $100 per share
 
4.35%
 
 
 
 
Common Stock without par value
 
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(g) of the Act: Kansas City Power & Light Company Common Stock without par value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
_
No
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Great Plains Energy Incorporated
Yes
_
No
X
 
Kansas City Power & Light Company
Yes
_
No
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
X
No
_
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Great Plains Energy Incorporated
Yes
X
No
_
 
Kansas City Power & Light Company
Yes
X
No
_
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K.
Great Plains Energy Incorporated
X
 
 
 
 
Kansas City Power & Light Company
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Great Plains Energy Incorporated
 
Large accelerated filer
X
Accelerated filer
_
 
 
 
 
 
 
Non-accelerated filer
_
Smaller reporting company
_
 
 
 
 
Kansas City Power & Light Company
 
Large accelerated filer
_
Accelerated filer
_
 
 
 
 
 
 
Non-accelerated filer
X
Smaller reporting company
_
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Great Plains Energy Incorporated
Yes
_
No
X
 
Kansas City Power & Light Company
Yes
_
No
X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of Great Plains Energy Incorporated (based on the closing price of its common stock on the New York Stock Exchange on June 30, 2013) was approximately $3,463,459,186. All of the common equity of Kansas City Power & Light Company is held by Great Plains Energy Incorporated, an affiliate of Kansas City Power & Light Company.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On February 25, 2014, Great Plains Energy Incorporated had 153,883,693 shares of common stock outstanding. 
On February 25, 2014, Kansas City Power & Light Company had one share of common stock outstanding and held by Great Plains Energy Incorporated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kansas City Power & Light Company meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Documents Incorporated by Reference
Portions of the 2014 annual meeting proxy statement of Great Plains Energy Incorporated to be filed with the Securities and Exchange Commission are incorporated by reference in Part III of this report.





TABLE OF CONTENTS
 
 
Page
Number
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.


2


This combined annual report on Form 10-K is being filed by Great Plains Energy Incorporated (Great Plains Energy) and Kansas City Power & Light Company (KCP&L). KCP&L is a wholly owned subsidiary of Great Plains Energy and represents a significant portion of its assets, liabilities, revenues, expenses and operations. Thus, all information contained in this report relates to, and is filed by, Great Plains Energy. Information that is specifically identified in this report as relating solely to Great Plains Energy, such as its financial statements and all information relating to Great Plains Energy's other operations, businesses and subsidiaries, including KCP&L Greater Missouri Operations Company (GMO), does not relate to, and is not filed by, KCP&L. KCP&L makes no representation as to that information. Neither Great Plains Energy nor its other subsidiaries have any obligation in respect of KCP&L's debt securities and holders of such securities should not consider Great Plains Energy's or its other subsidiaries' financial resources or results of operations in making a decision with respect to KCP&L's debt securities. Similarly, KCP&L has no obligation in respect of securities of Great Plains Energy or its other subsidiaries.
CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION
Statements made in this report that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, the outcome of regulatory proceedings, cost estimates of capital projects and other matters affecting future operations. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and KCP&L are providing a number of important factors that could cause actual results to differ materially from the provided forward-looking information. These important factors include: future economic conditions in regional, national and international markets and their effects on sales, prices and costs; prices and availability of electricity in regional and national wholesale markets; market perception of the energy industry, Great Plains Energy and KCP&L; changes in business strategy, operations or development plans; the outcome of contract negotiations for goods and services; effects of current or proposed state and federal legislative and regulatory actions or developments, including, but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates the Companies can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices governing tax, accounting and environmental matters including, but not limited to, air and water quality; financial market conditions and performance including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital and the effects on nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of terrorist acts, including, but not limited to, cyber terrorism; ability to carry out marketing and sales plans; weather conditions including, but not limited to, weather-related damage and their effects on sales, prices and costs; cost, availability, quality and deliverability of fuel; the inherent uncertainties in estimating the effects of weather, economic conditions and other factors on customer consumption and financial results; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of generation, transmission, distribution or other projects; Great Plains Energy's ability to successfully manage transmission joint venture; the inherent risks associated with the ownership and operation of a nuclear facility including, but not limited to, environmental, health, safety, regulatory and financial risks; workforce risks, including, but not limited to, increased costs of retirement, health care and other benefits; and other risks and uncertainties.
This list of factors is not all-inclusive because it is not possible to predict all factors. Part I Item 1A Risk Factors included in this report should be carefully read for further understanding of potential risks for each of Great Plains Energy and KCP&L. Other sections of this report and other periodic reports filed by each of Great Plains Energy and KCP&L with the Securities and Exchange Commission (SEC) should also be read for more information regarding risk factors. Each forward-looking statement speaks only as of the date of the particular statement. Great Plains Energy and KCP&L undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


3


GLOSSARY OF TERMS 
The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.
Abbreviation or Acronym
 
Definition
 
 
 
AEPTHC
 
AEP Transmission Holding Company, LLC, a wholly owned subsidiary of American Electric Power Company, Inc.
AFUDC
 
Allowance for Funds Used During Construction
ARO
 
Asset Retirement Obligation
BART
 
Best available retrofit technology
Board
 
Great Plains Energy Board of Directors
CAIR
 
Clean Air Interstate Rule
CAMR
 
Clean Air Mercury Rule
Clean Air Act
 
Clean Air Act Amendments of 1990
CO2
 
Carbon dioxide
Company
 
Great Plains Energy Incorporated and its subsidiaries
Companies
 
Great Plains Energy Incorporated and its consolidated subsidiaries and KCP&L and its consolidated subsidiaries
CSAPR
 
Cross-State Air Pollution Rule
DOE
 
Department of Energy
EBITDA
 
Earnings before interest, income taxes, depreciation and amortization
ECA
 
Energy Cost Adjustment
EIRR
 
Environmental Improvement Revenue Refunding
EPA
 
Environmental Protection Agency
EPS
 
Earnings per common share
ERISA
 
Employee Retirement Income Security Act of 1974, as amended
FAC
 
Fuel Adjustment Clause
FERC
 
The Federal Energy Regulatory Commission
GAAP
 
Generally Accepted Accounting Principles
GMO
 
KCP&L Greater Missouri Operations Company, a wholly owned subsidiary of Great Plains Energy
GPETHC
 
GPE Transmission Holding Company LLC, a wholly owned subsidiary of Great Plains Energy
Great Plains Energy
 
Great Plains Energy Incorporated and its subsidiaries
IRS
 
Internal Revenue Service
ISO
 
Independent System Operator
KCC
 
The State Corporation Commission of the State of Kansas
KCP&L
 
Kansas City Power & Light Company, a wholly owned subsidiary of Great Plains Energy
KCP&L Receivables Company
 
Kansas City Power & Light Receivables Company, a wholly owned subsidiary of KCP&L
KDHE
 
Kansas Department of Health and Environment
kV
 
Kilovolt
KW
 
Kilowatt
kWh
 
Kilowatt hour
MACT
 
Maximum achievable control technology
MATS
 
Mercury and Air Toxics Standards
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results of Operations

4


Abbreviation or Acronym
 
Definition
 
 
 
MDNR
 
Missouri Department of Natural Resources
MEEIA
 
Missouri Energy Efficiency Investment Act
MGP
 
Manufactured gas plant
MPS Merchant
 
MPS Merchant Services, Inc., a wholly owned subsidiary of GMO
MPSC
 
Public Service Commission of the State of Missouri
MW
 
Megawatt
MWh
 
Megawatt hour
NAAQS
 
National Ambient Air Quality Standard
NERC
 
North American Electric Reliability Corporation
NEIL
 
Nuclear Electric Insurance Limited
NOL
 
Net operating loss
NOx
 
Nitrogen oxide
NPNS
 
Normal purchases and normal sales
NRC
 
Nuclear Regulatory Commission
OCI
 
Other Comprehensive Income
PCB
 
Polychlorinated biphenyls
ppm
 
Parts per million
PRB
 
Powder River Basin
QCA
 
Quarterly Cost Adjustment
RTO
 
Regional Transmission Organization
SCR
 
Selective catalytic reduction
SEC
 
Securities and Exchange Commission
SERP
 
Supplemental Executive Retirement Plan
SO2
 
Sulfur dioxide
SPP
 
Southwest Power Pool, Inc.
Syncora
 
Syncora Guarantee, Inc.
TCR
 
Transmission Congestion Right
Transource
 
Transource Energy, LLC and its subsidiaries, 13.5% owned by GPETHC
Transource Missouri
 
Transource Missouri, LLC, a wholly owned subsidiary of Transource
WCNOC
 
Wolf Creek Nuclear Operating Corporation
Westar
 
Westar Energy, Inc., a Kansas utility company
Wolf Creek
 
Wolf Creek Generating Station


5


PART I
ITEM 1. BUSINESS
General
Great Plains Energy Incorporated and Kansas City Power & Light Company are separate registrants filing this combined annual report on Form 10-K. The terms "Great Plains Energy," "Company," "KCP&L" and "Companies" are used throughout this report. "Great Plains Energy" and the "Company" refer to Great Plains Energy Incorporated and its consolidated subsidiaries, unless otherwise indicated. "KCP&L" refers to Kansas City Power & Light Company and its consolidated subsidiaries. "Companies" refers to Great Plains Energy Incorporated and its consolidated subsidiaries and KCP&L and its consolidated subsidiaries.
Information in other Items of this report as to which reference is made in this Item 1 is hereby incorporated by reference in this Item 1. The use of terms such as "see" or "refer to" shall be deemed to incorporate into this Item 1 the information to which such reference is made.
GREAT PLAINS ENERGY INCORPORATED
Great Plains Energy, a Missouri corporation incorporated in 2001 and headquartered in Kansas City, Missouri, is a public utility holding company and does not own or operate any significant assets other than the stock of its subsidiaries. Great Plains Energy's wholly owned direct subsidiaries with operations or active subsidiaries are as follows:
KCP&L is an integrated, regulated electric utility that provides electricity to customers primarily in the states of Missouri and Kansas. KCP&L has one active wholly owned subsidiary, Kansas City Power & Light Receivables Company (KCP&L Receivables Company).
GMO is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri. GMO also provides regulated steam service to certain customers in the St. Joseph, Missouri area. GMO has two active wholly owned subsidiaries, GMO Receivables Company and MPS Merchant Services, Inc. (MPS Merchant).  MPS Merchant has certain long-term natural gas contracts remaining from its former non-regulated trading operations.
GPE Transmission Holding Company, LLC (GPETHC) owns 13.5% of Transource Energy, LLC (Transource) with the remaining 86.5% owned by AEP Transmission Holding Company, LLC (AEPTHC), a subsidiary of American Electric Power Company, Inc. Transource is focused on the development of competitive electric transmission projects.
Great Plains Energy's sole reportable business segment is electric utility. For information regarding the revenues, income and assets attributable to the electric utility business segment, see Note 23 to the consolidated financial statements. Comparative financial information and discussion regarding the electric utility business segment can be found in Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
The electric utility segment consists of KCP&L, a regulated utility, GMO's regulated utility operations which include its Missouri Public Service and St. Joseph Light & Power divisions and GMO Receivables Company. Electric utility serves approximately 830,800 customers located in western Missouri and eastern Kansas. Customers include approximately 730,800 residences, 97,400 commercial firms and 2,600 industrials, municipalities and other electric utilities. Electric utility's retail revenues averaged approximately 91% of its total operating revenues over the last three years. Wholesale firm power, bulk power sales and miscellaneous electric revenues accounted for the remainder of electric utility's revenues. Electric utility is significantly impacted by seasonality with approximately one-third of its retail revenues recorded in the third quarter. Electric utility's total electric revenues were 100% of Great Plains Energy's revenues over the last three years. Electric utility's net income accounted for approximately 103%, 108% and 115% of Great Plains Energy's net income in 2013, 2012 and 2011, respectively.

