UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                  -----------


                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


(X)   COMBINED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
      SECURITIES EXCHANGE ACT OF 1934
      For the fiscal year ended DECEMBER 31, 1995
                                       OR
(  )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

      For the transition period from    to


                              TNP ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)

  Texas                 4100 International Plaza,
                           P. O. Box 2943, 
                         Fort Worth, Texas 76113                Commission File
---------               ------------------------                ---------------
(State of               (Address and zip code of                 Number: 1-8847
incorporation)        principal executive offices)  

Telephone number, including area code:  817-731-0099              
                                                                  75-1907501
                                                               (I.R.S. employer
                                                             identification no.)

Securities registered pursuant to Section 12(b) of the Act:
                             Shares Outstanding            Name of each exchange
Title of each class          on January 31, 1996             on which registered
---------------------        -------------------           ---------------------
Common stock, no par value        10,920,060             New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes \X\ No \ \

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. \ \

     The aggregate  market value of TNP  Enterprises,  Inc. common stock held by
nonaffiliates on January 31, 1996, was $223,755,700, based on the common stock's
closing  price on the New York  Stock  Exchange  on the same date of $20.63  per
share.

-------------------------------------------------------------------------------
                         TEXAS-NEW MEXICO POWER COMPANY
             (Exact name of registrant as specified in its charter)

  Texas                 4100 International Plaza,
                           P. O. Box 2943, 
                         Fort Worth, Texas 76113                Commission File
---------               ------------------------                ---------------
(State of               (Address and zip code of                 Number:2-97230
incorporation)        principal executive offices)  

Telephone number, including area code:  817-731-0099 
                                                                  75-0204070
                                                               (I.R.S. employer
                                                            identification no.)
Securities registered pursuant to Section 12(b) of the Act:  None   

Securities registered pursuant to Section 12(g) of the Act:
                                           Name of each exchange
Title of each class                        on which registered
-------------------                       ------------------------
First mortgage bonds:   
  Series M, 8.7% due 2006; 
  Series R, 10.0% due 2017;
  Series S, 9.625% due 2019;
  Series T, 11.25% due 1997;
  and Series U, 9.25% due 2000                    None

Secured debentures:
  12.5% due 1999; 
  Series A, 10.75% due 2003                      None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes \X\ No \ \


     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. \X\

     TNP  Enterprises,  Inc.  holds  all  10,705  outstanding  common  shares of
Texas-New Mexico Power Company.

                       DOCUMENTS INCORPORATED BY REFERENCE
Document                                               Part Where Incorporated
 Proxy Statement for 1996 Annual 
 Meeting of Holders of TNP 
 Enterprises, Inc. Common Stock                                   III



<PAGE>



                      TNP ENTERPRISES INC. AND SUBSIDIARIES
                 TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES
 Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1995

     This  combined  annual  report  on Form  10-K is  filed  separately  by TNP
Enterprises,  Inc. and Texas-New Mexico Power Company.  Information contained in
this  report  relating  to  Texas-New  Mexico  Power  Company  is  filed  by TNP
Enterprises,  Inc. and  separately by Texas-New  Mexico Power Company on its own
behalf. Texas-New Mexico Power Company makes no representation as to information
relating to TNP Enterprises, Inc. or to any other affiliate or subsidiary of TNP
Enterprises, Inc., except as it may relate to Texas-New Mexico Power Company.
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


<S>                                                                         <C>
Glossary of Terms.........................................................   3

                                     Part I
Item 1.   BUSINESS........................................................   4
          Introduction....................................................   4
          TNP's Service Areas.............................................   4
          Seasonality of Business.........................................   5
          Sources of Energy...............................................   5
          Government Regulation...........................................   6
          Employees and Executive Officers................................   6
Item 2.   PROPERTIES......................................................   7
          Administrative and Service Facilities...........................   7
          Generating Facilities...........................................   7
          Transmission and Distribution Facilities........................   7
Item 3.   LEGAL PROCEEDINGS...............................................   8
Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............   8

                                     Part II

Item 5.   MARKET FOR REGISTRANTS' COMMON EQUITY
          AND RELATED STOCKHOLDER MATTERS.................................   8
Item 6.   SELECTED FINANCIAL DATA.........................................   9
Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.............................  11
          Competitive Conditions..........................................  11
          Results of Operations...........................................  12
          Liquidity and Capital Resources.................................  15
          Other Matters...................................................  15
Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................  16
          TNP Enterprises, Inc. and Subsidiaries..........................  18
          Texas-New Mexico Power Company and Subsidiaries.................  23
          Notes to Consolidated Financial Statements......................  28
          Selected Quarterly Consolidated Financial Data..................  39
Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.............................  39

                                    Part III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............  40
          Directors.......................................................  40
          Executive Officers..............................................  40
Item 11.  EXECUTIVE COMPENSATION..........................................  40
Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..  40
Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................  40

                                     Part IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.. 40

</TABLE>

                                     Page 1





                      TNP ENTERPRISES INC. AND SUBSIDIARIES
                 TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES
 Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1995


                                Glossary of Terms

     As used in this combined report, the following abbreviations,  acronyms, or
capitalized terms have the meanings set forth below:

<TABLE>
<CAPTION>

Abbreviation, Acronym,
or Capitalized Term                                            Meaning
------------------------------------------------------------------------------------------------
<S>                                              <C>
AFUDC .......................................... Allowance for borrowed funds used during construction
Bond Indenture.................................. Document pursuant to which FMBs are issued
DAT............................................. Deferred accounting treatment
EPA............................................. Environmental Protection Agency
EWG............................................. Exempt Wholesale Generator
EPS............................................. Earnings (loss) per share of common stock
FASB............................................ Financial Accounting Standards Board
FERC............................................ Federal Energy Regulatory Commission
FMB(s).......................................... One or more First Mortgage Bonds issued by TNP
GWH............................................. Gigawatt-Hours
IRS............................................. Internal Revenue Service
ITC............................................. Investment Tax Credits
KWH............................................. Kilowatt-Hours
MW.............................................. Megawatts
MWH............................................. Megawatt-Hours
New Credit Facility............................. Revolving  credit  facility from syndicate of lenders  represented
                                                 by Chemical Bank, effective November 3, 1995
NMPUC........................................... New Mexico Public Utility Commission
Note(s)......................................... One or more Notes to Consolidated Financial Statements
PPM............................................. PPM America, Inc.
PUCT............................................ Public Utility Commission of Texas
SPS............................................. Southwestern Public Service Company
SFAS............................................ Statement of Financial Accounting Standards
Rights Plan..................................... Shareholder Rights Plan adopted by TNPE
TEP............................................. Tucson Electric Power Company
TGC............................................. Texas Generating Company, a wholly owned subsidiary of TNP
TGC II.......................................... Texas Generating Company II, a wholly owned subsidiary of TNP
TNP One......................................... A two-unit, lignite-fueled, circulating fluidized-bed generating
                                                 plant located in Robertson County, Texas
TNP............................................. Texas-New Mexico Power Company, a wholly owned subsidiary of TNPE
TNPE............................................ TNP Enterprises, Inc.
Tri-State....................................... Tri-State Generation and Transmission Association
TU.............................................. Texas Utilities Electric Company
Unit 1.......................................... The first completed electric generating unit of TNP One
Unit 2.......................................... The second completed electric generating unit of TNP One

</TABLE>



                                     Page 2


                                     PART I


Item 1.      BUSINESS.

Introduction

     TNPE was  organized as a holding  company in 1983 and  currently  transacts
business  through  its  subsidiary,  TNP.  TNP is a public  utility  engaged  in
generating, purchasing,  transmitting,  distributing, and selling electricity to
customers in Texas and New Mexico.  TNP's original  predecessor was organized in
1925. TNP has two subsidiaries,  TGC and TGC II, both of which were organized to
facilitate  TNP's  acquisitions  of TNP One, Unit 1 and Unit 2 in 1990 and 1991,
respectively.

     TNPE,  TNP,  TGC, and TGC II are all Texas  corporations.  Their  executive
offices are located at 4100  International  Plaza,  P.O.  Box 2943,  Fort Worth,
Texas  76113 and their  telephone  number is (817)  731-0099.  Unless  otherwise
indicated,   all  financial  information  in  this  report  is  presented  on  a
consolidated basis.

TNP's Service Areas

     TNP provides electric service to 84 Texas and New Mexico municipalities and
adjacent rural areas with more than 213,000  customers.  TNP's service areas are
organized  into  three  operating   regions:   the  South-Western   Region,  the
North-Central Region, and the New Mexico Region.

   South-Western Region

     The  South-Western  Region  includes  the area  along the Texas  Gulf Coast
between   Houston  and  Galveston.   The  oil  and   petrochemical   industries,
agricultural  industry,  and general  commercial  activity  in the Houston  area
support the economy of this area. This region also includes the area in far west
Texas between  Midland and El Paso. The economy in this area is based  primarily
on oil and gas production, agriculture, and food processing.

   North-Central Region

     The North-Central Region extends from Lewisville,  Texas, which is north of
Dallas-Fort Worth International  Airport, to municipalities along the Red River.
TNP provides  electric  service to a variety of  commercial,  agricultural,  and
petroleum   industry   customers  in  this  area.   This  region  also  includes
municipalities and communities south and west of Fort Worth. This area's economy
depends  largely  on  agriculture  and,  to a  lesser  extent,  tourism  and oil
production.  The North-Central Region previously included service territory in a
portion of the Texas  Panhandle  that TNP sold in  September  1995.  Information
about the sale is set forth in Note 3, which is incorporated here by reference.

   New Mexico Region

     The New Mexico Region  includes  areas in southwest and  south-central  New
Mexico.   This  region's   economy  is  primarily   dependent  upon  mining  and
agriculture. Copper mines are the major industrial customers in this region.

     TNP's sales in all  regions are  primarily  to retail  customers.  Revenues
contributed  by each  operating  region and its  percentage  of total  operating
revenues in 1995, 1994, and 1993,  respectively,  are set forth in the following
table.  No single  customer  accounted  for more than 10% of operating  revenues
during the years presented in the table.

<TABLE>
<CAPTION>

                           Operating Revenues ($000's)

 Region                      1995                         1994                          1993
--------             -------------------            ------------------          --------------------
<S>               <C>             <C>           <C>              <C>          <C>              <C>  
South-Western     $  278,791       57.4%        $  269,194        56.3%       $  262,979        55.4%
North-Central        137,521       28.3            132,595        27.8           131,725        27.8
New Mexico            69,511       14.3             76,200        15.9            79,538        16.8
                    --------      -----            -------       -----          --------       -----
   Total          $  485,823      100.0%        $  477,989       100.0%       $  474,242       100.0%
                    ========      =====            =======       =====          ========       =====
</TABLE>



                                     Page 4


   Franchises and Certificates of Public Convenience and Necessity

     TNP holds 82  franchises  with  terms  ranging  from 20 to 50 years and two
franchises with indefinite terms from the 84 municipalities to which it provides
electric  service.  These  franchises  will expire on various dates from 1996 to
2039.  Three Texas  franchises,  comprising 21% of total company  revenues,  are
scheduled to expire in 1996, 1998, and 1999. However, Texas law does not require
an electric utility to execute a franchise  agreement with a Texas  municipality
to be entitled to provide or continue to provide  electrical  service within the
municipality. A franchise agreement documents the mutually agreeable terms under
which the service will be provided.  TNP intends to negotiate and execute new or
amended franchise agreements to be effective before existing franchises expire.

     TNP also  holds  PUCT  certificates  of public  convenience  and  necessity
covering all Texas areas that TNP serves.  These certificates include terms that
are  customary  in the  public  utility  industry.  TNP  generally  has not been
required to have  certificates  of public  convenience  and necessity to provide
electric power in New Mexico.

Seasonality of Business

     TNP experiences  increased  sales and operating  revenues during the summer
months as a result of increased air conditioner  usage in hot weather.  In 1995,
approximately  40% of annual revenues were recorded in June, July,  August,  and
September.

Sources of Energy

     TNP  generates  electricity  at TNP  One.  TNP  One,  which  has  300 MW of
capacity,  provided  approximately  25% of TNP's  total firm power  requirements
during  1995.  Power  generated  at  TNP  One  is  transmitted  over  TNP's  own
transmission  lines to other  utilities'  transmission  systems for  delivery to
TNP's Texas  service area systems.  To maintain a reliable  power supply for its
customers and to coordinate  interconnected  operations,  TNP is a member of the
Electric Reliability Council of Texas, the Inland Power Pool, and the New Mexico
Power Pool.

     TNP purchases the remainder of its electricity from various  suppliers with
diversified  fuel sources.  The availability and cost of purchased energy to TNP
is subject to changes in supplier costs,  regulations and laws, fuel costs,  and
other factors.  TNP is pursuing various  opportunities to reduce purchased power
costs.

     The following table sets forth certain information concerning TNP's sources
of electric energy in 1995.
<TABLE>
<CAPTION>

                                               Year Contract         Percent of
                                                  Expires          Energy Provided
TEXAS
---------
<S>                                              <C>                    <C>
Generation
TNP One....................................        -                     44%
Purchased Power
TU(1)......................................      1999                    29
Clear Lake Cogeneration L.P................      2004                    19
Other......................................      Various                  8
                                                                        ---
  Total                                                                 100%
                                                                        ===
NEW MEXICO
----------
Purchased Power
TEP(2).....................................      1995                    35%
Public Service Co. of New Mexico(3)........      2006                    26
El Paso Electric Co.(3)....................      2002                    21
SPS(3).....................................      2001                    11
Other......................................      Various                  7
                                                                       ----
  Total                                                                 100%
              
<FN>

(1)  TNP has  notified TU of its intent to cease  purchasing  full  requirements
     power and energy  effective  January 1, 1999,  as described in Note 12. 

(2)  TNP purchased  economy energy from TEP pursuant to a temporary  arrangement
     that expired in August 1995.  Subsequently,  TNP entered into a firm supply
     contract  with TEP that  expires at the end of 1996.  

(3)  Supplier may not terminate service to TNP without FERC authorization.
</FN>
</TABLE>

     Management   believes  that  current  supply   arrangements  and  available
capacities  on the wholesale  market are adequate to satisfy  TNP's  foreseeable
power requirements.


                                     Page 5



   Recovering Purchased Power and Fuel Costs

     Purchased power is recovered from TNP customers through power cost recovery
adjustment clauses authorized by the PUCT and NMPUC. These clauses enable TNP to
recover this  significant  component of operating  expenses within two months of
billing by its suppliers.

     Fuel costs are recovered  from TNP's Texas  customers  through a fixed fuel
recovery  factor  approved  by the  PUCT.  The  fixed  fuel  recovery  factor is
described at Item 7, "Pass-Through  Expenses--Fuel,"  which is incorporated here
by reference.

Government Regulation

     TNP is subject to PUCT and NMPUC regulation.  Some of its activities,  such
as issuing  securities,  are also subject to FERC regulation.  Recent regulatory
developments  are  changing  competitive  conditions  in  the  electric  utility
industry. These changes are discussed in Item 7, "Competitive Conditions," which
is incorporated here by reference.

     In addition to regulation as a utility,  TNP's  facilities are regulated by
the  EPA  and  Texas  and  New  Mexico  environmental  agencies.  TNP  One  uses
environmentally  superior  circulating  fluidized bed technology that eliminates
the  need  for  expensive  scrubbers.   TNP  was  allotted  sufficient  emission
allowances  to  comply  with the Clean Air Act of 1990  through  the year  2000.
During 1995,  1994, and 1993, TNP incurred  expenses  related to air, water, and
solid waste pollution  abatement  (including ash removal) of approximately  $5.5
million, $5.9 million, and $4.3 million, respectively.

Employees And Executive Officers

     At December  31,  1995,  TNP had 858  employees.  TNP's  employees  are not
represented  by a  union  or  covered  by  a  collective  bargaining  agreement.
Management believes TNP's relations with its employees are good.

     Executive  officers  of TNPE  and  TNP,  who are  elected  annually  by the
respective boards of directors and serve at the discretion of the boards, are as
follows:
<TABLE>
<CAPTION>

              Name                         Age             Position with TNPE
              <S>                          <C>             <C> 

              Kevern R. Joyce              49              Chairman, President, & Chief Executive Officer
              Manjit S. Cheema             41              Vice President & Chief Financial Officer
              Ralph Johnson                52              Vice President
              Michael D. Blanchard         45              Corporate Secretary & General Counsel
              Patrick L. Bridges           37              Treasurer

              Name                         Age             Position with TNP

              Kevern R. Joyce              49              Chairman, President, & Chief Executive Officer
              Jack V. Chambers, Jr.        46              Senior Vice President & Chief Customer Officer
              Manjit S. Cheema             41              Vice President & Chief Financial Officer
              Dennis R. Cash               42              Vice President - Human Resources
              Allan B. Davis               58              Vice President & Regional Customer Officer
              Larry W. Dillon              41              Vice President & Regional Customer Officer
              W. Douglas Hobbs             52              Vice President & Regional Customer Officer
              Ralph Johnson                52              Vice President - Power Resources
              John A. Montgomery           34              Vice President - Marketing & Communications
              Michael D. Blanchard         45              Corporate Secretary & General Counsel
              Patrick L. Bridges           37              Treasurer
              Melissa D. Davis             38              Controller
</TABLE>

     Kevern R. Joyce  joined TNPE and TNP in April 1994.  He became  Chairman in
April  1995.  From 1992  until  April  1994,  Mr.  Joyce  served as Senior  Vice
President and Chief Operating Officer of TEP, and from 1990 to 1992, he was Vice
President - Rates and Conservation.

     Manjit S. Cheema joined TNP in June 1994. He was also Treasurer of TNP from
June 1994 until  September  1995. In December  1994, he became Vice  President &
Chief  Financial  Officer of TNPE and TNP.  From March 1990 until he joined TNPE
and TNP, Mr.  Cheema was Assistant  Treasurer and Manager of Financial  Planning
and Budgeting for TEP.


                                     Page 6


     Jack V.  Chambers has served as Senior Vice  President  and Chief  Customer
Officer  of TNP  since  1994.  He was  TNP's  Sector  Vice  President  - Revenue
Production from 1990 to 1994.

     Ralph Johnson joined TNP and TNPE in February  1995.  From March 1991 until
he joined TNP and TNPE, Mr. Johnson was Assistant  General Manager for Tri-State
in Denver,  Colorado,  which sells power to rural  electric  cooperatives.  From
January  1991 to March  1991,  he was a  consultant  to the  General  Manager at
Tri-State. Mr.
Johnson managed electric power generation and transmission functions.

     Michael D.  Blanchard has been Corporate  Secretary and General  Counsel of
TNP and TNPE since 1987.

     Patrick L.  Bridges was  appointed  Treasurer  of TNPE and TNP in September
1995. He served as TNP's Director Finance from 1994 to September 1995, Assistant
Treasurer from 1993 to September 1995, Manager - Revenue Accounting during 1993,
and Manager - Forecasting from 1990 to 1993.

     Dennis R. Cash has served TNP as Vice  President  - Human  Resources  since
1994.  From  1990  until  1994  he was  General  Manager  - or  Manager  - Human
Resources.

     Allan B. Davis has been a TNP Vice President and Regional  Customer Officer
since 1994.  From 1991 to 1994,  he was TNP's Vice  President - Chief  Engineer,
Chief Engineer, or Assistant Chief Engineer.

     Larry W. Dillon has been a TNP Vice President and Regional Customer Officer
since 1994. From 1993 to 1994, he was TNP's Vice President - Operations.  He was
TNP's Division Manager from 1990 to 1993.

     W. Douglas Hobbs became a TNP Vice President and Regional  Customer Officer
in 1994. He served as TNP One Plant  Manager from April 1992 to 1994.  From 1989
until February 1992, Mr. Hobbs was Project Manager with Fluor Corporation, where
he  worked  on   international/domestic   projects   involving   developing  and
implementing  education,  maintenance,  and  operating  programs for utility and
industrial organizations.

     John A. Montgomery joined TNP in December 1995. From February 1994 until he
joined TNP, he served as Director of Marketing and Regional  Marketing  Director
of Greyhound  Lines,  Inc., a bus  transportation  company.  From August 1990 to
February 1994, Mr. Montgomery was President of Viva Brands International,  Inc.,
a tropical fruit beverage company that he founded.

     Melissa D. Davis was appointed  TNP's  Controller in September  1995.  From
1994 to September  1995,  she was Director - Financial  Accounting and Assistant
Controller of TNP. She served as Division Accounting Manager from 1991 to 1994.

