GUARANTEE AGREEMENT


                                     BETWEEN



                         CENTRAL POWER AND LIGHT COMPANY
                                 (AS GUARANTOR)



                                       AND



                              THE BANK OF NEW YORK
                             (AS GUARANTEE TRUSTEE)



                                   DATED AS OF




                                   MAY 1, 1997




















                                TABLE OF CONTENTS

 
                                                                           PAGE
                                    ARTICLE I
                                   DEFINITIONS

SECTION 101.           Definitions...........................................1

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 201.           Trust Indenture Act; Application......................5
SECTION 202.           List of Holders.......................................5
SECTION 203.           Reports by the Guarantee Trustee......................5
SECTION 204.           Periodic Reports to Guarantee Trustee.................5
SECTION 205.           Evidence of Compliance with Conditions Precedent......6
SECTION 206.           Events of Default; Waiver.............................6
SECTION 207.           Event of Default; Notice..............................6
SECTION 208.           Conflicting Interests.................................6

                                   ARTICLE III
                        POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 301.           Powers and Duties of the Guarantee Trustee............7
SECTION 302.           Certain Rights of Guarantee Trustee...................8
SECTION 303.           Indemnity............................................10

                                   ARTICLE IV
                                GUARANTEE TRUSTEE

SECTION 401.           Guarantee Trustee; Eligibility.......................10
SECTION 402.           Appointment, Removal and Resignation of the
                       Guarantee Trustee....................................11

                                    ARTICLE V
                                    GUARANTEE

SECTION 501.           Guarantee............................................11
SECTION 502.           Waiver of Notice and Demand..........................12
SECTION 503.           Obligations Not Affected.............................12
SECTION 504.           Rights of Holders....................................13
SECTION 505.           Guarantee of Payment.................................13
SECTION 506.           Subrogation..........................................13
SECTION 507.           Independent Obligations..............................13





                                                                           PAGE



                                   ARTICLE VI
                           COVENANTS AND SUBORDINATION

SECTION 601.           Subordination........................................14
SECTION 602.           Pari Passu Guarantees................................14

                                   ARTICLE VII
                                   TERMINATION

SECTION 701.           Termination..........................................14

                                  ARTICLE VIII
                                  MISCELLANEOUS

SECTION 801.           Successors and Assigns...............................14
SECTION 802.           Amendments...........................................15
SECTION 803.           Notices..............................................15
SECTION 804.           Benefit..............................................16
SECTION 805.           Interpretation.......................................16
SECTION 806.           Governing Law........................................17







                             CROSS-REFERENCE TABLE*


Section of                                                         Section of
Trust Indenture Act                                                Guarantee
OF 1939, AS AMENDED                                                AGREEMENT

310(a)..........................................................   401(a)
310(b)..........................................................   401(c), 208
310(c)..........................................................   Inapplicable
311(a)..........................................................   202(b)
311(b)..........................................................   202(b)
311(c)..........................................................   Inapplicable
312(a)..........................................................   202(a)
312(b)..........................................................   202(b)
313.............................................................   203
314(a)..........................................................   204
314(b)..........................................................   Inapplicable
314(c)..........................................................   205
314(d)..........................................................   Inapplicable
314(e)..........................................................   101, 205, 302
314(f)..........................................................   201, 302
315(a)..........................................................   301(d)
315(b)..........................................................   207
315(c)..........................................................   301
315(d)..........................................................   301(d)
316(a)..........................................................   101, 206, 504
316(b)..........................................................   503
316(c)..........................................................   802
317(a)..........................................................   Inapplicable
317(b)..........................................................   Inapplicable
318(a)..........................................................   201(b)
318(b)..........................................................   201
318(c)..........................................................   201(b)



----------------
*       This Cross-Reference Table does not constitute part of the Guarantee 
        Agreement and shall not affect the interpretation of any of its terms or
        provisions.




