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

(Mark One)

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

For the period ended March 31, 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        (I.R.S. 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 __

         As of May 31, 1997,  40,917,908  shares of the  Company's  common stock
were outstanding.
<PAGE>

                 SOUTHWESTERN PUBLIC SERVICE COMPANY
                             FORM 10-Q
                For the Quarter Ended March 31, 1997


TABLE OF CONTENTS


PART I. Financial Information

         Condensed Consolidated Balance Sheets at March 31, 1997
           and December 31, 1996

         Condensed Consolidated Statements of Earnings for the three months
           ended March 31, 1997 and 1996

         Condensed  Consolidated  Statements  of Cash Flows for the three months
           ended March 31, 1997 and 1996

         Notes to Condensed Consolidated Financial Statements

         Report of Independent Public Accountants

         Management's Discussion and Analysis of
           Financial Condition and Results of Operations

PART II. Other Information

         Item 1. Legal Proceedings

         Item 4. Submission of Matters to a Vote of Security Holders

         Item 5. Other Information

         Item 6. Exhibits and Reports on Form 8-K

Signatures

Exhibit 12. Statement of Computation of Ratio of Earnings






FORWARD LOOKING INFORMATION

         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,  which are  intended  to qualify for the safe
harbors from liability  established by the Private Securities  Litigation Reform
Act of 1995.  Such  statements  address future events and conditions  concerning
capital expenditures,  earnings,  litigation, rate and other regulatory matters,
the pending Merger,  liquidity and capital  resources,  and accounting  matters.
Actual  results  in each case  could  differ  materially  from  those  currently
anticipated in such  statements,  by reason of factors such as electric  utility
restructuring,  including  the  ongoing  state and  federal  activities;  future
economic conditions; developments in the legislative, regulatory and competitive
markets in which the Company  operates;  time and impact of pending merger;  and
other circumstances affecting anticipated revenues and costs.


<PAGE>

PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>

SOUTHWESTERN PUBLIC SERVICE COMPANY
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)


ASSETS
<S>                                                                         <C>           <C>
                                                                            March 31,     December 31,
                                                                            1997          1996
Property, plant and equipment, at cost:
         Electric .......................................................   $ 2,519,287    $ 2,517,580
         Other ..........................................................        38,149         37,541
         Construction in progress .......................................       103,825         79,346
                                                                              2,661,261      2,634,467
         Less: accumulated depreciation .................................      (956,944)      (944,279)

                  Total property, plant and equipment ...................     1,704,317      1,690,188

Investments, at cost ....................................................        35,153         34,446

Current assets:
         Cash and temporary cash investments ............................        50,709         40,609
         Accounts receivable, less reserve for uncollectible accounts
                  ($2,591 at March 31, 1997; $2,574 at December 31, 1996)        64,169         67,780
         Accrued unbilled revenues ......................................        15,634         20,304
         Recoverable fuel and purchased power cost, net .................        11,456         15,715
         Materials and supplies, at average cost ........................        18,149         17,776
         Fuel inventory, at average cost ................................         2,318          2,320
         Current portion of accumulated deferred income taxes ...........         3,568           --
         Prepaid expenses and other .....................................         5,201          4,984

                  Total current assets ..................................       171,204        169,488

Deferred charges:
         Regulatory assets (Note 1) .....................................       139,553        117,546
         Unamortized debt expense .......................................         9,814          9,864
         Other ..........................................................        33,779         23,262

                  Total deferred charges ................................       183,146        150,672


                                                                            $ 2,093,820    $ 2,044,794

The accompanying  notes to condensed  consolidated  financial  statements are an
integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SOUTHWESTERN PUBLIC SERVICE COMPANY
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)

CAPITALIZATION AND LIABILITIES
<S>                                                                       <C>          <C>    
                                                                          March 31,    December 31,
                                                                          1997         1996

Common stock ..........................................................   $  348,402   $  348,402
Retained earnings .....................................................      379,062      383,350