Item 2.      PROPERTIES.

     Substantially  all of TNP's real and  personal  property  secures its FMBs.
Substantially  all of TNP's real and  personal  property  in Texas  secures  its
revolving  credit facility and debentures.  TNP's long-term debt is described in
Note 9.

Administrative and Service Facilities

     TNPE's and TNP's corporate  headquarters  are located in an office building
in Fort Worth, Texas. Space in this building is leased through 2003.

     TNP  owns or  leases  local  offices  in 37 of the  municipalities  that it
serves. TNP owns 14 construction/service centers in Texas and New Mexico.

Generating Facilities

     TNP One  generates  power for TNP's Texas  service  areas and operates as a
base load facility.

Transmission and Distribution Facilities

     Management believes that TNP's transmission and distribution facilities are
of sufficient capacity to serve existing customers adequately and to be extended
and  expanded  to  serve  customer  growth  for the  foreseeable  future.  These
facilities  primarily  consist of overhead and underground  lines,  substations,
transformers,   and  meters.  TNP  generally  constructs  its  transmission  and
distribution  facilities  on easements  or public  rights of way and not on real
property held in fee simple.



                                     Page 7



Item 3.      LEGAL PROCEEDINGS.

     The  information  set forth in Notes 3, 5, and 12 regarding  regulatory and
legal matters is incorporated here by reference.

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

     No  matters  were  submitted  to a vote of  security  holders in the fourth
quarter of 1995.




                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     TNPE's  common  stock is traded on the New York  Stock  Exchange  under the
symbol  "TNP." The high and low sales  prices  of,  and the amount of  dividends
declared and paid on,  TNPE's  common stock during each quarter in 1995 and 1994
were as follows:
<TABLE>
<CAPTION>

                                                               TNPE
                         MARKET PRICE RANGE                  DIVIDENDS
                      1995                1994                 PAID
                 --------------     ----------------         ---------
QUARTER          HIGH      LOW       HIGH       LOW        1995    1994
-------          ----      ---       ----       ---        ----    ----
<S>            <C>      <C>        <C>      <C>          <C>     <C>   
First          $16 0/0  $14 5/8    $18 5/8  $16 5/8      $ 0.20  $ 0.41
Second          16 3/4   15 0/0     17 3/8   14 5/8        0.20    0.41
Third           17 3/4   16 0/0     15 5/8   13 1/4        0.20    0.20
Fourth          19 1/8   17 1/2     15 3/8   13 5/8        0.22    0.20
                                                           ----    ----
  Total                                                  $ 0.82  $ 1.22
                                                           ====    ====
</TABLE>

     As of January 31, 1996,  there were  approximately  6,300 record holders of
TNPE common stock.

     TNPE holds all 10,705  outstanding  common  shares of TNP.  During 1995 and
1994, TNP paid common dividends to TNPE as follows:

<TABLE>
<CAPTION>

                 TNP DIVIDENDS PAID ($000'S)
QUARTER          1995                1994
<S>           <C>                 <C>      
First         $      -            $   4,400
Second               -                4,400
Third                -                   -
Fourth            2,400               2,200
                  -----             -------
  Total       $   2,400           $  11,000
                  =====             =======

</TABLE>



                                     Page 8





Item 6.      SELECTED FINANCIAL DATA.


     The following table sets forth selected  financial data of TNPE and TNP for
1991 through 1995.  For  information  on changes in net earnings  (loss) and EPS
from 1993 through  1995,  see Item 7, which is  incorporated  here by reference.
Information  on  changes  from 1991 to 1992 is  contained  in  footnotes  to the
following table.
<TABLE>
<CAPTION>

                                                      1995            1994           1993             1992           1991
                                                      ----            ----           ----             ----           ----
                                                            (In thousands except per share amounts and percentages)
   TNP ENTERPRISES, INC.
<S>                                              <C>             <C>              <C>            <C>             <C>       
   Consolidated results
     Operating revenues..........................$    485,823    $   477,989      $   474,242    $   443,827     $  441,343
     Net earnings (loss)(1)......................$     41,505    $   (17,441)     $    11,605    $    10,930     $   19,533
   Total assets(2)...............................$  1,030,433    $ 1,054,488      $ 1,086,938    $ 1,182,707     $1,122,591
   Cash flows
     Construction expenditures...................$     28,689    $    29,038      $    26,360    $    22,410     $   42,536
     Cash internally generated as a percentage
       of construction expenditures (3)..........         274%           105%             123%           213%           101%
   Common shares outstanding
     Weighted average............................      10,901         10,750           10,641          8,545          8,275
     End of year.................................      10,920         10,866           10,696         10,598          8,318
   Per share of common stock
     Earnings (loss) (1).........................$       3.75    $     (1.70)     $     1.01     $      1.17     $     2.23
     Cash dividends declared.....................$       0.82    $      1.22      $     1.63     $      1.63     $     1.63
     Book value..................................$      19.91    $     17.01      $    19.97     $     20.62     $    21.45
   Capitalization
     Common shareholders' equity.................$    217,457        184,869          213,627        218,535        178,388
     Preferred stock.............................       3,600          8,680            9,560         10,440         11,320
     Long-term debt, less current maturities (4).     611,925        682,832          678,994        742,087        525,060
                                                      -------        -------          -------        -------        -------
       Total capitalization......................$    832,982    $   876,381      $   902,181    $   971,062     $  714,768
                                                      =======        =======          =======        =======        =======
   Capitalization ratios
     Common shareholders' equity..................       26.1%          21.1%           23.7%           22.5%          25.0%
     Preferred stock..............................        0.4            1.0             1.1             1.1            1.6
     Long-term debt, less current maturities......       73.5           77.9            75.2            76.4           73.4
                                                       ------          -----           -----           -----          -----
       Total capitalization.......................      100.0%         100.0%          100.0%          100.0%         100.0%
                                                        =====          =====           =====           =====          =====

   TEXAS-NEW MEXICO POWER COMPANY
   Consolidated results
     Operating revenues..........................$    485,823    $   477,989      $   474,242    $   443,827     $  441,343
     Net earnings (loss) (1).....................$     41,809    $   (16,634)     $    11,523    $    10,845     $   19,840
   Total assets(2)...............................$  1,024,943    $ 1,043,178      $ 1,076,820    $ 1,156,567     $1,111,281
   Cash flows (same as TNPE)
   Capitalization
     Common shareholder's equity.................$    224,351    $   185,777      $   214,184    $   205,875     $  171,393
     Preferred stock.............................       3,600          8,680            9,560         10,440         11,320
     Long-term debt, less current maturities(4)..     611,925        682,832          678,994        742,087        525,060
                                                      -------        -------          -------        -------        -------
       Total capitalization......................$    839,876    $   877,289      $   902,738    $   958,402     $  707,773
                                                      =======        =======          =======        =======        =======
   Capitalization ratios
     Common shareholder's equity.................        26.7%          21.2%           23.7%            21.5%         24.2%
     Preferred stock.............................         0.4            1.0             1.1              1.1           1.6
     Long-term debt, less current maturities.....        72.9           77.8            75.2             77.4          74.2
                                                      -------         ------          ------           ------        ------
       Total capitalization......................       100.0%         100.0%          100.0%           100.0%        100.0%
                                                      =======         ======          ======           ======        ======
<FN>

(1)  TNPE's  and  TNP's  1995  earnings  before  cumulative  effect of change in
     accounting were $33,060 and $33,364,  respectively.  TNPE's 1995 EPS before
     cumulative  effect of change in accounting was $2.98.  

(2)  Total  assets  for 1994 and 1993 were  reclassified  to conform to the 1995
     method of  presentation.  

(3)  Cash internally generated is defined as cash generated from operations less
     cash dividends.  The increase in cash internally  generated as a percentage
     of  construction  expenditures in 1992 resulted from rate increases late in
     1991. The decrease from 1992 to 1993 resulted from an $18 million refund to
     customers in 1993 for amounts  collected  over bonded rates relating to the
     1991 rate  increase.  (4) The increase in long-term  debt in 1992  resulted
     primarily  from  the  issuance  of  debt   securities  to  satisfy  current
     maturities of long-term debt and unsecured notes payable.
</FN>
</TABLE>

                                     Page 9




<TABLE>
<CAPTION>



                                                      1995            1994           1993             1992           1991
                                                      ----            ----           ----             ----           ----
UTILITY STATISTICS Operating revenues (in thousands):
<S>                                                <C>            <C>              <C>            <C>             <C>      
   Residential...................................  $  200,455     $  194,933       $  193,484     $  175,885      $ 176,651
   Commercial....................................     148,908        141,886          138,680        128,550        119,745
   Industrial....................................     113,728        122,714          124,474        121,027        128,356
   Other.........................................      22,732         18,456           17,604         18,365         16,591
                                                     --------        -------         --------       --------        -------
     Total.......................................  $  485,823     $  477,989       $  474,242     $  443,827      $ 441,343
                                                     ========        =======         ========       ========        =======

Sales (MWH):
   Residential..................................    2,141,553      2,085,621        2,047,360      1,947,593      2,017,349
   Commercial...................................    1,681,130      1,618,840        1,567,083      1,499,927      1,485,211
   Industrial...................................    2,704,159      2,652,844        2,567,552      2,508,837      2,798,369
   Other........................................      113,985        114,190          104,882        109,954        115,406
                                                   ----------     ----------       ----------     ----------      ---------
     Total......................................    6,640,827      6,471,495        6,286,877      6,066,311      6,416,335
                                                   ==========     ==========       ==========     ==========      =========
Number of customers (at year-end):
   Residential...................................     183,863        185,364          181,298        178,154        174,859
   Commercial....................................      29,361         30,624           30,235         30,359         30,300
   Industrial....................................         136            142              141            155            160
   Other.........................................         244            237              237            229            230
                                                     --------        -------         --------       --------        -------
     Total.......................................     213,604        216,367          211,911        208,897        205,549
                                                     ========        =======         ========       ========        =======

Revenue statistics:
   Average annual use per residential
     customer (KWH).............................       11,476         11,354           11,362         11,003         11,584
   Average annual revenue per residential
     customer (dollars).........................        1,074          1,061            1,067            987          1,010
   Average revenue per KWH
     sold - residential (cents).................         9.36           9.35            9.45            9.03           8.76
   Average revenue per KWH
     sold - total sales (cents).................         7.32           7.39            7.54            7.32           6.88

Net generation and purchases (MWH):
   Generated....................................    2,351,000      2,336,830        2,363,493      2,247,664      1,337,366
   Purchased....................................    4,612,186      4,472,306        4,385,697      4,261,129      5,452,132
                                                   ----------     ----------       ----------     ----------      ---------
     Total(5)...................................    6,963,186      6,809,136        6,749,190      6,508,793      6,789,498
                                                   ==========     ==========       ==========     ==========      =========

Average cost per KWH purchased (cents)..........         3.87           4.35             4.56           4.09           3.98

Employees (year-end)............................          858            894            1,051          1,086          1,104

<FN>

(5)  The  difference  between  total  sources  and total  sales  represents  TNP
     internal  use and line losses.  Also,  increase in MWH  generation  and the
     related  decrease in MWH  purchased in 1992 resulted from the full calendar
     year utilization of TNP One Unit 2 that became commercially  operational in
     October 1991.
</FN>
</TABLE>


                                    Page 10





Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Competitive Conditions

   Historical Condition

     Historically,  TNP has operated with little direct  competition  throughout
most of its  service  territory.  TNP is the  only  electric  utility  issued  a
certificate of public  convenience  and necessity to serve  customers in most of
its Texas service areas. In New Mexico, TNP holds exclusive franchise agreements
with  the  municipalities  and  adjacent  areas  that  it  serves.  TNP  expects
competitive conditions in the electric utility industry to change significantly,
as discussed below.

   Regulatory Changes

     Federal. In March 1995, FERC proposed  comprehensive  regulatory changes to
facilitate  development of a competitive wholesale electric power market. FERC's
notice of proposed  rulemaking,  commonly  referred to as the "Mega-NOPR,"  will
require all FERC regulated  public  utilities to offer  nondiscriminatory,  open
access  tariffs to all wholesale  sellers and  purchasers of electric  energy in
interstate commerce. Utilities that own transmission facilities will be required
to provide all wholesale  purchasers and sellers of electric energy full service
transmission  arrangements  comparable  in  quality  and  cost  to  transmission
services that the owner charges its own customers. No such requirement currently
exists.  These  utilities  will also be  required  to  provide  all  actual  and
potential transmission users access to real time information on the transmission
capabilities  of  its  network.   Currently,  this  information  is  treated  as
proprietary. FERC is expected to adopt the Mega-NOPR by mid 1996.

     FERC's  proposal stems from the Energy Policy Act of 1992, in which,  among
other  things,  Congress  authorized  FERC  to  relieve  various  discriminatory
practices in the electric utility  industry.  This  legislation  eliminated many
anticompetitive restrictions on owning and operating nonutility power producers,
or EWGs. It also mandated increased  transmission access for wholesale suppliers
in interstate commerce.

     State.  Many  states are also  considering  regulatory  changes to increase
competition in the electric utility industry and lower consumer prices. The PUCT
recently passed a wholesale  transmission access rule to lower costs for a third
party to transport electricity through a utility's transmission network.  During
1995, the PUCT considered  proposals to enable retail  customers to choose among
suppliers,  a practice  commonly  referred to as "retail  wheeling," but took no
action.  The New Mexico  legislature  has  currently  rejected  retail  wheeling
proposals. However, the NMPUC is conducting a study to determine the feasibility
of  "managed   competition,"  which  resembles  retail  wheeling.   The  largest
impediment  to retail  wheeling  centers  on how to  account  for the  potential
financial  impairment of utility  assets,  or "stranded  costs," as the industry
evolves from a regulated to a competitive environment. Generating facilities are
most at risk of impairment because they will be most exposed to competition from
an increasing  number of power  producers.  TNP believes that  transmission  and
distribution facilities are less vulnerable to impairment considerations because
they will continue to be regulated.

   Industry Response

     The  regulatory  changes  described  above are resulting in  competition in
generating and supplying  electricity and  contributing to a "buyers" market for
wholesale  power.  Electric  utilities  are  responding  by attempting to reduce
operating costs and adopting  strategies to protect current markets and identify
opportunities for customer growth.  This has been achieved through a combination
of mergers,  internal restructuring,  "unbundling of services," and the creation
of power marketers.  Services are "unbundled"  when a fully  integrated  utility
reorganizes  into  separate  companies  or  divisions,  each  specializing  in a
specific  service  such  as  generation,   transmission  and  distribution,  and
marketing.  Power  marketers  actively  search  for  buyers of excess  generated
electricity.

     Although the electric  utility  industry is evolving  into an  increasingly
competitive,  market-dominated  environment,  the transition  toward federal and
state deregulation is currently proceeding  independently and TNP cannot predict
when the transition  will be completed.  However,  the transition is expected to
result in a growing number of competing power  suppliers and declining  customer
prices.

   Impact on TNP

     The inability to recover  stranded costs could adversely  impact TNPE's and
TNP's financial  condition.  TNP is considering various  alternatives to address
its potential for stranded costs. Although final resolution and magnitude of the
issue is uncertain,  management anticipates that shareholders and customers will
share the financial burden of stranded costs.


                                    Page 11



     Assuming satisfactory  resolution of the stranded costs issue, TNP believes
that current  competitive  developments on the wholesale market  ultimately will
benefit TNP and its customers.  Because TNP purchases much of its power, TNP can
take advantage of the lower transmission prices,  additional market flexibility,
and new options in obtaining  purchased power.  TNP's  competitive  position has
been strengthened with the PUCT open access to transmission  rule. TNP currently
has no significant  wholesale power sales but expects to position itself to take
advantage  of  opportunities  to serve  additional  wholesale  customers as they
arise.  Management  believes  TNP's  revenue  growth  opportunities  are  in  an
increased  customer base and new services.  TNP established a marketing division
in December 1995 to pursue these opportunities.

     TNP believes  its market  niche is in smaller to medium sized  communities.
Only two of the 84 communities in TNP's service area have  populations in excess
of 50,000.  While some larger, fully integrated utilities are closing offices in
smaller towns and  consolidating  in major  population  centers,  TNP opened two
additional small-town offices in 1995.

Results of Operations

   Overall Results

     Earnings applicable to common stock were $40.8 million for 1995, the second
highest  earnings in TNPE's  history.  This was an increase of $59.0  million as
compared  to a loss  applicable  to  common  stock of $18.2  million  for  1994.
Management  believes the initiatives  taken in 1994 - adopting a strategic plan,
rate  settlements,  reorganization - set the framework for the earnings increase
in 1995.

     Excluding  the one-time  items  discussed  below,  1995 earnings were $19.9
million,  an $11.9 million  improvement over 1994 earnings of $8.0 million.  The
$11.9 million  improvement  resulted primarily from base revenue increases,  but
also from increased GWH sales, cost containment of operating expenses, and lower
interest charges.

     One-time items, net of taxes, in 1995 consisted of the cumulative effect of
the change in accounting for unbilled revenues of $8.4 million,  gain on sale of
the Texas  Panhandle  properties of $9.5 million,  and  recognition  of deferred
revenues  related to a favorable  IRS  private  letter  ruling of $3.0  million.
One-time items, net of taxes, in 1994 consisted of the recognition of regulatory
disallowances  of  $20.5  million  and  reorganization  costs  of $5.7  million.
Additional  information concerning these one-time items is set forth in Notes 2,
3, 4, 5, and 6, which are incorporated here by reference.

     Earnings applicable to common stock before one-time items in 1994 were $2.7
million less than in 1993.  This decrease  resulted  from  increases in interest
charges and  labor/benefits  expenses partially offset by increased base revenue
and decreased income taxes.

     The following  table sets forth results of operations  for 1995,  1994, and
1993 and the impact of one-time items:
<TABLE>
<CAPTION>




                                                           1995                    1994                    1993
                                                   ------------------      -------------------      -----------
                                                    Amount        EPS        Amount        EPS        Amount       EPS
                                                                    (In thousands except per share amounts)

<S>                                                <C>         <C>        <C>         <C>          <C>         <C>    
Earnings applicable to common
    stock before one-time items..................  $  19,908   $  1.83    $    7,997  $  0.74      $  10,726   $  1.01
                                                     -------     -----      --------    -----        -------      ----

One-time items, net of income taxes:
    Cumulative effect of change in accounting....      8,445      0.77            -      -                -         -
    Gain on sale of Texas Panhandle properties...      9,479      0.87            -      -                -         -
    Recognition of deferred revenues.............      3,018      0.28            -      -                -         -
    Reorganization costs.........................         -         -         (5,723)   (0.53)            -         -
    Regulatory disallowances.....................         -         -        (20,505)   (1.91)            -         -
                                                     -------     -----      --------    -----        -------      ---
       Total one-time items, net.................     20,942      1.92       (26,228)   (2.44)            -         -
                                                     -------      ----       -------    -----        -------      ---
Earnings (loss) applicable
    to common stock..............................  $  40,850   $  3.75    $  (18,231) $ (1.70)     $  10,726   $  1.01
                                                      ======     =====       =======    =====        =======      ====


</TABLE>

                                    Page 12




   Operating Revenues

     The following  table  summarizes the  components of operating  revenues (in
thousands). One-time items are identified separately to enhance comparability of
annual operating revenues.
<TABLE>
<CAPTION>


                                                                                          Increase (Decrease)
                                                 1995         1994         1993        `95 v. `94   `94 v. `93
                                               --------     ---------    ---------     ----------   ----------
<S>                                          <C>          <C>          <C>             <C>          <C>      
Operating revenues                           $  485,823   $ 477,989    $  474,242      $   7,834    $   3,747
Effect of change in unbilled revenues               212          -             -             212           -
Effect of recognizing deferred
  revenue from private letter ruling             (4,128)         -             -          (4,128)          -
                                                -------     -------      --------        -------       -----
     Subtotal                                   481,907     477,989       474,242          3,918        3,747
                                                -------     -------      --------        -------       ------

Less pass-through items:
   Purchased power                              178,465     194,595       200,183        (16,130)      (5,588)
   Fuel                                          44,828      43,024        41,099          1,804        1,925
   Standby power                                  5,610       5,894         6,474           (284)        (580)
                                                -------     -------      --------        -------       ------
     Total pass-through items                   228,903     243,513       247,756        (14,610)      (4,243)
                                                -------     -------       -------        -------       ------

Base revenues-billed                         $  253,004   $ 234,476    $  226,486      $  18,528    $   7,990
                                                =======     =======      ========        =======       ======
</TABLE>

     Pass-through  items are the portion of operating revenues that recover from
customers the costs of purchased  power,  fuel, and standby  power.  These items
affect customer rates but do not affect operating  income.  Annual variances are
discussed under "Results of Operations--Operating Expenses."