                               GUARANTEE AGREEMENT


               This GUARANTEE AGREEMENT, dated as of May 1, 1997, is executed
and delivered by Central Power and Light Company, a Texas corporation (the
"Guarantor"), and The Bank of New York, a New York banking corporation organized
under the laws of the State of New York, as trustee (the "Guarantee Trustee"),
for the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of CPL Capital I, a Delaware statutory
business trust (the "Issuer").

               WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of May 1, 1997 among the Issuer Trustees named
therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing 6,000,000 of its 8.00% Cumulative Quarterly Income Preferred Securities,
Series A (liquidation preference $25 per preferred security) (the "Preferred
Securities") representing preferred undivided beneficial interests in the assets
of the Issuer and having the terms set forth in the Trust Agreement;

               WHEREAS, the Preferred Securities will be issued by the Issuer
and the proceeds thereof, together with the proceeds from the issuance of the
Issuer's Common Securities (as defined below), will be used to purchase the
Debentures (as defined in the Trust Agreement) of the Guarantor which will be
deposited with The Bank of New York, as Property Trustee under the Trust
Agreement, as trust assets; and

               WHEREAS, as incentive for the Holders to purchase Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.

               NOW, THEREFORE, in consideration of the purchase by each Holder
of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.


                                    ARTICLE I
                                   DEFINITIONS

               SECTION 101.    DEFINITIONS.

               As used in this Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following meanings.
Capitalized or otherwise defined terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Trust Agreement as in
effect on the date hereof.

               "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, PROVIDED, HOWEVER, that an Affiliate
of the Guarantor shall not be deemed to include the Issuer. For the purposes of
this definition, "CONTROL" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.

               "Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.

               "Debt" means, with respect to any Person, whether recourse is to
all or a portion of the assets of such Person and whether or not contingent, (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.

               "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; PROVIDED, HOWEVER,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.

               "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Trust Agreement) required to be paid
on the Preferred Securities, to the extent the Issuer shall have funds on hand
available therefor at such time, (ii) the redemption price, including all
accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), with respect to the Preferred Securities called for redemption by the
Issuer to the extent the Issuer shall have funds on hand available therefor at
the date of redemption, and (iii) upon a voluntary or involuntary termination,
winding-up or liquidation of the Issuer, unless Debentures are distributed to
the Holders, the lesser of (a) the aggregate of the liquidation preference of
$25 per Preferred Security plus accumulated and unpaid Distributions on the
Preferred Securities to the date of payment to the extent the Issuer shall have
funds on hand available to make such payment at such time and (b) the amount of
assets of the Issuer remaining available for distribution to Holders in
liquidation of the Issuer (in either case, the "Liquidation Distribution").

               "Guarantee Trustee" means The Bank of New York, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.

               "Holder" means any holder, as registered on the books and records
of the Issuer, of any Preferred Securities; PROVIDED, HOWEVER, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the
Guarantor or the Guarantee Trustee.

               "Indenture" means the Indenture dated as of May 1, 1997 relating
to Junior Subordinated Debentures of the Guarantor, as supplemented and amended
between the Guarantor and The Bank of New York, as trustee.

               "List of Holders" has the meaning specified in Section 202(a).

               "Majority in liquidation preference of the Preferred Securities"
means, except as provided by the Trust Indenture Act, a vote by the Holder(s),
voting separately as a class, of more than 50% of the liquidation preference of
all then outstanding Preferred Securities issued by the Issuer.

               "Officer's Certificate" means, with respect to any Person, a
certificate signed by the Chairman, President, General Manager, the Treasurer,
an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary
of such Person, and delivered to the Guarantee Trustee. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee Agreement shall include:

               (a)   a statement that the officer signing the Officer's 
        Certificate has read the covenant or condition and the definitions 
        relating thereto;

               (b)   a brief statement of the nature and scope of the 
        examination or investigation undertaken by the officer in rendering the
        Officer's Certificate;

               (c) a statement that such officer has made such examination or
        investigation as, in such officer's opinion, is necessary to enable such
        officer to express an informed opinion as to whether or not such
        covenant or condition has been complied with; and

               (d) a statement as to whether, in the opinion of such officer,
        such condition or covenant has been complied with.

