UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q
              (X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the Quarter Ended March 31, 2000

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

                      For the Transition Period from _____ to _____

Commission             Registrant, State of Incorporation,  I.R.S. Employer
File Number            Address and Telephone Number         Identification No.
-----------            ----------------------------         ------------------
1-1443                 Central and South West Corporation   51-0007707
                       (A Delaware Corporation)
                       1616 Woodall Rodgers Freeway
                       Dallas, Texas 75202-1234
                       (214) 777-1000

0-346                  Central Power and Light Company      74-0550600
                       (A Texas Corporation)
                       539 North Carancahua Street
                       Corpus Christi, Texas 78401-2802
                       (361) 881-5300

0-343                  Public Service Company of Oklahoma   73-0410895
                       (An Oklahoma Corporation)
                       212 East 6th Street
                       Tulsa, Oklahoma 74119-1212
                       (918) 599-2000

1-3146                 Southwestern Electric Power Company  72-0323455
                       (A Delaware Corporation)
                       428 Travis Street
                       Shreveport, Louisiana 71156-0001
                       (318) 673-3000

0-340                  West Texas Utilities Company         75-0646790
                       (A Texas Corporation)
                       301 Cypress Street
                       Abilene, Texas 79601-5820
                       (915) 674-7000

      Indicate by check mark whether the  Registrants (1) have 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
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes X No__

Common Stock Outstanding at May 11, 2000                       Shares
  Central and South West Corporation                          212,652,493
  Central Power and Light Company                               6,755,535
  Public Service Company of Oklahoma                            9,013,000
  Southwestern Electric Power Company                           7,536,640
  West Texas Utilities Company                                  5,488,560

      This  Combined  Form 10-Q is  separately  filed by Central  and South West
Corporation,  Central  Power  and  Light  Company,  Public  Service  Company  of
Oklahoma,  Southwestern Electric Power Company and West Texas Utilities Company.
Information  contained herein relating to any individual  Registrant is filed by
such Registrant on its own behalf. Each Registrant makes no representation as to
information relating to the other Registrants.


<PAGE>




           CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES

               TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q
                                 MARCH 31, 2000



GLOSSARY OF TERMS..............................................................3


FORWARD-LOOKING INFORMATION....................................................5


PART I. FINANCIAL INFORMATION..................................................6


  ITEM 1. FINANCIAL STATEMENTS.................................................6
    CENTRAL AND SOUTH WEST CORPORATION.........................................6
    CENTRAL POWER AND LIGHT COMPANY...........................................14
    PUBLIC SERVICE COMPANY OF OKLAHOMA........................................20
    SOUTHWESTERN ELECTRIC POWER COMPANY.......................................26
    WEST TEXAS UTILITIES COMPANY..............................................33
    NOTES TO FINANCIAL STATEMENTS.............................................40

  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS.......................................................56

  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........69

PART II - OTHER INFORMATION...................................................71


  ITEM 1. LEGAL PROCEEDINGS...................................................71

  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................71

  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................71

SIGNATURES....................................................................73






                                       2


<PAGE>


GLOSSARY OF TERMS
The  following  abbreviations  or  acronyms  used in this Form 10-Q are  defined
below:

Abbreviation or Acronym Definition
AEP.....................American Electric Power Company, Inc.
AEP Merger .............Proposed Merger between AEP and CSW where CSW would
                        become a wholly owned subsidiary of AEP
Bankruptcy Code.........Title 11 Of The United States Code, as amended
CLECO ..................Central Louisiana Electric Company, Inc.
CPL ....................Central Power and Light Company, Corpus Christi, Texas
CSW ....................Central and South West Corporation, Dallas, Texas
CSW Energy .............CSW Energy, Inc., Dallas, Texas
CSW International ......CSW International, Inc., Dallas, Texas
CSW Services ...........Central and South West Services, Inc., Dallas, Texas and
                        Tulsa, Oklahoma
CSW System .............CSW and its subsidiaries
DGEGS ..................Director General of Electricity and Gas Supply
DHMV ...................Dolet Hills Mining Venture
Diversified Electric ...CSW Energy and CSW International
ECOM ...................Excess cost over market
EITF....................Emerging Issues Task Force
EITF 97-4...............Deregulation of the Pricing of Electricity - Issues
                        Related to the Application of SFAS Nos. 71 and 101
EPA ....................United States Environmental Protection Agency
EPS ....................Earnings per share of common stock
ERCOT ..................Electric Reliability Council of Texas
ESPS....................Electric Supply Pension Scheme
Exchange Act ...........Securities Exchange Act of 1934, as amended
EWG ....................Exempt Wholesale Generator
FCC.....................Federal Communications Commission
FERC ...................Federal Energy Regulatory Commission
FMB.....................First Mortgage Bond
FUCO ...................Foreign utility company as defined by the Holding
                        Company Act
Holding Company Act ....Public Utility Holding Company Act of 1935, as amended
IBEW ...................International Brotherhood of Electrical Workers
KWH ....................Kilowatt-hour
LIBOR...................London Inter-Bank Overnight Rate
LIFO ...................Last-in first-out (inventory accounting method)
MD&A ...................Management's Discussion and Analysis of Financial
                        Condition and Results of Operations
MGP ....................Manufactured gas plant or coal gasification plant
MMbtu ..................Million British Thermal Unit
MW .....................Megawatt
MWH ....................Megawatt-hour
National Grid ..........National Grid Group plc
NRC ....................Nuclear Regulatory Commission
OFGEM...................Office of Gas and Electricity Markets
PCB ....................Polychlorinated biphenyl
PSO ....................Public Service Company of Oklahoma, Tulsa, Oklahoma
Registrant(s) ..........CSW, CPL, PSO, SWEPCO and WTU
SEC ....................United States Securities and Exchange Commission
SEEBOARD ...............SEEBOARD Group plc, Crawley, West Sussex, United Kingdom
SEEBOARD U.S.A..........CSW's investment in SEEBOARD consolidated and converted
                        to U.S. Generally Accepted Accounting Principles
SFAS....................Statement of Financial Accounting Standards
SFAS No. 34.............Capitalization of Interest Cost
SFAS No. 52 ............Foreign Currency Translation
SFAS No. 71 ............Accounting for the Effects of Certain Types of
                        Regulation
SFAS No. 101............Regulated Enterprises - Accounting for the
                        Discontinuation of Application of SFAS No. 71
SFAS No. 115............Accounting for Certain Investments in Debt and Equity
                        Securities
SFAS No. 121............Accounting for the Impairment of Long-Lived Assets and
                        for Long-Lived Assets to Be Disposed Of
SPP ....................Southwest Power Pool
STP ....................South Texas Project nuclear electric generating station
SWEPCO .................Southwestern Electric Power Company, Shreveport,
                        Louisiana

                                       3
<PAGE>


GLOSSARY OF TERMS  (continued)
The  following  abbreviations  or  acronyms  used in this Form 10-Q are  defined
below:

Abbreviation or Acronym Definition
Texas Commission .......Public Utility Commission of Texas Texas Electric
                        Operating Companies  CPL, SWEPCO and WTU
Texas  Legislation......Texas Senate Bill 7, relating to deregulation of
                         electric utility industry
TNRCC...................Texas Natural Resource Conservation Commission
Trust Preferred
 Securities.............Collective term for securities issued by business trusts
                        of CPL, PSO and SWEPCO classified on the balance  sheet
                        as "Certain  Subsidiary (or  CPL/PSO/SWEPCO)-obligated,
                        mandatorily  redeemable preferred securities of
                        subsidiary trusts holding solely Junior Subordinated
                        Debentures of such Subsidiaries (or CPL/PSO/SWEPCO)"
U.K. Electric...........SEEBOARD U.S.A.
U.S. Electric Operating Companies or
  U.S. Electric.........CPL, PSO, SWEPCO and WTU
UWUA....................Utility Workers Union of America
Vale ...................Empresa De Electricidade Vale Paranapanema SA, a
                        Brazilian Electric Distribution Company
Valero..................Valero Refining Company-Texas, Valero Refining Company
                        and Valero Energy Company
WTU ....................West Texas Utilities Company, Abilene, Texas








                                       4
<PAGE>



FORWARD-LOOKING INFORMATION

This report made by CSW and certain of its subsidiaries contains forward-looking
statements  within the meaning of Section 21E of the Exchange Act.  Although CSW
and each of its  subsidiaries  believe  that  their  expectations  are  based on
reasonable  assumptions,  any such  statements may be influenced by factors that
could cause actual  outcomes and results to be materially  different  from those
projected.   Important  factors  that  could  cause  actual  results  to  differ
materially from those in the  forward-looking  statements  include,  but are not
limited to:

-  increased competition and electric utility industry restructuring in the
   United States,
-  the  impact of the proposed AEP Merger, including any regulatory conditions
   imposed on the merger,  the inability to consummate the AEP Merger, or other
   merger and acquisition activity,
-  federal and state regulatory developments and changes in law which may have a
   substantial adverse impact on the value of the CSW System assets,
-  the impact of general economic changes in the United States and in countries
   in which CSW either currently has made or in the future may make investments,
-  timing and adequacy of rate relief,
-  adverse changes in electric load and customer growth,
-  climatic changes or unexpected changes in weather patterns,
-  changing fuel prices, generating plant and distribution facility performance,
-  decommissioning  costs  associated  with  nuclear  generating  facilities,
-  uncertainties in foreign operations and foreign laws affecting CSW's
   investments in those countries,
-  the effects of retail competition in the natural gas and electricity supply
   businesses in the United Kingdom, and
-  the timing and success of efforts to develop domestic and international power
   projects.

In the  non-utility  area,  the  previously  mentioned  factors  apply  and also
include, but are not limited to:

-  the ability to compete effectively in new areas, including telecommunications
   and other energy related services, and
-  evolving federal and state regulatory legislation and policies that may
   adversely  affect  those  industries  generally  or  the  CSW  System's
   business in areas in which it operates.


                                       5
<PAGE>



                                      CSW



                       CENTRAL AND SOUTH WEST CORPORATION


                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.





                                       6

<PAGE>

Consolidated Statements of Income (unaudited)
Central and South West Corporation
                                                            Three Months Ended
                                                                 March 31,
                                                            2000         1999
                                                           --------    --------

                                                           (in millions, except
                                                            per share amounts)
Operating Revenues
    U.S. Electric                                           $   764     $   697
    United Kingdom                                              485         476
    Other diversified                                            50          52
                                                           --------    --------
                                                              1,299       1,225
                                                           --------    --------

Operating Expenses and Taxes
    U.S. Electric fuel                                          279         229
    U.S. Electric purchased power                                40          29
    United Kingdom cost of sales                                324         322
    Other operating                                             268         251
    Maintenance                                                  44          41
    Depreciation and amortization                               149         132
    Taxes, other than income                                     41          54
    Income taxes                                                 11          20
                                                           --------    --------
                                                              1,156       1,078
                                                           --------    --------
Operating Income                                                143         147
                                                           --------    --------

Other Income and (Deductions)
    Other                                                        13          13
    Non-operating income taxes                                   (4)         (4)
                                                           --------    --------
                                                                  9           9
                                                           --------    --------
Income Before Interest and Other Charges                        152         156
                                                           --------    --------

Interest and Other Charges
    Interest on long-term debt                                   76          78
    Interest on short-term debt and other                        31          24
    Distributions on Trust Preferred Securities                   7           7
    Preferred dividend requirements of subsidiaries            --             2
                                                           --------    --------
                                                                114         111
                                                           --------    --------
Net Income for Common Stock                                 $    38     $    45
                                                           ========    ========
Average Common Shares Outstanding                             212.7       212.6

Basic and Diluted EPS                                       $  0.18     $  0.21
                                                           ========    ========

Dividends Paid per Share of Common Stock                    $ 0.435     $ 0.435
                                                           ========    ========




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

                                       7
<PAGE>
Consolidated Statements of Stockholders' Equity
Central and South West Corporation
(millions)
<TABLE>
<CAPTION>

                                                                                   Accumulated
                                                                Additional            Other
                                                        Common  Paid-in  Retained Comprehensive
                                                        Stock   Capital  Earnings Income (Loss)   Total
                                                        ---------------------------------------   -------
<S>                                                     <C>     <C>      <C>      <C>             <C>

(audited)
Beginning Balance -- January 1, 1999                       $744   $1,049   $1,823            $8   $3,624
   Sale of common stock                                      --        1       --            --        1
   Common stock dividends                                    --       --     (370)           --     (370)
   Other                                                     --        1       (2)           --       (1)
                                                                                                  -------
                                                                                                   3,254
   Comprehensive Income:
      Foreign currency translation adjustment (net
       of tax of $15)                                        --       --       --           (28)     (28)
      Minimum pension liability (net of tax of $0.7)         --       --       --             2        2
      Net Income                                             --       --      455            --      455
                                                                                                  -------
         Total comprehensive income                                                                  429
                                                        ---------------------------------------   -------

Ending Balance -- December 31, 1999                        $744   $1,051   $1,906          ($18)  $3,683
                                                        =======================================   =======
(unaudited)
Beginning Balance -- January 1, 2000                       $744   $1,051   $1,906          ($18)  $3,683
   Sale of common stock                                      --        1       --            --        1
   Common stock dividends                                    --       --      (92)           --      (92)
                                                                                                  -------
                                                                                                   3,592

   Comprehensive Income:
      Foreign currency translation adjustment (net of
       tax of $4)                                            --       --       --           (13)     (13)
      Unrealized loss on securities (net of tax of $4)       --       --       --            (7)      (7)
      Net Income                                             --       --       38            --       38
                                                                                                  -------
         Total comprehensive income                                                                   18

                                                        ---------------------------------------   -------
Ending Balance -- March 31, 2000                           $744   $1,052   $1,852          ($38)  $3,610
                                                        =======================================   =======

</TABLE>




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


                                       8
<PAGE>

Consolidated Balance Sheets
Central and South West Corporation
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                   March 31,       December 31,
                                                                     2000              1999
                                                                  (unaudited)       (audited)
                                                                 --------------    -------------
<S>                                                              <C>               <C>
                                                                           (millions)
ASSETS
Fixed Assets
    Electric
        Production                                                     $ 5,903          $ 5,901
        Transmission                                                     1,666            1,663
        Distribution                                                     4,923            4,896
        General                                                          1,341            1,437
        Construction work in progress                                      279              205
        Nuclear fuel                                                       227              227
                                                                 --------------    -------------
                                                                        14,339           14,329
    Other diversified                                                      382              353
                                                                 --------------    -------------
                                                                        14,721           14,682
  Less - Accumulated depreciation and amortization                       6,002            6,008
                                                                 --------------    -------------
                                                                         8,719            8,674
                                                                 --------------    -------------
Current Assets
    Cash and temporary cash investments                                    138              270
    Special deposits for reacquisition of long-term debt                    --               50
    Accounts receivable                                                  1,018            1,140
    Materials and supplies, at average cost                                150              149
    Electric utility fuel inventory                                        126              129
    Under-recovered fuel costs                                              39               52
    Notes receivable                                                        55               53
    Prepayments and other                                                   80               84
                                                                 --------------    -------------
                                                                         1,606            1,927
                                                                 --------------    -------------
Deferred Charges and Other Assets
    Regulatory assets                                                      201              219
    Regulatory assets designated for securitization                        953              953
    Other non-utility investments                                          444              454
    Securities available for sale                                           56               62
    Benefit costs                                                          204              202
    Goodwill                                                             1,299            1,330
    Other                                                                  350              341
                                                                 --------------    -------------
                                                                         3,507            3,561
                                                                 --------------    -------------
                                                                      $ 13,832         $ 14,162
                                                                 ==============    =============

</TABLE>







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


                                       9
<PAGE>

Consolidated Balance Sheets
Central and South West Corporation
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                            March 31,             December 31,
                                                               2000                   1999
                                                           (unaudited)             (audited)
                                                           -------------          -------------
CAPITALIZATION AND LIABILITIES                                           (millions)
<S>                                                        <C>           <C>      <C>            <C>

Capitalization
    Common stock:   $3.50 par value
        Authorized:   350.0 million shares
        Issued and outstanding: 212.7 million
        shares on March 31, 2000 and 212.6
        million shares on December 31, 1999                       $ 744                  $ 744
    Paid-in capital                                               1,052                  1,051
    Retained earnings                                             1,852                  1,906
    Accumulated other comprehensive income                          (38)                   (18)
                                                           -------------          -------------
                                                                  3,610      45%         3,683     47%
                                                           ------------- -------- -------------  ------

    Preferred Stock                                                  18      --%            18     --%
    Certain Subsidiary-obligated, mandatorily redeemable
       preferred securities of subsidiary trusts holding solely
       Junior Subordinated Debentures of such Subsidiaries          335       4%           335      4%
    Long-term debt                                                4,088      51%         3,821     49%
                                                           ------------- -------- -------------  ------
                                                                  8,051     100%         7,857    100%
                                                           ------------- -------- -------------  ------

Current Liabilities
    Long-term debt due within twelve months                         216                    256
    Short-term debt                                               1,104                  1,346
    Short-term debt - CSW Credit, Inc.                              556                    754
    Loan notes                                                       22                     24
    Accounts payable                                                547                    581
    Accrued taxes                                                   162                    187
    Accrued interest                                                105                     64
    Other                                                           196                    175
                                                           -------------          -------------
                                                                  2,908                  3,387
                                                           -------------          -------------

Deferred Credits
    Accumulated deferred income taxes                             2,420                  2,431
    Investment tax credits                                          251                    254
    Other                                                           202                    233
                                                           -------------          -------------
                                                                  2,873                  2,918
                                                           -------------          -------------
                                                               $ 13,832               $ 14,162
                                                           =============          =============

</TABLE>



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


                                       10
<PAGE>
Consolidated Statements of Cash Flows (unaudited)
Central and South West Corporation
<TABLE>
<CAPTION>

                                                                      Three Months Ended
                                                                           March 31,
                                                                    ------------------------
                                                                      2000            1999
                                                                    -------          -------
                                                                           (millions)
<S>                                                                 <C>              <C>
OPERATING ACTIVITIES
    Net income for common stock                                       $ 38              $ 45
    Non-cash Items and Adjustments
        Depreciation and amortization                                  155               139
        Deferred income taxes and investment tax credits               (15)              (14)
        Preferred stock dividends                                        1                 2
    Changes in Assets and Liabilities
        Accounts receivable                                            118               185
        Accounts payable                                               (38)              (72)
        Accrued taxes                                                  (28)               (1)
        Fuel inventory                                                   2               (18)
        Fuel recovery                                                   16                23
        Other                                                           32               (40)
                                                                    -------          -------
                                                                       281               249
                                                                    -------          -------
INVESTING ACTIVITIES
    Construction expenditures                                         (163)             (125)
    CSW Energy/CSW International projects                               (7)              (41)
    Other                                                              (29)              (17)
                                                                    -------          -------
                                                                      (199)             (183)
                                                                    -------          -------
FINANCING ACTIVITIES
    Common stock sold                                                    1                 1
    Long-term debt sold                                                321                --
    Reacquisition/Maturity of long-term debt                           (60)               (1)
    Special deposit for reacquisition of long-term debt                 50                --
    Other financing activities                                           9                29
    Change in short-term debt                                         (440)              (32)
    Payment of dividends                                               (93)              (95)
                                                                    -------          -------
                                                                      (212)              (98)
                                                                    -------          -------


Effect of exchange rate changes on cash and cash equivalents            (2)               (2)
                                                                    -------          -------

Net Change in Cash and Cash Equivalents                               (132)              (34)
Cash and Cash Equivalents at Beginning of Year                         270               157
                                                                    -------          -------
Cash and Cash Equivalents at End of Period                           $ 138             $ 123
                                                                    =======          =======
SUPPLEMENTARY INFORMATION
    Interest paid less amounts capitalized                            $ 71              $ 86
                                                                    =======          =======
    Income taxes paid                                                  $ 3              $ 13
                                                                    =======          =======
</TABLE>



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


                                       11
<PAGE>


CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES RESULTS OF
OPERATIONS

      Set forth below is  information  concerning  the  consolidated  results of
operations of CSW for the three month periods ended March 31, 2000 and March 31,
1999. For information  concerning the results of operations for each of the U.S.
Electric Operating  Companies,  see the discussions under the heading RESULTS OF
OPERATIONS  following  the  financial  statements  of each of the U.S.  Electric
Operating Companies.


COMPARISON OF THE QUARTERS ENDED MARCH 31, 2000 AND 1999

      Net income for common stock  decreased to $38 million in the first quarter
of 2000  from $45  million  in 1999 due  primarily  to higher  depreciation  and
amortization  expense and other operating  expenses,  partially  offset by lower
taxes,  other than income and lower operating income tax expense.  Other factors
affecting earnings are discussed below.