6


Regulation
KCP&L and GMO are regulated by the Public Service Commission of the State of Missouri (MPSC) and KCP&L is also regulated by The State Corporation Commission of the State of Kansas (KCC) with respect to retail rates, certain accounting matters, standards of service and, in certain cases, the issuance of securities, certification of facilities and service territories. KCP&L and GMO are also subject to regulation by The Federal Energy Regulatory Commission (FERC) with respect to transmission, wholesale sales and rates, and other matters, the Southwest Power Pool, Inc. (SPP) and the North American Electric Reliability Corporation (NERC). KCP&L has a 47% ownership interest in Wolf Creek Generating Station (Wolf Creek), which is subject to regulation by the Nuclear Regulatory Commission (NRC) with respect to licensing, operations and safety-related requirements.
Missouri and Kansas jurisdictional retail revenues averaged approximately 71% and 29%, respectively, of electric utility's total retail revenues over the last three years. See Item 7 MD&A, Critical Accounting Policies section, and Note 5 to the consolidated financial statements for additional information concerning regulatory matters.
Competition
Missouri and Kansas continue on the fully integrated retail utility model. As a result, electric utility does not compete with others to supply and deliver electricity in its franchised service territory, although other sources of energy can provide alternatives to retail electric utility customers. If Missouri or Kansas were to pass and implement legislation authorizing or mandating retail choice, electric utility may no longer be able to apply regulated utility accounting principles to deregulated portions of its operations and may be required to write off certain regulatory assets and liabilities.
Electric utility competes in the wholesale market to sell power in circumstances when the power it generates is not required for customers in its service territory. In this regard, electric utility competes with owners of other generating stations and other power suppliers, principally utilities in its region, on the basis of availability and price. Electric utility's wholesale revenues averaged approximately 7% of its total revenues over the last three years.
Power Supply
Electric utility has approximately 6,600 MWs of generating capacity. The projected peak summer demand for 2014 is approximately 5,600 MWs. Electric utility expects to meet its projected capacity requirements for the foreseeable future with its generation assets, power and capacity purchases or new capacity additions.
KCP&L and GMO are members of the SPP. The SPP is a Regional Transmission Organization (RTO) mandated by FERC to ensure reliable supply of power, adequate transmission infrastructure and competitive wholesale prices of electricity. As members of the SPP, KCP&L and GMO are required to maintain a capacity margin of at least 12% of their projected peak summer demand. This net positive supply of capacity and energy is maintained through their generation assets and capacity, power purchase agreements and peak demand reduction programs. The capacity margin is designed to ensure the reliability of electric energy in the SPP region in the event of operational failure of power generating units utilized by the members of the SPP.
In March 2014, the SPP is scheduled to launch its Integrated Marketplace. Similar to other RTO or Independent System Operator (ISO) markets currently operating, this marketplace will determine which generating units among market participants should run, within the operating constraints of a unit, at any given time for maximum cost-effectiveness. It will also provide participants with greater access to reserve electricity, improve regional balancing of supply and demand, and facilitate the integration of renewable resources. KCP&L and GMO expect the Integrated Marketplace to potentially change the way their plants are dispatched. In the event that KCP&L's and GMO's generating units are not among the lowest cost generating units operating within the market, KCP&L and GMO could experience decreased levels of wholesale electricity sales once the Integrated Marketplace begins operations.


7


Fuel
The principal fuel sources for electric utility's electric generation are coal and nuclear fuel. It is expected, with normal weather, that approximately 97% of 2014 generation will come from these sources with the remainder provided by wind, natural gas and oil. The actual 2013 and estimated 2014 fuel mix and delivered cost in cents per net kWh generated are outlined in the following table.
 
 
 
 
 
 
 
Fuel cost in cents per
 
Fuel Mix (a)
 
net kWh generated
 
Estimated
 
Actual
 
Estimated
Actual
Fuel
2014
 
2013
 
 
2014
 
2013
Coal
82
%
 
85
%
 
 
2.02

 
2.14

Nuclear
15
 
 
12
 
 
 
0.77

 
0.79

Natural gas and oil
1
 
 
1
 
 
 
9.89

 
9.41

Wind
2
 
 
2
 
 
 

 

   Total Generation
100
%
 
100
%
 
 
1.89

 
1.99

(a) Fuel mix based on percent of net MWhs generated.
GMO's retail rates and KCP&L's retail rates in Kansas contain certain fuel recovery mechanisms. KCP&L's Missouri retail rates do not contain a fuel recovery mechanism. To the extent the price of fuel or purchased power increases significantly, or if electric utility's lower cost units do not meet anticipated availability levels, Great Plains Energy's net income may be adversely affected unless and until the increased cost could be reflected in KCP&L's Missouri retail rates.
Coal
During 2014, electric utility's generating units, including jointly owned units, are projected to burn approximately 16 million tons of coal. KCP&L and GMO have entered into coal-purchase contracts with various suppliers in Wyoming's Powder River Basin (PRB), the nation's principal supply region of low-sulfur coal, and with local suppliers. The coal to be provided under these contracts is expected to satisfy approximately 75% of the projected coal requirements for 2014, approximately 40% for 2015 and approximately 20% for 2016. The remainder of the coal requirements is expected to be fulfilled through additional contracts or spot market purchases. KCP&L and GMO have entered into coal contracts over time at higher average prices affecting coal costs for 2014 and beyond.
KCP&L and GMO have also entered into rail transportation contracts with various railroads to transport coal from the PRB to their generating units. The transportation services to be provided under these contracts are expected to satisfy almost all of the projected transportation requirements for 2014 through 2018. The contract rates adjust for changes in railroad costs.
Nuclear Fuel
KCP&L owns 47% of Wolf Creek Nuclear Operating Corporation (WCNOC), the operating company for Wolf Creek, which is electric utility's only nuclear generating unit. Wolf Creek purchases uranium and has it processed for use as fuel in its reactor. This process involves conversion of uranium concentrates to uranium hexafluoride, enrichment of uranium hexafluoride and fabrication of nuclear fuel assemblies. The owners of Wolf Creek have on hand or under contract all of the uranium and conversion services needed to operate Wolf Creek through September 2016 and approximately 70% after that date through March 2021. The owners also have under contract all of the uranium enrichment and fabrication required to operate Wolf Creek through March 2027 and September 2025, respectively.
See Note 4 to the consolidated financial statements for additional information regarding nuclear plant.

8


Natural Gas
At December 31, 2013, GMO had hedged approximately 40% and 6% of its expected on-peak natural gas generation and natural gas equivalent purchased power price exposure for 2014 and 2015, respectively.
Purchased Capacity and Power
KCP&L and GMO have distinct rate and dispatching areas. As a result, KCP&L and GMO do not joint-dispatch their respective generation. KCP&L purchases power to meet its customers' needs when it does not have sufficient available generation or when the cost of purchased power is less than KCP&L's cost of generation or to satisfy firm power commitments or renewable energy standards. KCP&L has long-term power purchase agreements for approximately 287 MWs of wind and hydroelectric generation which expire in 2023 through 2032. GMO has long-term power purchase agreements for approximately 159 MWs of wind generation which expire in 2016 through 2032. Additionally, KCP&L and GMO have each entered into power purchase agreements for approximately 200 MW of wind generation to begin in 2016 and expire in 2036. Management believes electric utility will be able to obtain enough power to meet its future demands due to the coordination of planning and operations in the SPP region; however, price and availability of power purchases may be impacted during periods of high demand. Electric utility's purchased power, as a percentage of MWh requirements, averaged approximately 14% over the last three years.
Environmental Matters
See Note 15 to the consolidated financial statements for information regarding environmental matters.
KANSAS CITY POWER & LIGHT COMPANY
KCP&L, a Missouri corporation incorporated in 1922 and headquartered in Kansas City, Missouri, is an integrated, regulated electric utility that engages in the generation, transmission, distribution and sale of electricity. KCP&L serves approximately 514,700 customers located in western Missouri and eastern Kansas. Customers include approximately 453,900 residences, 58,700 commercial firms, and 2,100 industrials, municipalities and other electric utilities. KCP&L's retail revenues averaged approximately 88% of its total operating revenues over the last three years. Wholesale firm power, bulk power sales and miscellaneous electric revenues accounted for the remainder of KCP&L's revenues. KCP&L is significantly impacted by seasonality with approximately one-third of its retail revenues recorded in the third quarter. Missouri and Kansas jurisdictional retail revenues averaged approximately 55% and 45%, respectively, of total retail revenues over the last three years.
Great Plains Energy and KCP&L Employees
At December 31, 2013, Great Plains Energy and KCP&L had 2,964 employees, including 1,861 represented by three local unions of the International Brotherhood of Electrical Workers (IBEW). KCP&L has labor agreements with Local 1613, representing clerical employees (expires March 31, 2018), with Local 1464, representing transmission and distribution workers (expires January 31, 2016), and with Local 412, representing power plant workers (expires February 28, 2018).
Executive Officers
All of the individuals in the following table have been officers or employees in a responsible position with the Company in the positions noted below for the past five years unless otherwise indicated in the footnotes.  The executive officers were reappointed to the indicated positions by the respective boards of directors, effective January 1, 2014, to hold such positions until their resignation, removal or the appointment of their successors. There are no family relationships between any of the executive officers, nor any arrangement or understanding between any executive officer and any other person involved in officer selection.  Each executive officer holds the same position with GMO as he or she does with KCP&L.

9


Name
Age
Current Position(s)
Year First Assumed an Officer Position
Terry Bassham (a)

53
Chairman of the Board, President and Chief Executive Officer - Great Plains Energy and KCP&L
2005
Scott H. Heidtbrink (b)
52
Executive Vice President and Chief Operating Officer - KCP&L
2008
James C. Shay (c)
50
Senior Vice President - Finance and Strategic Development  and Chief Financial Officer - Great Plains Energy and KCP&L
2010
Kevin E. Bryant (d)
38
Vice President - Investor Relations and Strategic Planning and Treasurer - Great Plains Energy and KCP&L
2006
Charles A. Caisley (e)
41
Vice President - Marketing and Public Affairs - Great Plains Energy and KCP&L
2011
Michael L. Deggendorf (f)

52
Senior Vice President - Corporate Services - KCP&L
2005
Ellen E. Fairchild (g) 
52
Vice President, Corporate Secretary and Chief Compliance Officer - Great Plains Energy and KCP&L
2010
Heather A. Humphrey (h) 
43
General Counsel and Senior Vice President - Human Resources - Great Plains Energy and KCP&L
2010
Darrin R. Ives (i)
44
Vice President - Regulatory Affairs - KCP&L
2013
Lori A. Wright (j) 
51
Vice President - Business Planning and Controller - Great Plains Energy and KCP&L
2002
(a) 
Mr. Bassham was appointed Chairman of the Board in May 2013 and has served as Chief Executive Officer of Great Plains Energy, KCP&L and GMO since 2012. He has served as President of each company since 2011. He previously served as President and Chief Operating Officer of Great Plains Energy, KCP&L and GMO (2011-2012) and as Executive Vice President - Utility Operations of KCP&L and GMO (2010-2011).  He was Executive Vice President - Finance and Strategic Development and Chief Financial Officer of Great Plains Energy (2005-2010) and of KCP&L and GMO (2009-2010).  He was Chief Financial Officer of KCP&L (2005-2008) and GMO (2008).

(b) 
Mr. Heidtbrink was appointed Executive Vice President and Chief Operating Officer of KCP&L and GMO in 2012. He previously served as Senior Vice President - Supply of KCP&L and GMO (2009-2012).  He was Senior Vice President - Corporate Services of KCP&L and GMO (2008), and Vice President - Power Generation & Energy Resources (2006-2008) of GMO.

(c) 
Mr. Shay was appointed Senior Vice President - Finance and Strategic Development and Chief Financial Officer of Great Plains Energy, KCP&L and GMO in 2010.  He was Chief Financial Officer, with responsibilities for finance, accounting and information technology, at Northern Power Systems, Inc., a wind turbine manufacturing business (2009-2010); Managing Director, with responsibilities for business development, transaction execution and advisory work, at Frontier Investment Banc Corporation (2007-2008); and Chief Financial Officer, with responsibilities for finance, accounting, human resources, information technology and procurement, at Machine Laboratory LLC, a manufacturer of machined parts for the automotive industry (2006-2007).