               "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

               "Responsible Officer" means, with respect to the Guarantee
Trustee, any Senior Vice President, any Vice President, any Assistant Vice
President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant
Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of
the Corporate Trust Department of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.

               "Senior Indebtedness" means the principal of, and premium, if
any, and interest on and any other payment due pursuant to any of the following,
whether outstanding at the date of execution of this Guarantee or thereafter
incurred, created or assumed: (a) all indebtedness of the Guarantor evidenced by
notes, debentures, bonds or other securities sold by the Guarantor for money,
(b) all indebtedness of others of the kinds described in the preceding clause
(a) assumed by or guaranteed in any manner by the Guarantor or in effect
guaranteed by the Guarantor through an agreement to purchase, contingent or
otherwise, (c) all renewals, extensions or refundings of indebtedness of the
kinds described in either of the preceding clauses (a) and (b) and (d) any
payment of money relating to any lease which is capitalized on the balance sheet
or consolidated balance sheet, as the case may be, of the Guarantor, in
accordance with generally accepted accounting principles as in effect from time
to time, unless, in the case of any particular indebtedness, renewal, extension,
refunding or lease payment, the instrument creating or evidencing the same or
the assumption or guarantee of the same expressly provides that such
indebtedness, renewal, extension, refunding or lease payment is not superior in
right of payment to or is PARI PASSU with this Guarantee. Such Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions set forth in Article VI of this
Guarantee irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.

               "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 401.

               "Trust Indenture Act" means the Trust Indenture Act of 1939, as 
amended.


                                   ARTICLE II
                               TRUST INDENTURE ACT

               SECTION 201.  TRUST INDENTURE ACT; APPLICATION.

        (a)    This Guarantee Agreement is subject to the provisions of the
               Trust Indenture Act that are required to be part of this
               Guarantee Agreement and shall, to the extent applicable, be
               governed by such provisions.

        (b)    If and to the extent that any provision of this Guarantee
               Agreement limits, qualifies or conflicts with the duties imposed
               by Sections 310 to 317, inclusive, of the Trust Indenture Act,
               such imposed duties shall control.

               SECTION 202.  LIST OF HOLDERS.

        (a)    The Guarantor shall furnish or cause to be furnished to the 
               Guarantee Trustee (a) semiannually, on or before January 15 and 
               July 15 of each year, a list, in such form as the Guarantee 
               Trustee may reasonably require, of the names and addresses of the
               Holders ("List of Holders") as of a date not more than 15 days
               prior to the delivery thereof, and (b) at such other times as the
               Guarantee Trustee may request in writing, within 30 days after 
               the receipt by the Guarantor of any such request, a List of 
               Holders as of a date not more than 15 days prior to the time such
               list is furnished, in each case to the extent such information is
               in the possession or control of the Guarantor and is not 
               identical to a previously supplied list of Holders or has not 
               otherwise been received by the Guarantee Trustee in its capacity
               as such.  The Guarantee Trustee may destroy any List of Holders
               previously given to it on receipt of a new List of Holders.

        (b)    The Guarantee Trustee shall comply with its obligations under
               Section 311(a), Section 311(b) and Section 312(b) of the Trust
               Indenture Act.

               SECTION 203.  REPORTS BY THE GUARANTEE TRUSTEE.

               Not later than November 1 of each year, commencing November 1,
1997, the Guarantee Trustee shall provide to the Holders such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.

               SECTION 204.  PERIODIC REPORTS TO GUARANTEE TRUSTEE.

               The Guarantor shall provide to the Guarantee Trustee, the
Securities and Exchange Commission and the Holders such documents, reports and
information, if any, as required by Section 314 of the Trust Indenture Act and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.

               SECTION 205.  EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

               The Guarantor shall provide to the Guarantee Trustee such
evidence of compliance with such conditions precedent, if any, provided for in
this Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officer's Certificate.