                  Total common equity .................................      727,464      731,752

SPS obligated mandatorily redeemable preferred securities of
         subsidiary trust holding solely subordinated debentures of SPS      100,000      100,000
Long-term debt ........................................................      620,597      620,400

                                                                           1,448,061    1,452,152

Noncurrent liabilities:
         Employees' postretirement benefits other than pensions .......        3,158        2,967
         Employees' postemployment benefits ...........................        1,340        2,369

                  Total noncurrent liabilities ........................        4,498        5,336

Current liabilities:
         Notes payable and commercial paper ...........................      119,586       53,836
         Long-term debt due within one year ...........................          229       15,231
         Accounts payable .............................................       76,758       63,004
         Customers' deposits ..........................................        5,761        5,842
         Accrued taxes ................................................       13,948       19,999
         Accrued interest .............................................        9,672       13,151
         Current portion of accumulated deferred income taxes..........         --          3,583
         Other ........................................................       29,162       28,503

                  Total current liabilities ...........................      255,116      203,149

Deferred credits:
         Customers' advances for construction .........................          412          366
         Unamortized investment tax credits ...........................        5,657        5,719
         Accumulated deferred income taxes ............................      369,304      367,272
         Other ........................................................       10,772       10,800

                  Total deferred credits ..............................      386,145      384,157

Commitments and contingencies (Notes 2 and 4) .........................         --           --

                                                                          $2,093,820   $2,044,794


The accompanying  notes to condensed  consolidated  financial  statements are an
integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SOUTHWESTERN PUBLIC SERVICE COMPANY
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
(In Thousands, Except Per Share Amounts)

   
                                                                    Three Months Ended
                                                                        March 31,
                                                                    1997         1996
<S>                                                               <C>          <C>    

Operating revenues:
         Electric .............................................   $ 214,495    $ 207,640
         Other ................................................       6,800        8,374

                                                                    221,295      216,014

Operating expenses:
         Fuel used in generation ..............................     104,618       98,393
         Purchased power ......................................       5,207        3,710
         Other operating expenses .............................      30,020       34,037
         Maintenance ..........................................       6,931        9,313
         Depreciation and amortization ........................      18,230       17,563
         Taxes (other than income taxes) ......................      11,526       11,533
         Income taxes .........................................      10,292       11,022

                                                                    186,824      185,571

Operating income ..............................................      34,471       30,443

Other income and deductions:
         Allowance for equity funds used during construction ..           5         --
         Miscellaneous income and deductions, net .............      (2,522)      (2,325)

                                                                     (2,517)      (2,325)

Interest charges:
         Interest on long-term debt ...........................      11,025       10,987
         Amortization of debt discount and expense less premium         562          518
         Other interest .......................................       1,026        2,584
         Allowance for borrowed funds used during construction         (840)        (853)
         Dividends on SPS obligated mandatorily reedeemable
            preferred securities of subsidiary trust ..........       1,963         --

                                                                     13,736       13,236

Net income ....................................................      18,218       14,882
Dividend requirements on preferred stock ......................        --            121
Earnings available for common stock ...........................   $  18,218    $  14,761

Weighted average common shares outstanding ....................      40,918       40,918

Earnings per weighted average share of common stock outstanding       $0.45        $0.36


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

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

SOUTHWESTERN PUBLIC SERVICE COMPANY
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)


                                                                                    Three Months Ended
                                                                                        March 31,

                                                                                     1997        1996
<S>                                                                                <C>         <C>    
Operating Activities:
         Net income ............................................................   $ 18,218    $ 14,882
         Adjustments to reconcile net income to net
          cash provided by operating activities:
                  Depreciation and amortization ................................   $ 18,230    $ 17,563
                  Amortization of investment tax credits .......................        (62)        (63)
                  Deferred income taxes ........................................     (5,119)      5,136
                  Allowance for equity funds used during construction ..........         (5)       --
                  Change in accounts  receivable ...............................      3,611       2,795
                  Change in inventories ........................................       (371)      2,454
                  Change in other current assets ...............................      8,644        (738)
                  Change in accounts payable ...................................     (7,833)     34,514
                  Change in other current liabilities ..........................     (8,952)    (57,733)
                  Change in deferred amounts ...................................    (10,851)     (1,853)
                  Change in noncurrent liabilities .............................       (838)        161