      In the first quarter of 2000, the U.S.  Electric Operating  Companies  and
U.K.  Electric  contributed  the  following  percentages  to  CSW's  results  of
operations.

                                                             Corporate
                               U.S.       U.K.       Total   Items and
                             Electric   Electric   Electric    Other    Total
                            ---------------------------------------------------
Operating Revenues             59%        37%         96%       4%       100%
Operating Income               59%        36%         95%       5%       100%
Net Income for Common Stock    59%        81%        140%    (40)%       100%


     Operating  revenues  increased $74 million,  or 6%, in the first quarter of
2000 compared to the same period a year ago. U.S.  Electric  revenues  increased
$67 million, or 10%, due to:
-   an increase of $46 million in fuel revenues due to higher fuel costs and
    purchased power, as discussed below,
-   an increase of $31 million in other U.S. Electric revenues due primarily to
    higher transmission access revenues, despite an adjustment to transmission
    revenues as discussed below, and
-   earnings  cap  adjustments  recorded  by  SWEPCO  and WTU in the  first
    quarter  of  2000.  Those  adjustments  resulted  from the  final  1999
    earnings  cap  filings  made  with the  Texas  Commission.  See NOTE 2.
    LITIGATION AND REGULATORY  PROCEEDINGS - Electric Utility Restructuring
    Legislation for additional information.

      The  increase in U.S.  Electric  revenues  was  partially  offset by a $10
million reduction in non-fuel U.S. Electric revenues resulting from a 2% decline
in KWH sales resulting from mild weather.

      In the first  quarter of 2000, a true-up  adjustment  was  recorded  which
decreased transmission revenues and transmission expenses by approximately $10.7
million under CSW's revised transmission  coordination  agreement,  as described
more fully in NOTE 2.  LITIGATION AND REGULATORY  PROCEEDINGS to CSW's financial
statements  in its  Form  10-K at  December  31,  1999.  The net  effect  of the
adjustment did not significantly affect earnings.

      United Kingdom revenues increased $9 million,  or 2%, in the first quarter
of 2000  compared to the same period a year ago,  due to higher  revenues of $41
million from  SEEBOARD's  domestic  gas supply  company,  Beacon Gas  reflecting
SEEBOARD's increased ownership interest in that company. The increase was offset

                                       12
<PAGE>

in part by a reduction in domestic  electricity  supply  revenues  following the
opening of retail competition in that market.

      U.S.  Electric fuel expense,  increased $50 million,  or 22%,  because the
average unit fuel cost increased to $1.81 per MMbtu in the first quarter of 2000
from $1.54 per MMbtu in the first  quarter of 1999 due  primarily to higher spot
market natural gas prices.  Purchased  power expense  increased $11 million,  or
38%, for the  comparison  periods due  primarily  to a higher  volume of economy
energy purchases and capacity  payments.  United Kingdom cost of sales increased
$2 million,  or 1%, during the first quarter of 2000 compared to the same period
a year ago due primarily to increased  cost of sales from Beacon Gas  reflecting
SEEBOARD's increased ownership interest in that company, offset by the reduction
in domestic  electricity  supply  following the opening to  competition  in this
market.

      Other operating  expenses  increased $17 million,  or 7%, due primarily to
increased power plant costs,  expenses for CPL's portion of an early  retirement
and severance  program at STP, and higher  insurance costs.  SEEBOARD  operating
expenses  were higher  reflecting  SEEBOARD's  increased  ownership  interest in
Beacon Gas.

      Depreciation and amortization  expense  increased $17 million,  or 13%, in
the first quarter of 2000 compared to the same period last year due to increases
of depreciable property at most CSW subsidiaries and accelerated amortization of
certain regulatory assets as prescribed by state utility commissions. See MD&A -
COMPETITION  AND INDUSTRY  CHALLENGES -  Restructuring  Readiness for additional
information.

      Taxes other than income  decreased  $13  million,  or 24%, due to lower ad
valorem and Texas state  franchise  taxes.  Operating  income taxes  declined $9
million,  or 45%, in the first  quarter of 2000 due  primarily to lower  taxable
income.

      Interest  and other  charges  increased  $3  million,  or 3%, in the first
quarter of 2000 due primarily to higher average borrowings and marginally higher
rates.


                                       13
<PAGE>




                                       CPL


                         CENTRAL POWER AND LIGHT COMPANY


                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.


                                       14
<PAGE>
Consolidated Statements of Income (unaudited)
Central Power and Light Company
<TABLE>
<CAPTION>

                                                                    Three Months Ended March 31,
                                                                  --------------------------------
                                                                      2000                   1999
                                                                  ----------            ----------
                                                                             (thousands)
<S>                                                                <C>                  <C>

Electric Operating Revenues                                       $ 316,328             $ 282,278

Operating Expenses and Taxes
    Fuel                                                             89,397                67,915
    Purchased power                                                  20,420                13,147
    Other operating                                                  74,296                61,827
    Maintenance                                                      16,422                15,226
    Depreciation and amortization                                    54,198                43,114
    Taxes, other than income                                         16,702                20,645
    Income taxes                                                      5,590                13,784
                                                                  ----------            ----------
                                                                    277,025               235,658
                                                                  ----------            ----------

Operating Income                                                     39,303                46,620
                                                                  ----------            ----------

Other Income and (Deductions)
    Other                                                               270                  (730)
    Non-operating income taxes                                          277                 1,678
                                                                  ----------            ----------
                                                                        547                   948

Income Before Interest Charges                                       39,850                47,568
                                                                  ----------            ----------

Interest Charges
    Interest on long-term debt                                       24,060                22,829
    Distributions on Trust Preferred Securities                       3,000                 3,000
    Interest on short-term debt and other                             5,573                 5,064
    Allowance for borrowed funds used during construction            (1,575)                 (873)
                                                                  ----------            ----------
                                                                     31,058                30,020
                                                                  ----------            ----------

Net Income                                                            8,792                17,548
    Less:  Preferred stock dividends                                     60                 1,812
                                                                  ----------            ----------
Net Income for Common Stock                                         $ 8,732              $ 15,736
                                                                  ==========            ==========

</TABLE>


  The accompanying notes to consolidated financial statements as they relate to
                  CPL are an integral part of these statements.

                                       15
<PAGE>
Consolidated Balance Sheets
Central Power and Light Company
<TABLE>
<CAPTION>

                                                                     March 31,           December 31,
                                                                       2000                 1999
                                                                    (unaudited)           (audited)
                                                                    -----------          ------------
                                                                               (thousands)
<S>                                                                 <C>                  <C>

ASSETS
Electric Utility Plant
    Production                                                       $3,155,806           $ 3,152,319
    Transmission                                                        568,131               566,629
    Distribution                                                      1,167,172             1,157,091
    General                                                             234,725               307,378
    Construction work in progress                                       128,761               101,550
    Nuclear fuel                                                        226,970               226,927
                                                                    -----------          ------------
                                                                      5,481,565             5,511,894
  Less - Accumulated depreciation and amortization                    2,235,154             2,263,925
                                                                    -----------          ------------
                                                                      3,246,411             3,247,969
                                                                    -----------          ------------

Current Assets
    Cash and temporary cash investments                                   3,186                 5,830
    Special deposits for reacquisition of long-term debt                     --                50,000
    Accounts receivable                                                  62,635                64,482
    Materials and supplies, at average cost                              56,397                58,196
    Fuel inventory at LIFO cost                                          24,786                26,434
    Under-recovered fuel costs                                           29,968                30,911
    Prepayments and other                                                 2,977                 5,353
                                                                    -----------          ------------
                                                                        179,949               241,206
                                                                    -----------          ------------

Deferred Charges and Other Assets
    Regulatory assets                                                   208,888               226,076
    Regulatory assets designated for securitization                     953,249               953,249
    Nuclear decommissioning trust                                        90,979                86,122
    Other                                                                80,786                93,228
                                                                    -----------          ------------
                                                                      1,333,902             1,358,675
                                                                    -----------          ------------
                                                                     $4,760,262           $ 4,847,850
                                                                    ===========          ============

</TABLE>

 The accompanying notes to consolidated financial statements as they relate to
                 CPL are an integral part of these statements.

                                       16
<PAGE>
Consolidated Balance Sheets
Central Power and Light Company
<TABLE>
<CAPTION>

                                                           March 31,            December 31,
                                                             2000                   1999
                                                          (unaudited)            (audited)
                                                          ------------          ------------
CAPITALIZATION AND LIABILITIES                                         (thousands)
<S>                                                       <C>             <C>   <C>               <C>

Capitalization
    Common stock:  $25 par value
        Authorized shares:  12,000,000
        Issued and outstanding shares:  6,755,535           $ 168,888              $ 168,888
    Paid-in capital                                           405,000                405,000
    Retained earnings                                         733,957                764,225
                                                          ------------          ------------
                                                            1,307,845      45%     1,338,113       48%
                                                          ------------    ----  ------------      ----

    Preferred stock                                             5,967      --%         5,967       --%

    CPL-obligated, mandatorily redeemable preferred securities of
        subsidiary trust holding solely Junior Subordinated
        Debentures of CPL                                     150,000       5%       150,000        5%
    Long-term debt                                          1,454,551      50%     1,304,541       47%
                                                          ------------    ----  ------------      ----
                                                            2,918,363     100%     2,798,621      100%
                                                          ------------    ----  ------------      ----

Current Liabilities
    Long-term debt due within twelve months                   100,000                150,000
    Advances from affiliates                                  159,892                322,158
    Accounts payable                                           96,120                 88,702
    Payables to affiliates                                     35,211                 33,162
    Accrued taxes                                              38,314                 41,121
    Accumulated deferred income taxes                           1,478                  2,103
    Accrued interest                                           29,608                 14,723
    Other                                                      24,027                 19,330
                                                          ------------          ------------
                                                              484,650                671,299
                                                          ------------          ------------
Deferred Credits
    Accumulated deferred income taxes                       1,215,668              1,234,942
    Investment tax credits                                    132,005                133,306
    Other                                                       9,576                  9,682
                                                          ------------          ------------
                                                            1,357,249              1,377,930
                                                          ------------          ------------
                                                          $ 4,760,262            $ 4,847,850
                                                          ============          ============

</TABLE>

 The accompanying notes to consolidated financial statements as they relate to
                  CPL are an integral part of these statements.

                                       17
<PAGE>
Consolidated Statements of Cash Flows (unaudited)
Central Power and Light Company
<TABLE>
<CAPTION>

                                                                     Three Months Ended
                                                                          March 31,
                                                                  --------------------------
                                                                    2000             1999
                                                                  ---------        ---------
                                                                         (thousands)
<S>                                                               <C>              <C>
OPERATING ACTIVITIES
    Net Income                                                     $ 8,792          $ 17,548
    Non-cash Items Included in Net Income
        Depreciation and amortization                               57,988            48,110
        Deferred income taxes and investment tax credits           (19,590)           (9,785)
    Changes in Assets and Liabilities
        Accounts receivable                                          1,847            (3,668)
        Fuel inventory                                               1,648            (2,653)
        Material and supplies                                        1,799             1,713
        Accrued interest                                            14,885             3,486
        Accounts payable                                             6,744           (16,156)
        Payables to affiliates                                       2,049            (6,367)
        Accrued taxes                                               (2,807)            6,487
        Fuel recovery                                                  943             9,109
        Deferred charges, other                                     12,442             2,514
        Other                                                        8,643              (426)
                                                                  ---------        ---------
                                                                    95,383            49,912
                                                                  ---------        ---------
INVESTING ACTIVITIES
    Construction expenditures                                      (44,406)          (37,018)
    Other                                                           (1,721)           (1,600)
                                                                  ---------        ---------
                                                                   (46,127)          (38,618)
                                                                  ---------        ---------
FINANCING ACTIVITIES
    Issuance of long-term debt                                     149,426                --
    Reacquisition of long-term debt                                (50,000)               --
    Special deposit for reacquisition of long-term debt             50,000                --
    Change in advances from affiliates                            (162,266)           32,340
    Payment of dividends                                           (39,060)          (39,056)
                                                                  ---------        ---------
                                                                   (51,900)           (6,716)
                                                                  ---------        ---------

Net Change in Cash and Cash Equivalents                             (2,644)            4,578
Cash and Cash Equivalents at Beginning of Year                       5,830             5,195
                                                                  ---------        ---------
Cash and Cash Equivalents at End of Period                         $ 3,186           $ 9,773
                                                                  =========        =========

SUPPLEMENTARY INFORMATION
    Interest paid less amounts capitalized (includes
      distributions on Trust Preferred Securities)                $ 15,348          $ 22,327
                                                                  =========        =========
    Income taxes paid/(refund received)                               $ --          $ (3,727)
                                                                  =========        =========
</TABLE>


  The accompanying notes to consolidated financial statements as they relate to
                  CPL are an integral part of these statements.



                                       18
<PAGE>

CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS


COMPARISON OF THE QUARTERS ENDED MARCH 31, 2000 AND 1999

      Net  income  for  common  stock  for the  first  quarter  of 2000 was $8.8
million, a decrease of $7.0 million, or 45%, from the first quarter of 1999. The
decrease resulted primarily from higher operating expenses,  partially offset by
an increase in revenues, as well as a reduction in preferred stock dividends.

      Electric operating  revenues increased $34.1 million,  or 12%, compared to
the first quarter of 1999.  Fuel-related revenues increased $20.1 million due to
higher  fuel  and  purchased  power  expenses  as  discussed  in  the  following
paragraph.  Non-fuel revenues  increased $14.0 million resulting  primarily from
higher miscellaneous transmission revenues.

      Fuel expense increased $21.5 million, or 32%, in the first quarter of 2000
when  compared to 1999 due  primarily to a rise in average unit fuel costs.  The
average unit fuel cost increased from $1.33 per MMbtu in 1999 to $1.81 per MMbtu
in the first quarter of 2000,  resulting  mainly from higher spot market natural
gas prices.  Also  contributing  to the increase in fuel costs was a maintenance
outage at STP Unit 1 which decreased nuclear  generation by approximately 16% in
the first quarter of 2000. The decreased  nuclear  generation was replaced by an
increase in gas generation and purchased power. Purchased power expenses for the
first quarter of 2000 increased $7.3 million,  or 55%, when compared to the same
period  in  1999,  due  primarily  to  higher  economy  purchases,  cogeneration
purchases as well as increased reservation and capacity charges.

      Other  operating  expenses were $74.3 million  during the first quarter of
2000, an increase of $12.5  million,  or 20%, from the same period in 1999.  The
increase was due primarily to higher  insurance  expenses and expenses for CPL's
portion of an early  retirement and severance  program due to  restructuring  at
STP.  Depreciation and amortization expenses increased $11.1 million, or 26%, in
2000  compared to the same period last year  reflecting  the final 1999 earnings
cap  filings  made  with  the  Texas  Commission.  See  NOTE 2.  LITIGATION  AND
REGULATORY  PROCEEDINGS - Electric Utility Restructuring  Legislation and MD&A -
Securitization  of  Generation-related  Regulatory Assets and Stranded Costs for
further discussion.

      Taxes,  other than income,  decreased $3.9 million to $16.7 million in the
first quarter of 2000 resulting mainly from lower ad valorem tax expense. Income
tax expense  associated with utility  operations  decreased $8.2 million for the
first quarter of 2000 as a result of lower taxable  income and a decrease in the
income portion of Texas state franchise tax expense.

      Preferred stock  dividends  decreased $1.8 million in the first quarter of
2000 as a result of the redemption of $160 million  auction  preferred  stock in
the fourth quarter of 1999.


                                       19

<PAGE>





                                       PSO


                       PUBLIC SERVICE COMPANY OF OKLAHOMA


                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.


                                       20
<PAGE>
Consolidated Statements of Income (unaudited)
Public Service Company of Oklahoma
<TABLE>
<CAPTION>

                                                                     Three Months Ended March 31,
                                                                   -------------------------------
                                                                      2000                 1999
                                                                   ----------           ----------
                                                                             (thousands)
<S>                                                                <C>                  <C>

Electric Operating Revenues                                         $ 161,329           $ 151,030
                                                                   ----------           ----------
Operating Expenses and Taxes
    Fuel                                                               71,586              61,881
    Purchased power                                                    20,666              14,044
    Other operating                                                    22,922              25,713
    Maintenance                                                         8,586               9,207
    Depreciation and amortization                                      18,913              18,455
    Taxes, other than income                                            7,217               8,059
    Income taxes                                                           68               1,143
                                                                   ----------           ----------
                                                                      149,958             138,502
                                                                   ----------           ----------
Operating Income                                                       11,371              12,528
                                                                   ----------           ----------

Other Income and (Deductions)
    Allowance for equity funds used during construction                    --                  81
    Other                                                                 139              (1,311)
    Non-operating income taxes                                             83                 709
                                                                   ----------           ----------
                                                                          222                (521)
                                                                   ----------           ----------
Income Before Interest Charges                                         11,593              12,007
                                                                   ----------           ----------

Interest Charges
    Interest on long-term debt                                          6,526               6,610
    Distributions on Trust Preferred Securities                         1,500               1,500
    Interest on short-term debt and other                               2,518               1,169
    Allowance for borrowed funds used during construction                (627)               (192)
                                                                   ----------           ----------
                                                                        9,917               9,087
                                                                   ----------           ----------

Net Income                                                              1,676               2,920
  Less:  Preferred stock dividends                                         53                  53
                                                                   ----------           ----------
Net Income for Common Stock                                           $ 1,623             $ 2,867
                                                                   ==========           ==========

</TABLE>


  The accompanying notes to consolidated financial statements as they relate to
                  PSO are an integral part of these statements.



                                       21
<PAGE>

Consolidated Balance Sheets
Public Service Company of Oklahoma
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                             March 31,               December 31,
                                                                2000                     1999
                                                            (unaudited)               (audited)
                                                         -------------------       -----------------
                                                                         (thousands)
<S>                                                      <C>                       <C>

ASSETS
Electric Utility Plant
    Production                                                    $ 916,087               $ 916,889
    Transmission                                                    392,420                 392,029
    Distribution                                                    907,281                 897,516
    General                                                         211,038                 217,368
    Construction work in progress                                    54,529                  35,903
                                                         -------------------       -----------------
                                                                  2,481,355               2,459,705
  Less - Accumulated depreciation and amortization                1,116,888               1,114,255
                                                         -------------------       -----------------
                                                                  1,364,467               1,345,450
                                                         -------------------       -----------------
Current Assets
    Cash                                                              2,943                   3,077
    Accounts receivable                                              27,725                  34,584
    Materials and supplies, at average cost                          33,896                  34,289
    Fuel inventory, at LIFO cost                                     23,879                  24,143
    Under-recovered fuel costs                                           --                   6,469
    Accumulated deferred income taxes                                21,955                  19,145
    Prepayments and other                                             2,463                   1,668
                                                         -------------------       -----------------
                                                                    112,861                 123,375
                                                         -------------------       -----------------

Deferred Charges and Other Assets                                    69,176                  75,046
                                                         -------------------       -----------------
                                                                $ 1,546,504             $ 1,543,871
                                                         ===================       =================

</TABLE>



  The accompanying notes to consolidated financial statements as they relate to
                  PSO are an integral part of these statements.


                                       22

<PAGE>

Consolidated Balance Sheets
Public Service Company of Oklahoma
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                       March 31,               December 31,
                                                         2000                      1999
                                                      (unaudited)                (audited)
                                                     --------------            --------------
CAPITALIZATION AND LIABILITIES                                        (thousands)
<S>                                                  <C>              <C>      <C>            <C>

Capitalization
    Common stock:   $15 par value
        Authorized:   11,000,000 shares
        Issued: 10,482,000 shares and outstanding
         9,013,000 shares                                 $157,230                  $157,230
    Paid-in capital                                        180,000                   180,000
    Retained earnings                                      126,642                   142,018
                                                     --------------            --------------
                                                           463,872       52%         479,248     52%
                                                     --------------   -------  -------------- -------

    Preferred stock                                          5,286        1%           5,286     --%
    PSO-obligated, mandatorily redeemable preferred
         securities of subsidiary trust holding solely
         Junior Subordinated Debentures of PSO              75,000        8%          75,000      8%
    Long-term debt                                         344,592       39%         364,516     40%
                                                     --------------   -------  -------------- -------
                                                           888,750      100%         924,050    100%
                                                     --------------   -------  -------------- -------
Current Liabilities
    Long-term debt due within twelve months                 30,000                    20,000
    Advances from affiliates                               110,203                    79,169
    Payables to affiliates                                  29,204                    34,043
    Accounts payable                                        62,973                    44,088
    Customer deposits                                       17,974                    17,752
    Accrued taxes                                            6,527                    18,480
    Accrued interest                                        10,312                     5,420
    Over-recovered fuel costs                                2,798                        --
    Other                                                    5,856                     5,085
                                                     --------------            --------------
                                                           275,847                   224,037
                                                     --------------            --------------
Deferred Credits
    Accumulated deferred income taxes                      308,608                   302,727
    Investment tax credits                                  37,126                    37,574
    Income tax related regulatory liabilities, net          32,215                    32,826
    Other                                                    3,958                    22,657
                                                     --------------            --------------
                                                           381,907                   395,784
                                                     --------------            --------------
                                                       $ 1,546,504               $ 1,543,871
                                                     ==============            ==============

</TABLE>




  The accompanying notes to consolidated financial statements as they relate to
                 PSO are an integral part of these statements.