               SECTION 206.  EVENTS OF DEFAULT: WAIVER.

               The Holders of a Majority in liquidation preference of the
Preferred Securities may, by vote, on behalf of the Holders, waive any past
Event of Default and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Guarantee Agreement, but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.

               SECTION 207.  EVENT OF DEFAULT; NOTICE.

        (a)    The Guarantee Trustee shall, within 90 days after the occurrence
               of an Event of Default, transmit by mail, first class postage 
               prepaid, to the Holders, notices of all Events of Default known 
               to the Guarantee Trustee, unless such defaults have been cured 
               before the giving of such notice, provided, that, except in the 
               case of a default in the payment of a Guarantee Payment, the 
               Guarantee Trustee shall be protected in withholding such notice 
               if and so long as the Board of Directors, the executive committee
               or a trust committee of directors and/or Responsible Officers
               of the Guarantee Trustee in good faith determines that the 
               withholding of such notice is in the interests of the Holders.

        (b)    The Guarantee Trustee shall not be deemed to have knowledge of
               any Event of Default unless the Guarantee Trustee shall have
               received written notice, or a Responsible Officer charged with
               the administration of the Trust Agreement shall have obtained
               written notice, of such Event of Default.

               SECTION 208.   CONFLICTING INTERESTS.

               The Trust Agreement shall be deemed to be specifically described
in this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.


                                   ARTICLE III
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

               SECTION 301.  POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

        (a)    This Guarantee Agreement shall be held by the Guarantee Trustee 
               for the benefit of the Holders, and the Guarantee Trustee shall 
               not transfer this Guarantee Agreement to any Person except a 
               Holder exercising his or her rights pursuant to Section 504(iv) 
               or to a Successor Guarantee Trustee on acceptance by such
               Successor Guarantee Trustee of its appointment to act as 
               Successor Guarantee Trustee.  The right, title and interest of 
               the Guarantee Trustee shall automatically vest in any Successor 
               Guarantee Trustee, upon acceptance by such Successor Guarantee 
               Trustee of its appointment hereunder, and such vesting and
               cessation of title shall be effective whether or not conveyancing
               documents have been executed and delivered pursuant to the 
               appointment of such Successor Guarantee Trustee.

        (b)    If an Event of Default has occurred and is continuing, the
               Guarantee Trustee shall enforce this Guarantee Agreement for the
               benefit of the Holders.

        (c)    The Guarantee Trustee, before the occurrence of any Event of 
               Default and after the curing of all Events of Default that may 
               have occurred, shall undertake to perform only such duties as are
               specifically set forth in this Guarantee Agreement, and no 
               implied covenants shall be read into this Guarantee Agreement
               against the Guarantee Trustee.  In case an Event of Default has 
               occurred (that has not been cured or waived pursuant to Section 
               206),  the  Guarantee Trustee shall exercise such of the rights 
               and powers vested in it by this Guarantee Agreement, and use the
               same degree of care and skill in its exercise thereof, as a 
               prudent person would exercise or use under the circumstances in 
               the conduct of his or her own affairs.

        (d)    No provision of this Guarantee Agreement shall be construed to
               relieve the Guarantee Trustee from liability for failure to act
               or willful misconduct, except that:

               (i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:

               (A) the duties and obligations of the Guarantee Trustee shall be
        determined solely by the express provisions of this Guarantee Agreement,
        and the Guarantee Trustee shall not be liable except for the performance
        of such duties and obligations as are specifically set forth in this
        Guarantee Agreement; and

               (B) in the absence of bad faith on the part of the Guarantee
        Trustee, the Guarantee Trustee may conclusively rely, as to the truth of
        the statements and the correctness of the opinions expressed therein,
        upon any certificates or opinions furnished to the Guarantee Trustee and
        conforming to the requirements of this Guarantee Agreement; but in the
        case of any such certificates or opinions that by any provision hereof
        or of the Trust Indenture Act are specifically required to be furnished
        to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to
        examine the same to determine whether or not they conform to the
        requirements of this Guarantee Agreement;

               (ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee Trustee,
unless it shall be proved that the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;

               (iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation
preference of the Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and

               (iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if the Guarantee Trustee shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not reasonably assured to it.