(d) 
Mr. Bryant was appointed Vice President - Investor Relations and Strategic Planning and Treasurer of Great Plains Energy, KCP&L and GMO in 2013. He previously served as Vice President - Investor Relations and Treasurer of Great Plains Energy, KCP&L and GMO (2011-2013). He was Vice President - Strategy and Risk Management of KCP&L and GMO (2011) and Vice President - Energy Solutions (2006-2011) of KCP&L and GMO.

(e) 
Mr. Caisley was appointed Vice President - Marketing and Public Affairs of Great Plains Energy, KCP&L and GMO in 2011. He was Senior Director of Public Affairs (2008-2011) and Director of Governmental Affairs (2007-2008). Prior to that, he was the president of the Missouri Energy Development Association (2005-2007).

(f) 
Mr. Deggendorf was appointed Senior Vice President - Corporate Services in 2012. He previously served as Senior Vice President - Delivery of KCP&L and GMO (2008-2012).  He was Vice President - Public Affairs of Great Plains Energy (2005-2008).


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(g) 
Ms. Fairchild was appointed Vice President, Corporate Secretary and Chief Compliance Officer of Great Plains Energy, KCP&L and GMO in 2010.  She was Senior Director of Investor Relations and Assistant Secretary (2010) and Director of Investor Relations (2008-2010) of Great Plains Energy, KCP&L and GMO.  Prior to that, she was an associate at Hagen and Partners (2005-2007), a public relations firm.

(h) 
Ms. Humphrey was appointed General Counsel in 2010 and Senior Vice President - Human Resources of Great Plains Energy, KCP&L and GMO in 2012.  She previously served as Vice President - Human Resources of Great Plains Energy, KCP&L and GMO (2010-2012). She was Senior Director of Human Resources and Interim General Counsel of Great Plains Energy, KCP&L and GMO (2010) and Managing Attorney of KCP&L (2007-2010).  Prior to that, she was a shareholder of the law firm of Shughart Thomson & Kilroy (1996-2006).

(i) 
Mr. Ives was appointed Vice President - Regulatory Affairs of KCP&L and GMO in 2013. He previously served as Senior Director - Regulatory Affairs of KCP&L and GMO (2011-2013). He was Assistant Controller of Great Plains Energy, KCP&L and GMO (2008 - 2011).

(j) 
Ms. Wright was appointed Vice President - Business Planning and Controller of Great Plains Energy, KCP&L and GMO in 2012.  She previously served as Vice President and Controller of Great Plains Energy, KCP&L and GMO (2009-2012). She was Controller of Great Plains Energy and KCP&L (2002-2008) and GMO (2008).

Available Information
Great Plains Energy's website is www.greatplainsenergy.com and KCP&L's website is www.kcpl.com. Information contained on these websites is not incorporated herein. The Companies make available, free of charge, on or through their websites, their annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the companies electronically file such material with, or furnish it to, the SEC. In addition, the Companies make available on or through their websites all other reports, notifications and certifications filed electronically with the SEC.
The public may read and copy any materials that the Companies file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. For information on the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov that contains reports, proxy statements and other information regarding the Companies.
ITEM 1A. RISK FACTORS
Actual results in future periods for Great Plains Energy and KCP&L could differ materially from historical results and the forward-looking statements contained in this report.  The Companies' business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond their control.  Additional risks and uncertainties not presently known or that the Companies' management currently believes to be immaterial may also adversely affect the Companies.  This information, as well as the other information included in this report and in the other documents filed with the SEC, should be carefully considered before making an investment in the securities of Great Plains Energy or KCP&L.  Risk factors of KCP&L are also risk factors of Great Plains Energy.
Utility Regulatory Risks:
Complex utility regulation could adversely affect the Companies' results of operations, financial position and cash flows.
The Companies are subject to, or affected by, extensive federal and state utility regulation, including regulation by the MPSC, KCC, FERC, NRC, SPP and NERC.  The Companies must address in their business planning and management of operations the effects of existing and proposed laws and regulations and potential changes in the regulatory framework, including initiatives by federal and state legislatures, RTOs, utility regulators and taxing authorities.  Failure of the Companies to obtain adequate rates or regulatory approvals in a timely manner, new or changed laws, regulations, standards, interpretations or other legal requirements, deterioration of the Companies' relationship with regulators and increased compliance costs and potential non-compliance consequences may

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materially affect the Companies' results of operations, financial position and cash flows.  Additionally, regulators may impose burdensome restrictions and conditions on the Companies' transactions and ventures, rendering them less attractive from a financial or operational perspective. Certain of these risks are addressed in greater detail below.
The outcome of retail rate proceedings could have a material impact on the business and is largely outside the Companies' control.
The rates that KCP&L and GMO are allowed to charge their customers significantly influence the Companies' results of operations, financial position and cash flows.  These rates are subject to the determination, in large part, of governmental entities outside of the Companies' control, including the MPSC, KCC and FERC.  
The utility rate-setting principle generally applicable to KCP&L and GMO is that rates should provide a reasonable opportunity to recover expenses and investment prudently incurred to provide utility service plus a reasonable return on such investment.  Various expenses incurred by KCP&L and GMO have been excluded from rates by the MPSC and KCC in past rate cases as not being prudently incurred or not providing utility customer benefit, and there is a risk that certain expenses incurred in the future may not be recovered in rates.  The MPSC and KCC also have in the past and may in the future exclude from rates all or a portion of investments in various facilities as not being prudently incurred or not being useful in providing utility service.  
As discussed in the "Environmental Risks" and "Financial Risks" sections below, the Companies' capital expenditures are expected to be substantial over the next several years for environmental projects, as well as other projects, and there is a risk that a portion of the capital costs could be excluded from rates in future rate cases.
The Companies are also exposed to cost-recovery shortfalls due to the inherent "regulatory lag" in the rate-setting process, especially during periods of significant cost inflation or declining retail usage, as KCP&L's and GMO's utility rates are generally based on historical information and are not subject to adjustment between rate cases, other than principally for fuel, purchased power, transmission and property taxes for KCP&L in Kansas and fuel, purchased power and certain transmission costs for GMO.  These and other factors may result in under-recovery of costs, failure to earn the authorized return on investment, or both.
There are mandatory renewable energy standards in Missouri and Kansas.  There is the potential for future federal or state mandatory energy efficiency requirements. KCP&L has implemented certain energy efficiency programs, and currently the recovery of these program expenses are on a deferred basis with no recovery mechanism for associated lost revenues.
Failure to timely recover the full investment costs of capital projects, the impact of renewable energy and energy efficiency programs, other utility costs and expenses due to regulatory disallowances, regulatory lag or other factors could lead to lowered credit ratings, reduced access to capital markets, increased financing costs, lower flexibility due to constrained financial resources and increased collateral security requirements, or reductions or delays in planned capital expenditures.  In response to competitive, economic, political, legislative, public perception (including, but not limited to, the Companies' environmental reputation) and regulatory pressures, the Companies may be subject to rate moratoriums, rate refunds, limits on rate increases, lower allowed returns on investment or rate reductions, including phase-in plans designed to spread the impact of rate increases over an extended period of time for the benefit of customers.  
Regulatory requirements regarding utility operations may increase costs and may expose the Companies to compliance penalties or adverse rate consequences.
The FERC, NERC and SPP have implemented and enforce an extensive set of transmission system reliability, cyber security and critical infrastructure protection standards that apply to public utilities, including KCP&L and GMO.  The MPSC and KCC have the authority to implement utility operational standards and requirements, such as vegetation management standards, facilities inspection requirements

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and quality of service standards.  In addition, the Companies are also subject to health, safety and other requirements enacted by the Occupational Safety and Health Administration, the Department of Transportation, the Department of Labor and other federal and state agencies.  As discussed more fully under "Operational Risks," the NRC extensively regulates nuclear power plants, including Wolf Creek. The costs of existing, new or modified regulations, standards and other requirements could have an adverse effect on the Companies' results of operations, financial position and cash flows as a result of increased operations or maintenance and capital expenditures for new facilities or to repair or improve existing facilities.  In addition, failure to meet quality of service, reliability, cyber security, critical infrastructure protection, operational or other standards and requirements could expose the Companies to penalties, additional compliance costs, or adverse rate consequences.
Environmental Risks:
The Companies are subject to current and potential environmental requirements and the incurrence of environmental liabilities, any or all of which may adversely affect their business and financial results.
The Companies are subject to extensive federal, state and local environmental laws, regulations and permit requirements relating to air and water quality, waste management and disposal, natural resources and health and safety.  In addition to imposing continuing compliance obligations and remediation costs for historical and pre-existing conditions, these laws, regulations and permits authorize the imposition of substantial penalties for noncompliance, including fines, injunctive relief and other sanctions.  There is also a risk that new environmental laws and regulations, new judicial interpretations of environmental laws and regulations, or the requirements in new or renewed environmental permits could adversely affect the Companies' operations.  In addition, there is also a risk of lawsuits brought by third parties alleging violations of environmental commitments or requirements, creation of a public nuisance or other matters, and seeking injunctions or monetary or other damages. Certain federal courts have held that state and local governments and private parties have standing to bring climate change tort suits seeking company-specific emission reductions and damages.
Environmental permits are subject to periodic renewal, which may result in more stringent permit conditions and limits.  New facilities, or modifications of existing facilities, may require new environmental permits or amendments to existing permits.  Delays in the environmental permitting process, public opposition and challenges, denials of permit applications, limits or conditions imposed in permits and the associated uncertainty may materially adversely affect the cost and timing of projects, and thus materially adversely affect the Companies' results of operations, financial position and cash flows.
KCP&L and GMO periodically seek recovery of capital costs and expenses for environmental compliance and remediation through rate increases; however, there can be no assurance that recovery of these costs would be granted.  
As discussed above, KCP&L and GMO may be subject to material adverse rate treatment in response to competitive, economic, political, legislative or regulatory pressures and/or public perception of the Companies' environmental reputation.  The costs of compliance or noncompliance with environmental requirements, remediation costs, adverse outcomes of lawsuits, or failure to timely recover environmental costs could have a material adverse effect on the Companies' results of operations, financial position and cash flows.  Certain of these matters are discussed in more detail below.  See Note 15 to the consolidated financial statements for additional information regarding certain significant environmental matters.
Air and Climate Change
Management believes it is possible that additional federal or relevant state or local laws or regulations could be enacted to address global climate change.  At the international level, while the United States is not a current party to the international Kyoto Protocol, it has agreed to undertake certain voluntary actions under the non-binding Copenhagen Accord and pursuant to subsequent international discussions relating to climate change, including the establishment of a goal to reduce greenhouse gas emissions.  International agreements legally binding on the United States may be reached in the future.  Such new laws or regulations could mandate new or increased requirements to control or reduce the emission of greenhouse