                           Net cash provided by operating activities ...........     14,672      17,118

Investing activities:
         Construction expenditures .............................................    (32,359)    (30,376)
         Allowance for equity funds used during construction ...................          5        --
         Purchase and sale of other investments ................................       (707)        360

                           Net cash used in investing activities ...............    (33,061)    (30,016)

Financing activities:
         Proceeds from sale of long-term debt ..................................       --        60,000
         Redemption of long-term debt ..........................................    (14,755)       (525)
         Redemption of preferred stock .........................................       --          (260)
         Short-term borrowings, net ............................................     65,750     (25,201)
         Dividends on common stock .............................................    (22,506)    (22,505)
         Dividends on preferred stock ..........................................       --          (121)

                  Net cash provided by financing activities ....................     28,489      11,388

                  Net increase (decrease) in cash and temporary cash investments     10,100      (1,510)
                  Cash and temporary cash investments at beginning of period ...     40,609      13,613
                  Cash and temporary cash investments at end of period .........   $ 50,709    $ 12,103


The accompanying  notes to condensed  consolidated  financial  statements are an
integral part of these financial statements.
</TABLE>
<PAGE>

SOUTHWESTERN PUBLIC SERVICE COMPANY
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(1) INTERIM  PERIODS.  The results of operations for the interim periods are not
necessarily  an  indication  of the  expected  results  for the  year due to the
seasonal  nature  of  Southwestern  Public  Service  Company's  (the  "Company")
business.  The unaudited condensed  consolidated  financial  statements included
herein were prepared from the books of the Company in accordance  with generally
accepted  accounting  principles and reflect all adjustments  (none of which are
other  than  normal  recurring   adjustments)  which  are,  in  the  opinion  of
management,  necessary  to  provide  a  fair  presentation  of  the  results  of
operations,  financial  position  or cash  flows for the  interim  periods.  The
current interim period reported herein is included in the year and is subject to
independent audit at the end of the year.

(2) ACCOUNTING POLICIES.

         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.  Approximately  71% of the  Company's  operating  revenues
during  fiscal  1996,  excluding  sales to other  utilities,  were  derived from
operations  in Texas and New  Mexico.  The  Company  maintains  its  accounts in
accordance with the Uniform System of Accounts  prescribed by the Federal Energy
Regulatory  Commission  ("FERC") and as adopted by the Public Utility Commission
of Texas  ("PUCT"),  the New Mexico Public  Utility  Commission  ("NMPUC"),  the
Oklahoma  Corporation  Commission ("OCC") and the Kansas Corporation  Commission
("KCC").

         The  consolidated  financial  statements  include  the  accounts of the
Company and its wholly-owned  subsidiaries  Utility Engineering  Corporation and
its subsidiaries ("UE") and Quixx Corporation and its subsidiaries ("Quixx"). UE
is primarily engaged in engineering,  design and construction management.  Quixx
invests in energy related projects including  cogeneration  facilities and holds
water rights and certain other nonutility assets.

         Regulatory  Assets and Liabilities.  The Company prepares its financial
statements  in  accordance   with  the  provisions  of  Statement  of  Financial
Accounting  Standards No. 71 _  "Accounting  for the Effects of Certain Types of
Regulation"  ("SFAS 71").  SFAS 71 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.

         On  September  1, 1996,  the Company  adopted  Statement  of  Financial
Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of" ("SFAS 121"). SFAS 121 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 consolidated balance sheets:
<TABLE>
<S>                                                           <C>              <C>   
                                                              March 31, 1997   December 31, 1996
                                                                    (In Thousands)

Income taxes .............................................    $80,867          $81,403
Employees' postretirement benefits other than pensions ...      3,138            3,192
Early retirement costs ...................................      1,636            1,727
Demand-side management costs .............................      2,658            2,317
Unamortized debt reacquisition costs .....................     19,496           19,880
Thunder Basin judgement ..................................     22,346             --
Other ....................................................      9,412            9,027