     Excluding the effects of one-time items,  1995 base revenues  exceeded 1994
base revenues by $18.5 million.  The increase is primarily due to rate increases
in  both  Texas  ($17.5  million   annualized)  and  New  Mexico  ($0.4  million
annualized)  resulting  from  settlement  agreements in October and May of 1994,
respectively.  Increased  sales also  contributed to the base revenue  increase.
Sales of 6,641 GWH in 1995  represented a 2.6% improvement over prior year sales
and contributed $5.1 million to the increase in 1995 base revenues. The increase
in sales resulted from increased  consumption  by all customer  classes,  and is
attributed  to warmer  weather  and  customer  growth.  The  increases  for each
customer class are residential (2.7%), commercial (3.9%), and industrial (1.9%).
Excluding  the  reduction  in  customers  from the sale of the  Texas  Panhandle
properties, total customers increased by 2.1%.

     Base  revenues  in 1994  exceeded  the 1993  amount by $8.0  million.  This
increase is also attributable to the 1994 settlement  agreements,  as well as to
higher  customer  usage (2.9% overall KWH sales  increase) from increases in the
number of residential and commercial customers.

     In 1995,  85.7% of TNP's  revenues were  generated in Texas.  Pursuant to a
rate case settlement  approved by the PUCT in October 1994, TNP may not increase
its base  rates in Texas  prior to March 1999  except in  certain  extraordinary
circumstances.  Additional information about the settlement is set forth in Note
5. TNP  currently  has no plans to file for a rate increase in New Mexico in the
near term.

     TNP is aggressively  pursuing  arrangements with industrial  customers that
benefit both the customer and TNP.  One  industrial  customer has switched  from
self-generation  and is expected to increase annual sales by 430 GWH and provide
$2.4 million of additional base revenues  beginning in mid 1996. TNP is actively
negotiating with another major industrial  customer providing annual revenues of
$26.7  million  in 1995  ($9.4  million  in base  revenues).  This  customer  is
constructing a 300-MW  cogeneration  plant, the first phase of which is expected
to commence operations in 1998. TNP is negotiating with the customer to continue
providing  electrical services to the customer.  If TNP is successful,  revenues
from this customer are expected to be at lower profit margins.

   Operating Expenses

     Operating expenses for 1995 were $2.0 million lower than in 1994, excluding
the $8.8 million  reorganization costs in 1994. The decrease is primarily due to
lower pass-through expenses of $14.6 million and labor/benefits expenses of $1.0
million offset by increased income tax expense of $13.6 million.

     Operating expenses for 1994, excluding  reorganization costs,  decreased by
$4.8  million as  compared to 1993.  This  decrease  is  primarily  due to lower
pass-through  expenses of $4.2  million  and income tax expense of $5.5  million
partially offset by increases in labor/benefits expenses of $2.3 million.



                                    Page 13


   Pass-Through Expenses

     Pass-through  expenses consist of purchased power, fuel, and standby power.
The overall decreases are primarily due to lower costs of purchased power offset
by increased fuel expense.

    Purchased  Power.  Purchased  power in 1995 and 1994 decreased $16.1 million
and $5.6 million,  respectively,  as compared to the corresponding  prior years.
Purchases for Texas service areas were shifted to lower cost  suppliers for 1995
supplemental  summer peaking capacity.  This arrangement became effective May 1,
1995,  and is expected to result in  annualized  cost  savings of $7.0  million.
During 1995,  TNP actively  intervened in a Texas rate case of a major  supplier
and is benefiting with  annualized cost savings of $10.5 million.  Purchases for
New Mexico service areas were also shifted to lower cost suppliers beginning mid
1994 and continuing in 1995.  TNP's customers  directly  benefit from these cost
reductions as these expenses are recovered through adjustment clauses.

     Purchased power costs represent TNP's largest operating  expense.  In 1995,
TU was TNP's largest  supplier of purchased  power in Texas and is TNP's highest
price  supplier.  As  described in Note 12, TNP has notified TU of its intent to
cease purchasing full  requirements  power and energy effective January 1, 1999.
In July 1995, TNP issued  requests for proposals for purchased  power  resources
during 1996 through 2004 to replace the power currently provided by TU.

     Fuel.  Fuel  expense  in 1995  and 1994  increased  $1.8  million  and $1.9
million,  excluding amounts of nonpass-through fuel expenditures,  respectively,
as compared to the  corresponding  prior years. Fuel expense is directly related
to an increased  fixed fuel recovery  factor  approved by the PUCT in connection
with the 1994 Texas rate case settlement.  The majority of TNP's fuel expense is
recovered in revenues and any  difference  from actual costs is deferred until a
new  factor is  established  under a fuel  factor  reconciliation  hearing.  The
current fixed fuel factor was  established to recover current expense as well as
any under-recovered  fuel. The under-recovered  amount at December 31, 1995, was
$9.3 million.  Also,  contributing to the recovery of under-recovered  fuel is a
20% reduction in the cost of lignite coal or $7.6 million  annually.  Additional
information  about  the cost of coal is set  forth in Note 12.  In  management's
opinion, the current fixed fuel factor along with the fuel cost reduction should
enable the  recovery of  under-recovered  fuel costs by the second half of 1997.
Originally,  the  recovery  of  under-recovered  fuel costs was  expected by the
second half of 1996;  however,  increased  standby  purchases in connection with
outages at TNP One and increased  economy sales,  to which the fixed fuel factor
does not apply, have delayed the recovery of under-recovered fuel costs. Economy
sales were higher because of the  increasing  number of  renegotiated  contracts
with industrial customers.

   Labor/Benefits Expenses

     Other  operating  expense  was $1.0  million  lower  in 1995  than in 1994.
Payroll and payroll related items decreased $7.2 million,  primarily as a result
of the 1994 reorganization.  Offsetting these savings were the costs of employee
incentive  compensation plans adopted in 1995,  increases in customer collection
costs,  outsourcing,  outside  services,  wage and salary  increases,  and other
administrative expenses.

     Labor/benefits  expenses  increased  $2.3 million from 1993 to 1994.  Labor
increased $1.2 million due to a 3% general wage increase  implemented in January
1994, the first such adjustment since 1991. TNP also restored  employer matching
contributions to the 401(k) thrift plan in July 1994. Matching contributions had
been discontinued since January 1, 1993.

   Interest Charges

     The $1.3 million  decrease in 1995 interest  charges  resulted from reduced
long-term  debt levels and  decreased  interest  rates  associated  with the New
Credit  Facility.  Contributing  to reduced debt levels were the  retirement  of
$29.2  million of Series T FMBs in October 1995 with  proceeds  from the sale of
the Texas panhandle  properties and lower average  borrowings under TNP's credit
facilities.  Increased  profitability  during 1995 as  previously  discussed  at
"Results  of  Operations--Overall  Results"  enabled  TNP to reduce its  average
borrowings under the its credit facilities.

     Interest  charges are expected to decrease  during 1996 for three  reasons.
First,  management expects to use available cash flow to reduce borrowings under
the New Credit Facility in 1996.  Second, TNP will experience a full year effect
of the $29.2 million Series T FMBs retirement  ($3.3 million  annually).  Third,
the reduced  interest rate margin  associated  with the New Credit Facility will
contribute to lower interest charges.

     Annual  interest  charges during 1994 increased by $7.3 million as compared
to 1993.  The  increase  resulted  from the  issuance of $270.0  million of debt
during  September 1993 which replaced debt with lower  interest  rates.  Issuing
these    securities    enabled   TNP   to   extend    maturities   and   utilize
prepayment/subsequent  reborrowing  provisions of the remaining debt outstanding
under  its  previous  credit  facilities,  which  were  used  to  finance  TNP's
acquisition of TNP One.



                                    Page 14



Liquidity and Capital Resources

   Sources of Liquidity

     As  discussed  in Note 9, TNP  entered  into  the New  Credit  Facility  on
November 3, 1995,  amending its previous credit facilities.  TNP's improved cash
flow from operations resulted in significant reductions in outstanding principal
balances  associated  with its credit  facilities.  As of December 31, 1995, the
unused commitment under the New Credit Facility was $107 million. TNP can borrow
only $57  million  of the  unused  commitment  unless it  pledges  FMBs equal in
principal amount to total New Credit Facility borrowings over $100 million.

   Capital Resources

     Both TNPE's and TNP's  capital  structure  improved  during 1995 as TNP was
able to reduce  debt  levels due to the sale of the Texas  Panhandle  properties
(see Note 3) and the significant earnings  improvement  described at "Results of
Operations--Overall  Results." The equity  portion of TNPE's  capital  structure
increased  from 21.1% at  December  31,  1994,  to 26.1% at December  31,  1995.
Conversely,  the long-term debt ratio decreased from 77.9% to 73.5% for the same
period.  TNP  experienced  similar  results  with its capital  ratios.  TNP also
retired $5.1 million of preferred stock during 1995.

     TNP's  capital  requirements  through  2000 are  projected to be as follows
(amounts in millions):
<TABLE>
<CAPTION>



                                                              1996       1997       1998      1999        2000
                                                              ----       ----       ----      ----        ----

     <S>                                                    <C>       <C>         <C>       <C>        <C>    
     FMB and secured debenture maturities (see Note 9)      $   1.1   $  101.9    $   1.1   $ 131.1    $ 110.1
     Capital expenditures                                      32.3       30.5       31.8      33.2       34.9
                                                              -----     ------      -----     -----      -----
       Total capital requirements                           $  33.4   $  132.4    $  32.9   $ 164.3    $ 145.0
                                                              =====     ======      =====     =====      =====
</TABLE>

     At the end of 1995 the  outstanding  balance under the New Credit  Facility
was $43 million,  which will be due in 2000.  The New Credit  Facility  provides
greater  financial  flexibility  to TNP.  In  addition  to lower  interest  rate
margins,  the New Credit  Facility  is  available  to retire  other  outstanding
long-term  debt.  TNP  believes  that  cash flow from  operations  and  periodic
borrowings  under the New Credit  Facility  will be  sufficient  to meet working
capital  requirements  and fund planned capital  requirements  through 1996. TNP
expects  to use the  New  Credit  Facility  to  redeem  maturing  debt in  1997.
Borrowings  under the New  Credit  Facility  may be  supplemented,  however,  by
issuing other  long-term debt or a capital  contribution  from the proceeds of a
TNPE common stock sale.

Other Matters

     In March 1995,  FASB issued SFAS 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets  and for  Long-Lived  Assets  to be  Disposed  Of."  SFAS 121
requires  that  long-lived  assets  and  certain  intangibles  be  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.

     In  October  1995,  FASB  issued  SFAS  123,  "Accounting  for  Stock-Based
Compensation."  SFAS 123 permits  companies  to retain the current  approach set
forth in APB  Opinion  25,  "Accounting  for  Stock  Issued to  Employees,"  for
recognizing stock-based compensation. However, companies are encouraged to adopt
a new accounting  method based on estimated  fair values.  Companies that do not
follow the new fair value based  method  will be  required  to provide  expanded
disclosures in their 1996 financial statements.

     Management  believes  that  adopting SFAS 121 and SFAS 123 in 1996 will not
have a material effect on TNPE's and TNP's  consolidated  financial  position or
results of operations.


                                    Page 15


Item 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                          Independent Auditors' Report




The Board of Directors and Shareholders
TNP Enterprises, Inc.:

We have audited the consolidated  financial statements of TNP Enterprises,  Inc.
and  subsidiaries  as  listed  in the  accompanying  index  at  Part  IV.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of TNP Enterprises,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1995,  in  conformity  with  generally  accepted  accounting
principles.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
changed its method of accounting for operating revenues in 1995. As discussed in
Note 1 to the consolidated financial statements,  the Company changed its method
of accounting  for income taxes in 1993 to adopt the provisions of the Financial
Accounting   Standards  Board's  Statement  of  Financial  Accounting  Standards
("SFAS")  No. 109,  Accounting  for Income  Taxes.  As  discussed in Note 7, the
Company  also  adopted the  provisions  of the  Financial  Accounting  Standards
Board's SFAS No. 106,  Employers'  Accounting for Postretirement  Benefits Other
Than Pensions in 1993.



                                              KPMG Peat Marwick LLP


Fort Worth, Texas
February 6, 1996





                                    Page 16






                          Independent Auditors' Report




The Board of Directors
Texas-New Mexico Power Company:

We have audited the consolidated  financial statements of Texas-New Mexico Power
Company (a wholly owned subsidiary of TNP Enterprises, Inc.) and subsidiaries as
listed  in the  accompanying  index at Part  IV.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Texas-New Mexico
Power Company and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
changed its method of accounting for operating revenues in 1995. As discussed in
Note 1 to the consolidated financial statements,  the Company changed its method
of accounting  for income taxes in 1993 to adopt the provisions of the Financial
Accounting   Standards  Board's  Statement  of  Financial  Accounting  Standards
("SFAS")  No. 109,  Accounting  for Income  Taxes.  As  discussed in Note 7, the
Company  also  adopted the  provisions  of the  Financial  Accounting  Standards
Board's SFAS No. 106,  Employers'  Accounting for Postretirement  Benefits Other
Than Pensions in 1993.



                                         KPMG Peat Marwick LLP


Fort Worth, Texas
February 6, 1996



                                    Page 17



<TABLE>
<CAPTION>


                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       Three Years Ended December 31, 1995

                                                                               1995          1994            1993
                                                                               ----          ----            ----
                                                                            (In thousands except per share amounts)
<S>                                                                        <C>           <C>              <C>       
OPERATING REVENUES (Notes 2, 4, and 5)...................................  $  485,823    $   477,989      $  474,242
                                                                            ---------        -------         -------

OPERATING EXPENSES:
   Purchased power.......................................................     178,465        194,595         200,183
   Fuel..................................................................      48,898         46,988          44,348
   Other operating and general expenses..................................      71,311         72,472          69,406
   Maintenance...........................................................      11,522         11,966          11,460
   Reorganization costs (Note 6).........................................          -           8,782              -
   Depreciation of utility plant.........................................      37,850         36,782          36,015
   Taxes other than income taxes.........................................      28,865         29,651          30,296
   Income taxes (Note 8).................................................      12,317         (1,238)          4,294
                                                                             --------       --------        --------
      Total operating expenses...........................................     389,228        399,998         396,002
                                                                             --------       --------        --------

NET OPERATING INCOME.....................................................      96,595         77,991          78,240
                                                                             --------       --------        --------

OTHER INCOME (LOSS):
   Gain on sale of Texas Panhandle properties (Note 3)...................      14,583             -               -
   Recognition of regulatory disallowances (Note 5)......................          -         (31,546)             -
   Other income and deductions, net .....................................       1,245          1,057           1,972
   Income taxes (Note 8).................................................      (5,403)        10,305            (666)
                                                                             --------       --------        --------
      Other income (loss), net of taxes..................................      10,425        (20,184)          1,306
                                                                             --------       --------        --------

EARNINGS BEFORE INTEREST CHARGES
      AND CHANGE IN ACCOUNTING...........................................     107,020         57,807          79,546
                                                                             --------       --------        --------

INTEREST CHARGES:
   Interest on long-term debt............................................      70,544         71,568          63,833
   Other interest and amortization of debt-related costs.................       3,416          3,680           4,108
                                                                             --------       --------        --------
      Total interest charges.............................................      73,960         75,248          67,941
                                                                             --------       --------        --------

EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
      OF CHANGE IN ACCOUNTING............................................      33,060        (17,441)         11,605

Cumulative effect of change in accounting for
   unbilled revenues, net of taxes (Note 2)..............................       8,445             -               -
                                                                             --------       --------        -------

NET EARNINGS (LOSS)......................................................      41,505        (17,441)         11,605

Dividends on preferred stock.............................................         655            790             879
                                                                             --------       --------        --------

EARNINGS (LOSS) APPLICABLE TO COMMON STOCK...............................  $   40,850    $   (18,231)     $   10,726
                                                                             ========       ========        ========


EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
   Earnings (loss) before cumulative effect of change in accounting......  $     2.98    $    (1.70)      $     1.01
   Cumulative effect of change in accounting for unbilled revenues.......        0.77             -               -
                                                                             --------       --------        -------
   Earnings (loss) per share.............................................  $     3.75    $    (1.70)      $     1.01
                                                                             ========       =======         ========
DIVIDENDS PER SHARE......................................................  $     0.82    $     1.22       $     1.63
                                                                             ========       =======         ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...............................      10,901         10,750          10,641
                                                                             ========       ========        ========

PRO FORMA AMOUNTS ASSUMING RETROACTIVE
      APPLICATION OF CHANGE IN ACCOUNTING:
   Earnings (loss) applicable to common stock............................  $   32,405    $   (16,884)     $   11,724
   Earnings (loss) per share.............................................  $     2.98    $    (1.57)      $     1.10

</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                    Page 18

<TABLE>
<CAPTION>

                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       Three Years Ended December 31, 1995

                                                                              1995             1994              1993
                                                                              ----             ----              ----
                                                                                          (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                       <C>               <C>              <C>        
    Cash received from customers..........................................$   481,470       $   475,462      $   460,463
    Purchased power.......................................................   (172,486)         (193,366)        (195,063)
    Fuel costs paid.......................................................    (44,781)          (46,537)         (46,049)
    Cash paid for payroll and to other suppliers..........................    (76,735)          (85,912)         (76,254)
    Interest paid, net of amounts capitalized.............................    (68,484)          (76,402)         (59,028)
    Income taxes paid.....................................................     (1,095)              365           (3,263)
    Other taxes paid, net of amounts capitalized..........................    (30,556)          (30,323)         (30,344)
    Other operating cash receipts and payments, net.......................      1,043             1,014              236
                                                                            ---------         ---------        ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................     88,376            44,301           50,698
                                                                            ---------         ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to utility plant, net of
        capitalized depreciation and interest............................     (28,689)          (29,038)          (26,360)
    Net proceeds from sale of Texas Panhandle properties..................     29,009                -                -
    Purchases of temporary investments....................................         -             (5,590)              -
    Maturities of temporary investments...................................      5,590                -                -
                                                                            ---------         ---------        --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.......................      5,910           (34,628)         (26,360)
                                                                            ---------         ---------        --------- 
CASH FLOWS FROM FINANCING ACTIVITIES:
    Dividends paid on preferred and common stocks.........................     (9,616)          (13,823)         (18,223)
    Issuances:
       Common stock.......................................................        856             2,502            1,701
       Borrowings under revolving credit facility.........................     77,000           188,500               -
       First mortgage bonds...............................................         -                 -           240,000
       Deferred expenses associated with financings.......................     (2,096)               -            (8,940)
    Redemptions:
       Preferred stock....................................................     (5,080)             (880)            (880)
       Repayments under revolving credit facility.........................   (119,272)         (182,028)        (280,700)
       First mortgage bonds...............................................    (30,270)           (1,070)         (31,658)
                                                                            ---------         ---------        ---------
NET CASH USED IN FINANCING ACTIVITIES.....................................    (88,478)           (6,799)         (98,700)
                                                                            ---------         ---------        --------- 
NET CHANGE IN CASH AND CASH EQUIVALENTS...................................      5,808             2,874          (74,362)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................     15,297            12,423           86,785
                                                                            ---------         ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................................$    21,105       $    15,297      $    12,423
                                                                            =========         =========        =========
RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH
    PROVIDED BY OPERATING ACTIVITIES:
    Net earnings (loss)...................................................$    41,505       $   (17,441)     $    11,605
    Adjustments to reconcile net earnings (loss) to net cash provided:
       Cumulative effect of change in accounting, net of taxes............     (8,445)               -                -
Gain on sale of Texas Panhandle properties................................    (14,583)               -                -
       Depreciation of utility plant......................................     37,850            36,782           36,015
       Amortization of debt-related costs and other deferred charges......      4,952             5,495            4,939
       Allowance for borrowed funds used during construction..............       (162)             (275)            (303)
       Deferred income taxes (excluding the change in accounting).........      5,256           (10,915)           5,534
       Investment tax credits.............................................      1,679            (1,436)            (953)
       Reorganization costs...............................................         -              6,858               -
       Recognition of regulatory disallowances............................         -             31,546               -
    Cash flows impacted by changes in current assets and liabilities:
       Deferred purchased power and fuel costs............................      5,997              (107)           2,584
       Accrued interest...................................................      2,289            (4,422)           7,246
       Accrued taxes......................................................      8,483            (1,108)          (2,130)
       Revenues subject to refund.........................................     (4,782)            1,382          (14,115)
       Purchased power costs subject to refund............................      5,688                -                -
       Changes in other current assets and liabilities....................      3,138            (1,387)             972
    Other, net............................................................       (489)             (671)            (696)
                                                                            ---------         ---------        ---------

NET CASH PROVIDED BY OPERATING ACTIVITIES.................................$    88,376       $    44,301      $    50,698
                                                                            =========         =========        =========


</TABLE>


See accompanying Notes to Consolidated Financial Statements.