                                       23

<PAGE>
Consolidated Statements of Cash Flows (unaudited)
Public Service Company of Oklahoma
<TABLE>
<CAPTION>

                                                                    Three Months Ended
                                                                          March 31,
                                                              ------------------------------
                                                                2000                   1999
                                                              --------              --------
                                                                         (thousands)
<S>                                                           <C>                   <C>

OPERATING ACTIVITIES
    Net Income                                                $ 1,676                $ 2,920
    Non-cash Items Included in Net Income
        Depreciation and amortization                          19,515                 18,700
        Deferred income taxes and investment tax credits        2,012                 (1,967)
    Changes in Assets and Liabilities
        Accounts receivable                                     6,859                  1,224
        Prepayments and other                                    (795)                (2,990)
        Accounts payable                                       14,164                (19,898)
        Accrued taxes                                         (11,953)                (9,022)
        Accrued interest                                        4,892                  2,581
        Other deferred credits                                (18,699)                 1,052
        Fuel recovery                                           9,267                  9,419
        Other                                                   7,250                 (1,760)
                                                              --------              --------
                                                               34,188                    259
                                                              --------              --------
INVESTING ACTIVITIES
    Construction expenditures                                 (34,760)               (21,299)
    Other                                                      (3,543)                 1,775
                                                              --------              --------
                                                              (38,303)               (19,524)
                                                              --------              --------
FINANCING ACTIVITIES
    Change in advances from affiliates                         31,034                 30,901
    Retirement of long-term debt                              (10,000)                    --
    Payment of dividends                                      (17,053)               (15,053)
                                                              --------              --------
                                                                3,981                 15,848
                                                              --------              --------

Net Change in Cash and Cash Equivalents                          (134)                (3,417)
Cash and Cash Equivalents at Beginning of Year                  3,077                  4,670
                                                              --------              --------
Cash and Cash Equivalents at End of Period                    $ 2,943                $ 1,253
                                                              ========              ========

SUPPLEMENTARY INFORMATION
    Interest paid less amounts capitalized (includes
        distributions on Trust Preferred Securities)          $ 4,238                $ 6,125
                                                              ========              ========
    Income taxes paid                                         $ 2,850                $ 5,510
                                                              ========              ========


</TABLE>


  The accompanying notes to consolidated financial statements as they relate to
                  PSO are an integral part of these statements.


                                       24
<PAGE>

PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS


COMPARISON OF THE QUARTERS ENDED MARCH 31, 2000 AND 1999

      Net  income  for  common  stock  for the  first  quarter  of 2000 was $1.7
million,  a decrease of $1.2 million  compared to 1999.  The  decrease  resulted
primarily from a net increase in operating expenses and operating income taxes.

      Electric operating revenues increased $10.3 million,  or 7%, higher during
the first quarter of 2000 compared to the first quarter of 1999 due primarily to
a $10.6 million increase in fuel-related  revenues as discussed in the following
paragraph.  Non-fuel  related  revenues  decreased $5.7 million due primarily to
reclassifications related to CSW's transmission coordination agreement.

      Fuel expense increased $9.7 million, or 16%, for the first quarter of 2000
compared to the first  quarter of 1999 due  primarily  to an increase in average
unit fuel cost.  The average unit fuel costs  increased  from $1.70 per MMbtu in
the first  quarter  of 1999 to $2.05 per MMbtu in the first  quarter of 2000 due
primarily  to  increased  natural gas prices.  Purchased  power  increased  $6.6
million, due primarily to higher economy energy purchases.

      Other  operating  expenses were $22.9 million in the first three months of
2000, an 11% decrease from 1999,  due primarily to lower  transmission  expenses
resulting  from  reclassifications  related to CSW's  transmission  coordination
agreement.  Income tax expense associated with utility operations decreased $1.1
million due primarily to lower taxable income.

      Other  income and  deductions  increased  $0.7  million in the first three
months  of 2000  primarily  as a result  of the  absence  of  losses  on  equity
investments in 1999.  Interest  charges  increased $0.8 million during the first
quarter of 2000 when  compared to the same period in 1999  primarily as a result
of increased short-term borrowings during the first quarter of 2000.


                                       25
<PAGE>





                                     SWEPCO



                       SOUTHWESTERN ELECTRIC POWER COMPANY


                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.



                                       26
<PAGE>
Consolidated Statements of Income (unaudited)
Southwestern Electric Power Company
<TABLE>
<CAPTION>

                                                                      Three Months Ended March 31,
                                                                      ----------------------------
                                                                         2000              1999
                                                                      ----------         ---------
                                                                              (thousands)
<S>                                                                   <C>                <C>


Electric Operating Revenues                                            $ 212,156         $ 197,064
                                                                      ----------         ---------
Operating Expenses and Taxes
    Fuel                                                                  89,352            76,271
    Purchased power                                                       11,698             6,193
    Other operating                                                       33,733            30,180
    Maintenance                                                           14,306            12,244
    Depreciation and amortization                                         27,357            26,206
    Taxes, other than income                                              10,924            15,794
    Income taxes                                                           1,428             3,807
                                                                      ----------         ---------
                                                                         188,798           170,695
                                                                      ----------         ---------

Operating Income                                                          23,358            26,369
                                                                      ----------         ---------

Other Income and (Deductions)
    Allowance for equity funds used during construction                       --                47
    Other                                                                   (282)             (454)
    Non-operating income taxes                                                49               683
                                                                      ----------         ---------
                                                                            (233)              276
                                                                      ----------         ---------

Income Before Interest Charges                                            23,125            26,645
                                                                      ----------         ---------
Interest Charges
    Interest on long-term debt                                             9,918             9,802
    Distributions on Trust Preferred Securities                            2,166             2,166
    Interest on short-term debt and other                                  3,533             2,391
    Allowance for borrowed funds used during construction                   (782)             (367)
                                                                      ----------         ---------
                                                                          14,835            13,992
                                                                      ----------         ---------

Net Income                                                                 8,290            12,653
   Less: Preferred stock dividends                                            57                57
                                                                      ----------         ---------
Net Income for Common Stock                                              $ 8,233          $ 12,596
                                                                      ==========         =========


</TABLE>

  The accompanying notes to consolidated financial statements as they relate to
                SWEPCO are an integral part of these statements.


                                       27
<PAGE>

Consolidated Balance Sheets
Southwestern Electric Power Company
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                 March 31,               December 31,
                                                                    2000                     1999
                                                                (unaudited)               (audited)
                                                              -----------------        -----------------
                                                                             (thousands)
<S>                                                           <C>                      <C>

ASSETS

  Electric Utility Plant
    Production                                                     $ 1,401,410              $ 1,402,062
    Transmission                                                       485,312                  484,327
    Distribution                                                       963,814                  958,318
    General                                                            333,115                  333,949
    Construction work in progress                                       70,390                   52,775
                                                              -----------------        -----------------
                                                                     3,254,041                3,231,431
  Less - Accumulated depreciation and amortization                   1,404,261                1,384,242
                                                              -----------------        -----------------
                                                                     1,849,780                1,847,189
                                                              -----------------        -----------------
Current Assets
    Cash                                                                 2,476                    2,018
    Accounts receivable                                                 32,167                   45,511
    Receivables from affiliates                                         11,425                    6,053
    Materials and supplies, at average cost                             26,229                   26,420
    Fuel inventory, at average cost                                     59,547                   60,844
    Accumulated deferred income taxes                                    2,003                    1,583
    Prepayments and other                                               16,655                   16,978
                                                              -----------------        -----------------
                                                                       150,502                  159,407
                                                              -----------------        -----------------

Deferred Charges and Other Assets                                      102,943                  101,202
                                                              -----------------        -----------------
                                                                   $ 2,103,225              $ 2,107,798
                                                              =================        =================

</TABLE>


  The accompanying notes to consolidated financial statements as they relate to
                SWEPCO are an integral part of these statements.


                                       28
<PAGE>

Consolidated Balance Sheets
Southwestern Electric Power Company
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                      March 31,               December 31,
                                                        2000                     1999
                                                     (unaudited)               (audited)
                                                     ------------             ------------
CAPITALIZATION AND LIABILITIES                                    (thousands)
<S>                                                  <C>            <C>       <C>          <C>

Capitalization
    Common stock:   $18 par value
        Authorized:   7,600,000 shares
        Issued and outstanding: 7,536,640 shares       $ 135,660                $ 135,660
    Paid-in capital                                      245,000                  245,000
    Retained earnings                                    280,751                  288,018
                                                     ------------             ------------
                                                         661,411      47%         668,678    52%
                                                     ------------   ------    ------------ ------

    Preferred stock                                        4,706      --%           4,706    --%
    SWEPCO-obligated, mandatorily redeemable preferred securities
         of subsidiary trust holding solely Junior Subordinated
         Debentures of SWEPCO                            110,000       8%         110,000     9%
    Long-term debt                                       645,527      45%         495,973    39%
                                                     ------------   ------    ------------ ------
                                                       1,421,644     100%       1,279,357   100%
                                                     ------------   ------    ------------ ------

Current Liabilities
    Long-term debt due within twelve months               45,595                   45,595
    Advances from affiliates                              13,289                  140,897
    Accounts payable                                      58,625                   60,689
    Payables to affiliates                                40,532                   37,353
    Customer deposits                                     14,803                   14,236
    Accrued taxes                                         16,655                   24,374
    Accrued interest                                      12,731                    9,792
    Over-recovered fuel costs                              3,612                    2,888
    Other                                                 15,364                   13,874
                                                     ------------             ------------
                                                         221,206                  349,698
                                                     ------------             ------------
Deferred Credits
    Accumulated deferred income taxes                    388,631                  380,495
    Investment tax credits                                56,528                   57,649
    Other                                                 15,216                   40,599
                                                     ------------             ------------
                                                         460,375                  478,743
                                                     ------------             ------------

                                                     $ 2,103,225              $ 2,107,798
                                                     ============             ============

</TABLE>



  The accompanying notes to consolidated financial statements as they relate to
                SWEPCO are an integral part of these statements.


                                       29
<PAGE>
Consolidated Statements of Cash Flows (unaudited)
Southwestern Electric Power Company
<TABLE>
<CAPTION>

                                                                   Three Months Ended
                                                                         March 31,
                                                               ----------------------------
                                                                 2000                 1999
                                                               --------            --------
                                                                        (thousands)
<S>                                                            <C>                 <C>

OPERATING ACTIVITIES
    Net Income                                                 $ 8,290             $ 12,653
    Non-cash Items Included in Net Income
        Depreciation and amortization                           28,698               27,403
        Deferred income taxes and investment tax credits         4,762               (4,510)
    Changes in Assets and Liabilities
        Accounts receivable                                      7,972               (4,130)
        Fuel inventory                                           1,297              (13,109)
        Accounts payable                                        (2,173)             (26,393)
        Payables to affiliates                                   3,179               (8,789)
        Accrued taxes                                           (7,719)              11,121
        Other deferred credits                                 (25,383)               4,582
        Other                                                    6,343               (2,909)
                                                               --------            --------
                                                                25,266               (4,081)
                                                               --------            --------
INVESTING ACTIVITIES
    Construction expenditures                                  (28,062)             (17,250)
    Other                                                       (2,645)                 383
                                                               --------            --------
                                                               (30,707)             (16,867)
                                                               --------            --------
FINANCING ACTIVITIES
    Redemption of preferred stock                                   --                   (1)
    Proceeds from issuance of long-term debt                   149,515                   --
    Retirement of long-term debt                                  (450)              (1,637)
    Change in advances from affiliates                        (127,608)              47,796
    Payment of dividends                                       (15,558)             (27,057)
                                                               --------            --------
                                                                 5,899               19,101
                                                               --------            --------

Net Change in Cash and Cash Equivalents                            458               (1,847)
Cash and Cash Equivalents at Beginning of Year                   2,018                4,444
                                                               --------            --------
Cash and Cash Equivalents at End of Period                     $ 2,476              $ 2,597
                                                               ========            ========
SUPPLEMENTARY INFORMATION
    Interest paid less amounts capitalized (includes
      distributions on Trust Preferred Securities)             $ 7,172             $ 14,485
                                                               ========            ========
    Income taxes paid                                          $ 1,205              $ 1,676
                                                               ========            ========

</TABLE>

  The accompanying notes to consolidated financial statements as they relate to
                SWEPCO are an integral part of these statements.

                                       30
<PAGE>

SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS


COMPARISON OF THE QUARTERS ENDED MARCH 31, 2000 AND 1999

      SWEPCO's  net income for  common  stock for the first  quarter of 2000 was
$8.2 million,  which was $4.4 million,  or 35%,  lower than the first quarter of
1999.  The decrease  resulted  primarily  from  increased  other  operating  and
maintenance expenses and increased interest expense, offset in part by increased
non-fuel revenues and lower taxes, other than income.

      Electric  operating revenues for the first quarter of 2000 increased $15.1
million,  or 8%, to $212.2  million  compared  to the same  period of 1999.  The
increase  resulted  primarily  from  increased  fuel-related  revenues  of $11.6
million due to higher fuel and  purchased  power  expenses as  discussed  in the
following  paragraph and increased  sales for resale to other  utilities of $3.4
million as a result of  increased  demand.  The  increase in  revenues  was also
affected by a $4.4 million true-up  adjustment under the final 1999 earnings cap
filing related to the Texas  Legislation.  See NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS  -  Electric  Utility   Restructuring   Legislation  for  additional
information. These increases were partially offset by decreased non-fuel-related
revenues of $1.1 million due  primarily  to rate  reductions  in  Louisiana  and
Arkansas  implemented  in  December  1999  and a $1.9  million  reclassification
related to CSW's transmission coordination agreement.

      Fuel and purchased power expenses  increased for the first quarter of 2000
compared to the same period in 1999. Fuel expense  increased  $13.1 million,  or
17%, to $89.4 million resulting primarily from increased  generation,  which was
offset in part by  decreased  average  unit fuel costs.  Average unit fuel costs
decreased  from $1.61 per MMbtu in 1999 to $1.56 per MMbtu in the first  quarter
of 2000 due to lower spot market coal and lignite prices.  Also  contributing to
the decrease in average unit fuel costs was a decrease in natural gas generation
because of its relatively  higher costs per MMbtu.  Purchased power expenses for
the first quarter of 2000 increased $5.5 million  compared to the same period in
1999 due primarily to an increase in firm energy contract purchases.

      Other operating expenses for the first quarter of 2000 were $33.7 million,
an increase of $3.6  million,  or 12%,  compared to the same period in 1999 as a
result of increased customer accounts expenses and increased insurance expenses,
which were offset in part by decreased  transmission  expenses.  The decrease in
transmission  expenses was due primarily to  reclassifications  related to CSW's
transmission coordination agreement.

      Maintenance  expenses for the first quarter of 2000 were $14.3 million, an
increase of $2.1 million,  or 17%, when compared to the same period in 1999, due
primarily  to increased  tree  trimming  maintenance  activities  and  increased
overhead power line maintenance activities.

      Depreciation  and  amortization  expenses were $27.4 million for the first
quarter of 2000, an increase of $1.2  million,  or 4%, when compared to the same
period in 1999 due to changes in depreciation rates associated with rate-related
settlements in Arkansas and Louisiana in 1999.

      Taxes,  other than income  decreased  $4.9 million,  or 31%, for the first
quarter of 2000  compared to the same period of 1999 as a result of decreased ad
valorem taxes expense and decreased franchise tax expense.


                                       31
<PAGE>

      Income taxes associated with utility  operations  during the first quarter
of 2000  decreased  $1.4 million,  a decrease of $2.4 million,  due primarily to
lower taxable income.

      Interest  charges on short-term and other debt increased $1.1 million as a
result of an increase in the level of short-term borrowings.


                                       32
<PAGE>




                                       WTU



                          WEST TEXAS UTILITIES COMPANY


                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.


                                       33
<PAGE>
Statements of Income (unaudited)
West Texas Utilities Company
<TABLE>
<CAPTION>

                                                                      Three Months Ended March 31,
                                                                      ------------------------------
                                                                          2000              1999
                                                                      ----------          ----------
                                                                               (thousands)
<S>                                                                   <C>                 <C>


Electric Operating Revenues                                             $ 96,535          $ 81,052
                                                                      ----------          ----------
Operating Expenses and Taxes
    Fuel                                                                  28,580            23,134
    Purchased power                                                       14,893             8,294
    Other operating                                                       19,761            20,133
    Maintenance                                                            4,862             4,178
    Depreciation and amortization                                         11,241            10,774
    Taxes, other than income                                               4,963             7,488
    Income taxes                                                           2,102              (247)
                                                                      ----------          ----------
                                                                          86,402            73,754
                                                                      ----------          ----------
Operating Income                                                          10,133             7,298
                                                                      ----------          ----------

Other Income and (Deductions)
    Allowance for equity funds used during construction                       62                96
    Other                                                                   (236)             (199)
    Non-operating income taxes                                                84               219
                                                                      ----------          ----------
                                                                             (90)              116
                                                                      ----------          ----------
Income Before Interest Charges                                            10,043             7,414
                                                                      ----------          ----------

Interest Charges
    Interest on long-term debt                                             5,088             5,088
    Interest on short-term debt and other                                  1,011             1,162
    Allowance for borrowed funds used during construction                   (241)             (143)
                                                                      ----------          ----------
                                                                           5,858             6,107
                                                                      ----------          ----------

Net Income                                                                 4,185             1,307
    Less: Preferred stock dividends                                           26                26
                                                                      ----------          ----------
Net Income for Common Stock                                              $ 4,159           $ 1,281
                                                                      ==========          ==========


</TABLE>

         The accompanying notes to financial statements as they relate t
                  WTU are an integral part of these statements.


                                       34
<PAGE>

Balance Sheets
West Texas Utilities Company
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                   March 31,       December 31,
                                                                     2000              1999
                                                                  (unaudited)        (audited)
                                                                 --------------    --------------
                                                                           (thousands)
<S>                                                              <C>               <C>

ASSETS

  Electric Utility Plant
    Production                                                       $ 429,449         $ 429,783
    Transmission                                                       220,394           220,479
    Distribution                                                       405,349           403,206
    General                                                            110,537           113,945
    Construction work in progress                                       25,524            15,131
                                                                 --------------    --------------
                                                                     1,191,253         1,182,544
  Less - Accumulated depreciation and amortization                     498,389           495,847
                                                                 --------------    --------------
                                                                       692,864           686,697
                                                                 --------------    --------------
Current Assets
    Cash                                                                 3,078             3,810
    Accounts receivable                                                 43,148            50,579
    Materials and supplies, at average cost                             13,936            14,029
    Fuel inventory, at LIFO cost                                        17,946            17,133
    Accumulated deferred income taxes                                      408                --
    Under-recovered fuel costs                                           9,291            14,652
    Prepayments and other                                                2,713             2,883
                                                                 --------------    --------------
                                                                        90,520           103,086
                                                                 --------------    --------------
Deferred Charges and Other Assets
    Deferred Oklaunion costs                                             7,421             8,352
    Other                                                               45,806            63,070
                                                                 --------------    --------------
                                                                        53,227            71,422
                                                                 --------------    --------------

                                                                     $ 836,611         $ 861,205
                                                                 ==============    ==============

</TABLE>




        The accompanying notes to financial statements as they relate to
                  WTU are an integral part of these statements.


