SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  FORM 10-Q

       [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
              For the quarterly period ended September 30, 1997
                                      OR
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
     For the transition period from ________________ to ________________
                        Commission file number 1-3789



                     Southwestern Public Service Company
            (Exact name of registrant as specified in its charter)



             New Mexico                                75-0575400
   (State or other jurisdiction of                    (IRS Employer
   incorporation or organization)                  Identification No.)

   Tyler at Sixth, Amarillo, Texas                        79101
(Address of principal executive offices)               (Zip Code)


Registrant's Telephone Number, including area code: (806) 378-2121


                 --------------------------------------------


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

      At November 10, 1997, 100 shares of the registrant's  Common Stock,  $1.00
par value (the only class of common stock), were outstanding.

      Registrant meets the conditions of General  Instruction H(1)(a) and (b) to
Form 10-Q and is therefore filing this form with a reduced disclosure format.



<PAGE>


                              Table of Contents

                        PART I - FINANCIAL INFORMATION

Item l.Financial Statements ...............................................  1

Item 2.Management's Discussion and Analysis of Financial Condition
           and Results of Operations ...................................... 12


                          PART II - OTHER INFORMATION


Item 1.  Legal Proceedings................................................. 15

Item 6.  Exhibits and Reports on Form 8-K.................................. 15

SIGNATURE.................................................................. 16

EXHIBIT 12................................................................. 17

EXHIBIT 15 ................................................................ 18





















   In addition  to the  historical  information  contained  herein,  this report
contains a number of  "forward-looking  statements",  within the  meaning of the
Securities  Exchange Act of 1934.  Such  statements  address  future  events and
conditions concerning capital expenditures,  earnings,  resolution and impact of
litigation,  regulatory matters, liquidity and capital resources, and accounting
matters.  Actual  results  in each  case  could  differ  materially  from  those
projected  in such  statements  due to a variety of factors  including,  without
limitation,  restructuring of the utility industry;  future economic conditions;
earnings   retention  and  dividend   payout   policies;   developments  in  the
legislative,  regulatory  and  competitive  environments  in which  the  Company
operates;  and other  circumstances that could affect  anticipated  revenues and
costs, such as compliance with laws and regulations. These and other factors are
discussed in the Company's filings with the Securities and Exchange  Commission,
including this report.


                                       i
<PAGE>


                                    TERMS

The abbreviations or acronyms used in the text and notes are defined below:

Abbreviation or Acronym                                           Term
--------------------------------------------------------------------------------
Cheyenne..................................Cheyenne Light, Fuel and Power Company
Company......................................Southwestern Public Service Company
FERC........................................Federal Energy Regulatory Commission
Merger.............................the business combination between PSCo and SPS
NCE...................................................New Century Energies, Inc.
NC Enterprises.............NC Enterprises, Inc., an intermediate holding company
NCS...................................................New Century Services, Inc.
NMPUC.......................................New Mexico Public Utility Commission
PSCo..................Public Service Company of Colorado, a Colorado corporation
PUHCA.................................Public Utility Holding Company Act of 1935
PSCCC.............................................PS Colorado Credit Corporation
PSRI.......................................................PSR Investments, Inc.
PUCT..........................................Public Utility Commission of Texas
Quixx.........................................Quixx Corporation and subsidiaries
SEC...........................................Securities and Exchange Commission
SFAS 71.....................Statement of Financial Accounting Standards No. 71 -
                     "Accounting for the Effects of Certain Types of Regulation"
SFAS 121...................Statement of Financial Accounting Standards No. 121 -
       "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
          to Be Disposed Of"
Thunder Basin.........................................Thunder Basin Coal Company
UE..............................Utility Engineering Corporation and subsidiaries
WGI.....................................................WestGas InterState, Inc.



                                       ii
<PAGE>



                        PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

                       SOUTHWESTERN PUBLIC SERVICE COMPANY
                            CONDENSED BALANCE SHEETS
                             (Thousands of Dollars)

                                     ASSETS

                                                     September 30,  December 31,
                                                          1997          1996
                                                          ----          ----
                                                      (Unaudited)

Property, plant and equipment, at cost:
   Electric ........................................   $2,510,263    $2,517,579
   Other............................................            -        37,542
   Construction in progress.........................      161,827        79,346
                                                          -------       -------
                                                        2,672,090     2,634,467
   Less: accumulated depreciation ..................     (971,757)     (944,279)
                                                         --------      -------- 
    Total property, plant and equipment.............    1,700,333     1,690,188
                                                        ---------     ---------


Investments, at cost:
   Notes receivable from affiliate (Note 1).........      119,039             -
   Other............................................        5,773        34,446
                                                          -------       -------
    Total investments...............................      124,812        34,446
                                                          -------       -------

Current assets:
   Cash and temporary cash investments..............       13,572        40,610
   Accounts receivable, less reserve for uncollectible
     accounts ($3,826 at September 30, 1997; $2,574
     at December 31, 1996) .........................      103,319        67,779
   Accrued unbilled revenues ........................      16,706        20,304
   Recoverable fuel and purchased power cost, net....      17,776        15,715
   Materials and supplies, at average cost...........      18,050        17,776
   Fuel inventory, at average cost...................       2,306         2,320
   Prepaid expenses and other........................       2,837         4,984
                                                          -------       -------
    Total current assets.............................     174,566       169,488
                                                          -------       -------

Deferred charges:
   Regulatory assets (Note 1)........................     121,981       117,546
   Unamortized debt expense .........................       9,538         9,864
   Other.............................................      44,188        23,262
                                                          -------       -------
    Total deferred charges...........................     175,707       150,672
                                                          -------       -------
                                                       $2,175,418    $2,044,794
                                                       ==========    ==========



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

                                       1
<PAGE>


                       SOUTHWESTERN PUBLIC SERVICE COMPANY
                            CONDENSED BALANCE SHEETS
                             (Thousands of Dollars)

                             CAPITAL AND LIABILITIES

                                                     September 30,  December 31,
                                                          1997          1996
                                                          ----          ----
                                                      (Unaudited)

Common stock (Note 1)................................  $  348,402    $  348,402
Retained earnings....................................     352,668       383,350
                                                          -------       -------
    Total common equity..............................     701,070       731,752

SPS obligated mandatorily redeemable preferred 
   securities of subsidiary trust holding solely
   subordinated debentures of SPS (Note 3)...........     100,000       100,000
Long-term debt.......................................     620,572       620,400
                                                          -------       -------
                                                        1,421,642     1,452,152

Noncurrent liabilities:
   Employees' postretirement benefits other than
     pensions ......................................        6,152         2,967
   Employees' postemployment benefits...............          498         2,369
                                                          -------       -------
    Total noncurrent liabilities....................        6,650         5,336
                                                          -------       -------

Current liabilities:
   Notes payable and commercial paper ..............      155,175        53,836
   Notes payable to affiliates......................       25,160             -
   Long-term debt due within one year...............          173        15,231
   Accounts payable.................................      102,558        63,003
   Dividends payable................................       24,622             -
   Customers' deposits..............................        5,487         5,842
   Accrued taxes....................................       28,586        19,999
   Accrued interest.................................        9,761        13,151
   Current portion of accumulated deferred income taxes     9,338         3,583
   Other............................................        9,255        28,504
                                                          -------       -------
    Total current liabilities.......................      370,115       203,149
                                                          -------       -------

Deferred credits:
   Unamortized investment tax credits ..............        5,531         5,719
   Accumulated deferred income taxes  ..............      366,709       367,272
   Other............................................        4,771        11,166
                                                          -------       -------
    Total deferred credits..........................      377,011       384,157
                                                          -------       -------

Commitments and contingencies (Notes 1 and 2).......
                                                       $2,175,418    $2,044,794
                                                       ==========    ==========



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

                                       2
<PAGE>


                       SOUTHWESTERN PUBLIC SERVICE COMPANY
                         CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)
                             (Thousands of Dollars)


                                                           Three Months Ended
                                                              September 30,
                                                           1997           1996
                                                         --------      -------

Operating revenues:
   Electric..........................................    $279,511     $253,630
   Other.............................................       4,645        8,915
                                                         --------      -------
                                                          284,156      262,545

Operating expenses:
   Fuel used in generation...........................     141,907      118,303
   Purchased power...................................       3,957        5,778
   Other operating expenses..........................      27,852       32,695
   Maintenance.......................................       7,332        6,768
   Depreciation and amortization.....................      17,272       17,396
   Taxes (other than income taxes)...................      11,969       11,978
   Income taxes......................................      20,816       22,597
                                                         --------      -------
                                                          231,105      215,515
                                                          -------      -------
Operating income.....................................      53,051       47,030

Other income and deductions:
   Merger expenses...................................      (7,200)      (4,659)
   Miscellaneous income and deductions - net.........        (383)      11,805
                                                         ---------     -------
                                                           (7,583)       7,146
Interest charges:
   Interest on long-term debt........................      11,000       12,139
   Amortization of debt discount and expense less
     premium ........................................         560          534
   Other interest....................................       1,963        1,386
   Allowance for borrowed funds used during 
     construction                                          (1,129)        (137)
   Dividends on SPS obligated mandatorily redeemable
        preferred securities of subsidiary trust ....       1,963            -
                                                         --------      -------
                                                           14,357       13,922
                                                           ------       ------
Net income...........................................    $ 31,111      $40,254
                                                         ========      =======




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

                                       3
<PAGE>


                       SOUTHWESTERN PUBLIC SERVICE COMPANY
                         CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)
                             (Thousands of Dollars)


                                                            Nine Months Ended
                                                              September 30,
                                                            1997         1996
                                                            ----         ----

Operating revenues:
   Electric..........................................    $728,436      $702,410
   Other.............................................      20,236        24,483
                                                         --------       -------
                                                          748,672       726,893

Operating expenses:
   Fuel used in generation...........................     364,221       328,850
   Purchased power...................................      12,088        16,816
   Other operating expenses..........................      97,294        98,255
   Maintenance.......................................      22,461        25,746
   Depreciation and amortization.....................      53,717        52,524
   Taxes (other than income taxes)...................      34,819        34,899
   Income taxes......................................      36,894        50,845
                                                         --------       -------
                                                          621,494       607,935
                                                          -------       -------
Operating income.....................................     127,178       118,958

Other income and deductions:
   Write-off of investment in Carolina Energy Project
     (Note 2) .......................................     (16,052)            -
   Merger expenses...................................     (15,239)       (8,444)
   Miscellaneous income and deductions - net.........       2,113        12,800
                                                         --------       -------
                                                          (29,178)        4,356
Interest charges:
   Interest on long-term debt........................      33,057        34,859
   Amortization of debt discount and expense less
     premium ........................................       1,683         1,581
   Other interest....................................       4,710         5,623
   Allowance for borrowed funds used during 
     construction ...................................      (3,047)       (1,770)
   Dividends on SPS obligated mandatorily redeemable
        preferred securities of subsidiary trust ....       5,888             -
                                                         --------       -------
                                                           42,291        40,293
Net income...........................................      55,709        83,021
Dividend requirements on preferred stock.............           -           121
                                                         --------       -------
Earnings available for common stock..................    $ 55,709      $ 82,900
                                                         ========      ========




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

                                       4
<PAGE>


                       SOUTHWESTERN PUBLIC SERVICE COMPANY
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Thousands of Dollars)

                                                              Nine Months Ended
                                                                September 30,
                                                               1997      1996
                                                               ----      ----
Operating activities:
   Net income........................................         $55,709  $83,021
   Adjustments to reconcile net income to net
     cash provided by operating activities:
    Depreciation and amortization....................          56,290   54,918
    Write off of investments.........................          16,052      695
    Amortization of investment tax credits...........            (188)    (188)
    Deferred income taxes............................           1,957  (12,345)
    Allowance for equity funds used during construction            (5)       -
    Change in accounts receivable....................         (37,112)  (3,580)
    Change in inventories............................          (1,419)   1,425
    Change in other current assets...................           1,543      (97)
    Change in accounts payable.......................          39,276    4,279
    Change in other current liabilities..............         (10,565)  (5,340)
    Change in deferred amounts.......................         (52,143)  13,775
    Change in noncurrent liabilities.................           1,419    5,601
    Other............................................             312     (278)
                                                              -------  -------
      Net cash provided by operating activities......          71,126  141,886
                                                              -------  -------

Investing activities:
   Construction expenditures.........................         (87,707) (86,304)
   Allowance for equity funds used during construction              5        -
   Proceeds from disposition of property, plant and
     equipment ......................................              61    2,377
   Sale of Quixx and UE to NC Enterprises (Note 1)...         (29,567)       -
   Purchase of other investments.....................          (4,583)  (3,290)
                                                               ------   ------
      Net cash used in investing activities..........        (121,791) (87,217)
                                                             --------  ------- 

Financing activities:
   Proceeds from sale of long-term debt..............               -   58,615
   Redemption of long-term debt......................         (16,099)  (6,086)
   Redemption of preferred stock.....................               -     (260)
   Short-term borrowings - net.......................         101,495  (18,727)
   Dividends on common stock.........................         (61,769) (67,515)
   Dividends on preferred stock......................               -     (121)
                                                              -------  -------
      Net cash provided by (used in) financing
        activities ..................................          23,627  (34,094)
                                                               ------  ------- 
      Net (decrease) increase in cash and temporary
        cash investments ............................         (27,038)  20,575
      Cash and temporary cash investments at
        beginning of period .........................          40,610   13,612
                                                               ------   ------
      Cash and temporary cash investments at end of period    $13,572  $34,187
                                                              =======  =======


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



                                       5
<PAGE>



                       SOUTHWESTERN PUBLIC SERVICE COMPANY

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


1.  Accounting Policies

Merger

      On April 22, 1997, the Board of Directors of the Company approved a change
in the  Company's  fiscal year.  Effective  January 1, 1997,  the  Company's new
fiscal year is the  twelve-month  period  ending  December 31.  Previously,  the
Company's fiscal year was a twelve-month period ending August 31.

      Effective  August 1, 1997,  following  receipt of all  required  state and
Federal regulatory approvals,  the Company and PSCo merged in a tax-free "merger
of equals" transaction and became  wholly-owned  subsidiaries of NCE, which is a
registered  holding  company  under the  PUHCA.  NCE owns the  following  direct
subsidiaries:  the Company,  PSCo, Cheyenne,  WGI, NCS and NC Enterprises.  Each
outstanding  share of Company  common stock was canceled and converted  into the
right to  receive  0.95 of one share of NCE  common  stock and each  outstanding
share of PSCo common stock was canceled and converted  into the right to receive
one share of NCE common stock with this  transaction  being  accounted  for as a
pooling of interests for accounting purposes.

   Effective  with the  Merger,  the  common  stock of Quixx and UE,  previously
wholly-owned  subsidiaries,  was transferred  through the sale by the Company of
all of the  outstanding  common  stock of such  subsidiaries  at net book value,
aggregating  approximately  $119.0 million,  to NC Enterprises (an  intermediate
holding company) in exchange for notes payable from NC Enterprises.  These notes
payable  have  thirty-year  terms and bear  interest at a rate of 7.25% per year
with annual interest  payments due beginning August 1, 1998 and annual principal
payments due beginning  August 1, 2001. The  accompanying  financial  statements
reflect the financial  position,  results of operations and cash flows for Quixx
and UE for all periods prior to August 1, 1997. The transfer of Quixx and UE did
not have a  material  impact on the  Company's  financial  position,  results of
operations or cash flows.

Business, Utility Operations and Regulation

      The  Company  was  incorporated  in New  Mexico  in  1921.  The  Company's
principal  business is the generation,  transmission,  distribution  and sale of
electric energy.  Electric service is provided through an interconnected  system
to a population of about one million people in a 52,000-square-mile  area of the
Panhandle and south plains of Texas,  eastern and southeastern  New Mexico,  the
Oklahoma Panhandle and southwestern Kansas. The Company's operating revenues are
derived primarily from operations in Texas and New Mexico. The Company maintains
its accounts in accordance with the Uniform System of Accounts prescribed by the
FERC and as adopted  by the state  utility  commissions  in Texas,  New  Mexico,
Oklahoma and Kansas.

Regulatory Assets and Liabilities

      The Company  prepares its  financial  statements  in  accordance  with the
provisions of SFAS 71, as amended,  which  recognizes  that  accounting for rate
regulated  enterprises  should  reflect the  relationship  of costs and revenues
introduced by rate regulation.  A regulated  utility may defer  recognition of a
cost (a regulatory asset) or recognize an obligation (a regulatory liability) if
it  is  probable  that,  through  the  ratemaking  process,   there  will  be  a
corresponding increase or decrease in revenues.



                                       6
<PAGE>


                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Continued)

      On September 1, 1996, the Company adopted SFAS 121, which imposes stricter
criteria for the continued recognition of regulatory assets on the balance sheet
by  requiring  that such assets be probable of future  recovery at each  balance
sheet date. The adoption of this statement did not have a material impact on the
Company's results of operations, financial position or cash flows. The following
regulatory assets are reflected in the Company's condensed balance sheets:

                                           September 30,  December 31,
                                                 1997        1996
                                                 ----        ----
                                               (Thousands of Dollars)

Income taxes..............................     $79,738      $81,403
Employees' postretirement benefits
  other than pensions.....................       3,062        3,192
Early retirement costs....................       1,454        1,727
Demand-side management costs..............       3,593        2,317
Unamortized debt reacquisition costs......      18,728       19,880
Thunder Basin judgment....................       7,626            -
Other.....................................       7,780        9,027
                                               -------       ------
  Total...................................     121,981      117,546
                                               =======      =======

      As of  September  30,  1997,  the  Company's  regulatory  assets are being
recovered  through rates charged to customers  over periods  ranging from ten to
thirty   years,   except  for  the  costs   related  to  the  state   regulatory
jurisdictional  portion of the  Thunder  Basin  judgment  for which  recovery is
currently   undetermined.   Under  current  rates,  the  Company  is  recovering
approximately $8 million related to its regulatory  assets per year. The Company
believes  it will  continue  to be  subject  to rate  regulation  to the  extent
necessary to recover these assets.  In the event that a portion of the Company's
operations  is no longer  subject to the  provisions of SFAS 71 as a result of a
change in  regulation  or the  effects  of  competition,  the  Company  could be
required to write-off  related  regulatory  assets,  determine any impairment to
other assets  resulting from  deregulation and write-down any impaired assets to
their estimated fair value which could materially adversely impact the Company's
results of operations, financial position or cash flows.

      The Company was named as a defendant in a case entitled Thunder Basin Coal
Co. v. Southwestern Public Service Co., No. 93-CV-304B (D. Wyo.). (See Note 6 of
the Notes to Consolidated  Financial Statements in the Company's 1996 Transition
Report on Form 10-K as of December  31,  1996).  On  November 1, 1994,  the jury
returned a verdict in favor of Thunder  Basin and awarded  Thunder Basin damages
of approximately  $18.8 million.  The Company appealed the judgment to the Tenth
Circuit  Court of Appeals  and on January 7, 1997,  that Court found in favor of
Thunder Basin and upheld the judgment. The Company filed a motion for rehearing,
which was denied.  In February 1997, the Company  recorded the liability for the
judgment,  including  interest and court costs,  in the amount of  approximately
$22.3 million and deferred these costs for future rate recovery.  These amounts,
including  interest,  were paid in April 1997.  The Company is amortizing  these
costs as a recoverable component of fuel used in generation. As of September 30,
1997, approximately $14.7 million of these costs have been amortized.

      Management  believes that the Thunder Basin judgment is  recoverable  from
customers,  although  any such  recovery  would be  subject to review by various
regulatory  agencies.  On September 17, 1996,  the FERC issued an order granting
the Company approval to collect the FERC jurisdictional  portion of the judgment
from  wholesale  customers.  On  October  24,  1997,  the NMPUC  issued an order
granting  recovery  of the  New  Mexico  retail  jurisdictional  portion  of the
judgment. On May 1, 1997, the Company filed a request with the PUCT to surcharge
under-collected  fuel and purchased power expenses,  which included $9.1 million
of the Thunder Basin judgment.  On November 4, 1997, an administrative law judge
("ALJ") issued a proposal for a decision  which denied  recovery of the judgment
through a surcharge. The Company filed exceptions to this ALJ recommendation

                                       7
<PAGE>
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Continued)

and on November 19, 1997 the PUCT will consider this matter. Management believes
that recovery of the Thunder Basin costs in the Texas retail  jurisdiction  will
be approved  either in this surcharge  request or through a fuel  reconciliation
proceeding in 1998.

General

      See  Note 1 of the  Notes  to  Consolidated  Financial  Statements  in the
Company's  1996  Transition  Report on Form 10-K as of  December  31, 1996 for a
summary of the Company's significant accounting policies.

2.  Commitments and Contingencies

Regulatory Matters

Fuel and Purchased Power Recovery

      A PUCT  substantive  rule requires  periodic  examination of the Company's
fuel and  purchased  power  costs,  the  efficiency  of the use of such fuel and
purchased  power,  fuel  acquisition and management  policies and purchase power
commitments.  On May 1, 1995,  the Company  filed with the PUCT a petition for a
fuel  reconciliation  for the months of January 1992 through  December 1994. The
PUCT  issued an order in  January  1996  requiring  the  Company  to make a $3.9
million fuel refund  consisting of $2.1 million of overrecovered  fuel costs and
$1.8 million of  disallowed  fuel costs for the period.  This refund was made in
April 1996.  Additionally,  the order  required  the Company to flow  through to
customers  100% of margins  from  non-firm  off-system  opportunity  sales as of
January 1995.  Prior PUCT rulings had allowed the Company to retain 25% of these
margins.  The 100% flow through is required by PUCT rules, absent a rule waiver.
A motion for  rehearing  on the fuel  disallowance  (which was  adjusted to $1.9
million) was subsequently denied by the PUCT and the Company was ordered to flow
through 100% of the margin effective with the first billing cycle after the date
of the order.  Upon appeal to the Travis County  District Court in May 1996, the
PUCT's  decision  on the  disallowed  fuel costs was upheld.  The Travis  County
District  Court  decision has been  appealed to the Texas Court of Appeals which
has not yet ruled in the matter.  Management  believes that the ultimate outcome
of  this  matter  will  not  significantly   affect  the  Company's  results  of
operations, financial position or cash flows. At September 30, 1997, the Company
had approximately  $18.1 million in  underrecovered  fuel costs in Texas and has
requested   PUCT   approval  to  surcharge   Texas  retail   customers  for  the
underrecovery,  including  the Thunder  Basin  judgment as  discussed in Note 1.
Accounting  Policies  Business,  Utility  Operations and Regulation - Regulatory
Assets and Liabilities.

FERC Rate Case

      On December  19,  1989,  the FERC issued its final order  regarding a 1985
rate case. The Company  appealed  certain  portions of the order that related to
recognition in rates of the reduction of the federal income tax rate from 46% to
34%. The United  States  Court of Appeals for the  District of Columbia  Circuit
remanded the case,  directing the FERC to reconsider  the Company's  claim of an
offsetting  cost and limiting the FERC's  actions.  The FERC issued its Order on
Remand in July 1992,  required  filings were made and a hearing was completed in
February 1994. In October 1994, the  administrative law judge issued a favorable
initial  decision  that, if approved by the FERC,  would result in a substantial
recovery by the  Company.  Negotiated  settlements  with the  Company's  partial
requirements  customers and Texas-New  Mexico Power Company were approved by the
FERC in July 1993 and September  1993,  respectively,  and the Company  received
approximately  $2.8  million,  including  interest.  In a  settlement  with  the
Company's New Mexico cooperative  customers,  the Company received approximately
$7 million,  including interest. The FERC approved this settlement in July 1995.
Resolutions  of these matters with the  remaining  wholesale  customers,  Golden
Spread Electric  Cooperative,  Inc. member  cooperatives  and Lyntegar  Electric
Cooperative,  have not been reached.  The Company cannot reasonably estimate

                                       8
<PAGE>
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Continued)

the remaining amount  recoverable from these  proceedings;  however, a favorable
resolution  could  materially  improve  earnings  in the  year  in  which  it is
resolved.

BCH Energy Limited Partnership Investment

      As discussed in the Company's  1996  Transition  Report on Form 10-K as of
December  31,  1996 under  BUSINESS.  Nonutility  Businesses,  Quixx holds a 49%
limited partnership  interest in BCH Energy Limited Partnership  ("BCH"),  which
owns a waste-to-energy  cogeneration  facility located near Fayetteville,  North
Carolina.  Limited  commercial  operation of the BCH project began in June 1996;
however,  the facility did not achieve the expected performance level. An effort
was made to  restructure  the  project  but it was not  possible  to achieve the
required improvements on economically viable terms; therefore, in December 1996,
Quixx wrote off its investment of approximately $16 million.

Carolina Energy Limited Partnership Investment

      The Carolina Energy Project is similar to the BCH project, but with design
modifications.  Construction  was originally  scheduled to be completed later in
1997 but was halted pending an independent analysis of the project's engineering
and financial viability. Additionally, the banks providing debt financing to the
project  withheld  funds for  continued  construction.  Quixx,  UE, other equity
owners,  senior  creditors and the  construction  contractor have been unable to
restructure the project on mutually agreeable terms. The construction contractor
is  demobilizing  and the creditors have initiated  remedies  provided under the
credit  agreement.  Accordingly,  management  has  determined it is unlikely the
project will be completed  under the present  ownership,  if at all, and Quixx's
and UE's net  investments  in the  Carolina  Energy  Project are  unlikely to be
recovered.

      As a  consequence,  in  June  1997,  Quixx  wrote-off  its  investment  of
approximately  $13.64  million  in  the  Carolina  Energy  Limited  Partnership.
Additionally,  UE wrote-off its net investment of approximately $2.42 million in
this same partnership. Quixx held a one-third ownership interest, including a 1%
general  partnership  interest,  in the partnership.  UE's net investment in the
partnership  was  comprised  of  subordinated  debt  and  the  related  interest
receivable, as well as engineering services. This combined investment represents
approximately $16.1 million.

3.  SPS Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Subordinated Debentures of SPS

      In October 1996,  Southwestern  Public  Service  Capital I, a wholly-owned
trust,  issued in a public  offering  $100 million of its 7.85% Trust  Preferred
Securities,  Series  A. The sole  asset of the trust is $103  million  principal
amount of the  Company's  7.85%  Deferrable  Interest  Subordinated  Debentures,
Series A due September 1, 2036.

4.  Management's Representations

      In the  opinion  of the  Company,  the  accompanying  unaudited  condensed
financial statements include all adjustments necessary for the fair presentation
of the financial  position of the Company at September 30, 1997 and December 31,
1996,  and the  results  of  operations  for the  three  and nine  months  ended
September  30, 1997 and 1996 and cash flows for the nine months ended  September
30, 1997 and 1996. The condensed financial  information and notes thereto should
be read in conjunction with the consolidated  financial statements and notes for
the four months ended December 31, 1996 and for the years ended August 31, 1996,
1995 and 1994 included in the Company's 1996 Transition Report on Form 10-K.


                                       9
<PAGE>
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Continued)

      Because  of  seasonal  and other  factors,  including  the  reorganization
associated  with the Merger,  the results of  operations  for the three and nine
months ended September 30, 1997 should not be taken as an indication of earnings
for all or any part of the balance of the year.



                                       10
<PAGE>



                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


TO SOUTHWESTERN PUBLIC SERVICE COMPANY

We have reviewed the accompanying condensed balance sheet of Southwestern Public
Service  Company (a New Mexico  corporation)  as of September 30, 1997,  and the
related  condensed  statements  of income for the three and nine  month  periods
ended  September  30, 1997 and  condensed  statement  of cash flows for the nine
month period  ended  September  30, 1997.  These  financial  statements  are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be  made  to the  financial  statements  referred  to  above  for  them to be in
conformity with generally accepted accounting principles.

The  consolidated  balance  sheet of  Southwestern  Public  Service  Company and
subsidiaries as of December 31, 1996, was not audited by us and, accordingly, we
do not express an opinion on it. The consolidated condensed statements of income
for  the  three  and  nine  month  periods  ended  September  30,  1996  and the
consolidated  condensed  statement of cash flows for the nine month period ended
September 30, 1996, of Southwestern Public Service Company and subsidiaries were
not reviewed by us and, accordingly, we do not express an opinion on them.


                                                        ARTHUR ANDERSEN LLP
Denver, Colorado,
November 10, 1997

                                       11
<PAGE>

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

Merger

      Effective  August 1, 1997,  following  receipt of all  required  state and
Federal regulatory approvals,  the Company and PSCo merged in a tax-free "merger
of equals" transaction and became  wholly-owned  subsidiaries of NCE, which is a
registered  holding company under PUCHA. This transaction was accounted for as a
pooling of interest for accounting  purposes.  Effective with the Merger,  Quixx
and UE, previously wholly-owned subsidiaries,  were transferred through the sale
by the Company of all of the  outstanding  common stock of such  subsidiaries at
net book value, to NC Enterprises,  an intermediate  holding company of NCE. See
Note 1 in Item 1. FINANCIAL STATEMENTS for additional discussion of the Company,
the Merger and the sale of UE and Quixx.

      The  condensed  statements of income and cash flows reflect the results of
operations  of Quixx and UE through July 31, 1997.  Where  relevant,  additional
information  has been  presented  to discuss the impact of the transfer of these
subsidiaries.

Earnings

      Net income  decreased $9.1 million for the third quarter of 1997 and $27.3
million for the nine months ended  September  30, 1997,  as compared to the same
periods  in 1996  primarily  due to  lower  earnings  of Quixx  and UE,  and the
recognition  of higher merger costs.  Net income  decreased  approximately  $7.8
million due to the  recognition of a gain on the sale of certain water rights by
Quixx in August 1996.  The June 1997  write-off of  investments  in the Carolina
Energy Project by Quixx and UE contributed to the lower  year-to-date  September
1997 earnings.  Higher merger-related and business integration costs,  including
executive  severance  costs,  resulting  from the August 1, 1997  closing of the
Merger  contributed to the lower  earnings.  While third quarter 1997 sales were
strong,  the wet and mild  weather  during the  spring and early  summer of 1997
negatively  impacted  sales and margins for the nine months ended  September 30,
1997.

Operating Revenues

Electric Operations

      Substantially all of the Company's operating revenues result from the sale
of electric energy.  The principal factors  determining  revenues are the amount
and price per unit of energy sold. The following  table  describes the principal
components of changes in electric operating revenues.

                                                   Increase (Decrease) From
                                                  Corresponding Prior Period
                                                  --------------------------
                                             Three Months Ended   Nine Months
                                             ------------------   -----------
Ended
                                                    (Thousands of Dollars)
Estimated effect on revenues of variations in:
   Kilowatt-hour (kwh) sales*............          $ 22,394       $ 12,434
   Rates and other.......................            (2,168)        (7,917)
   Fuel and purchased power cost recovery             6,708         22,132
                                                      -----         ------
     Subtotal............................            26,934         26,649
   Non-firm kwh sales....................            (1,053)          (623)
                                                     ------           ----
     Increase in electric revenue........          $ 25,881       $ 26,026
                                                   ========       ========

Percentage increase in kwh sales*........              11.3%           2.8%
                                                       ====            ===
Percentage decrease in non-firm kwh sales             (47.9)%        (30.8)%
                                                      =====          =====  

  *Comprised of retail and wholesale excluding economy (non-firm) wholesale
kwh sales.

                                       12
<PAGE>

      Variations  in Kwh Sales.  Revenues  during the third quarter and the nine
months ended  September 30, 1997,  respectively  increased  from the  comparable
periods in 1996,  primarily due to an increase in retail and firm  wholesale Kwh
sales  totaling  11.3% and 2.8%.  The  increase in revenues  for the nine months
ended  September 30, 1997 comparable  periods,  as compared to the third quarter
results,  are lower  primarily due to the mild,  wet weather  experienced in the
service territory during the spring and early summer months of 1997.

      Variations  in Rates and Other.  Decreased  revenues for the third quarter
and for the nine months  ended  September  30, 1997 are  primarily  due to lower
interruptible  rates  available  to  certain  classes  of retail  and  wholesale
customers.  These rates were approved and implemented in Texas and New Mexico in
1996.  Reductions for estimated  refunds  related to guaranteed  merger savings,
also  contributed  to  lower  revenues  for both the  quarter  and  year-to-date
comparable periods. Under the various state regulatory approvals, the Company is
required to provide credits to retail  customers over five years for one-half of
the measured non-fuel operation and maintenance  expense savings associated with
the Merger.  The Company  will provide a guaranteed  minimum  annual  savings to
retail customers of $3.0 million in Texas, $1.2 million in New Mexico,  $100,000
in Oklahoma and $10,000 in Kansas.

      Variations in Fuel and Purchased Power Cost Recovery. The revenue increase
in the current  period is  primarily  due to the  recovery of the Thunder  Basin
judgment (See Note 1 in Item 1. FINANCIAL  STATEMENTS) and increased natural gas
prices and coal costs which are recovered through cost recovery mechanisms.

      Variations  in Non-Firm  Kwh Sales.  The amount of revenues  arising  from
non-firm  sales is dependent,  in large part,  upon the amount and cost of power
available to the Company for sale,  the demand for power,  the  availability  of
competing  hydroelectric  power from the  Northwest  and  generation  from major
plants in the West.  The decrease in revenues for the third  quarter of 1997 and
for the nine months ended  September 30, 1997 is due to the  availability of low
cost power throughout the region.

Operating Expenses and Non-Operating Items

      Fuel and  purchased  power  expense  as a  percentage  of total  operating
expenses  approximated  63.1% and 57.6% for the third  quarter of 1997 and 1996,
respectively.  Fuel and purchased  power expense  increased $21.8 million in the
third quarter of 1997, as compared to the same period in 1996,  primarily due to
higher electric kwh sales,  higher gas costs and costs  recognized in connection
with the  Thunder  Basin  judgment.  The  effect of the  judgment  for the third
quarter of 1997 was  approximately  0.03 cents per net kwh  generated.  Overall,
fuel expense increased from 2.03 to 2.19 cents per net kwh generated.

      For the nine months end  September  30, 1997 and 1996,  fuel and purchased
power as a percentage of total operating expenses, approximated 60.5% and 56.9%,
respectively.  The increase in fuel and  purchased  power during the nine months
ended  September  30,  1997,  as compared  to the same  period in 1996,  was due
primarily to the effects of the Thunder Basin judgment and a slight  increase in
electric kwh sales for the comparable periods. The effect of the judgment on the
cost per kwh  generated  for the nine months ended  September  30, 1997 was 0.12
cents.  Overall,  fuel  expense  increased  from 2.04 to 2.18  cents per net kwh
generated.

      Operating and  maintenance  costs  decreased for the third quarter of 1997
and for the nine months ended September 30, 1997, as compared to the same period
in 1996,  primarily  due to lower  labor and  employee  benefit  costs and other
decreases attributable to the Company's overall cost containment efforts.

      Income  taxes  decreased  for the third  quarter  of 1997 and for the nine
months  ended  September  30,  1997,  as compared  to the same  periods in 1996,
primarily due to lower pre-tax income  offset,  in part, by the effect of higher
1997 non-deductible merger and executive severance costs.


                                       13
<PAGE>

Other Income and Deductions

      Other income and deductions  decreased $14.7 million for the third quarter
of 1997,  as compared to the third  quarter of 1996,  primarily  due to the 1996
gain  recognized by Quixx on the sale of certain water rights and increased 1997
merger and business integration costs, including executive severance costs. This
decrease was offset,  in part, by higher  interest  income  primarily due to the
note receivable from NC Enterprises for the sale of UE and Quixx.

      Other income and  deductions  decreased  $33.5 million for the nine months
ended September 30, 1997, as compared to the same period of 1996,  primarily due
to the write-off of the Carolina  Energy  Project,  the 1996 gain  recognized by
Quixx on the sale of certain  water  rights  (approximately  $11.8  million) and
higher 1997 merger and business  integration  costs. While costs associated with
the Merger,  transition  planning and  implementation  have negatively  impacted
earnings  during 1997 and 1996,  management  anticipates  that future  operating
results will  benefit from  synergies  resulting  from the Merger.  (For further
discussion  of  the  Carolina  Energy  Project,   see  Note  2  Commitments  and
Contingencies in Item 1. FINANCIAL STATEMENTS).

Commitments and Contingencies

      Issues relating to regulatory matters are discussed in Note 2. Commitments
and Contingencies in Item 1. FINANCIAL STATEMENTS.  These matters and the future
resolution  thereof  may  impact the  Company's  future  results of  operations,
financial position or cash flows.

     Based on a preliminary  analysis,  NCE and its subsidiaries expect to incur
costs of  approximately  $50-65  million  over the next two years to modify  its
computer   software,    hardware   and   other   automated   systems   used   in
operationsenabling  proper data processing relating to the year 2000 and beyond.
Approximately  one-third  of these  costs  are  expected  to be  incurred  by or
allocated to the Company.  The Company continues to evaluate appropriate courses
of  corrective   action,   including  the  replacement  of  certain  systems.  A
significant  portion of these costs will represent the  redeployment of existing
information   technology   resources.   Management  does  not  anticipate  these
activities  will  have a  material  adverse  impact on the  Company's  financial
position, results of operations or cash flows.

Liquidity and Capital Resources

Cash Flows - Nine Months Ended September 30
                                                1997         1996     Decrease
                                                ----         ----     --------
Net cash provided by operating activities
  (in millions) .........................      $71.1        $141.9    $(70.8)

      Cash  provided by  operating  activities  decreased in the nine months end
September 30, 1997,  when compared to the same period in 1996,  primarily due to
lower  earnings  (which  included the write-off of  investments  in the Carolina
Energy  Project by Quixx and UE), the effects  resulting from the August 1, 1997
sale of Quixx  and UE,  and the  payment  in  April  1997 of the  Thunder  Basin
judgment.

                                                1997         1996     Increase
                                                ----         ----     --------
Net cash used in investing activities
  (in millions) ........................     $(121.8)      $(87.2)     $34.6

      Cash used in  investing  activities  increased  during the nine months end
September 30, 1997,  when compared to the same period in 1996,  primarily due to
the sale of Quixx and UE to NC Enterprises in connection with the Merger.

                                                1997         1996     Increase
                                                ----         ----     --------
Net cash provided by (used in) financing
  activities (in millions) .............       $23.6        $(34.1)     $57.7


                                       14
<PAGE>

      Cash provided by financing  activities  increased  (indicating  that there
were more  borrowings) in the nine months end September 30, 1997,  when compared
to the same  period  in 1996,  primarily  due to a net  increase  in  short-term
borrowings,  offset  in part by a  decrease  in the  proceeds  from  the sale of
long-term  debt.   These  proceeds  were  used  to  finance   on-going   capital
expenditures.

Electric Utility Industry

      Electric  utilities  have  historically  operated  in a  highly  regulated
environment  in which they have an  obligation  to provide  electric  service to
their  customers  in return for an  exclusive  franchise  within  their  service
territory  with  an  opportunity  to  earn a  regulated  rate  of  return.  This
regulatory  environment  is  changing.  The  generation  sector has  experienced
competition from nonutility power producers and the FERC is requiring utilities,
including the Company, to provide wholesale  transmission  service to others and
may order electric utilities to enlarge their transmission systems to facilitate
transmission   services   without   impairing   reliability.   State  regulatory
authorities  are in the process of changing  utility  regulations in response to
federal  and  state   statutory   changes  and   evolving   markets,   including
consideration of providing open access to retail customers. All of the Company's
jurisdictions   continue  to  evaluate  utility   regulations  with  respect  to
competition.  The Company is unable to predict what  financial  impact or effect
the adoption of these proposals would have on its operations. The Merger between
the Company and PSCo was, in part, in response to these changing conditions.


                                       15
<PAGE>


                            PART II OTHER INFORMATION

Item 1. Legal Proceedings.

   Thunder Basin Lawsuit - see Note (1).

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits:

   12 Computation  of Ratio of  Earnings  to Fixed  Charges  for the nine months
      ended September 30, 1997 and 1996.

   15 Letter from Arthur Andersen LLP regarding unaudited interim information.

   27 Financial Data Schedule UT.

(b)    Reports on Form 8-K:

   - A report dated April 22, 1997 and filed on August 8, 1997 which included
   Item 4. Changes in Registrant's Certifying Accountant.

                                       16
<PAGE>



                                    SIGNATURE

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


                                           SOUTHWESTERN PUBLIC SERVICE COMPANY

                                          By     /s/ R. C. Kelly
                                          ---------------------------------
                                                   R. C. KELLY
                                          Executive Vice President and
                                           and Chief Financial Officer

Dated: November 14, 1997



                                       17
<PAGE>



                                                                    EXHIBIT 12

                     SOUTHWESTERN PUBLIC SERVICE COMPANY

                       COMPUTATION OF RATIO OF EARNINGS
                               TO FIXED CHARGES

          (not covered by Report of Independent Public Accountants)


                                                     Nine Months Ended
                                                       September 30,
                                                      1997       1996
                                                      ----       ----
                                           (Thousands of Dollars, except ratios)

Fixed charges:

   Interest on long-term debt...................     $33,057    $34,859
   Other interest...............................       4,710      5,623
   Dividends on SPS obligated mandatorily 
     redeemable preferred securities of 
     subsidiary trust ..........................       5,888          -
   Amortization of debt discount and expense 
     less premium ..............................       1,683      1,581
   Interest component of rental expense.........         934        934
                                                         ---        ---

     Total .....................................     $46,272    $42,997
                                                     =======    =======

Earnings (before fixed charges and taxes on income):
   Net income ..................................     $55,709    $83,021
   Fixed charges as above.......................      46,272     42,997
   Provisions for Federal and state taxes on income,
   net of investment tax credit amortization....      36,894     50,845
                                                      ------     ------

     Total......................................    $138,875   $176,863
                                                    ========   ========

Ratio of earnings to fixed charges..............        3.00       4.11
                                                        ====       ====


                                       18
<PAGE>



                                                                    EXHIBIT 15
November 10, 1997


Southwestern Public Service Company:

      We are aware that Southwestern  Public Service Company has incorporated by
reference  in  its  Registration   Statement  No.  333-05199  on  Form  S-3  and
Registration Statements No. 33-27452 and 33-57869 on Form S-8, its Form 10-Q for
the quarter ended  September 30, 1997,  which includes our report dated November
10, 1997,  covering  the  unaudited  condensed  financial  statements  contained
therein.  Pursuant to Regulation C of the Securities Act of 1933, that report is
not considered a part of the registration statement prepared or certified by our
Firm or a report  prepared  or  certified  by our Firm  within  the  meaning  of
Sections 7 and 11 of the Act.


                                                        Very truly yours,



                                                        ARTHUR ANDERSEN LLP



                                     19