                                    Page 19



<TABLE>
<CAPTION>


                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1995, and 1994



                                                                                          1995               1994
                                                                                          ----               ----
                                                                                              (In thousands)
ASSETS

<S>                                                                                  <C>                 <C>         
UTILITY PLANT (Notes 3, 5, and 9):
   Electric plant................................................................... $  1,193,538        $  1,192,277
   Construction work in progress....................................................        3,334               3,816
                                                                                        ---------          ----------
         Total......................................................................    1,196,872           1,196,093
   Less accumulated depreciation....................................................      252,868             228,820
                                                                                        ---------          ----------
         Net utility plant..........................................................      944,004             967,273
                                                                                        ---------          ----------

NONUTILITY PROPERTY, at cost........................................................        1,156               1,308

CURRENT ASSETS:
   Cash and cash equivalents........................................................       21,105              15,297
   Temporary investments............................................................           -                5,590
   Customer receivables (Note 2)....................................................       15,569               3,832
   Inventories, at the lower of average cost or market:
      Fuel..........................................................................          492               1,157
      Materials and supplies........................................................        7,287               7,527
   Deferred purchased power and fuel costs..........................................        9,261              15,258
   Accumulated deferred income taxes (Note 8).......................................          144               2,702
   Other current assets.............................................................          960               1,817
                                                                                        ---------          ----------
         Total current assets.......................................................       54,818              53,180
                                                                                        ---------          ----------

DEFERRED CHARGES....................................................................       30,455              32,727
                                                                                        ---------          ----------
                                                                                     $  1,030,433        $  1,054,488
                                                                                        =========          ==========

CAPITALIZATION AND LIABILITIES

CAPITALIZATION (See Consolidated Statements of Capitalization):
   Common shareholders' equity (Note 11)............................................ $    217,457        $    184,869
   Preferred stock (Note 10)........................................................        3,600               8,680
   Long-term debt, less current maturities (Note 9).................................      611,925             682,832
                                                                                        ---------          ----------
         Total capitalization.......................................................      832,982             876,381
                                                                                        ---------          ----------

CURRENT LIABILITIES:
   Current maturities of long-term debt (Note 9)....................................        1,070               2,670
   Accounts payable.................................................................       22,040              21,951
   Accrued interest.................................................................       13,982              11,693
   Accrued taxes....................................................................       26,205              17,722
   Customers' deposits..............................................................        2,493               3,973
   Revenues subject to refund (Note 4)..............................................           -                4,782
   Purchased power costs subject to refund..........................................        5,688                  -
   Other current liabilities........................................................       12,472              10,621
                                                                                        ---------          ----------
         Total current liabilities..................................................       83,950              73,412
                                                                                        ---------          ----------
REGULATORY TAX LIABILITIES..........................................................       26,826              30,003
ACCUMULATED DEFERRED INCOME TAXES (Note 8)..........................................       57,381              46,960
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS (Note 8)................................       18,592              16,912
DEFERRED CREDITS (Note 7)...........................................................       10,702              10,820
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 5, 8, and 12)
                                                                                     $  1,030,433        $  1,054,488
                                                                                        =========          ==========

</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                    Page 20



<TABLE>
<CAPTION>


                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CAPITALIZATION
                           December 31, 1995, and 1994

                                                                                                  1995             1994
                                                                                                  ----             ----
                                                                                                     (In thousands)
<S>                                                                                            <C>            <C> 
COMMON SHAREHOLDERS' EQUITY (Note 11): Common stock with no par value per share.
       Authorized shares: 50,000,000
       Outstanding shares: 10,920,060 in 1995 and 10,866,441 in 1994........................  $  134,973      $  134,117
    Retained earnings.......................................................................      82,484          50,752
                                                                                                --------        --------

          Total common shareholders' equity                                                   $  217,457      $  184,869
                                                                                                ========        ========

PREFERRED STOCK (Note 10): Preferred stock with no par value.
       Authorized shares: 5,000,000
       Outstanding shares: None

    Redeemable cumulative preferred stock of TNP with $100 par value.
       Authorized shares: 1,000,000

                               Redemption price at
                                  option of TNP          Outstanding shares
                               1995          1994         1995         1994

<S>                 <C>        <C>          <C>          <C>          <C>                     <C>             <C>       
       Series B     4.65%      $100.00      $100.00      22,800       24,000................  $    2,280      $    2,400
       Series C     4.75        100.00       100.00      13,200       13,800................       1,320           1,380
       Series D    11.00          -          101.04          -         2,000................          -              200
       Series E    11.00          -          101.04          -         1,000................          -              100
       Series F    11.00          -          101.04          -         2,000................          -              200
       Series G    11.88          -          106.43          -        44,000................          -            4,400
                                                       --------      -------                    --------        --------


<S>                                                      <C>          <C>                     <C>             <C>                 
        Total redeemable
            cumulative preferred stock                   36,000       86,800                  $    3,600      $    8,680
                                                       ========      =======                    ========        ========

LONG-TERM DEBT (Note 9):
    FIRST MORTGAGE BONDS:
<S>                <C>          <C>                                                           <C>             <C>       
       Series L    10.50%       due 2000....................................................  $    9,600      $    9,720
       Series M     8.70        due 2006....................................................       8,200           8,300
       Series R    10.00        due 2017....................................................      62,400          63,050
       Series S     9.63        due 2019....................................................      19,600          19,800
       Series T    11.25        due 1997....................................................     100,800         130,000
       Series U     9.25        due 2000....................................................     100,000         100,000
                                                                                                --------        --------
<S>                                                                                           <C>             <C>    
           Total first mortgage bonds                                                            300,600         330,870
             Unamortized discount...........................................................        (605)           (640)
                                                                                                --------        --------
           Total first mortgage bonds, net                                                       299,995         330,230
                                                                                                --------        --------

    SECURED DEBENTURES:
       12.50% due 1999......................................................................     130,000         130,000
       Series A 10.75% due 2003.............................................................     140,000         140,000
                                                                                                --------        --------
          Total secured debentures                                                               270,000         270,000
                                                                                                --------        --------

    REVOLVING CREDIT FACILITY...............................................................      43,000          85,272
                                                                                                --------        --------

          Total long-term debt                                                                   612,995         685,502
            Less current maturities.........................................................      (1,070)         (2,670)
                                                                                                --------        --------

          Total long-term debt, less current maturities                                       $  611,925      $  682,832
                                                                                                ========        ========

TOTAL CAPITALIZATION                                                                          $  832,982      $  876,381
                                                                                                ========        ========

</TABLE>



See accompanying Notes to Consolidated Financial Statements.


                                    Page 21


<TABLE>
<CAPTION>

                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
                    AND REDEEMABLE CUMULATIVE PREFERRED STOCK
                       Three Years Ended December 31, 1995



                                                                         Common Shareholders' Equity                Redeemable
                                                              --------------------------------------------------    Cumulative
                                                                  Common Stock             Retained                  Preferred
                                                              Shares        Amount         Earnings       Total        Stock
                                                              ------        ------         --------       -----      ---------
                                                                                        (In thousands)
                                                              ----------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:

<S>                                                            <C>       <C>             <C>           <C>          <C>       
   Balance at December 31, 1992.............................   10,598    $  129,914      $    88,621   $ 218,535    $   10,440
   Net earnings.............................................       -             -            11,605      11,605            -
   Dividends on preferred stock.............................       -             -              (879)       (879)           -
   Dividends on common stock - $1.63 per share..............       -             -           (17,344)    (17,344)           -
   Sale of common stock.....................................       98         1,701               -        1,701            -
   Purchase and retirement of preferred stock...............       -             -                 9           9          (880)
                                                              -------      --------         --------     -------      --------

      Balance at December 31, 1993                             10,696       131,615           82,012     213,627         9,560


YEAR ENDED DECEMBER 31, 1994:

   Net loss.................................................       -             -           (17,441)    (17,441)           -
   Dividends on preferred stock.............................       -             -              (790)       (790)           -
   Dividends on common stock - $1.22 per share..............       -             -           (13,046)    (13,046)           -
   Sale of common stock.....................................      170         2,502               -        2,502            -
   Purchase and retirement of preferred stock...............       -             -                17          17          (880)
                                                              -------      --------         --------     -------      --------

      Balance at December 31, 1994                             10,866       134,117           50,752     184,869         8,680


YEAR ENDED DECEMBER 31, 1995:

   Net earnings.............................................       -             -            41,505      41,505            -
   Dividends on preferred stock.............................       -             -              (655)       (655)           -
   Dividends on common stock - $ 0.82 per share.............       -             -            (8,938)     (8,938)           -
   Sale of common stock.....................................       54           856               -          856            -
   Purchase and retirement of preferred stock (Note 10).....       -             -              (180)       (180)       (5,080)
                                                              -------      --------         --------     -------      --------

      Balance at December 31, 1995                             10,920    $  134,973      $    82,484   $ 217,457    $    3,600
                                                              =======      ========         ========     =======      ========



</TABLE>



















See accompanying Notes to Consolidated Financial Statements.

                                    Page 22

<TABLE>
<CAPTION>


                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       Three Years Ended December 31, 1995



                                                                         1995              1994              1993
                                                                         ----              ----              ----
                                                                                      (In thousands)

<S>                                                                   <C>              <C>               <C>       
OPERATING REVENUES (Notes 2, 4, and 5)............................... $  485,823       $  477,989        $  474,242
                                                                        --------         --------          --------

OPERATING EXPENSES:
   Purchased power...................................................    178,465          194,595           200,183
   Fuel..............................................................     48,898           46,988            44,348
   Other operating and general expenses..............................     71,311           72,472            69,406
   Maintenance.......................................................     11,522           11,966            11,460
   Reorganization costs (Note 6).....................................         -             8,782                -
   Depreciation of utility plant.....................................     37,850           36,782            36,015
   Taxes other than income taxes.....................................     28,865           29,651            30,296
   Income taxes (Note 8).............................................     12,317           (1,238)            4,294
                                                                        --------         --------          --------
      Total operating expenses.......................................    389,228          399,998           396,002
                                                                        --------         --------          --------

NET OPERATING INCOME.................................................     96,595           77,991            78,240
                                                                        --------         --------          --------

OTHER INCOME (LOSS):
   Gain on sale of Texas Panhandle properties (Note 3)...............     14,583               -                 -
   Recognition of regulatory disallowances (Note 5)..................         -           (31,546)               -
   Other income and deductions, net .................................      1,470            1,475             1,846
   Income taxes (Note 8).............................................     (5,324)          10,694              (622)
                                                                        --------         --------          --------
      Other income (loss), net of taxes..............................     10,729          (19,377)            1,224
                                                                        --------         --------          --------

EARNINGS BEFORE INTEREST CHARGES
      AND CHANGE IN ACCOUNTING.......................................    107,324           58,614            79,464
                                                                        --------         --------          --------

INTEREST CHARGES
   Interest on long-term debt........................................     70,544           71,568            63,833
   Other interest and amortization of debt-related costs.............      3,416            3,680             4,108
                                                                        --------         --------          --------
      Total interest charges.........................................     73,960           75,248            67,941
                                                                        --------         --------          --------

EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
      OF CHANGE IN ACCOUNTING........................................     33,364          (16,634)           11,523

Cumulative effect of change in accounting
   for unbilled revenues, net of taxes (Note 2)......................      8,445               -                 -
                                                                        --------         --------          -------

NET EARNINGS (LOSS)..................................................     41,809          (16,634)           11,523

Dividends on preferred stock.........................................        655              790               879
                                                                        --------         --------          --------

EARNINGS (LOSS) APPLICABLE TO COMMON STOCK........................... $   41,154       $  (17,424)       $   10,644
                                                                        ========         ========          ========

PRO FORMA EARNINGS (LOSS) APPLICABLE TO
      COMMON STOCK ASSUMING RETROACTIVE.....................
      APPLICATION OF CHANGE IN ACCOUNTING............................ $   32,709       $  (16,077)       $   11,642
                                                                        ========         ========          ========



</TABLE>








See accompanying Notes to Consolidated Financial Statements.


                                    Page 23



<TABLE>
<CAPTION>

                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       Three Years Ended December 31, 1995

                                                                               1995             1994              1993
                                                                               ----             ----              ----
                                                                                           (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                       <C>               <C>              <C>        
    Cash received from customers..........................................$   481,470       $   475,462      $   460,463
    Purchased power.......................................................   (172,486)         (193,366)        (195,063)
    Fuel costs paid.......................................................    (44,781)          (46,537)         (46,049)
    Cash paid for payroll and to other suppliers..........................    (76,793)          (86,632)         (79,583)
    Interest paid, net of amounts capitalized.............................    (68,484)          (76,402)         (59,028)
    Income taxes paid.....................................................     (1,199)           (1,215)          (2,388)
    Other taxes paid, net of amounts capitalized..........................    (30,054)          (29,906)         (29,888)
    Other operating cash receipts and payments, net.......................        639             1,442            1,532
                                                                            ---------         ---------        ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................     88,312            42,846           49,996
                                                                            ---------         ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to utility plant, net of capitalized depreciation and interest                (28,689)         (29,038)
(26,360)
    Net proceeds from sale of Texas Panhandle properties..................     29,009                -                -
                                                                            ---------         ---------        --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.......................        320           (29,038)         (26,360)
                                                                            ---------         ---------        --------- 

CASH FLOWS FROM FINANCING ACTIVITIES:
    Dividends paid on preferred and common stocks.........................     (3,078)          (11,794)         (18,223)
    Issuances:
       Borrowings under revolving credit facility.........................     77,000           188,500               -
       First mortgage bonds...............................................         -                 -           240,000
       Deferred expenses associated with financings.......................     (2,096)               -            (8,940)
       Equity contribution received from TNPE.............................         -                 -            15,000
    Redemptions:
       Preferred stock....................................................     (5,080)             (880)            (880)
       Repayments under revolving credit facility.........................   (119,272)         (182,028)        (280,700)
       First mortgage bonds...............................................    (30,270)           (1,070)         (31,658)
                                                                            ---------         ---------        ---------
NET CASH USED IN FINANCING ACTIVITIES.....................................    (82,796)           (7,272)         (85,401)
                                                                            ---------         ---------        --------- 
NET CHANGE IN CASH AND CASH EQUIVALENTS...................................      5,836             6,536          (61,765)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................      8,614             2,078           63,843
                                                                            ---------         ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................................$    14,450       $     8,614      $     2,078
                                                                            =========         =========        =========

RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH
    PROVIDED BY OPERATING ACTIVITIES:
    Net earnings (loss)...................................................$    41,809       $   (16,634)     $    11,523
    Adjustments to reconcile net earnings (loss) to net cash provided:
       Cumulative effect of change in accounting, net of taxes............     (8,445)               -                -

       Gain on sale of Texas Panhandle properties.........................    (14,583)               -                -
       Depreciation of utility plant......................................     37,850            36,782           36,015
       Amortization of debt-related costs and other deferred charges......      4,952             5,495            4,939
       Allowance for borrowed funds used during construction..............       (162)             (275)            (303)
       Deferred income taxes (excluding the change in accounting).........      5,132           (10,920)           5,515
       Investment tax credits.............................................      1,691            (1,374)            (959)
       Reorganization costs...............................................         -              6,858               -
       Recognition of regulatory disallowances............................         -             31,546               -
    Cash flows impacted by changes in current assets and liabilities:
       Deferred purchased power and fuel costs............................      5,997              (107)           2,584
       Accrued interest...................................................      2,289            (4,422)           7,246
       Accrued taxes......................................................      8,432            (1,108)          (2,130)
       Revenues subject to refund.........................................     (4,782)            1,382          (14,115)
       Purchased power costs subject to refund............................      5,688                -                -
       Changes in other current assets and liabilities....................      3,174            (3,103)           4,174
    Other, net............................................................       (730)           (1,274)          (4,493)
                                                                            ---------         ---------        ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................$    88,312       $    42,846      $    49,996
                                                                            =========         =========        =========


</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                    Page 24

<TABLE>
<CAPTION>


                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1995, and 1994



                                                                                          1995               1994
                                                                                          ----               ----
                                                                                              (In thousands)
ASSETS

UTILITY PLANT (Notes 3, 5, and 9):
<S>                                                                                  <C>                 <C>         
   Electric plant................................................................... $  1,193,538        $  1,192,277
   Construction work in progress....................................................        3,334               3,816
                                                                                        ---------          ----------
         Total......................................................................    1,196,872           1,196,093
   Less accumulated depreciation....................................................      252,868             228,820
                                                                                        ---------          ----------
         Net utility plant..........................................................      944,004             967,273
                                                                                        ---------          ----------

NONUTILITY PROPERTY, at cost........................................................          175                 183

CURRENT ASSETS:
   Cash and cash equivalents........................................................       14,450               8,614
   Customer receivables (Note 2)....................................................       15,569               3,832
   Inventories, at the lower of average cost or market:
      Fuel..........................................................................          492               1,157
      Materials and supplies........................................................        7,287               7,527
   Deferred purchased power and fuel costs..........................................        9,261              15,258
   Accumulated deferred income taxes (Note 8).......................................          144               2,702
   Other current assets.............................................................        1,274               1,958
                                                                                        ---------          ----------
         Total current assets.......................................................       48,477              41,048
                                                                                        ---------          ----------

DEFERRED CHARGES....................................................................       32,287              34,674
                                                                                        ---------          ----------
                                                                                     $  1,024,943        $  1,043,178
                                                                                        =========          ==========

CAPITALIZATION AND LIABILITIES

CAPITALIZATION (See Consolidated Statements of Capitalization):
   Common shareholder's equity (Note 11)............................................ $    224,351        $    185,777
   Redeemable cumulative preferred stock (Note 10)..................................        3,600               8,680
   Long-term debt, less current maturities (Note 9).................................      611,925             682,832
                                                                                        ---------          ----------
         Total capitalization.......................................................      839,876             877,289
                                                                                        ---------          ----------

CURRENT LIABILITIES:
   Current maturities of long-term debt (Note 9)....................................        1,070               2,670
   Accounts payable.................................................................       22,040              21,951
   Accrued interest.................................................................       13,982              11,693
   Accrued taxes....................................................................       25,330              16,898
   Customers' deposits..............................................................        2,493               3,973
   Revenues subject to refund (Note 4)..............................................           -                4,782
   Purchased power costs subject to refund..........................................        5,688                  -
   Other current liabilities........................................................       12,472              10,622
                                                                                        ---------          ----------
         Total current liabilities..................................................       83,075              72,589
                                                                                        ---------          ----------

REGULATORY TAX LIABILITIES..........................................................       26,826              30,003
ACCUMULATED DEFERRED INCOME TAXES (Note 8)..........................................       47,066              36,769
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS (Note 8)................................       17,398              15,708
DEFERRED CREDITS (Note 7)...........................................................       10,702              10,820
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 5, 8, and 12)
                                                                                     $  1,024,943        $  1,043,178
                                                                                        =========          ==========


</TABLE>
See accompanying Notes to Consolidated Financial Statements.

                                    Page 25



<TABLE>
<CAPTION>


                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                    CONSOLIDATED STATEMENTS OF CAPITALIZATION
                           December 31, 1995, and 1994

                                                                                                 1995             1994
                                                                                                 ----             ----
                                                                                                    (In thousands)
<S>                                                                                           <C>             <C>       
COMMON SHAREHOLDER'S EQUITY (Note 11): Common stock, $10 par value per share.
       Authorized shares: 12,000,000
       Outstanding shares: 10,705...........................................................  $      107      $      107
    Capital in excess of par value..........................................................     174,931         175,111
    Retained earnings.......................................................................      49,313          10,559
                                                                                                --------        --------

          Total common shareholder's equity                                                   $  224,351      $  185,777
                                                                                                ========        ========


REDEEMABLE CUMULATIVE PREFERRED STOCK (Note 10):
    Redeemable cumulative preferred stock, $100 par value.
       Authorized shares: 1,000,000

                                Redemption price at
                                   option of TNP         Outstanding shares
                                 1995         1994        1995         1994

<S>                 <C>        <C>          <C>          <C>          <C>                     <C>             <C>       
       Series B     4.65%      $100.00      $100.00      22,800       24,000................  $    2,280      $    2,400
       Series C     4.75        100.00       100.00      13,200       13,800................       1,320           1,380
       Series D    11.00          -          101.04          -         2,000................          -              200
       Series E    11.00          -          101.04          -         1,000................          -              100
       Series F    11.00          -          101.04          -         2,000................          -              200
       Series G    11.88          -          106.43          -        44,000................          -            4,400
                                                       --------      -------                    --------        --------

<S>                                                      <C>          <C>                     <C>             <C>       
          Total redeemable
            cumulative preferred stock                   36,000       86,800                  $    3,600      $    8,680
                                                       ========      =======                    ========        ========


LONG-TERM DEBT (Note 9):
   FIRST MORTGAGE BONDS:
<S>                <C>              <C>                                                       <C>             <C>       
       Series L    10.50%       due 2000....................................................  $    9,600      $    9,720
       Series M     8.70        due 2006....................................................       8,200           8,300
       Series R    10.00        due 2017....................................................      62,400          63,050
       Series S     9.63        due 2019....................................................      19,600          19,800
       Series T    11.25        due 1997....................................................     100,800         130,000
       Series U     9.25        due 2000....................................................     100,000         100,000
                                                                                                --------        --------
<S>                                                                                              <C>             <C>  
          Total first mortgage bonds                                                             300,600         330,870
             Unamortized discount...........................................................        (605)           (640)
                                                                                                --------        --------
          Total first mortgage bonds, net                                                        299,995         330,230
                                                                                                --------        --------

    SECURED DEBENTURES:
       12.50% due 1999......................................................................     130,000         130,000
       Series A 10.75% due 2003.............................................................     140,000         140,000
                                                                                                --------        --------
          Total secured debentures                                                               270,000         270,000
                                                                                                --------       ---------

    REVOLVING CREDIT FACILITY...............................................................      43,000          85,272
                                                                                                --------       ---------

          Total long-term debt                                                                   612,995         685,502
            Less current maturities.........................................................      (1,070)         (2,670)
                                                                                                --------       ---------

          Total long-term debt, less current maturities                                       $  611,925      $  682,832
                                                                                                ========        ========

TOTAL CAPITALIZATION                                                                          $  839,876      $  877,289
                                                                                                 =======         =======

</TABLE>




See accompanying Notes to Consolidated Financial Statements.


                                    Page 26




<TABLE>
<CAPTION>


                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
             CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY
                    AND REDEEMABLE CUMULATIVE PREFERRED STOCK
                       Three Years Ended December 31, 1995



                                                                         Common Shareholder's Equity                 
                                                           ------------------------------------------------------    Redeemable
                                                                                 Capital in                          Cumulative
                                                                Common Stock      Excess of   Retained               Preferred
                                                             Shares    Amount     Par Value   Earnings      Total      Stock
                                                             ------    ------     ---------   --------      -----    ----------
                                                                                         (In thousands)
                                                                       --------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:

<S>                                                         <C>        <C>      <C>         <C>         <C>         <C>       
   Balance at December 31, 1992...........................  10,705     $ 107    $ 160,085   $  45,683   $  205,875  $   10,440
   Net earnings...........................................      -         -            -       11,523       11,523          -
   Dividends on preferred stock...........................      -         -            -         (879)        (879)         -
   Dividends on common stock..............................      -         -            -      (17,344)     (17,344)         -
   Equity contribution from TNPE..........................      -         -        15,000          -        15,000          -
   Purchase and retirement of preferred stock.............      -         -             9          -             9        (880)
                                                            ------       ---      -------     -------     --------    --------

      Balance at December 31, 1993                          10,705       107      175,094      38,983      214,184       9,560


YEAR ENDED DECEMBER 31, 1994:

   Net loss...............................................      -         -            -      (16,634)     (16,634)         -
   Dividends on preferred stock...........................      -         -            -         (790)        (790)         -
   Dividends on common stock..............................      -         -            -      (11,000)     (11,000)         -
   Purchase and retirement of preferred stock.............      -         -            17          -            17        (880)
                                                            ------       ---      -------     -------     --------    --------

      Balance at December 31, 1994                          10,705       107      175,111      10,559      185,777       8,680


YEAR ENDED DECEMBER 31, 1995:

   Net earnings...........................................      -         -            -       41,809       41,809          -
   Dividends on preferred stock...........................      -         -            -         (655)        (655)         -
   Dividends on common stock..............................      -         -            -       (2,400)      (2,400)         -
   Purchase and retirement of preferred stock (Note 10)...      -         -          (180)         -          (180)     (5,080)
                                                            ------       ---      -------     -------     --------    --------

      Balance at December 31, 1995                          10,705     $ 107    $ 174,931   $  49,313   $  224,351  $    3,600
                                                            ======       ===      =======     =======     ========    ========






</TABLE>



See accompanying Notes to Consolidated Financial Statements.

                                    Page 27







                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                       Three Years Ended December 31, 1995

(1)    Summary of Significant Accounting Policies

   General Information

     The consolidated  financial statements of TNPE and subsidiaries include the
accounts of TNPE and its wholly owned subsidiaries,  TNP, Bayport  Cogeneration,
Inc., and TNP Operating Company.  The consolidated  financial  statements of TNP
and subsidiaries  include the accounts of TNP and its wholly owned subsidiaries,
TGC and TGC II. All intercompany  transactions and balances have been eliminated
in consolidation.

     TNP is  TNPE's  principal  operating  subsidiary.  TNP is a public  utility
engaged in  generating,  purchasing,  transmitting,  distributing,  and  selling
electricity  in  Texas  and  New  Mexico.  TNP is  subject  to  PUCT  and  NMPUC
regulation. Some of TNP's activities,  including the issuance of securities, are
subject  to FERC  regulation  and  its  accounting  records  are  maintained  in
accordance with FERC's Uniform System of Accounts.

     The use of estimates is required to prepare  TNPE's and TNP's  consolidated
financial   statements  in  conformity   with  generally   accepted   accounting
principles.  Management  believes  that  estimates  are  essential  and will not
materially differ from actual results.

     Certain 1994 and 1993 amounts have been reclassified to conform to the 1995
method of presentation.

   Accounting for the Effects of Regulation

     Electric  utilities operate in a highly regulated  environment.  TNPE's and
TNP's  consolidated  financial  statements  reflect the  application  of certain
accounting standards,  including SFAS 71, "Accounting for the Effects of Certain
Types of Regulation,"  which provide for recognition of the economic  effects of
rate regulation.  Included among these effects are the recognition of regulatory
assets and liabilities.  Regulatory  assets represent  revenues  associated with
certain costs that are expected to be recovered  from customers in future rates.
Regulatory  liabilities are costs previously  collected from customers and other
amounts that are  refundable in future rates.  The  following  table  summarizes
TNPE's and TNP's regulatory  assets and liabilities as of December 31, 1995, and
1994.
<TABLE>
<CAPTION>


                                                                                  1995                 1994
                                                                                  ----                 ----
                                                                                       (In thousands)
Regulatory Assets:
<S>                                                               <C>                 <C>      
  Deferred purchased power and fuel costs                         $  9,261            $  15,258
  Deferred charges:
    Losses on reaquired debt                                         4,810                5,034
    Rate case expenses                                               4,454                5,817
    DAT                                                              4,287                4,418
    Other                                                              792                  437
                                                                    ------               ------
       Total                                                      $ 23,604            $  30,964
                                                                    ======               ======

Regulatory Liabilities:
  Income tax related                                              $ 26,826            $  30,003
  Purchased power costs subject to refund                            5,688                   -
                                                                    ------               -----
       Total                                                      $ 32,514            $  30,003
                                                                    ======               ======
</TABLE>

     Federal and state  legislators and regulatory  authorities  have adopted or
are considering a number of changes that are significantly impacting competitive
conditions in the electric utility industry, such as the creation of independent
power producers, wholesale transmission access, and retail wheeling. If recovery
of costs through rates becomes uncertain or unlikely, whether due to legislative
or regulatory changes,  competition, or otherwise,  accounting standards such as
SFAS 71 may no longer apply to TNPE and TNP. As a result,  TNPE and TNP could be
required  to  write  off  all  or a  portion  of  their  regulatory  assets  and
liabilities.  Moreover,  to the extent that  future  rates are  insufficient  to
recover costs, additional write downs could be required.  Management of TNPE and
TNP are  currently  unable to  predict  the  ultimate  outcome of changes in the
electric utility industry and whether the outcome will have a significant effect
on their  consolidated  financial  position and results of operations.  However,
based upon current  regulatory  conditions  in the states in which TNP operates,
management  believes  it  probable  that  TNPE  and TNP will  continue,  for the
foreseeable future, to recover from ratepayers the regulatory assets included in
the table above.


                                    Page 28


   Utility Plant

     Utility  plant is  stated  at the  historical  cost of  construction  which
includes labor,  materials,  indirect  charges for such items as engineering and
administrative costs, and AFUDC. Property repairs and replacement of minor items
are charged to operating  expenses;  major  replacements  and  improvements  are
capitalized to utility plant.

     AFUDC is a noncash item designed to enable a utility to capitalize interest
costs during periods of construction.  Established  regulatory  practices enable
TNP to recover these costs from  ratepayers.  The composite rates used for AFUDC
were 8.0%, 8.8%, and 7.5% in 1995, 1994, and 1993, respectively.

     The costs of  depreciable  units of plant  retired  or  disposed  of in the
normal course of business are  eliminated  from utility plant  accounts and such
costs  plus  removal   expenses   less   salvage  are  charged  to   accumulated
depreciation.  When  complete  operating  units  are  disposed  of,  appropriate
adjustments  are made to accumulated  depreciation,  and the resulting  gains or
losses, if any, are recognized.

     Depreciation is provided on a  straight-line  method based on the estimated
lives of the properties as indicated by periodic depreciation studies. A portion
of depreciation of  transportation  equipment used in construction is charged to
utility plant accounts in accordance with the equipment's use. Depreciation as a
percentage of average  depreciable  cost was 3.3%, 3.1%, and 3.0% in 1995, 1994,
and 1993, respectively.

   Cash Equivalents

     All highly liquid debt  instruments with maturities of three months or less
when purchased are considered cash equivalents.

   Temporary Investments

     Temporary   investments  are  recorded  at  amortized  cost,  adjusted  for
amortized or accreted  premiums or discounts,  as management has the ability and
intent to hold these  securities  until maturity.  These  securities are federal
debt obligations that mature within one year.

   Customer Receivables and Operating Revenues

     Effective  January 1,  1995,  TNP  changed  its  method of  accounting  for
operating revenues from cycle billing to the accrual method as described in Note
2. Unbilled  revenues  represent the estimated  amount customers will be charged
for  service  received,  but  not  yet  billed,  as of the  end of  each  month.
Previously these revenues were recognized as operating revenues in the following
month.

     TNP sells customer  receivables to an unaffiliated company on a nonrecourse
basis.

   Purchased Power and Fuel Costs

     Electric rates include estimates of purchased power and fuel costs incurred
by TNP in purchasing  or generating  electricity.  Differences  between  amounts
collected and allowable  costs are recorded either as purchased power subject to
refund or deferred  purchased power and fuel costs in accordance with regulatory
ratemaking policy.

   Deferred Charges

     Expenses  incurred  in issuing  long-term  debt and  related  discount  and
premium are amortized on a straight-line  basis over the lives of the respective
issues.

     Included in deferred  charges are other assets that are expected to benefit
future periods and certain costs that are deferred for rate making  purposes and
amortized over periods allowed by regulatory authorities.

   Income Taxes

     In 1993, TNPE and TNP implemented  SFAS 109,  "Accounting for Income Taxes"
on a prospective  basis.  SFAS 109 required a change from the deferred method to
the asset and liability  method of accounting for income taxes.  Under the asset
and  liability  method,  deferred  income  taxes  are  recognized  for  the  tax
consequences  of  "temporary  differences"  by  applying  enacted  tax  rates to
differences  between  the  financial  statement  amounts  and the tax  bases  of
existing assets and liabilities.

     SFAS 109 required TNP to recognize deferred income taxes for:

                  - the reduction in depreciable tax bases due to ITC,
                  - ITC accounted for under the deferred method,
                  - prior  flow-through  rate making treatment of certain income
                    tax  benefits, and
                  - the effects of federal  income tax rate changes.

                                    Page 29



     SFAS 109 permits regulated  enterprises to recognize  adjustments resulting
from the  adoption  of SFAS 109 as  regulatory  assets  or  liabilities  if such
amounts are probable of being  recovered  from or returned to customers  through
future rates.  Accordingly,  TNP recorded regulatory and deferred tax assets and
liabilities as a result of the adoption of SFAS 109. The  implementation of SFAS
109 in 1993 did not have a significant effect on results of operations.

     ITC  amounts  utilized in the federal  income tax return are  deferred  and
amortized to earnings  ratably over the  estimated  service lives of the related
assets.

     TNPE files a  consolidated  federal  income tax return  that  includes  the
consolidated operations of TNP and its subsidiaries. The amounts of income taxes
recognized in TNP's accompanying consolidated financial statements were computed
as if TNP and its subsidiaries filed a separate  consolidated federal income tax
return.

   Fair Values of Financial Instruments

     Fair  values  of cash  equivalents,  temporary  investments,  and  customer
receivables approximated the carrying amounts because of the short maturities of
those instruments.

     The estimated fair values of long-term debt and preferred  stock were based
on quoted market prices of the same or similar issues. The estimated fair values
of long-term debt and preferred stock were as follows:
<TABLE>
<CAPTION>

                                       December 31, 1995                   December 31, 1994
                                 Carrying Amount   Fair Values       Carrying Amount    Fair Values
                                 ---------------   -----------       ---------------    -----------
                                                          (In thousands)
<S>                               <C>               <C>                <C>              <C>      
          Long-term debt          $ 612,995         $ 643,000          $ 685,502        $ 674,000
          Preferred stock             3,600             1,600              8,680            5,900
</TABLE>

   Earnings (Loss) Per Share

     EPS is computed for each year based upon the weighted average common shares
outstanding.   Net   earnings   (loss)  is  adjusted  for   preferred   dividend
requirements.  The  effect on EPS of the  incentive  compensation  plans was not
significant as discussed in Note 7.

   Common Stock

     At December 31, 1995,  306,223  shares of TNPE's common stock were reserved
for issuance to TNP's 401(k) plan. Additionally, 646,957 shares of TNPE's common
stock were reserved for subsequent  issuance under other stock  compensation  or
shareholder plans.

   Shareholder Rights Plan

     TNPE has a Rights Plan that is designed to protect TNPE's shareholders from
coercive  takeover  tactics and  inadequate or unfair  takeover bids. The Rights
Plan provides for the  distribution of one right for each share of TNPE's common
stock currently outstanding or issued until the close of business on November 4,
1998.

     Upon the occurrence of certain events, each right entitles a shareholder to
elect to purchase one share of common  stock at $45 per share or, under  certain
circumstances,  shares of common stock at half the then-current  market price or
to receive TNPE common stock or other securities having an aggregate value equal
to the excess of (i) the value of the common  stock or other  securities  on the
date the rights are  exercised  over (ii) the cash  payment that would have been
payable upon exercise of the rights if cash payment had been elected.

     Until certain  triggering events occur, the rights will trade together with
TNPE's common stock and separate rights  certificates will not be issued.  Among
the triggering events are the acquisition by a person or group of 10% or more of
TNPE's  outstanding  common  stock or the  commencement  of a tender or exchange
offer  that,  upon  consummation,  would  result in a person or group of persons
owning  15% or more of  TNPE's  outstanding  common  stock.  The  rights  expire
November 4, 1998,  unless earlier redeemed or exchanged by TNPE, and have had no
effect on EPS.

(2)    Change in Accounting for Unbilled Revenues

     Effective  January 1,  1995,  TNP  changed  its  method of  accounting  for
operating  revenues  from  cycle  billing to the  accrual  method.  This  change
resulted in the recognition of $12,993,000 of additional  revenues  ($8,445,000,
net of taxes,  or $0.77 per share).  Accruing  unbilled  revenues  more  closely
matches  revenues  and  expenses  and more  closely  conforms to common  utility
industry  practice.  At December 31, 1995, the accrual for unbilled revenues was
$12,781,000.

                                    Page 30


(3)    Sale of Texas Panhandle Properties

     TNP completed the $29.2 million sale of its Texas  Panhandle  properties to
SPS on September 15, 1995, and recognized a net of tax gain of $9.5 million,  or
$0.87 per share of TNPE common stock.  The sale was consummated  pursuant to the
sale  agreement  between  TNP and SPS in  connection  with the  Texas  rate case
settlement  discussed in Note 5. The Panhandle properties comprised a relatively
small portion of TNP's business. The book value of the Panhandle properties sold
was $14.3  million.  Revenues from the  properties  for 1995 through the closing
date were $7.4 million with corresponding sales of 76.3 GWH to 7,350 customers.

     The  proceeds  received  from  SPS were  deposited  directly  with  Bank of
America,  Illinois,  as Trustee and $29.2 million of Series T FMBs were redeemed
in accordance with the indenture  governing TNP's FMBs. On October 16, 1995, the
Trustee paid the proceeds to the holders of the FMBs that were called.

     In January  1996,  TNP filed a class  action  lawsuit  against John Hancock
Mutual Life Insurance  Company,  a Series T bondholder.  TNP seeks  confirmation
that its  redemption of Series T FMBs with proceeds from the Panhandle  sale was
within  its  rights  under the  indenture  governing  the FMBs.  TNP also  seeks
attorneys' fees.

     TNP's lawsuit  originally  was filed in Texas state court in September 1995
against PPM,  which  claimed to be a  bondholder  and  threatened  to take legal
action against TNP over the redemption.  On PPM's motion,  the original  lawsuit
was removed to the United States  District  Court,  Northern  District of Texas,
Fort  Worth  Division  (No.  495-CV-738-A).  PPM  filed a  counterclaim  seeking
declarations  that the  Series  T  partial  redemption  breached  the  indenture
governing  the FMBs and that TNP cannot  redeem  Series T FMBs prior to maturity
under  circumstances  like the Panhandle sale. PPM sought an injunction  barring
future redemptions under such circumstances.  PPM also claimed that TNP violated
the antifraud  provisions of the Texas  Securities Act and  Section10(b)  of the
Securities  Exchange Act of 1934 and  restrictions of the Trust Indenture Act of
1939 on impairing  bondholder  rights.  PPM sought  alleged  actual and punitive
damages of approximately $6.0 million and attorneys' fees. Because PPM was not a
bondholder,  it was  dismissed  from the lawsuit and, on PPM's  motion,  Jackson
National Life Insurance Company was substituted as defendant.

     Management  believes  that the  substitute  defendant's  counterclaims  are
without merit and is vigorously  contesting the claims. In management's opinion,
the ultimate  disposition of this matter will not have a material adverse effect
on TNPE's and TNP's consolidated financial position or results of operations.

(4)    Revenues Subject to Refund

     During the third  quarter of 1995,  the IRS issued TNP a favorable  private
letter  ruling that  enabled TNP to  recognize  additional  revenues and accrued
interest of $4.9 million that  previously had been deferred.  This resulted in a
one-time after-tax earnings increase of $3.0 million, or $0.28 per share of TNPE
common stock.

     The revenues  recognized  were collected from October 1991 through  October
1994,  as a result of a Texas rate case filed in 1991.  The PUCT  allowed TNP to
collect additional annualized revenues of $1.6 million pending the resolution of
the regulatory tax treatment of disallowed  utility plant.  Recognition of these
revenues was conditioned upon TNP obtaining the ruling from the IRS. The private
letter ruling does not affect revenues related to electricity sales on and after
October  2,  1994,  when the new  rates  in the  most  recent  Texas  rate  case
settlement were implemented.

