SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996

                                       OR
              ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE TRANSITION PERIOD FROM _____TO_____

COMMISSION          REGISTRANT, STATE OF INCORPORATION,        I.R.S. EMPLOYER
FILE NUMBER            ADDRESS AND TELEPHONE NUMBER          IDENTIFICATION NO.

1-1443              CENTRAL AND SOUTH WEST CORPORATION            51-0007707
                    (A Delaware Corporation)
                    1616 Woodall Rodgers Freeway
                    Dallas, Texas 75202-1234
                    (214) 777-1000

0-346               CENTRAL POWER AND LIGHT COMPANY               74-0550600
                    (A Texas Corporation)
                    539 North Carancahua Street
                    Corpus Christi, Texas 78401-2802
                    (512) 881-5300

0-343               PUBLIC SERVICE COMPANY OF OKLAHOMA            73-0410895
                    (An Oklahoma Corporation)
                    212 East 6th Street
                    Tulsa, Oklahoma 74119-1212
                    (918) 599-2000

1-3146              SOUTHWESTERN ELECTRIC POWER COMPANY           72-0323455
                    (A Delaware Corporation)
                    428 Travis Street
                    Shreveport, Louisiana 71156-0001
                    (318) 222-2141

0-340               WEST TEXAS UTILITIES COMPANY                  75-0646790
                    (A Texas Corporation)
                    301 Cypress Street
                    Abilene, Texas 79601-5820
                    (915) 674-7000

            INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO

Common Stock Outstanding at November 8, 1996                         Shares
  Central and South West Corporation                               210,884,974
  Central Power and Light Company                                    6,755,535
  Public Service Company of Oklahoma                                 9,013,000
  Southwestern Electric Power Company                                7,536,640
  West Texas Utilities Company                                       5,488,560

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


<PAGE> 2




           CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                               SEPTEMBER 30, 1996

                                                                          Page
                                                                         NUMBER

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


PART I - FINANCIAL INFORMATION

     ITEM 1.   Financial Statements.

         Central and South West Corporation and Subsidiary Companies.........6

         Central Power and Light Company....................................16

         Public Service Company of Oklahoma.................................26

         Southwestern Electric Power Company................................33

         West Texas Utilities Company.......................................40

         Notes to Financial Statements......................................47


     ITEM 2.   Management's Discussion and Analysis of Financial
                 Condition and Results of Operations........................58


PART II - OTHER INFORMATION

     ITEM 1.   Legal Proceedings............................................64

     ITEM 2.   Changes in Securities...............................Inapplicable

     ITEM 3.   Defaults Upon Senior Securities.....................Inapplicable

     ITEM 4.   Submission of Matters to a Vote of Security 
                 Holders...........................................Inapplicable

     ITEM 5.   Other Information............................................65

     ITEM 6.   Exhibits and Reports on Form 8-K.............................66


SIGNATURES..................................................................67


<PAGE> 3
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this text are defined below:

ABBREVIATION OR ACRONYM          DEFINITION

ALJ..............................Administrative Law Judge
Alpek............................Alpek S.A. de C.V.
First Amended SWEPCO Plan........The plan of reorganization for Cajun filed by
                                   the Members Committee, SWEPCO and Entergy 
                                   Gulf States on September 30, 1996 with the 
                                   U.S. Bankruptcy Court for the Middle District
                                   of Louisiana
ANI..............................American Nuclear Insurance
Burlington Northern..............Burlington Northern Railroad Company
Cajun............................Cajun Electric Power Cooperative, Inc.
Court of Appeals.................Court of Appeals, Third District of Texas, 
                                   Austin, Texas
CPL..............................Central Power and Light Company, Corpus 
                                   Christi, Texas
CPL 1995 Agreement...............Settlement Agreement filed by CPL with the 
                                   Texas Commission to settle certain CPL 
                                   regulatory matters
CPL 1996 Fuel Agreement..........Fuel settlement agreement entered into by CPL 
                                   and other parties to CPL's current rate 
                                   review
CSW..............................Central and South West Corporation, Dallas,
                                   Texas
CSW Common.......................CSW common stock, $3.50 par value per share
CSW Communications...............CSW Communications, Inc., Austin, Texas
CSW Credit Agreement.............$850 million senior credit agreement entered
                                   into by CSW with a consortium of banks to 
                                   partially fund the SEEBOARD acquisition
CSW Energy.......................CSW Energy, Inc., Dallas, Texas
CSW Investments..................CSW Investments, an unlimited company organized
                                   in the United Kingdom which is wholly owned,
                                   indirectly though subsidiaries, by CSW
                                   International
CSW Investments Credit Facility..1.0 billion (pound) senior credit facility
                                   arranged by CSW Investments with a consortium
                                   of banks to partially fund the SEEBOARD 
                                   acquisition
CSW System.......................CSW and its subsidiaries
CSW U.K. Group...................Consolidated SEEBOARD, SEEBOARD Group plc 
                                   (which has replaced CSW (UK) plc) and CSW
                                   Investments converted to U.S. Generally 
                                   Accepted Accounting Principles
CWIP.............................Construction work in progress
El Paso..........................El Paso Electric Company
EnerShop.........................EnerShop Inc., Dallas, Texas
Entergy Gulf States..............Gulf States Utilities Company
EPA..............................Environmental Protection Agency
EPS..............................Earnings per share
ERCOT............................Electric Reliability Council of Texas
FERC.............................Federal Energy Regulatory Commission
KWH..............................Kilowatt-hour
LIFO.............................Last-in First-out (fuel inventory accounting 
                                   method)
Matagorda........................Matagorda County Navigation District Number 
                                   One (Texas)
MD&A.............................Management's Discussion and Analysis of 
                                   Financial Condition and Results of Operations
Members Committee................The members committee of Cajun, which 
                                   represents 10 of the 12 Louisiana
                                   distribution cooperatives that are served by
                                   Cajun 
Merger...........................The proposed merger whereby El Paso would have
                                   become a wholly owned subsidiary of CSW
Merger Agreement.................Agreement and Plan of Merger between El Paso
                                   and CSW, dated as of May 3, 1993, as amended
Mirror CWIP......................Mirror construction work in progress
Mississippi Power................Mississippi Power Company
MMbtu............................Million British thermal units
MW...............................Megawatt
MWH..............................Megawatt-hour
National Grid....................National Grid Group plc
NEIL.............................Nuclear Electric Insurance Limited
Oklahoma Commission..............Corporation Commission of the State of Oklahoma
Oklaunion........................Oklaunion Power Station Unit No. 1


<PAGE> 4

GLOSSARY OF TERMS (CONTINUED)
The following abbreviations or acronyms used in this text are defined below:

ABBREVIATION OR ACRONYM          DEFINITION

Original SWEPCO Plan.............The plan of reorganization for Cajun filed by
                                   the Members Committee, SWEPCO and Entergy
                                   Gulf States on April 19, 1996 with the U.S.
                                   Bankruptcy Court for the Middle District of
                                   Louisiana
PCB..............................Polychlorinated biphenyl
PCRB.............................Pollution Control Revenue Bond
PSO..............................Public Service Company of Oklahoma, Tulsa,
                                   Oklahoma
Red River........................Red River Authority of Texas
Registrant(s)....................CSW, CPL, PSO, SWEPCO and WTU
Sabine...........................Sabine River Authority of Texas
SEC..............................Securities and Exchange Commission
Second Amended SWEPCO Plan.......The plan of reorganization for Cajun filed by 
                                   the Members Committee, SWEPCO and Entergy
                                   Gulf States on October 26, 1996 with the U.S.
                                   Bankruptcy Court for the Middle District of
                                   Louisiana (amends both the Original SWEPCO
                                   Plan and the First Amended SWEPCO Plan)
SEEBOARD.........................SEEBOARD plc, Crawley, West Sussex, United
                                   Kingdom
SFAS.............................Statement of Financial Accounting Standards
SFAS No. 52......................Foreign Currency Translation
STP..............................South Texas Project nuclear electric generating
                                   station
SWEPCO...........................Southwestern Electric Power Company,
                                   Shreveport, Louisiana
Tejas............................Tejas Gas Corporation
Texas Commission.................Public Utility Commission of Texas
Transok..........................Transok, Inc. and subsidiaries, Tulsa, Oklahoma
U.S. Electric or U.S. Electric
   Operating Companies...........CPL, PSO, SWEPCO and WTU
WTU..............................West Texas Utilities Company, Abilene, Texas
WTU Stipulation and Agreement....Stipulation and Agreement to settle certain WTU
                                   regulatory matters

<PAGE> 5



CSW


                       CENTRAL AND SOUTH WEST CORPORATION
                            AND SUBSIDIARY COMPANIES




                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.



<PAGE> 6
                       CENTRAL AND SOUTH WEST CORPORATION

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)

                                      Three Months Ended Nine Months Ended
                                          September 30,   September 30,
                                         --------------  ---------------
                                          1996   1995     1996     1995
                                         ------ -------  -------  ------
                                      (millions, except per share amounts)
Operating Revenues
    U.S. Electric                        $1,028    $933   $2,555  $2,221
    United Kingdom                          391    --      1,322    --
    Other diversified                        19      15       43      36
                                         ------ -------  -------  ------
                                          1,438     948    3,920   2,257
                                         ------ -------  -------  ------
Operating Expenses and Taxes
    U.S. Electric fuel and purchased
      power                                 367     305      945     798
    United Kingdom cost of sales            274    --        961    --
    Other operating                         199     127      561     399
    Maintenance                              33      35      109     110
    Depreciation and amortization           122      86      356     255
    Taxes, other than income                 49      47      138     124
    Income taxes                            110      89      208      66
                                         ------ -------  -------  ------
                                          1,154     689    3,278   1,752
                                         ------ -------  -------  ------

Operating Income                            284     259      642     505
                                         ------ -------  -------  ------

Other Income and Deductions
    Mirror CWIP liability amortization     --        11     --        31
    U.S. Electric utility plant
      development costs, net of tax        --      --        (84)   --
    Other                                    11      11       15      45
                                         ------ -------  -------  ------
                                             11      22      (69)     76
                                         ------ -------  -------  ------

Income Before Interest Charges              295     281      573     581
                                         ------ -------  -------  ------

Interest Charges
    Interest on long-term debt               80      57      240     163
    Interest on short-term debt
      and other                              21      26       76      78
                                         ------ -------  -------  ------
                                            101      83      316     241
                                         ------ -------  -------  ------

Income from Continuing Operations           194     198      257     340
                                         ------ -------  -------  ------

Discontinued Operations
    Income from discontinued operations,
      net of tax of $-- and $6 for 1996
      and $3 and $7 for 1995               --         5       12      14
    Gain on sale of discontinued
      operations, net of tax of $71        --      --        113    --
                                         ------ -------  -------  ------
                                           --         5      125      14
                                         ------ -------  -------  ------

Net Income                                  194     203      382     354
Preferred stock dividends                     4       4       13      14
                                         ====== =======  =======  ======
Net Income for Common Stock                $190    $199     $369    $340
                                         ====== =======  =======  ======

Average Common Shares Outstanding         210.3   191.9    206.3   191.4

EPS of Common Stock from Continuing
  Operations                              $0.90   $1.01    $1.18   $1.71
EPS of Common Stock from Discontinued
  Operations                               --      0.03     0.61    0.07
                                         ------ -------  -------  ------
EPS of Common Stock                       $0.90   $1.04    $1.79   $1.78
                                         ====== =======  =======  ======

Dividends Paid per Share of Common Stock $0.435   $0.43   $1.305   $1.29



           The accompanying notes to consolidated financial statements
                      are an integral part of these statements.
<PAGE> 7
                       CENTRAL AND SOUTH WEST CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                                              September 30,   December 31,
                                                  1996           1995
                                               (unaudited)     (audited)
                                                 -------        -------
                                                       (millions)
ASSETS

Fixed Assets
    Electric
        Production                                $5,833         $5,888
        Transmission                               1,521          1,484
        Distribution                               4,040          3,799
        General                                    1,297          1,209
        Construction work in progress                203            346
        Nuclear fuel                                 175            165
                                                 -------        -------
            Total Electric                        13,069         12,891
    Gas                                             --              869
    Other diversified                                 57             18
                                                 -------        -------
                                                  13,126         13,778
  Less - Accumulated depreciation
    and amortization                               4,820          4,761
                                                 -------        -------
                                                   8,306          9,017
                                                 -------        -------
Current Assets
    Cash and temporary cash investments              422            401
    Special deposits                                  60           --
    National Grid assets held for sale              --              100
    Accounts receivable                            1,216          1,093
    Materials and supplies, at
      average cost                                   179            188
    Electric utility fuel inventory,
      substantially at average cost                  111            129
    Gas inventory/products for resale               --               13
    Prepayments and other                            164            115
                                                 -------        -------
                                                   2,152          2,039
                                                 -------        -------
Deferred Charges and Other Assets
    Deferred plant costs                             505            514
    Mirror CWIP asset                                302            312
    Other non-utility investments                    292            296
    Income tax related regulatory
      assets, net                                    239            253
    Goodwill                                       1,374          1,074
    Other                                            422            364
                                                 -------        -------
                                                   3,134          2,813
                                                 -------        -------
                                                 $13,592        $13,869
                                                 =======        =======










            The accompanying notes to consolidated financial statements
                      are an integral part of these statements.
<PAGE> 8
                       CENTRAL AND SOUTH WEST CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                                               September 30,   December 31,
                                                   1996            1995
                                                (unaudited)     (audited)
                                                 --------       --------
                                                       (millions)
CAPITALIZATION AND LIABILITIES

Capitalization
  Common Stock Equity
    Common stock:   $3.50 par value
      Authorized: 350.0 million shares
      Issued and outstanding: 210.8 million
        shares in 1996 and 192.9 million
        shares in 1995                               $737           $675
    Paid-in capital                                   999            610
    Retained earnings                               1,996          1,893
    Foreign currency translation
      adjustment                                       (3)          --
                                                 --------       --------
                                                    3,729          3,178
  Preferred Stock
    Not subject to mandatory redemption               293            292
    Subject to mandatory redemption                    32             34
  Long-term debt                                    4,315          3,914
                                                 --------       --------
                                                    8,369          7,418
                                                 --------       --------

  Minority Interest                                  --              202
                                                 --------       --------

Current Liabilities
    Long-term debt and preferred stock
      due within twelve months                         65             30
    Short-term debt                                   378            692
    Short-term debt - CSW Credit, Inc.                809            646
    Loan notes                                         97           --
    Accounts payable                                  457            595
    Accrued taxes                                     451            228
    Accrued interest                                   74             77
    Provision for SEEBOARD acceptances               --            1,001
    Other                                             175            156
                                                 --------       --------
                                                    2,506          3,425
                                                 --------       --------

Deferred Credits
    Accumulated deferred income taxes               2,229          2,306
    Investment tax credits                            295            306
    Other                                             193            212
                                                 --------       --------
                                                    2,717          2,824
                                                 --------       --------
                                                  $13,592        $13,869
                                                 ========       ========




           The accompanying notes to consolidated financial statements
                      are an integral part of these statements.
<PAGE> 9
                       CENTRAL AND SOUTH WEST CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                     Nine Months Ended
                                                       September 30,
                                                 ----------------------
                                                   1996           1995
                                                 -------        -------
OPERATING ACTIVITIES                                    (millions)
    Net Income                                      $382           $354
    Non-cash Items Included in Net Income
        Depreciation and amortization                403            312
        Deferred income taxes and investment
          tax credits                                 17            (41)
        Mirror CWIP liability amortization          --              (31)
        Charges for terminated Merger               --               42
        Establishment of regulatory asset           --              (34)
        Provision for bonded rate refund               7           --
        Utility plant and other project
          development costs                          141           --
        Inventory reserve                              7           --
        Gain on sale of subsidiary                  (184)          --
    Changes in Assets and Liabilities
        Accounts receivable                         (177)          (266)
        Accounts payable                             (92)           (24)
        Accrued taxes                                109             56
        Unrecovered fuel costs                       (84)            68
        Refund due customers                          (2)            22
        Other                                        (50)           (34)
                                                 -------        -------
                                                     477            424
                                                 -------        -------
INVESTING ACTIVITIES
    Construction expenditures                       (343)          (333)
    Acquisition expenditures                      (1,391)            (6)
    CSW Energy/CSW International projects            (52)            57
    Sale of National Grid assets                      99           --
    Cash proceeds from sale of subsidiary            690           --
    Other                                             (5)           (23)
                                                 -------        -------
                                                  (1,002)          (305)
                                                 -------        -------
FINANCING ACTIVITIES
    Common stock sold                                451             42
    Proceeds from issuance of
      long-term debt                                 238            337
    SEEBOARD acquisition financing                   517           --
    Reacquisition/Maturity of
      long-term debt                                (178)          (263)
    Special deposits for reacquisition
      of long-term debt                              (60)          --
    Change in short-term debt                       (151)           (20)
    Payment of dividends                            (279)          (262)
                                                 -------        -------
                                                     538           (166)
                                                 -------        -------

Effect of exchange rate changes on
  cash and cash equivalents                            8           --

Net Change in Cash and Cash Equivalents               21            (47)
Cash and Cash Equivalents at Beginning
  of Period                                          401            108
                                                 =======        =======
Cash and Cash Equivalents at End of Period          $422            $61
                                                 =======        =======

SUPPLEMENTARY INFORMATION
    Interest paid less amounts capitalized          $261           $225
                                                 =======        =======
    Income taxes paid                               $139            $68
                                                 =======        =======

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

<PAGE> 10


CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES

         Set forth below is information concerning the consolidated results of
operations for CSW for the three month and nine month periods ended September
30, 1996. For information concerning the results of operations for each of the
U.S. Electric Operating Companies, see the discussions under the heading RESULTS
OF OPERATIONS following the financial statements of each of the U.S. Electric
Operating Companies. For supplementary information concerning SEEBOARD's results
of operations for these periods, see NOTE 9. SUPPLEMENTAL INFORMATION - 
SEEBOARD'S RECENT OPERATING RESULTS.

RESULTS OF OPERATIONS

COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995

         OVERVIEW. Net income for common stock decreased to $190 million or
$0.90 per share for the third quarter of 1996 compared to $199 million or $1.04
per share for the third quarter of 1995. Third quarter 1996 earnings decreased
when compared to the same period a year ago due primarily to increased
depreciation and amortization, increased other operating expense, increased
interest expense, the loss of Mirror CWIP earnings and the absence of Transok
earnings. Partially offsetting these factors were the addition of earnings from
SEEBOARD and increased non-fuel electric revenue due to the implementation of
bonded rates at CPL, increased customer usage and customer growth. For
discussion of the CPL 1996 Rate Case, see NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS. Below normal temperatures in the third quarter of 1996 partially
offset the increase in non-fuel electric revenue.

         In the third quarter of 1996, the U.S. Electric Operating Companies and
the CSW U.K. Group contributed the following percentages to CSW's results of
operations.
                                                          CORPORATE
                             U.S.     CSW U.K.   TOTAL    ITEMS AND
                           ELECTRIC    GROUP    ELECTRIC    OTHER        TOTAL
                           ---------------------------------------------------

Operating Revenues           72%         27%       99%        1%          100%
Operating Income             86%         11%       97%        3%          100%
Net Income for CSW Common    96%          6%      102%       (2)%         100%

         OPERATING REVENUES. Operating revenues increased 52% to $1,438 million
in the third quarter of 1996 from $948 million in the third quarter of 1995.
This increase reflects the addition of $391 million of SEEBOARD revenues and a
$95 million increase in revenues for the U.S. Electric Operating Companies over
the third quarter of 1995. The main factors contributing to the increase at the
U.S. Electric Operating Companies were an increase in fuel revenues as discussed
below, the implementation of bonded rates at CPL in the third quarter of 1996
and the recording of a base rate refund reserve in accordance with the WTU
Stipulation and Agreement in the third quarter of 1995. Total retail KWH sales
for the U.S. Electric Operating Companies increased 2% in the second quarter of
1996 compared to the third quarter of 1995. Residential KWH sales were
relatively unchanged while commercial and industrial KWH sales increased 2% and
5%, respectively. Customer usage and growth contributed to the increase in KWH
sales, while below normal temperatures partially offset the increase.

         U.S. ELECTRIC FUEL AND PURCHASED POWER.  Fuel and purchased power 
expense increased 20% to $367 million in the third quarter of 1996 from $305 
million in the third quarter of 1995.  Fuel expense was higher at the U.S. 
Electric Operating Companies due primarily to an increase in the average unit 


<PAGE> 11
CSW RESULTS OF OPERATIONS (CONTINUED)

cost of fuel to $1.77 per MMbtu in the third quarter of 1996 from $1.51 per 
MMbtu in the third quarter of 1995, reflecting higher natural gas prices. 
Partially offsetting this increase was the reduction in the delivered cost of 
coal at the U.S. Electric Operating Companies. Purchased power increased $4 
million due primarily to increased economy energy purchases.

         UNITED KINGDOM COST OF SALES. SEEBOARD's cost of sales was $274 million
for the third quarter of 1996. CSW did not acquire SEEBOARD until the fourth
quarter of 1995. As a result, there is no amount shown for cost of sales in the
third quarter of 1995.

         OTHER OPERATING. Other operating expense increased 57% to $199 million
during the third quarter of 1996 from $127 million during the third quarter of
1995. The increase reflected the addition of SEEBOARD's operating expenses and
higher operating expenses at the U.S. Electric Operating Companies including the
effect of bonded rate implementation at CPL and the recognition in 1995 of a
regulatory asset for previously recorded restructuring charges established in
accordance with the WTU Stipulation and Agreement.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
42% to $122 million in the third quarter of 1996 from $86 million in the third
quarter of 1995 due primarily to the addition of SEEBOARD's depreciable fixed
assets and the goodwill amortization related to the purchase of SEEBOARD, as
well as increases in depreciable fixed assets at the U.S. Electric Operating
Companies. Also contributing to the increase were accelerated amortization of
deferred STP plant costs at CPL implemented with bonded rates in May 1996 and
accelerated amortization of deferred Oklaunion plant costs at WTU in accordance
with the WTU Stipulation and Agreement.

         INCOME TAXES. Income taxes increased $21 million to $110 million during
the third quarter of 1996 when compared to the third quarter of 1995 due in part
to the addition of income taxes from SEEBOARD. Also contributing to the increase
was the absence of a tax benefit recorded in the third quarter of 1995 related
to the WTU Stipulation and Agreement.

         OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased $11
million when compared to the third quarter of 1995 due primarily to the absence
of CPL's 1995 Mirror CWIP liability amortization.

         INTEREST CHARGES. Interest on long-term debt increased $23 million or
40% during the third quarter of 1996 as compared to the third quarter of 1995
due to higher levels of long-term debt outstanding related to the SEEBOARD
acquisition. Interest on short-term debt and other decreased $5 million or 19%
during the third quarter of 1996 as compared to the third quarter of 1995 due
primarily to lower levels of short-term borrowings.

         DISCONTINUED OPERATIONS. The results of Transok are shown separately in
discontinued operations. Since Transok was sold on June 6, 1996, CSW's results
for the quarter ended September 30, 1996 do not reflect any earnings from
Transok. See NOTE 7. DISCONTINUED OPERATIONS for information, including
comparative statements of income, related to the sale of Transok.


<PAGE> 12
CSW RESULTS OF OPERATIONS (CONTINUED)

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

         OVERVIEW. Net income for common stock for the nine months ended
September 30, 1996 increased to $369 million from $340 million for the first
nine months of 1995 due primarily to the gain from the sale of Transok, earnings
from SEEBOARD and the absence of charges in 1996 related to the termination of
the proposed El Paso Merger in June 1995 and the CPL 1995 Agreement. Also
contributing to the increase were the implementation of bonded rates at CPL and
stronger KWH sales resulting from increased usage and weather-related demand.
Partially offsetting these increases in earnings for the nine months ended
September 30, 1996 were the recording in June 1996 of one-time charges
associated with certain investments and contingencies, the absence of favorable
tax adjustments made in 1995 and the CPL 1996 Fuel Agreement. For additional
information on the one-time charges, see NOTE 8. UTILITY PLANT DEVELOPMENT COSTS
and NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES. For further discussion of
CPL's Rate Case, see NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS. Increased
depreciation and amortization, increased other operating expense, increased
interest expense and the loss of Mirror CWIP earnings also reduced the increase
in net income for the nine months ended September 30, 1996.

         In the first nine months of 1996, the U.S. Electric Operating
Companies, the CSW U.K. Group and Transok contributed the following percentages
to CSW's results of operations.
                                                                CORPORATE
                             U.S.   CSW U.K.  TOTAL             ITEMS AND
                           ELECTRIC  GROUP   ELECTRIC TRANSOK(1)  OTHER   TOTAL
                           ----------------------------------------------------
Operating Revenues            65%     34%      99%      --(2)       1%     100%
Operating Income              79%     18%      97%      --(2)       3%     100%
After-tax one-time charges    86%     --       86%      --         14%     100%
Net Income for CSW Common     63%     14%      77%      3%(3)      20%(4)  100%

(1)  On June 6, 1996, CSW sold Transok to Tejas.  See NOTE 7. DISCONTINUED 
     OPERATIONS.
(2)  Transok's Operating Revenues and Operating Income are shown as Income from
     Discontinued Operations in CSW's Consolidated Statements of Income.
(3)  Net Income for CSW Common for the nine months ended September 30, 1996 
     includes earnings from Transok for January through May 1996 only.
(4)  Includes CSW's gain on the sale of Transok.

         OPERATING REVENUES. Operating revenues increased 74% to $3,920 million
in the first nine months of 1996 from $2,257 million in the first nine months of
1995. This increase reflects $1,322 million of SEEBOARD revenues and a $334
million increase in revenues for the U.S. Electric Operating Companies including
the effects of higher fuel revenue, as discussed below, and bonded rate
implementation at CPL. Also contributing to the increase were the recording of
base rate and fuel refund reserves in the first quarter of 1995 in accordance
with the CPL 1995 Agreement and the recording of a base rate refund reserve in
the third quarter of 1995 in accordance with the WTU Stipulation and Agreement.
Total retail KWH sales for the U.S. Electric Operating Companies increased 5% in
the first nine months of 1996 compared to the first nine months of 1995.
Residential, commercial and industrial KWH sales increased 6%, 4% and 5%,
respectively. Increased usage, primarily by residential customers, as well as
more favorable weather in the first six months of 1996 contributed to KWH sales
growth.

         U.S. ELECTRIC FUEL AND PURCHASED POWER.  Fuel and purchased power 
expense increased 18% to $945 million in the first nine months of 1996 from $798
million in the first nine months of 1995.  Fuel expense was higher at the U.S. 
Electric Operating Companies due primarily to an increase in the average

<PAGE> 13
CSW RESULTS OF OPERATIONS (CONTINUED)

unit cost of fuel to $1.80 per MMbtu in the first nine months of 1996 from $1.57
per MMbtu in the first nine months of 1995, reflecting higher natural gas
prices. Partially offsetting this increase was the reduction in the delivered
cost of coal at CPL and WTU. Purchased power increased $31 million due primarily
to increased economy energy purchases.

         UNITED KINGDOM COST OF SALES. SEEBOARD's cost of sales was $961 million
for the first nine months of 1996. CSW did not acquire SEEBOARD until the fourth
quarter of 1995. As a result, there is no amount shown for cost of sales for the
first nine months of 1995.

         OTHER OPERATING. Other operating expense increased 41% to $561 million
during the first nine months of 1996 from $399 million during the first nine
months of 1995. This increase was due primarily to the addition in 1996 of
SEEBOARD's operating expenses as well as the recognition in the first quarter of
1995 of a $23 million regulatory asset for previously recorded restructuring
charges established in accordance with the CPL 1995 Agreement and the reversal
of $4 million in rate case costs pursuant to the CPL 1995 Agreement. Also
contributing to the increase was the recognition in the third quarter of 1995 of
a regulatory asset for previously recorded restructuring charges in accordance
with the WTU Stipulation and Agreement. Other factors contributing to increased
other operating expense were the bonded rate implementation at CPL and expenses
incurred with the CSW restructuring recorded in the second and third quarters of
1996. For additional information on this restructuring, see MD&A - COMPETITION
AND INDUSTRY CHALLENGES. Operating expenses for the first nine months of 1995
were unusually high because of a $42 million reserve for deferred merger and
acquisition costs recorded in 1995 from the termination of the proposed El Paso
Merger.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
40% to $356 million in the first nine months of 1996 from $255 million in the
first nine months of 1995 due primarily to the addition of SEEBOARD's
depreciable fixed assets and the goodwill amortization related to the purchase
of SEEBOARD, as well as increases in depreciable fixed assets at the U.S.
Electric Operating Companies. Also contributing to the increase were accelerated
amortization of deferred STP plant costs at CPL implemented with bonded rates in
May 1996 and accelerated amortization of deferred Oklaunion plant costs at WTU
in accordance with the WTU Stipulation and Agreement.

         TAXES, OTHER THAN INCOME. Taxes, other than income increased 11% to
$138 million in the first nine months of 1996 from $124 million in the first
nine months of 1995. The increase was due primarily to lower 1995 ad valorem
taxes resulting from revisions of prior year estimates recorded in 1995.

         INCOME TAXES. Income taxes increased $142 million to $208 million
during the first nine months of 1996 when compared to the first nine months of
1995. For the first nine months of 1995, income taxes were reduced primarily due
to prior period adjustments, as well as the tax effect from both the CPL 1995
Agreement and the WTU Stipulation and Agreement. For the first nine months of
1996, SEEBOARD recorded $42 million in income taxes.

         OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased $145
million in the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to one-time charges recorded in June 1996 associated with
certain investments for plant sites, engineering studies and lignite reserves
for the U.S. Electric Companies and project development costs for CSW Energy.
For additional information concerning the one-time charges for the U.S. Electric
Operating Companies, see NOTE 8. UTILITY PLANT DEVELOPMENT COSTS, and for CSW


<PAGE> 14
CSW RESULTS OF OPERATIONS (CONTINUED)

Energy, see NOTE 3.  COMMITMENTS AND CONTINGENT LIABILITIES. Also, CPL's Mirror
CWIP liability, which has now been fully amortized, contributed $31 million in 
the first nine months of 1995.

         INTEREST CHARGES. Interest on long-term debt increased $77 million or
47% during the first nine months of 1996 as compared to the first nine months of
1995 due to higher levels of long-term debt outstanding related to the SEEBOARD
acquisition.

         DISCONTINUED OPERATIONS. The results of Transok are shown separately in
discontinued operations. Transok's earnings for the first five months of 1996
were $12 million compared to $14 million for the nine months ended September 30,
1995. Since Transok was sold on June 6, 1996, CSW's results for the nine months
ended September 30, 1996 do not reflect a full nine months of earnings from
Transok. See NOTE 7. DISCONTINUED OPERATIONS for information, including
comparative statements of income, related to the sale of Transok.



<PAGE> 15



CPL


                         CENTRAL POWER AND LIGHT COMPANY




                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.


<PAGE> 16
                         CENTRAL POWER AND LIGHT COMPANY

                              STATEMENTS OF INCOME
                                   (unaudited)


                                  Three Months Ended     Nine Months Ended
                                     September 30,          September 30,
                                 --------------------  ----------------------
                                    1996      1995        1996        1995
                                 ---------  ---------  -----------  ---------
                                       (thousands)           (thousands)

Electric Operating Revenues       $410,899   $358,790   $1,026,352   $810,597
                                 ---------  ---------  -----------  ---------

Operating Expenses and Taxes
   Fuel                            101,994     87,606      256,489    223,670
   Purchased power                  19,293      4,409       48,593     11,436
   Other operating                  56,480     52,578      166,242    133,567
   Maintenance                      11,080     12,842       40,190     44,744
   Depreciation and amortization    43,907     37,552      126,044    111,924
   Taxes, other than income         22,699     20,426       62,040     50,423
   Income taxes                     42,774     39,295       85,805      3,677
                                 ---------  ---------  -----------  ---------
                                   298,227    254,708      785,403    579,441
                                 ---------  ---------  -----------  ---------

Operating Income                   112,672    104,082      240,949    231,156
                                 ---------  ---------  -----------  ---------

Other Income and Deductions
   Mirror CWIP liability
     amortization                     --       10,250         --       30,750
   Utility plant development
     costs, net of tax                --         --        (15,481)      --
   Other                             1,498      2,829        4,708     13,288
                                 ---------  ---------  -----------  ---------
                                     1,498     13,079      (10,773)    44,038
                                 ---------  ---------  -----------  ---------

Income Before Interest Charges     114,170    117,161      230,176    275,194
                                 ---------  ---------  -----------  ---------

Interest Charges
   Interest on long-term debt       28,407     32,082       83,072     89,176
   Interest on short-term debt
     and other                       3,355      3,991       14,485     15,340
   Allowance for borrowed
     funds used during
     construction                     (194)    (1,150)      (1,410)    (3,566)
                                 ---------  ---------  -----------  ---------
                                    31,568     34,923       96,147    100,950
                                 ---------  ---------  -----------  ---------


Net Income                          82,602     82,238      134,029    174,244
Preferred stock dividends            3,386      3,535       10,183     10,899
                                 ---------  ---------  -----------  ---------
Net Income for Common Stock        $79,216    $78,703     $123,846   $163,345
                                 =========  =========  ===========  =========






                 The accompanying notes to financial statements
         as they relate to CPL are an integral part of these statements.
<PAGE> 17
                         CENTRAL POWER AND LIGHT COMPANY

                                 BALANCE SHEETS

                                                September 30,   December 31,
                                                    1996           1995
                                                 (unaudited)     (audited)
                                                 ----------     ----------
ASSETS                                                   (thousands)

 Electric Utility Plant
     Production                                  $3,108,291     $3,110,744
     Transmission                                   500,320        486,090
     Distribution                                   937,473        879,618
     General                                        265,257        248,629
     Construction work in progress                   81,370        127,307
     Nuclear fuel                                   174,698        165,087
                                                 ----------     ----------
                                                  5,067,409      5,017,475

  Less - Accumulated depreciation
    and amortization                              1,674,030      1,547,530
                                                 ----------     ----------
                                                  3,393,379      3,469,945
                                                 ----------     ----------

Current Assets
     Cash                                             5,946          2,883
     Special deposits                                60,113            797
     Accounts receivable                             36,301         45,186
     Under-recovered fuel costs                      22,727           --
     Materials and supplies, at average cost         75,856         71,112
     Fuel inventory, at average cost                 16,132         26,472
     Accumulated deferred income taxes                9,304         22,171
     Prepayments and other                            1,602          1,739
                                                 ----------     ----------
                                                    227,981        170,360
                                                 ----------     ----------

Deferred Charges and Other Assets
     Deferred STP costs                             481,295        488,047
     Mirror CWIP asset                              301,970        311,804
     Income tax related regulatory assets, net      337,388        346,993
     Other                                          124,557         93,987
                                                 ----------     ----------
                                                  1,245,210      1,240,831
                                                 ----------     ----------

                                                 $4,866,570     $4,881,136
                                                 ==========     ==========










                The accompanying notes to financial statements as
          they relate to CPL are an integral part of these statements.
<PAGE> 18
                         CENTRAL POWER AND LIGHT COMPANY

                                 BALANCE SHEETS

                                                September 30,   December 31,
                                                    1996           1995
                                                 (unaudited)     (audited)
                                                 ----------     ----------
CAPITALIZATION AND LIABILITIES                          (thousands)

Capitalization
    Common stock: $25 par value
       Authorized shares: 12,000,000
       Issued and outstanding shares: 6,755,535  $  168,888     $  168,888
    Paid-in capital                                 405,000        405,000
    Retained earnings                               872,290        863,444
                                                 ----------     ----------
                                                  1,446,178      1,437,332

     Preferred stock                                250,351        250,351
     Long-term debt                               1,521,652      1,517,347
                                                 ----------     ----------
                                                  3,218,181      3,205,030
                                                 ----------     ----------

Current Liabilities
     Long-term debt due within
       twelve months                                 60,000            231
     Advances from affiliates                        58,055        176,334
     Accounts payable                                49,816         49,507
     Accrued taxes                                   98,851         61,614
     Accrued interest                                35,719         32,742
     Over-recovered fuel costs                         --           12,586
     Refund due customers                             6,642           --
     Other                                           29,727         24,758
                                                 ----------     ----------
                                                    338,810        357,772
                                                 ----------     ----------

Deferred Credits
     Accumulated deferred income taxes            1,149,657      1,151,823
     Investment tax credits                         148,402        152,744
     Other                                           11,520         13,767
                                                 ----------     ----------
                                                  1,309,579      1,318,334
                                                 ----------     ----------

                                                 $4,866,570     $4,881,136
                                                 ==========     ==========











                The accompanying notes to financial statements as
          they relate to CPL are an integral part of these statements.
<PAGE> 19
                         CENTRAL POWER AND LIGHT COMPANY

                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                     Nine Months Ended
                                                       September 30,
                                                 ------------------------
                                                   1996           1995
                                                 ---------     ----------
OPERATING ACTIVITIES                                    (thousands)
     Net Income                                   $134,029       $174,244
     Non-cash Items Included in Net Income
         Depreciation and amortization             144,374        129,827
         Deferred income taxes and investment
           tax credits                              15,964        (41,244)
         Mirror CWIP liability amortization           --          (30,750)
         Establishment of regulatory assets           --          (20,652)
         Provision for bonded rate refund            6,642           --
         Utility plant development costs            21,374           --
         Inventory reserve                             487           --
     Changes in Assets and Liabilities
         Accounts receivable                         8,885        (16,814)
         Fuel inventory                             10,340            615
         Accounts payable                             (172)       (34,459)
         Accrued taxes                              37,237         11,312
         Over- and under-recovered fuel
           costs                                   (35,313)        61,193
         Other                                     (13,445)         1,958
                                                 ---------      ---------
                                                   330,402        235,230
                                                 ---------      ---------

INVESTING ACTIVITIES
     Construction expenditures                     (82,245)      (112,868)
     Allowance for borrowed funds used
       during construction                          (1,410)        (3,566)
     Other                                           2,415           --
                                                 ---------      ---------
                                                   (81,240)      (116,434)
                                                 ---------      ---------

FINANCING ACTIVITIES
     Proceeds from issuance of long-term debt       63,967        297,851
     Retirement of long-term debt                     (231)          --
     Reacquisition of long-term debt                (6,140)      (253,278)
     Special deposits for reacquisition
       of long-term debt                           (60,000)          --
     Change in advances from affiliates           (118,279)       (16,706)
     Payment of dividends                         (125,416)      (145,836)
                                                 ---------      ---------
                                                  (246,099)      (117,969)
                                                 ---------      ---------

Net Change in Cash and Cash Equivalents              3,063            827
Cash and Cash Equivalents at Beginning
  of Period                                          2,883            642
                                                 =========      =========
Cash and Cash Equivalents at End of Period          $5,946         $1,469
                                                 =========      =========

SUPPLEMENTARY INFORMATION
     Interest paid less amounts capitalized        $85,876        $81,377
                                                 =========      =========
     Income taxes paid                             $26,721        $25,280
                                                 =========      =========


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

<PAGE> 20
CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS

COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. Net income for common stock increased to
$79.2 million during the third quarter of 1996 from $78.7 million in the third
quarter of 1995. Third quarter earnings increased when compared to the prior
year due to the implementation of bonded rates and an increase in KWH sales
partially offset by the expiration of the Mirror CWIP liability amortization.
See NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information
relating to bonded rates.

         ELECTRIC OPERATING REVENUES. Total revenues increased 15% to $410.9
million during the third quarter of 1996 from $358.8 million during the third
quarter of 1995 due primarily to an increase in fuel revenues of $29.6 million
resulting from higher average unit fuel costs and purchased power as discussed
below. Also contributing to the higher revenues was a $22.5 million increase in
non-fuel revenues due primarily to the implementation of bonded rates and a 4%
increase in KWH sales resulting primarily from residential and commercial
customer growth, as well as increased customer demand.

         FUEL. Fuel expense increased 16% to $102.0 million during the third
quarter of 1996 from $87.6 million during the third quarter of 1995 due
primarily to an increase in the average unit cost of fuel from $1.31 per MMbtu
in the third quarter of 1995 to $1.69 per MMbtu in 1996 offset in part by an 8%
decrease in generation. The cost of fuel reflects an increase in the spot market
price of natural gas partially offset by a decrease in the delivered cost of
coal.

         PURCHASED POWER. Purchased power increased $14.9 million in the third
quarter of 1996 when compared to the third quarter of 1995 due primarily to
increased economy energy purchases.

         OTHER OPERATING. Other operating expenses increased $3.9 million or 7%
during the third quarter of 1996 when compared to the third quarter of 1995.
This increase was due primarily to additional insurance, decommissioning and
regulatory expenses associated with the implementation of bonded rates. Such
increases were partially offset by lower nuclear production expenses due
primarily to lower STP employee-related costs and fewer scheduled refueling
outages and decreased transmission expenses resulting from the benefits
associated with the installation of the high-voltage direct-current east tie.

         MAINTENANCE. Maintenance expense decreased $1.8 million or 14% during
the third quarter of 1996 when compared to the third quarter of 1995 due
primarily to fewer scheduled steam production maintenance repair projects in the
third quarter of 1996.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $6.4 million or 17% during the third quarter of 1996 when compared to
the third quarter of 1995 as a result of an increase in depreciable property and
the accelerated amortization of STP deferred costs in accordance with the
implementation of bonded rates in May 1996.

         TAXES, OTHER THAN INCOME. Taxes, other than income increased $2.3
million in third quarter of 1996 when compared to the third quarter of 1995 due
primarily to higher state franchise taxes partially offset by lower ad valorem
taxes.


<PAGE> 21
CPL RESULTS OF OPERATIONS (CONTINUED)

         INCOME TAXES. Income taxes increased $3.5 million in the third quarter
of 1996 when compared to the third quarter of 1995 due primarily to higher
pre-tax income.

         OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$11.6 million in the third quarter of 1996 when compared to the third quarter of
1995. Mirror CWIP liability amortization, which expired in 1995, contributed
$10.3 million to other income and deductions in the third quarter of 1995.

         INTEREST CHARGES. Interest charges decreased $3.4 million during the
third quarter of 1996 when compared to 1995 as a result of the refinancing of
higher cost bonds.


<PAGE> 22
CPL RESULTS OF OPERATIONS (CONTINUED)

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. Net income for common stock decreased 24%
to $123.8 million during the first nine months of 1996 from $163.3 million in
the first nine months of 1995. The decrease resulted primarily from the
expiration of Mirror CWIP liability amortization and a one-time charge
associated with certain investments for plant sites, engineering studies and
lignite reserves. Partially offsetting this decrease were the net effects of the
settlements of certain regulatory issues, as shown in the table below, and the
impact associated with the implementation of bonded rates. See NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS for additional information relating to
bonded rates. See NOTE 8. UTILITY PLANT DEVELOPMENT COSTS for additional
information relating to the one-time charge.

                                          PRE-TAX   AFTER-TAX
                                              (million)
CPL 1996 FUEL AGREEMENT                  
Provision for refund                       $(14.4)     $(9.4)
Reduction of fuel expense                     9.6        6.2
Increased interest expense                   (1.1)      (0.7)
Litigation and settlement expense            (0.8)      (0.5)


CPL 1995 AGREEMENT
Base rate refund                           $(50.0)    $(32.5)
Fuel disallowance                           (62.3)     (40.5)
Wholesale fuel refund                        (3.2)      (2.1)
Current flowback of excess deferred
  federal income tax                         34.3       34.3
Capitalization of previously expensed
  restructuring and rate case costs          27.6       17.9
Recognition of factoring income              16.1       10.5
Amortization, interest and other             (6.6)      (4.4)

         ELECTRIC OPERATING REVENUES. Total revenues increased $215.8 million or
27% during the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to an increase in non-fuel revenues. The increase in
non-fuel revenues resulted principally from the net change in the provision for
rate refunds, as reflected in the above table, and the implementation of bonded
rates. Also contributing to the higher revenues was a 7% increase in KWH sales
resulting primarily from increased customer demand, favorable weather-related
demand as well as residential and commercial customer growth. Fuel revenues
increased $78.3 million as a result of higher average unit fuel costs and
purchased power as discussed below.

         FUEL. Fuel expense increased $32.8 million or 15% during the first nine
months of 1996 when compared to the first nine months of 1995 due primarily to
an increase in the average unit cost of fuel from $1.35 per MMbtu in the first
nine months of 1995 to $1.59 per MMbtu for the same period in 1996. The cost of
fuel reflects an increase in the spot market price of natural gas partially

<PAGE> 23
CPL RESULTS OF OPERATIONS (CONTINUED)

offset by a decrease in the delivered cost of coal and a one-time $9.6 million 
reduction in fuel expense as a result of the CPL 1996 Fuel Agreement.

         PURCHASED POWER. Purchased power increased $37.2 million during the
first nine months 1996 when compared to the first nine months of 1995 primarily
as a result of increased economy energy and cogeneration purchases.

         OTHER OPERATING. Other operating expenses increased $32.7 million or
24% during the first nine months of 1996 when compared to the first nine months
of 1995. This increase was due primarily to the 1995 recognition of a $20.7
million regulatory asset for previously recorded restructuring charges and the
reversal of $4.3 million in rate case costs pursuant to the CPL 1995 Agreement.
Also, contributing to this increase were additional insurance, decommissioning
and regulatory expenses associated with the implementation of bonded rates as
well as higher employee-related costs. Partially offsetting the increase were
lower nuclear production expenses due primarily to lower STP employee-related
costs and fewer scheduled refueling outages.

         MAINTENANCE. Maintenance expense decreased $4.6 million or 10% during
the first nine months of 1996 when compared to the first nine months of 1995 due
primarily to fewer scheduled steam production maintenance repair projects in the
first nine months of 1996 when compared to 1995. Distribution maintenance also
decreased due to a change in capitalization policy.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $14.1 million or 13% in the first nine months of 1996 primarily as a
result of the accelerated amortization of deferred STP costs in accordance with
the implementation of bonded rates in May 1996 as well as increases in
depreciable property and Mirror CWIP asset amortization.

         TAXES, OTHER THAN INCOME. The $11.6 million increase in other taxes
during the first nine months of 1996 when compared to the first nine months of
1995 was due primarily to lower 1995 ad valorem taxes resulting from revisions
of prior year estimates. Also, higher accruals in 1996 for state franchise taxes
partially offset by lower current year ad valorem taxes contributed to this
increase.

         INCOME TAXES. Income taxes increased $82.1 million in the first nine
months of 1996 when compared to the first nine months of 1995 due primarily to
the accelerated flowback of $34.3 million of unprotected excess deferred income
taxes in accordance with the CPL 1995 Agreement. The increase is also
attributable to prior year tax adjustments, as well as higher pre-tax income,
excluding the effects of the one-time charge, as discussed below.

         OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$54.8 million in the first nine months of 1996 when compared to 1995. Mirror
CWIP liability amortization, which expired in 1995, contributed $30.8 million to
other income and deductions in the first nine months of 1995. Also, a one-time
charge in 1996 associated with certain investments for plant sites, engineering
studies and lignite reserves of approximately $15.5 million, net of tax,
contributed to this decline. See NOTE 8. UTILITY PLANT DEVELOPMENT COSTS for
additional information. Furthermore, other income decreased in 1996 due
primarily to the recognition of $12.4 million of factoring income in 1995
pursuant to the CPL 1995 Agreement.


<PAGE> 24
CPL RESULTS OF OPERATIONS (CONTINUED)

         INTEREST CHARGES. Interest charges decreased $4.8 million during 1996
when compared to 1995 primarily as a result of the refinancing of higher cost
bonds partially offset by a decrease in allowance for borrowed funds used for
construction.


<PAGE> 25


PSO



                       PUBLIC SERVICE COMPANY OF OKLAHOMA




                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.


<PAGE> 26

                       PUBLIC SERVICE COMPANY OF OKLAHOMA

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)


                                    Three Months Ended      Nine Months Ended
                                        September 30,         September 30,
                                   --------------------  ----------------------
                                      1996       1995        1996       1995
                                   ---------  ---------  -----------  ---------
                                        (thousands)            (thousands)

Electric Operating Revenues         $250,015   $232,156     $579,021   $542,215
                                   ---------  ---------  -----------  ---------

Operating Expenses and Taxes
   Fuel                               93,670     76,434      224,914    209,895
   Purchased power                    10,012      6,220       28,451     16,614
   Other operating                    30,818     28,196       88,340     86,201
   Maintenance                         8,777      8,716       26,487     23,778
   Depreciation and amortization      19,559     16,916       57,990     49,981
   Taxes, other than income            6,461      6,093       19,870     18,345
   Income taxes                       27,172     31,057       39,069     37,659
                                   ---------  ---------  -----------  ---------
                                     196,469    173,632      485,121    442,473
                                   ---------  ---------  -----------  ---------

Operating Income                      53,546     58,524       93,900     99,742
                                   ---------  ---------  -----------  ---------

Other Income and Deductions
   Utility plant development
     costs, net of tax                  --         --        (35,552)      --
   Other                                  38       (212)         237      3,543
                                   ---------  ---------  -----------  ---------
                                          38       (212)     (35,315)     3,543
                                   ---------  ---------  -----------  ---------

Income Before Interest Charges        53,584     58,312       58,585    103,285
                                   ---------  ---------  -----------  ---------

Interest Charges
   Interest on long-term debt          7,821      7,398       22,936     22,196
   Interest on short-term
     debt and other                    1,130      1,352        4,452      4,888
   Allowance for borrowed
     funds used during
     construction                       (376)    (1,120)      (1,075)    (2,442)
                                   ---------  ---------  -----------  ---------
                                       8,575      7,630       26,313     24,642
                                   ---------  ---------  -----------  ---------

Net Income                            45,009     50,682       32,272     78,643
Preferred stock dividends                204        204          612        612
                                   ---------  ---------  -----------  ---------
Net Income for Common Stock          $44,805    $50,478      $31,660    $78,031
                                   =========  =========  ===========  =========








                The accompanying notes to consolidated financial
                statements as they relate to PSO are an integral
                            part of these statements.
<PAGE> 27
                       PUBLIC SERVICE COMPANY OF OKLAHOMA

                           CONSOLIDATED BALANCE SHEETS


                                                September 30,   December 31,
                                                    1996           1995
                                                 (unaudited)     (audited)
                                                 ----------     ----------
ASSETS                                                  (thousands)

Electric Utility Plant
     Production                                    $902,271       $939,106
     Transmission                                   370,544        363,692
     Distribution                                   761,107        712,483
     General                                        186,359        182,705
     Construction work in progress                   45,806         56,576
                                                 ----------     ----------
                                                  2,266,087      2,254,562

  Less - Accumulated depreciation
    and amortization                                973,260        924,186
                                                 ----------     ----------
                                                  1,292,827      1,330,376
                                                 ----------     ----------

Current Assets
     Cash                                               747            744
     Accounts receivable                             26,723         17,957
     Materials and supplies, at
       average cost                                  36,100         41,179
     Fuel inventory,  at LIFO cost                   15,431         15,765
     Accumulated deferred income taxes                1,947         10,389
     Prepayments and other                            2,272          2,450
                                                 ----------     ----------
                                                     83,220         88,484
                                                 ----------     ----------

Deferred Charges and Other Assets                    57,693         61,956
                                                 ----------     ----------

                                                 $1,433,740     $1,480,816
                                                 ==========     ==========

















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

<PAGE> 28

                       PUBLIC SERVICE COMPANY OF OKLAHOMA

                           CONSOLIDATED BALANCE SHEETS


                                                     September 30, December 31,
                                                         1996          1995
                                                     (unaudited)     (audited)
                                                     ----------     ----------
CAPITALIZATION AND LIABILITIES                             (thousands)

Capitalization
     Common stock:  $15 par value
        Authorized shares 11,000,000; 
        issued 10,482,000 shares
        and outstanding 9,013,000 
        shares                                         $157,230       $157,230
     Paid-in capital                                    180,000        180,000
     Retained earnings                                  146,941        150,281
                                                     ----------     ----------
                                                        484,171        487,511

     Preferred stock                                     19,826         19,826
     Long-term debt                                     419,921        379,250
                                                     ----------     ----------
                                                        923,918        886,587
                                                     ----------     ----------

Current Liabilities
     Long-term debt due within
       twelve months                                       --           25,000
     Advances from affiliates                            29,785         70,510
     Payables to affiliates                              19,560         40,463
     Accounts payable                                    41,258         23,094
     Payables to customers                               14,123         32,517
     Accrued taxes                                       44,389         27,014
     Accrued interest                                    10,993          9,025
     Other                                                9,142          8,589
                                                     ----------     ----------
                                                        169,250        236,212
                                                     ----------     ----------

Deferred Credits
     Accumulated deferred income taxes                  243,245        264,353
     Investment tax credits                              44,134         46,222
     Income tax related regulatory
       liabilities, net                                  46,236         41,820
     Other                                                6,957          5,622
                                                     ----------     ----------
                                                        340,572        358,017
                                                     ----------     ----------

                                                     $1,433,740     $1,480,816
                                                     ==========     ==========









                The accompanying notes to consolidated financial
                statements as they relate to PSO are an integral
                            part of these statements.
<PAGE> 29
                       PUBLIC SERVICE COMPANY OF OKLAHOMA

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                Nine Months Ended
                                                       September 30,
                                                 ------------------------
                                                   1996            1995
                                                 ---------      ---------
OPERATING ACTIVITIES                                    (thousands)
     Net Income                                    $32,272        $78,643
     Non-cash Items Included in Net Income
         Depreciation and amortization              62,457         54,256
         Deferred income taxes and
           investment tax credits                  (10,338)        (2,584)
         Allowance for equity funds used
           during construction                         (85)        (1,180)
         Utility plant development costs            50,854           --
         Inventory reserve                           3,945           --
     Changes in Assets and Liabilities
         Accounts receivable                        (8,766)         2,667
         Accounts payable                          (19,769)       (28,093)
         Accrued taxes                              17,375         22,698
         Other                                      (3,066)         2,110
                                                 ---------      ---------
                                                   124,879        128,517
                                                 ---------      ---------

INVESTING ACTIVITIES
     Construction expenditures                     (56,830)       (70,942)
     Allowance for borrowed funds used
       during construction                          (1,075)        (2,442)
     Other                                          (4,355)        (5,024)
                                                 ---------      ---------
                                                   (62,260)       (78,408)
                                                 ---------      ---------

FINANCING ACTIVITIES
     Proceeds from issuance of
       long-term debt                               51,785           --
     Retirement of long-term debt                  (25,000)          --
     Reacquisition of long-term debt               (13,040)          --
     Change in advances from affiliates            (40,725)       (11,852)
     Payment of dividends                          (35,636)       (40,613)
                                                 ---------      ---------
                                                   (62,616)       (52,465)
                                                 ---------      ---------

Net Change in Cash and Cash Equivalents                  3         (2,356)
Cash and Cash Equivalents at Beginning
  of Period                                            744          5,453
                                                 =========      =========
Cash and Cash Equivalents at End of Period            $747         $3,097
                                                 =========      =========

SUPPLEMENTARY INFORMATION
     Interest paid less amounts capitalized        $22,686        $21,393
                                                 =========      =========
     Income taxes paid                             $20,142        $20,949
                                                 =========      =========







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

<PAGE> 30
PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS

COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. Net income for common stock decreased 11%
to $44.8 million during the third quarter of 1996 from $50.5 million during the
third quarter of 1995. The decrease resulted primarily from decreased non-fuel
revenue, increased depreciation and amortization expenses and increased other
operating expenses.

         ELECTRIC OPERATING REVENUES. Electric operating revenues increased 8%
to $250 million during the third quarter of 1996 from $232.2 million during the
third quarter of 1995. The increase was due primarily to increased fuel revenues
as discussed below, offset in part by decreased weather-related demand from
retail customers.

         FUEL. Fuel expense was $93.7 million during the third quarter of 1996,
a 23% increase from $76.4 million in the third quarter of 1995. The increase was
due primarily to a higher under-recovery of fuel costs in the third quarter of
1995 and an increase in the average unit fuel cost from $1.70 per MMbtu in the
third quarter of 1995 to $2.00 per MMbtu in the third quarter of 1996. The
increase in the average unit fuel cost is attributable to an increase in the
spot market price of natural gas offset in part by a decline in the delivered
cost of coal resulting from lower transportation charges as well as purchases of
lower priced spot market coal. In addition, partially offsetting this increase
was a 3% decrease in KWH generation.

         PURCHASED POWER. Purchased power expenses increased approximately 61%
to $10 million for the third quarter of 1996 from $6.2 million in the same
period of 1995. The increase was due primarily to increases in purchases of
economy energy.

         OTHER OPERATING. Other operating expenses were $30.8 million during the
third quarter of 1996, a 9% increase from $28.2 million for the third quarter of
1995. The increase was due primarily to increased employee related expenses.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 16% to $19.6 million in the third quarter of 1996 from $16.9 million
in the third quarter of 1995. The increase was due to increases in depreciable
property and completion in 1995 of the amortization of previously expensed
inventory and supply items that were credited through amortization to cost of
service.

         INCOME TAXES. Income tax expense for the third quarter of 1996
decreased $3.9 million from $31.1 million in 1995 to $27.2 million in 1996
primarily due to lower pre-tax income.


<PAGE> 31
PSO RESULTS OF OPERATIONS (CONTINUED)

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. For the nine months ended September 30,
1996, net income for common stock decreased 59% to $31.7 million from $78
million for the nine months ended September 30, 1995. The decrease resulted
primarily from a one-time charge associated with certain investments for plant
sites, engineering studies and lignite reserves of approximately $35.6 million,
net of tax, offset in part by increased non-fuel revenue and prior year tax
adjustments recorded in 1995.

         ELECTRIC OPERATING REVENUES. Electric operating revenues increased 7%
to $579 million for the nine months ended September 30, 1996 from $542.2 million
for the first nine months of 1995. The increase was due primarily to increased
fuel revenues, as discussed below, and a 6% increase in retail KWH sales
resulting from additional weather-related demand from customers in the first six
months of 1996, as well as customer growth.

         FUEL. Fuel expense was $224.9 million for the first nine months of
1996, a 7% increase from $209.9 million for the same period of 1995. The
increase was due primarily to an increase in average unit fuel costs from $1.76
per MMbtu in the first nine months of 1995 to $2.04 per MMbtu in the first nine
months of 1996. The increase in the average unit fuel cost is attributable to an
increase in the spot market price of natural gas offset in part by a decline in
the delivered cost of coal resulting from lower transportation charges as well
as purchases of lower priced spot market coal. Offsetting these factors in part
was an under-recovery of fuel costs in the first nine months of 1996 compared to
an over-recovery of fuel costs in the first nine months of 1995, as well as
decreased KWH generation.

         PURCHASED POWER. Purchased power increased approximately 71% to $28.5
million for the first nine months of 1996 from $16.6 million during the first
nine months of 1995. The increase was due primarily to increases in purchases of
economy energy.

         MAINTENANCE. Maintenance expenses increased 11% to $26.5 million for
the nine months ended September 30, 1996 from $23.8 million for the same period
of 1995. The increase was due primarily to a $3.9 million write-down of
production inventory in 1996 offset in part by decreased power plant maintenance
activities and decreased distribution maintenance activities.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 16% to $58 million for the nine month period ended September 30, 1996
from $50 million in the same period of 1995. The increase was due to increases
in depreciable property and completion in 1995 of the amortization of previously
expensed inventory and supply items that were credited through amortization to
cost of service.

         INCOME TAXES. Income tax expense for the first nine months of 1996
increased $1.4 million from $37.7 million in 1995 to $39.1 million in 1996.
Income tax expense was affected by prior year tax adjustments recorded in 1995
offset in part by lower pre-tax income, excluding the effects of a one-time
charge, as discussed below.

         OTHER INCOME AND DEDUCTIONS. Other income and deductions for the nine
months ended September 30, 1996 decreased approximately $39 million when
compared to the same period of 1995 as a result of a one-time charge associated
with certain investments for plant sites, engineering studies and lignite
reserves of approximately $35.6 million, net of tax. See NOTE 8. UTILITY PLANT
DEVELOPMENT COSTS for additional information. Other income and deductions were
also affected by the $2.7 million gain on the sale of non-utility fiber optic
telecommunication property in the first quarter of 1995.


<PAGE> 32


SWEPCO


                       SOUTHWESTERN ELECTRIC POWER COMPANY




                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.



<PAGE> 33

                       SOUTHWESTERN ELECTRIC POWER COMPANY

                              STATEMENTS OF INCOME
                                   (unaudited)


                                    Three Months Ended     Nine Months Ended
                                       September 30,          September 30,
                                   --------------------  ----------------------
                                      1996      1995        1996        1995
                                   ---------  ---------  -----------  ---------
                                        (thousands)            (thousands)

Electric Operating Revenues         $278,227   $266,268     $715,671   $648,468
                                   ---------  ---------  -----------  ---------

Operating Expenses and Taxes
   Fuel                              116,612    101,811      301,530    243,655
   Purchased power                     4,845      4,074       20,943     13,806
   Other operating                    35,887     32,533       99,360     90,482
   Maintenance                        10,406     10,849       31,444     31,665
   Depreciation and amortization      23,010     20,853       67,949     61,496
   Taxes, other than income           12,746     12,299       36,158     34,275
   Income taxes                       20,904     23,969       38,100     37,744
                                   ---------  ---------  -----------  ---------
                                     224,410    206,388      595,484    513,123
                                   ---------  ---------  -----------  ---------

Operating Income                      53,817     59,880      120,187    135,345
                                   ---------  ---------  -----------  ---------

Other Income and Deductions
   Utility plant development
     costs, net of tax                  --         --        (21,743)      --
   Allowance for equity funds
     used during construction             (1)     1,430          325      3,535
   Other                                  12     (1,056)         937        396
                                   ---------  ---------  -----------  ---------
                                          11        374      (20,481)     3,931
                                   ---------  ---------  -----------  ---------

Income Before Interest Charges        53,828     60,254       99,706    139,276
                                   ---------  ---------  -----------  ---------

Interest Charges
   Interest on long-term debt         11,542     10,986       33,537     33,423
   Interest on short-term debt
     and other                         2,055      2,235        7,012      7,919
   Allowance for borrowed
     funds used during
     construction                       (465)    (1,440)      (1,691)    (4,134)
                                   ---------  ---------  -----------  ---------
                                      13,132     11,781       38,858     37,208
                                   ---------  ---------  -----------  ---------

Net Income                            40,696     48,473       60,848    102,068
Preferred stock dividends                758        854        2,295      2,472
                                   ---------  ---------  -----------  ---------
Net Income for Common Stock          $39,938    $47,619      $58,553    $99,596
                                   =========  =========  ===========  =========







                The accompanying notes to financial statements as
                  they relate to SWEPCO are an integral part of
                                these statements.
<PAGE> 34
                       SOUTHWESTERN ELECTRIC POWER COMPANY

                                 BALANCE SHEETS


                                                September 30,   December 31,
                                                    1996           1995
                                                 (unaudited)     (audited)
                                                 ----------     ----------
ASSETS                                                 (thousands)

Electric Utility Plant
     Production                                  $1,406,026     $1,410,546
     Transmission                                   450,336        435,362
     Distribution                                   835,129        789,884
     General                                        272,226        231,276
     Construction work in progress                   49,881        128,963
                                                 ----------     ----------
                                                  3,013,598      2,996,031

  Less - Accumulated depreciation
    and amortization                              1,175,285      1,116,375
                                                 ----------     ----------
                                                  1,838,313      1,879,656
                                                 ----------     ----------

Current Assets
     Cash                                             1,857          1,702
     Accounts receivable                             60,308         54,628
     Materials and supplies, at
       average cost                                  28,895         30,097
     Fuel inventory, substantially
       at average cost                               64,151         73,276
     Accumulated deferred income
       taxes                                           --            4,636
     Under-recovered fuel costs                      10,077           --
     Prepayments and other                           15,966         14,109
                                                 ----------     ----------
                                                    181,254        178,448
                                                 ----------     ----------

Deferred Charges and Other Assets                    83,243         58,615
                                                 ----------     ----------

                                                 $2,102,810     $2,116,719
                                                 ==========     ==========















                The accompanying notes to financial statements as
                  they relate to SWEPCO are an integral part of
                                these statements.
<PAGE> 35
                       SOUTHWESTERN ELECTRIC POWER COMPANY

                                 BALANCE SHEETS


                                                     September 30,  December 31,
                                                        1996           1995
                                                     (unaudited)     (audited)
                                                     ----------     ----------
CAPITALIZATION AND LIABILITIES                               (thousands)

Capitalization
     Common stock:  $18 par value
        Authorized shares: 7,600,000
        Issued and outstanding shares: 7,536,640       $135,660       $135,660
     Paid-in capital                                    245,000        245,000
     Retained earnings                                  324,887        302,334
                                                     ----------     ----------
                                                        705,547        682,994
     Preferred stock
        Not subject to mandatory redemption              16,032         16,032
        Subject to mandatory redemption                  32,428         33,628
     Long-term debt                                     595,971        598,951
                                                     ----------     ----------
                                                      1,349,978      1,331,605
                                                     ----------     ----------

Current Liabilities
     Long-term debt and preferred stock
       due within twelve months                           4,898          5,099
     Advances from affiliates                            78,481        101,228
     Payables to affiliates                              53,127         52,474
     Accounts payable                                    43,600         34,717
     Over-recovered fuel costs                             --            8,923
     Customer deposits                                   10,719         11,027
     Accrued taxes                                       42,275         25,268
     Accumulated deferred income taxes                    2,027           --
     Accrued interest                                    11,963         17,894
     Other                                               16,100         30,525
                                                     ----------     ----------
                                                        263,190        287,155
                                                     ----------     ----------

Deferred Credits
     Accumulated deferred income taxes                  371,217        377,245
     Investment tax credits                              72,690         76,237
     Income tax related regulatory
       liabilities, net                                  37,857         37,363
     Other                                                7,878          7,114
                                                     ----------     ----------
                                                        489,642        497,959
                                                     ----------     ----------

                                                     $2,102,810     $2,116,719
                                                     ==========     ==========





                The accompanying notes to financial statements as
                  they relate to SWEPCO are an integral part of
                                these statements.
<PAGE> 36
                       SOUTHWESTERN ELECTRIC POWER COMPANY

                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                     Nine Months Ended
                                                        September 30,
                                                 ------------------------
                                                    1996           1995
                                                 ---------      ---------
OPERATING ACTIVITIES                                     (thousands)
     Net Income                                    $60,848       $102,068
     Non-cash Items Included in Net Income
         Depreciation and amortization              75,686         69,269
         Deferred income taxes and
           investment tax credits                   (2,417)        (3,576)
         Allowance for equity funds used
           during construction                        (325)        (3,535)
         Utility plant development costs            29,590           --
         Inventory reserve                           1,130           --
     Changes in Assets and Liabilities
         Accounts receivable                        (5,680)         9,429
         Fuel inventory                              9,125         (4,121)
         Accounts payable                            9,588         (3,857)
         Accrued taxes                              17,007         29,457
         Accrued interest                           (5,931)        (3,706)
         Over- and under-recovered fuel
           costs                                   (19,000)        (1,684)
         Other                                     (26,294)        (3,783)
                                                 ---------      ---------
                                                   143,327        185,961
                                                 ---------      ---------

INVESTING ACTIVITIES
     Construction expenditures                     (67,837)       (79,261)
     Allowance for borrowed funds used
       during construction                          (1,691)        (4,134)
     Other                                          (4,210)        (5,064)
                                                 ---------      ---------
                                                   (73,738)       (88,459)
                                                 ---------      ---------

FINANCING ACTIVITIES
     Proceeds from issuance of
       long-term debt                               79,273           --
     Retirement of long-term debt                   (3,561)        (3,262)
     Reacquisition of long-term debt               (83,334)          --
     Redemption of preferred stock                  (1,200)           (50)
     Change in advances from affiliates            (22,747)       (18,803)
     Payment of dividends                          (37,865)       (76,237)
                                                 ---------      ---------
                                                   (69,434)       (98,352)
                                                 ---------      ---------

Net Change in Cash and Cash Equivalents                155           (850)
Cash and Cash Equivalents at Beginning
  of Period                                          1,702          1,296
                                                 =========      =========
Cash and Cash Equivalents at End of Period          $1,857           $446
                                                 =========      =========

SUPPLEMENTARY INFORMATION
     Interest paid less amounts capitalized        $43,686        $39,402
                                                 =========      =========
     Income taxes paid                             $25,736        $21,598
                                                 =========      =========



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


<PAGE> 37
SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS

COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. Net income for common stock decreased 16%
to $39.9 million during the third quarter of 1996 from $47.6 million during the
third quarter of 1995. The decrease resulted primarily from increased other
operating expenses and increased depreciation and amortization.

         ELECTRIC OPERATING REVENUES. Although KWH sales were relatively stable,
electric operating revenues increased $12.0 million to $278.2 million during the
third quarter of 1996 from $266.3 million during the third quarter of 1995. The
increase is due primarily to an $11 million increase in fuel revenue resulting
from higher average unit fuel cost as discussed below and a $1 million increase
in non-fuel revenue. The increase in non-fuel revenue is attributable to higher
customer demand which was partially offset by a decrease in weather-related
demand.

         FUEL. Fuel expense increased 15% to $116.6 million during the third
quarter of 1996 when compared to the third quarter of 1995 due primarily to an
increase in the average unit fuel cost from $1.56 per MMbtu in 1995 to $1.66 per
MMbtu in 1996. The increase in average unit fuel cost is attributable to an
increase in the spot market price of natural gas offset in part by a decline in
the delivered cost of coal resulting from lower transportation charges as well
as purchases of lower priced spot market coal.

         OTHER OPERATING. Other operating expenses increased $3.4 million, or
10%, during the third quarter of 1996 when compared to the third quarter of 1995
due primarily to increases in production expenses and prior year adjustments
made in 1995 to customer account expenses.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
approximately $2.2 million, or 10%, during the third quarter of 1996 as compared
to the third quarter of 1995 due primarily to an increase in depreciable plant
and the completion in 1995 of the amortization of previously expensed inventory
and supply items that were credited through amortization to cost of service.

         INCOME TAXES. Income taxes decreased $3.1 million, or 13%, to $20.9
million during the third quarter of 1996 as compared to the third quarter of
1995 due primarily to lower pre-tax income.



<PAGE> 38
SWEPCO RESULTS OF OPERATIONS (CONTINUED)

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. Net income for common stock decreased 41%
to $58.6 million during the nine months ended September 30, 1996 from $99.6
million during the nine months ended September 30, 1995. The decrease resulted
primarily from a one-time charge associated with certain investments for plant
sites, engineering studies and lignite reserves of approximately $21.7 million,
net of tax. Increased other operating expenses, increased depreciation and
amortization, and prior year tax adjustments recorded in 1995 also contributed
to the decrease in net income for common stock.

         ELECTRIC OPERATING REVENUES. Electric operating revenues increased
$67.2 million to $715.7 million during the first nine months of 1996 from $648.5
million during the first nine months of 1995 due primarily to a $50 million
increase in fuel revenue and a $17 million increase in non-fuel revenue. The
increase in fuel revenue was due to higher average unit fuel cost as discussed
below. The increase in non-fuel revenue is attributable to a 4% increase in
retail KWH sales resulting from increased customer demand.

         FUEL. Fuel expense increased 24% to $301.5 million during the first
nine months of 1996 when compared to the first nine months of 1995 due primarily
to a 10% increase in generation and an increase in the average unit fuel cost
from $1.61 per MMbtu in 1995 to $1.77 per MMbtu in 1996. The increase in average
unit fuel cost is attributable to an increase in the spot market price of
natural gas offset in part by a decline in the delivered cost of coal resulting
from lower transportation charges as well as purchases of lower priced spot
market coal.

         PURCHASED POWER. Purchased power expense increased $7.1 million, or
52%, during the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to an increase in economy energy purchases.

         OTHER OPERATING. Other operating expenses increased $8.9 million, or
10%, during the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to increases in production expenses, employee-related
expenses and outside services.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
approximately $6.5 million, or 10%, during the first nine months of 1996 as
compared to the first nine months of 1995 due primarily to an increase in
depreciable plant and the completion in 1995 of the amortization of previously
expensed inventory and supply items that were credited through amortization to
cost of service.

         TAXES, OTHER THAN INCOME. Taxes, other than income increased
approximately $1.9 million, or 5%, during the first nine months of 1996 as
compared to the first nine months of 1995 due primarily to an increase in ad
valorem taxes and state franchise taxes.

         OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$24.4 million in the first nine months of 1996 when compared with the first nine
months of 1995 due primarily to a one-time charge associated with certain
investments for plant sites, engineering studies and lignite reserves of
approximately $21.7 million, net of tax. See NOTE 8. UTILITY PLANT DEVELOPMENT
COSTS for additional information.


<PAGE> 39
WTU



                          WEST TEXAS UTILITIES COMPANY




                         PART I. FINANCIAL INFORMATION.

                          ITEM 1. FINANCIAL STATEMENTS.

<PAGE> 40

                          WEST TEXAS UTILITIES COMPANY

                              STATEMENTS OF INCOME
                                   (unaudited)


                                    Three Months Ended      Nine Months Ended
                                       September 30,          September 30,
                                   --------------------  ----------------------
                                      1996       1995       1996         1995
                                   ---------  ---------  -----------  ---------
                                        (thousands)            (thousands)

Electric Operating Revenues         $113,314    $87,178     $295,690   $245,148
                                   ---------  ---------  -----------  ---------

Operating Expenses and Taxes
   Fuel                               35,177     29,963      102,982     90,891
   Purchased power                     8,918      4,373       21,442      8,198
   Other operating                    16,133      2,959       50,835     34,520
   Maintenance                         3,007      3,133       10,698     10,130
   Depreciation and amortization      10,081      8,147       29,591     24,264
   Taxes, other than income            5,940      6,108       17,121     17,448
   Income taxes                        9,367      2,063       14,402      6,183
                                   ---------  ---------  -----------  ---------
                                      88,623     56,746      247,071    191,634
                                   ---------  ---------  -----------  ---------

Operating Income                      24,691     30,432       48,619     53,514
                                   ---------  ---------  -----------  ---------

Other Income and Deductions
   Utility plant development
     costs, net of tax                  --         --        (10,917)      --
   Other                                 204       (468)         861        576
                                   ---------  ---------  -----------  ---------
                                         204       (468)     (10,056)       576
                                   ---------  ---------  -----------  ---------

Income Before Interest Charges        24,895     29,964       38,563     54,090
                                   ---------  ---------  -----------  ---------

Interest Charges
   Interest on long-term debt          5,815      5,297       16,407     15,435
   Interest on short-term debt
     and other                         1,043        833        3,788      2,987
   Allowance for borrowed funds
     used during construction           (183)      (187)        (687)      (512)
                                   ---------  ---------  -----------  ---------
                                       6,675      5,943       19,508     17,910
                                   ---------  ---------  -----------  ---------

Net Income                            18,220     24,021       19,055     36,180
Preferred stock dividends                 66         66          198        198
                                   ---------  ---------  -----------  ---------
Net Income for Common Stock          $18,154    $23,955      $18,857    $35,982
                                   =========  =========  ===========  =========








                 The accompanying notes to financial statements
         as they relate to WTU are an integral part of these statements.
<PAGE> 41
                          WEST TEXAS UTILITIES COMPANY

                                 BALANCE SHEETS


                                                September 30,   December 31,
                                                    1996           1995
                                                 (unaudited)     (audited)
                                                 ----------     ----------
ASSETS                                                   (thousands)

Electric Utility Plant
     Production                                    $416,358       $427,547
     Transmission                                   200,066        199,055
     Distribution                                   343,455        326,337
     General                                         93,797         84,326
     Construction work in progress                   25,757         32,686
                                                 ----------     ----------
                                                  1,079,433      1,069,951

  Less - Accumulated depreciation
    and amortization                                412,494        389,379
                                                 ----------     ----------
                                                    666,939        680,572
                                                 ----------     ----------

Current Assets
     Cash                                               557            717
     Accounts receivable                             20,963         28,923
     Materials and supplies, at
       average cost                                  15,366         16,660
     Fuel inventory,  at average cost                 8,151          8,281
     Coal inventory, at LIFO cost                     6,855          5,545
     Accumulated deferred income taxes                2,649          5,328
     Under-recovered fuel costs                       3,901           --
     Prepayments and other                            2,701          1,042
                                                 ----------     ----------
                                                     61,143         66,496
                                                 ----------     ----------

Deferred Charges and Other Assets
     Deferred Oklaunion costs                        23,297         26,092
     Restructuring costs                             11,326         12,741
     Other                                           32,715         29,713
                                                 ----------     ----------
                                                     67,338         68,546
                                                 ----------     ----------

                                                   $795,420       $815,614
                                                 ==========     ==========










                The accompanying notes to financial statements as
          they relate to WTU are an integral part of these statements.
<PAGE> 42
                          WEST TEXAS UTILITIES COMPANY

                                 BALANCE SHEETS


                                                    September 30,   December 31,
                                                        1996           1995
                                                     (unaudited)     (audited)
                                                     ----------     ----------
CAPITALIZATION AND LIABILITIES                               (thousands)

Capitalization
     Common stock:  $25 par value
        Authorized shares: 7,800,000
        Issued and outstanding shares: 5,488,560       $137,214       $137,214
     Paid-in capital                                      2,236          2,236
     Retained earnings                                  125,627        125,770
                                                     ----------     ----------
                                                        265,077        265,220

     Preferred stock                                      6,291          6,291
     Long-term debt                                     274,178        273,245
                                                     ----------     ----------
                                                        545,546        544,756
                                                     ----------     ----------

Current Liabilities
     Advances from affiliates                             4,152         19,820
     Payables to affiliates                               6,421          8,244
     Accounts payable                                    17,595         20,611
     Accrued taxes                                       18,299         13,182
     Accrued interest                                     9,291          6,081
     Over-recovered fuel costs                             --            4,060
     Refund due customers                                     5          1,812
     Other                                                3,104          3,121
                                                     ----------     ----------
                                                         58,867         76,931
                                                     ----------     ----------

Deferred Credits
     Accumulated deferred income
       taxes                                            142,252        145,130
     Investment tax credits                              29,570         30,561
     Income tax related regulatory
       liabilities, net                                  14,724         14,464
     Other                                                4,461          3,772
                                                     ----------     ----------
                                                        191,007        193,927
                                                     ----------     ----------

                                                       $795,420       $815,614
                                                     ==========     ==========









                The accompanying notes to financial statements as
          they relate to WTU are an integral part of these statements.
<PAGE> 43
                          WEST TEXAS UTILITIES COMPANY

                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                     Nine Months Ended
                                                       September 30,
                                                 ------------------------
                                                   1996            1995
                                                 ---------      ---------
OPERATING ACTIVITIES                                     (thousands)
     Net Income                                    $19,055        $36,180
     Non-cash Items Included in Net Income
         Depreciation and amortization              30,816         25,288
         Deferred income taxes and investment
           tax credits                                (930)          (734)
         Regulatory assets established for
           restructuring charges                      --          (13,213)
         Allowance for equity funds used during
           construction                               (232)          (260)
         Utility plant development costs            14,905           --
         Inventory reserve                           1,103           --
     Changes in Assets and Liabilities
         Accounts receivable                         7,960         (5,324)
         Accounts payable                           (2,456)        (2,231)
         Accrued taxes                               5,117          1,334
         Over- and under-recovered fuel costs       (7,961)         6,573
         Refunds due customers                      (1,807)        22,335
         Other                                         874        (10,970)
                                                 ---------      ---------
                                                    66,444         58,978
                                                 ---------      ---------

INVESTING ACTIVITIES
     Construction expenditures                     (28,243)       (31,931)
     Allowance for borrowed funds used
       during construction                            (687)          (512)
     Other                                            (603)        (1,329)
                                                 ---------      ---------
                                                   (29,533)       (33,772)
                                                 ---------      ---------

FINANCING ACTIVITIES
     Proceeds from issuance of long-term debt       43,368         39,411
     Reaquisition of long-term debt                (45,639)        (2,053)
     Change in advances from affiliates            (15,668)       (34,083)
     Payment of dividends                          (19,132)       (27,198)
                                                 ---------      ---------
                                                   (37,071)       (23,923)
                                                 ---------      ---------

Net Change in Cash and Cash Equivalents               (160)         1,283
Cash and Cash Equivalents at Beginning
  of Period                                            717          2,501
                                                 =========      =========
Cash and Cash Equivalents at End of Period            $557         $3,784
                                                 =========      =========

SUPPLEMENTARY INFORMATION
     Interest paid less amounts capitalized        $11,563        $12,548
                                                 =========      =========
     Income taxes paid                              $5,384        $14,155
                                                 =========      =========




                The accompanying notes to financial statements as
          they relate to WTU are an integral part of these statements.
<PAGE> 44
WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS

COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. During the third quarter of 1996, net
income for common stock decreased from $24.0 million in the third quarter of
1995 to $18.2 million. The decrease resulted primarily from decreased non-fuel
revenues as well as increased depreciation and amortization. Although the
initial after-tax effect of the WTU Stipulation and Agreement, recorded in the
third quarter of 1995, had an immaterial effect on net income for common stock,
it did have an impact on other income statement items as discussed below. See
NOTE 2.  LITIGATION AND REGULATORY PROCEEDINGS for additional information.

         ELECTRIC OPERATING REVENUES. Electric operating revenues increased
$26.1 million, or 30%, in the third quarter of 1996 as compared to the third
quarter of 1995. This increase was due primarily to recording a $21 million
reserve for a base rate refund pursuant to the WTU Stipulation and Agreement
during the third quarter of 1995. Also contributing to the variance were
increased fuel revenues, as discussed below. The increase was partially offset
by a $4.4 million decrease in non-fuel revenues, which was due primarily to a
decrease in unbilled revenues and the effect of lower rates implemented in
accordance with the WTU Stipulation and Agreement.  Unbilled revenues represent
electricity used by customers but not yet billed.

         FUEL. Fuel expense increased $5.2 million, or 17%, for the third
quarter of 1996 as compared to the third quarter of 1995 due primarily to an
increase in average unit fuel costs from $1.55 per MMbtu in 1995 to $1.91 per
MMbtu in 1996, which resulted from higher spot market natural gas prices. The
increase was partially offset by lower coal costs resulting from lower
transportation charges as well as purchases of lower priced spot market coal.

         PURCHASED POWER. Purchased power increased $4.5 million during the
third quarter of 1996 as compared to the third quarter of 1995, primarily as a
result of increased economy energy purchases at a higher cost per MWH.

         OTHER OPERATING. Other operating expenses increased $13.2 million in
the third quarter of 1996 as compared to the third quarter of 1995 due primarily
to the recording in the third quarter of 1995 of a $13.2 million regulatory
asset in accordance with the WTU Stipulation and Agreement for previously
recorded restructuring costs.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased approximately $2.0 million during the third quarter of 1996 as
compared to the third quarter of 1995 due primarily to increases in depreciable
property and the accelerated amortization of deferred Oklaunion plant costs and
amortization of regulatory assets established in 1995 in accordance with the WTU
Stipulation and Agreement.

         INCOME TAXES. Income taxes increased $7.3 million in the third quarter
of 1996 as compared to the third quarter of 1995 due primarily to a $6.9 million
reduction of deferred income taxes in accordance with the WTU Stipulation and
Agreement in the third quarter of 1995.


<PAGE> 45
WTU RESULTS OF OPERATIONS (CONTINUED)

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

         NET INCOME FOR COMMON STOCK. For the first nine months of 1996, net
income for common stock decreased to $18.9 million from $36.0 million in the
first nine months of 1995. The decrease resulted from a one-time charge
associated with certain investments for plant sites, engineering studies and
lignite reserves of approximately $10.9 million, net of tax. Also contributing
to the decrease were increased other operating expense and increased
depreciation and amortization. Although the initial after-tax effect of the WTU
Stipulation and Agreement, recorded in the third quarter of 1995, had an
immaterial effect on net income for common stock, it did have an impact on other
income statement items as discussed below. See NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS for additional information.

         ELECTRIC OPERATING REVENUES. Electric operating revenues increased
$50.5 million, or 21%, in the first nine months of 1996 as compared to the first
nine months of 1995. This increase was due primarily to recording a $21 million
reserve during the third quarter of 1995 for a base rate refund pursuant to the
WTU Stipulation and Agreement. Also contributing to the variance were increased
fuel revenues, as discussed below, and an 8% increase in KWH sales resulting
from additional weather-related demand in the first six months of 1996 as well
as increased customer demand. Partially offsetting this increase was the effect
of lower rates implemented in accordance with the WTU Stipulation and Agreement.

         FUEL. Fuel expense increased $12.1 million, or 13%, for the first nine
months of 1996 as compared to the first nine months of 1995 due primarily to an
increase in average unit fuel costs from $1.77 per MMbtu in 1995 to $2.00 per
MMbtu in 1996, which resulted from higher spot market natural gas prices. The
increase was partially offset by lower coal costs resulting from lower
transportation charges as well as purchases of lower priced spot market coal.

         PURCHASED POWER. Purchased power increased $13.2 million during the
first nine months of 1996 as compared to the first nine months of 1995,
primarily as a result of increased economy energy purchases at a higher cost per
MWH.

         OTHER OPERATING. Other operating expenses increased $16.3 million, or
approximately 47%, in the first nine months of 1996 as compared to the first
nine months of 1995 due primarily to the recording in the third quarter of 1995
of a $13.2 million regulatory asset in accordance with the WTU Stipulation and
Agreement. Also contributing to this variance were increased expenses associated
with regulatory activity, increased employee related expenses, and the
amortization of a regulatory asset in accordance with the WTU Stipulation and
Agreement.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased approximately $5.3 million during the first nine months of 1996 as
compared to the first nine months of 1995 due primarily to increases in
depreciable property and the accelerated amortization of deferred Oklaunion
plant costs and amortization of regulatory assets established in accordance with
the WTU Stipulation and Agreement during 1995.

         INCOME TAXES. Income taxes increased $8.2 million in the first nine
months of 1996 as compared to the first nine months of 1995 due primarily to a
$6.9 million reduction of deferred income taxes in accordance with the WTU
Stipulation and Agreement in the third quarter of 1995 and prior year tax
adjustments recorded in 1995.


<PAGE> 46
WTU RESULTS OF OPERATIONS (CONTINUED)

         OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$10.6 million during the first nine months of 1996 as compared with the first
nine months of 1995 as a result of a one-time charge associated with certain
investments for plant sites, engineering studies and lignite reserves of
approximately $10.9 million, net of tax. See NOTE 8. UTILITY PLANT DEVELOPMENT
COSTS for additional information.



<PAGE> 47


INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT





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

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

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

NOTE 4.      DIVIDENDS                              CSW, CPL, PSO, SWEPCO, WTU

NOTE 5.      CSW EARNINGS AND DIVIDENDS PER         CSW
             SHARE OF CSW COMMON STOCK

NOTE 6.      LONG-TERM FINANCING                    CSW, CPL, PSO, SWEPCO, WTU

NOTE 7.      DISCONTINUED OPERATIONS                CSW

NOTE 8.      UTILITY PLANT DEVELOPMENT COSTS        CSW, CPL, PSO, SWEPCO, WTU

NOTE 9.      SUPPLEMENTAL INFORMATION -             CSW
             SEEBOARD'S RECENT OPERATING
             RESULTS



<PAGE> 48


NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

1.  PRINCIPLES OF PREPARATION

         The condensed financial statements of the Registrants included herein
have been prepared by each Registrant pursuant to the rules and regulations of
the SEC. Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
each Registrant believes that the disclosures are adequate to make the
information presented not misleading. These condensed financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Registrant's Combined Annual Report on Form 10-K for the
year ended December 31, 1995 and the Registrant's Combined Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996.

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

         The financial statements of the CSW U.K. Group, which are included in
CSW's consolidated financial statements, have been translated from British
pounds to U.S. dollars in accordance with SFAS No. 52. All balance sheet
accounts are translated at the exchange rate at September 30, 1996 and all
income statement items are translated at the average exchange rate for the
applicable period. At September 30, 1996, the current exchange rate was
approximately (pound)1.00=$1.56 and the average exchange rate for the nine month
period ended September 30, 1996 was approximately (pound)1.00=$1.54. All
resulting translation adjustments are recorded directly to Foreign Currency
Translation Adjustment on CSW's consolidated balance sheets. Cash flow statement
items are translated at a combination of average, historical and current
exchange rates. The effect of the changes in exchange rates on cash and cash
equivalents, resulting from the translation of items at the different exchange
rates, is shown on CSW's Consolidated Statements of Cash Flows in Effect of
Exchange Rate Changes on Cash and Cash Equivalents.

         Certain financial statement items for prior years have been
reclassified to conform to the 1996 presentation.


2.  LITIGATION AND REGULATORY PROCEEDINGS

         See the Registrants' Combined Annual Report on Form 10-K for the year
ended December 31, 1995 and the Registrants' Combined Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996 and June 30, 1996 for additional
discussion of litigation and regulatory proceedings. Reference is also made to
NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES and PART II - ITEM 1. for
additional discussion of litigation matters and MD&A - COMPETITION AND INDUSTRY
CHALLENGES for additional discussion of regulatory matters.

CPL RATE REVIEW DOCKET NO. 14965
         As previously reported, on November 6, 1995, CPL filed with the Texas
Commission a request to increase its retail base rates by $71 million and reduce
its annual retail fuel factors by $17 million. The net effect of these proposals
would result in an increase of $54 million, or 4.6%, in total annual retail

<PAGE> 49

revenues based on a test year ended June 30, 1995. CPL's filing also sought to
reconcile $229 million of fuel costs incurred during the period July 1, 1994
through June 30, 1995. CPL's previous request to reconcile fuel costs from March
1, 1990 to June 30, 1994 in Docket No. 13650 was consolidated with the current
rate review. If the requested increase and other adjustments in rate structure
are approved, CPL will commit not to increase its base rates prior to January 1,
2001, subject to certain force majeure events.

         On April 30, 1996, CPL implemented new fuel factors that will lower
fuel costs to its retail customers by $25 million annually. The lower fuel
factors result primarily from the projected decline in CPL's fuel costs during
the twelve-month period following the implementation of the new factors. On May
9, 1996, CPL placed a $70 million base rate increase into effect under bond. The
bonded rates are subject to refund based on the final order of the Texas
Commission. When combined with the fuel factor reduction, the net result is an
increase in annual retail revenues of $45 million, or 3.8%.

         On May 10, 1996, CPL and other parties to the fuel reconciliation phase
of the current rate review filed the CPL 1996 Fuel Agreement with the Texas
Commission that reconciles CPL's fuel costs through June 1995. A final order
implementing the settlement was issued on June 28, 1996, approving a one-time
fuel refund of $23 million that was refunded to customers in July 1996. As a
condition of the settlement, CPL agreed not to seek recovery of $6 million of
fuel and fuel-related costs incurred during the reconciliation period. The
additional amount of the refund results from an over-recovery of fuel costs
during the reconciliation period and did not have a material impact on CPL's
results of operations or financial condition.

         In a preliminary order issued December 21, 1995, the Texas Commission
expanded the scope of the rate review to address certain competitive issues
facing the electric utility industry. CPL made a supplemental filing on April 1,
1996, addressing a recommended model for restructuring the electric industry
within ERCOT. In addition, the supplemental filing included: (i) estimates of
CPL's potential stranded costs based upon various possible structures of the
electric industry and under several energy price scenarios; and (ii) a
recommendation that the potential stranded costs not be quantified in rates
until any changes in the electricity market and structure of utilities in Texas
are known. In this supplemental filing, CPL estimated its potential stranded
costs could range from approximately zero to approximately $3.7 billion in a
worst-case scenario. The range is dependent upon a number of presently unknown
factors, including the extent to which CPL is compensated for its reasonable
costs and the extent and timing of any implementation of retail competition.
Hearings in this phase of the rate review concluded August 23, 1996.

         CPL has filed rebuttal testimony that challenges positions taken by the
Texas Commission staff and other parties intervening in this case. CPL's
testimony challenges the Texas Commission staff's proposals as unreasonable and
contrary to current law and regulatory policy. While the Texas Commission staff
reported the use of a "point estimate" of $850 million for potentially stranded
costs, their testimony actually describes their range of potential stranded
costs as very uncertain and having a range from $200 million to $2 billion. The
Texas Commission staff subsequently revised their "point estimate" to $1.069
billion and their range to $223 million to $2.9 billion. In addition, the Texas
Commission staff recommended (i) a nuclear performance standard that would
penalize CPL unless it operates its nuclear units better than 75 percent of the
U.S. nuclear industry; and (ii) a fuel-recovery mechanism that is based on
prices in an undeveloped energy market; and (iii) a one-sided cap on CPL's
earnings that effectively prevents CPL from realizing its authorized level of
earnings.

         Hearings for the final stage of the case, the rate case expense phase,
were completed in October 1996. Other parties to the rate case have recommended
rate case expense disallowances from $8 to $9 million.

<PAGE> 50

         A proposal for decision is expected in December 1996 and a final order
from the Texas Commission is expected in February 1997. CPL's management cannot
predict the ultimate outcome of CPL's rate case, although management believes
that the ultimate resolution will not have a material adverse effect on CPL's
results of operations or financial condition. However, if CPL ultimately is
unsuccessful in obtaining adequate rate relief, CPL could experience a material
adverse effect on its results of operations and financial condition.

         For further information related to the preliminary order issued
December 21, 1995, by the Texas Commission expanding the scope of the CPL rate
review to address certain competitive issues facing the electric utility
industry, see the Registrants' Combined Annual Report on Form 10-K for the year
ended December 31, 1995 and the Registrants' Combined Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996 and June 30, 1996.

PSO REGULATORY MATTERS
         As previously reported, on July 19, 1996, the Oklahoma Commission staff
filed an application seeking a review of PSO's earnings and rate structure. The
application does not include language indicating that the Oklahoma Commission
staff believes a rate reduction is needed. Instead, the review is being
initiated to investigate the potential impact on PSO's rates from both the sale
of Transok and PSO's restructuring efforts as well as PSO's improved financial
results. Although rate reviews do not have specific time limitations, a schedule
has been established for PSO's response. In accordance with the established
schedule, PSO filed a package of financial information with the Oklahoma
Commission staff on November 1, 1996. PSO cannot predict the outcome of this
review.

SWEPCO FUEL SURCHARGE
         On October 31, 1996, SWEPCO filed with the Texas Commission an
Application for Authority to Implement an Interim Surcharge of Fuel Cost
Under-Recoveries. Through September 1996, SWEPCO had a fuel cost under-recovery
balance of approximately $9.6 million including accumulated interest. SWEPCO
proposes to surcharge its customers approximately $10.2 million which includes
additional interest through the end of the surcharge period. An order in this
proceeding is expected in January 1997 which will allow SWEPCO to surcharge
customers from February 1997 through January 1998.

WTU STIPULATION AND AGREEMENT
         As previously reported, in the third quarter of 1995 WTU entered into
the WTU Stipulation and Agreement to settle several pending regulatory matters
that included: (i) a retail rate proceeding and fuel reconciliation before the
Texas Commission in Docket No. 13369; (ii) Writ of Error to the Supreme Court of
Texas - review of WTU's 1987 Texas rate case in Docket 7510; and (iii) the Texas
Commission's proceeding on remand in Docket No. 13949 regarding deferred
accounting treatment for Oklaunion. In the fourth quarter of 1995, the Texas
Commission rendered a final order that implemented the agreement.

         Part of the final order also set into motion the actions required to
seek a remand of the appeal of Docket No. 7510 to the Texas Commission to
implement a final order consistent with the WTU Stipulation and Agreement. The
Court of Appeals issued a mandate on April 15, 1996, directed to the Travis
County District Court, that permitted the case to be remanded back to the Texas
Commission. On May 23, 1996, the Texas Commission assigned it a new proceeding
for docketing purposes, Docket No. 15988. Parties to Docket No. 15988 filed a
joint motion with the ALJ on June 21, 1996 that proposed to adopt a finding to
implement the last outstanding element related to the WTU Stipulation and
Agreement in Docket No. 13369, WTU's settled rate case. On October 4, 1996, the

<PAGE> 51

ALJ issued a proposed order that is fully consistent with the terms of the WTU
Stipulation and Agreement. The Texas Commission entered a final order in Docket
No. 15988 approving this agreement on October 28, 1996.


3.  COMMITMENTS AND CONTINGENT LIABILITIES

TERMINATION OF EL PASO MERGER
         As previously reported, in May 1993, CSW entered into a Merger
Agreement pursuant to which El Paso would have emerged from bankruptcy as a
wholly owned subsidiary of CSW. On June 9, 1995, following CSW's notification
that it was terminating the Merger Agreement, El Paso filed a suit against CSW
seeking a $25 million termination fee from CSW, additional unspecified damages,
punitive damages, interest as permitted by law and certain other costs. On June
15, 1995, CSW filed suit against El Paso seeking a $25 million termination fee
from El Paso due to El Paso's breach of the Merger Agreement, at least $3.6
million in rate case expenses incurred by CSW on behalf of El Paso related to
state regulatory merger proceedings and a declaratory judgment that CSW properly
terminated the Merger Agreement. On June 14, 1996, CSW filed an amended
complaint seeking a first priority administrative expense claim of $50 million
from El Paso based upon El Paso's breach of the Merger Agreement.

         The United States Bankruptcy Court for the Western District of Texas,
Austin Division, consolidated the El Paso suit and the CSW suit into one
adversary proceeding. CSW is the named plaintiff in the consolidated adversary
proceeding. A trial date of January 21, 1997 has been set for a two-week trial
of the lawsuit.

         Although CSW believes that it has substantial defenses to El Paso's
claims and intends to defend El Paso's claims and pursue CSW's claims
vigorously, CSW cannot presently predict the outcome of the lawsuit. However, if
the lawsuit is decided adversely to CSW, it could have a material adverse effect
on CSW's consolidated results of operations but not on its financial condition.

CSW ENERGY PROJECTS AND COMMITMENTS
         CSW Energy is authorized to develop various independent power and
cogeneration facilities and to own and operate such non-utility projects,
subject to regulatory approval. As previously disclosed, CSW Energy owns
interests in five operating projects totaling 648 MW in Colorado, Florida and
Texas. In addition, CSW Energy has a 330 MW project (Phillips Sweeny in the
table below) under construction in Texas. CSW Energy has agreed to provide
construction financing for this project. Construction on this project began in
September 1996 with commercial operation scheduled for early 1998. To date, CSW
Energy has incurred $30 million of construction and development costs. Total
project costs are estimated at $190 million. The following table summarizes
equity investments and loans made by CSW Energy and commitments provided by CSW
at September 30, 1996.

                                                 LETTERS OF CREDIT
PROJECT                               EQUITY       AND GUARANTEES         LOANS
-------------------------------------------------------------------------------
                                                      (MILLIONS)

Brush II                             $15.3              $  --            $  --
Ft. Lupton                            43.0               56.4               --
Mulberry                              24.0               15.7               --
Orange Cogen                          53.2                1.7               --
Phillips Sweeny                         --              228.0             30.0
Newgulf                               10.5                 --               --
Various developmental projects         3.8                7.6              5.5

<PAGE> 52

         During the second quarter of 1996, CSW Energy recorded a one-time
charge of approximately $14 million after-tax to establish reserves for equity
investments, loans made to development projects and deferred charges associated
with certain operating projects.

CSW INTERNATIONAL PROJECTS
         As previously reported, in July, 1996, CSW International announced a
joint venture with Alpek, through a subsidiary, to build, own and operate a 120
MW, gas-fired cogeneration project at Alpek's Petrocel industrial complex in
Altamira, Tamaulipas, Mexico. CSW International and Alpek each will have 50%
ownership in the project, Enertek, which will cost approximately $75 million.
CSW International has agreed to provide construction financing for the project
of which approximately $11 million had been funded as of September 30, 1996. CSW
International has entered into a limited guarantee agreement with the project's
engineering, procurement and construction contractor that provides the
contractor a guarantee of up to $5 million. The Enertek project is expected to
commence commercial operations in the first quarter of 1998.

         CSW International is currently negotiating the acquisition of capital
stock in a Brazilian electric utility company. The acquisition is expected to be
consummated by December 1996. See MD&A - CAPITAL REQUIREMENTS, LIQUIDITY AND
FINANCING for a discussion of the issuance of Senior Notes by CSW Energy. A
portion of the proceeds from this issuance will be used to fund the $40 million
acquisition.

CPL DEFERRED ACCOUNTING
         CPL was granted deferred accounting treatment for certain STP Unit 1
and 2 costs by Texas Commission orders issued in October 1990 and December 1990,
respectively. In 1994, the Supreme Court of Texas sustained deferred accounting
as an appropriate mechanism for the Texas Commission to use in preserving the
financial integrity of CPL, but remanded CPL's case to the Court of Appeals to
consider certain substantial evidence points of error not previously decided by
the Court of Appeals given its prior determinations. On August 16, 1995, the
Court of Appeals rendered its opinion in the remand proceeding and affirmed the
Texas Commission's order in all respects.

         CPL believes that the language of the Supreme Court of Texas opinion
suggests that the appropriateness of allowing deferred accounting may be
reviewed under a financial integrity standard in the first case in which the
deferred STP costs are recovered through rates. If the courts decide that
subsequent review under the financial integrity standard is required, that
review would be conducted in a remand of the STP Unit 1 and Unit 2 orders.
Pending the ultimate resolution of CPL's deferred accounting issues, CPL is
unable to predict how its deferred accounting orders will ultimately be resolved
by the Texas Commission.

         If CPL's deferred accounting matters are not favorably resolved, CPL
could experience a material adverse effect on its results of operations and
financial condition. While CPL's management is unable to predict the ultimate
outcome of these matters, management believes CPL will receive approval of its
deferred accounting orders or will be successful in renegotiation of its rate
orders, so that there will be no material adverse effect on CPL's results of
operation or financial condition.

CPL NUCLEAR INSURANCE
         In connection with the licensing and operation of STP, the owners have
purchased the maximum limits of nuclear liability insurance, as required by law,
and have executed indemnification agreements with the Nuclear Regulatory
Commission in accordance with the financial protection requirements of the
Price-Anderson Act.

<PAGE> 53

         The Price-Anderson Act, a comprehensive statutory arrangement providing
limitations on nuclear liability and governmental indemnities, is in effect
until August 1, 2002. The limit of liability under the Price-Anderson Act for
licensees of nuclear power plants is $8.92 billion per incident, effective as of
January 1996. The owners of STP are insured for their share of this liability
through a combination of private insurance amounting to $200 million and a
mandatory industry-wide program for self-insurance totaling $8.72 billion. The
maximum amount that each licensee may be assessed under the industry-wide
program of self-insurance following a nuclear incident at an insured facility is
$75.5 million per reactor, which may be adjusted for inflation, plus a five
percent charge for legal expenses, but not more than $10 million per reactor for
each nuclear incident in any one year. CPL and each of the other STP owners are
subject to such assessments, which CPL and the other owners have agreed will be
allocated on the basis of their respective ownership interests in STP. For
purposes of these assessments, STP has two licensed reactors.

         The owners of STP currently maintain on-site decontamination liability
and property damage insurance in the amount of $2.75 billion provided by ANI and
NEIL. Policies of insurance issued by ANI and NEIL stipulate that policy
proceeds must be used first to pay decontamination and cleanup costs before
being used to cover direct losses to property. Under project agreements, CPL and
the other owners of STP will share the total cost of decontamination liability
and property insurance for STP, including premiums and assessments, on a pro
rata basis, according to each owner's respective ownership interest in STP.

         CPL purchased, for its own account, a NEIL I Business Interruption
and/or Extra Expense policy to reimburse CPL for extra expenses incurred for
replacement generation or purchased power as the result of a covered accident
that shuts down production at one or both of the STP Units for more than 21
consecutive weeks. In the event of an outage of STP Units 1 and 2 and the outage
is the result of the same accident, such insurance will reimburse CPL up to 80%
of the single unit recovery. The maximum amount recoverable for a single unit
outage is $118.6 million for both Unit 1 and 2. CPL is subject to an additional
assessment up to $1.9 million for the current policy year in the event that
insured losses at a nuclear facility covered under the NEIL I policy exceeds the
accumulated funds available under the policy. CPL renewed its current NEIL I
Business Interruption and/or Extra Expense policy September 15, 1996.

         For further information relating to litigation associated with CPL
nuclear insurance claims, reference is made to PART II - ITEM 1.

PSO SAND SPRINGS/GRANDFIELD, OKLAHOMA PCB COMPLAINTS
          In 1989, PSO investigated a Sand Springs, Oklahoma PCB storage
facility and found some PCB contamination. The clean-up plan was approved by the
EPA and clean-up of the facility began in November 1994. In October 1996, EPA
filed a complaint against PSO alleging PSO failed to comply with provisions of
the Toxic Substances Control Act. The complaint has three counts, two of which
pertain to the Sand Springs facility and the third dealing with a substation in
Grandfield, Oklahoma. EPA alleges improper disposal of PCBs at the Sand Springs
site due to the length of time between discovery of the contamination and the
actual clean-up at the site. The complaint at the Grandfield site relates to
failure to date PCB articles at the site. The total proposed penalty for the
three counts is $479,500. PSO has filed an extension to respond to the complaint
and is currently in discussions with EPA. PSO is unable to predict the outcome
of the discussions.


<PAGE> 54


PSO PCB CASES
         For information regarding the commitments and contingent liabilities
relating to PSO's PCB cases, reference is made to PART II - ITEM 1.

SWEPCO BILOXI, MISSISSIPPI MANUFACTURED GAS PLANT SITE
         As previously reported, SWEPCO was notified by Mississippi Power in
1994 that it may be a potentially responsible party at a manufactured gas plant
site in Biloxi, Mississippi, formerly owned and operated by a predecessor of
SWEPCO. Since then, SWEPCO has worked with Mississippi Power on both the
investigation of the extent of contamination on the site as well as on the
subsequent sampling of the site. The sampling results indicated contamination at
the property as well as the possibility of contamination of an adjacent
property. A risk assessment was submitted to the Mississippi Department of
Environmental Quality, whose ensuing comments requested that a future
residential exposure scenario be evaluated for comparison with commercial and
industrial exposure scenarios. A final range of cleanup costs has not been
determined, but based on preliminary estimates, SWEPCO has accrued approximately
$2 million for its portion of the cleanup of this site, of which approximately
$200,000 has been incurred to date.

SWEPCO HENRY W. PIRKEY POWER PLANT
         In connection with the lignite mining contract for its Henry W. Pirkey
Power Plant, SWEPCO has agreed, under certain conditions, to assume the
obligations of the mining contractor. As of September 30, 1996, the maximum
SWEPCO would have to assume is $64.7 million. The maximum amount may vary as the
mining contractor's need for funds fluctuates. The contractor's actual
obligation outstanding as of September 30, 1996 was approximately $58.9 million.


4.  DIVIDENDS

         The U.S. Electric Operating Companies' mortgage indentures, as amended
and supplemented, contain certain restrictions on the use of their retained
earnings for cash dividends on their common stock. These restrictions do not
currently limit the ability of CSW to pay dividends to its shareholders. At
September 30, 1996, approximately $1.8 billion of the subsidiary companies'
retained earnings were available for payment of cash dividends by such
subsidiaries to CSW. Of this, the amounts attributable to the U.S. Electric
Operating Companies were as follows.

CPL-$771 million  PSO-$147 million  SWEPCO-$325 million  WTU-$126 million


5.  CSW EARNINGS AND DIVIDENDS PER SHARE OF COMMON STOCK

         Earnings per share of common stock are computed by dividing net income
for common stock by the average number of common shares outstanding for the
respective periods. Dividends per common share reflect per share amounts paid
during the periods.


6.  LONG-TERM FINANCING

SWEPCO SABINE SERIES PCRBS
         In July 1996, $81.7 million of Sabine, 6.10%, Series 1996 PCRBs were
issued for the benefit of SWEPCO. The proceeds from this issuance were used to
refund the $81.7 million Sabine, 8.20%, Series 1986 PCRBs.

<PAGE> 55

CPL, PSO, WTU RED RIVER SERIES PCRBS
         In August 1996, $63.3 million of Red River, 6.0%, Series 1996, PCRBs
were issued for the benefit of CPL, PSO, and WTU. The proceeds from this
issuance were used to refund the $63.3 million of Red River, 7 7/8%, Series 1984
PCRBs.

CPL MATAGORDA SERIES PCRBS
         In September 1996, $60 million of Matagorda, 6 1/8%, Series 1996 PCRBs
were issued for the benefit of CPL. The proceeds from this issuance will be used
to refund the $60 million Matagorda, 7 7/8%, Series 1986 PCRBs, which are
classified on the balance sheet as Long-term debt due within twelve months, on
December 1, 1996. At September 30, 1996, the proceeds from the issuance were
held in trust and are reflected as Special Deposits on the balance sheet.

OTHER FINANCING ACTIVITIES
         See MD&A - CAPITAL REQUIREMENTS, LIQUIDITY AND FINANCING for a 
discussion of the financing transactions that have been undertaken during 1996 
related to the acquisition of SEEBOARD as well as a discussion of the issuance 
by CSW Energy of $200 million in Senior Notes.


7.  DISCONTINUED OPERATIONS

         On June 6, 1996, CSW sold Transok to Tejas. Accordingly, the results of
operations for Transok have been reported as discontinued operations and prior
periods have been restated for consistency.

         Transok is an intrastate natural gas gathering, transmission, marketing
and processing company that provides natural gas services to the U.S. Electric
Operating Companies, predominantly PSO, and to other non-affiliated gas
customers throughout the United States. Transok's natural gas facilities are
located in Oklahoma, Louisiana and Texas. After the sale, Transok has continued
to supply gas to the U.S. Electric Operating Companies.

         Operating results of Transok for the nine month period ended September
30, 1996 and 1995 are summarized in the following table (intercompany
transactions have not been eliminated).

                                               Nine Months Ended
                                                 September 30,
                                             ----------------------
                                               1996          1995
                                             --------       -------
                                                   (millions)

Total revenue                                  $362          $511

Operating income before income taxes             23            32

Earnings before income taxes                     18            21
Income taxes                                      6             7
                                                ---           ---
Net income from discontinued operations         $12           $14
                                                ---           ---

         Since Transok was sold on June 6, 1996, the results of operations for
the nine month period ended September 30, 1996 do not reflect a full nine months
of earnings from Transok. CSW's Consolidated Balance Sheet at September 30, 1996
does not contain any assets or liabilities from Transok.

         CSW sold Transok to Tejas for approximately $890 million, consisting of
$690 million in cash and $200 million in existing long-term debt that remained
with Transok after the sale. A portion of the cash proceeds was used to repay

<PAGE> 56

the CSW Credit Agreement and the remaining proceeds were used to repay
commercial paper borrowings. CSW recorded an after tax gain on the sale of
Transok of approximately $113 million in the second quarter of 1996. As a result
of the gain, CSW incurred a current tax liability of approximately $195 million.
Approximately two-thirds of the current tax liability results from taxes
previously deferred by Transok. The deferred taxes were generated primarily by
the excess of Transok's tax depreciation over its book depreciation.


8.  UTILITY PLANT DEVELOPMENT COSTS

         During the second quarter of 1996, the U.S. Electric Operating
Companies recorded one-time charges reflected in Other Income and Deductions
relating to investments made in prior years for plant sites, engineering studies
and lignite reserves for which future recovery is not probable. The charges are
as follows.
                          Pre-tax effect    Income tax        Net Income
                             on income        benefit           effect
                            --------------------------------------------
                                             (thousands)

CPL                         $(21,374)          $5,893         $(15,481)
PSO                          (50,854)          15,302          (35,552)
SWEPCO                       (29,590)           7,847          (21,743)
WTU                          (14,905)           3,988          (10,917)
                            --------           ------          -------
                           $(116,723)         $33,030         $(83,693)
                            --------           ------          -------

         For a discussion of reserves established by CSW Energy during the 
second quarter of 1996, see NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES.


9.  SUPPLEMENTAL INFORMATION - SEEBOARD'S RECENT OPERATING RESULTS

         SEEBOARD's results of operations discussed below are prepared in
accordance with Generally Accepted Accounting Principles in the United Kingdom
and exclude currency conversion, CSW consolidation adjustments and the impact of
interest expense on the debt incurred in connection with CSW's purchase of
SEEBOARD. CSW did not own SEEBOARD during the prior periods presented in the
discussion below. Accordingly, the comparative information has been provided for
information only.

NINE MONTHS ENDED SEPTEMBER 30, 1996
         Net income for the nine months ended September 30, 1996, was
(pound)97.6 million compared to (pound)69.1 million for the nine months ended
September 30, 1995. Gross profit (revenue less cost of sales) is higher than the
comparable period last year despite the impact of a reduction in regulatory
allowed revenues following the completion of the regulatory price review of
SEEBOARD's distribution business. This primarily reflects an improvement in
volume in the current period, supplemented by increases in tariffs to customers
from February 1996. Allowed revenue in SEEBOARD's distribution business was
reduced by 14% with effect from April 1995 and a further 13% from April 1996. At
the net income before interest level, the improvement reflects the continued
cost reduction programs of SEEBOARD, the first year contribution from SEEBOARD's
37.5% interest in Medway Power Limited, a company formed to construct, own and
operate a 675 MW power station, and the benefit of a release of a (pound)17.5
million accrual no longer required in respect of a previous liability for
redundancy costs. Partially offsetting these benefits, during the nine months
ended September 30, 1995, SEEBOARD received dividends of (pound)9.9 million as a

<PAGE> 57

result of its shareholding in the National Grid. SEEBOARD's interest in the
National Grid was demerged to shareholders of SEEBOARD in December 1995, and
accordingly, did not receive any dividends in 1996.

THREE MONTHS ENDED SEPTEMBER 30, 1996
         Net income for the three months ended September 30, 1996 was
(pound)25.8 million compared to (pound)12.6 million for the three months ended
September 30, 1995. The improvement in net income primarily reflects improvement
in volume, SEEBOARD's cost reduction programs and the first year contribution
from SEEBOARD's 37.5% interest in Medway Power Limited.


<PAGE> 58


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

         Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Registrants' Combined Annual
Report on Form 10-K for the year ended December 31, 1995 and their Combined
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June
30, 1996. Reference is also made to each Registrant's unaudited Financial
Statements and related Notes to Financial Statements included herein. The
information included therein should be read in conjunction with, and is
essential in understanding, the following discussion and analysis.


RESULTS OF OPERATIONS

         Reference is made to ITEM 1. FINANCIAL STATEMENTS for each of the
Registrants' Results of Operations.


COMPETITION AND INDUSTRY CHALLENGES

INDUSTRY RESTRUCTURING IN TEXAS
         In compliance with the Texas Commission's Project 15001, "Stranded
Costs Report," CPL, SWEPCO and WTU each filed information in response to the
Texas Commission's order initiating investigation concerning potential stranded
costs. The filings consist of various scenarios used to estimate potential
stranded costs. Based on the requirements of the filing, no significant
potential stranded costs were identified for SWEPCO or WTU. See NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS for a discussion of the potential impact
of potential stranded costs relating to CPL.

         The Texas Commission's Project 15002, "Scope of Competition Report," is
a report that the Texas Commission is required to present to the Texas
Legislature in each odd-numbered year detailing the impact of competition in the
electric utility industry. In addition, the report will include the Texas
Commission's recommendations concerning the public's interest in a partially
competitive electric market. In June 1996, CPL, SWEPCO and WTU each filed
information for the Texas Commission's report.

INDEPENDENT SYSTEM OPERATOR PLAN
         In June 1996, CSW (including CPL and WTU) and more than 20 other
parties, including other investor-owned utilities, municipal power companies,
electric cooperatives, independent power producers and power marketers, filed
plans to create an independent system operator to manage the ERCOT power grid.
The filing marks a major step towards implementing the Texas Commission's
overall strategy of creating the competitive wholesale electric market that was
mandated by the Texas Legislature in 1995. The Texas Commission approved the
independent system operator in August 1996. Such approval made Texas the first
state in the nation to implement a regional independent system operator and a
regional competitive wholesale bulk power market.

INDUSTRY RESTRUCTURING IN OKLAHOMA
         In June 1996, the Oklahoma Commission announced that it has begun
soliciting public comment to aid in the potential restructuring of the Oklahoma
electric utility industry. The issues the Oklahoma Commission is exploring
include the extent and speed of a restructuring, the unbundling of utility
services, as well as the legislative and regulatory needs of such a
restructuring. Informal public technical conferences have been held to discuss

<PAGE> 59

these issues. The Commissioners of the Oklahoma Commission are scheduled to
conduct a conference late in 1996 to review such comments and recommendations in
order to prepare themselves for the 1997 session of the Oklahoma Legislature.

FERC ORDER 888
         As previously reported, on April 24, 1996, the FERC issued Order 888
which is the final comparable open access transmission rule. The provisions of
the final rule are similar to provisions of the FERC's 1995 Notice of Proposed
Rule Making in that they provide for comparable service between utilities and
their transmission customers by requiring utilities to take service under their
open access tariffs for all of their new wholesale sales and purchases and by
requiring utilities to rely on the same transmission information network that
their transmission customers rely on to make wholesale purchases and sales. In
addition, it also reaffirms the FERC's position that utilities are entitled to
recover, through a formula, all legitimate, prudent and verifiable stranded
costs.

         The final rule requires holding companies to offer single system rates.
However, the rule grants CSW an exemption whereby CSW will be given an
opportunity to propose a solution that will provide comparability to all
wholesale users whereby the rates, terms and conditions for the CSW ERCOT
companies (CPL and WTU) would be permitted to differ from those offered by the
CSW Southwest Power Pool companies (PSO and SWEPCO). CSW has filed open access
tariffs that conform to the provisions of the pro forma tariff included as part
of the final rule. CSW filed a system-wide tariff on November 1, 1996 that will,
upon FERC approval, replace the conforming tariffs and comply with FERC Order
888 for a single system tariff.

STRATEGIC EXECUTIVE AND ORGANIZATIONAL RESTRUCTURING
         As previously reported, in April 1996 CSW announced organizational and
executive changes as CSW prepares for increased competition and for an
unbundling of the electric utility industry into generation, transmission,
distribution and service segments. This restructuring is expected to provide a
more competitive organizational structure for CSW. In connection with
implementing its 1996 restructuring, CSW has incurred approximately $8 million
in expenses through the third quarter of 1996. Approximately $2.8 million of the
restructuring expense relates to the U.S. Electric Operating Companies of which
CPL's portion is approximately $1.9 million. The remaining amounts range from
approximately $700,000 at SWEPCO to less than $100,000 at WTU. CSW could incur
up to $15 million in additional expenses for the restructuring which is expected
to be completed by early 1997. CPL, PSO, SWEPCO and WTU are currently unable to
reasonably estimate their respective portions of such additional restructuring
expenses.


NON-UTILITY VENTURES

CSW COMMUNICATIONS
         In September 1996, the Georgetown, Texas City Council awarded a $4.2
million contract to CSW Communications to implement a communications-based
utility management system for the city of Georgetown. The Georgetown project,
which is expected to be completed in 18 months, will be based on a wireless
network to be owned and operated by the city of Georgetown. The network will
enable the city to offer advanced energy management, water management and
communications services to its more than 25,000 residents.


<PAGE> 60


ENERSHOP
         In October 1996, the Hall Financial Group awarded EnerShop a $1 million
energy services contract for a 36-story office tower in downtown Dallas, Texas.
Under the agreement, EnerShop will retrofit the lighting, energy management
system and other electrical equipment for the office tower. EnerShop is
providing low-cost lease financing for the project and is guaranteeing that the
savings on utility bills will more than offset Hall Financial Group's lease
payments for the project. EnerShop expects to complete the project in the first
quarter of 1997.


CAPITAL REQUIREMENTS, LIQUIDITY AND FINANCING

CONSTRUCTION EXPENDITURES
         CSW's construction expenditures totaled $343 million for the nine
months ended September 30, 1996. Such expenditures for the U.S. Electric
Operating Companies totaled $82 million, $57 million, $68 million and $28
million, for CPL, PSO, SWEPCO and WTU, respectively. CSW's construction
expenditures, including those for SEEBOARD, were primarily for improvements to
existing production, transmission and distribution facilities. The improvements
are required to meet the needs of new customers and to satisfy the changing
requirements of existing customers. CSW anticipates that the majority of all
funds required for construction for the remainder of the year will be provided
from internal sources.

SEEBOARD ACQUISITION FINANCING
         As previously reported, CSW, indirectly through intermediate
subsidiaries, has acquired control of 100% of SEEBOARD for an aggregate adjusted
purchase price of approximately (pound)1.4 billion (approximately $2.1 billion
assuming average exchange rates during the purchase period). As of September 30,
1996, CSW had contributed approximately $829 million of the purchase price for
the acquisition of SEEBOARD shares. Such funds, which were initially obtained
through borrowings under the $850 million CSW Credit Agreement, have since been
repaid by using the $398 million net proceeds from CSW's February 1996 common
stock offering and $431 million of the proceeds from the sale of Transok.

         The additional funds necessary for the transaction were made with
capital contributions and loans made to CSW (UK) plc (which has been replaced by
SEEBOARD Group plc) by its sole shareholder, CSW Investments, which arranged the
CSW Investments Credit Facility for that purpose. In August 1996, CSW
Investments refinanced a total of (pound)358 million in two separate
transactions. (pound)258 million was refinanced by the sale of $200 million of 
unsecured notes due 2001 and $200 million of unsecured notes due 2006. The 
proceeds were then swapped into British pounds through a cross currency swap 
and used to reduce borrowings outstanding under the CSW Investments Credit 
Facility. The remaining (pound)100 million was refinanced by the issuance of 
unsecured 10-year Sterling Eurobonds due 2006 and used to reduce the borrowings 
outstanding under the CSW Investments Credit Facility. In addition, SEEBOARD has
entered into a (pound)155 million receivables securitization facility, which is
expected to be drawn upon in the fourth quarter of 1996 to further reduce the 
borrowings outstanding under the CSW Investments Credit Facility.

         As of September 30, 1996, approximately (pound)467 million
(approximately $729 million assuming the prevailing exchange rate on that date)
was outstanding under the CSW Investments Credit Facility. CSW Investments
anticipates that this amount will be repaid through dividends from SEEBOARD and
other proceeds received from refinancing activities.


<PAGE> 61


CAPITAL STRUCTURE
         The CSW System is committed to maintaining financial flexibility by
having a strong capital structure and favorable securities ratings which help to
assure future access to capital markets when required. At September 30, 1996,
the capitalization ratios of each of the Registrants is presented in the
following table.
                      Common           Preferred            Long
                   Stock Equity          Stock            Term Debt
                 ----------------   ----------------   ----------------
CSW                     44%                4%                52%
CPL                     45%                8%                47%
PSO                     52%                2%                46%
SWEPCO                  52%                4%                44%
WTU                     49%                1%                50%

SWEPCO SABINE SERIES PCRBS
         In July 1996, $81.7 million of Sabine, 6.10%, Series 1996 PCRBs were
issued for the benefit of SWEPCO. The proceeds from this issuance were used to
refund the $81.7 million Sabine, 8.20%, Series 1986 PCRBs.

CPL, PSO, WTU RED RIVER SERIES PCRBS
         In August 1996, $63.3 million of Red River, 6.0%, Series 1996 PCRBs
were issued for the benefit of CPL, PSO and WTU. The proceeds from this issuance
were used to refund the $63.3 million of Red River, 7 7/8%, Series 1984 PCRBs.

CPL MATAGORDA SERIES PCRBS
         In September 1996, $60 million of Matagorda, 6 1/8%, Series 1996 PCRBs
were issued for the benefit of CPL. The proceeds from this issuance will be used
to refund the $60 million Matagorda, 7 7/8%, Series 1986 PCRBs, which are
classified on the balance sheet as Long-term debt due within twelve months, on
December 1, 1996. At September 30, 1996, the proceeds from the issuance were
held in trust and are reflected as Special Deposits on the balance sheet.

CSW INVESTMENTS YANKEE NOTES AND EUROBONDS
         In August 1996, CSW Investments issued unsecured notes in order to
refinance a portion of the debt incurred to finance the SEEBOARD acquisition.
CSW Investments issued $400 million Yankee Notes ($200 million 6.95% Notes due 
2001 and $200 million 7.45% Notes due 2006) and issued (pound)100 million 8.875%
Eurobonds due 2006. See SEEBOARD ACQUISITION FINANCING above for additional 
discussion of these financing activities.

CSW ENERGY SENIOR NOTES
         In October 1996, CSW Energy issued $200.0 million, 6.875% Senior Notes
due 2001. CSW Energy intends to use the proceeds from this issuance for the
acquisition, development and construction of electric generation assets in the
United States and to make affiliated loans to CSW International. CSW
International, the guarantor of the senior notes, intends to use any such funds
for the acquisition, development and construction of electric generation,
transmission and distribution assets internationally. See NOTE 3. COMMITMENTS
AND CONTINGENT LIABILITIES, for a discussion of CSW International's anticipated
use of a portion of such proceeds.

SHORT-TERM FINANCING
         The CSW System uses short-term debt to meet fluctuations in working
capital requirements and other interim capital needs. The Registrants, together
with other subsidiaries of CSW have: (i) established a money pool to coordinate

<PAGE> 62

short-term borrowings and (ii) incurred borrowings outside the money pool
through CSW's issuance of commercial paper. As of September 30, 1996, CSW had a
revolving credit facility totaling $1.2 billion to back up its commercial paper
program.

SWEPCO CAJUN ASSET PURCHASE PROPOSAL
         As previously reported, Cajun filed a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code on December 21, 1994 and is
currently operating under the supervision of the United States Bankruptcy Court
Bankruptcy Court for the Middle District of Louisiana.

         On October 26, 1996, SWEPCO, together with Entergy Gulf States and the
Members Committee filed the Second Amended SWEPCO Plan in the bankruptcy court.
Under the Second Amended SWEPCO Plan, a SWEPCO subsidiary or affiliate would
acquire all of the non-nuclear assets of Cajun, comprised of the Big Cajun I
gas-fired plant, the Big Cajun II coal-fired plant, and related non-nuclear
assets, for approximately $780 million in cash, up to an additional $20 million
to pay certain other bankruptcy claims and expenses and an additional $7 million
to acquire claims of unsecured creditors. In addition, the Second Amended SWEPCO
Plan provides for SWEPCO and the Cajun member cooperatives to enter into new
25-year power supply agreements which will provide the Cajun member cooperatives
with wholesale rates starting at approximately 3.74 cents per kilowatt-hour
while permitting the Cajun member cooperatives the flexibility to acquire power
on the open market when their requirements exceed mutually agreed upon levels of
generating capacity available from SWEPCO. The Second Amended SWEPCO Plan would
settle all claims and litigation in the bankruptcy case, including potentially
protracted litigation over power supply contract rights. The filing of the
Second Amended SWEPCO Plan complies with an amended schedule of proceedings
established by the bankruptcy court which provides for the filing of amended
plans, disclosure statements and related documents by October 26, 1996 and for
confirmation hearings to begin on December 16, 1996. The bankruptcy court's
decision in the case is expected in the first quarter of 1997.

         The Second Amended SWEPCO Plan amends the Original SWEPCO Plan filed on
April 19, 1996 (as amended by the First Amended SWEPCO Plan filed on September 
30, 1996) by the Members Committee, SWEPCO and Entergy Gulf States in the 
bankruptcy court. Under the Original SWEPCO Plan, SWEPCO had proposed to acquire
all of the non-nuclear assets of Cajun for approximately $405 million in cash. 
In addition, under the Original SWEPCO Plan, the Cajun member cooperatives would
have made future payments with a net present value ranging from $497 million to
$567 million to the Rural Utilities Service of the federal government, Cajun's
largest creditor, by using a portion of the cooperatives' future income from
their retail customers.

         Two competing plans of reorganization for the non-nuclear assets of
Cajun have been filed with the bankruptcy court at about the same time as the
filing of the First Amended SWEPCO Plan, including one plan with a higher bid 
price. Under one competing plan, Cajun's non-nuclear assets would be acquired by
Louisiana Generating LLC, which would be owned by affiliates of SEI Holding,
Inc., NRG Energy, Inc. and Zeigler Coal Holdings Company. Cajun's court
appointed trustee in bankruptcy is supporting this plan. In addition, Enron
Capital & Trade Resources Corp. and the Official Committee of Unsecured
Creditors have jointly filed a competing plan of reorganization.

         Consummation of the Second Amended SWEPCO Plan is conditioned upon
confirmation by the bankruptcy court, the receipt by SWEPCO and CSW of all
requisite state and federal regulatory approvals in addition to the receipt of
their corresponding board approvals. If the Second Amended SWEPCO Plan is
confirmed, CSW and SWEPCO expect initially to finance the $807 million required
to consummate the acquisition of Cajun's non-nuclear assets through a
combination of external borrowings and internally generated funds.

<PAGE> 63

REGULATORY MATTERS
         Reference is made to NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for
a discussion of CPL's, PSO's and WTU's regulatory proceedings.

LITIGATION RELATING TO TERMINATION OF EL PASO MERGER
         For information regarding the commitments and contingent liabilities 
relating to the termination of the Merger, reference is made to NOTE 3.  
COMMITMENTS AND CONTINGENT LIABILITIES.


<PAGE> 64


PART II - OTHER INFORMATION

         For background and earlier developments relating to PART II
information, reference is made to the Registrants' Combined Annual Report on
Form 10-K for the year ended December 31, 1995 and Combined Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996.


ITEM 1.  LEGAL PROCEEDINGS.

CPL NUCLEAR INSURANCE CLAIMS
         As previously reported, in 1994, CPL filed a claim under the NEIL I
business interruption and/or extra expense policy relating to the 1993-1994
outage at STP Units 1 and 2. NEIL formally denied CPL's claim on November 21,
1995. On April 9, 1996, CPL filed an action in state district court in Corpus
Christi, Texas, against NEIL and Johnson & Higgins of Texas, Inc., the former
insurance broker for STP, seeking recovery under the policy and other relief.
NEIL responded by filing a suit against CPL on April 16, 1996, in the United
States District Court for the Southern District of New York seeking a
declaratory judgment to enforce an arbitration provision contained in the
policy. On May 24, 1996, the New York court ordered the dispute, including the
issue of whether the arbitration provision is enforceable, to arbitration and
stayed the Texas proceeding. NEIL canceled CPL's current NEIL I policy effective
July 31, 1996. NEIL also filed a claim in arbitration seeking a determination
that NEIL properly terminated CPL's coverage and that CPL has caused NEIL
damages by opposing NEIL's attempt to compel arbitration and seeking recovery of
NEIL's attorneys' fees. On June 21, 1996, CPL filed a notice of appeal of the
New York court's order in the United States Court of Appeals for the Second
Circuit. Subsequently, CPL and NEIL agreed to dismiss all litigation between
them concerning CPL's claim for NEIL coverage. CPL and NEIL also agreed to
submit their disputes over coverage to a non-binding neutral evaluation process,
although both CPL and NEIL have reserved the right to take their dispute to
binding arbitration. CPL and NEIL also agreed that CPL's NEIL I policy would be
reinstated. CPL intends to assert its rights to recovery under the NEIL I policy
vigorously, but cannot predict the ultimate outcome of these matters. CPL's
management believes that the resolution of these actions will not have a
material adverse effect on its results of operations or financial condition.

PSO GAS PURCHASE CONTRACTS
         As previously reported, PSO has been named defendant in complaints
filed in federal and state courts of Oklahoma and Texas in 1984 through 1995 by
gas suppliers alleging claims arising out of certain gas purchase contracts. The
plaintiffs seek relief through the filing dates as well as attorneys' fees.
Through September 1996, complaints representing approximately $11 million in
claims were settled. Remaining complaints currently total approximately $100,000
in claimed actual damages. The settlements did not have a material effect on
PSO's consolidated results of operations or financial condition.

PSO PCB CASES
         As previously reported, PSO has been named a defendant in complaints
filed in federal and state courts in Oklahoma in 1984, 1985, 1986, 1993 and
1996. The complaints allege, among other things, that some of the plaintiffs and
the property of other plaintiffs were contaminated with PCBs and other toxic
by-products following certain incidents, including transformer malfunctions, in
April 1982, December 1983 and May 1984. To date, all complaints, except for
certain claims filed in 1996 for additional unspecified actual and punitive
damages, have been dismissed, certain of which resulted in settlements among the
parties. Management believes that PSO has defenses to the remaining complaints
and intends to defend the suits vigorously. Moreover, management believes that
the remaining complaints are covered under insurance. Management also believes

<PAGE> 65

that the ultimate resolution of the remaining complaints will not have a
material adverse effect on PSO's consolidated results of operations or financial
condition.

SWEPCO BURLINGTON NORTHERN TRANSPORTATION CONTRACT
         As previously reported, a state district court in Bowie County, Texas
awarded SWEPCO a judgment of approximately $72 million against Burlington
Northern for damages regarding rates charged under two rail transportation
contracts for delivery of coal to two of SWEPCO's power plants, post-judgment
interest and attorneys' fees and also granted certain declaratory relief
requested by SWEPCO. Burlington Northern appealed the state district court's
judgment to the Texarkana, Texas Court of Appeals and, on April 30, 1996, the
Texarkana, Texas Court of Appeals reversed the judgment of the state district
court. Subsequently, SWEPCO filed two motions for rehearing, but both were
overruled. On October 14, 1996, SWEPCO filed an application with the Supreme
Court of Texas to grant a writ of error to review and reverse the judgment of
the Texas Court of Appeals.

OTHER LEGAL CLAIMS AND PROCEEDINGS
         The CSW System is party to various other legal claims and proceedings
arising in the normal course of business. Management does not expect disposition
of these matters to have a material adverse effect on the Registrants' results
of operations or financial condition. See PART I - NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS for a discussion CPL's and WTU's regulatory proceedings,
and also to PART 1 - NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES for a
discussion of litigation involving the termination of the El Paso Merger.


ITEMS 2 - 4.  INAPPLICABLE


ITEM 5.  OTHER INFORMATION.

PSO UNION NEGOTIATIONS

         Since July 1, 1996, PSO and its Local Union 1002 of the International
Brotherhood of Electrical Workers have been engaged in contract renewal
negotiations for the approximately 600 members of the Local. The principal issue
is over PSO's anticipated need for flexibility in a deregulated environment. The
underlying agreement expired September 30, 1996, and the parties continue to
negotiate.



<PAGE> 66


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

(A)  EXHIBITS:

     (3)   BYLAWS AS AMENDED AND RESTATED
           CPL - (Exhibit 3.1)
           PSO - (Exhibit 3.2)
           SWEPCO - (Exhibit 3.3)
           WTU - (Exhibit 3.4)

     (12)  COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
           CPL - (Exhibit 12.1) 
           PSO - (Exhibit 12.2) 
           SWEPCO - (Exhibit 12.3) 
           WTU - (Exhibit 12.4)

     (27)  FINANCIAL DATA SCHEDULES
           SWEPCO - (Exhibit 27.1) 


(B)  REPORTS FILED ON FORM 8-K:

           CSW, SWEPCO
           ITEM 5.  OTHER EVENTS and ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS,
           reporting SWEPCO's proposal for the purchase of Cajun assets, dated
           September 30, 1996.

           CPL, PSO AND WTU
           None


<PAGE> 67



SIGNATURES

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


                                         CENTRAL AND SOUTH WEST CORPORATION


Date:  November 12, 1996                 /S/ LAWRENCE B. CONNORS
                                         --------------------------
                                         Lawrence B. Connors
                                         Controller and Chief Accounting Officer
                                         (Principal Accounting Officer)



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


Date: November 12, 1996                  /S/ R. RUSSELL DAVIS
                                         -----------------------
                                         R. Russell Davis
                                         Controller and Chief Accounting Officer
                                         (Principal Accounting Officer)