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gases, such as CO2, which are created in the combustion of fossil fuels.  These requirements could include, among other things, taxes or fees on fossil fuels or emissions, cap and trade programs, emission limits and clean or renewable energy standards.  The Companies' current generation capacity is primarily coal-fired, and is estimated to produce about one ton of CO2 per MWh, or approximately 25 million tons and 18 million tons of CO2 per year for Great Plains Energy and KCP&L, respectively. 
The Environmental Protection Agency (EPA) has enacted various regulations regarding the reporting and permitting of greenhouse gases and has proposed other regulations under the existing Clean Air Act.  The EPA has established thresholds for greenhouse gas emissions, defining when Clean Air Act permits under the New Source Performance Standards, New Source Review and Title V operating permits programs would be required for new or existing industrial facilities and when the installation of best available control technology would be required.  Most of the Companies' generating facilities are affected by these existing rules and would be affected by the proposed rules.  Additional federal and/or state legislation or regulation respecting greenhouse gas emissions may be proposed or enacted in the future.  Requirements to reduce greenhouse gas emissions may cause the Companies to incur significant costs relating to their ongoing operations (such as for additional environmental control equipment, retiring and replacing existing generation, or selecting more costly generation alternatives), to procure emission allowance credits, or due to the imposition of taxes, fees or other governmental charges as a result of such emissions.  
Rules issued by the EPA regarding emissions of mercury and other hazardous air pollutants, NOX, SO2 and particulates are also in a state of flux. Some of these rules have been overturned by the courts and remanded to the EPA to be revised consistent with the courts' orders while others have been stayed pending judicial review or are otherwise subject to revision. The Companies' current estimate of capital expenditures (exclusive of Allowance for Funds Used During Construction (AFUDC) and property taxes) to comply with current final environmental regulations where the timing is certain is approximately $700 million. This estimate reflects costs to install environmental equipment at KCP&L’s La Cygne Nos. 1 and 2 by June 2015 to comply with the best available retrofit technology (BART) rule and environmental upgrades at other coal-fired generating units through 2016 to comply with the Mercury and Air Toxics Standards (MATS) rule. The Companies estimate that other capital projects at coal-fired generating units for compliance with the Clean Air Act and Clean Water Act (discussed below) based on proposed regulations or final regulations with implementation plans not yet finalized where the timing is uncertain could be approximately $600 to $800 million, which includes approximately $350 million to $450 million for KCP&L. These other projects are not included in the approximately $700 million estimated cost of compliance discussed above. It is unknown what requirements and standards will be imposed in the future, when the Companies may have to comply or what costs may ultimately be required.
Missouri law requires at least 5% of the electricity provided by certain utilities, including KCP&L and GMO, to come from renewable resources, increasing to 10% by 2018 and 15% by 2021.  Kansas law requires certain utilities, including KCP&L, to have renewable energy generation capacity equal to at least 10% of their three-year average Kansas peak retail demand, increasing to 15% by 2016 and 20% by 2020. Management believes that national renewable energy standards are also possible. The timing, provisions and impact of such possible future requirements, including the cost to obtain and install new equipment to achieve compliance, cannot be reasonably estimated at this time.  Such requirements could have a significant financial and operational impact on the Companies.
Water
The Clean Water Act and associated regulations enacted by the EPA form a comprehensive program to restore and preserve water quality.  All of the Companies' generating facilities, and certain of their other facilities, are subject to the Clean Water Act.
In March 2011, the EPA proposed regulations regarding protection of aquatic life from being killed or injured by cooling water intake structures. The EPA agreed to finalize the rule by April 2014. Although the impact on the Companies' operations will not be known until after the rule is finalized, it could have a significant effect on the Companies' results of operations, financial position and cash flows.

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KCP&L holds a permit from the Missouri Department of Natural Resources (MDNR) authorizing KCP&L to, among other things, withdraw water from the Missouri River for cooling purposes and return the heated water to the Missouri River at its Hawthorn Station.  KCP&L has applied for a renewal of this permit and the EPA has submitted an interim objection letter regarding the allowable amount of heat that can be contained in the returned water.  Until this matter is resolved, KCP&L continues to operate under its current permit.  KCP&L cannot predict the outcome of this matter; however, while less significant outcomes are possible, this matter may require KCP&L to reduce its generation at Hawthorn Station, install cooling towers or both, any of which could have a significant adverse impact on KCP&L's results of operations, financial position and cash flows.  The outcome could also affect the terms of water permit renewals at KCP&L's Iatan Station and at GMO's Sibley and Lake Road Stations.  Additionally, in April 2013, the EPA proposed to revise the technology-based effluent limitations guidelines and standards regulation to make the existing controls on discharges from steam electric power plants more stringent. The EPA is under a consent decree to take final action on the proposed rule by May 2014.  Until a rule is finalized, the financial and operational impacts cannot be determined.  Further, the possible effects of climate change, including potentially increased temperatures and reduced precipitation, could make it more difficult and costly to comply with the current and final permit requirements.
Solid Waste
Solid and hazardous waste generation, storage, transportation, treatment and disposal are regulated at the federal and state levels under various laws and regulations.  The Companies principally use coal in generating electricity and dispose of coal combustion residuals (CCRs) in both on-site facilities and facilities owned by third parties.  The EPA has proposed regulations regarding the handling and disposal of CCRs, which include alternative proposals to regulate CCRs as special or hazardous waste or as non-hazardous waste.  If enacted, any new laws and regulations, especially if CCRs are classified as hazardous waste, could have a material adverse effect on the Companies' results of operations, financial position and cash flows.
Remediation
Under current law, the Companies are also generally responsible for any liabilities associated with the environmental condition of their properties and other properties at which the Companies arranged for the disposal or treatment of hazardous substances, including properties that they have previously owned or operated, such as manufactured gas plants (MGP), regardless of whether they were responsible for the contamination or whether the liabilities arose before, during or after the time they owned or operated the properties or arranged for the disposal or treatment of hazardous substances. 
Due to all of the above, the Companies' projected capital and other expenditures for environmental compliance are subject to significant uncertainties, including the timing of implementation of any new or modified environmental requirements, the emissions limits imposed by such requirements and the types and costs of the compliance alternatives selected by the Companies.  As a result, costs to comply with environmental requirements cannot be estimated with certainty, and actual costs could be significantly higher than projections.  New environmental laws and regulations affecting the operations of the Companies may be adopted, and new interpretations of existing laws and regulations could be adopted or become applicable to the Companies or their facilities, any of which may materially adversely affect the Companies' business, adversely affect the Companies' ability to continue operating its power plants as currently done and substantially increase their environmental expenditures or liabilities in the future.
Financial Risks:
Financial market disruptions and declines in credit ratings may increase financing costs and/or limit access to the credit markets, which may adversely affect liquidity and results.
The Companies' capital requirements are expected to be substantial over the next several years.  The Companies rely on access to short-term money markets, revolving credit facilities provided by financial institutions and long-term capital markets as significant sources of liquidity for capital requirements not satisfied by cash flows from operations.  The Companies also rely on bank-provided credit facilities for credit support, such as letters of credit,

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to support operations.  The amount of credit support required for operations varies and is impacted by a number of factors.  
Great Plains Energy, KCP&L, GMO and certain of their securities are rated by Moody's Investors Service and Standard & Poor's.  These ratings impact the Companies' cost of funds and Great Plains Energy's ability to provide credit support for its subsidiaries.  The interest rates on borrowings under the Companies' revolving credit agreements and on a portion of Great Plains Energy's debt are subject to increase as their respective credit ratings decrease.  The amount of collateral or other credit support required under power supply and certain other agreements is also dependent on credit ratings.  
Although the United States capital and credit markets have generally stabilized after an extended period of volatility and disruption, there is no assurance that conditions will not deteriorate in the future due to instability in global markets, political uncertainty in the United States or other unforeseen events both in the United States and around the world.  Adverse market conditions or decreases in Great Plains Energy's, KCP&L's or GMO's credit ratings could have material adverse effects on the Companies.  These effects could include, among others: reduced access to capital and increased cost of funds; dilution resulting from equity issuances at reduced prices; changes in the type and/or increases in the amount of collateral or other credit support obligations required to be posted with contractual counterparties; increased nuclear decommissioning trust and pension and other post-retirement benefit plan funding requirements; rate case disallowance of KCP&L's or GMO's costs of capital; reductions in or delays of capital expenditures; or reductions in Great Plains Energy's ability to provide credit support for its subsidiaries.  Any of these results could adversely affect the Companies' results of operations, financial position and cash flows.  In addition, market disruption and volatility could have an adverse impact on the Companies' lenders, suppliers and other counterparties or customers, causing them to fail to meet their obligations.
Great Plains Energy has guaranteed some of GMO’s long-term and short-term debt and payments under these guarantees may adversely affect Great Plains Energy's liquidity.
Great Plains Energy has issued guarantees covering $99.9 million of long-term debt of GMO. Great Plains Energy also guarantees GMO's commercial paper program. At December 31, 2013, GMO had $15.0 million of commercial paper outstanding.  The guarantees obligate Great Plains Energy to pay amounts owed by GMO directly to the holders of the guaranteed debt in the event GMO defaults on its payment obligations.  Great Plains Energy may also guarantee debt that GMO may issue in the future.  Any guarantee payments could adversely affect Great Plains Energy's liquidity.
The inability of Great Plains Energy's subsidiaries to provide sufficient dividends to Great Plains Energy, or the inability otherwise of Great Plains Energy to pay dividends to its shareholders and meet its financial obligations would have an adverse effect.
Great Plains Energy is a holding company with no significant operations of its own.  The primary source of funds for payment of dividends to its shareholders and its other financial obligations is dividends paid to it by its subsidiaries, particularly KCP&L and GMO.  The ability of Great Plains Energy's subsidiaries to pay dividends or make other distributions, and accordingly, Great Plains Energy's ability to pay dividends on its common stock and meet its financial obligations principally depends on the actual and projected earnings and cash flow, capital requirements and general financial position of its subsidiaries, as well as regulatory factors, financial covenants, general business conditions and other matters.
In addition, Great Plains Energy, KCP&L and GMO are subject to certain corporate and regulatory restrictions and financial covenants that could affect their ability to pay dividends.  Great Plains Energy's articles of incorporation restrict the payment of common stock dividends in the event common equity is 25% or less of total capitalization.  In addition, if preferred stock dividends are not declared and paid when scheduled, Great Plains Energy could not declare or pay common stock dividends or purchase any common shares.  If the unpaid preferred stock dividends equal four or more full quarterly dividends, the preferred shareholders, voting as a single class, could elect the smallest number of directors necessary to constitute a majority of the full Great Plains Energy Board of Directors.  Certain conditions in the MPSC and KCC orders authorizing the holding company structure require Great Plains Energy and KCP&L to maintain consolidated common equity of at least 30% and 35%, respectively, of total capitalization (including only the amount of short-term debt in excess of the amount of construction work in

16


progress).  Under the Federal Power Act, KCP&L and GMO generally can pay dividends only out of retained earnings.  The revolving credit agreements of Great Plains Energy, KCP&L and GMO and the note purchase agreement for GMO's Series A, B and C Senior Notes contain a covenant requiring each company to maintain a consolidated indebtedness to consolidated total capitalization ratio of not more than 0.65 to 1.00.  While these corporate and regulatory restrictions and financial covenants are not expected to affect the Companies' ability to pay dividends at the current level in the foreseeable future, there is no assurance that adverse financial results would not trigger such restrictions or covenants and reduce or eliminate the Companies' ability to pay dividends.
Market performance, increased retirements and retirement plan regulations could significantly impact retirement plan funding requirements and associated cash needs and expenses.
Substantially all of the Companies' and WCNOC's employees participate in defined benefit retirement and other post-retirement plans.  Former employees also have accrued benefits in defined benefit retirement and other post-retirement plans.  The costs of these plans depend on a number of factors, including the rates of return on plan assets, the level and nature of the provided benefits, discount rates, the interest rates used to measure required minimum funding levels, changes in benefit design, changes in laws or regulations, and the Companies' required or voluntary contributions to the plans.  The Companies currently have substantial unfunded liabilities under these plans.  Also, if the rate of retirements exceeds planned levels, or if these plans experience adverse market returns on investments, or if interest rates materially fall, the Companies' contributions to the plans could rise substantially over historical levels.  In addition, changes in accounting rules and assumptions related to future costs, returns on investments, interest rates and other actuarial assumptions, including projected retirements, could have a significant impact on the Companies' results of operations, financial position and cash flows.
The use of derivative contracts in the normal course of business could result in losses that could negatively impact the Companies' results of operations, financial position and cash flows.
The Companies use derivative instruments, such as swaps, options, futures and forwards, to manage commodity and financial risks.  Losses could be recognized as a result of volatility in the market values of these contracts, if a counterparty fails to perform, or if the underlying transactions which the derivative instruments are intended to hedge fail to materialize.  In the absence of actively quoted market prices and pricing information from external sources, the valuation of these financial instruments can involve management's judgment or the use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts.
As a service provider to GMO, KCP&L may have exposure to GMO's financial performance and operations.
GMO has no employees of its own.  KCP&L employees operate and manage GMO's properties, and KCP&L charges GMO for the cost of these services.  These arrangements may pose risks to KCP&L, including possible claims arising from actions of KCP&L employees in operating GMO's properties and providing other services to GMO.  KCP&L's claims for reimbursement for services provided to GMO are unsecured and rank equally with other unsecured obligations of GMO.  KCP&L's ability to be reimbursed for the costs incurred for the benefit of GMO depends on the financial ability of GMO to make such payments.
Customer and Weather-Related Risks:
The results of operations, financial position and cash flows of the Companies can be materially affected by changes in customer electricity consumption.
Changes in customer electricity consumption due to sustained financial market disruptions, downturns or sluggishness in the economy, technological advances, or other factors may adversely affect the Companies' results of operations, financial position and cash flows.  
Technological advances or other energy conservation measures could reduce customer electricity consumption. KCP&L and GMO generate electricity at central station power plants to achieve economies of scale and produce electricity at a competitive cost. There are distributed generation technologies that produce electricity, including microturbines, wind turbines, fuel cells and solar cells, that could become more cost competitive. If these technologies become cost competitive, the Companies customer electricity consumption could be reduced.