(5)    Regulatory Matters

   Texas Rate Case Settlement

     On October 6, 1994,  the PUCT  approved a  unanimous  settlement  among the
parties in TNP's 1994 retail rate application. The rate case settlement provides
for an increase in annualized revenues in Texas of $17.5 million, or 4.5%, which
TNP implemented on October 2, 1994.

     The settlement  resolved all  outstanding  court appeals in connection with
TNP's two previous rate cases and required TNP to write off $31.5 million ($35.0
million of the original cost of TNP One).  TNP  recognized  the write-off in the
second quarter of 1994,  which resulted in an after-tax  charge of approximately
$20.5  million,  or $1.91 per share of TNPE common stock.  The  settlement  also
required  TNP to  sell  its  Texas  Panhandle  properties,  subject  to  certain
conditions.

     The  rate  case  settlement  includes  a  moratorium  restricting  TNP from
applying for rate  increases  in Texas until March 31, 1999,  subject to certain
conditions.  These  conditions  do not  allow  TNP to apply  for any  base  rate
increase  under any  circumstances  prior to March 31, 1997,  but would allow an
application  for  increased  rates to be filed after that time if certain  force
majeure events (as defined in the agreement) occur during the moratorium.



                                    Page 31


   Other Regulatory Matters

     In a 1990 PUCT  application,  TNP was granted DAT for certain operating and
interest  costs  relating  to  the  construction  of  Unit  1 of  TNP  One.  The
unamortized  balances  of these costs were $4.3  million and $4.4  million as of
December 31, 1995, and 1994,  respectively.  Certain cities have filed an appeal
in district court  contesting the DAT.  Management  does not expect the ultimate
disposition of this matter to have a material adverse effect on TNP's and TNPE's
consolidated financial position or results of operations.

(6)    Reorganization

     During the fourth quarter of 1994, TNP reduced company-wide staffing levels
by 140  positions,  or 14% of the  workforce,  as a result  of work  elimination
reviews by employee teams. The goals of the teams were to streamline  operations
and reduce future costs.  The staffing  reductions were  accomplished  primarily
through early  retirements  and  involuntary  terminations.  The aggregate costs
impacting TNP's 1994 operations  were $8,782,000  ($5,723,000,  net of taxes, or
$0.53 per share of TNPE common stock).

(7)    Employee Benefit Plans

   Pension Plan

     TNP has a defined  benefit pension plan covering  substantially  all of its
employees.   Benefits  are  based  on  an   employee's   years  of  service  and
compensation.  TNP's funding policy is to contribute the minimum amount required
by federal funding  standards.  The following table sets forth the plan's funded
status and amounts recognized in the consolidated balance sheets at December 31,
1995, and 1994.
<TABLE>
<CAPTION>

                                                                       1995           1994
                                                                       ----           ----
                                                                          (In thousands)

<S>                                                              <C>              <C>       
         Actuarial present value of benefit obligations:
             Vested benefit obligation                           $    59,393      $   45,845
             Unvested benefit obligation                               4,383           4,212
                                                                     -------         -------
                Accumulated benefit obligation                   $    63,776      $   50,057
                                                                     =======         =======

         Projected benefit obligation                            $    67,752      $   60,000
         Unrecognized net asset                                          107             131
         Unrecognized prior service cost                               2,536           2,746
         Unrecognized net gain from past experience                   11,357          10,533
                                                                     -------         -------
                                                                      81,752          73,410
         Plan assets (principally marketable securities)
           at estimated fair value                                    75,037          66,338
                                                                     -------         -------
             Accrued pension costs (included in deferred
                credits in the consolidated balance sheets)      $     6,715      $    7,072
                                                                     =======         =======
</TABLE>

     Net pension costs were comprised of the following  components as determined
using the projected unit credit actuarial method:
<TABLE>
<CAPTION>


                                                                       1995           1994            1993
                                                                       ----           ----            ----
                                                                                 (In thousands)
         <S>                                                     <C>              <C>            <C>       
         Service cost                                            $     1,071      $    1,763     $    1,472
         Interest cost on projected benefit obligation                 4,762           4,179          4,191
         Adjustment for actual return on plan assets                 (13,797)            260         (6,126)
         Effect of reorganization costs, net                              -            3,537             -
         Net amortization and deferral                                 7,607          (6,238)           300
                                                                     -------         -------        -------
           Net pension costs                                     $      (357)     $    3,501     $     (163)
                                                                     =======         =======        =======
</TABLE>

     Assumptions  used in  accounting  for the pension  plan as of December  31,
1995, and 1994 were as follows:
<TABLE>
<CAPTION>


                                                                        1995            1994
                                                                        ----            ----
         <S>                                                            <C>             <C> 
         Discount rates                                                 7.3%            8.5%
         Rates of increase in compensation levels                       4.0%            5.5%
         Expected long-term rate of return on assets                    9.5%            9.5%

</TABLE>


                                    Page 32


   Postretirement Benefit Plan

     TNP sponsors a health care plan that  provides  postretirement  medical and
death  benefits to retirees who satisfied  minimum age and service  requirements
during  employment.  In 1993, TNP adopted SFAS 106,  "Employers'  Accounting for
Postretirement  Benefits Other Than  Pensions." SFAS 106 requires an employer to
recognize the costs of  postretirement  benefits on the accrual basis during the
periods that employees  render service to earn the benefits.  Prior to 1993, the
costs of these benefits were expensed on a  "pay-as-you-go"  basis. TNP has been
permitted to recover  through  rates the  additional  costs  resulting  from the
adoption of SFAS 106.  TNP  established  a trust fund  dedicated to paying these
postretirement benefits.

     The  following  table  sets  forth the plan's  funded  status  and  amounts
recognized in the consolidated balance sheets at December 31, 1995, and 1994.

<TABLE>
<CAPTION>

                                                                           1995             1994
                                                                           ----             ----
                                                                               (In thousands)
         <S>                                                          <C>             <C>        
         Accumulated postretirement benefit obligation:
             Retirees and dependents                                  $    14,229     $    15,936
             Active employees                                               4,093           7,192
                                                                         --------        --------
                Total benefits earned                                      18,322          23,128
         Plan assets (principally marketable securities)
           at estimated fair value                                          5,710           4,026
                                                                         --------        --------
         Accumulated postretirement benefit
           obligation in excess of plan assets                             12,612          19,102
         Unrecognized transition obligation                               (14,579)        (15,436)
         Unrecognized net gain from past experience                         5,603              -
                                                                         --------        -------
             Accrued postretirement benefit costs (included in
               deferred credits in the consolidated balance sheets)   $     3,636     $     3,666
                                                                         ========        ========

</TABLE>

     Net   postretirement   benefit  costs  were   comprised  of  the  following
components:

<TABLE>
<CAPTION>
                                                                           1995             1994         1993
                                                                           ----             ----         ----
                                                                                     (In thousands)
<S>                                                                      <C>             <C>           <C>    
         Service cost                                                    $    374        $    738      $   508
         Interest cost on postretirement benefit obligation                 1,265           1,642        1,510
         Reduction for actual return on plan assets                          (956)            (59)          -
         Effect of reorganization costs, net                                   -            2,945           -
         Net amortization and deferral                                      1,145             784          934
                                                                           ------           -----        -----
           Net postretirement benefit costs                              $  1,828        $  6,050      $ 2,952
                                                                           ======           =====        =====
</TABLE>


     The  transition  obligation is being  amortized  over a 20-year period that
began in 1993.  The  assumed  health  care cost trend  rate used to measure  the
expected  cost of  benefits  was 6.0% for 1995 and is assumed to trend  downward
slightly each year to 4.3% for 2003 and  thereafter.  The health care cost trend
rate assumption has a significant  effect on the amounts reported.  For example,
increasing the assumed  health care cost trend rates by one percentage  point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1995, by $2.3 million and the aggregate of the service and interest
cost components of net postretirement benefit cost for 1995 by $279,000.

     Additional  assumptions used in accounting for the  postretirement  benefit
plan as of December 31, 1995, and 1994, were as follows:
<TABLE>
<CAPTION>

                                                                            1995             1994
                                                                            ----             ----
         <S>                                                                <C>              <C> 
         Discount rates                                                     7.3%             8.5%
         Expected rate of return on assets (net of taxes)                   6.0%             6.0%
</TABLE>

   Incentive Plans

     TNPE and TNP established several incentive  compensation plans in 1995. All
employees participate in one or more of these plans.  Incentive  compensation is
based on meeting key financial and  operational  performance  goals such as EPS,
operations  and  maintenance  costs per KWH,  and system  reliability  measures.
Results of operations  at December 31, 1995,  include costs for the various cash
and equity plans of $2.0 million.



                                    Page 33


   Other Employee Benefits

     TNP has a 401(k)  plan  designed  to  enhance  the other  retirement  plans
available to its employees.  Employees may invest their  contributions  in fixed
income securities,  mutual funds, or TNPE common stock. TNP's  contributions are
used to purchase  TNPE common  stock,  which  employees  may later  convert into
investments in other investment options. TNP dedicated a portion of its matching
contribution  to  meeting  certain  performance  goals  during  1995.  Based  on
achievement of 1995 financial performance goals, TNP contributed $653,000 to the
401(k) plan.  TNP's total  contributions  to the 401(k) plan were  approximately
$1,746,000 in 1995,  $753,000 in 1994,  and none in 1993.  Plan assets  included
1,474,982  shares and  1,721,553  shares of TNPE common stock as of December 31,
1995, and 1994, respectively.

     TNP has employment  contracts with certain  members of management and other
key  personnel.  The contracts  provide for lump sum  compensation  payments and
other  rights  in the  event of  termination  of  employment  or  other  adverse
treatment of such persons  following a "change in control" of TNPE or TNP.  Such
event is defined to include,  among  other  things,  substantial  changes in the
corporate structure, ownership, or board of directors of either entity.

     An excess  benefit  plan has been  provided for certain key  personnel  and
retired  employees.  The excess  benefit  plan is  partially  provided  under an
insurance  policy  arrangement  for  benefits  that  generally  would  have been
provided by the pension and thrift plans except for federal limitations.

(8)    Income Taxes
<TABLE>
<CAPTION>

     Components of income taxes were as follows:

                                                      TNPE                                     TNP
                                      ----------------------------------        ------------------
                                        1995          1994       1993             1995        1994        1993
                                        ----          ----       ----             ----        ----        ----
                                                                     (In thousands)
Taxes on net operating income:
<S>                                  <C>          <C>          <C>            <C>          <C>          <C>     
    Federal - current                $  3,108     $     (253)  $   (356)      $   3,108    $     (253)  $  (356)
    State - current                       507             55         94             507            55        94
    Federal - deferred                  6,700            (13)     5,515           6,700           (13)    5,515
    ITC adjustments                     2,002         (1,027)      (959)          2,002        (1,027)     (959)
                                       ------       --------     ------          ------      --------     -----
                                       12,317         (1,238)     4,294          12,317        (1,238)    4,294
                                       ------       --------     ------          ------      --------     -----
Taxes on other income (loss):
    Federal - current                   7,170          1,006        641           7,203           560       622
    Federal - deferred                 (1,444)       (10,902)        19          (1,568)      (10,907)       -
    ITC adjustments                      (323)          (409)         6            (311)         (347)       -
                                       ------       --------     ------          ------      --------     ----
                                        5,403        (10,305)       666           5,324       (10,694)      622
                                       ------       --------     ------          ------      --------     -----

Taxes on cumulative effect
 of change in accounting,
 federal-deferred (Note 2)              4,548             -          -            4,548            -         -
                                       ------       --------     ------          ------      --------     ----

    Total income taxes               $ 22,268     $  (11,543)  $  4,960       $  22,189    $  (11,932)  $ 4,916
                                       ======       ========     ======          ======      ========     =====



</TABLE>

                                    Page 34


     The  amounts for total  income  taxes  differ from the amounts  computed by
applying  the  appropriate  federal  income tax rate to earnings  (loss)  before
income taxes for the following reasons:
<TABLE>
<CAPTION>


                                                      TNPE                                     TNP
                                       ---------------------------------         -----------------
                                         1995        1994        1993              1995        1994       1993
                                         ----        ----        ----              ----        ----       ----
                                                                     (In thousands)
<S>                                   <C>        <C>          <C>               <C>        <C>          <C>     
Tax at statutory tax rate             $  17,595  $   (9,873)  $   5,601         $ 17,674   $   (9,731)  $  5,557
    Amortization of
      accumulated deferred ITC           (1,079)     (1,055)     (1,048)          (1,079)      (1,055)    (1,048)
    Amortization of
      excess deferred taxes                (160)       (183)       (142)            (318)        (183)      (142)
    State income taxes                      507          55          94              507           55         94
    ITC related to disallowances           (312)       (347)         -              (312)        (347)        -
    Taxes on cumulative effect
      of change in accounting,
      federal- deferred (Note 2)          4,548          -           -             4,548           -          -
    Other, net                            1,169        (140)        455            1,169         (671)       455
                                        -------    --------     -------           ------     --------     ------
        Actual income taxes           $  22,268  $  (11,543)  $   4,960         $ 22,189   $  (11,932)  $  4,916
                                        =======    ========     =======           ======     ========     ======

</TABLE>

     The tax  effects of  temporary  differences  that gave rise to  significant
portions of net current and net noncurrent  deferred income taxes as of December
31, 1995, and 1994, are presented below.
<TABLE>
<CAPTION>


                                                                      TNPE                            TNP
                                                           --------------------------    ----------------
                                                              1995            1994           1995          1994
                                                              ----            ----           ----          ----
                                                                                (In thousands)
     <S>                                                  <C>            <C>            <C>            <C>        
     Current deferred income taxes:
       Deferred tax assets:
         Unbilled revenues                                $     2,413    $     6,264    $     2,413    $     6,264
         Revenues subject to refund                              -             1,404           -             1,404
         Other                                                    264            222            264            222
                                                            ---------      ---------      ---------      ---------
                                                                2,677          7,890          2,677          7,890
       Deferred tax liability:
         Deferred purchased power and fuel costs               (2,533)        (5,188)        (2,533)        (5,188)
                                                            ---------      ---------      ---------      ---------
           Current deferred income taxes, net             $       144    $     2,702    $       144    $     2,702
                                                            =========      =========      =========      =========

     Noncurrent deferred income taxes:
       Deferred tax assets:
         Minimum tax credit carryforwards                 $    22,365    $    10,086    $    27,317    $    14,993
         Federal regular tax net operating
           loss carryforwards                                   4,240         17,662          9,604         23,104
         ITC carryforwards                                     14,399         17,469         15,591         18,672
         Regulatory related items                              17,921         18,291         17,921         18,291
         Accrued employee benefit costs                         3,323          3,355          3,323          3,355
         Other                                                  1,900          2,149            707            788
                                                            ---------      ---------      ---------      ---------
                                                               64,148         69,012         74,463         79,203
                                                            ---------      ---------      ---------      ---------
       Deferred tax liabilities:
         Utility plant, principally due to
           depreciation and basis differences                (114,446)      (108,094)      (114,446)      (108,094)
         Deferred charges                                      (4,743)        (5,344)        (4,743)        (5,344)
         Regulatory related items                              (2,340)        (2,534)        (2,340)        (2,534)
         Other                                                     -              -              -              -
                                                            ---------      ---------      ---------      --------
                                                             (121,529)      (115,972)      (121,529)      (115,972)
                                                            ---------      ---------      ---------      ---------
             Noncurrent deferred income taxes, net        $   (57,381)   $   (46,960)   $   (47,066)   $   (36,769)
                                                            =========      =========      =========      =========



</TABLE>
                                    Page 35


     Federal tax carryforwards as of December 31, 1995, were as follows:
<TABLE>
<CAPTION>


                                                                                  TNPE              TNP
                                                                                      (In thousands)
           <S>                                                                  <C>              <C>      
           Net operating loss
              Amount                                                            $ 12,115         $  27,440
              Expiration period                                                     2009              2009
           Minimum tax credits
              Amount                                                            $ 22,365         $  27,317
              Expiration period                                                     None              None
           Investment tax credit
              Amount                                                            $ 14,399         $  15,591
              Expiration period                                                     2005              2005

</TABLE>

     In 1991, TNPE received an IRS private letter ruling  confirming that Unit 1
generating  plant was property  eligible for ITC. In connection with an audit of
TNPE's 1990 and 1991  consolidated  federal income tax returns,  the IRS revenue
agent recommended,  in March 1995, that the private letter ruling concerning the
TNP  One  generating  plant's  eligibility  for  ITC be  revoked  retroactively.
Management  believes  that TNP's  claim for ITC is valid and is  contesting  the
agent's  recommendation.  Of the $22.5  million  of ITC at  issue,  TNPE and its
subsidiaries  have utilized $5.2 million in the consolidated tax returns through
1994 and expect to utilize  $2.9 million in the 1995  consolidated  tax returns.
TNP's portion is $4.0 million and $2.9 million,  respectively.  However, through
1995,  TNPE and TNP have only  recognized  $1.1 million of the ITC in results of
operations since 1990.

(9)    Long-Term Debt

   First Mortgage Bonds

     FMBs  issued  under the Bond  Indenture  are secured by  substantially  all
utility plant owned directly by TNP. The Bond Indenture  restricts cash dividend
payments on TNP common stock as discussed  in Note 11. The Bond  Indenture  also
prohibits  issuing  additional  FMBs  unless net  earnings  available  for fixed
charges are at least twice the annual interest  charges on bonded  indebtedness,
as defined.  Under this test,  as of December  31,  1995,  approximately  $208.0
million of additional  FMBs could be issued,  assuming an interest rate of 9.0%.
In addition, TNP may only issue FMBs for 60% of available additions,  as defined
in the Bond Indenture. At December 31, 1995, TNP could not issue any significant
amount of FMBs pursuant to this test.

   Secured Debentures

     TNP's Series A, 10.75% secured  debentures and 12.5% secured debentures are
secured with a first lien on a portion of Unit 1. The 12.5%  secured  debentures
are also secured by a first lien on a portion of Unit 2. TNP's secured debenture
holders are also secured by second liens on  substantially  all utility plant in
Texas owned directly by TNP.

     The secured  debentures  also contain  restrictions  on dividends and asset
dispositions.

   Revolving Credit Facility

     TNP entered into a New Credit Facility  effective November 3, 1995. The New
Credit  Facility  provides for a total  commitment  of $150 million and replaced
borrowings  under the credit  facilities  used to acquire TNP One.  The interest
rate margins under the New Credit  Facility were 0.875% lower in 1995 than those
under the previous credit facilities.  In addition,  interest rate margins under
the previous  credit  facilities were scheduled to increase  automatically  each
year while those under the New Credit  Facility  will decrease as the ratings on
TNP's FMBs improve.

     Collateral  securing the New Credit Facility is generally a first lien on a
portion of TNP One, a second  lien on TNP's  first  mortgage  bond trust  estate
located in Texas,  and a pledge of $30 million of FMBs that do not bear interest
except upon  default  under the New Credit  Facility.  This  collateral  secures
borrowings up to $100 million.  Before increasing borrowings above $100 million,
TNP must pledge additional FMBs (noninterest  bearing except upon default) in an
amount equal to the borrowings  over $100 million.  As of December 31, 1995, TNP
had outstanding borrowings of $43 million under the New Credit Facility.

     The New Credit  Facility not only resulted in lower  interest rate margins,
but also will provide TNP with additional  financing  flexibility.  The previous
credit  facilities'  commitment was scheduled to reduce by  approximately  $36.9
million  annually over four years  beginning  December 31, 1995.  The New Credit
Facility commitment will reduce to $125 million on November 3, 1998, and to $100
million on November 3, 1999,  and will expire on November 3, 2000.  TNP also has
the ability to draw on the New Credit Facility to redeem other outstanding debt.



                                    Page 36



     During 1995,  interest  rates on borrowings  under TNP's credit  facilities
ranged from 7.63% to 11.38%.  The  average  borrowing  rates under TNP's  credit
facilities were 8.92% and 9.27% for 1995 and 1994, respectively.

     Under specified conditions, TNP's credit facilities restrict the payment of
cash  dividends on TNP common  stock.  The credit  facilities  also prohibit the
sale, lease, transfer, or other disposition of assets other than in the ordinary
course of business.

   Maturities

     As of December 31, 1995, FMB and secured  debenture  maturities and sinking
fund requirements for the five years following 1995 are as follows:
<TABLE>
<CAPTION>


                                                              Secured          Total FMBs and
                            Year             FMBs           Debentures       Secured Debentures
                                                          (In thousands)
                            <S>          <C>                <C>                  <C>      
                            1996         $    1,070         $       -            $   1,070
                            1997            101,870                 -              101,870
                            1998              1,070                 -                1,070
                            1999              1,070            130,000             131,070
                            2000            110,070                 -              110,070

</TABLE>

     At the end of 1995,  $43  million  was  outstanding  under  the New  Credit
Facility,  which matures in 2000. TNP anticipates  that borrowings under the New
Credit Facility will fluctuate up to $150 million over this period.


(10)   Redeemable Cumulative Preferred Stock

     If TNP liquidates voluntarily or involuntarily,  holders of preferred stock
have  preferences  equal to amounts payable on redemption or par,  respectively,
plus accrued  dividends.  During 1995, TNP partially retired Series B and C, and
completely  retired  series  D, E, F, and G, with a  combined  par value of $5.1
million.

     TNP's charter provides that additional shares of preferred stock may not be
issued  unless  certain  tests are met. As of December 31, 1995,  no  additional
preferred stock could be issued.

(11)   Common Stock Dividends

   TNP
   ---
     The Bond  Indenture  prohibits TNP from paying cash dividends on its common
stock (which is wholly owned by TNPE) unless unrestricted  retained earnings are
available.  The restriction  became operative during 1994 due to the recognition
of  $35.0  million  of  regulatory  disallowances  as  discussed  in  Note 5 and
temporarily  precluded  TNP from paying cash  dividends.  Unrestricted  retained
earnings became available again at March 31, 1995, and continued to be available
during  the  remainder  of 1995.  As of  December  31,  1995,  $30.6  million of
unrestricted retained earnings were available for dividends.

   TNPE
   ----
     The dividend restriction at TNP did not preclude TNPE from paying quarterly
cash  dividends to its  shareholders  during 1994 and 1995.  TNPE  increased its
quarterly  dividend  from $0.20 to $0.22 per  share,  beginning  with  quarterly
dividends paid on December 15, 1995. TNPE had reduced the quarterly  dividend by
51% from $0.41 to $0.20 per share  beginning  with the third quarter of 1994 due
to TNP's  restriction and other factors such as the relatively low common equity
of TNPE's capital structure and industry considerations.

(12)   Commitments and Contingencies

   Fuel Supply Agreement

     TNP successfully negotiated a 20% reduction in the cost of lignite provided
by Walnut Creek Mining  Company  effective  January 1, 1995, for the life of TNP
One.  Walnut Creek Mining  Company is jointly owned by Phillips Coal Company and
Peter Kiewit Sons',  Inc.  Initially,  the reduction  will be used to offset the
accumulated under-recovery of fuel costs which aggregated $9.3 million and $15.3
million as of December 31, 1995, and 1994, respectively.



                                    Page 37


   Wholesale Purchased Power Agreements

     TNP  purchases a  significant  portion of its  electric  requirements  from
various wholesale suppliers.  These contracts are scheduled to expire in various
years through 2010.

     TNP has  notified TU of its intent to cease  purchasing  full  requirements
power and energy effective January 1, 1999. In addition,  in July 1995 TNP filed
proceedings  with the PUCT and in a Texas state  district court to declare TNP's
wholesale  purchased power agreement with TU null and void. TNP asserts that the
terms of the  agreement  are against  public  policy and violate  Texas law. TNP
requests a declaration that provisions in the TU agreement  prohibiting TNP from
disclosing the agreement's  terms and filing the agreement for regulatory review
are against public policy and violate Texas law.  Pursuant to an order issued by
the state district court, TNP's action is being held in abeyance until such time
as TNP's PUCT action is resolved.  In February 1996, an administrative law judge
recommended  that the PUCT conclude that most of TNP's  complaints  about the TU
agreements lack merit.  The judge did recommend,  however,  that the agreement's
prohibitions on disclosure and regulatory  review are void. TNP expects the PUCT
action to be determined by mid 1996.

     In 1995, TU supplied  approximately  36% of TNP's Texas capacity and 29% of
its Texas  energy  requirements.  Management  expects  that,  as a result of the
developing  competition  within the wholesale power market,  TNP will enter into
new  arrangements  for such capacity and energy on terms that are more favorable
for its  customers.  During July 1995,  TNP issued  requests for  proposals  for
purchased  power  resources  during 1996 through 2004 to replace power currently
purchased from TU.

   Legal Actions

     TNP is involved in various  claims and other legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these matters will not have a material  adverse  effect on TNP's
and TNPE's consolidated financial position or results of operations.



                                    Page 38







                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                 Selected Quarterly Consolidated Financial Data

     The following  selected quarterly  consolidated  financial data for TNPE is
unaudited,  and, in the opinion of the TNPE's  management,  is a fair summary of
the results of operations for such periods:
<TABLE>
<CAPTION>


                                                            March 31      June 30     Sept. 30       Dec. 31
                                                            --------      -------     --------       -------
                                                                (In thousands except per share amounts)
1995
----
<S>                                                        <C>          <C>          <C>          <C>       
Operating revenues........................................ $  105,647   $  121,237   $  151,586   $  107,353
Net operating income......................................     17,044       25,100       35,147       19,304
Net earnings..............................................      6,124        6,131       26,728        2,522
Earnings applicable to common stock.......................      5,936        5,951       26,576        2,387
Earnings per share of common stock........................      0.55          0.54         2.44         0.22
Dividends per share of common stock....................... $    0.20    $     0.20   $     0.20   $     0.22

Weighted average common shares outstanding................     10,877       10,901       10,909       10,915

1994
----
Operating revenues........................................ $  107,599   $  111,046   $  149,864   $  109,480
Net operating income......................................     15,704       17,622       30,984       13,681
Net earnings (loss).......................................     (2,884)     (21,654)      11,921       (4,824)
Earnings (loss) applicable to common stock................     (3,095)     (21,855)      11,732       (5,013)
Earnings (loss) per share of common stock.................     (0.29)        (2.04)        1.09        (0.47)
Dividends per share of common stock....................... $    0.41    $     0.41   $     0.20   $     0.20

Weighted average common shares outstanding................     10,702       10,725       10,752       10,822

</TABLE>

     Generally,   the   variations   between   quarters   reflect  the  seasonal
fluctuations of TNP's business.  In addition,  the results above are impacted by
one-time items. These items, net of taxes, are as follows:

          -    change in  accounting  for  unbilled  revenues of $8.4 million in
               first  quarter of 1995  (Note 2) 

          -    gain on sale of Texas  Panhandle  properties  of $9.5  million in
               third quarter of 1995 (Note 3)

          -    recognition of previously  deferred revenues of $3.0 million
               during the third quarter of 1995 (Note 4)

          -    regulatory  disallowances  of $20.5 million in second  quarter of
               1994 (Note 5)

          -    reorganization  costs of $5.7  million in fourth  quarter of 1994
               (Note 6)

     The changes in dividend payments  commencing with the third quarter of 1994
and the fourth  quarter of 1995 are explained at Note 11. The annual  variations
between 1995 and 1994 are  addressed  at Item 7,  "Managements'  Discussion  and
Analysis of Financial Condition and Results of Operations."


Item 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

     None.


                                    Page 39


                                    PART III

Item 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors

     The  information  required by this item is  incorporated  by  reference  to
"Election  of  Directors"  and  "Security  Ownership of  Management  and Certain
Beneficial Owners" in the proxy statement relating to the 1996 Annual Meeting of
Holders of TNPE Common Stock.

Executive Officers

     The  information  set forth under  "Employees and  Executives" in Part I is
incorporated here by reference.

Item 11.     EXECUTIVE COMPENSATION.*

Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.*

Item 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.*

*    The  information  required  by Items  11,  12,  and 13 is  incorporated  by
     reference  to  "Compensation  of  Directors  and  Executive  Officers"  and
     "Security  Ownership of Management  and Certain  Beneficial  Owners" in the
     proxy  statement  relating  to the 1996  Annual  Meeting of Holders of TNPE
     Common Stock.


                                     PART IV

Item 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)    The following financial statements are filed as part of this report:
<TABLE>
<CAPTION>

                                                                                                                Page
       <S>                                                                                                       <C>
       Independent Auditors' Reports......................................................................       16

       TNPE
       Consolidated Statements of Operations, Three Years Ended December 31, 1995.........................       18
       Consolidated Statements of Cash Flows, Three Years Ended December 31, 1995.........................       19
       Consolidated Balance Sheets, December 31, 1995, and 1994...........................................       20
       Consolidated Statements of Capitalization, December 31, 1995, and 1994.............................       21
       Consolidated Statements of Common Shareholders' Equity
         and Redeemable Cumulative Preferred Stock, Three Years Ended December 31, 1995...................       22

       TNP
       Consolidated Statements of Operations, Three Years Ended December 31, 1995.........................       23
       Consolidated Statements of Cash Flows, Three Years Ended December 31, 1995.........................       24
       Consolidated Balance Sheets, December 31, 1995, and 1994...........................................       25
       Consolidated Statements of Capitalization, December 31, 1995, and 1994.............................       26
       Consolidated Statements of Common Shareholder's Equity
         and Redeemable Cumulative Preferred Stock, Three Years Ended December 31, 1995...................       27

       Notes to Consolidated Financial Statements.........................................................       28
       Selected Quarterly Consolidated Financial Data - TNPE..............................................       39
</TABLE>

(b) No reports on Form 8-K were filed during the last quarter of 1995.

(c)    The Exhibit Index on pages 42-47 is incorporated here by reference.

(d)    All  financial   statement   schedules  are  omitted,   as  the  required
       information  is not  applicable  or the  information  is presented in the
       consolidated financial statements or related Notes.



                                    Page 40



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrants  have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.

                                  TNP ENTERPRISES, INC.


Date:  March 7, 1996              By:  \s\ M. S. Cheema
                                       -----------------------------------
                                        Manjit S. Cheema, Vice President & 
                                             Chief Financial Officer


                                  TEXAS-NEW MEXICO POWER COMPANY


Date:  March 7, 1996              By:  \s\ M. S. Cheema
                                       -----------------------------------
                                       Manjit S. Cheema, Vice President & 
                                            Chief Financial Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrants and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>


                                                            Title                                            Date
<S>                                                   <C>                                                    <C>
By  \s\ Kevern R. Joyce                               Chairman, President, & Chief Executive Officer         3/7/96
    --------------------------------                                                                         ------
    Kevern R. Joyce


By  \s\ M. S. Cheema                                  Vice President & Chief Financial Officer               3/7/96
    --------------------------------                                                                         ------
    Manjit S. Cheema


By  \s\ Melissa D. Davis                              Controller of TNP & Chief Accounting                   3/7/96
    --------------------------------                                                                         ------
    Melissa D. Davis                                      Officer of TNPE


By  \s\ R. Denny Alexander                            Director                                               3/7/96
    --------------------------------                                                                         ------
    R. Denny Alexander


By  \s\ Cass O. Edwards, II                           Director                                               3/7/96
    --------------------------------                                                                         ------
    C. O. Edwards, II


By  \s\ John A. Fanning                               Director                                               3/7/96
    --------------------------------                                                                         ------
    John A. Fanning


By  \s\ Sidney M. Gutierrez                           Director                                               3/7/96
    --------------------------------                                                                         ------
    Sidney M. Gutierrez


By  \s\ Harris L. Kempner, Jr.                        Director                                               3/7/96
    --------------------------------                                                                         ------
    Harris L. Kempner, Jr.


By  \s\ Dwight R. Spurlock                            Director                                               3/7/96
    --------------------------------                                                                         ------
    Dwight R. Spurlock


By  \s\ Dr. Carol D. Smith Surles                     Director                                               3/7/96
    --------------------------------                                                                         ------
    Dr. Carol D. Smith Surles


By  \s\ Dennis H. Withers                             Director                                               3/7/96
    --------------------------------                                                                         ------
    Dennis H. Withers

</TABLE>


                                    Page 41


<TABLE>
<CAPTION>

                                               
                                  EXHIBIT INDEX

     Exhibits filed with this report are denoted by "*."

  Exhibit
    No.                                            Description

TNPE  incorporates  the  following  exhibits by  reference  to the  exhibits and
filings noted in parenthesis.

<S>          <C>          
   3(a)   -  Articles of  Incorporation  and Amendments  through March 6, 1984 (Exhibit 3(a) to TNPE 1984 Form S-14, File No.
             2-89800).

   3(b)   -  Amendment to Articles of  Incorporation  filed September 25, 1984 (Exhibit 3(b) to TNPE 1984 Form 10-K, File No.
             1-8847).

   3(c)   -  Amendment to Articles of  Incorporation  filed August 29, 1985  (Exhibit  3(a) to TNPE 1985 Form 10-K,  File No.
             1-8847).

   3(d)   -  Amendment  to  Articles  of  Incorporation  filed June 2, 1986  (Exhibit  3(a) to TNPE 1986 Form 10-K,  File No.
             1-8847).

   3(e)   -  Amendment  to  Articles  of  Incorporation  filed May 10, 1988  (Exhibit  3(e) to TNPE 1988 Form 10-K,  File No.
             1-8847).

   3(f)   -  Amendment  to  Articles  of  Incorporation  filed May 10, 1988  (Exhibit  3(f) to TNPE 1988 Form 10-K,  File No.
             1-8847).

   3(g)   -  Amendment to Articles of  Incorporation  filed December 27, 1988 (Exhibit 3(g) to TNPE 1988 Form 10-K,  File No.
             1-8847).

   3(h)   -  Bylaws, as amended (Exhibit 3(h) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).

   4(u)   -  Rights Agreement and Form of Right  Certificate,  as amended,  effective  November 13, 1990 (Exhibit 2.1 to TNPE
             Form 8-A, File No. 1-8847).

 *23      -  Independent Auditors' Consent - KPMG Peat Marwick LLP.

 *27      -  Financial Data Schedule for TNPE.

TNP incorporates the following exhibits by reference to the exhibits and filings
noted in parenthesis.

  *3(i)   -  Restated Articles of Incorporation.

   3(ii)  -  Bylaws, as amended November 15, 1994 (Exhibit 3(hh) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).

 *27      -  Financial Data Schedule for TNP.

TNPE and TNP incorporate the following exhibits by reference to the exhibits and
filings noted in parenthesis.

   4(a)   -  Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (Exhibit 2(d) to Community  Public  Service
             Co. ("CPS") 1978 Form S-7, File No. 2-61323).

   4(b)   -  Seventh Supplemental Indenture dated as of May 1, 1963 (Exhibit 2(k) to CPS Form S-7, File No. 2-61323).

   4(c)   -  Eighth Supplemental Indenture dated as of July 1, 1963 (Exhibit 2(1), to CPS Form S-7, File No. 2-61323).

   4(d)   -  Ninth Supplemental Indenture dated as of August 1, 1965 (Exhibit 2(m), to CPS Form S-7, File No. 2-61323).

   4(e)   -  Tenth Supplemental Indenture dated as of May 1, 1966 (Exhibit 2(n), to CPS Form S-7, File No. 2-61323).

   4(f)   -  Eleventh Supplemental Indenture dated as of October 1, 1969 (Exhibit 2(o), to CPS Form S-7, File No. 2-61323).

   4(g)   -  Twelfth Supplemental Indenture dated as of May 1, 1971 (Exhibit 2(p), to CPS Form S-7, File No. 2-61323).

   4(h)   -  Thirteenth Supplemental Indenture dated as of July 1, 1974 (Exhibit 2(q), to CPS Form S-7, File No. 2-61323).

   4(i)   -  Fourteenth Supplemental Indenture dated as of March 1, 1975 (Exhibit 2(r), to CPS Form S-7, File No. 2-61323).

   4(j)   -  Fifteenth Supplemental Indenture dated as of September 1, 1976 (Exhibit 2(e), File No. 2-57034).

   4(k)   -  Sixteenth Supplemental Indenture dated as of November 1, 1981 (Exhibit 4(x), File No. 2-74332).

   4(l)   -  Seventeenth Supplemental Indenture dated as of December 1, 1982 (Exhibit 4(cc), File No. 2-80407).

                                    Page 42


   4(m)   -  Eighteenth  Supplemental  Indenture  dated as of  September  1,  1983  (Exhibit  (a) to Form 10-Q of TNP for the
             quarter ended September 30, 1983, File No. 1-4756).

   4(n)   -  Nineteenth Supplemental Indenture dated as of May 1, 1985 (Exhibit 4(v), File No. 2-97230).

   4(o)   -  Twentieth  Supplemental  Indenture dated as of July 1, 1987 (Exhibit 4(o) to Form 10-K of TNP for the year ended
             December 31, 1987, File No. 2-97230).

   4(p)   -  Twenty-First  Supplemental  Indenture dated as of July 1, 1989 (Exhibit 4(p) to Form 10-Q of TNP for the quarter
             ended June 30, 1989, File No. 2-97230).

   4(q)   -  Twenty-Second  Supplemental  Indenture  dated as of January 15, 1992  (Exhibit  4(q) to Form 10-K of TNP for the
             year ended December 31, 1991, File No. 2-97230).

   4(r)   -  Twenty-Third  Supplemental  Indenture  dated as of September  15, 1993 (Exhibit 4(r) to Form 10-K of TNP for the
             year ended December 31, 1993, File No. 2-97230).

  *4(s)   -  Twenty-Fourth Supplemental Indenture dated as of November 3, 1995.

   4(t)   -  Indenture and Security  Agreement for 12 1/2% Secured  Debentures dated as of January 15,  1992 (Exhibit 4(r) to
             TNP 1991 Form 10-K, File No. 2-97230).

   4(u)   -  Indenture and Security  Agreement for 10 3/4% Secured Debentures dated as of September 15, 1993 (Exhibit 4(t) to
             TNP 1993 Form 10-K, File No. 2-97230).

                            Contracts Relating to TNP One

  10(a)   -  Fuel Supply  Agreement,  dated  November 18, 1987,  between  Phillips Coal Company and TNP (Exhibit 10(j) to TNP
             1987 Form 10-K, File No. 2-97230).

  10(a)1  -  Amendment  No.  1,  dated as of April 1,  1988,  to Fuel  Supply
             Agreement  dated November 18, 1987,  between  Phillips Coal Company
             and TNP (Exhibit  10(a)1 to Joint 1994 Form 10-K,  File Nos. 1-8847
             and 2-97230).

  10(a)2  -  Amendment  No. 2, dated as of November 29, 1994,  between  Walnut
             Creek  Mining  Company  and TNP,  to Fuel  Supply  Agreement  dated
             November 18, 1987,  between Phillips Coal Company and TNP, (Exhibit
             10(a)2 to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).

  10(b)   -  Unit 1 First Amended and Restated  Project Loan and Credit  Agreement,  dated as of January 8, 1992 (the "Unit 1
             Credit  Agreement"),  among TNP, TGC,  certain  banks (the "Unit 1 Banks") and Chase  Manhattan  Bank  (National
             Association),  as Agent for the Unit 1 Banks (the "Unit 1 Agent"),  (Exhibit  10(c) to TNP 1991 Form 10-K , File
             No. 2-97230).

  10(b)1  -  Participation Agreement,  dated as of January 8, 1992, among certain banks,  Participants,  and the Unit 1 Agent
             (Exhibit 10(c)1 to TNP 1991 Form 10-K, File No. 2-97230).

  10(b)2  -  Amendment  No. 1, dated as of September  21, 1993, to the Unit 1 Credit  Agreement  (Exhibit  10(b)2 to TNP 1993
             Form 10-K , File No. 2-97230).

  10(c)   -  Assignment and Security  Agreement,  dated as of January 8, 1992,  among TGC and the Unit 1 Agent (Exhibit 10(d)
             to TNP 1991 Form 10-K , File No. 2-97230).

  10(d)   -  Amended and Restated Subordination Agreement, dated as of October
             1, 1988, among TNP,  Continental  Illinois  National Bank and Trust
             Company of Chicago and the Unit 1 Agent(Exhibit  10(uu) to TNP 1988
             Form 10-K, File No.
             2-97230).

  10(e)   -  Unit 1 Mortgage and Deed of Trust,  dated as of December 1, 1987,  (Exhibit  10(ee) to TNP 1987 Form 10-K , File
             No. 2-97230).

  10(e)1  -  Supplemental  Unit 1 Mortgage and Deed of Trust executed on January 27, 1992,  (Exhibit  10(g)4 to TNP 1991 Form
             10-K , File No. 2-97230).

  10(e)2  -  First TGC Modification and Extension  Agreement,  dated as of January 24, 1992, among the Unit 1 Banks, the Unit
             1 Agent, TNP, and TGC (Exhibit 10(g)1 to TNP 1991 Form 10-K, File No. 2-97230).

  10(e)3  -  Second TGC Modification and Extension Agreement,  dated as of January 27, 1992, among the Unit 1 Banks, the Unit
             1 Agent, TNP, and TGC (Exhibit 10(g)2 to TNP 1991 Form 10-K, File No. 2-97230).

  10(e)4  -  Third TGC Modification and Extension  Agreement,  dated as of January 27, 1992, among the Unit 1 Banks, the Unit
             1 Agent, TNP, and TGC (Exhibit 10(g)3 to TNP 1991 Form 10-K, File No. 2-97230).


                                    Page 43


  10(e)5  -  Fourth TGC  Modification  and Extension  Agreement,  dated as of September 29, 1993, among the Unit 1 Banks, the
             Unit 1 Agent, TNP, and TGC (Exhibit 10(f)5 to TNP 1993 Form 10-K, File No. 2-97230).

  10(e)6  -  Fifth  TGC  Modification  and  Extension  Agreement,  dated as of
             September 29, 1993, among the Unit 1 Banks, the Unit 1 Agent,  TNP,
             and TGC (Exhibit 10(f)6 to TNP 1993 Form 10-K, File No. 2-97230).

  10(f)   -  Indemnity Agreement,  dated December 1, 1987, by Westinghouse,  CE and Zachry,  (Exhibit 10(ff) to TNP 1987 Form
             10-K, File No. 2-97230).

  10(g)   -  Unit 1 Second Lien  Mortgage  and Deed of Trust dated as of December 1, 1987,  (Exhibit  10(jj) to TNP 1987 Form
             10-K, File No. 2-97230).

  10(g)1  -  Correction  Second Lien Mortgage and Deed of Trust,  dated as of December 1, 1987,  (Exhibit  10(vv) to TNP 1988
             Form 10-K, File No. 2-97230).

  10(g)2     - Second Lien  Mortgage and Deed of Trust  Modification,  Extension
             and  Amendment  Agreement,  dated as of  January  8, 1992  (Exhibit
             10(i)2 to TNP 1991 Form 10-K, File No. 2-97230).

  10(g)3  -  TNP Second Lien Mortgage  Modification  No. 2, dated as of September  21, 1993 (Exhibit  10(h)3 to TNP 1993 Form
             10-K, File No. 2-97230).

  10(h)   -  Agreement  for  Conveyance  and Partial  Release of Liens,  dated as of December 1, 1987,  by PFC and the Unit 1
             Agent (Exhibit 10(kk) to TNP 1987 Form 10-K, File No. 2-97230).

  10(i)   -  Inducement and Consent  Agreement,  dated as of June 15, 1988, among Phillips Coal Company,  Kiewit Texas Mining
             Company,  TNP, Phillips Petroleum  Company,  and Peter Kiewit Son's, Inc. (Exhibit 10(nn) to TNP 1988 Form 10-K,
             File No. 2-97230).

  10(j)   -  Assumption Agreement,  dated as of October 1, 1988, by TGC, in favor of certain banks, the Unit 1 Agent, and the
             Depositary, as defined therein (Exhibit 10(ww) to TNP 1988 Form 10-K, File No. 2-97230).

  10(k)   -  Guaranty,  dated as of October 1, 1988, by TNP of TGC obligations under Unit 1 Credit Agreement  (Exhibit 10(xx)
             to TNP 1988 Form 10-K of TNP, File No. 2-97230).

  10(l)   -  First  Amended  and  Restated  Facility  Purchase  Agreement,  dated as of January 8, 1992,  between TNP and TGC
             (Exhibit 10(n) to TNP 1991 Form 10-K, 1991, File No. 2-97230).

  10(m)   -  Operating  Agreement,  dated as of October 1, 1988,  between TNP and TGC (Exhibit  10(zz) to TNP 1988 Form 10-K,
             File No. 2-97230).

  10(n)   -  Unit 2 First Amended and Restated  Project Loan and Credit  Agreement,  dated as of January 8, 1992 (the "Unit 2
             Credit  Agreement"),  among TNP,  TGC II,  certain  banks (the  "Unit 2  Banks")  and The Chase  Manhattan  Bank
             (National  Association),  as Agent for the Unit 2 Banks  (the  "Unit 2 Agent")  (Exhibit  10(q) to TNP 1991 Form
             10-K, File No. 2-97230).

  10(n)1  -  Amendment  No. 1, dated as of September  21, 1993, to the Unit 2 Credit  Agreement  (Exhibit  10(o)1 to TNP 1993
             Form 10-K, File No. 2-97230).

  10(o)   -  Assignment  and  Security  Agreement,  dated as of January 8, 1992,  among TGC II and the Unit 2 Agent  (Exhibit
             10(r) to TNP 1991 Form 10-K, File No. 2-97230).

  10(p)   -  Assignment and Security  Agreement,  dated as of October 1, 1988, by TNP to the Unit 2 Agent (Exhibit 10(jjj) to
             TNP 1988 Form 10-K, File No. 2-97230).

  10(q)      - Subordination Agreement,  dated as of October 1, 1988, among TNP,
             Continental  Illinois  National  Bank and Trust Company of Chicago,
             and the Unit 2 Agent (Exhibit  10(mmm) to TNP 1988 Form 10-K,  File
             No. 2-97230).

  10(r)   -  Unit 2 Mortgage and Deed of Trust dated as of October 1, 1988 (Exhibit  10(uuu) to TNP 1988 Form 10-K,  File No.
             2-97230).

  10(r)1  -  First TGC II Modification  and Extension  Agreement,  dated as of January 24, 1992,  among the Unit 2 Banks, the
             Unit 2 Agent, TNP, and TGC II (Exhibit 10(u)1 to TNP 1991 Form 10-K, File No. 2-97230).

  10(r)2  -  Second TGC II Modification  and Extension  Agreement,  dated as of January 27, 1992, among the Unit 2 Banks, the
             Unit 2 Agent, TNP and TGC II (Exhibit 10(u)2 to TNP 1991 Form 10-K, File No. 2-97230).

  10(r)3  -  Third TGC II Modification  and Extension  Agreement,  dated as of January 27, 1992,  among the Unit 2 Banks, the
             Unit 2 Agent, TNP, and TGC II (Exhibit 10(u)3 to TNP 1991 Form 10-K, File No. 2-97230).


                                    Page 44


  10(r)4  -  Fourth TGC II Modification and Extension Agreement,  dated as of September 29, 1993, among the Unit 2 Banks, the
             Unit 2 Agent, TNP, and TGC II (Exhibit 10(s)4 to TNP 1993 Form 10-K, File No. 2-97230).

  10(r)5  -  Fifth TGC II Modification  and Extension  Agreement,  dated as of
             June 15, 1994, among the Unit 2 Banks,  the Unit 2 Agent,  TNP, and
             TGC II (Exhibit  10(s)5 to TNP Form 10-Q for quarter ended June 30,
             1994, File No. 2-97230).

  10(s)   -  Release and Waiver of Liens and Indemnity  Agreement,  dated October 1, 1988,  by  Westinghouse,  CE, and Zachry
             (Exhibit 10(vvv) to TNP 1988 Form 10-K, File No. 2-97230).

  10(t)   -  Second Lien  Mortgage and Deed of Trust,  dated as of October 1, 1988,  (Exhibit  10(www) to TNP 1988 Form 10-K,
             File No. 2-97230).

  10(t)1     - Second Lien  Mortgage and Deed of Trust  Modification,  Extension
             and  Amendment  Agreement,  dated as of January  8, 1992,  (Exhibit
             10(w)1 to TNP 1991 Form 10-K, File No. 2-97230).

  10(t)2  -  TNP Second Lien Mortgage  Modification  No. 2, dated as of September 21, 1993,  (Exhibit 10(u)2 to TNP 1993 Form
             10-K, File No. 2-97230).

  10(u)   -  Intercreditor  and  Nondisturbance  Agreement,  dated as of October 1, 1988,  among PFC, Texas PFC,  Inc.,  TNP,
             certain  creditors,  as defined  therein,  and the Collateral  Agent, as defined therein (Exhibit 10(xxx) to TNP
             1988 Form 10-K, File No. 2-97230).

  10(u)1  -  Amendment No. 1, dated as of January 8, 1992, to Intercreditor and Nondisturbance Agreement,  (Exhibit 10(x)1 to
             TNP 1991 Form 10-K, File No. 2-97230).

  10(u)2  -  Amendment No. 2, dated as of September 21, 1993, to Intercreditor and Nondisturbance Agreement,  (Exhibit 10(v)2
             to TNP 1993 Form 10-K of TNP, File No. 2-97230).

  10(v)      - Grant  of  Reciprocal  Easements  and  Declaration  of  Covenants
             Running with the Land, dated October 1, 1988, between PFC and Texas
             PFC,  Inc.  (Exhibit  10(yyy)  to TNP  1988  Form  10-K,  File  No.
             2-97230).

  10(w)   -  Non-Partition  Agreement,  dated as of May 30, 1990, among TNP, TGC, and the Unit 1 Agent (Exhibit 10(ss) to TNP
             1990 Form 10-K of TNP, File No. 2-97230).

  10(x)   -  Assumption  Agreement,  dated as of May 31, 1991, by TGC II in favor of certain banks, the Unit 2 Agent, and the
             Depositary, as defined therein (Exhibit 10(kkk) to Amendment No. 1 to File No. 33-41903).

  10(y)   -  Guaranty,  dated as of May 31, 1991, by TNP, for TGC II obligations  under the Unit 2 Credit Agreement  (Exhibit
             10(lll) to Amendment No. 1 to File No. 33-41903).

  10(z)   -  First Amended and Restated Facility  Purchase  Agreement,  dated as of January 8, 1992,  between TNP, and TGC II
             (Exhibit 10(dd) to TNP 1991 Form 10-K, File No. 2-97230).

  10(z)1     - Amendment No. 1 to the Unit 2 First Amended and Restated Facility
             Purchase Agreement, dated as of September 21, 1993, between TNP and
             TGC II (Exhibit 10(aa)1 to TNP 1993 Form 10-K, File No. 2-97230).

  10(aa)  -  Operating  Agreement,  dated as of May 31, 1991,  between TNP and TGC II (Exhibit  10(nnn) to Amendment No. 1 to
             File No. 33-41903).

  10(bb)  -  Non-Partition  Agreement,  dated as of May 31, 1991, among TNP, TGC II, and the Unit 2 Agent (Exhibit 10(ppp) to
             Amendment No. 1 to File No. 33-41903).

                            Contracts Relating to TNP One

 *10(cc)     -  Revolving  Credit  Facility  Agreement,  dated as of November 3,
             1995,   among  TNP,   certain   lenders,   and  Chemical  Bank,  as
             Administrative Agent and Collateral Agent.

 *10(cc)1-   Form of  Guarantee  and Pledge  Agreement,  dated as of November 3,
             1995,  between  TGC II, and  Chemical  Bank,  as  collateral  agent
             (Exhibit D to Revolving Credit Facility Agreement).

 *10(cc)2-   Form of Bond Agreement,  dated as of November 3, 1995,  between TNP
             and Chemical  Bank,  as  Collateral  Agent  (Exhibit E to Revolving
             Credit Facility Agreement).

 *10(cc)3-   Form of Note  Pledge  Agreement,  dated  as of  November  3,  1995,
             between TNP and Chemical  Bank, as collateral  agent  (Exhibit F to
             Revolving Credit Facility Agreement).


                                    Page 45


 *10(cc)4-   Form of Sixth TGC II Modification and Extension Agreement, dated as
             of November 3, 1995,  among the Unit 2 Banks,  The Chase  Manhattan
             Bank, as agent,  TNP, and TGC II (Exhibit H to the Revolving Credit
             Facility Agreement).

 *10(cc)5-   Form of Second Lien Mortgage and Deed of Trust  Modification,  Extension and Amendment Agreement No. 3, dated as
             of November 3, 1995 (Exhibit I to the Revolving Credit Facility Agreement).

 *10(cc)6-   Form of Assignment and Amendment Agreement, dated as of November 3,
             1995, among TNP, TGC II, and Chemical Bank, as administrative agent
             and collateral  agent (Exhibit J to the Revolving  Credit  Facility
             Agreement).

 *10(cc)7-   Form of Assignment of TGC II Mortgage Lien, dated as of November 3,
             1995,  by The  Chase  Manhattan  Bank as  agent  to  Chemical  Bank
             (Exhibit K to the Revolving Credit Facility Agreement).

 *10(cc)8-   Form of Collateral Transfer of Notes,  Rights and Interests,  dated
             as  of  November  3,  1995,  between  TNP  and  Chemical  Bank,  as
             Administrative  Agent and as  Collateral  Agent  (Exhibit  L to the
             Revolving Credit Facility Agreement).

 *10(cc)9-   Form of Assignment of Second Lien Mortgage and Deed of Trust, dated
             as of November 3, 1995, between the Chase Manhattan Bank, as Agent,
             and Chemical  Bank,  as agent  (Exhibit M to the  Revolving  Credit
             Facility Agreement).

 *10(cc)10-  Form of Collateral Transfer of Notes,  Rights and Interests,  dated
             as  of  November  3,  1995,  between  TNP  and  Chemical  Bank,  as
             Administrative  Agent and as  Collateral  Agent  (Exhibit  N to the
             Revolving Credit Facility Agreement).

 *10(cc)11-  Form of Amendment No. 1, dated as of November 3, 1995, to the  Assignment  and Security  Agreement  between TNP,
             and The Chase Manhattan Bank, as agent (Exhibit O to the Revolving Credit Agreement).

                            Power Supply Contracts

  10(dd) -   Contract  dated May 12,  1976,  between  TNP and Houston
             Lighting & Power Company  (Exhibit 5(a), File No.  2-69353).

  10(dd)1-   Amendment,  dated  January  4, 1989,  to  contract between TNP and Houston  
             Lighting & Power  Company  (Exhibit 10(cccc) to TNP 1988 Form 10-K).

  10(ee)     - Amended and Restated Agreement for Electric Service dated May 14,
             1990,  between TNP and Texas Utilities  Electric  Company  (Exhibit
             10(vv) to TNP 1990 Form 10-K, File No. 2-97230).

  10(ee)1-   Amendment,  dated April 19, 1993, to Amended and Restated Agreement
             for  Electric  Service,  between TNP and Texas  Utilities  Electric
             Company (Exhibit 10(ii)1 to 1993 Form S-2, Registration  Statement,
             File No. 33-66232).

  10(ff)  -  Contract  dated June 11, 1984  between TNP and SPS (Exhibit  10(d) of Form 8  applicable  to TNP 1986 Form 10-K,
             File No. 2-97230).

  10(gg)  -  Contract dated April 27, 1977, between TNP and West Texas Utilities  Company,  as amended (Exhibit 10(e) of Form
             8 applicable to TNP 1986 Form 10-K, File No. 2-97230).

  10(hh)  -  Contract dated April 29, 1987,  between TNP and El Paso Electric  Company (Exhibit 10(f) of Form 8 applicable to
             TNP 1986 Form 10-K, File No. 2-97230).

  10(ii)  -  Amended and Restated  Contract  for  Electric  Service,  dated April 29,  1988,  between TNP and Public  Service
             Company of New Mexico (Exhibit 10(zz)3 to Amendment No. 1 to File No. 33-41903).

  10(jj)  -  Contract dated December 8, 1981,  between TNP and SPS as amended (Exhibit 10(h) of Form 8 applicable to TNP 1986
             Form 10-K, File No. 2-97230).

  10(jj)1-   Amendment,  dated  December 12, 1988, to contract  between TNP and SPS (Exhibit  10(llll) to TNP 1988 Form 10-K,
             File No. 2-97230).

  10(jj)2-   Amendment,  dated December 12, 1990, to contract  between TNP and SPS (Exhibit 19(t) to TNP 1990 Form 10-K, File
             No. 2-97230).

  10(kk)  -  Contract dated August 31, 1983,  between TNP and Capitol  Cogeneration  Company,  Ltd.  (Exhibit 10(i) of Form 8
             applicable to TNP 1986 Form 10-K, File No. 2-97230).

  10(kk)1-   Agreement  Substituting a Party,  dated May 3, 1988,  among Capitol
             Cogeneration   Company,   Ltd.,  Clear  Lake  Cogeneration  Limited
             Partnership  and TNP (Exhibit  10(nnnn) to TNP 1988 Form 10-K, File
             No. 2-97230).

  10(kk)2-   Letter Agreements, dated May 30, 1990, and August 28, 1991, between
             Clear  Lake  Cogeneration  Limited  Partnership  and  TNP  (Exhibit
             10(oo)2 to TNP 1992 Form 10-K, File No. 2-97230).


                                    Page 46


  10(kk)3-   Notice of Extension  Letter,  dated August 31, 1992,  between Clear
             Lake Cogeneration  Limited  Partnership and TNP (Exhibit 10(oo)3 to
             TNP 1992 Form 10-K, File No. 2-97230).

  10(kk)4-   Scheduling Agreement,  dated September 15, 1992, between Clear Lake
             Cogeneration  Limited  Partnership and TNP (Exhibit  10(oo)4 to TNP
             1992 Form 10-K, File No. 2-97230).

  10(ll)  -  Interconnection  Agreement between TNP and Plains Electric Generation and Transmission  Cooperative,  Inc. dated
             July 19, 1984 (Exhibit 10(j) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230).

  10(mm)  -  Interchange  Agreement  between TNP and El Paso Electric  Company dated April 29, 1987 (Exhibit  10(l) of Form 8
             applicable to TNP 1986 Form 10-K, File No. 2-97230).

  10(nn)1-   Amendment No. 1, dated  November 21, 1994, to  Interchange  Agreement  between TNP and El Paso Electric  Company
             (Exhibit 10(nn)1 to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).

  10(oo)  -  DC Terminal  Participation  Agreement between TNP and El Paso Electric Company dated December 8, 1981 as amended
             (Exhibit 10(m) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230).

  10(pp)  -  1996 Firm Capacity & Energy Sale Agreement  between TNP and TEP dated,  as of January 1, 1996 (Exhibit 10(pp) to
             joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).

                            Management Contracts

 *10(qq)  -  Form of TNP Executive  Agreement for Severance  Compensation Upon
             Change  in  Control  and   schedule  of   substantially   identical
             agreements.

  10(rr)  -  Agreement  between Kevern Joyce and TNPE and TNP, executed March 25, 1994 (Exhibit 10(tt) to TNP 1994 Form 10-Q,
             File No. 2-97230).

 *10(ss)  -  Form of TNPE Incentive  Compensation  Award Agreement and schedule of
             substantially identical agreements.

 *21      -  Subsidiaries of the Registrants.

</TABLE>


                                    Page 47








                   SUBSIDIARIES OF THE REGISTRANTS                   Exhibit 21

<TABLE>
<CAPTION>

Name                                                     State of Incorporation

TNPE
----
<S>                                                                <C>
Texas-New Mexico Power Company                                     Texas

Bayport Cogeneration, Inc.                                         Texas

TNP Operating Company                                              Texas





TNP
---
Texas Generating Company                                           Texas

Texas Generating Company II                                        Texas
</TABLE>



<PAGE>


                TNP ENTERPRISES, INC. AND SUBSIDIARIES               Exhibit 23
                --------------------------------------


                          Independent Auditors' Consent

The Board of Directors
TNP Enterprises, Inc.:

We consent to  incorporation  by reference in the  Registration  Statement  (No.
2-93266)  on Form  S-3 and in the  Registration  Statements  (Nos.  2-93265  and
33-58897) on Form S-8 of TNP  Enterprises,  Inc. of our report dated February 6,
1996,   relating  to  the   consolidated   balance   sheets  and  statements  of
capitalization of TNP Enterprises, Inc. and subsidiaries as of December 31, 1995
and  1994,  and  the  related  consolidated  statements  of  operations,  common
shareholders'  equity and redeemable  cumulative preferred stock, and cash flows
for each of the years in the three-year  period ended  December 31, 1995,  which
report  appears in the  December  31,  1995,  annual  report on Form 10-K of TNP
Enterprises, Inc.


Our report refers to a change in the method of accounting for operating revenues
in  1995  and  changes  in the  methods  of  accounting  for  income  taxes  and
postretirement benefits in 1993.


                                                       KPMG Peat Marwick LLP


Fort Worth, Texas
March 15, 1996