               SECTION 302.  CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

               (a)  Subject to the provisions of Section 301:

                       (i)  The Guarantee Trustee may rely and shall be fully 
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, 
order, bond, debenture, note, other evidence of indebtedness or other paper or 
document reasonably believed by it to be genuine and to have been signed, sent 
or presented by the proper party or parties.

                       (ii)  Any direction or act of the Guarantor contemplated
by this Guarantee Agreement shall be sufficiently evidenced by an Officer's 
Certificate unless otherwise prescribed herein.

                       (iii)  Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting to take any action 
hereunder, the Guarantee Trustee (unless other evidence is herein specifically 
prescribed) may, in the absence of bad faith on its part, request and rely upon
an Officer's Certificate which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor.

                       (iv)  The Guarantee Trustee may consult with legal 
counsel of its choice, and the written advice or opinion of such legal counsel 
with respect to legal matters shall be full and complete authorization and 
protection in respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or opinion. Such
legal counsel may be legal counsel to the Guarantor or any of its Affiliates and
may be one of its employees. The Guarantee Trustee shall have the right at any
time to seek instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction.

                       (v)  The Guarantee Trustee shall be under no obligation 
to exercise any of the rights or powers vested in it by this Guarantee Agreement
at the request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee such adequate security and indemnity as would
satisfy a reasonable person in the position of the Guarantee Trustee, against
the costs, expenses (including attorneys' fees and expenses) and liabilities
that might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Guarantee Trustee;
provided that nothing contained in this Section 302(a)(v) shall be taken to
relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this Guarantee
Agreement.

                       (vi)  The Guarantee Trustee shall not be bound to make 
any investigation into the facts or matters stated in any resolution, 
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit.

                       (vii)  The Guarantee Trustee may execute any of the 
trusts or powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent or
attorney appointed with due care by it hereunder.

                       (viii)  Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the Holders,
(B) may refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected in acting in
accordance with such instructions.

               (b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

               SECTION 303.  INDEMNITY.

               The Guarantor agrees to indemnify the Guarantee Trustee for, and
to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this Guarantee Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The Guarantee Trustee will not claim or exact any lien or
charge on any Guarantee Payments as a result of any amount due to it under this
Guarantee Agreement.


                                   ARTICLE IV
                                GUARANTEE TRUSTEE

               SECTION 401.  GUARANTEE TRUSTEE; ELIGIBILITY.

               (a)  There shall at all times be a Guarantee Trustee which shall:

                       (i)  not be an Affiliate of the Guarantor; and

                       (ii)  be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of Section 310
(a) of the Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority, then, for the purposes of this Section and
to the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.

               (b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 401(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 402(c).

               (c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.

               SECTION 402.  APPOINTMENT, REMOVAL AND RESIGNATION OF THE 
                             GUARANTEE TRUSTEE.

               (a) Subject to Section 402(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

               (b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

               (c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

               (d) If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 402 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.


                                    ARTICLE V
                                    GUARANTEE

               SECTION 501.  GUARANTEE.

               The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer), as and when due, regardless of
any defense, right of set-off or counterclaim which the Issuer may have or
assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.

               SECTION 502.   WAIVER OF NOTICE AND DEMAND.

               The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

               SECTION 503.  OBLIGATIONS NOT AFFECTED.

               The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:

               (a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

               (b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as so provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities;

               (c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;

               (d) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;

               (e)  any invalidity of, or defect or deficiency in, the Preferred
Securities;

               (f)  the settlement or compromise of any obligation guaranteed 
hereby or hereby incurred; or

               (g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 503 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

               There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of the
foregoing.

               SECTION 504.  RIGHTS OF HOLDERS.

               The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation preference of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other Person.

               SECTION 505.  GUARANTEE OF PAYMENT.