                                                             $139,553         $117,546
</TABLE>


         As of March  31,  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  judgement  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 ITEM
3. LEGAL  PROCEEDINGS  in the  Company's  1996 Annual  Report on Form 10-K as of
August 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 judgement to the Tenth Circuit Court of Appeals and on
January 7,  1997,  that  Court  found in favor of  Thunder  Basin and upheld the
judgement.  The  Company  filed a motion  for  rehearing  which was  denied.  In
February  1997, the Company  recorded the liability for the judgement  including
interest and court costs. These amounts,  including interest, were paid in April
1997. The recording of the liability for the amount of the judgement and related
costs resulted in a noncash  transaction for the three-month  period ended March
31, 1997.

         Management  believes that the judgement amount paid 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 conditional  approval to collect the FERC jurisdictional  portion of
the judgement from wholesale customers.  Therefore, management believes that the
ultimate  resolution  will not have a material  adverse  effect on the Company's
results of operations, financial position or cash flows.

         Change in Fiscal Year. On April 22, 1997, the Board of Directors of the
Company approved a change in the Company's fiscal year. The Company's new fiscal
year  will be the  twelve-month  period  ending  December  31.  Previously,  the
Company's fiscal year was a twelve-month period ending August 31

         In  conjunction  with the  change  in the  fiscal  year and in order to
conform  to  the  presentation  of  the  proposed  holding  company's  financial
statements  (see Note 3), the  Company  has  reclassified  certain  items in its
condensed consolidated financial statements.

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

(3) MERGER. In August 1995,  the Company,  Public  Service  Company of  Colorado
("PSCo"),  a Colorado  corporation,  and New Century Energies,  Inc. ("NCE"),  a
Delaware  corporation,  entered  into an  Agreement  and Plan of  Reorganization
("Merger  Agreement")  providing  for  a  business  combination  as  peer  firms
involving  the  Company  and  PSCo in a  "merger  of  equals"  transaction  (the
"Merger").  Based on the  outstanding  common  stock of the  Company and PSCo at
March 31,  1997,  the  Merger  would  result in the common  shareholders  of the
Company  owning 37% of the common equity of NCE and the common  shareholders  of
PSCo owning 63% of the common equity of NCE.

         All required State and Federal  regulatory agency  authorizations  have
been received, except for the approval by the Securities and Exchange Commission
("SEC").  The  completion  of the Merger is targeted  for the second  quarter of
1997.

         It is management's  intention that NCE begin realizing  certain savings
upon the  consummation  of the Merger.  Accordingly,  costs  associated with the
Merger and the transition planning and implementation are expected to negatively
impact earnings during 1997. The Company recognized  approximately $2.8 and $2.6
million of  merger-related  and business  integration  expenses during the first
three months of 1997 and 1996,  respectively.  The Merger is expected to qualify
as a  tax-free  reorganization  and as a pooling  of  interests  for  accounting
purposes.

         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
business  combination.  The Company  will provide a  guaranteed  minimum  annual
savings of $3 million in Texas, $1.2 million in New Mexico, $100,000 in Oklahoma
and $10,000 in Kansas.

(4) COMMITMENTS AND CONTINGENCIES.

         Rate and Regulatory  Matters. 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 a
petition with the PUCT for a fuel  reconciliation for the months of January 1992
through  December  1994.  A hearing was held in September  1995,  and in January
1996, an order was issued which required 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. The Company filed
a motion for  rehearing on January 25,  1996.  The PUCT issued an order on March
14, 1996, denying rehearing on the fuel disallowance (which was adjusted to $1.9
million) and ordered the flow through of 100% of the margin  effective  with the
first  billing cycle after the date of the order.  On May 24, 1996,  the Company
filed an appeal in the Travis County  District Court on the PUCT's decision with
respect to the $1.9  million of  disallowed  fuel costs in which the  hearing of
merits  was held on  November  1, 1996.  The  District  Court  upheld the PUCT's
decision on the  disallowed  fuel costs.  The District  Court  decision has been
appealed  to the Texas  Court of Appeals  which has not yet ruled in the matter.
Management  believes the ultimate outcome of this matter will not  significantly
affect the Company's  results of operations,  financial  position or cash flows.
Currently the Company has  approximately  $11.5 million in  underrecovered  fuel
costs and is  surcharging  customers  for a portion  of the  underrecovery.  The
Company has requested to continue the surcharge to collect the remaining  amount
of underrecovered fuel costs.

         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 member  cooperatives  and Lyntegar  Electric  Cooperative,  have not been
reached. The Company cannot reasonably estimate the remaining amount recoverable
from these proceedings; however, a favorable resolution could materially improve
consolidated earnings in the year in which it is resolved.

         Thunder Basin Lawsuit. Reference is made to Note (2) for discussion of
the judgement made against the Company in this litigation.

         BCH  Energy  Limited  Partnership  Investment.   As  discussed  in  the
Company's 1996 Annual Report on Form 10-K as of August 31, 1996 under  BUSINESS.
Nonutility  Businesses,  Quixx holds a 49% limited  partnership  interest in BCH
Energy Limited  Partnership 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  or $0.25 per  common  share,  after-  tax,  in this
project.

         Carolina  Energy  Limited  Partnership  Investment.  Quixx  also has an
equity  investment of approximately $13 million,  holding a one-third  ownership
interest in the Carolina Energy Project which is similar to the BCH project, but
with design modifications. Construction was originally scheduled to be completed
later this year but has been  halted  pending  an  independent  analysis  of the
project's  engineering  and financial  viability.  Negotiations  are in progress
concerning the restructuring of the project; however, a final restructuring plan
has not yet been  approved.  In  addition,  UE loaned  $2.6  million to Carolina
Energy Limited  Partnership to assist in the financing of the construction.  The
note bears interest at 12% per annum and is due on the financial completion date
of the project. Any unpaid principal amount,  together with interest,  is due on
December 31, 2002.  The Company is unable to predict at this time if the project
will be completed.  Should the project not be completed, Quixx would be required
to  write-off  its  investment  in the  project,  and UE  would be  required  to
write-off its loan and related accrued interest.

(5) ISSUANCE OF SECURITIES. In October 1996, Southwestern Public Service Capital
I, a wholly-owned trust,  issued in a public offering  $100,000,000 of its 7.85%
Trust  Preferred  Securities,   Series  A.  The  sole  asset  of  the  trust  is
$103,000,000  principal  amount  of  the  Company's  7.85%  Deferrable  Interest
Subordinated Debentures, Series A due September 1, 2036.

(6)  MANAGEMENT'S   REPRESENTATIONS.   In  the  opinion  of  the  Company,   the
accompanying  unaudited condensed  consolidated financial statements include all
adjustments necessary for the fair presentation of the financial position of the
Company and its  subsidiaries  at March 31, 1997 and December 31, 1996,  and the
results of  operations  and cash flows for the three months ended March 31, 1997
and 1996. The condensed  consolidated  financial  information  and notes thereto
should be read in conjunction  with the  consolidated  financial  statements and
notes for the  years  ended  August  31,  1996,  1995 and 1994  included  in the
Company's 1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.

         Because of seasonal and other  factors,  the results of operations  for
the three  months ended March 31, 1997 should not be taken as an  indication  of
earnings for all or any part of the balance of the year.

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


Southwestern Public Service Company:

We have  reviewed  the  accompanying  condensed  consolidated  balance  sheet of
Southwestern  Public Service Company and  subsidiaries as of March 31, 1997, and
the related condensed consolidated statements of earnings and cash flows for the
three month period  ended March 31, 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  condensed  consolidated  statements  of
earnings and cash flows of Southwestern  Public Service Company and subsidiaries
for the three month period  ended March 31,  1996,  were not reviewed by us and,
accordingly, we do not express an opinion on them.



ARTHUR ANDERSEN LLP

June 5, 1997
Denver, Colorado

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

         Operating Revenues and Kilowatt-Hour Sales

                  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 revenues.
<TABLE>
<CAPTION>

                                                                  Increase (Decrease) From
                                                                 Corresponding Prior Period
                                                                     Three Months Ended
                                                                        3-31-97
                                                                   (Dollars In Thousands)
<S>                                                                     <C>    

Estimated effect on revenues of variations in:
         Kilowatt-hour (kwh) sales* ............................        $ 5,776
         Rates .................................................         (2,614)
         Fuel and purchased power cost recovery ................          4,121
                  Subtotal .....................................          7,283
         Non-firm kwh sales ....................................           (428)
                  Total revenue increase .......................        $ 6,855

Increase in kwh sales* (in millions) ...........................            176

Decrease in non-firm kwh sales (in millions) ...................            (49)

         *Comprised of retail and wholesale excluding economy and interruptible (non-firm) wholesale kwh sales.
</TABLE>

         Variations  in  Kwh  Sales.   The  revenue   increase  in  the  current
three-month  period  is  attributable  to  increased  sales  to all  classes  of
customers.  These sales increased due primarily to increased  economic  activity
throughout  the  region.  Additionally,  the dry,  colder  weather  this  winter
contributed to sales increases in the retail and agriculture sectors.

         Variations in Rates.  The decrease for the current  period is primarily
the  result of  interruptible  rates  available  to  certain  classes  of retail
customers.  These rates were approved and implemented in Texas and New Mexico in
1996 and acted to lower related  revenues.  The Company  sought  approval to put
these new rates into effect in compliance with settlement agreements in the 1993
and 1994 rate  cases in Texas and New  Mexico,  respectively,  and to respond to
generation resource capacity needs.

         Variations  in Fuel and  Purchased  Power Cost  Recovery.  The  revenue
increase in the current  period is due to 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  the  current  quarter  is  due to the
availability of low cost power throughout the region.

         Other Revenues. Other operating revenues are comprised of revenue from
the Company's consolidated subsidiaries and from non-electric operations.

         Operating Expenses and Non-Operating Items

         Fuel and purchased  power expense  comprised  60.6% of total  operating
expenses  for the three  months  ended  March 31,  1997.  When  compared  to the
corresponding  period last year, these expenses  increased $7.7 million or 7.6%.
Fuel  expense  (excluding  purchased  power  expense),  per net  kwh  generated,
increased from 2.03 to 2.12 cents, due to higher natural gas and coal costs.

         Total operating expenses,  excluding fuel and purchased power decreased
$7.1 million or 9.1%,  for the  three-month  period  ended March 31, 1997.  This
decrease resulted primarily from continued cost containment efforts.

         Other Income and Deductions. A decline in "other income and deductions"
for the three month period ended March 31, 1997,  is due  primarily to increased
merger-related and business integration expenses.

         Earnings

         Decreased  operating  expenses,  excluding  fuel and  purchased  power,
favorably  affected  earnings  applicable  to common  stock for the three months
ended March 31, 1997.  Additionally,  increased  revenue due to higher kwh sales
also contributed to increased earnings.

         In  December  1996 Quixx  wrote off its  investment  in the BCH limited
partnership and related receivables and expenses of approximately $16 million or
$0.25 per SPS common  share,  after-tax.  The BCH  project is a  waste-to-energy
cogeneration  project  in  North  Carolina.  The  project  experienced  problems
primarily related to deficiencies in the waste-fuel handling system.  Quixx also
has an equity investment of $13.2 million,  representing approximately $0.21 per
SPS  common  share,   after-tax,   in  the  Carolina  Energy  Project,   another
waste-to-energy  facility,  which is a similar  project to BCH,  but with design
modifications. (See Note 4). Also, UE has loaned $2.6 million to Carolina Energy
Limited  Partnership.  Construction at the Carolina  Energy Project,  originally
scheduled  to  be  completed  later  this  year,  has  been  halted  pending  an
independent analysis of the project's engineering and financial viability.

         Assuming normal weather  conditions,  1997 operating income is expected
to remain  relatively  flat, but net earnings for 1997 will likely be negatively
impacted by  increased  merger-related  and  business  integration  expenses.  A
resolution  of the 1985 FERC rate case with Texas  wholesale REC  customers,  by
settlement or otherwise,  would favorably affect income and earnings in the year
resolved.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company's   demand  for  capital  is  primarily   related  to  the
construction  of utility plant and equipment.  Cash  construction  expenditures,
excluding  allowance  for funds used during  construction  for the three  months
ended  March 31,  1997,  were  $32.4  million.  Also in June 1996,  the  Company
received  regulatory  approval to make investments in Quixx of up to $15 million
each year  beginning  in fiscal  1996 and  continuing  for five  years.  Quixx's
investment in independent  power projects is dependent upon suitable  investment
opportunities  and the availability of capital.  The Company expects the portion
of  internally  generated  funds to be used  for  capital  expenditures  will be
approximately  40% in calendar 1997. To the extent the capital  required in 1997
is not supplied by internally  generated  funds,  the Company  expects to obtain
such capital  from  short-term  borrowing  or from the sale of  long-term  debt,
preferred stock and/or common stock.  The Company's  estimates of capital needs,
in particular those related to construction and the generation of internal funds
are  subject  to  review  and  revision,  and may  vary  substantially  from the
foregoing  especially  in a  more  competitive  environment.  Additionally,  the
completion of the merger could significantly impact these estimates.  Due to the
merger, Standard & Poor's downgraded the Company's rated debt.

         The Company has effective a shelf registration under which $220 million
of debt securities and/or preferred stock are available for issuance.

OTHER MATTERS

         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.  On July 9,  1996,  the
Company filed its open access  transmission tariff in compliance with FERC Order
No. 888. (See GENERAL.  Competition. in the Company's 1996 Annual Report on Form
10-K as of August 31, 1996.) State regulatory  authorities are in the process of
changing utility  regulations in response to federal and state statutory changes
and evolving markets.  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.  In part, and in response to these changing  conditions,
the Company has entered into a definitive  merger  agreement with Public Service
Company  of  Colorado  (the  Merger).  Consummation  of the Merger is subject to
customary conditions including receiving regulatory authority approvals. The two
utilities  have targeted a completion  date in the second  quarter of 1997.  The
foregoing  discussions of the Company's  "Results of Operations"  and "Liquidity
and Capital  Resources" do not take into account any changes that could arise as
a result of the Merger.
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

         Thunder Basin Lawsuit - see Note (2).

Item 4. Submission of Matters to a Vote of Security Holders.

         The Company's  Annual Meeting of Shareholders was held January 8, 1997.
The following persons were reelected to the Company's Board of Directors to hold
office until the annual Meeting of Shareholders in 2000.

         Director              In Favor         Withheld
         J. C. Chambers        33,653,658       430,017
         Giles M. Forbess      33,678,820       404,854
         Shirley Bird Perry    33,650,066       433,608
         David M. Wilks        33,699,992       383,682

Item 5. Other Information.

         The Company's  ratio of earnings to fixed charges for the twelve months
ended March 31, 1997, was 3.68.

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

         (a)  Exhibits:

                12      Statement showing computations of ratio of earnings
                        for the twelve months ended March 31, 1997

                15      Letter of Arthur Andersen LLP regarding unaudited 
                        condensed consolidated interim financial information

         (b)  Reports on Form 8-K:

                Items reported - Item 5. Other Events
                Financial Statements filed - None
                Date of reports filed - February 7, 1997, reporting a recorded 
                                         charge related to the write-off of the
                                         BCH project.
                                      - February 24, 1997, reporting the joint
                                         offer by PSCo and American Electric
                                         Power to acquire Yorkshire Electricity
                                         Group plc in the United Kingdom.

                Items reported - Item 4. Changes in Registrant's Certifying
                                         Accountant
                               - Item 8. Change in Fiscal Year
                Financial Statements filed - None  
                Date of report filed - April 28, 1997


SIGNATURES

         Pursuant to the  requirements  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       Doyle R. Bunch II
                  Executive Vice-President
                  Accounting and Corporate Development

DATE: June 5, 1997