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Changes in technology could also alter the channels through which the Companies’ customers purchase or use electricity, which could reduce the Companies customer electricity consumption.
Weather is a major driver of the Companies' results of operations, financial position and cash flow.
Weather conditions directly influence the demand for electricity and natural gas and affect the price of energy commodities.  Great Plains Energy and KCP&L are significantly impacted by seasonality, with approximately one-third of their retail electric revenues recorded in the third quarter. Unusually mild winter or summer weather can adversely affect sales.  In addition, severe weather, including but not limited to tornados, snow, rain, flooding and ice storms can be destructive causing outages and property damage that can potentially result in additional expenses, lower revenues and additional capital restoration costs.  KCP&L's and GMO's rates may not always be adjusted timely and adequately to reflect these increased costs. Some of the Companies' generating stations utilize water from the Missouri River for cooling purposes.  Low water and flow levels can increase maintenance costs at these stations and, if these levels were to get low enough, could require modifications to plant operations.  The possible effects of climate change (such as increased temperatures, increased occurrence of severe weather or reduced precipitation, among other possible results) could potentially increase the volatility of demand and prices for energy commodities, increase the frequency and impact of severe weather, increase the frequency of flooding or decrease water and flow levels.
Operational Risks:
Operational risks may adversely affect the Companies' results of operations, financial position and cash flows.
The operation of the Companies' electric generation, transmission, distribution and information systems involves many risks, including breakdown or failure of equipment, processes and personnel performance; problems that delay or increase the cost of returning facilities to service after outages; limitations that may be imposed by equipment conditions or environmental, safety or other regulatory requirements; fuel supply or fuel transportation reductions or interruptions; labor disputes; difficulties with the implementation or continued operation of information systems; transmission scheduling constraints; and catastrophic events such as fires, floods, droughts, explosions, terrorism, cyber threats, severe weather or other similar occurrences.  An equipment or system outage or constraint can, among other things:
in the case of generation equipment, affect operating costs, increase capital requirements and costs, increase purchased power volumes and costs and reduce wholesale sales opportunities;
in the case of transmission equipment, affect operating costs, increase capital requirements and costs, require changes in the source of generation and affect wholesale sales opportunities and the ability to meet regulatory reliability and security requirements;
in the case of distribution systems, affect revenues and operating costs, increase capital requirements and costs, and affect the ability to meet regulatory service metrics and customer expectations; and
in the case of information systems, affect the control and operations of generation, transmission, distribution and other business operations and processes, increase operating costs, increase capital requirements and costs, and affect the ability to meet regulatory reliability and security requirements and customer expectations.
With the exception of Hawthorn No. 5, which was substantially rebuilt in 2001, and Iatan No. 2, which was completed in 2010, all of KCP&L's and GMO's coal-fired generating units and its nuclear generating unit were constructed prior to 1986.  The age of these generating units increases the risk of unplanned outages, reduced generation output and higher maintenance expense.  Training, preventive maintenance and other programs have been implemented, but there is no assurance that these programs will prevent or minimize future breakdowns or failures of the Companies' generation facilities or increased maintenance expense.
The Companies currently have general liability and property insurance in place to cover their facilities in amounts that management considers appropriate.  These policies, however, do not cover the Companies' transmission or distribution systems, and the cost of repairing damage to these systems may adversely affect the Companies' results

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of operations, financial position and cash flows.  Such policies are subject to certain limits and deductibles and do not include business interruption coverage.  Insurance coverage may not be available in the future at reasonable costs or on commercially reasonable terms, and the insurance proceeds received for any loss of, or any damage to, any of the Companies' facilities may not be sufficient to restore the loss or damage.
These and other operating events may reduce the Companies' revenues, increase their costs, or both, and may materially affect their results of operations, financial position and cash flows.
The cost and schedule of construction projects may materially change and expected performance may not be achieved.
Great Plains Energy's and KCP&L's businesses are capital intensive.  The Companies currently have significant construction projects pending and may also have significant construction projects in the future. The risks of any construction project include: that actual costs may exceed estimated costs due to inflation or other factors; risks associated with the incurrence of additional debt or the issuance of additional equity to fund such projects; delays that may occur in obtaining permits and materials; the failure of suppliers and contractors to perform as required under their contracts; inadequate availability or increased cost of equipment, materials or qualified craft labor; delays related to inclement weather; the scope, cost and timing of projects may change due to new or changed environmental requirements, health and safety laws or other factors; and other events beyond the Companies' control may occur that may materially affect the schedule, cost and performance of these projects.
These and other risks could materially increase the estimated costs of construction projects, delay the in-service dates of projects, adversely affect the performance of the projects, and/or require the Companies to purchase additional electricity to supply their respective retail customers until the projects are completed.  Thus, these risks may significantly affect the Companies' results of operations, financial position and cash flows.
Failure of one or more generation plant co-owners to pay their share of construction or operations and maintenance costs could increase the Companies' costs and capital requirements.
KCP&L owns 47% of Wolf Creek, 50% of La Cygne Station, 70% of Iatan No. 1 and 55% of Iatan No. 2.  GMO owns 18% of both Iatan units and 8% of Jeffrey Energy Center.  The remaining portions of these facilities are owned by other utilities that are contractually obligated to pay their proportionate share of capital and other costs.
While the ownership agreements provide that a defaulting co-owner's share of the electricity generated can be sold by the non-defaulting co-owners, there is no assurance that the revenues received will recover the increased costs borne by the non-defaulting co-owners.  Occurrence of these or other events could materially increase the Companies' costs and capital requirements.
The Companies are subject to information security risks and risks of unauthorized access to their systems.
In the course of their businesses, the Companies handle a range of system security and sensitive customer information. KCP&L and GMO are subject to laws and rules issued by different agencies concerning safeguarding and maintaining the confidentiality of this information. A security breach of the utilities' information systems such as theft or the inappropriate release of certain types of information, including confidential customer information or system operating information, could have a material adverse impact on the results of operations, financial position and cash flows of the Companies.
KCP&L and GMO operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. Despite implementation of security measures, the technology systems are vulnerable to disability, failures, employee error or malfeasance, or unauthorized access. Such failures or breaches of the systems could impact the reliability of the utilities' generation and transmission and distribution systems, result in legal claims and proceedings, damage the Companies' reputation and also subject the Companies to financial harm. If the technology systems were to fail or be breached and not recovered in a timely way, critical business functions could be impaired and sensitive confidential data could be compromised, which could have a material adverse impact on the Companies' results of operations, financial position and cash flows.

19


KCP&L is exposed to risks associated with the ownership and operation of a nuclear generating unit, which could result in an adverse effect on the Companies' business and financial results.
KCP&L owns 47% of Wolf Creek.  The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities, including Wolf Creek.  In the event of non-compliance, the NRC has the authority to impose fines, shut down the facilities, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Additionally, the non-compliance of other nuclear facility operators with applicable regulations or the occurrence of a serious nuclear incident anywhere in the world could result in increased regulation of the nuclear industry as a whole.  Any revised safety requirements promulgated by the NRC could result in substantial capital expenditures at Wolf Creek.
Wolf Creek has the lowest fuel cost per MWh of any of KCP&L's generating units.  An extended outage of Wolf Creek, whether resulting from NRC action, an incident at the plant or otherwise, could have a material adverse effect on KCP&L's results of operations, financial position and cash flows in the event KCP&L incurs higher replacement power and other costs that are not recovered through rates or insurance.  If a long-term outage occurred, the state regulatory commissions could reduce rates by excluding the Wolf Creek investment from rate base.  Wolf Creek was constructed prior to 1986 and the age of Wolf Creek increases the risk of unplanned outages and results in higher maintenance costs.
Ownership and operation of a nuclear generating unit exposes KCP&L to risks regarding decommissioning costs at the end of the unit's life.  KCP&L contributes annually based on estimated decommissioning costs to a tax-qualified trust fund to be used to decommission Wolf Creek.  The funding level assumes a projected level of return on trust assets.  If the actual return on trust assets is below the projected level or actual decommissioning costs are higher than estimated, KCP&L could be responsible for the balance of funds required and may not be allowed to recover the balance through rates.
KCP&L is also exposed to other risks associated with the ownership and operation of a nuclear generating unit, including, but not limited to, potential liability associated with the potential harmful effects on the environment and human health resulting from the operation of a nuclear generating unit and the storage, handling, disposal and potential release (by accident, through third-party actions or otherwise) of radioactive materials.  Under the structure for insurance among owners of nuclear generating units, KCP&L is also liable for potential retrospective premium assessments (subject to a cap) per incident at any commercial reactor in the country and losses in excess of insurance coverage.
The regional power market in which the Companies operate has changing market and transmission structures, which could have an adverse effect on the Companies' results of operations, financial position and cash flows.
In March 2014, the SPP is scheduled to launch its Integrated Marketplace. Similar to other RTO or Independent
System Operator (ISO) markets currently operating, this marketplace will determine which generating units among
market participants should run, within the operating constraints of a unit, at any given time for maximum cost-effectiveness. In the event that KCP&L's and GMO's generating units are not among the lowest cost generating units operating within the market, KCP&L and GMO could experience decreased levels of wholesale electricity sales once the Integrated Marketplace begins operations.

A market for Transmission Congestion Rights (TCR) is also included as part of the Integrated Marketplace. TCRs are financial instruments used to hedge transmission congestion charges. Both KCP&L and GMO have acquired TCRs for the purpose of hedging against transmission congestion charges once the Integrated Marketplace begins operations. There is a risk that KCP&L and GMO could incorrectly model the amount of TCRs needed, or that the TCRs acquired could be ineffective in hedging against transmission congestion charges which could lead to increased purchased power costs.
The rules governing the various regional power markets may change from time to time and such changes could impact the Companies' costs and revenues. Because the manner in which RTO's or ISO's will evolve is unclear, the Companies are unable to assess fully the impact of these changes.

20


Commodity Price Risks:
Changes in commodity prices could have an adverse effect on the Companies' results of operations, financial position and cash flows.
The Companies engage in the wholesale and retail marketing of electricity and are exposed to risks associated with the price of electricity.  To the extent that exposure to the price of electricity is not successfully hedged, the Companies could experience losses associated with the changing market price for electricity.
Increases in fuel, fuel transportation and purchased power prices could have an adverse impact on the Companies' costs.
KCP&L's Kansas retail rates and GMO's retail electric and steam rates contain fuel recovery mechanisms.  KCP&L's Missouri retail rates do not contain a similar provision.  As a result, the Companies are exposed to varying degrees of risk from changes in the market prices of fuel for generation of electricity and purchased power.  Changes in the Companies' fuel mix due to electricity demand, plant availability, transportation issues, fuel prices, fuel availability and other factors can also adversely affect the Companies' fuel and purchased power costs.
The Companies do not hedge their respective entire exposures from fuel and transportation price volatility.  Consequently, the Companies' results of operations, financial position and cash flows may be materially impacted by changes in these prices unless and until increased costs are recovered in KCP&L's Missouri retail rates.
Wholesale electricity sales affect revenues, creating earnings volatility.
The levels of the Companies' wholesale sales depend on the wholesale market price, transmission availability and the availability of generation for wholesale sales, among other factors.  A substantial portion of wholesale sales are made in the spot market, and thus the Companies have immediate exposure to wholesale price changes.  Wholesale power prices can be volatile and generally increase in times of high regional demand and high natural gas prices. Conversely, wholesale power prices generally decrease in times of low regional demand and low natural gas prices.  While wholesale sales are reflected in KCP&L's Kansas and GMO's fuel recovery mechanisms, KCP&L's Missouri rates are set on an estimated amount of wholesale sales.  KCP&L will not recover any shortfall in non-firm wholesale electric sales margin from the level included in Missouri rates. Declines in wholesale market price, availability of generation, transmission constraints in the wholesale markets, or low wholesale demand could reduce the Companies' wholesale sales and may materially affect the Companies' results of operations, financial position and cash flows.
Litigation Risks:
The outcome of legal proceedings cannot be predicted.  An adverse finding could have a material adverse effect on the Companies' results of operations, financial position and cash flows.
The Companies are party to various material litigation and regulatory matters arising out of their business operations.  The ultimate outcome of these matters cannot presently be determined, nor, in many cases, can the liability that could potentially result from a negative outcome in each case be reasonably estimated.  The liability that the Companies may ultimately incur with respect to any of these cases in the event of a negative outcome may be in excess of amounts currently reserved and insured against with respect to such matters.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

21


ITEM 2. PROPERTIES
Electric Utility Generation Resources
 
 
 
 
Year
 
Estimated 2014
 
Primary
 
Unit
Location
 
Completed
 
MW Capacity
 
Fuel
Base Load
Iatan No. 2
Missouri
 
2010
 
 
482

(a) 
 
Coal
 
Wolf Creek
Kansas
 
1985
 
 
547
(a) 
 
Nuclear
 
Iatan No. 1
Missouri
 
1980
 
 
499
(a) 
 
Coal
 
La Cygne Nos. 1 and 2
Kansas
 
1973, 1977
 
 
709
(a) 
 
Coal
 
Hawthorn No. 5 (b)
Missouri
 
1969
 
 
564
 
 
Coal
 
Montrose Nos. 1, 2 and 3
Missouri
1958, 1960, 1964
 
517
 
 
Coal
Peak Load
West Gardner Nos. 1, 2, 3 and 4
Kansas
 
2003
 
 
311
 
 
Natural Gas
 
Osawatomie
Kansas
 
2003
 
 
77
 
 
Natural Gas
 
Hawthorn Nos. 6 and 9
Missouri
 
2000
 
 
227
 
 
Natural Gas
 
Hawthorn No. 8
Missouri
 
2000
 
 
72
 
 
Natural Gas
 
Hawthorn No. 7
Missouri
 
2000
 
 
69
 
 
Natural Gas
 
Northeast Black Start Unit
Missouri
 
1985
 
 
2
 
 
Oil
 
Northeast Nos. 17 and 18
Missouri
 
1977
 
 
97
 
 
Oil
 
Northeast Nos. 13 and 14
Missouri
 
1976
 
 
91
 
 
Oil
 
Northeast Nos. 15 and 16
Missouri
 
1975
 
 
89
 
 
Oil
 
Northeast Nos. 11 and 12
Missouri
 
1972
 
 
96
 
 
Oil
Wind
Spearville 2 Wind Energy Facility (c)
Kansas
 
2010
 
 
3
 
 
Wind
 
Spearville 1 Wind Energy Facility (d)
Kansas
 
2006
 
 
7
 
 
Wind
Total KCP&L
 
 
 
 
 
4,459

 
 
 
Base Load
Iatan No. 2
Missouri
 
2010
 
 
159
(a) 
 
Coal
 
Iatan No. 1
Missouri
 
1980
 
 
128
(a) 
 
Coal
 
Jeffrey Energy Center Nos. 1, 2 and 3
Kansas
1978, 1980, 1983
 
172
(a) 
 
Coal
 
Sibley Nos. 1, 2 and 3
Missouri
1960, 1962, 1969
 
463
 
 
Coal
 
Lake Road Nos. 2 and 4
Missouri
 
1957, 1967
 
 
115
 
 
Coal and Natural Gas
Peak Load
South Harper Nos. 1, 2 and 3
Missouri
 
2005
 
 
317
 
 
Natural Gas
 
Crossroads Energy Center
Mississippi
 
2002
 
 
307
 
 
Natural Gas
 
Ralph Green No. 3
Missouri
 
1981
 
 
71
 
 
Natural Gas
 
Greenwood Nos. 1, 2, 3 and 4
Missouri
 
1975-1979
 
 
248
 
 
Natural Gas/Oil
 
Lake Road No. 5
Missouri
 
1974
 
 
67
 
 
Natural Gas/Oil
 
Lake Road Nos. 1 and 3
Missouri
 
1951, 1962
 
 
16
 
 
Natural Gas/Oil
 
Lake Road Nos. 6 and 7
Missouri
 
1989, 1990
 
 
42
 
 
Oil
 
Nevada
Missouri
 
1974
 
 
19
 
 
Oil
Total GMO
 
 
 
 
 
2,124

 
 
 
Total Great Plains Energy
 
 
 
 
 
6,583

 
 
 
(a)    Share of a jointly owned unit.
(b) 
The Hawthorn Generating Station returned to commercial operation in 2001 with a new boiler, air quality control equipment and an uprated turbine following a 1999 explosion.
(c) 
The 48 MW Spearville 2 Wind Energy Facility's accredited capacity is 3 MW pursuant to SPP reliability standards.
(d) 
The 100.5 MW Spearville Wind Energy Facility's accredited capacity is 7 MW pursuant to SPP reliability standards.

KCP&L owns 50% of La Cygne Nos. 1 and 2, 70% of Iatan No. 1, 55% of Iatan No. 2 and 47% of Wolf Creek. GMO owns 18% of each of Iatan Nos. 1 and 2 and 8% of Jeffrey Energy Center Nos. 1, 2 and 3.


22


Electric Utility Transmission and Distribution Resources
Electric utility's electric transmission system interconnects with systems of other utilities for reliability and to permit wholesale transactions with other electricity suppliers. Electric utility has approximately 3,700 circuit miles of transmission lines, 15,600 circuit miles of overhead distribution lines and 6,800 circuit miles of underground distribution lines in Missouri and Kansas. Electric utility has all material franchise rights necessary to sell electricity within its retail service territory. Electric utility's transmission and distribution systems are continuously monitored for adequacy to meet customer needs. Management believes the current systems are adequate to serve customers.
Electric Utility General
Electric utility's generating plants are located on property owned (or co-owned) by KCP&L or GMO, except the Spearville Wind Energy Facilities which are located on easements and the Crossroads Energy Center and South Harper which are contractually controlled. Electric utility's service centers, electric substations and a portion of its transmission and distribution systems are located on property owned or leased by electric utility. Electric utility's transmission and distribution systems are for the most part located above or underneath highways, streets, other public places or property owned by others. Electric utility believes that it has satisfactory rights to use those places or properties in the form of permits, grants, easements, licenses or franchise rights; however, it has not necessarily undertaken efforts to examine the underlying title to the land upon which the rights rest. Great Plains Energy's and KCP&L's headquarters are located in leased office space.
Substantially all of the fixed property and franchises of KCP&L, which consist principally of electric generating stations, electric transmission and distribution lines and systems, and buildings (subject to exceptions, reservations and releases), are subject to a General Mortgage Indenture and Deed of Trust dated as of December 1, 1986, as supplemented. Mortgage bonds totaling $596.4 million were outstanding at December 31, 2013.

Substantially all of the fixed property and franchises of GMO's St. Joseph Light & Power division is subject to a General Mortgage Indenture and Deed of Trust dated as of April 1, 1946, as supplemented. Mortgage bonds totaling $9.0 million were outstanding at December 31, 2013.
ITEM 3.  LEGAL PROCEEDINGS
Other Proceedings
The Companies are parties to various lawsuits and regulatory proceedings in the ordinary course of their respective businesses.  For information regarding material lawsuits and proceedings, see Notes 5, 15 and 16 to the consolidated financial statements.  Such information is incorporated herein by reference.
ITEM 4.  MINE SAFETY DISCLOSURES
Not applicable.


23


PART II
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
GREAT PLAINS ENERGY
Great Plains Energy's common stock is listed on the New York Stock Exchange under the symbol "GXP". At February 25, 2014, Great Plains Energy's common stock was held by 18,170 shareholders of record. Information relating to market prices and cash dividends on Great Plains Energy's common stock is set forth in the following table.
 
Common Stock Price Range (a)
 
Common Stock
 
2013
 
2012
 
Dividends Declared
Quarter
High
 
Low
 
High
 
Low
 
2014
 
 
2013
 
2012
First
$
23.19

 
$
20.41

 
$
21.60

 
$
19.60

 
$
0.23

(b) 
 
$
0.2175

 
$
0.2125

Second
24.41

 
21.94

 
21.41

 
19.54

 
 
 
 
0.2175

 
0.2125

Third
24.60

 
21.49

 
22.48

 
21.26

 
 
 
 
0.2175

 
0.2125

Fourth
24.76

 
21.86

 
22.81

 
19.80

 
 
 
 
0.23

 
0.2175

(a)    Based on closing stock prices.
(b)    Declared February 11, 2014, and payable March 20, 2014, to shareholders of record as of February 27, 2014.
Dividend Restrictions
For information regarding dividend restrictions, see Note 13 to the consolidated financial statements.
Purchases of Equity Securities
Great Plains Energy had no purchases of its equity securities during the three months ended December 31, 2013.
KCP&L
KCP&L is a wholly owned subsidiary of Great Plains Energy, which holds the one share of issued and outstanding KCP&L common stock.
Dividend Restrictions
For information regarding dividend restrictions, see Note 13 to the consolidated financial statements.

24


ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31
 
2013
 
2012
 
2011
 
2010
 
2009
Great Plains Energy
 
(dollars in millions except per share amounts)
Operating revenues
 
$
2,446

 
$
2,310

 
$
2,318

 
$
2,256

 
$
1,965

Income from continuing operations (a)
 
$
250

 
$
200

 
$
174

 
$
212

 
$
152

Net income attributable to Great Plains Energy
 
$
250

 
$
200

 
$
174

 
$
212

 
$
150

Basic earnings per common
 
 
 
 
 
 
 
 
 
 
share from continuing operations
 
$
1.62

 
$
1.36

 
$
1.27

 
$
1.55

 
$
1.16

Basic earnings per common share
 
$
1.62

 
$
1.36

 
$
1.27

 
$
1.55

 
$
1.15

Diluted earnings per common
 
 
 
 
 
 
 
 
 
 
share from continuing operations
 
$
1.62

 
$
1.35

 
$
1.25

 
$
1.53

 
$
1.15

Diluted earnings per common share
 
$
1.62

 
$
1.35

 
$
1.25

 
$
1.53

 
$
1.14

Total assets at year end
 
$
9,795

 
$
9,647

 
$
9,118

 
$
8,818

 
$
8,483

Total redeemable preferred stock, mandatorily
 
 
 
 
 
 
 
 
 
 
redeemable preferred securities and long-
 
 
 
 
 
 
 
 
 
 
term debt (including current maturities)
 
$
3,517

 
$
3,020

 
$
3,544

 
$
3,428

 
$
3,214

Cash dividends per common share
 
$
0.8825

 
$
0.855

 
$
0.835

 
$
0.83

 
$
0.83

SEC ratio of earnings to fixed charges
 
2.75
 
2.31
 
2.03
 
2.28
 
1.81
 
 
 
 
 
 
 
 
 
 
 
KCP&L
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
1,671

 
$
1,580

 
$
1,558

 
$
1,517

 
$
1,318

Net income
 
$
169

 
$
142

 
$
136

 
$
163

 
$
129

Total assets at year end
 
$
6,839

 
$
6,704

 
$
6,292

 
$
6,026

 
$
5,702

Total redeemable preferred stock, mandatorily
 
 
 
 
 
 
 
 
 
 
redeemable preferred securities and long-
 
 
 
 
 
 
 
 
 
 
term debt (including current maturities)
 
$
2,312

 
$
1,902

 
$
1,915

 
$
1,780

 
$
1,780

SEC ratio of earnings to fixed charges
 
2.76
 
2.58
 
2.52
 
2.86
 
2.44
(a) 
This amount is before loss from discontinued operations, net of income taxes, of $1.5 million in 2009.
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GREAT PLAINS ENERGY INCORPORATED
EXECUTIVE SUMMARY
Description of Business
Great Plains Energy is a public utility holding company and does not own or operate any significant assets other than the stock of its subsidiaries.  Great Plains Energy's direct subsidiaries with operations or active subsidiaries are KCP&L, GMO and GPETHC.  
Great Plains Energy's sole reportable business segment is electric utility. Electric utility consists of KCP&L, a regulated utility, GMO's regulated utility operations, which include its Missouri Public Service and St. Joseph Light & Power divisions, and GMO Receivables Company.  Electric utility has approximately 6,600 MWs of generating capacity and engages in the generation, transmission, distribution and sale of electricity to approximately 830,800 customers in the states of Missouri and Kansas.  Electric utility's retail electricity rates are comparable to the national average of investor-owned utilities.

25


2013 Earnings Overview
Great Plains Energy's 2013 earnings available for common shareholders increased to $248.6 million or $1.62 per share from $198.3 million or $1.35 per share in 2012 driven by:
an $86.7 million increase in gross margin driven by new retail rates, an increase in weather-normalized retail demand and the impact from an unplanned outage at Wolf Creek in the first quarter of 2012, partially offset by unfavorable weather and increased purchased power and transmission expense;
a $2.4 million decrease in Wolf Creek operating and maintenance expenses primarily due to an unplanned outage in the first quarter of 2012, mostly offset by higher operating and maintenance expenses in 2013;
a $22.0 million increase from certain regulatory items included in operating and maintenance expenses including increased pension expense corresponding to the resetting of pension expense trackers with the effective date of new retail rates, costs for energy efficiency and demand side management programs under the Missouri Energy Efficiency Investment Act (MEEIA), and solar rebates provided to customers, all of which are included in retail rates;
a $15.1 million increase in general taxes driven by increased property taxes;
a $22.4 million decrease in interest expense primarily due to the repayment of GMO's $500.0 million 11.875% Senior Notes at maturity in July 2012, a lower interest rate on the refinanced long-term debt that was underlying Great Plains Energy's $287.5 million Equity Units, the repayment of Great Plains Energy's $250.0 million 2.75% Senior Notes at maturity in August 2013 and an increase in the debt component of AFUDC at KCP&L. These decreases were partially offset by increased interest expense due to KCP&L's issuance of $300.0 million 3.15% Senior Notes in March 2013 and GMO's issuance of $350.0 million of senior notes in August 2013; and
a $24.6 million increase in income tax expense driven primarily by increased pre-tax income and $4.5 million of income tax benefits related to the release of uncertain tax positions in 2012.
In addition, a higher number of shares outstanding due to the issuance of 17.1 million shares in connection with the June 2012 settlement of the purchase contracts underlying the Equity Units diluted earnings per share by $0.06.
Gross margin is a financial measure that is not calculated in accordance with Generally Accepted Accounting Principles (GAAP). See the explanation of gross margin and the reconciliation to GAAP operating revenues under Great Plains Energy's Results of Operations for further information.
For additional information regarding the change in earnings, refer to the Great Plains Energy Results of Operations and the Electric Utility Results of Operations sections within this MD&A.
Regulatory Proceedings
See Note 5 to the consolidated financial statements for information regarding regulatory proceedings.
Wolf Creek Refueling Outage
Wolf Creek's latest refueling outage began on February 4, 2013, and the unit returned to service on April 15, 2013. A mid-cycle maintenance outage is planned for the spring of 2014 with the next refueling outage planned to begin in the first quarter of 2015.
Transmission Investment Opportunities
GPETHC, a wholly owned subsidiary of Great Plains Energy, owns 13.5% of Transource with AEPTHC, a subsidiary of American Electric Power Company, Inc., owning the remaining 86.5%. Transource is focused on the development of competitive electric transmission projects.
In December 2013, FERC accepted the SPP's approval of the novation of KCP&L's and GMO's SPP-approved regional transmission projects to Transource Missouri, LLC (Transource Missouri), a wholly owned subsidiary of Transource. The projects consist of an approximately 30-mile, 345kV transmission line from KCP&L's and GMO's Iatan generating station to KCP&L's Nashua substation with estimated construction costs of $65 million and an

26


expected 2015 in-service date (Iatan-Nashua line) and the Missouri portion of an approximately 180-mile, 345kV transmission line from Sibley, Missouri to Nebraska City, Nebraska with estimated construction costs of $330 million for Transource Missouri's portion of the line and an expected 2017 in-service date (Sibley-Nebraska City line). In January 2014, KCP&L and GMO sold the related assets of these projects, at cost, to Transource Missouri. See Note 12 to the consolidated financial statements for information regarding the asset sale.
ENVIRONMENTAL MATTERS
See Note 15 to the consolidated financial statements for information regarding environmental matters.
RELATED PARTY TRANSACTIONS
See Note 18 to the consolidated financial statements for information regarding related party transactions.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or different estimates that could have been used could have a material impact on Great Plains Energy's results of operations and financial position. Management has identified the following accounting policies as critical to the understanding of Great Plains Energy's results of operations and financial position. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Great Plains Energy Board of Directors (Board).
Pensions
Great Plains Energy incurs significant costs in providing non-contributory defined pension benefits. The costs are measured using actuarial valuations that are dependent upon numerous factors derived from actual plan experience and assumptions of future plan experience.
Pension costs are impacted by actual employee demographics (including age, life expectancies, compensation levels and employment periods), earnings on plan assets, the level of contributions made to the plan, and plan amendments. In addition, pension costs are also affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the discount rates used in determining the projected benefit obligation and pension costs.
The assumed rate of return on plan assets was developed based on the weighted-average of long-term returns forecast for the expected portfolio mix of investments held by the plan. The assumed discount rate was selected based on the prevailing market rate of fixed income debt instruments with maturities matching the expected timing of the benefit obligation. These assumptions, updated annually at the measurement date, are based on management's best estimates and judgment; however, material changes may occur if these assumptions differ from actual events. See Note 8 to the consolidated financial statements for information regarding the assumptions used to determine benefit obligations and net costs.

27


The following table reflects the sensitivities associated with a 0.5% increase or a 0.5% decrease in key actuarial assumptions. Each sensitivity reflects the impact of the change based on a change in that assumption only.
 
 
 
Impact on
Impact on
 
 
 
Projected
2013
 
Change in
Benefit
Pension
Actuarial assumption
Assumption
Obligation
Expense
 
 
 
(millions)
Discount rate
0.5
%
increase
 
$
(66.0
)
 
 
$
(5.1
)
 
Rate of return on plan assets
0.5
%
increase
 

 
 
(3.5
)
 
Discount rate
0.5
%
decrease
 
70.8

 
 
5.2

 
Rate of return on plan assets
0.5
%
decrease
 

 
 
3.5

 
Pension expense for KCP&L and GMO is recorded in accordance with rate orders from the MPSC and KCC. The orders allow the difference between pension costs under GAAP and pension costs for ratemaking to be recorded as a regulatory asset or liability with future ratemaking recovery or refunds, as appropriate.
In 2013, Great Plains Energy's pension expense was $102.5 million under GAAP and $85.7 million for ratemaking. The impact on 2013 pension expense in the table above reflects the impact on GAAP pension costs. Under the Companies' rate agreements, any increase or decrease in GAAP pension expense would be deferred in a regulatory asset or liability for future ratemaking treatment. See Note 8 to the consolidated financial statements for additional information regarding the accounting for pensions.
Market conditions and interest rates significantly affect the future assets and liabilities of the plan. It is difficult to predict future pension costs, changes in pension liability and cash funding requirements due to the inherent uncertainty of market conditions.
Regulatory Assets and Liabilities
The Company has recorded assets and liabilities on its consolidated balance sheets resulting from the effects of the ratemaking process, which would not otherwise be recorded under GAAP. Regulatory assets represent incurred costs that are probable of recovery from future revenues. Regulatory liabilities represent future reductions in revenues or refunds to customers.
Management regularly assesses whether regulatory assets and liabilities are probable of future recovery or refund by considering factors such as decisions by the MPSC, KCC or FERC in electric utility's rate case filings; decisions in other regulatory proceedings, including decisions related to other companies that establish precedent on matters applicable to electric utility; and changes in laws and regulations. If recovery or refund of regulatory assets or liabilities is not approved by regulators or is no longer deemed probable, these regulatory assets or liabilities are recognized in the current period results of operations. Electric utility's continued ability to meet the criteria for recording regulatory assets and liabilities may be affected in the future by restructuring and deregulation in the electric industry or changes in accounting rules. In the event that the criteria no longer applied to all or a portion of electric utility's operations, the related regulatory assets and liabilities would be written off unless an appropriate regulatory recovery mechanism were provided. Additionally, these factors could result in an impairment on utility plant assets. See Note 5 to the consolidated financial statements for additional information.
Impairments of Assets, Intangible Assets and Goodwill
Long-lived assets and intangible assets subject to amortization are required to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed under GAAP.
Accounting rules require goodwill to be tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. The goodwill impairment test is a two step process. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. If the

28


carrying amount exceeds the fair value of the reporting unit, the second step of the test is performed, consisting of assignment of the reporting unit's fair value to its assets and liabilities to determine an implied fair value of goodwill, which is compared to the carrying amount of goodwill to determine the impairment loss, if any, to be recognized in the financial statements. Great Plains Energy's regulated electric utility operations are considered one reporting unit for assessment of impairment, as they are included within the same operating segment and have similar economic characteristics.
The annual impairment test for the $169.0 million of GMO acquisition goodwill was conducted on September 1, 2013. Fair value of the reporting unit exceeded the carrying amount, including goodwill; therefore, there was no impairment of goodwill.
The determination of fair value of the reporting unit consisted of two valuation techniques: an income approach consisting of a discounted cash flow analysis and a market approach consisting of a determination of reporting unit invested capital using market multiples derived from the historical revenue, EBITDA, net utility asset values and market prices of stock of peer companies. The results of the two techniques were evaluated and weighted to determine a point within the range that management considered representative of fair value for the reporting unit, which involves a significant amount of management judgment.
The discounted cash flow analysis is most significantly impacted by two assumptions: estimated future cash flows and the discount rate applied to those cash flows. Management determined the appropriate discount rate to be based on the reporting unit's weighted average cost of capital (WACC). The WACC takes into account both the return on equity authorized by the MPSC and KCC and after-tax cost of debt. Estimated future cash flows are based on Great Plains Energy's internal business plan, which assumes the occurrence of certain events in the future, such as the outcome of future rate filings, future approved rates of return on equity, anticipated earnings/returns related to future capital investments, continued recovery of cost of service and the renewal of certain contracts. Management also makes assumptions regarding the run rate of operations, maintenance and general and administrative costs based on the expected outcome of the aforementioned events. Should the actual outcome of some or all of these assumptions differ significantly from the current assumptions, revisions to current cash flow assumptions could cause the fair value of Great Plains Energy's reporting unit under the income approach to be significantly different in future periods and could result in a future impairment charge to goodwill.
The market approach analysis is most significantly impacted by management's selection of relevant peer companies as well as the determination of an appropriate control premium to be added to the calculated invested capital of the reporting unit, as control premiums associated with a controlling interest are not reflected in the quoted market price of a single share of stock. Management determined an appropriate control premium by using an average of control premiums for recent acquisitions in the industry. Changes in results of peer companies, selection of different peer companies and future acquisitions with significantly different control premiums could result in a significantly different fair value of Great Plains Energy's reporting unit.
Income Taxes
Income taxes are accounted for using the asset/liability approach. Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Deferred investment tax credits are amortized ratably over the life of the related property. Deferred tax assets are also recorded for net operating losses, capital losses and tax credit carryforwards. The Company is required to estimate the amount of taxes payable or refundable for the current year and the deferred tax liabilities and assets for future tax consequences of events reflected in the Company's consolidated financial statements or tax returns. This process requires management to make assessments regarding the timing and probability of the ultimate tax impact. The Company records valuation allowances on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized.
Additionally, the Company establishes reserves for uncertain tax positions based upon management's judgment regarding potential future challenges to those positions. The accounting estimates related to the liability for uncertain tax positions require management to make judgments regarding the sustainability of each uncertain tax

29


position based on its technical merits. If it is determined that it is more likely than not a tax position will be sustained based on its technical merits, the impact of the position is recorded in the Company's consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts, circumstances and information available. Management is also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to the unrecognized tax benefits will occur during the next twelve months. See Note 22 to the consolidated financial statements for additional information.
GREAT PLAINS ENERGY RESULTS OF OPERATIONS 
The following table summarizes Great Plains Energy's comparative results of operations.
 
 
2013
 
2012
 
2011
 
 
(millions)
Operating revenues
 
$
2,446.3

 
$
2,309.9

 
$
2,318.0

 
Fuel
 
(539.5
)
 
(539.5
)
 
(483.8
)
 
Purchased power
 
(125.9
)
 
(94.0
)
 
(203.4
)
 
Transmission
 
(53.2
)
 
(35.4
)
 
(30.2
)
 
Gross margin (a)
 
1,727.7

 
1,641.0

 
1,600.6

 
Other operating expenses
 
(868.8
)
 
(834.1
)
 
(835.0
)
 
Voluntary separation program
 

 
4.3

 
(12.7
)
 
Depreciation and amortization
 
(289.7
)
 
(272.3
)
 
(273.1
)
 
Operating income
 
569.2

 
538.9

 
479.8

 
Non-operating income and expenses
 
8.8

 
(13.2
)
 
(2.3
)
 
Interest charges
 
(198.4
)
 
(220.8
)
 
(218.4
)
 
Income tax expense
 
(129.2
)
 
(104.6
)
 
(84.8
)
 
Loss from equity investments
 
(0.2
)
 
(0.4
)
 
(0.1
)
 
Net income
 
250.2

 
199.9

 
174.2

 
Less: Net loss attributable to noncontrolling interest
 

 

 
0.2

 
Net income attributable to Great Plains Energy
 
250.2

 
199.9

 
174.4

 
Preferred dividends
 
(1.6
)
 
(1.6
)
 
(1.6
)
 
Earnings available for common shareholders
 
$
248.6

 
$
198.3

 
$
172.8

 
(a) 
Gross margin is a non-GAAP financial measure. See explanation of gross margin below.
2013 Compared to 2012
Great Plains Energy's 2013 earnings available for common shareholders increased to $248.6 million or $1.62 per share from $198.3 million or $1.35 per share in 2012.
Electric utility's net income increased $40.5 million in 2013 compared to 2012 driven by:
an $86.7 million increase in gross margin driven by:
an estimated $111 million increase primarily from new retail rates in Kansas effective January 1, 2013, and Missouri effective January 26, 2013;
an estimated $42 million increase driven by an increase in weather-normalized retail demand;
an estimated $4 million increase from the impact of an unplanned outage at Wolf Creek in the first quarter of 2012;
an estimated $47 million decrease due to unfavorable weather driven by a 27% decrease in cooling degree days partially offset by the impact of favorable weather during the first and fourth quarters of 2013; and
an estimated $23 million decrease primarily due to increased purchased power and transmission expense;

30


a $2.4 million decrease in Wolf Creek operating and maintenance expenses primarily due to an unplanned outage in the first quarter of 2012, mostly offset by higher operating and maintenance expenses in 2013;
a $22.0 million increase from certain regulatory items included in operating and maintenance expenses including increased pension expense corresponding to the resetting of pension expense trackers with the effective date of new retail rates, costs for energy efficiency and demand side management programs under MEEIA, and solar rebates provided to customers, all of which are included in retail rates;
a $15.3 million increase in general taxes driven by increased property taxes;
a $6.8 million decrease in interest expense primarily due to:
a $13.4 million decrease from the repayment of GMO's $500.0 million 11.875% Senior Notes at maturity in July 2012;
a $6.5 million increase in the debt component of AFUDC resulting from a higher average construction work in progress balance due to environmental upgrades at KCP&L's La Cygne Station;
a $7.5 million increase due to KCP&L's issuance of $300.0 million 3.15% Senior Notes in March 2013;
a $5.4 million increase resulting from GMO's issuance of $350.0 million of senior notes in August 2013; and
a $3.9 million increase relating to intercompany loans from Great Plains Energy to GMO; and
a $13.4 million increase in income tax expense driven primarily by increased pre-tax income.
Great Plains Energy's corporate and other activities loss decreased $9.8 million in 2013 compared to 2012 driven by:
an $8.1 million decrease in after-tax interest expense as a result of a lower interest rate on the refinanced long-term debt that was underlying Great Plains Energy's $287.5 million Equity Units and the repayment of Great Plains Energy's $250.0 million 2.75% Senior Notes at maturity in August 2013;
a $2.3 million increase in after-tax intercompany interest income relating to intercompany loans from Great Plains Energy to GMO; and
2012 included:
a $1.8 million after-tax loss on the sale of real estate property; and
$4.5 million of income tax benefits from the release of uncertain tax positions related to former GMO non-regulated operations.
2012 Compared to 2011
Great Plains Energy's 2012 earnings available for common shareholders increased to $198.3 million or $1.35 per share from $172.8 million or $1.25 per share in 2011.
Electric utility's net income increased $16.7 million in 2012 compared to 2011 driven by:
new retail rates in Missouri effective May 4, 2011, for KCP&L and June 25, 2011, for GMO;
favorable weather with a 15% increase in cooling degree days partially offset by the impact of unfavorable weather during the first quarter of 2012; and
2011 included:
the impact from flooding along the Missouri River, which decreased gross margin by an estimated $16 million due to coal conservation and increased other operating expenses $3.3 million;
an estimated $11 million decrease in gross margin from an extended refueling outage at Wolf Creek;

31


$12.7 million of expense relating to a voluntary separation program; and
a $2.3 million loss relating to the impact of disallowed construction costs for the Iatan No. 1 environmental project and Iatan No. 2 and $3.9 million of expenses related to other accounting effects of the KCP&L and GMO 2011 MPSC rate orders.
These increases were partially offset by:
a decrease in weather-normalized retail demand;
decreased gross margin from lower KCP&L Missouri wholesale sales margin along with increased fuel and transmission expense, partially offset by favorable purchased power expense at KCP&L in Missouri, where there is no fuel recovery mechanism;
an estimated $17 million impact at Wolf Creek due to an unplanned outage in the first quarter of 2012, increased amortization from the 2011 extended refueling outage and increased other operating expenses; and
a $20.4 million increase in interest expense primarily due to the deferral to a regulatory asset of $22.1 million of Iatan Nos. 1, 2 and common facilities construction accounting carrying costs during 2011.
Great Plains Energy's corporate and other activities loss decreased $8.8 million in 2012 compared to 2011 primarily due to a $4.3 million decrease in after-tax interest expense as a result of a lower interest rate on the refinanced long-term debt that was underlying Great Plains Energy's $287.5 million Equity Units; a $1.6 million decrease in after-tax interest expense related to the release of uncertain tax positions; and expenses of $2.3 million included in 2011 related to the resolution of certain general tax related matters. These decreases were partially offset by a $1.8 million after-tax loss on the sale of real estate property in 2012 and a $2.2 million tax benefit from the reversal of tax valuation allowances in 2011.
Gross Margin
Gross margin is a financial measure that is not calculated in accordance with GAAP.  Gross margin, as used by Great Plains Energy and KCP&L, is defined as operating revenues less fuel, purchased power and transmission. Expenses for fuel, purchased power and transmission, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms, except for KCP&L's Missouri retail operations.  As a result, operating revenues increase or decrease in relation to a significant portion of these expenses.  Management believes that gross margin provides a more meaningful basis for evaluating electric utility's operations across periods than operating revenues because gross margin excludes the revenue effect of fluctuations in these expenses.  Gross margin is used internally to measure performance against budget and in reports for management and the Board.  The Companies' definition of gross margin may differ from similar terms used by other companies.

32


ELECTRIC UTILITY RESULTS OF OPERATIONS
The following table summarizes the electric utility segment results of operations.
 
 
2013
 
2012
 
2011
 
 
(millions)
Operating revenues
 
$
2,446.3

 
$
2,309.9

 
$
2,318.0

 
Fuel
 
(539.5
)
 
(539.5
)
 
(483.8
)
 
Purchased power
 
(125.9
)
 
(94.0
)
 
(203.4
)
 
Transmission
 
(53.2
)
 
(35.4
)
 
(30.2
)
 
Gross margin (a)
 
1,727.7

 
1,641.0

 
1,600.6

 
Other operating expenses
 
(865.6
)
 
(825.9
)
 
(828.7
)
 
Voluntary separation program
 

 
4.3

 
(12.7
)
 
Depreciation and amortization
 
(289.7
)
 
(272.3
)
 
(273.1
)
 
Operating income
 
572.4

 
547.1

 
486.1

 
Non-operating income and expenses
 
10.6

 
(11.2
)
 

 
Interest charges
 
(190.5
)
 
(197.3
)
 
(176.9
)
 
Income tax expense
 
(135.4
)
 
(122.0
)
 
(109.3
)
 
Net income
 
$
257.1

 
$
216.6

 
$
199.9

 
(a) 
Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.
Electric Utility Gross Margin and MWh Sales
The following tables summarize electric utility's gross margin and MWhs sold.
 
 
 
%
 
 
 
%
 
 
 
Gross Margin (a)
2013
 
Change
 
2012
 
Change
 
2011
 
Retail revenues
(millions)
 
Residential
$
1,008.4

 
4

 
$
965.5

 
1

 
$
955.8

 
Commercial
966.7

 
7

 
907.6

 
3

 
878.8

 
Industrial
213.0

 
8

 
197.8

 
1

 
196.7

 
Other retail revenues
20.5

 
3

 
19.9

 
3

 
19.5

 
Kansas property tax surcharge
(1.3
)
 
N/M

 
4.8

 
32

 
3.7

 
Provision for rate refund

 
N/M

 
0.1

 
N/M

 
(2.9
)
 
Fuel recovery mechanism
21.9

 
23

 
17.8

 
(65
)
 
50.6

 
Total retail
2,229.2

 
5

 
2,113.5

 
1

 
2,102.2


Wholesale revenues
168.8

 
10

 
152.9

 
(11
)
 
172.4

 
Other revenues
48.3

 
11

 
43.5

 

 
43.4

 
Operating revenues
2,446.3

 
6

 
2,309.9

 

 
2,318.0


Fuel
(539.5
)
 

 
(539.5
)
 
12

 
(483.8
)
 
Purchased power
(125.9
)
 
34

 
(94.0
)
 
(54
)
 
(203.4
)
 
Transmission
(53.2
)
 
50

 
(35.4
)
 
17

 
(30.2
)
 
Gross margin
$
1,727.7

 
5

 
$
1,641.0

 
3

 
$
1,600.6


(a) 
Gross margin is a non-GAAP financial measure. See explanation of gross margin under Great Plains Energy's Results of Operations.

33


 
 
 
%
 
 
 
%
 
 
 
MWh Sales
2013
 
Change
 
2012
 
Change
 
2011
 
Retail MWh sales
(thousands)
 
Residential
8,999

 
1

 
8,930

 
(4
)
 
9,285