                                       35
<PAGE>

Balance Sheets
West Texas Utilities Company
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                    March 31,               December 31,
                                                       2000                     1999
                                                   (unaudited)               (audited)
                                                  ---------------          ---------------
CAPITALIZATION AND LIABILITIES                                    (thousands)
<S>                                               <C>             <C>      <C>               <C>

Capitalization
    Common stock:   $25 par value
        Authorized:  7,800,000 shares
        Issued and outstanding: 5,488,560 shares       $ 137,214                $ 137,214
    Paid-in capital                                        2,236                    2,236
    Retained earnings                                    115,515                  115,856
                                                  ---------------          ---------------
                                                         254,965     49%          255,306       49%
                                                  --------------- -------  ---------------   -------

    Preferred stock                                        2,482     --%            2,482       --%
    Long-term debt                                       263,728     51%          263,686       51%
                                                                  -------                    -------
                                                  ---------------          ---------------
                                                         521,175    100%          521,474      100%
                                                  --------------- -------  ---------------   -------
                                                  ---------------          ---------------

Current Liabilities
    Long-term debt due within twelve months               40,000                   40,000
    Advances from affiliates                               4,602                   21,408
    Payables to affiliates                                15,401                   18,856
    Accounts payable                                      38,585                   39,611
    Accrued taxes                                         12,647                   12,458
    Accumulated deferred income taxes                         --                    1,653
    Accrued interest                                       8,525                    4,165
    Refund due customers                                   2,800                    6,000
    Other                                                  6,157                    4,799
                                                  ---------------          ---------------
                                                         128,717                  148,950
                                                  ---------------          ---------------
Deferred Credits
    Accumulated deferred income taxes                    145,008                  148,746
    Investment tax credits                                25,005                   25,323
    Income tax related regulatory liabilities, net        13,100                   13,057
    Other                                                  3,606                    3,655
                                                  ---------------          ---------------
                                                         186,719                  190,781
                                                  ---------------          ---------------

                                                       $ 836,611                $ 861,205
                                                  ===============          ===============


</TABLE>



        The accompanying notes to financial statements as they relate to
                  WTU are an integral part of these statements.


                                       36
<PAGE>
Statements of Cash Flows (unaudited)
West Texas Utilities Company
<TABLE>
<CAPTION>

                                                                           Three Months Ended
                                                                       --------------------------
                                                                                March 31,
                                                                          2000              1999
                                                                       --------          --------
                                                                              (thousands)
<S>                                                                    <C>               <C>

OPERATING ACTIVITIES
    Net Income                                                         $ 4,185           $ 1,307
    Non-cash Items Included in Net Income
        Depreciation and amortization                                   11,241            11,051
        Deferred income taxes and investment tax credits                (6,073)           (1,922)
    Changes in Assets and Liabilities
        Accounts receivable                                              7,431               367
        Fuel inventory                                                    (813)             (907)
        Accounts payable                                                (1,026)             (456)
        Payables to affiliates                                          (3,455)           (4,123)
        Accrued taxes                                                      189            (4,543)
        Accrued interest                                                 4,360             3,875
        Fuel recovery                                                    5,361             3,742
        Other deferred charges                                          16,776               578
        Other                                                           (1,310)             (875)
                                                                       --------          --------
                                                                        36,866             8,094
                                                                       --------          --------
INVESTING ACTIVITIES
    Construction expenditures                                          (15,284)          (12,445)
    Other                                                                 (982)           (2,077)
                                                                       --------          --------
                                                                       (16,266)          (14,522)
                                                                       --------          --------

FINANCING ACTIVITIES
    Payment of dividends                                                (4,526)           (7,026)
    Change in advances from affiliates                                 (16,806)           14,061
                                                                       --------          --------
                                                                       (21,332)            7,035
                                                                       --------          --------

Net Change in Cash and Cash Equivalents                                   (732)              607
Cash and Cash Equivalents at Beginning of Year                           3,810             2,093
                                                                       --------          --------
Cash and Cash Equivalents at End of Period                             $ 3,078           $ 2,700
                                                                       ========          ========

SUPPLEMENTARY INFORMATION
    Interest paid less amounts capitalized                             $ 1,214           $ 1,200
                                                                       ========          ========
    Income taxes paid                                                     $ --             $ 295
                                                                       ========          ========


</TABLE>

      The accompanying notes to financial statements as they relate to WTU
                    are an integral part of these statements.


                                       37
<PAGE>

WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS


COMPARISON OF THE QUARTERS ENDED MARCH 31, 2000 AND 1999

      Net income for common stock  increased $2.9 million to $4.2 million during
the first  quarter of 2000 from $1.3 million in the first  quarter of 1999.  The
increase was due primarily to increased non-fuel revenues and lower taxes, other
than income, offset in part by higher operating income taxes.

      Electric operating revenues increased $15.5 million,  or 19%, in the first
quarter  of 2000  when  compared  to the  first  quarter  of 1999.  Fuel-related
revenues  increased  $8.5 million in the first  quarter of 2000  compared to the
same period last year due primarily to higher fuel and purchased  power expenses
as discussed below. Non-fuel revenue increased $7.0 million in the first quarter
of 2000  compared  to the same  period  last  year due  primarily  to a  true-up
adjustment  under  the final  1999  earnings  cap  filing  related  to the Texas
Legislation.  See  ITEM 1.  NOTE 2.  LITIGATION  AND  REGULATORY  PROCEEDINGS  -
Electric Utility Restructuring  Legislation.  Also included in this increase was
an increase in revenues for services rendered but not yet billed.

      Fuel expense increased $5.4 million,  or 24%, in the first quarter of 2000
compared to the first  quarter of 1999,  due primarily to an increase in average
unit fuel cost from  $1.75 per MMbtu in 1999 to $2.40 per MMbtu in 2000  related
to an  increase  in the  spot  market  price of  natural  gas.  Purchased  power
increased $6.6 million to $14.9 million in the first quarter of 2000 compared to
the same period last year due primarily to increased economy energy purchases.

      Taxes,  other than income  decreased  $2.5 million in the first quarter of
2000  compared to the same period in 1999 due  primarily to lower ad valorem and
state franchise taxes.

      Income tax expense  associated  with  utility  operations  increased  $2.3
million in the first  quarter of 2000 compared to the same period last year as a
result of higher taxable income.



                                       38
<PAGE>


INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT

NOTE 1.  PRINCIPLES OF PREPARATION           CSW, CPL, PSO, SWEPCO, WTU

NOTE 2.  LITIGATION AND REGULATORY
         PROCEEDINGS                         CSW, CPL, PSO, SWEPCO, WTU

NOTE 3.  COMMITMENTS AND CONTINGENT
         LIABILITIES                         CSW, CPL, SWEPCO, WTU

NOTE 4.  COMMON STOCK AND DIVIDENDS          CSW, CPL, PSO, SWEPCO, WTU

NOTE 5.  PROPOSED AEP MERGER                 CSW, CPL, PSO, SWEPCO, WTU

NOTE 6.  BUSINESS SEGMENTS                   CSW

NOTE 7.  SOUTH AMERICAN INVESTMENTS          CSW

NOTE 8.  LONG-TERM DEBT                      CSW, CPL, SWEPCO


                                       39
<PAGE>


NOTES TO FINANCIAL STATEMENTS
(Unaudited)


1.     PRINCIPLES OF PREPARATION

       General
      The condensed  financial  statements of the Registrants have been prepared
by each  Registrant  pursuant to the rules and  regulations of the SEC.  Certain
information  and note  disclosures  normally  included in  financial  statements
prepared in accordance with generally accepted  accounting  principles have been
condensed  or omitted  pursuant  to such rules and  regulations,  although  each
Registrant  believes that the  disclosures  are adequate to make the information
presented not misleading. These condensed financial statements should be read in
conjunction  with  the  financial  statements  and  the  notes  included  in the
Registrants' Combined Annual Report on Form 10-K for the year ended December 31,
1999.

      The unaudited financial  information  reflects all adjustments of a normal
recurring  nature which are, in the opinion of  management  of such  Registrant,
necessary  for a fair  statement  of the results of  operations  for the interim
periods. Information for quarterly periods is affected by seasonal variations in
sales, rate changes, timing of fuel expense recovery and other factors.

      CPL Nuclear Decommissioning of STP
      At the end of  STP's  service  life,  decommissioning  is  expected  to be
accomplished using the  decontamination  method,  which is one of the techniques
acceptable to the NRC. Using this method, the  decontamination  activities occur
as soon as possible after the end of plant operations. Contaminated equipment is
cleaned and removed to a permanent disposal location,  and the site is generally
returned to its original condition.

      CPL's  decommissioning  costs are accrued and funded to an external  trust
over the  expected  service life of the STP units.  The  existing NRC  operating
licenses  will  allow the  operation  of STP Unit 1 until  2027 and Unit 2 until
2028. CPL pays annual  decommissioning  costs based on the estimated future cost
to decommission STP, including escalation for expected inflation to the expected
time of decommissioning.

      CPL estimates its portion of the costs of  decommissioning  STP to be $289
million in 1999 dollars based on a study  completed in 1999. CPL is accruing and
recovering these  decommissioning  costs through rates based on the service life
of STP at a rate of $8.2  million  per  year.  The funds  are  deposited  with a
trustee  under the terms of an  irrevocable  trust  and are  reflected  in CPL's
consolidated   balance  sheets  as  Nuclear   decommissioning   trust,   with  a
corresponding amount accrued in Accumulated depreciation.  On CSW's consolidated
balance sheets,  the irrevocable trust is included in Deferred Charges and Other
Assets, Other, with a corresponding amount accrued in Accumulated  depreciation.
In CSW's and CPL's consolidated  statements of income, the income related to the
irrevocable  trust is recorded in Other Income and  Deductions,  Other. In CPL's
consolidated   statements  of  income,  the  interest  expense  related  to  the
irrevocable trust is recorded in Interest  Charges,  Interest on short-term debt
and other.  In CSW's  consolidated  statements  of income the  interest  expense
related to the  irrevocable  trust is recorded in  Interest  and Other  Charges,
Interest  on  short-term  debt  and  other.  At  March  31,  2000,  the  nuclear
decommissioning trust balance was $91 million.

      Foreign Currency Translation
      The financial  statements of SEEBOARD U.S.A.,  which are included in CSW's
consolidated  financial statements,  have been translated from British pounds to
U.S.  dollars in  accordance  with SFAS No. 52. All assets and  liabilities  are
translated  at the  exchange  rate  at the  end of the  period  and  all  income

                                       40
<PAGE>

statement  items are translated at the average  exchange rate for the applicable
period.  All the  resulting  translation  adjustments  are recorded  directly to
Accumulated other  comprehensive  income on CSW's  Consolidated  Balance Sheets.
Cash flow statement items are translated at a combination of average, historical
and current exchange rates. The non-cash impact of the changes in exchange rates
on cash and cash  equivalents,  resulting  from the  translation of items at the
different  exchange  rates,  is shown on CSW's  Consolidated  Statements of Cash
Flows in Effect of exchange rate changes on cash and cash equivalents.

One British pound equals the following U.S. dollar amounts:

                                    2000        1999
                                  ---------   ----------
      At March 31                  $1.59        $1.61

      Weighted average for 3
      months ended March 31        $1.61        $1.62

      At December 31                 --         $1.62

      See NOTE 7. SOUTH AMERICAN  INVESTMENTS  for  information  regarding CSW's
investments in Brazil and Chile.

      Securities Available for Sale
      CSW accounts for its  investments in equity  securities in accordance with
SFAS No. 115. The investments have been designated as available for sale, and as
a result, are stated at fair value.  Unrealized holding gains and losses, net of
related taxes, are included in Accumulated other  comprehensive  income on CSW's
Consolidated  Balance Sheets.  Information related to these securities available
for sale as of March 31, 2000 is presented in the following table:

                                  Original   Unrealized Holding
                                    Cost       Gains/(Losses)     Fair Value
                                 ----------------------------------------------
                                                  (millions)

   Securities available for sale     $110            $(54)             $56


      As of March 31, 2000, CSW International has invested $110 million in stock
of a Chilean  electric  company.  Management  views its investment in Chile as a
long-term  investment  strategy and believes this  investment  continues to have
significant long-term value and that it is recoverable. Management will continue
to closely  evaluate the changes in the South American economy and its impact on
CSW International's investment in the Chilean electric company. See ITEM 1. NOTE
7. SOUTH AMERICAN INVESTMENTS for additional information.

      Components of Other Comprehensive Income
      The  following  table  provides the  components  that comprise the balance
sheet amounts in Accumulated other comprehensive income.

                                            March 31,    December 31,
               Components                     2000           1999
      -----------------------------------------------------------------
                                                  (millions)

      Foreign Currency Adjustments             $(7)            $6
      Unrealized Losses on Securities          (27)           (20)
      Minimum Pension Liability                 (4)            (4)
                                         ------------------------------
                                              $(38)          $(18)
                                         ------------------------------

                                       41
<PAGE>

      Risk Management
      CSW has, at times,  been exposed to currency and interest rate risks which
reflect the floating  exchange rate that exists between the U.S.  dollar and the
British pound. CSW has utilized certain risk management  tools,  including cross
currency swaps, foreign currency futures and foreign currency options, to manage
adverse  changes in  exchange  rates and to  facilitate  financing  transactions
resulting from CSW's acquisition of SEEBOARD.

      SEEBOARD has entered into contracts for  differences to reduce exposure to
fluctuations  in the price of electricity  purchased  from the United  Kingdom's
electricity power pool. This pool was established at privatization of the United
Kingdom's  electric  industry  for  the  bulk  trading  of  electricity  between
generators and suppliers.

      CSW accounts for these transactions as hedge transactions and any gains or
losses associated with the risk management tools are recognized in the financial
statements  at the time the hedge  transactions  are  settled.  CSW believes its
credit risk in these contracts is negligible.

      See ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK for
additional discussion of these contracts.

      Reclassifications
      Certain financial statement items for prior periods have been reclassified
to conform to the 2000 presentation.  These reclassifications did not impact net
income.


2.     LITIGATION AND REGULATORY PROCEEDINGS

      See the  Registrants'  Combined  Annual  Report  on Form 10-K for the year
ended December 31, 1999 for  additional  discussion of litigation and regulatory
proceedings.  Reference  is also  made to NOTE  3.  COMMITMENTS  AND  CONTINGENT
LIABILITIES  and ITEM 2.  MD&A  for  additional  discussion  of  litigation  and
regulatory matters.

      Electric Utility Restructuring Legislation
      On June 18,  1999,  legislation  was  signed  into law in Texas  that will
restructure the electric utility industry in the state. The new law, among other
things:

-  gives Texas customers of investor-owned utilities the opportunity to choose
   their electric provider beginning January 1, 2002;

-  provides for the recovery of stranded costs,  which are defined as the excess
   of net book value of generation assets over the defined market value of those
   assets;

-  requires reductions in nitrogen oxide and sulfur dioxide emissions;

-  provides a rate freeze until January 1, 2002 followed by a 6% rate  reduction
   for residential and small commercial customers,  an additional rate reduction
   for low-income customers and a number of customer protections; and

-  sets certain limits on capacity owned and controlled by power generation
   companies.

                                       42
<PAGE>

      Pursuant to the  legislation,  rural electric  cooperatives  and municipal
 electric  systems  can choose  whether to  participate  in retail  competition.
 Delivery of the electricity will continue to be the responsibility of the local
 electric  transmission  and distribution  utility company at regulated  prices.
 Each utility  must  unbundle its  business  activities  into a retail  electric
 provider,  a power  generation  company  and a  transmission  and  distribution
 utility.

      The Texas Electric Operating Companies filed their business separation, or
"unbundling",  plans with the Texas  Commission on January 10, 2000. The filings
give an overview of how the Texas Electric  Operating  Companies  could separate
into three separate companies to meet the requirements of the Texas Legislation.
Specifically,  the filing  describes  the financial  aspects of separating  each
company,  lists  the  functions  that  each of the new  business  entities  will
perform,  describes how each company will  physically  separate its  operations,
discusses the accounting aspects of separation,  describes how each company will
handle competitive  energy services,  and introduces interim and permanent codes
of conduct.  In March 2000, the Texas Commission ruled that CSW's proposed plans
were not in compliance with the Texas  Legislation.  CPL and WTU were ordered to
provide  revised plans by May 15, 2000,  and SWEPCO by June 1, 2000,  that would
place  legal  title  to the  generation  assets  and to the wire  assets  of the
companies  into separate  legal  entities by January 1, 2002.  Other  separation
issues were presented in a March 31, 2000 cost unbundling filing which will also
be updated to reflect the new structure required by the Texas Commission.

      During 1999, legislation was also enacted in Arkansas that will ultimately
restructure  the  electric  utility  industry in that state.  SWEPCO will file a
business unbundling plan in Arkansas in mid-2000.

      The financial  statements of the U.S.  Electric  Operating  Companies have
historically  reflected the effects of applying the requirements of SFAS No. 71.
Pursuant to those  requirements,  the U.S.  Electric  Operating  Companies  have
recorded  regulatory  assets  and  liabilities  (probable  future  revenues  and
refunds) to reflect the economic effect of cost-based regulation. When a company
determines  that its  operations or a segment of its  operations no longer meets
the criteria for applying SFAS No. 71, it is required to apply the provisions of
SFAS No. 101.  Pursuant to those  requirements and further guidance  provided in
EITF 97-4, a company is required to write-off  regulatory assets and liabilities
related to deregulated  operations,  unless recovery of such amounts is provided
through rates to be collected in a continuing regulated portion of the company's
operations.  Additionally,  it is required to  determine if any plant assets are
impaired under SFAS No. 121.

      Electric  utilities that have stranded  costs under the Texas  Legislation
are allowed to recover  generation-related  regulatory assets that otherwise may
not be recoverable in the future competitive  market. All or a majority of those
costs can be refinanced through  securitization,  which is a financing structure
designed  to provide  lower  financing  costs  than are  available  through  the
conventional  utility cost of capital model.  The  securitized  amounts are then
recovered through a non-bypassable  wires charge. On October 18, 1999, CPL filed
an  application  with the Texas  Commission  to securitize  approximately  $1.27
billion of its retail generation-related regulatory assets and approximately $47
million in other qualified costs. Hearings were held before the Texas Commission
in December 1999.

      On  February  10,  2000,  the  Texas  Commission  tentatively  approved  a
settlement,  which will permit CPL to securitize  approximately  $764 million of
regulatory assets. The Texas Commission final order authorized issuance of up to
$797  million of  securitization  bonds  including  $764 million for recovery of
stranded costs and $33 million for other qualified  costs.  The $764 million for
recovery of stranded  costs  reflects the recovery of $949 million of regulatory
assets  offset by $185  million to reflect  customer  benefits  associated  with
accumulated  deferred  income taxes.  CPL had previously  proposed to flow these
benefits  back to customers  over the 14-year term of the bonds.  An  additional
$287  million  of  regulatory  assets   originally   requested  by  CPL  in  its
securitization request has been included in the calculation of stranded costs in

                                       43
<PAGE>

CPL's March 31, 2000 filing to establish non-bypassable charges for transmission
and distribution service.

      On  April  11,  2000,  four  parties   appealed  the  Texas   Commission's
securitization  order to the Travis County District Court.  One of these appeals
challenges  the  ability  to  recover  securitization  charges  under  the Texas
Constitution. CPL will not be able to issue the securitization bonds until these
appeals are resolved. As a result, the securitization bonds are not likely to be
issued until 2001.

      As a result  of the  scheduled  deregulation  of  generation  in Texas and
Arkansas,  CSW concluded that it should  discontinue the application of SFAS No.
71 for the generation  portion of the business for CPL and WTU and the Texas and
Arkansas  jurisdictional  portions of the generation business for SWEPCO.  Under
the provisions of EITF 97-4, CPL's generation-related net regulatory assets were
transferred to the  transmission  and  distribution  portion of the business and
will be amortized as they are recovered through charges to customers. Management
currently believes that all generation-related regulatory assets for CPL will be
recovered as provided  under Texas  Legislation.  If future events were to occur
that made the recovery of these assets no longer  probable,  CPL would write-off
any non-recoverable portion of such assets as a non-cash charge to earnings.

      CPL's  amount of  regulatory  assets and  stranded  costs are subject to a
final  determination  by the Texas  Commission  in 2004.  The Texas  Legislation
provides  that all such finally  determined  stranded  costs will be  recovered.
Since  SWEPCO  and  WTU  are  not  expected  to have  net  stranded  costs,  all
generation-related  non-recoverable net regulatory assets were written off as an
extraordinary loss in 1999.

      Additionally, in 1999, the Texas Electric Operating Companies performed an
accounting  impairment  analysis  of  generation  assets  under SFAS No. 121 and
concluded  there  was no  impairment  of  generation  assets  at that  time.  An
impairment  analysis involves  estimating future net cash flows arising from the
use of an asset.  If the net cash flows  exceed the net book value of the asset,
then there is no  impairment  of the asset for  accounting  purposes.  The Texas
Electric Operating  Companies will continue to review their assets for potential
impairment if events or changes in circumstances indicate the carrying amount of
an asset may not be recoverable.

      The Texas Legislation also provides that each year during the 1999 through
2001 rate freeze period, utilities with stranded costs are required to apply any
earnings in excess of the most recently  approved cost of capital in a company's
last rate case (if issued on or after January 1, 1992) to reduce stranded costs.
As a result of this  earnings cap, CPL recorded a net charge to earnings of $8.8
million in the first  quarter of 2000 to reflect  the impact of this  provision.
Utilities without stranded costs must either flow such amounts back to customers
or make capital expenditures, at no charge to customers, to improve transmission
or distribution  facilities or to improve air quality. As a result, in the first
quarter of 2000, WTU recorded an increase to earnings of $2.1 million and SWEPCO
recorded an increase of $2.9 million to earnings from the effect of the earnings
cap under the Texas  Legislation.  The  adjustments  were based on estimates and
filings  for 1999 made in 2000 and are  subject  to final  determination  by the
Texas Commission.

      In March 2000, the Texas Electric  Operating  Companies filed earnings cap
reports and CPL filed its ECOM report with the Texas Commission.

      Beginning  January  1,  2002,  fuel  costs  will not be  subject  to Texas
Commission fuel  reconciliation  proceedings.  Consequently,  the Texas Electric
Operating  Companies  will  file a final  fuel  reconciliation  with  the  Texas
Commission  which reconciles their fuel costs through the period ending December
31, 2001.  These final fuel balances will be included in each company's  true-up
proceeding in 2004.


                                       44
<PAGE>

      CSW  continues  to analyze  the impact of the  electric  utility  industry
restructuring  legislation on the U.S. Electric Operating  Companies.  The Texas
Commission has established numerous task forces, including  representatives from
the Texas Electric  Operating  Companies,  to address various issues  associated
with the Texas Legislation and to provide guidance  regarding  implementation of
restructuring.

      Also see ITEM 2.  MD&A - Securitization of  Generation-related  Regulatory
Assets and Stranded Costs.

      CPL Fuel Factor Filing
      In January 2000, CPL filed with the Texas  Commission an  application  for
authority to implement an increase in fuel factors of $55.4  million,  or 16.5%,
on an annual basis  effective with the March 2000 billing  month.  Additionally,
CPL proposed to implement an interim fuel surcharge of $36.5 million,  including
accumulated interest over a six-month period to collect its under-recovered fuel
costs beginning in April 2000. In the two months  subsequent to the filing,  CPL
experienced  approximately  $12.7  million in  over-recoveries  of fuel expense,
including interest. Subsequently, CPL entered into a settlement providing for an
increase  in fuel  factors of $43.3  million or 12.9% and a  surcharge  of $24.7
million.  The  settlement  as  approved  by the  Texas  Commission  enabled  the
increased fuel factors to be  implemented in March 2000 and the surcharge  began
in April 2000.

      CPL Municipal Franchise Fee Litigation
      In May 1996,  the City of San Juan,  Texas  filed a class  action  suit in
Hidalgo County, Texas District Court on behalf of all cities served by CPL based
upon CPL's alleged  underpayment  of municipal  franchise  fees. The City of San
Juan's third amended petition,  filed in January 2000, asserted various contract
and tort claims  against CPL as well as certain audit rights.  The third amended
petition seeks actual damages of up to $200 million,  punitive  damages of up to
$100 million and  attorneys'  fees.  In December  1999,  the City of Weslaco was
added as an additional class representative.  In March 2000, the City of Weslaco
filed a fourth  amended  petition  that  asserts  claims for breach of contract,
conversion,  fraudulent inducement,  fraud, negligent misrepresentation,  unjust
enrichment,  breach of the higher public utility duty, and  declaratory  relief.
CPL filed a counterclaim  for any overpayment of franchise fees it may have made
as well as its  attorneys'  fees.  CPL also filed a motion to transfer  venue to
Nueces  County,  Texas,  and a plea to the  jurisdiction  and pleas in abatement
asserting that the Texas Commission has primary jurisdiction over the claims. In
May 1996 and December  1996,  respectively,  the Cities of Pharr,  Texas and San
Benito,  Texas filed individual suits making claims virtually identical to those
claimed  by the City of San Juan.  The suit  filed by the City of San Benito has
been voluntarily dismissed.

      In January 1997,  CPL filed an original  petition at the Texas  Commission
requesting  the  Texas  Commission  to  declare  its  jurisdiction   over  CPL's
collection  and payment of municipal  franchise  fees. In April 1997,  the Texas
Commission   issued  a  declaratory   order  in  which  it  declined  to  assert
jurisdiction  over the claims of the City of San Juan.  CPL  appealed  the Texas
Commission's decision to the Travis County, Texas District Court, which affirmed
the Texas  Commission  ruling on February 19, 1999.  CPL appealed this ruling to
the Austin  Court of Appeals.  In May 2000,  the Court of Appeals  affirmed  the
district court's decision.

      After the Texas  Commission's  order,  the Hidalgo  County  District Court
overruled  CPL's plea to the  jurisdiction.  In July 1997,  the  Hidalgo  County
District  Court  entered an order  certifying  the case as a class  action.  CPL
appealed this order to the Corpus  Christi Court of Appeals.  In February  1998,
the Corpus Christi Court of Appeals  affirmed the trial court's order certifying
the class.  CPL appealed the Corpus Christi Court of Appeals ruling to the Texas
Supreme  Court,  which  declined to hear the case.  In August 1998,  the Hidalgo
County   District  Court  ordered  the  case  to  mediation  and  suspended  all

                                       45
<PAGE>

proceedings pending the completion of the mediation. The mediation was completed
in December 1998 without resolution.

      On January 5, 1999, a class notice was mailed to each of the cities served
by CPL.  Over 90 of the 128  cities  declined  to  participate  in the  lawsuit.
However, CPL has pledged that if any final, non-appealable court decision in the
litigation awards a judgement against CPL for a franchise underpayment, CPL will
extend  the  principles  of  that   decision,   with  regard  to  the  franchise
underpayment,  to the cities that decline to participate in the litigation.  The
plaintiffs filed a motion to extend the time for the cities to decide whether to
participate  in the lawsuit.  In December  1999,  the court ruled that the class
would consist of approximately 30 cities,  and the plaintiffs'  motion to extend
the time for the cities to participate in the lawsuit was withdrawn.

      Although  CPL  believes  that it has  substantial  defenses to the cities'
claims and intends to defend  itself  against the cities'  claims and pursue its
counterclaims vigorously, management cannot predict the outcome of the municipal
franchise  fee  litigation or its impact on CSW's or CPL's results of operations
or financial position.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.

      CPL Valero Litigation
      In April  1998,  Valero  filed suit  against CPL in Nueces  County,  Texas
District Court, alleging claims for breach of contract and negligence.  Valero's
suit  seeks in excess of $11  million  as  damages  for  property  loss and lost
profits allegedly  incurred after an interruption of electricity to its facility
in Corpus  Christi,  Texas in April 1996.  The trial of this matter has been set
for October 2, 2000.  Management  cannot predict the outcome of this litigation.
However,  management believes that CPL has valid defenses to Valero's claims and
intends to defend the  matter  vigorously.  Management  also  believes  that the
ultimate  resolution of this matter will not have a material  adverse  impact on
CSW's or CPL's consolidated results of operations or financial condition.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.

      PSO PCB Cases
      PSO was named a defendant in petitions filed in state court in Oklahoma in
1996. The petitions allege that the plaintiffs suffered personal injury and fear
future  injury  as  a  result  of  contamination  by  PCBs  from  a  transformer
malfunction  that occurred in April 1982 at the Page Belcher Federal Building in
Tulsa,  Oklahoma.  Each of the plaintiffs  seeks actual and punitive  damages in
excess of $10,000.  All but four of the claims  arising from this  incident have
been settled or dismissed by the court. During 1999, 11 cases were settled. Four
cases remain pending. Management believes that PSO has defenses to the remaining
cases and  intends  to defend  them  vigorously.  Management  believes  that the
remaining  claims,  excluding  claims  for  punitive  damages,  are  covered  by
insurance and that the ultimate  resolution  of the remaining  lawsuits will not
have a material  effect on CSW's or PSO's  results of  operations  or  financial
condition.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.


                                       46
<PAGE>

      SWEPCO Lignite Mining Agreement Litigation
      SWEPCO and CLECO are each a 50% owner of Dolet Hills Power  Station Unit 1
and  jointly  own  lignite  reserves  in the Dolet  Hills  area of  northwestern
Louisiana.  In 1982,  SWEPCO and CLECO entered into a lignite  mining  agreement
with the DHMV,  a  partnership  for the mining and  delivery  of lignite  from a
portion of these reserves.

      On April 15,  1997,  SWEPCO  and CLECO sued DHMV and its  partners  in the
United States  District Court for the Western  District of Louisiana  seeking to
enforce various obligations of DHMV to SWEPCO and CLECO under the lignite mining
agreement,  including  provisions  relating  to the  quality  of  the  delivered
lignite,  pricing, and mine reclamation practices.  On June 15, 1997, DHMV filed
an answer denying the allegations in the suit and filed a counterclaim asserting
various  contract-related claims against SWEPCO and CLECO. SWEPCO and CLECO have
denied  the  allegations  contained  in the  counterclaims.  On January 8, 1999,
SWEPCO and CLECO  amended  the claims  against  DHMV in the lawsuit to include a
request that the lignite mining agreement be terminated.

      In April 2000,  the parties  agreed to settle the litigation by SWEPCO and
CLECO and agreed to buy DHMV's  interest in the mining  operations and to assume
related debt and other obligations.  The closing date for the settlement is June
30,  2000,  which can be extended  until  December  31, 2000 by agreement of the
parties.  The court has stayed the litigation until October 30, 2000 to give the
parties time to consummate the settlement agreement.

      Management  believes  that the  resolution  of this matter will not have a
material effect on SWEPCO's results of operations or financial condition.

      CSW Energy, Texas-New Mexico Power Company Phillips Litigation
      In May 1997, equipment operated by an unrelated third party allegedly came
in contact with a Texas-New  Mexico Power  Company transmission  line  rendering
Texas-New Mexico Power Company's Old Ocean switching  station  inoperable.  As a
result, Phillips' refinery, in Sweeny, Texas, lost power.

      In October  1997,  Phillips  filed suit  against  Texas-New  Mexico  Power
Company in the District  Court of Brazoria  County,  Texas,  seeking  damages in
excess of $36 million alleged to be caused by the loss of power to its refinery.
Texas-New Mexico Power Company denies any liability to Phillips.

      In June 1999,  Texas-New  Mexico Power Company joined Sweeny  Cogeneration
Limited  Partnership  as a third  party  defendant  to the  pending  litigation.
Texas-New  Mexico Power Company  alleged that during the  construction of Sweeny
Cogeneration Limited  Partnership's  cogeneration facility adjacent to Phillips'
refinery, Sweeny Cogeneration Limited Partnership negligently modified Texas-New
Mexico Power Company's equipment supplying power to the Phillips refinery.

      Sweeny  Cogeneration  Limited  Partnership  believes these allegations are
without  merit and intends to  vigorously  contest  all claims made  against it.
Management  is  unable to  predict  the  outcome  of this  litigation.  However,
management believes the claim is covered by insurance and the resolution of this
matter will not have a material adverse effect on CSW's results of operations or
financial condition.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.

                                       47
<PAGE>


      Other
      The  Registrants  are party to various  other  legal  claims,  actions and
complaints arising in the normal course of business.  Management does not expect
disposition  of  these  matters  to  have  a  material  adverse  effect  on  the
Registrants' results of operations or financial condition.


3.     COMMITMENTS AND CONTINGENT LIABILITIES

      SWEPCO Henry W. Pirkey Power Plant
      In connection with the South  Hallsville  lignite-mining  contract for its
Henry W. Pirkey Power Plant,  SWEPCO has agreed,  under certain  conditions,  to
assume the  obligations  of the mining  contractor.  As of March 31,  2000,  the
maximum  amount SWEPCO  believes it may have to assume is $65 million,  which is
the contractor's actual obligation outstanding at March 31, 2000.

      SWEPCO South Hallsville Lignite Mine
      As part of the process to receive a renewal of a Texas Railroad Commission
permit for lignite  mining at the South  Hallsville  lignite mine and  expansion
into the Marshall South Lignite Project area, SWEPCO has agreed to guarantee the
costs of mine reclamation of up to $85 million.  Since SWEPCO uses self-bonding,
the guarantee provides for SWEPCO to commit to use its resources to complete the
reclamation in the event the work is not completed by the third party miner.  At
March 31, 2000 the cost to reclaim the mine is estimated to be approximately $36
million.

      SWEPCO Marshall Street Site
      SWEPCO  owns a  tract  of  land  known  as the  Marshall  Street  site  in
Shreveport,  Louisiana,  which was previously a MGP site. The City of Shreveport
may  acquire  the  Marshall  Street  site from  SWEPCO to expand its  convention
center.  In  1999,   environmental   testing  was  performed  at  the  site  and
contaminants  were  discovered  that  could  be  related  to a  MGP.  SWEPCO  is
negotiating  with the City of Shreveport to determine  under what terms the city
may  acquire  the  Marshall  Street  site and who  would  pay for any  potential
clean-up  costs  related  to the site.  In the fourth  quarter  of 1999,  SWEPCO
accrued  $4.0  million for  SWEPCO's  portion of any  potential  clean-up  costs
related to the Marshall Street site.

      SWEPCO Wilkes Power Plant Copper Limit Compliance
      The EPA has issued to SWEPCO with respect to its Wilkes  power  plant,  an
administrative  order for wastewater permit violations related to copper limits.
Planned compliance activities,  including activities that have been conducted to
determine  the source of copper,  were  presented by SWEPCO to the EPA during an
administrative  meeting held on August 13, 1998. SWEPCO and the EPA negotiated a
$41,500  penalty.  The fine has been paid.  Although the issue is not officially
closed, no further action is expected.

      Clean Air Provisions of the Texas Legislation
      The Texas  Legislation  requires that  grandfathered  electric  generating
facilities be permited and reduce  emission  levels 50%. Final  regulations  are
still being  developed.  The  estimated  total costs to comply with the expected
regulations are  approximately  $1.5 million,  $1.0 million and $0.5 million for
CPL,  SWEPCO  and  WTU,  respectively.  Expenditures  have  begun  to  meet  the
requirements of the legislation.

      Proposed Regional Control Strategy Regulations
      The TNRCC adopted  regulations  that require  reductions in nitrogen oxide
emissions for existing permited electric generating facilities in the East Texas
Region  in  addition  to the  Clean  Air  provisions  of the  Texas  Legislation
discussed  above. The  implementation  date is May 2003 for CPL and May 2005 for
SWEPCO.  The current  estimate for  compliance  with the rules is as much as $38

                                       48
<PAGE>

million  for CPL and $151  million for SWEPCO in capital  projects  costs and as
much as $3  million  for CPL and $11  million  for SWEPCO in  additional  annual
operating costs.

      SEEBOARD London Underground Commitment
      SEEBOARD has committed  (pound)52  million,  or $83 million  (converted at
(pound)1.00 equals $1.59), for costs associated with its contract related to the
London  Underground  transportation  system.  In  1998,  SEEBOARD,  through  its
subsidiary,  SEEBOARD  Powerlink,  signed a $1.6 billion,  30-year contract as a
joint venture partner to operate,  maintain,  finance and renew the high-voltage
power distribution network of the London Underground.

      SEEBOARD Third Party Pension Litigation
      In the U.K.,  National  Grid and National  Power PLC have been involved in
continuing  litigation  regarding their use of actuarial  surpluses disclosed in
the 1992 and 1995 valuations of the electricity industry's  occupational pension
plan, the ESPS. A High Court decision in favor of the National Grid and National
Power PLC was  appealed.  On February 10, 1999,  the U.K.  Court of Appeal ruled
that the particular  arrangements made by these  corporations to dispose of part
of the surplus  were  invalid  due to  procedural  defects.  This  decision  was
confirmed at a later hearing of the U.K.  Court of Appeal held in May 1999.  The
National Grid has appealed to the House of Lords, the highest court of appeal in
the U.K.,  and a decision  is  expected  in late 2000 or early  2001.  The final
outcome of this appeal cannot presently be determined.

      SEEBOARD  employees are members of the ESPS, and SEEBOARD has made similar
use of  actuarial  surpluses  disclosed  in the 1992 and 1995  valuations.  As a
result of subsequent  legal  clarification  of certain  issues  arising from the
hearing  held in May  1999,  the  potential  impact of the  ruling  on  SEEBOARD
increased.  The amount of the payments  cancelled by SEEBOARD in  recognition of
these  surpluses  amounts to  approximately  (pound)49  million,  or $78 million
(converted at (pound)1.00 equals $1.59), excluding any accrued interest.

      The U.K. Court of Appeal did not order the National Grid or National Power
PLC to make payment into the ESPS, and the court  indicated that any requirement
to make such payments  would be extreme since the relevant  sections of the ESPS
are already in surplus. In the event that the court finally decides a payment by
SEEBOARD  into the  ESPS is  necessary,  such a  payment  is  likely  to  create
additional  pension fund surplus,  which SEEBOARD should then be able to utilize
over the next several years to reduce pension expense.

      Management  is unable  currently to predict the amount of any payment that
it may be required to make to ESPS,  but the payment  should not have a material
adverse affect on CSW's results of operations or financial condition.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD - LOOKING INFORMATION.

      Diversified Electric Commitments and Contingencies
      In June 1998, the 330 MW Sweeny cogeneration facility, an entity 50% owned
by CSW Energy,  obtained permanent project financing.  The $149 million of debt,
with an effective  interest rate of 7.4%, is  unconditionally  guaranteed by the
project and is  non-recourse  to CSW Energy and CSW.  Concurrently,  the project
repaid its outstanding note to CSW Energy for construction financing.


                                       49
<PAGE>

      In October 1999, GE Capital  Structured Finance Group purchased 50 percent
of the equity ownership of Sweeny Cogeneration Limited Partnership. CSW Energy's
after-tax  earnings from the proceeds of the transaction were  approximately $33
million and were recorded in the fourth quarter of 1999.  The agreement  between
CSW Energy and GE Capital  Structured Finance Group also provides for additional
payments  to CSW Energy  subject to  completion  of an  expansion  of the Sweeny
cogeneration facility.

      CSW Energy  began  construction  in August  1998 of a 500 MW power  plant,
known as Frontera,  in the Rio Grande Valley,  near the city of Mission,  Texas.
The natural  gas-fired  facility began simple cycle  operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in the second quarter
of  2000.  Pursuant  to  AEP's  and  CSW's  stipulated  agreement  with  several
intervenors in the state of Texas related to the AEP Merger, CSW Energy may sell
250 MW of Frontera.  See ITEM 1. NOTE 5. PROPOSED AEP MERGER for a discussion of
divestiture of generating capacity.

      CSW  International  and its 50% partner,  Scottish  Power plc have entered
into a joint venture to construct and operate the South Coast power  project,  a
400 MW combined cycle gas turbine power station in Shoreham, United Kingdom. CSW
International has guaranteed  approximately  (pound)19 million of the (pound)190
million  construction  financing.   Both  the  guarantee  and  the  construction
financing are  denominated in pounds  sterling.  The U.S.  dollar  equivalent at
March 31,  2000 would be $30  million  and $302  million  respectively,  using a
conversion  rate  of  (pound)1.00  equals  $1.59.  The  permanent  financing  is
unconditionally guaranteed by the project.  Construction of the project began in
March 1999, and commercial operation is expected to begin in late 2000.

      CSW Energy's Colorado  facilities are cogeneration  plants with steam as a
by-product of its electricity generation.  In February 2000, notice was received
that  the  lessee  of  the   facilities   utilizing  the  steam  had  filed  for
reorganization  under Chapter 11 of the Bankruptcy  Code,  which could result in
the lessee rejecting the leases. Should that occur,  management is positioned to
pursue other lease  arrangements.  Management  believes the  resolution  of this
matter will not have a material adverse effect on CSW's results of operations or
financial condition.  As of March 31, 2000, the lessee was continuing to operate
the facilities under Chapter 11 protection.

      CSW, CSW Energy and CSW International  have provided letters of credit and
guarantees  on  behalf  of  CSW  Energy  and  CSW   International   projects  of
approximately $78 million,  $41 million, and $232 million,  respectively,  as of
March 31, 2000.

      Numanco Commitment
      Numanco, L.L.C., which is a subsidiary of CSW Energy Services, Inc., and
provides staffing services for nuclear-powered electric generating plans, has a
bank commitment of $8.5 million to help fund its operations.  CSW has guaranteed
the bank commitment on behalf of Numanco, L.L.C.


4.     COMMON STOCK AND DIVIDENDS

      CSW's basic  earnings  per share of common  stock are computed by dividing
net income for common stock by the average  number of common shares  outstanding
for the respective  periods.  CSW's dividends per common share reflect per share
amounts paid for each of the respective periods.

      At  March  31,  2000,  approximately  $1.5  billion  of  CSW's  subsidiary
companies'  retained  earnings were  available for payment of cash  dividends by
such  subsidiaries  to CSW.  The  amounts of  retained  earnings  available  for
dividends  attributable to each the U.S. Electric  Operating  Companies at March
31, 2000 were as follows.

CPL - $734 million  PSO - $127 million SWEPCO - $281 million WTU - $116 million


                                       50
<PAGE>


5.    PROPOSED AEP MERGER

      On December 22, 1997, CSW and AEP announced that their boards of directors
had  approved a  definitive  merger  agreement  for a tax-free,  stock-for-stock
transaction. The combined company would serve more than 4.8 million customers in
11 states and  approximately 4 million  customers  outside the United States. On
May 27, 1998, AEP shareholders approved the issuance of the additional shares of
stock  required  to complete  the  merger.  On May 28,  1998,  CSW  stockholders
approved the merger.  On December 16, 1999, the merger  agreement was amended to
extend the term of the agreement to June 30, 2000.  After June 30, 2000,  either
party may terminate the merger agreement if the merger has not been consummated.

      AEP is subject  to the  information  requirements  of the  Securities  and
Exchange Act of 1934, as amended, and in accordance therewith, files reports and
other information with the SEC. For additional  information  related to AEP, see
AEP's Current  Reports on Form 8-K, its  Quarterly  Reports on Form 10-Q and its
Annual Report on Form 10-K, and the documents referenced therein.

      Under the AEP merger agreement, each common share of CSW will be converted
into 0.6 share of AEP common stock. CSW stockholders  will own approximately 40%
of the combined  company.  CSW plans to continue to pay  dividends on its common
stock  until the closing of the AEP Merger at  approximately  the same times and
rates per share as in 1999, subject to continuing  evaluation of CSW's earnings,
financial condition and other factors by the CSW board of directors.

      Cook Nuclear Plant
      The Cook Nuclear  Plant was shut down in  September  1997 due to questions
regarding the  operability  of certain  safety  systems that arose during an NRC
architect engineer design inspection.  The two-unit,  220 MW Cook Plant is owned
and  operated  by  AEP's  subsidiary,   Indiana  Michigan  Power  Company.   The
confirmatory  action  letter  was issued in  September  1997  requiring  Indiana
Michigan Power company to address certain issues identified in the letter.

      In February 2000,  Indiana  Michigan Power Company was notified by the NRC
that the confirmatory action letter had been closed. Closing of the confirmatory
action letter is one of the key approvals needed to restart the nuclear units.

      Progress to restart the units  continues.  Refueling  of Unit 2, the first
unit scheduled to restart, was completed on April 14, 2000. The NRC's final Unit
2 pre-restart  inspection began on May 8, 2000, which coincides with the planned
reactor heat-up of Unit 2 and the return to operational  service of common plant
systems. When testing and other work required for restart are complete,  Indiana
Michigan  Power Company will seek  concurrence  from the NRC to return Unit 2 to
service.  Refueling  and  maintenance  work to restart  Unit 1 will be performed
after Unit 2 is returned to service.  Any issues or difficulties  encountered in
testing of equipment as part of the restart  process  could delay the restart of
the units.

      Expenditures   to  restart   the  Cook  units  are   estimated   to  total
approximately $574 million. Through March 31, 2000, $453 million has been spent.

      Merger Regulatory Approvals
      The merger is  conditioned,  among  other  things,  upon the  approval  of
several state and federal  regulatory  agencies.  Some of the merger  conditions
cannot be waived by the parties.

      State Regulatory Commissions
      The U.S.  Electric  Operating  Companies  have  received  approval for the
merger  from  their  respective   state  regulatory   commissions  in  Arkansas,
Louisiana, Oklahoma and Texas.


                                       51
<PAGE>

      FERC
      On April 30, 1998,  AEP and CSW jointly  filed a request with the FERC for
approval of their proposed  merger.  On March 15, 2000,  the FERC  conditionally
approved the merger. Conditions placed on the merger include:

-  Transfer of operational  control of AEP's east and west transmission  systems
   to a fully-functioning,  FERC-approved regional transmission  organization by
   December  15, 2001,  which is the same  implementation  date  included in the
   FERC's general order for regional transmission  organizations that applies to
   all transmission-owning utilities.

-  Two interim  transmission-related  mitigation  measures  consisting of market
   monitoring and independent  calculation and posting of available transmission
   capacity to monitor the operation of AEP's east transmission system.

-  Divestiture of 550 MW of generating  capacity comprised of 300 MW of capacity
   in SPP and 250 MW of capacity in ERCOT.  The FERC will require AEP and CSW to
   divest their entire ownership interest in the generating  facilities that are
   to be divested.  Alternatively,  AEP and CSW may choose to divest the same or
   greater  amount  of  capacity  from  different  generating  plants  in  their
   entirety.  However, such generating plants must be of similar cost, operation
   and location  characteristics  of  generating  plants AEP and CSW  originally
   proposed.

-  AEP and CSW must complete divestiture of the ERCOT capacity by March 15, 2001
   and divestiture of the SPP capacity by July 1, 2002.

      The  FERC  found  that  certain  energy  sales in SPP and  ERCOT  would be
reasonable and effective  interim  mitigation  measures until  completion of the
required SPP and ERCOT divestitures.  The FERC will require the proposed interim
energy sales to be in effect when the merger is consummated.

      On March 31, 2000, AEP and CSW submitted  their  compliance  filing to the
FERC.  The filing  outlined  AEP's and CSW's plans to comply with the conditions
placed  on  the  merger  by  the  FERC  in  its  order  issued  March  15,  2000
conditionally approving the merger. As part of the filing, AEP and CSW requested
the FERC to  modify  its order to allow the  merger to be  completed  on May 15,
2000,  if the SEC has approved the merger by that date.  The FERC's merger order
required  AEP and CSW to make the  compliance  filing  at  least 60 days  before
completing the merger.

      On April 14,  2000,  AEP and CSW filed a request  for  rehearing  with the
FERC. In the request for  rehearing,  AEP and CSW noted that they have agreed to
implement the interim measures  specified in the FERC's merger order and further
stated that they do not expect the FERC to rule,  prior to  consummation  of the
merger,  on the issues  raised in the rehearing  request.  AEP and CSW requested
that the FERC reconsider the evidence of record regarding:

-  the FERC's  conclusion  that the merger  creates  vertical  market power (the
   potential  for  manipulation  of  transmission  due  to  the  combination  of
   generation and transmission assets); and

-  the FERC's ordered modification of the system energy pricing mechanism.

      In addition,  two other intervening  parties filed requests for rehearing.
One party had requested the merger be rejected  unless FERC ordered  divestiture
of certain generation and transmission  assets, but the request was subsequently
withdrawn.  The other party requested the merger be rejected due to market power
concerns.


                                       52
<PAGE>

      NRC
      On June 19, 1998, CPL filed a license  transfer  application  with the NRC
requesting  the NRC's  consent  to the  indirect  transfer  of  control of CPL's
interests in the NRC licenses issued for STP from CSW to AEP. CPL would continue
to own its  25.2%  interest  in STP,  and  CPL's  name  would  remain on the NRC
operating  license.  On November 5, 1998, the NRC approved the license  transfer
application  with a condition  that the merger must be completed by December 31,
1999. The NRC has extended the condition relating to completion of the merger to
June 30, 2000.

      SEC
      On October 13, 1998, AEP and CSW jointly filed an application with the SEC
for approval of the proposed merger.  The SEC merger filing requests approval of
the merger and related  transactions and outlines the expected  combined company
benefits of the merger to AEP and CSW  customers and  shareholders.  Since then,
AEP and CSW have filed several  amendments to the  application.  Several parties
have filed petitions opposing the proposed merger at the SEC.

      Other Federal
      The FCC has  approved  the  transfer of control of licenses of several CSW
entities to AEP, which will be effective upon completion of the proposed merger.

      The  proposed  AEP  merger  has  received  antitrust  clearance  from  the
Department of Justice under the Hart-Scott-Rodino  Antitrust Improvements Act of
1976.

      United Kingdom
      The United Kingdom's  Department of Trade and Industry approved the common
ownership of the United Kingdom entities that would result from the proposed AEP
merger, subject to certain conditions concerning the separate operation of their
respective distribution and supply businesses.

      Other
      AEP and CSW have reached  settlements with the Indiana Utility  Regulatory
Commission,  the Kentucky Public Service Commission, the Missouri Public Service
Commission,  the  Michigan  Public  Service  Commission  and  various  wholesale
customers and  intervenors  in the FERC merger  proceeding.  The Public  Utility
Commission  of Ohio has issued a decision  stating that it would notify the FERC
that it is no longer opposed to AEP's proposed merger with CSW and that it would
no longer seek conditions to the merger.  AEP and CSW have ratified a settlement
agreement with local unions of the IBEW  representing  employees of AEP and CSW,
and , as part of the  settlement,  the IBEW local  unions have  withdrawn  their
opposition  to the merger.  AEP has ratified a settlement  agreement  with local
unions  of  the  UWUA  representing  employees  of  AEP,  and,  as  part  of the
settlement, the UWUA local unions will not oppose the merger.

      Completion of the Merger
      AEP and CSW have  targeted  consummation  of the AEP  Merger in the second
quarter  of 2000.  The  merger is  conditioned,  among  other  things,  upon the
approval  of  several  state  and  federal  regulatory  agencies.  All  of  such
approvals, except from the SEC, have been obtained. The transaction must satisfy
many  conditions,  including  the  condition  that it must be accounted for as a
pooling of interests.  The parties may not waive some of these  conditions.  AEP
and CSW continue the process of seeking regulatory  approvals,  but there can be
no assurance as to when, on what terms or whether the required approvals will be
received.  After  June 30,  2000,  either  CSW or AEP may  terminate  the merger
agreement if all of the conditions to their respective obligations to close have
not been  satisfied.  There  can be no  assurance  that the AEP  Merger  will be
consummated.


                                       53
<PAGE>

      Merger Costs
      As of March 31, 2000,  CSW had deferred  $46.2 million in costs related to
the AEP  Merger on its  consolidated  balance  sheet,  which  will be charged to
expense if AEP and CSW do not complete their proposed merger.


6.    BUSINESS SEGMENTS

      CSW's  business  segments  include  the U.S.  Electric  and U.K.  Electric
segments. The U.S. Electric segment is comprised of CSW's four domestic electric
operating  companies,  CPL, PSO,  SWEPCO and WTU. The U.K.  Electric  segment is
comprised of CSW's foreign electric operating company,  SEEBOARD U.S.A. The U.S.
Electric  segment's  primary  business  is  the  generation,   transmission  and
distribution of electricity. The U.K. Electric segment's primary business is the
supply and distribution of electricity. Financial data for the business segments
for the periods covered in this Form 10-Q is in the following table.

<TABLE>
<CAPTION>

                                                                Other   Eliminations      CSW
                                   U.S. Electric U.K. Electric Segments & Reconciling Consoldiated
                                   ----------------------------------------------------------------
                                                               (millions)
<S>                                <C>           <C>           <C>      <C>           <C>

Three months ended March 31, 2000
   Operating Revenues               $764            $485          $57       ($7)        $1,299
   Net Income/(Loss) for
    Common Stock                      23              31          (4)       (12)            38
Total Assets at March 31, 2000     9,130           3,028       2,534       (860)        13,832
Total Assets at December 31, 1999  9,239           3,024       2,688       (789)        14,162


Three months ended March 31, 1999
   Operating Revenues               $697            $476         $60        ($8)        $1,225
   Net Income/(Loss) for
    Common Stock                      32              27          --        (14)            45
Total Assets at March 31, 1999     9,014           2,966       2,579       (885)        13,674
Total Assets at December 31, 1998  8,994           3,032       2,745       (874)        13,897
</TABLE>


7.    SOUTH AMERICAN INVESTMENTS

      At March 31, 2000, CSW  International  owned a 44% equity interest in Vale
which it had purchased for a total of $149 million. The investment is covered by
a put option, which, if exercised, requires Vale to purchase CSW International's
shares  at  a  minimum  price  equal  to  the  U.S.  dollar  equivalent  of  CSW
International's  purchase price. As a result,  management has concluded that CSW
International's  investment  carrying  amount will not be reduced  below the put
option value unless  there is deemed to be a permanent  impairment.  Since 1999,
Vale has experienced losses of approximately $22 million, net of tax, related to
the devaluation of the Brazilian Real.  Pursuant to the put option  arrangement,
these losses are not  reflected in the  carrying  value of the Vale  investment.
Conversely,  CSW International  will not recognize any future earnings from Vale
until the losses are recovered.

      As of March 31, 2000, CSW International had invested $110 million in stock
in a Chilean  electric  company.  The  investment  is  classified  as securities
available  for sale.  Based on the  current  market  value of the shares and the
quarter end foreign exchange rate, the value of the investment at March 31, 2000
was $56 million. The reduction in the carrying value of this investment has been
reflected in Other  Comprehensive  Income in CSW's  Consolidated  Statements  of
Stockholders' Equity.

      Management   views  its  investments  in  South  America  as  a  long-term
investment strategy and believes these investments  continue to have significant
long-term  value and that they are  recoverable.  Management  will  continue  to

                                       54
<PAGE>

closely evaluate the changes in these South American  economies and their impact
on these investments.


8.    LONG-TERM DEBT

      In February 2000, CPL sold $150 million of unsecured  floating rate notes.
The bonds have a two-year  final  maturity  of  February  22,  2002,  but may be
redeemed at par after one year.  The interest  rate will reset  quarterly at the
then current  three-month  LIBOR plus 0.45%.  The initial rate, set February 18,
2000, was 6.56%. Net proceeds of $149.6 million were used to refund $100 million
of FMBs maturing April 1, 2000 and to repay a portion of short-term debt.

      In March 2000, CPL reacquired $50 million of its 7 1/2% Series AA FMBs due
March 1, 2020. The reacquisition was funded from the issuance of Series 1999B in
December 1999 which was placed in a special deposit for reacquisition.

      In March 2000, SWEPCO sold $150 million of unsecured  floating rate notes.
The notes have a two-year  final  maturity of March 1, 2002, but may be redeemed
at par after one year.  The  interest  rate  will  reset  quarterly  at the then
current  three-month  LIBOR plus 0.23%.  The initial  rate set March 1, 2000 was
6.34%.  Net  proceeds of $149.6  million were used to refund $45 million of FMBs
maturing  April  1,  2000 and  repay  of a  portion  of  outstanding  short-term
indebtedness.

      In March 2000, $10 million of PSO's 6.43% medium-term notes matured.

                                       55
<PAGE>


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

      Reference  is made to  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations included in the Registrants' Combined Annual
Report on Form 10-K for the year ended December 31, 1999. Reference is also made
to each  Registrant's  unaudited  Financial  Statements  and  related  Notes  to
Financial Statements included herein. The information included therein should be
read in  conjunction  with,  and is essential to  understanding,  the  following
discussion and analysis.


RESULTS OF OPERATIONS

      Reference  is  made  to  ITEM  1.  FINANCIAL  STATEMENTS  for  each of the
Registrants'  RESULTS OF  OPERATIONS  for the three month period ended March 31,
2000.


LIQUIDITY AND CAPITAL RESOURCES

      Overview of CSW Operating, Investing, and Financing Activities
      Cash  inflows  from  operating  activities  increased  $32 million to $281
million for the first quarter of 2000 compared to the same period last year. The
increase  in cash  inflows  was due  primarily  to lower  levels of  payments on
accounts  payable  and  lower  levels  of fuel  inventories  for the  comparison
periods.  Partially  offsetting  the  increase in cash  inflows  from  operating
activities  was a lower  decrease in accounts  receivable  balances and a larger
decrease in tax accruals for the comparison periods.

      Cash  outflows  from  investing  activities  increased $16 million to $199
million  for the first  quarter of 2000  compared to the same period a year ago.
The  increase  in these cash  outflows  was due  primarily  to higher  levels of
construction  expenditures  in 2000 at the U.S.  Electric  Operating  Companies.
Partially offsetting the increase in cash outflows from investing activities was
a lower level of spending for CSW Energy and CSW International projects.

      Cash outflows from  financing  activities  increased  $114 million to $212
million for the first  quarter of 2000  compared to the first  quarter  1999 due
primarily to short-term debt reductions at CPL and SWEPCO.  Also contributing to
these increased cash outflows were higher levels of maturities of long-term debt
at CPL  and  PSO.  Partially  offsetting  the  increase  in cash  outflows  from
financing  activities  were cash inflows from the sale of long-term  debt at CPL
and SWEPCO, as well as a special deposit related to debt reacquisitions at CPL.

      Construction Expenditures
      CSW's construction expenditures, including allowance for funds used during
construction,  totaled  $173  million for the three months ended March 31, 2000.
Such expenditures for the U.S. Electric Operating Companies totaled $46 million,
$35  million,  $29  million  and $16  million,  for CPL,  PSO,  SWEPCO  and WTU,
respectively. Construction expenditures at the U.S. Electric Operating Companies
were  primarily  for  improvements  to  existing  production,  transmission  and
distribution facilities.  The improvements are required to meet the needs of new
customers and to satisfy the changing  requirements of existing  customers.  CSW
anticipates  that the majority of the funds  required for  construction  for the
remainder of the year will be provided  from  internal  sources.  However,  some
long-term financing will likely be required.

      Other Financing Issues
      The CSW  System  uses  short-term  debt to meet  fluctuations  in  working
capital  requirements  and other interim  capital needs.  CSW has  established a
system  money  pool to  coordinate  short-term  borrowings  for  certain  of its

                                       56
<PAGE>

subsidiaries,  primarily the U.S. Electric Operating Companies. In addition, CSW
also incurs borrowings for other subsidiaries that are not included in the money
pool. As of March 31, 2000, CSW had revolving  credit  facilities  totaling $1.4
billion to back up its commercial paper program. On April 20, 2000, CSW obtained
an additional $300 million  revolving  credit facility to back up its commercial
paper program.

      In February 2000, CPL sold $150 million of unsecured  floating rate notes.
The bonds have a two-year  final  maturity  of  February  22,  2002,  but may be
redeemed at par after one year.  The interest  rate will reset  quarterly at the
then current  three-month  LIBOR plus 0.45%.  The initial rate, set February 18,
2000, was 6.56%. Net proceeds of $149.6 million were used to refund $100 million
of FMBs maturing  April 1, 2000 and to repay a portion of short-term  debt.  CPL
presently  plans to replace  FMBs with  unsecured  debt,  which is  expected  to
provide more financial flexibility as CPL unbundles its electric operations.

      In March 2000, CPL reacquired $50 million of its 7 1/2% Series AA FMBs due
March 1, 2020. The reacquisition was funded from the issuance of Series 1999B in
December 1999 which was placed in a special deposit for reacquisition.

      In March 2000, SWEPCO sold $150 million of unsecured  floating rate notes.
The notes have a two-year  final  maturity of March 1, 2002, but may be redeemed
at par after one year.  The  interest  rate  will  reset  quarterly  at the then
current  three-month  LIBOR plus 0.23%.  The initial  rate set March 1, 2000 was
6.34%.  Net  proceeds of $149.6  million were used to refund $45 million of FMBs
maturing  April  1,  2000 and  repay  of a  portion  of  outstanding  short-term
indebtedness.

      In March 2000, $10 million of PSO's 6.43% medium-term notes matured.

      CPL  anticipates issuing  securitization bonds in 2001 due to appeals from
the  Texas  Commission's  final  order in the  securitization  proceedings.  The
preceding statement is a forward-looking statement within the meaning of Section
21E of the  Exchange  Act.  Actual  results  may  differ  materially  from  such
projected  information  due  to  changes  in  the  underlying  assumptions.  See
FORWARD-LOOKING INFORMATION.


PROPOSED AEP MERGER

      On December 22, 1997, CSW and AEP announced that their boards of directors
had  approved a  definitive  merger  agreement  for a tax-free,  stock-for-stock
transaction. The combined company would serve more than 4.8 million customers in
11 states and  approximately 4 million  customers  outside the United States. On
May 27, 1998, AEP shareholders approved the issuance of the additional shares of
stock  required  to complete  the  merger.  On May 28,  1998,  CSW  stockholders
approved the merger.  On December 16, 1999, the merger  agreement was amended to
extend the term of the agreement to June 30, 2000.  After June 30, 2000,  either
party may terminate the merger agreement if the merger has not been consummated.

      AEP is subject  to the  information  requirements  of the  Securities  and
Exchange Act of 1934, as amended, and in accordance therewith, files reports and
other information with the SEC. For additional  information  related to AEP, see
AEP's Current  Reports on Form 8-K, its  Quarterly  Reports on Form 10-Q and its
Annual Report on Form 10-K, and the documents referenced therein.

      Under the AEP merger agreement, each common share of CSW will be converted
into 0.6 share of AEP common stock. CSW stockholders  will own approximately 40%
of the combined  company.  CSW plans to continue to pay  dividends on its common
stock  until the closing of the AEP Merger at  approximately  the same times and

                                       57
<PAGE>


rates per share as in 1999, subject to continuing  evaluation of CSW's earnings,
financial condition and other factors by the CSW board of directors.

      Cook Nuclear Plant
      The Cook Nuclear  Plant was shut down in  September  1997 due to questions
regarding the  operability  of certain  safety  systems that arose during an NRC
architect engineer design inspection.  The two-unit,  220 MW Cook Plant is owned
and  operated  by  AEP's  subsidiary,   Indiana  Michigan  Power  Company.   The
confirmatory  action  letter  was issued in  September  1997  requiring  Indiana
Michigan Power company to address certain issues identified in the letter.

      In February 2000,  Indiana  Michigan Power Company was notified by the NRC
that the confirmatory action letter had been closed. Closing of the confirmatory
action letter is one of the key approvals needed to restart the nuclear units.

      Progress to restart the units  continues.  Refueling  of Unit 2, the first
unit scheduled to restart, was completed on April 14, 2000. The NRC's final Unit
2 pre-restart  inspection began on May 8, 2000, which coincides with the planned
reactor heat-up of Unit 2 and the return to operational  service of common plant
systems. When testing and other work required for restart are complete,  Indiana
Michigan  Power Company will seek  concurrence  from the NRC to return Unit 2 to
service.  Refueling  and  maintenance  work to restart  Unit 1 will be performed
after Unit 2 is returned to service.  Any issues or difficulties  encountered in
testing of equipment as part of the restart  process  could delay the restart of
the units.

      Expenditures   to  restart   the  Cook  units  are   estimated   to  total
approximately $574 million. Through March 31, 2000, $453 million has been spent.

      Merger Regulatory Approvals
      The merger is  conditioned,  among  other  things,  upon the  approval  of
several state and federal  regulatory  agencies.  Some of the merger  conditions
cannot be waived by the parties.

      State Regulatory Commissions
      The U.S.  Electric  Operating  Companies  have  received  approval for the
merger  from  their  respective   state  regulatory   commissions  in  Arkansas,
Louisiana, Oklahoma and Texas.

      FERC
      On April 30, 1998,  AEP and CSW jointly  filed a request with the FERC for
approval of their proposed  merger.  On March 15, 2000,  the FERC  conditionally
approved the merger. Conditions placed on the merger include:

-  Transfer of operational  control of AEP's east and west transmission  systems
   to a fully-functioning,  FERC-approved regional transmission  organization by
   December  15, 2001,  which is the same  implementation  date  included in the
   FERC's general order for regional transmission  organizations that applies to
   all transmission-owning utilities.

-  Two interim  transmission-related  mitigation  measures  consisting of market
   monitoring and independent  calculation and posting of available transmission
   capacity to monitor the operation of AEP's east transmission system.

-  Divestiture of 550 MW of generating  capacity comprised of 300 MW of capacity
   in SPP and 250 MW of capacity in ERCOT.  The FERC will require AEP and CSW to
   divest their entire ownership interest in the generating  facilities that are
   to be divested.  Alternatively,  AEP and CSW may choose to divest the same or
   greater  amount  of  capacity  from  different  generating  plants  in  their
   entirety.  However, such generating plants must be of similar cost, operation

                                       58
<PAGE>

   and location  characteristics  of  generating  plants AEP and CSW  originally
   proposed.

-  AEP and CSW must complete divestiture of the ERCOT capacity by March 15, 2001
   and divestiture of the SPP capacity by July 1, 2002.

      The  FERC  found  that  certain  energy  sales in SPP and  ERCOT  would be
reasonable and effective  interim  mitigation  measures until  completion of the
required SPP and ERCOT divestitures.  The FERC will require the proposed interim
energy sales to be in effect when the merger is consummated.

      On March 31, 2000, AEP and CSW submitted  their  compliance  filing to the
FERC.  The filing  outlined  AEP's and CSW's plans to comply with the conditions
placed  on  the  merger  by  the  FERC  in  its  order  issued  March  15,  2000
conditionally approving the merger. As part of the filing, AEP and CSW requested
the FERC to  modify  its order to allow the  merger to be  completed  on May 15,
2000,  if the SEC has approved the merger by that date.  The FERC's merger order
required  AEP and CSW to make the  compliance  filing  at  least 60 days  before
completing the merger.

      On April 14,  2000,  AEP and CSW filed a request  for  rehearing  with the
FERC. In the request for  rehearing,  AEP and CSW noted that they have agreed to
implement the interim measures  specified in the FERC's merger order and further
stated that they do not expect the FERC to rule,  prior to  consummation  of the
merger,  on the issues  raised in the rehearing  request.  AEP and CSW requested
that the FERC reconsider the evidence of record regarding:

-  the FERC's  conclusion  that the merger  creates  vertical  market power (the
   potential  for  manipulation  of  transmission  due  to  the  combination  of
   generation and transmission assets); and

-  the FERC's ordered modification of the system energy pricing mechanism.

      In addition,  two other intervening  parties filed requests for rehearing.
One party had requested the merger be rejected  unless FERC ordered  divestiture
of certain generation and transmission  assets, but the request was subsequently
withdrawn.  The other party requested the merger be rejected due to market power
concerns.

      NRC
      On June 19, 1998, CPL filed a license  transfer  application  with the NRC
requesting  the NRC's  consent  to the  indirect  transfer  of  control of CPL's
interests in the NRC licenses issued for STP from CSW to AEP. CPL would continue
to own its  25.2%  interest  in STP,  and  CPL's  name  would  remain on the NRC
operating  license.  On November 5, 1998, the NRC approved the license  transfer
application  with a condition  that the merger must be completed by December 31,
1999. The NRC has extended the condition relating to completion of the merger to
June 30, 2000.

      SEC
      On October 13, 1998, AEP and CSW jointly filed an application with the SEC
for approval of the proposed merger.  The SEC merger filing requests approval of
the merger and related  transactions and outlines the expected  combined company
benefits of the merger to AEP and CSW  customers and  shareholders.  Since then,
AEP and CSW have filed several  amendments to the  application.  Several parties
have filed petitions opposing the proposed merger at the SEC.

      Other Federal
      The FCC has  approved  the  transfer of control of licenses of several CSW
entities to AEP, which will be effective upon completion of the proposed merger.

                                       59
<PAGE>

      The  proposed  AEP  merger  has  received  antitrust  clearance  from  the
Department of Justice under the Hart-Scott-Rodino  Antitrust Improvements Act of
1976.

      United Kingdom
      The United Kingdom's  Department of Trade and Industry approved the common
ownership of the United Kingdom entities that would result from the proposed AEP
merger, subject to certain conditions concerning the separate operation of their
respective distribution and supply businesses.

      Other
      AEP and CSW have reached  settlements with the Indiana Utility  Regulatory
Commission,  the Kentucky Public Service Commission, the Missouri Public Service
Commission,  the  Michigan  Public  Service  Commission  and  various  wholesale
customers and  intervenors  in the FERC merger  proceeding.  The Public  Utility
Commission  of Ohio has issued a decision  stating that it would notify the FERC
that it is no longer opposed to AEP's proposed merger with CSW and that it would
no longer seek conditions to the merger.  AEP and CSW have ratified a settlement
agreement with local unions of the IBEW  representing  employees of AEP and CSW,
and , as part of the  settlement,  the IBEW local  unions have  withdrawn  their
opposition  to the merger.  AEP has ratified a settlement  agreement  with local
unions  of  the  UWUA  representing  employees  of  AEP,  and,  as  part  of the
settlement, the UWUA local unions will not oppose the merger.

      Completion of the Merger
      AEP and CSW have  targeted  consummation  of the AEP  Merger in the second
quarter  of 2000.  The  merger is  conditioned,  among  other  things,  upon the
approval  of  several  state  and  federal  regulatory  agencies.  All  of  such
approvals, except from the SEC, have been obtained. The transaction must satisfy
many  conditions,  including  the  condition  that it must be accounted for as a
pooling of interests.  The parties may not waive some of these  conditions.  AEP
and CSW continue the process of seeking regulatory  approvals,  but there can be
no assurance as to when, on what terms or whether the required approvals will be
received.  After  June 30,  2000,  either  CSW or AEP may  terminate  the merger
agreement if all of the conditions to their respective obligations to close have
not been  satisfied.  There  can be no  assurance  that the AEP  Merger  will be
consummated.

      Merger Costs
      As of March 31, 2000,  CSW had deferred  $46.2 million in costs related to
the AEP  Merger on its  consolidated  balance  sheet,  which  will be charged to
expense if AEP and CSW do not complete their proposed merger.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.


COMPETITION AND INDUSTRY CHALLENGES

      Restructuring Readiness
      CSW  has  initiated  a  restructuring  readiness  effort  to  prepare  for
competition in the states served by the U.S. Electric Operating Companies.  This
effort includes the development and implementation of a business separation plan
and the system and process  changes  required to prepare  for  competition.  The
business  separation plan filed with the Texas  Commission in January,  2000, is
discussed  below.  An analysis of the  processes  and systems in place and those
needed in the future has been completed, and CSW is beginning the implementation
phase of the restructuring readiness effort.


                                       60
<PAGE>

      Texas Business Separation Plan
      On January 10,  2000,  CSW filed with the Texas  Commission  its  business
separation  plan  required  by  the  Texas   Legislation  on  electric   utility
restructuring.  The business  separation plan describes the approach proposed by
CSW to unbundle the business  activities of each of its Texas Electric Operating
Companies into three entities: the Power Generation Company, the Energy Delivery
Company and the Retail Electric Provider.  Under CSW's business separation plan,
all three new entities would  continue to be owned by CSW. The Power  Generation
Company  would own a CPL Power  Generation  Company  and a WTU Power  Generation
Company.  The Energy  Delivery  Company  would own CPL,  WTU and  SWEPCO  Energy
Delivery  Companies.  Although the plan is directed to meet the  requirements of
the Texas  Legislation,  CSW expects  the plan will also meet the  restructuring
requirements anticipated to be enacted in Arkansas, Louisiana and Oklahoma.

      As a result of rulings by the Texas  Commission  on March 16, 2000,  CSW's
unbundling  plan will include full legal  separations of the  generating  assets
from the wires  assets of CPL and WTU by  January  1, 2002.  This  includes  the
structural  separation  of the  management  and  control of the Energy  Delivery
Companies  from the Power  Generation  Companies  as well as the  creation  of a
separate Retail Electric Provider. For CPL and WTU, unbundling will require that
legal  ownership of generation,  transmission  and  distribution  assets will be
separated and  transferred  to or vested in separate  entities,  the CPL and WTU
Power Generation Companies and Energy Delivery Companies,  respectively. The CPL
and WTU Energy Delivery Companies would be regulated  utilities under Texas law.
Office systems, computer systems, accounting systems and similar equipment would
be  segregated  and an  employee  code of  conduct  would  restrict  information
exchanges  between  employees of the regulated  entities and the other  business
units.  Because  SWEPCO also is regulated in Arkansas and  Louisiana,  the Texas
Commission deferred its decision on the appropriate  separation for SWEPCO until
interested  parties have an opportunity to discuss issues that could result in a
separation  plan  acceptable in each state.  CSW believes that its total cost to
restructure  the CSW  System,  which  includes  costs  for the  Energy  Delivery
Company,  Power Generation  Company and Retail Electric Provider in implementing
retail  competition in its service  territory,  is  approximately  $200 million,
including  refinancing costs.  Recognition in rates of the Texas  jurisdictional
Energy  Delivery  Company  portion  of these  costs  will be sought in the Texas
Electric  Operating  Companies' cost unbundling  filings to establish new Energy
Delivery Company regulated rates during the year 2000.

      Proposed Energy Delivery Costs for Texas Retail Competition
      On March 31, 2000, CSW and its Texas Electric Operating Companies
submitted a filing to the Texas Commission to request approval  of the  proposed
energy delivery charge portion of customer bills when retail competition  begins
in Texas on January 1, 2002.

      These  filings  are  part of the  transition  to  retail  competition  for
electricity  customers in Texas as provided in the Texas Electric  Restructuring
Legislation.  The ultimate  effect of this  transition will be a 6% reduction in
the overall total bills for  residential  and small  commercial  customers  when
retail  competition  begins.  These customers also will have the opportunity for
additional savings by shopping for a new electric provider.

      The  March  31,  2000  filing  was  made for  CSW's  new  Energy  Delivery
Companies,  which  will  deliver  electricity  to  customers  and  will  remain,
regulated by the Texas Commission when retail competition begins.

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<PAGE>

      The energy delivery charge will cover the following costs:

-     Transmission system charge

-     Energy delivery system charges including:
-     Distribution charge
-     Metering system charge
-     Customer service charge
-     Energy efficiency rider
-     Nuclear decommissioning charge for CPL only

-     Competition Transition Charge
-     Transition charge to recover CPL's securitized  regulatory assets as
      previously  approved  by the Texas  Commission  and other  qualified
      costs
-     Competition transition charge to recover CPL's remaining stranded costs
-     Competition restructuring charge to recover one-time costs incurred to
      implement retail competition

-     System benefit fund (approximately 50 cents per megawatt-hour)

-     Municipal gross receipts for payment of franchise fees to municipalities

      A May 15, 2000 filing will further  clarify the proposed costs for CPL and
WTU. A similar  filing for SWEPCO will be submitted June 1, 2000. The May 15 and
June 1 filings became  necessary after the Texas  Commission  chose not to allow
CSW's  proposed  two-stage  approach  to  unbundling,  as filed in the  Business
Separation Plan on January 10, 2000.

      The March 31,  2000  filing  envisions  the  continued  recovery  of costs
associated with investments made under the regulated market structure that might
be  unrecoverable  or left  stranded  in a  competitive  market.  CPL is seeking
recovery of stranded costs associated with its 25.2% ownership of STP.

      CPL currently  estimates  that its total amount of stranded costs is $2.08
billion.  Of this amount,  $949  million,  less $185 million of  associated  tax
benefits,  has been  approved  for  recovery  by the  Texas  Commission  through
securitization.  A second phase of securitization is expected to occur after the
Texas Commission makes a preliminary  determination of stranded costs, currently
expected to occur in the first half of 2001.

      As part of the transition to competition, the legislation allowed electric
utilities  to  securitize  100% of  regulatory  assets  (regulatory  costs whose
recovery has been delayed until some future date) and 75% of the stranded  costs
identified  in the Texas  Commission's  ECOM  model.  Continued  recovery of the
remaining  25% of stranded  costs will occur  through a  competitive  transition
charge included in the energy delivery charge.

      The other  significant  costs  driving the amount of the  proposed  energy
delivery  charge are planned new  additions  to  transmission  and  distribution
systems that deliver  electricity to customers.  Significant  transmission  line
expenditures are being made by CPL and WTU to connect new independent generators
to the electric system and to eliminate  transmission  bottlenecks,  which could
hinder competition.

                                       62
<PAGE>

      Code of Conduct Under Customer Choice
      Legislation  was enacted in Arkansas and Texas in 1999 to restructure  the
electric utility  industry in those states.  These two new laws require that the
CSW System  begin to separate  its  business  activities  into power  generation
units,  retail electric providers and transmission and distribution units. Power
generation   units  and  retail  electric   providers  will  be   non-regulated;
transmission and distribution entities will continue to be regulated.

      The  purpose of these  laws and the  separation  they  impose is to create
financial  and  informational  firewalls  between  regulated  and  non-regulated
activities of the CSW System so that competitively  sensitive information cannot
be shared by regulated and non-regulated entities.

      In order to comply with the new Arkansas and Texas laws,  the  Registrants
will  follow  a code of  conduct,  which  requires  the  non-regulated  business
activities to operate  separately  from the regulated  activities.  Transactions
between  the  regulated  and   non-regulated   activities   are  subject  to  an
information-sharing  firewall  and  the  requirement  to act on an  arm's-length
basis.

      Regulatory Accounting
      Consistent with industry practice and the provisions of SFAS No. 71, which
allows for the recognition of regulatory  assets,  the U.S.  Electric  Operating
Companies have recognized  significant  regulatory assets and liabilities.  As a
result of  legislation  passed in  Arkansas  and Texas,  the retail  electricity
generation  business of CPL, SWEPCO and WTU, in those  jurisdictions,  no longer
meets the criteria to apply SFAS No. 71.  Instead,  the  principles  of SFAS No.
101, as interpreted by EITF 97-4,  have been applied.  Management  believes that
CPL,  SWEPCO and WTU currently  meet the criteria for following  SFAS No. 71 for
the remainder of their electric utility business.

      Additional  non-cash write-offs of regulatory assets and liabilities would
be required if additional  portions of the electric utility business of the U.S.
Electric  Operating  Companies no longer meet the criteria for applying SFAS No.
71, absent a means of recovering such assets or settling such liabilities.

      Securitization of Generation-related Regulatory Assets and Stranded Costs
      Electric  utilities  under  the  Texas Legislation are  allowed to recover
generation-related  regulatory  assets and stranded costs that otherwise may not
be  recoverable  in the future  competitive  market.  All or a majority of those
costs can be refinanced through  securitization,  which is a financing structure
designed  to  provide  lower  financing  costs  than is  available  through  the
conventional  utility cost of capital model.  The  securitized  amounts are then
recovered through a non-bypassable  wires charge. On October 18, 1999, CPL filed
an  application  with the Texas  Commission  to securitize  approximately  $1.27
billion of its retail generation-related regulatory assets and approximately $47
million in other qualified costs. The Texas Commission held hearings on December
7 and 8, 1999 on CPL's securitization application.

      On  February  10,  2000,  the  Texas  commission  tentatively  approved  a
settlement,  which will permit CPL to securitize  certain regulatory assets. The
Texas  Commission  final order  authorized the issuance of up to $797 million of
securitization  bonds  including $764 million for recovery of stranded costs and
$33 million for other qualified costs. The $764 million for recovery of stranded
costs reflects the recovery of $949 million of regulatory  assets offset by $185
million to reflect customer benefits associated with accumulated deferred income
taxes. CPL had previously proposed to flow these benefits back to customers over
the 14-year term of the bonds. An additional  $287 million of regulatory  assets
originally  requested by CPL in its securitization  request has been included in
the  calculation  of stranded  costs in CPL's March 31, 2000 filing to establish
non-bypassable charges for transmission and distribution service.


                                       63
<PAGE>

      On  April  11,  2000,  four  parties   appealed  the  Texas   Commission's
securitization  order to the Travis County District Court.  One of these appeals
challenges  the  ability  to  recover  securitization  charges  under  the Texas
Constitution. CPL will not be able to issue the securitization bonds until these
appeals are resolved.  As a result the securitization bonds are not likely to be
issued until 2001.

      Under the provisions of EITF 97-4, CPL's generation-related net regulatory
assets were  transferred to the  transmission  and  distribution  portion of the
business  and  will be  amortized  as they  are  recovered  through  charges  to
customers.  Management  currently  believes  all  generation-related  regulatory
assets for CPL will be recovered  as provided  under the Texas  Legislation.  If
future  events were to occur that made the  recovery  of these  assets no longer
probable,  CPL would write-off any  non-recoverable  portion of such assets as a
non-cash charge to earnings.

      CPL believes it will also have stranded costs, which are the excess of net
book  value of  generation  assets as  defined  over the  market  value of those
assets.  CPL's amount of regulatory  assets and stranded  costs are subject to a
final  determination  by the Texas  Commission  in 2004.  The Texas  Legislation
provides  that all such finally  determined  stranded  costs will be  recovered.
Since  SWEPCO  and  WTU  are  not  expected  to have  net  stranded  costs,  all
generation-related  non-recoverable  net regulatory  assets were written off and
reflected on their statements of income as an extraordinary loss in 1999.

      Additionally, in 1999, the Texas Electric Operating Companies performed an
accounting  impairment  analysis  of  generation  assets  under SFAS No. 121 and
concluded  there  was no  impairment  of  generation  assets  at that  time.  An
impairment  analysis involves  estimating future net cash flows arising from the
use of an asset.  If the net cash flows  exceed the net book value of the asset,
then there is no  impairment  of the asset for  accounting  purposes.  The Texas
Electric Operating  Companies will continue to review their assets for potential
impairment if events or changes in circumstances indicate the carrying amount of
an asset may not be recoverable.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.

      Texas Legislation and Final Fuel Proceedings
      Beginning  January  1,  2002,  fuel  costs  will not be  subject  to Texas
Commission fuel reconciliation proceedings.  Consequently,  CPL, SWEPCO, and WTU
will file a final fuel reconciliation with the Texas Commission reconciling fuel
costs  through the period  ending  December 31, 2001.  These final fuel balances
will be included in each company's true-up proceeding in 2004.

      Industry Restructuring Initiatives in Oklahoma
      The Oklahoma Legislature  continues to consider several bills, which would
provide the framework to implement  retail  customer choice as scheduled on July
1, 2002, pursuant to previously enacted legislation. PSO is unable to predict if
legislation to implement  retail  customer choice will be enacted in the current
session of the Oklahoma Legislature.


RATES AND REGULATORY MATTERS

      Other
      Reference is made to NOTE 2.  LITIGATION  AND REGULATORY  PROCEEDINGS  for
information regarding fuel proceedings at CPL and SWEPCO.

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<PAGE>

U.K. ELECTRIC

      SEEBOARD Recent Regulatory Actions
      Following the  completion of the phased-in  opening of the United  Kingdom
domestic and small business  electricity  market to competition in May 1999, all
customers are now able to choose their electricity  supplier.  SEEBOARD competes
for  customers  in its own area as well as  throughout  the  rest of the  United
Kingdom.  The DGEGS has allowed a significant  portion of the system development
costs  associated  with the  introduction  of competition to be recovered by the
regional  electricity  companies through a charge to all customers over the next
five years.  The DGEGS has also announced price  restraints  which set a maximum
amount that existing  electricity supply companies can charge their domestic and
small  business  customers,  taking into account its view of future  electricity
purchase  costs.  For SEEBOARD,  these price  restraints  reduced prices in real
terms by 6% for the  regulatory  year ended March 31, 1999, and a further 3% for
the following regulatory year ending March 31, 2000.

       Regulatory Price Proposal for SEEBOARD
      On December 2, 1999,  OFGEM  published its final price  proposals from its
United  Kingdom  electricity  distribution  review.  OFGEM has proposed  revenue
reductions in SEEBOARD's  distribution  business of 21%. In addition,  OFGEM has
proposed  the  reallocation  of  a  further  12%  of  costs  out  of  SEEBOARD's
distribution business into its supply business. These proposals were accepted on
December 20, 1999,  and will take effect on April 1, 2000,  and remain in effect
for five years.  OFGEM's  proposals  will reduce net income for  SEEBOARD in the
year 2000 by approximately $40 million, dependent upon the level of further cost
reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A.,  its United Kingdom business segment,  was $118
million for the twelve months ended March 31, 2000.

      OFGEM's price  proposals for SEEBOARD will have a material  adverse effect
on the future results of operations of SEEBOARD  U.S.A.  and CSW, but are not be
expected to adversely affect the financial condition of CSW.

      OFGEM also published the final price proposals for the electricity  supply
price review.  OFGEM has  recommended  that the price cap for charges  levied to
electricity  supply domestic and small business customers should be extended for
two years from April 1, 2000.  Overall,  these  proposals are expected to have a
broadly neutral effect on the results of SEEBOARD U.S.A.

      In the fourth  quarter of 1999, SEEBOARD's credit rating was downgraded to
BBB+ due to recent U.K. regulatory action.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.

      SEEBOARD - Third Party Pension Litigation
      In the U.K.,  National  Grid and National  Power PLC have been involved in
continuing  litigation  regarding their use of actuarial  surpluses disclosed in
the 1992 and 1995 valuations of the electricity industry's  occupational pension
plan, the ESPS. A High Court decision in favor of the National Grid and National
Power PLC was  appealed.  On February 10, 1999,  the U.K.  Court of Appeal ruled
that the particular  arrangements made by these  corporations to dispose of part
of the surplus  were  invalid  due to  procedural  defects.  This  decision  was
confirmed at a later hearing of the U.K.  Court of Appeal held in May 1999.  The
National Grid has appealed to the House of Lords, the highest court of appeal in

                                       65
<PAGE>

the U.K.,  and a decision  is  expected  in late 2000 or early  2001.  The final
outcome of this appeal cannot presently be determined.

      SEEBOARD  employees are members of the ESPS, and SEEBOARD has made similar
use of  actuarial  surpluses  disclosed  in the 1992 and 1995  valuations.  As a
result of subsequent  legal  clarification  of certain  issues  arising from the
hearing  held in May  1999,  the  potential  impact of the  ruling  on  SEEBOARD
increased.  The amount of the payments  cancelled by SEEBOARD in  recognition of
these surpluses amounts to approximately  (pound)49 or $78 million (converted at
(pound)1.00 equals $1.59), excluding any accrued interest.

      The U.K. Court of Appeal did not order the National Grid or National Power
PLC to make payment into the ESPS, and the court  indicated that any requirement
to make such payments  would be extreme since the relevant  sections of the ESPS
are already in surplus. In the event that the court finally decides a payment by
SEEBOARD  into the  ESPS is  necessary,  such a  payment  is  likely  to  create
additional  pension fund surplus,  which SEEBOARD should then be able to utilize
over the next several years to reduce pension expense.

      Management  is unable  currently to predict the amount of any payment that
it may be required to make to ESPS,  but the payment  should not have a material
adverse affect on CSW's results of operations or financial condition.

      The foregoing discussion  constitutes  forward-looking  information within
the  meaning of Section  21E of the  Exchange  Act.  Actual  results  may differ
materially from such projected information. See FORWARD - LOOKING INFORMATION.


DIVERSIFIED ELECTRIC

      CSW Energy
      CSW Energy  presently  owns  interests in seven  operating  power projects
totaling 1,308 MW which are located in Colorado,  Florida and Texas. In addition
to  these  projects,  CSW  Energy  has  other  projects  in  various  stages  of
development.

      CSW Energy  began  construction  in August  1998 of a 500 MW power  plant,
known as Frontera,  in the Rio Grande Valley,  near the city of Mission,  Texas.
The natural  gas-fired  facility began simple cycle  operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in the second quarter
of  2000.  Pursuant  to  AEP's  and  CSW's  stipulated  agreement  with  several
intervenors in the state of Texas related to the AEP Merger, CSW Energy may sell
250 MW of Frontera upon completion of the merger.  See ITEM 2. - MD&A,  PROPOSED
AEP MERGER and ITEM 1. NOTE 5. PROPOSED AEP MERGER for additional information.

      CSW Energy  also has  entered  into an  agreement  with  Eastman  Chemical
Company to  construct  and operate a 440 MW  cogeneration  facility in Longview,
Texas. This facility is known as the Eastex Cogeneration  Project.  Construction
of the facility began in the fourth quarter of 1999, with expected  operation in
early 2001. Excess electricity generated by the plant will be sold by CSW Energy
in the wholesale electricity market.

      In October 1999, GE Capital  Structured Finance Group purchased 50% of the
equity  ownership  of Sweeny  Cogeneration  Limited  Partnership.  CSW  Energy's
after-tax  earnings from the proceeds of the transaction were  approximately $33

                                       66
<PAGE>

million and were recorded in the fourth quarter of 1999.  The agreement  between
CSW Energy and GE Capital  Structured Finance Group also provides for additional
payments to CSW Energy,  subject to  completion  of a planned  expansion  of the
Sweeny cogeneration facility,  which is expected to be operational in the fourth
quarter of 2000.

      The preceding discussion contains  forward-looking  information within the
meaning of Section 21E of the Exchange Act. Actual results may differ materially
from such projected  information  due to changes in the underlying  assumptions.
See FORWARD-LOOKING INFORMATION.

      CSW International
      CSW International was organized to pursue investment opportunities in EWGs
and FUCOs and currently  holds  investments  in the United  Kingdom,  Mexico and
South America.

      CSW  International  and its 50% partner,  Scottish  Power plc have entered
into a joint venture to construct and operate the South Coast power  project,  a
400 MW combined cycle gas turbine power station in Shoreham, United Kingdom. CSW
International has guaranteed  approximately  (pound)19 million of the (pound)190
million  construction  financing.   Both  the  guarantee  and  the  construction
financing are  denominated in pounds  sterling.  The U.S.  dollar  equivalent at
March 31, 2000 was $30 million and $302 million respectively, using a conversion
rate of (pound)1.00  equals $1.59.  The permanent  financing is  unconditionally
guaranteed by the project.  Construction of the project began in March 1999, and
commercial operation is expected to begin in late 2000.

      At March 31, 2000, CSW International  owned a 44% equity interest in Vale,
which it had purchased for a total of $149 million. The investment is covered by
a put option, which, if exercised, requires Vale to purchase CSW International's
shares  at  a  minimum  price  equal  to  the  U.S.  dollar  equivalent  of  CSW
International's  purchase price. As a result,  management has concluded that CSW
International's  investment  carrying  amount will not be reduced  below the put
option value unless  there is deemed to be a permanent  impairment.  Since 1999,
Vale has experienced losses of approximately $22 million, net of tax, related to
the devaluation of the Brazilian Real.  Pursuant to the put option  arrangement,
these losses are not  reflected in the  carrying  value of the Vale  investment.
Conversely,  CSW International  will not recognize any future earnings from Vale
until the losses are recovered.

      As of March 31, 2000, CSW International had invested $110 million in stock
of a Chilean  electric  company.  The  investment  is  classified  as securities
available for sale and  accounted  for by the cost method.  Based on the current
market value of the shares and the quarter end foreign  exchange rate, the value
of the  investment  at March 31,  2000 was $56  million.  The  reduction  in the
carrying  value of this  investment  has been  reflected in Other  Comprehensive
Income in CSW's Consolidated Statements of Stockholders' Equity.

      Management   views  its  investments  in  South  America  as  a  long-term
investment strategy and believes these investments  continue to have significant
long-term  value and that they are  recoverable.  Management  will  continue  to
closely evaluate the changes in these South American  economies and their impact
on these investments.

      The preceding discussion contains  forward-looking  information within the
meaning of Section 21E of the Exchange Act. Actual results may differ materially
from such projected  information  due to changes in the underlying  assumptions.
See FORWARD-LOOKING INFORMATION.


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OTHER MATTERS

      Year 2000
      On a system-wide  basis, CSW initiated and implemented a year 2000 project
to prepare  internal  computer systems and applications for the year 2000. These
systems and applications  include  management  information  systems that support
business   operations  such  as  customer   billing,   payroll,   inventory  and
maintenance.    Other   systems   with    computer-based    controls   such   as
telecommunications,  elevators,  building  environmental  management,  metering,
plant, transmission,  distribution and substations were included in this project
as well.

      Cost to Address Year 2000 Issues
      As of March 31, 2000, cost incurred for the year 2000 project  amounted to
approximately $33 million, including $2 million in the first quarter of 2000.

      Transition Results to Date
      The  results  of the year 2000  project  have all been  positive.  The CSW
System  completed  the  year  2000  transition  without  any year  2000  related
problems.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      In 1997,  CSW's board of directors  adopted a risk  management  resolution
authorizing CSW to engage in currency, interest rate and energy spot and forward
transactions and related  derivative  transactions on behalf of CSW with foreign
and domestic  parties as deemed  appropriate  by executive  officers of CSW. The
risk  management  program  is  necessary  to meet the  growing  demands of CSW's
customers for competitive  prices and price stability,  to enable CSW to compete
in a deregulated  power industry,  to manage the risks  associated with domestic
and  foreign   investments  and  to  take  advantage  of  strategic   investment
opportunities.

      The U.S. Electric Operating Companies experience commodity price exposures
related to the purchase of fuel supplies for the generation of  electricity  and
for the purchase of power and energy from other  generation  sources.  Contracts
that  provide for the future  delivery of these  commodities  can be  considered
forward  contracts  which  contain  pricing  and/or  volume  terms  designed  to
stabilize the cost of the commodity.  Consequently,  the U.S. Electric Operating
Companies  manage their price exposure for the benefit of customers by balancing
their commodity  purchases  through a combination of long-term and short-term or
spot market agreements.

      In response  to the  development  of a more  competitive  electric  energy
market, CSW has received regulatory approval, which authorizes the U.S. Electric
Operating  Companies to conduct a pilot program  offering power sales agreements
at tariffed  rates with a fixed fuel cost.  To offset the  commodity  price risk
associated with these contracts, CSW has purchased natural gas swaps and futures
contracts.  These arrangements cover estimated natural gas deliveries  beginning
in May 2000 and  continuing  for the remainder of the year.  Natural gas volumes
purchased  to serve these  contracts,  for which CSW has secured swap or futures
contracts, represents approximately 1% of annual natural gas purchases.

      Based on  contractual  commitments  at March 31, 2000,  CSW's  natural gas
futures and swap contracts and electricity  forward contracts that are sensitive
to changes in commodity prices include fair value of deferred gains or assets of
$4.2  million.  The swap and future  contracts  hedge a portion  of the  related
commodity  price exposure for 2000. Cash inflows on these contracts would offset
lower margins on electricity  sales to customers under tariffed rates with fixed
fuel costs.  The electricity  forward  contracts hedge a portion of CSW's energy
requirements  through  August  2000.  The  average  contract  cost  for  forward
purchases is $69 per MWH and $2.74 per MMbtu versus  average fair market  quotes
at March 31,  2000 of $82.95  per MWH and $2.97  per  MMbtu,  respectively.  The
average cost for natural gas futures  contracts is $2.67 per MMbtu and $2.38 per
MMbtu for swaps versus a fair market value quote of $2.98 per month.

      SEEBOARD has entered into contracts for  differences to reduce exposure to
fluctuations  in the price of electricity  purchased  from the United  Kingdom's
electricity power pool. This pool was established at privatization of the United
Kingdom's  electric  industry  for  the  bulk  trading  of  electricity  between
generators and  suppliers.  At March 31, 2000, the gross value of such contracts
for differences was approximately 93% of the expected power purchases for 2000.

      CSW has, at times,  been exposed to currency and interest rate risks which
reflect the floating  exchange rate that exists between the U.S.  dollar and the
British pound.  CSW has utilized certain risk management tools to manage adverse
changes in exchange  rates and to facilitate  financing  transactions  resulting
from CSW's acquisition of SEEBOARD.  At March 31, 2000, CSW had positions in two
cross currency swap contracts. The following table presents information relating
to these  contracts.  The fair value of cross currency swaps reflect third party
valuations   calculated  using  proprietary  pricing  models.   Based  on  these
valuations,  CSW's  position  in  these  cross  currency  swaps  represented  an
unrealized  loss of $36.5  million at March 31, 2000.  This  unrealized  loss is

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<PAGE>

offset by unrealized gains related to the underlying  transactions being hedged,
which are included in long-term  debt on CSW's  consolidated  balance sheet at a
carrying  value  of  approximately  $411  million.  CSW  expects  to hold  these
contracts to maturity.

                                               Expected          Expected Cash
                                             Cash Inflows          Outflows
Contract                 Maturity Date     (Maturity Value)     (Market Value)
--------------------------------------------------------------------------------
                                                        (millions)
Cross currency swaps    August 1, 2001           $200                $210
Cross currency swaps    August 1, 2006           $200                $227

      For information related  to currency risk in South America see DIVERSIFIED
ELECTRIC - CSW International and ITEM 1. NOTE 7. SOUTH AMERICAN INVESTMENTS.

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<PAGE>


PART II - OTHER INFORMATION

      For background and earlier  developments  relating to PART II information,
reference is made to the  Registrants'  Combined  Annual Report on Form 10-K for
the year ended December 31, 1999.


ITEM 1. LEGAL PROCEEDINGS.

      Other Legal Claim and Proceedings
      The CSW System is party to various  other  legal  claims  and  proceedings
arising in the normal course of business. Management does not expect disposition
of these matters to have a material adverse effect on the  Registrants'  results
of  operations  or financial  condition.  See PART I. - NOTE 2.  LITIGATION  AND
REGULATORY PROCEEDINGS and NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES.


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

      No matters were submitted to a vote of security holders of the Registrants
since the last annual  meeting was held.  No annual  meetings  have been held in
2000 in  contemplation  of  consummation  of the  merger.  If the  merger is not
consummated  for any reason,  the Registrants  will schedule annual  shareholder
meetings later this year.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS:

   (3)      Articles of Incorporation and Bylaws.

      CPL
      1     Amendment  of  the  Bylaws  of  Central  Power  and  Light  Company,
            effective April 19, 2000, filed herewith.

      PSO
      2     Bylaws of Public Service Company of Oklahoma, as amended April 18,
            2000, filed herewith.

      SWEPCO
      3     Bylaws of Southwestern Electric Power Company, as amended April 27,
            2000, filed  herewith.

      WTU
      4     Bylaws of West Texas Utilities Company, as amended May 1, 2000,
            filed herewith.


 (12)Computation  of Ratio of  Earnings to Fixed  Charges
     CPL - (Exhibit  12.1), filed herewith.
     PSO - (Exhibit 12.2), filed herewith.
     SWEPCO - (Exhibit  12.3), filed herewith.
     WTU - (Exhibit  12.4), filed herewith.


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<PAGE>

(27) Financial  Data  Schedules
     CSW - (Exhibit  27.1), filed herewith.
     CPL - (Exhibit  27.2), filed herewith.
     PSO - (Exhibit  27.3), filed herewith.
     SWEPCO - (Exhibit 27.4), filed  herewith.
     WTU - (Exhibit  27.5), filed herewith.

(b) REPORTS FILED ON FORM 8-K:

CSW, CPL, SWEPCO and WTU
Date of earliest event reported: January 10, 2000
Date of report:  January 25, 2000
Item 5. Other Events and Item 7. Financial  Statements  and Exhibits,  copies of
news release and Texas Commission filing by CSW and its three electric utilities
serving Texas jurisdictional customers announcing a business separation plan for
"unbundling" Texas electrical  utilities into three entities:  a retail electric
provider, a power generation company and an energy delivery company.

SWEPCO
Date of earliest event reported: February 4, 2000
Date of report:  February 4, 2000
Item 5. Other Events and Item 7. Financial  Statements  and Exhibits,  reporting
SWEPCO's  1999  earnings  in  anticipation  of  filing a Form  S-3  registration
statement  with the SEC for a new debt  offering.  Exhibits  include  a ratio of
earnings to fixed charges and a financial data schedule.

CSW, CPL, PSO, SWEPCO and WTU
Date of earliest event reported: January 25, 2000
Date of report:  February 14, 2000
Item 5.  Other  Events  and Item 7.  Financial  Statements  and  Exhibits,  news
releases  reporting  regulatory  approvals  of AEP Merger from United  Kingdom's
Department of Trade and Industry and United States  Department of Justice;  news
release reporting a settlement between CPL and the Texas Commission  relating to
the initial  securitization  of stranded costs;  and the reporting of CPL's 1999
earnings in  anticipation  of a new debt offering.  Exhibits  include a ratio of
earnings to fixed charges and a financial data schedule.



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SIGNATURES

      Pursuant to the requirements of the Securities  Exchange Act of 1934, each
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned  thereunto  duly  authorized.  The  signature  for each  undersigned
Registrant  shall be deemed to relate only to matters  having  reference to such
Registrant or its subsidiaries.

                       CENTRAL AND SOUTH WEST CORPORATION

Date: May 12, 2000                   /s/ Lawrence B. Connors
                                     -----------------------
                                     Lawrence B. Connors
                                     Controller and Chief Accounting Officer
                                     (Principal Accounting Officer)



                      CENTRAL POWER AND LIGHT COMPANY
                     PUBLIC SERVICE COMPANY OF OKLAHOMA
                   SOUTHWESTERN ELECTRIC POWER COMPANY
                         WEST TEXAS UTILITIES COMPANY

Date: May 12, 2000                   /s/ R. Russell Davis
                                     --------------------
                                     R. Russell Davis
                                     Controller and Chief Accounting Officer
                                     (Principal Accounting Officer)


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