               This Guarantee Agreement creates a guarantee of payment and not
of collection. This Guarantee Agreement will not be discharged except by payment
of the Guarantee Payments in full (without duplication of amounts theretofore
paid by the Issuer) or upon distribution of Debentures to Holders as provided in
the Trust Agreement.

               SECTION 506.  SUBROGATION.

               The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 501; PROVIDED, HOWEVER, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.

               SECTION 507.   INDEPENDENT OBLIGATIONS.

               The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 503 hereof.


                                   ARTICLE VI
                           COVENANTS AND SUBORDINATION

               SECTION 601.   SUBORDINATION.

               This Guarantee Agreement will constitute an unsecured obligation
of the Guarantor and will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Guarantor.

               SECTION 602.   PARI PASSU GUARANTEES.

               This Guarantee Agreement shall rank pari passu with any similar
Guarantee Agreements issued by the Guarantor on behalf of the holders of
Preferred Securities issued by CPL Capital I.


                                   ARTICLE VII
                                   TERMINATION

               SECTION 701.  TERMINATION.

               This Guarantee Agreement shall terminate and be of no further
force and effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of Debentures to the Holders in exchange for
all of the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.


                                  ARTICLE VIII
                                  MISCELLANEOUS

               SECTION 801.   SUCCESSORS AND ASSIGNS.

               All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Ten of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantor's obligations hereunder, the Guarantor shall
not assign its obligations hereunder.

               SECTION 802.  AMENDMENTS.

               Except with respect to any changes which do not adversely affect
the rights of the Holders in any material respect (in which case no consent of
the Holders will be required), this Guarantee Agreement may only be amended with
the prior approval of the Holders of not less than a Majority in liquidation
preference of the Preferred Securities. The provisions of Article VI of the
Trust Agreement concerning meetings of the Holders shall apply to the giving of
such approval.

               SECTION 803.   NOTICES.

               Any notice, request or other communication required or permitted
to be given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:

                       (a)  if given to the Guarantor, to the address set forth
below or such other address as the Guarantor may give notice of to the Holders:

                       Central Power and Light Company
                       c/o Central and South West Corporation
                       1616 Woodall Rodgers Freeway
                       Dallas, Texas  75202

                       Facsimile No:  (214) 777-1223
                       Attention:  Director, Finance

                       (b)  if given to the Issuer, in care of the Guarantee 
Trustee, at the Issuer's (and the Guarantee Trustee's) address set forth below 
or such other address as the Guarantee Trustee on behalf of the Issuer may give
notice to the Holders:

                       CPL Capital I
                       c/o Central and South West Corporation
                       1616 Woodall Rodgers Freeway
                       Dallas, Texas  75202

                       Facsimile No:  (214) 777-1223
                       Attention:  Director, Finance
                       with a copy to:

                       The Bank of New York
                       101 Barclay Street
                       21 West
                       New York, NY 10286
                       Facsimile No:  (212) 815-5915
                       Attention:  Corporate Trust Trustee Administration

                       (c)  if given to any Holder, at the address set forth on
the books and records of the Issuer.

               All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

               SECTION 804.   BENEFIT.

               This Guarantee Agreement is solely for the benefit of the Holders
and is not separately transferable from the Preferred Securities.

               SECTION 805.   INTERPRETATION.

               In this Guarantee Agreement, unless the context otherwise
requires:

               (a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to them in
Section 101;

               (b)   a term defined anywhere in this Guarantee Agreement has the
same meaning throughout;

               (c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;

               (d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;

               (e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;

               (f)  a reference to the singular includes the plural and vice 
versa; and

               (g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.

               SECTION 806.  GOVERNING LAW.

               THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

               This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.


               THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.

                                      CENTRAL POWER AND LIGHT COMPANY


                                      By:
                                          Name:      Wendy G. Hargus
                                          Title:     Treasurer

                                      THE BANK OF NEW YORK, as Guarantee Trustee


                                      By:
                                          Name:
                                          Title: