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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended March 31, 2005

or

For the Transition Period From              to             

Indicate by check mark whether each 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 and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether each registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

As of April 30, 2005, there were 77,543,200 shares of Duquesne Light Holdings, Inc.’s single class of common stock outstanding.

As of April 30, 2005, there were 10 shares of Duquesne Light Company’s single class of common stock outstanding, all held by Duquesne Light Holdings, Inc.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Duquesne Light Holdings, Inc.

Condensed Consolidated Statements of Income (Unaudited)

See notes to condensed consolidated financial statements.

2

Duquesne Light Holdings, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

See notes to condensed consolidated financial statements.

3

Duquesne Light Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

See notes to condensed consolidated financial statements.

4

Duquesne Light Company

Condensed Consolidated Statements of Income (Unaudited)

See notes to condensed consolidated financial statements.

5

Duquesne Light Company

Condensed Consolidated Balance Sheets (Unaudited)

See notes to condensed consolidated financial statements.

6

Duquesne Light Company

Condensed Consolidated Statements of Cash Flows (Unaudited)

See notes to condensed consolidated financial statements.

Duquesne Light Company

Consolidated Statements of Comprehensive Income (Unaudited)

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following Notes present information on both Duquesne Light Holdings, Inc. (Holdings) and Duquesne Light Company (Duquesne Light). Information on Holdings and its subsidiaries (not including Duquesne Light and its subsidiaries) shall not be deemed to be included as part of Duquesne Light’s Notes.

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References in the Notes to “we,” “us” and “our” are to Holdings and its subsidiaries, collectively.

1. ACCOUNTING POLICIES

Consolidation

Holdings is an energy services holding company. Our subsidiaries include those discussed below.

The consolidated financial statements of Holdings and Duquesne Light include their accounts and their wholly and majority owned subsidiaries. The equity method of accounting is used for 20% to 50% interests in other companies. Under the equity method, original investments are recorded at cost and adjusted by our share of undistributed earnings or losses of these companies. All material intercompany balances and transactions have been eliminated in the consolidation.

In addition, effective March 31, 2004, we consolidate variable interest entities for which we are the primary beneficiary in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 46, “Consolidation of Variable Interest Entities” (revised December 2003) (FIN 46), regardless of the ownership percentage held by us.

Continuing Operations

Duquesne Light, our largest subsidiary, is an electric utility engaged in the supply (through its provider-of-last-resort service (POLR)), transmission and distribution of electric energy.

Duquesne Power, L.P., an unregulated subsidiary of Duquesne Light, maintains a portfolio of energy commodity contracts to provide full-requirements energy supply contracts for both (i) Duquesne Light’s residential and small commercial POLR customers and (ii) Duquesne Light Energy, LLC’s large commercial and industrial customers. These energy commodity contracts are with unrelated parties and include payment guarantees from Holdings.

Duquesne Light Energy, LLC (DLE) is an unregulated, competitive, retail electric generation supplier that offers customized solutions tailored to meet its customers’ specific electricity needs. DLE’s primary focus is on the large commercial and industrial customer market segment in Duquesne Light’s service territory.

Duquesne Energy Solutions, LLC is an energy facilities management company that provides energy outsourcing solutions including development, operation and maintenance of energy and synthetic fuel facilities.

DQE Financial Corp. owns and operates landfill gas collection and processing systems, and is an investment and portfolio management organization focused on structured finance and alternative energy investments. DQE Financial also owns Waste Energy Technology, LLC (WET), a leading landfill gas engineering, design, construction and operations firm.

DQE Communications, LLC owns, operates and maintains a high-speed, fiber optic based network, and leases dark fiber from the network to commercial, industrial and academic customers.

DQE Capital Corporation provides financing to Holdings for use with its affiliates.

Discontinued Operations

During 2003, AquaSource, Inc. (formerly our water resource management subsidiary) completed the sale of its assets, pursuant to agreements entered into in 2002. We sold the propane distribution business of our subsidiary, Pro Am, Inc. in December 2002. (See Note 8.)

Basis of Accounting

Holdings and Duquesne Light are subject to the accounting and reporting requirements of the Securities and Exchange Commission (SEC). Duquesne Light’s electricity delivery business is also subject to regulation by the Pennsylvania Public Utility Commission (PUC) and the Federal Energy Regulatory Commission (FERC) with respect to rates for delivery of electric power, accounting and other matters.

The electricity delivery business segment meets the criteria of Statement of Financial Accounting Standards (SFAS) No. 71, “Accounting for the Effects of Certain Types of Regulation,” and accordingly reflects regulatory assets and liabilities consistent with cost-based ratemaking regulations. The regulatory assets represent probable future revenue, because provisions for these costs are currently included, or are expected to be included, in charges to electric utility customers through the ratemaking process. The majority of these assets are currently being recovered over a period of approximately 26 years and are not earning a rate of return.

Pursuant to the PUC’s final restructuring order, generation-related transition costs are being recovered through a competitive transition charge (CTC) collected in connection with providing transmission and distribution services.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions with respect to values and conditions that affect the

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reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period also may be affected by these estimates and assumptions. Management evaluates these estimates on an ongoing basis, using historical experience and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from these estimates.

The interim financial information for the three month periods ended March 31, 2005 and 2004 is unaudited and has been prepared on the same basis as the audited financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim information. This information does not include all footnotes which would be required for complete annual financial statements in accordance with accounting principles generally accepted in the United States of America.

These statements should be read with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2004 filed with the SEC. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of the results that may be expected for the full year.

Recent Accounting Pronouncements

Share-Based Payments

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment (revised December 2004),” which will eliminate the use of Accounting Principles Board No. 25. SFAS 123R requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. This standard is effective at the beginning of the first fiscal year that begins after June 15, 2005. We are currently evaluating the impact of the adoption of this standard on our financial statements.

In March 2005, the FASB issued Financial Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No. 143.” This clarifies that the term conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity. This interpretation also states that the fair value of a liability for the conditional asset obligation should be recognized when incurred. This interpretation is effective no later than the end of the fiscal year ending after December 15, 2005. We are currently evaluating the impact of the adoption of this standard on our financial statements.

Earnings Per Share

Basic earnings per share are computed on the basis of the weighted average number of common shares outstanding. Diluted earnings per share are computed on the basis of the weighted average number of common shares outstanding, plus the effect of the outstanding Employee Stock Ownership Plan shares, Holdings preferred stock, stock options and performance share awards. The treasury stock method is used in computing the dilutive effect of stock options. This method assumes any proceeds obtained upon the exercise of options would be used to purchase common stock at the average market price during the period. The following table presents the numerators and denominators used in computing the diluted earnings per share from continuing operations for Holdings for the three months ended March 31, 2005 and 2004.

Diluted Earnings Per Share for the Three Months Ended March 31,

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2. RATE MATTERS

Effective January 1, 2005, Duquesne Light joined PJM Interconnection (PJM), becoming (along with other electric generation suppliers) a load-serving entity within PJM. In addition, POLR III became effective on that date.

As previously reported, the FERC has issued a series of orders eliminating the regional through and out rates (RTOR) for certain transmission services between the Midwest Independent System Operator (MISO) and PJM effective December 1, 2004. A transitional pricing mechanism called the seams elimination charge adjustment (SECA) has been put in place through April 2006 in order to compensate transmission owners for the estimated revenue lost as a result of the elimination of the RTOR. Total net SECA charges for the Duquesne Light zone are expected to be approximately $35 million. Duquesne Light (together with other PJM participants) has filed with the FERC a proposed allocation of SECA charges among load-serving entities within the Duquesne Light zone. Under that proposal, Duquesne Light would be allocated approximately $11 million of the charges from MISO transmission owners, and receive approximately $1 million of compensation from PJM transmission owners. The other load-serving entities in the Duquesne Light zone would be allocated the remainder of such charges, with DLE’s allocation of combined MISO and PJM charges expected to be approximately $1 million. We continue to pursue all avenues available to us to eliminate or reduce our SECA obligations, including requiring reimbursement from others who will benefit from the elimination of the RTOR, such as suppliers and retail customers.

As of March 31, 2005, net SECA charges totaling $2.8 million have been recorded by Duquesne Light, and are reflected on the condensed consolidated balance sheets in regulatory assets and accrued liabilities.

3. RECEIVABLES

The components of receivables for the periods indicated are as follows:

Holdings

Duquesne Light

4. DERIVATIVE INSTRUMENTS

Energy Contracts

Beginning January 1, 2005, our supply business is responsible for providing all of the energy requirements for both (i) residential and small commercial POLR customers and (ii) any customers with whom DLE contracts. To meet this obligation, we entered into energy commodity contracts with multiple investment-grade suppliers for a significant portion of our expected customer requirements. These purchase contracts are designed solely to provide for the delivery of energy as needed to supply customer usage. A Board-approved risk management policy permits transactions for the prudent management of customer energy requirements, and precludes any speculative transactions.

The economic value of these contracts will be determined by the difference in values between the fixed revenue level we receive from each of the ultimate retail customers and the fully loaded cost of the energy supplied to these customers.

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The accounting for these contracts is primarily governed by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted. Under the terms of the contracts, the majority of the energy purchases are delivered to the Duquesne Light zone as defined by PJM. These purchases are reflected as purchased power expense in the condensed consolidated statements of income at their wholesale price upon delivery to us. At March 31, 2005 the remaining notional value of these contracts was $479.3 million, including $345.9 million for the contracts that mature in 2006 and 2007.

We also entered into certain purchase contracts that are for delivery to points other than the Duquesne Light zone within PJM. Even though these purchases are for the sole purpose of serving our customers in the Duquesne Light zone, because they aren’t settled at the Duquesne Light zone they are accounted for on a mark-to-market basis. The remaining notional amount of these contracts at March 31, 2005 is $204.2 million, including $148.4 million for the contracts maturing in 2006 and 2007.

During the first quarter of 2005, we entered into sales contracts maturing in 2006 and 2007 that are accounted for on a mark-to-market basis. The notional amount of these sales contracts was $156.4 million at March 31, 2005. These contracts were entered into solely for the purpose of offsetting volatility associated with the mark-to-market accounting for the purchase contracts maturing in 2006 and 2007, as described above. We record the revenue associated with our mark-to-market contracts on a net basis in purchased power expense in our condensed consolidated statements of income.

The following table summarizes the derivative assets and liabilities for the energy contracts included in the condensed consolidated balance sheets for both Holdings and Duquesne Light:

The change in the net derivative assets of $14.2 million for the quarter ended March 31, 2005, has been recorded in purchased power expense in the condensed consolidated statements of income for both Holdings and Duquesne Light.

Interest Rate Lock

Our financing plan for 2005 included a $100 million senior unsecured debt issuance in the first quarter. On February 9, 2005, we entered into an interest-rate lock agreement to hedge exposure to interest rate fluctuations for this planned debt offering. The interest-rate lock was designated as a cash flow hedge under SFAS No. 133. Changes in our cash requirements resulted in the postponement of the debt offering. On March 30, 2005, we unwound the interest-rate lock agreement, resulting in a $4.0 million pre-tax gain that was recorded in other income on our condensed consolidated statements of income.

5. DISPOSITIONS

In January 2005, DQE Financial sold its investment in a natural gas operating partnership for $12.7 million and recognized an after-tax gain of $4.6 million.

In the first quarter of 2005, DQE Financial received $1.1 million in additional sales proceeds related to the sale of 50% of its investment in a synthetic fuel partnership in the fourth quarter of 2004. Additional sale proceeds may be received for the remainder of the tax credit period through December 2007.

6. NOTES PAYABLE AND LONG-TERM DEBT

As of March 31, 2005, $5 million was outstanding under the Holdings revolving credit facility.

In the first quarter of 2005, Duquesne Power entered into a demand note with Holdings for general working capital purposes. The note bears a market rate of interest. Under the terms of the note, Duquesne Power can have outstanding up to $60 million from Holdings. As of March 31, 2005, Duquesne Power had $38.6 million outstanding under the demand note.

As of March 31, 2004, $90 million was outstanding under the Duquesne Light revolving credit facility. These borrowings had been made primarily to retire the $75 million of Monthly Income Preferred Securities (MIPS).

In the first quarter of 2004, Duquesne Capital redeemed $75 million of its MIPS. Pursuant to the terms of the MIPS, Duquesne Light simultaneously redeemed $75.8 million of subordinated debentures.

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On February 18, 2004, as part of an amended and restated concession agreement with the City of New York, GSF Energy, L.L.C. (GSF), a DQE Financial subsidiary, paid $4.5 million to the City and was released from all financial obligations under the prior concession agreement, including the $21.4 million note payable to the City. As a direct result of the settlement, we are recognizing approximately $16 million in pre-tax income ratably over the new contract term, scheduled to end June 30, 2006.

7. COMMITMENTS AND CONTINGENCIES

Guarantees

As part of DQE Financial’s investment portfolio in seven affordable housing funds, we have received fees in exchange for guaranteeing a minimum defined yield to unrelated investors. We entered into these transactions between 1995 and 1999 because of the attractive risk/reward characteristics available to guarantors. The guarantee period will expire by 2015. In the event the underlying affordable housing properties do not generate the necessary minimum yield during the guarantee period, we will make cash payments necessary to achieve the minimum yield. The original amount guaranteed was approximately $250 million, and has declined as investors have earned the guaranteed returns. We estimate the maximum potential amount of undiscounted future payments that we could be required to make under the guarantees if the investors earn no future returns was $45.1 million at March 31, 2005.

In connection with DQE Energy Services’ 2000 sale, through a subsidiary, of its synthetic fuel facilities, we agreed to guarantee the subsidiary’s obligation under the sales agreement to indemnify the purchaser against breach of warranties, representations or covenants. The guarantee generally extends up to six years or otherwise as stipulated under the statute of limitations, based on the expiration of the underlying warranty, representation, or covenant. We have determined our exposure to be limited, as both legal and factual representations and warranties have been primarily limited to matters within the control and knowledge of our subsidiary. As such, no liability has been recorded on the statement of financial position.

In addition, Holdings has backed certain limited obligations during a long-term contract held by a subsidiary with a $1.5 million payment guarantee that has not been recorded as a liability on the condensed consolidated balance sheets. We do not believe these guarantees will have any material impact on our results of operations, financial position or cash flows.

Holdings has guaranteed portions of the obligations of Duquesne Power under its energy commodity contracts. The notional value of the contracts (and consequently the guarantee amounts) changes as additional energy commodities are bought or sold, and as Duquesne Power pays for its energy commodity deliveries. As of March 31, 2005, the maximum amount of Holdings’ payment guarantee amount totals $556.4 million, or 78.2%, of the total remaining notional value of the purchase and capacity obligations under these contracts. In general, if Duquesne Power is required to make a payment under these contracts and fails to do so, Holdings would be required to make such payment. The guarantees were provided in order to use Holdings’ stronger credit profile to obtain better pricing and contract terms for Duquesne Power and no guarantee amount has been recorded as a liability on the condensed consolidated balance sheets. In addition, Holdings posts mark-to-market collateral on behalf of Duquesne Power as needed under the contracts. At March 31, 2005, no collateral was outstanding.

In conjunction with certain transactions, primarily divestitures, we provide routine indemnifications (e.g., retention of previously existing environmental, tax and employee liabilities) whose terms range in duration and often are not explicitly defined. Where appropriate, an obligation for such indemnifications is recorded as a liability. Because the obligated amounts of these types of indemnifications often are not explicitly stated, the overall maximum amount of the obligation under such indemnifications cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, historically we have not made significant payments for these indemnifications.

Income Taxes

The Internal Revenue Service (IRS) has audited all federal corporate tax returns for the years through 1997 and these years are closed. As a result of this audit, the balance, including interest due to the IRS, of $51.3 million and $50.9 million as of March 31, 2005 and December 31, 2004, is included in other current liabilities on our condensed consolidated balance sheets.

The IRS is currently auditing the 1998 through 2002 tax years. During that period, a subsidiary of Holdings constructed and operated six synthetic fuel plants, which were subsequently sold to an unrelated

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party. Duquesne Energy Solutions currently operates these plants. At this time, the IRS has made no determinations regarding these plants. Holdings claimed approximately $10 million of Section 29 tax credits prior to their sale.

The Pennsylvania Department of Revenue has issued assessments of additional tax for 1999 through 2002 primarily to include income of a Duquesne Light out of state subsidiary corporation in Pennsylvania taxable income. If, as expected, the Department asserts the same positions for 2003 and 2004, Duquesne Light’s total exposure for all years, without interest or penalty, could approximate $96 million (net of associated federal benefit). Ultimately, Duquesne Light expects all years involved to be appealed to and decided at the Pennsylvania Commonwealth Court.

It is not possible to predict if, when or to what extent any state income tax adjustments ultimately proposed for the period 1999 through 2004 will be sustained. Duquesne Light does not believe that the ultimate resolution of its state tax issue for the years 1999 through 2004 will have a material adverse effect on its financial position or results of operation. However, the resolution, depending on the extent and timing thereof, could have a material adverse effect on cash flows for the period in which they are paid.

In connection with the above examinations, both Holdings and Duquesne Light have established tax reserves, which are included primarily in other non-current liabilities on the condensed consolidated balance sheets. We believe these reserves are adequate in relation to the above matters. We regularly assess the likelihood of additional assessments resulting from these and subsequent year’s examinations. Once established, reserves are adjusted only when there is more information available or when an event occurs that necessitates a change to the reserves.

Legal Proceedings

Shareholder Class Action. In April 2005, we agreed in principle to settle all claims of the class and sub-class. The proposed settlement is contingent on execution of a definitive settlement agreement and court approval. We expect the settlement to be covered in full by our insurance.

Section 29 Tax Credits and Synthetic Fuel

Section 29 of the Internal Revenue Code provides tax credits through 2007 for the production and sale of non-conventional fuels, including solid synthetic fuels and landfill gas. Holdings earns Section 29 tax credits from DQE Financial’s landfill gas operations and an investment in a synthetic fuel partnership. Duquesne Energy Solutions operates synthetic fuel facilities for a single customer, earning fees based on production.

Section 29 tax credits are subject to a phase-out provision that could reduce tax credits as the average annual wellhead price per barrel of domestic crude oil increases into an inflation-adjusted phase-out range. For 2004, the tax credit would have begun to phase-out if the annual average wellhead price per barrel of domestic crude oil exceeded $51.35 per barrel and would have been completely phased out if the annual average wellhead price per barrel of domestic crude oil exceeded $64.47 per barrel. The average wellhead price was $36.75 for 2004. The 2005 phase-out range will be calculated using inflation rates published in 2006 by the IRS. We cannot predict the level of domestic crude oil prices for 2005, nor whether a phase-out of the credit is likely to occur.

During the first quarter of 2005, we recorded $5.0 million of Section 29 tax credits.

Discontinued Operations

As part of the sale of AquaSource, we retained certain obligations related to the business that was sold to Aqua America, Inc., including responsibility for certain existing litigation matters as well as a 10-year indemnity for certain pre-closing environmental claims. We purchased an environmental liability policy to mitigate this indemnity. We also had a maximum three-year indemnity obligation for certain other pre-closing liabilities that was limited by a $15 million indemnity cap. We have notified Aqua America that with the passage of the first anniversary of the closing of the transaction, and since the claims made by them under the indemnity provision during the first year did not reach the required dollar threshold, the indemnity cap is reduced to $7.5 million and the indemnity period will end on July 31, 2005 (the second anniversary of closing).

8. DISCONTINUED OPERATIONS

Pursuant to agreements entered into in 2002 to sell the majority of our investment in AquaSource and our investment in Pro Am, as well as our subsequent sale of the remaining net assets of AquaSource, these subsidiaries have been reflected as discontinued operations in the condensed consolidated financial statements.

The $3.3 million promissory note, due April 1, 2005, from former members of AquaSource management from the sale of AquaSource’s water

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and wastewater utility construction business was paid in full in January 2005 when the corresponding value of outstanding shares of Holdings common stock were surrendered by these individuals.

In March 2005, we received $0.9 million in cash as final settlement on the sale of Pro Am.

The following table summarizes income statement data from discontinued operations:

9. PENSION AND POSTRETIREMENT BENEFITS

The following table summarizes the components of net periodic pension benefit cost for the three months ended March 31:

In January 2005, Duquesne Light met its obligation, pursuant to the January 2001 PUC Order regarding Duquesne Light’s final generation asset sale proceeds accounting, by contributing $32.1 million to the pension plans. As of March 31, 2005, we do not anticipate being required to contribute any additional amounts to fund the pension plan in 2005.

The following table summarizes the components of net periodic postretirement benefit cost for the three months ended March 31: