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 quarterly period ended March 31, 1998

                      OR

 [   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
           OF THE SECURITIES EXCHANGE ACT OF 1934

           For the transition period from _____________   to   ____________

            Exact name of registrant as specified in its
            charter, State or other jurisdiction of 
            incorporation or organization, Address of
Commission  principal executive offices and Registrant's      IRS Employer
File Number Telephone Number, including area code             Identification No.
----------- -------------------------------------             ------------------

1-12927    NEW CENTURY ENERGIES, INC.                            84-1334327
           (a Delaware Corporation)
           1225 17th Street
           Denver, Colorado  80202
           Telephone (303) 571-7511

1-3280     PUBLIC SERVICE COMPANY OF COLORADO                    84-0296600
           (a Colorado Corporation)
           1225 17th Street
           Denver, Colorado  80202
           Telephone (303) 571-7511

1-3789     SOUTHWESTERN PUBLIC SERVICE COMPANY                   75-0575400
           (a New Mexico Corporation)
           Tyler at Sixth
           Amarillo, Texas  79101
           Telephone (303) 571-7511
                             -------------------
      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

      On May 11, 1998,  111,266,057 shares of the Registrant's Common Stock were
outstanding.   The  aggregate   market  value  of  this  common  stock  held  by
nonaffiliates  based on the  closing  price on the New York Stock  Exchange  was
approximately $5,215,596,422.

Southwestern  Public  Service  Company meets the conditions set forth in General
Instruction  H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q
with the reduced  disclosure  format  specified in General  Instruction H (2) to
such Form 10-Q.

<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 ............................ 29


                          PART II - OTHER INFORMATION


Item 1.  Legal Proceedings................................................. 39

Item 6.  Exhibits and Reports on Form 8-K.................................. 39








This  combined  Form 10-Q is  separately  filed by New Century  Energies,  Inc.,
Public Service  Company of Colorado and  Southwestern  Public  Service  Company.
Information contained herein relating to any individual company is filed by such
company on its own behalf.  Each  registrant  makes  representations  only as to
itself and makes no other representations  whatsoever as to information relating
to the other registrants.

This report should be read in its  entirety.  No one section of the report deals
with all aspects of the subject matter.

                         FORWARD-LOOKING INFORMATION

The  following  discussions  include  "forward-looking  statements"  within  the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities  Exchange  Act of  1934.  Investors  and  prospective  investors  are
cautioned that the forward-looking  statements  contained herein with respect to
the  revenues,   earnings,  capital  expenditures,   resolution  and  impact  of
litigation,  competitive performance, or other prospects for the business of New
Century Energies,  Inc., Public Service Company of Colorado and/or  Southwestern
Public  Service  Company or their  affiliated  companies,  including any and all
underlying  assumptions  and other  statements that are other than statements of
historical  fact, may be influenced by factors that could cause actual  outcomes
and results to be materially different than projected. Such factors include, but
are not  limited to, the effects of weather,  future  economic  conditions,  the
performance  of  generating  units,  fuel  prices and  availability,  regulatory
decisions  and the  effects of changes in state and  federal  laws,  the pace of
deregulation of domestic retail natural gas and electricity  markets, the timing
and  extent of change  in  commodity  prices  for all forms of  energy,  capital
spending  requirements,  the evolution of  competition,  earnings  retention and
dividend payout policies,  changes in accounting  standards,  and other factors.
From time to time,  New  Century  Energies,  Inc.,  Public  Service  Company  of
Colorado and  Southwestern  Public Service Company may publish or otherwise make
available  forward-looking   statements.  All  such  subsequent  forward-looking
statements,  whether  written or oral and  whether  made by or on behalf of each
company, are also expressly qualified by these cautionary statements.


                                       i
<PAGE>


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

Abbreviation or Acronym                                           Term
-----------------------                                           ----

AEP.....................................................American Electric Power
CDPHE......................................Colorado Department of Public Health
                                              and Environment
Cheyenne.................................Cheyenne Light, Fuel and Power Company
CPUC...................The Public Utilities Commission of the State of Colorado
Denver District Court ................................District Court in and for
                                                  the City and County of Denver
DOE........................................................Department of Energy
DSM......................................................Demand Side Management
DSMCA....................................Demand Side Management Cost Adjustment
Dth...................................................................Dekatherm
ECA......................................................Energy Cost Adjustment
e prime..........................................e prime, inc. and subsidiaries
FERC.......................................Federal Energy Regulatory Commission
Fort St. Vrain ......................Fort St. Vrain Electric Generating Station,
                                          formerly a nuclear generating station
Fuelco ..........................................Fuel Resources Development Co.,
                                               a dissolved Colorado Corporation
GCA.........................................................Gas Cost Adjustment
ICA...................................................Incentive Cost Adjustment
Kwh...............................................................kilowatt-hour
Merger............................the business combination between PSCo and SPS
Natural Fuels.........................................Natural Fuels Corporation
NCE or Company.......................................New Century Energies, Inc.
NC Enterprises.............................................NC Enterprises, Inc.
NCI.............................................New Century International, Inc.
NMPUC......................................New Mexico Public Utility Commission
NOx..............................................................Nitrogen Oxide
PSCo.........................................Public Service Company of Colorado
PUHCA................................Public Utility Holding Company Act of 1935
PSCCC............................................PS Colorado Credit Corporation
PUCT.........................................Public Utility Commission of Texas
QF..........................................................Qualifying Facility
Quixx........................................Quixx Corporation and subsidiaries
SEC..........................................Securities and Exchange Commission
SO2..............................................................Sulfur Dioxide
SPS.........................................Southwestern Public Service Company
SFAS 71....................Statement of Financial Accounting Standards No. 71 -
                   "Accounting for the Effects of Certain Types of Regulation"
SFAS 112..................Statement of Financial Accounting Standards No. 112 -
                   "Employers' Accounting for Postemployment Benefits"
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.
Yorkshire Electricity..........................Yorkshire Electricity Group plc
Yorkshire Power......................................Yorkshire Power Group Ltd.



                                       ii
<PAGE>



                 NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED CONDENSED BALANCE SHEETS
                            (Thousands of Dollars)


                                    ASSETS

                                                       March 31,    December 31,
                                                         1998          1997
                                                         ----          ----
                                                      (Unaudited)

Property, plant and equipment, at cost:
   Electric ........................................  $6,735,650    $6,703,863
   Gas..............................................   1,152,410     1,136,231
   Steam and other..................................     107,570       120,322
   Common to all departments........................     469,054       437,636
   Construction in progress.........................     374,063       318,124
                                                         -------       -------
                                                       8,838,747     8,716,176
   Less: accumulated depreciation ..................   3,237,807     3,182,800
                                                       ---------     ---------
     Total property, plant and equipment............   5,600,940     5,533,376
                                                       ---------     ---------



Investments, at cost:
   Investment in Yorkshire Power and other
      unconsolidated  subsidiaries (Note 2).........     299,077       295,316
   Other............................................      66,123        71,411
                                                         -------        ------
    Total investments........................... ...     365,200       366,727
                                                         -------       -------

Current assets:
   Cash and temporary cash investments................    76,005        72,623
   Accounts receivable, less reserve for uncollectible
     accounts ($5,143 at March 31, 1998; $5,355 at
     December 31, 1997) .... .........................   300,166       315,539
   Accrued unbilled revenues..........................   103,830       110,877
   Recoverable purchased gas and electric energy costs
      - net ..........................................   101,765       129,292
   Materials and supplies, at average cost............    65,037        68,411
   Fuel inventory, at average cost....................    22,094        23,162
   Gas in underground storage, at cost (LIFO).........    14,923        47,394
   Prepaid expenses and other.........................    57,402        56,868
                                                          ------        ------
    Total current assets..............................   741,222       824,166
                                                         -------       -------

Deferred charges:
   Regulatory assets (Note 1).........................   417,918       430,475
   Unamortized debt expense ..........................    20,276        20,833
   Other..............................................   144,337       134,704
                                                         -------       -------
    Total deferred charges............................   582,531       586,012
                                                         -------       -------
                                                      $7,289,893    $7,310,281
                                                      ==========    ==========


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



                                       1
<PAGE>


                   NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (Thousands of Dollars)

                             CAPITAL AND LIABILITIES

                                                       March 31,    December 31,
                                                         1998          1997
                                                         ----          ----
                                                      (Unaudited)

Common stock ........................................ $1,716,152    $1,694,195
Retained earnings....................................    680,667       659,050
                                                         -------       -------
    Total common equity..............................  2,396,819     2,353,245

Preferred stock of subsidiaries:
   Not subject to mandatory redemption...............    140,002       140,002
   Subject to mandatory redemption at par............     39,253        39,253
SPS obligated mandatorily redeemable preferred 
   securities of subsidiary trust holding solely
   subordinated debentures of SPS ...................    100,000       100,000
Long-term debt of subsidiaries ......................  1,986,183     1,987,955
                                                       ---------     ---------
                                                       4,662,257     4,620,455

Noncurrent liabilities:
   Employees' postretirement benefits other than
     pensions .......................................     65,089        62,716
   Employees' postemployment benefits ...............     27,319        27,953
                                                          ------        ------
    Total noncurrent liabilities.....................     92,408        90,669
                                                          ------        ------

Current liabilities:
   Notes payable and commercial paper ...............    608,761       588,343
   Long-term debt due within one year................    207,486       257,469
   Preferred stock subject to mandatory redemption
     within one year ................................      2,576         2,576
   Accounts payable..................................    228,253       298,469
   Dividends payable.................................     69,083        68,296
   Customers' deposits...............................     29,153        27,993
   Accrued taxes.....................................    121,668        66,587
   Accrued interest..................................     36,456        52,615
   Current portion of accumulated deferred income 
     taxes ..........................................     23,773        27,391
   Other.............................................     83,602        87,380
                                                          ------        ------
    Total current liabilities........................  1,410,811     1,477,119
                                                       ---------     ---------

Deferred credits:
   Customers' advances for construction..............     52,778        53,041
   Unamortized investment tax credits ...............    104,868       106,147
   Accumulated deferred income taxes.................    918,057       922,341
   Other.............................................     48,714        40,509
                                                         -------        ------
    Total deferred credits...........................  1,124,417     1,122,038
                                                       ---------     ---------

Commitments and contingencies (Notes 3 and 4)........  ---------     ---------
                                                      $7,289,893    $7,310,281
                                                      ==========    ==========


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


                                       2
<PAGE>


                   NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)
                             (Thousands of Dollars)

                                                            Three Months Ended
                                                                 March 31,
                                                               1998      1997
                                                               ----      ----
Operating revenues:
   Electric...........................................     $ 599,988  $ 588,357
   Gas................................................       319,707    291,624
   Other..............................................        19,809     10,030
                                                             -------     ------
                                                             939,504    890,011

Operating expenses:
   Fuel used in generation............................       140,919    148,879
   Purchased power....................................       148,864    127,833
   Cost of gas sold...................................       224,912    206,989
   Other operating and maintenance expenses...........       147,681    135,121
   Depreciation and amortization......................        62,418     61,167
   Taxes (other than income taxes) ...................        32,873     34,022
                                                             -------     ------
                                                             757,667    714,011
Operating  income.....................................       181,837    176,000

Other income and deductions:
   Merger expenses....................................          (785)    (4,058)
   Equity in earnings of Yorkshire Power and other
     unconsolidated subsidiaries (Note 2).............         3,752        253
   Miscellaneous income and deductions - net..........        (2,183)    (1,534)
                                                              ------     ------ 
                                                                 784     (5,339)

Interest charges and preferred dividends of subsidiaries:
   Interest on long-term debt.........................        40,473     39,421
   Other interest.....................................         8,494      4,917
   Allowance for borrowed funds used during construction      (4,506)    (2,301)
   Dividends on SPS obligated mandatorily redeemable
     preferred securities of subsidiary trust holding
     solely subordinated debentures of SPS ...........         1,963      1,963
   Dividend requirements on preferred stock of subsidiaries    2,929      2,943
                                                               -----      -----
                                                              49,353     46,943

Income before income taxes............................        133,268   123,718
Income taxes..........................................         47,119    45,562
                                                              -------   -------
Net income............................................        $86,149   $78,156
                                                              =======   =======

Weighted average common shares outstanding............        110,973   103,994
                                                              =======   =======

Basic and diluted earnings per share of common stock
 outstanding .........................................         $ 0.78     $0.75
                                                               ======     =====


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


                                       3
<PAGE>


                   NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Thousands of Dollars)


                                                             Three Months Ended
                                                                  March 31,
                                                               1998      1997
                                                               ----      ----

Operating activities:
   Net income.........................................      $ 86,149   $ 78,156
   Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and amortization....................        64,887     62,162
     Amortization of investment tax credits...........        (1,279)    (1,314)
     Deferred income taxes............................        (6,433)    18,490
     Equity in earnings of Yorkshire Power and other
       unconsolidated subsidiaries, net...............        (3,756)         -
     Allowance for funds used during construction.....             3         (5)
     Change in accounts receivable....................        15,373     18,139
     Change in inventories............................        36,913     24,221
     Change in other current assets...................        34,040     (7,015)
     Change in accounts payable.......................       (70,216)  (107,695)
     Change in other current liabilities..............        45,221      6,414
     Change in deferred amounts.......................         5,192    (10,766)
     Change in noncurrent liabilities.................         1,738       (574)
     Other............................................             -       (296)
                                                             -------   --------
       Net cash provided by operating activities......       207,832     79,917

Investing activities:
   Construction expenditures..........................      (127,989)   (89,904)
   Allowance for equity funds used during construction            (3)         5
   Proceeds from disposition from property, plant and
     equipment .......................................           441      1,244
   Purchase of other investments......................          (214)    (1,125)
   Sale of other investments..........................         5,458      4,205
                                                              ------      -----
       Net cash used in investing activities..........      (122,307)   (85,575)

Financing activities:
   Proceeds from sale of common stock.................        13,038      7,658
   Proceeds from sale of long-term notes and bonds....             -    323,733
   Redemption of long-term notes and bonds............       (51,854)   (16,510)
   Short-term borrowings - net........................        20,418    116,425
   Dividends on common stock..........................       (63,745)   (56,536)
                                                             --------   -------
       Net cash provided by (used in)financing
         activities ..................................       (82,143)   374,770
                                                             -------    -------
       Net increase in cash and temporary cash
         investments .................................         3,382    369,112
       Cash and temporary cash investments at beginning
         of period ...................................        72,623     50,015
                                                              ------     ------
       Cash and temporary cash investments at end of
         period ......................................      $ 76,005   $419,127
                                                            ========   ========



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

                                       4
<PAGE>


                       PUBLIC SERVICE COMPANY OF COLORADO
                                AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (Thousands of Dollars)

                                    ASSETS

                                                         March 31,  December 31,
                                                           1998        1997
                                                           ----        ----
                                                        (Unaudited)

Property, plant and equipment, at cost:
   Electric ..........................................  $4,113,935   $4,088,447
   Gas................................................   1,113,569    1,100,003
   Steam and other....................................      78,707       78,740
   Common to all departments..........................     454,162      432,840
   Construction in progress...........................     213,160      170,503
                                                           -------      -------
                                                         5,973,533    5,870,533
   Less: accumulated depreciation ....................   2,182,818    2,145,673
                                                          ---------   ---------
     Total property, plant and equipment..............   3,790,715    3,724,860
                                                         ---------    ---------

Investments, at cost:
   Investment in Yorkshire Power (Note 2).............           -      286,703
   Note receivable from affiliate (Note 2)............     292,620            -
   Other..............................................      23,898       43,311
                                                           -------       ------
    Total investments.................................     316,518      330,014
                                                           -------      -------

Current assets:
   Cash and temporary cash investments................      19,665       18,909
   Accounts receivable, less reserve for uncollectible
     accounts ($2,006 at March 31, 1998; $2,272 at
     December 31, 1997) ..............................     180,611      191,155
   Accrued unbilled revenues .........................      83,243       94,284
   Recoverable purchased gas and electric energy costs
      - net ..........................................      86,221      103,197
   Materials and supplies, at average cost............      44,569       48,030
   Fuel inventory, at average cost....................      19,792       20,862
   Gas in underground storage, at cost (LIFO).........      14,561       46,576
   Prepaid expenses and other.........................      34,874       39,594
                                                           -------       ------
    Total current assets..............................     483,536      562,607
                                                           -------      -------

Deferred charges:
   Regulatory assets (Note 1).........................     300,207      310,658
   Unamortized debt expense ..........................      10,416       10,800
   Other..............................................      61,760       55,794
                                                           -------       ------
    Total deferred charges............................     372,383      377,252
                                                           -------      -------
                                                        $4,963,152   $4,994,733
                                                        ==========   ==========



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

                                       5
<PAGE>


                       PUBLIC SERVICE COMPANY OF COLORADO
                                AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (Thousands of Dollars)

                             CAPITAL AND LIABILITIES

                                                         March 31,  December 31,
                                                           1998      1997
                                                           ----      ----
                                                        (Unaudited)



Common stock..........................................  $1,302,119  $1,302,119
Retained earnings.....................................     342,335     319,280
                                                           -------     -------
    Total common equity...............................   1,644,454   1,621,399

Preferred stock:
   Not subject to mandatory redemption................     140,002     140,002
   Subject to mandatory redemption at par.............      39,253      39,253
Long-term debt........................................   1,336,351   1,338,138
                                                         ---------   ---------
                                                         3,160,060   3,138,792

Noncurrent liabilities:
   Employees' postretirement benefits other than
     pensions ........................................      57,964      58,695
   Employees' postemployment benefits.................      25,031      25,031
                                                           -------     -------
    Total noncurrent liabilities......................      82,995      83,726
                                                           -------     -------

Current liabilities:
   Notes payable and commercial paper.................     353,500     348,555
   Long-term debt due within one year.................     207,236     257,160
   Preferred stock subject to mandatory redemption 
     within one year .................................       2,576       2,576
   Accounts payable...................................     171,238     218,773
   Dividends payable..................................      45,842      40,975
   Customers' deposits................................      22,996      21,888
   Accrued taxes......................................      94,489      42,549
   Accrued interest...................................      26,658      39,177
   Current portion of accumulated deferred income taxes     17,228      19,872
   Other..............................................      59,996      59,880
                                                            ------      ------
    Total current liabilities.........................   1,001,759   1,051,405
                                                         ---------   ---------
Deferred credits:
   Customers' advances for construction...............      51,599      51,830
   Unamortized investment tax credits ................      98,158      99,355
   Accumulated deferred income taxes..................     532,550     534,246
   Other..............................................      36,031      35,379
                                                           -------     -------
    Total deferred credits............................     718,338     720,810
                                                           -------     -------

Commitments and contingencies (Notes 3 and 4).........  ----------   ----------
                                                        $4,963,152   $4,994,733
                                                        ==========   ==========



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

                                       6
<PAGE>


                       PUBLIC SERVICE COMPANY OF COLORADO
                                AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)
                             (Thousands of Dollars)


                                                             Three Months Ended
                                                                  March 31,  
                                                               1998      1997
                                                               ----      ----

Operating revenues:
   Electric...........................................      $375,446  $373,863
   Gas................................................       265,483   291,624
   Other..............................................         3,713     3,230
                                                             -------   -------
                                                             644,642   668,717

Operating expenses:
   Fuel used in generation............................        50,629    44,261
   Purchased power....................................       124,057   122,626
   Gas purchased for resale...........................       176,482   206,989
   Other operating and maintenance expenses...........        93,945    98,157
   Depreciation and amortization......................        42,896    42,937
   Taxes (other than income taxes) ...................        19,969    22,496
   Income taxes  .....................................        36,818    35,270
                                                             -------   -------
                                                             544,796   572,736
Operating income......................................        99,846    95,981

Other income and deductions:
   Merger expenses....................................           418    (1,280)
   Equity earnings in Yorkshire Power (Note 2)........         3,446         -
   Miscellaneous income and deductions - net..........        (3,303)   (1,508)
                                                             -------   -------
                                                                 561    (2,788)

Interest charges:
   Interest on long-term debt.........................         27,600   26,906
   Amortization of debt discount and expense less premium         978      928
   Other interest.....................................          5,653    3,939
   Allowance for borrowed funds used during construction       (2,721)  (1,461)
                                                               ------   ------ 
                                                               31,510   30,312
                                                               ------   ------

Net income............................................         68,897   62,881
Dividend requirements on preferred stock..............          2,929    2,943
                                                              -------  -------
Earnings available for common stock...................        $65,968  $59,938
                                                              =======  =======



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

                                       7
<PAGE>


                       PUBLIC SERVICE COMPANY OF COLORADO
                                AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Thousands of Dollars)


                                                             Three Months Ended
                                                                  March 31,
                                                               1998      1997
                                                               ----      ----

Operating activities:
   Net income.........................................      $68,897    $62,881
   Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and amortization....................       44,124     43,932
     Amortization of investment tax credits...........       (1,197)    (1,252)
     Deferred income taxes............................         (801)    23,609
     Equity in earnings of Yorkshire Power............       (3,446)         -
     Change in accounts receivable....................       10,165     14,528
     Change in inventories............................       36,546     24,592
     Change in other current assets...................       32,739    (15,659)
     Change in accounts payable.......................      (46,326)   (99,862)
     Change in other current liabilities..............       39,889     15,366
     Change in deferred amounts.......................       (2,194)        85
     Change in noncurrent liabilities.................         (732)       264
     Other............................................            -       (296)
                                                            -------   --------
       Net cash provided by operating activities......      177,664     68,188

Investing activities:
   Construction expenditures..........................     (107,298)   (57,545)
   Proceeds from disposition of property, plant and
     equipment .......................................        1,393      1,244
   Purchase of other investments......................         (152)      (418)
   Sale of other investments..........................        5,026      4,205
                                                            -------     ------
       Net cash used in investing activities..........     (101,031)   (52,514)

Financing activities:
   Proceeds from sale of common stock.................            -      7,658
   Proceeds from sale of long-term notes and bonds....            -    323,733
   Redemption of long-term notes and bonds............      (51,800)    (1,755)
   Short-term borrowings - net........................       16,899     50,675
   Dividends on common stock..........................      (38,047)   (34,030)
   Dividends on preferred stock.......................       (2,929)    (2,943)
                                                            -------    -------
       Net cash provided by (used in) financing 
          activities .................................       (75,877)  343,338
                                                             -------   -------
       Net increase in cash and temporary cash 
          investments ................................           756   359,012
       Cash and temporary cash investments at beginning
          of period ..................................        18,909     9,406
       Cash and temporary cash investments at end of
          period .....................................     $  19,665  $368,418
                                                           =========  ========


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


                                       8
<PAGE>


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

                                     ASSETS

                                                         March 31,  December 31,
                                                           1998       1997
                                                           ----       ----
                                                        (Unaudited)

Property, plant and equipment, at cost:
   Electric ..........................................   $2,562,573  $2,557,579
   Construction in progress...........................      157,435     144,452
                                                          2,720,008   2,702,031
   Less: accumulated depreciation ....................    1,004,030     987,487
    Total property, plant and equipment...............    1,715,978   1,714,544
                                                          ---------   ---------



Investments, at cost:
   Notes receivable from affiliate ...................      119,036     119,036
   Other..............................................        5,894       5,832
                                                            -------     -------
    Total investments.................................      124,930     124,868
                                                            -------     -------

Current assets:
   Cash and temporary cash investments................        9,119         986
   Accounts receivable, less reserve for uncollectible
     accounts ($2,315 at March 31, 1998; $2,442 at 
     December 31, 1997) ..............................       80,540      96,548
   Accrued unbilled revenues .........................       19,727      15,468
   Recoverable electric energy costs - net............       13,057      23,086
   Materials and supplies, at average cost............       16,641      16,337
   Fuel inventory, at average cost....................        2,302       2,301
   Prepaid expenses and other.........................        3,130       3,367
                                                            -------     -------
    Total current assets..............................      144,516     158,093
                                                            -------     -------

Deferred charges:
   Regulatory assets (Note 1).........................      117,164     119,244
   Unamortized debt expense ..........................        9,229       9,395
   Other..............................................       53,538      55,349
                                                            -------     -------
    Total deferred charges............................      179,931     183,988
                                                            -------     -------
                                                         $2,165,355  $2,181,493
                                                         ==========  ==========



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

                                       9
<PAGE>


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

                             CAPITAL AND LIABILITIES

                                                         March 31,  December 31,
                                                           1998        1997
                                                           ----        ----
                                                       (Unaudited)


Common stock..........................................  $  348,402   $ 348,402
Retained earnings.....................................     343,125     349,988
                                                           -------     -------
    Total common equity...............................     691,527     698,390

SPS obligated mandatorily redeemable preferred
  securities of subsidiary trust holding solely
  subordinated debentures of SPS .....................     100,000     100,000
Long-term debt........................................     620,667     620,598
                                                           -------     -------
                                                         1,412,194   1,418,988

Noncurrent liabilities:
   Employees' postretirement benefits other than
     pensions ........................................       4,153       3,800
   Employees' postemployment benefits.................       1,812       2,446
                                                           -------     -------
    Total noncurrent liabilities......................       5,965       6,246
                                                           -------     -------

Current liabilities:
   Notes payable and commercial paper.................     158,762     154,244
   Notes payable to affiliates........................      17,660      25,160
   Long-term debt due within one year.................         114         173
   Accounts payable...................................      98,325     107,465
   Dividends payable..................................      25,002      22,546
   Customers' deposits................................       5,515       5,471
   Accrued taxes......................................      31,168      28,051
   Accrued interest...................................       9,320      12,715
   Current portion of accumulated deferred income taxes      6,174      10,740
   Other..............................................       6,291       7,415
                                                           -------     -------
    Total current liabilities.........................     358,331     373,980
                                                           -------     -------

Deferred credits:
   Unamortized investment tax credits ................       5,406       5,469
   Accumulated deferred income taxes .................     374,113     372,447
   Other..............................................       9,346       4,363
                                                           -------     -------
    Total deferred credits............................     388,865     382,279
                                                           -------     -------

Commitments and contingencies (Notes 3 and 4).........
                                                        $2,165,355  $2,181,493
                                                        ==========  ==========



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


                                       10
<PAGE>


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


                                                             Three Months Ended
                                                                  March 31,
                                                               1998      1997
                                                               ----      ----

Operating revenues:
   Electric...........................................     $199,732   $214,495
   Other..............................................            -      6,800
                                                            -------    -------
                                                            199,732    221,295

Operating expenses:
   Fuel used in generation............................       90,290    104,618
   Purchased power....................................        2,641      5,207
   Other operating & maintenance expenses.............       34,396     36,965
   Depreciation and amortization......................       17,776     18,230
   Taxes (other than income taxes) ...................       12,065     11,526
   Income taxes ......................................       11,225     10,292
                                                            -------    -------
                                                            168,393    186,838
                                                            -------    -------
Operating income......................................       31,339     34,457

Other income and deductions:
   Merger expenses....................................       (1,203)    (2,778)
   Miscellaneous income and deductions - net .........        2,278        275
                                                            -------    -------
                                                              1,075     (2,503)

Interest charges:
   Interest on long-term debt.........................       10,943     11,025
   Amortization of debt discount and expense less premium       561        562
   Other interest.....................................        2,579      1,026
   Allowance for borrowed funds used during construction     (1,771)      (840)
   Dividends on SPS obligated mandatorily redeemable 
    preferred  securities of subsidiary trust holding
    solely subordinated debentures of SPS ............        1,963      1,963
                                                              -----      -----
                                                             14,275     13,736
                                                             ------     ------

Net income............................................      $18,139    $18,218
                                                            =======    =======


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

                                       11
<PAGE>


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


                                                             Three Months Ended
                                                                  March 31,
                                                              1998       1997
                                                              ----       ----

Operating activities:
   Net income.........................................      $18,139    $18,218
   Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and amortization....................       18,859     18,230
     Amortization of investment tax credits...........          (63)       (62)
     Deferred income taxes............................       (4,969)    (5,119)
     Allowance for funds used during construction.....            3         (5)
     Change in accounts receivable....................       16,008      3,611
     Change in inventories............................         (305)      (371)
     Change in other current assets...................        6,008      8,644
     Change in accounts payable.......................       (9,140)    (7,833)
     Change in other current liabilities..............       (1,359)    (8,952)
     Change in deferred amounts.......................       10,438    (10,851)
     Change in noncurrent liabilities.................         (279)      (838)
                                                            -------    -------
       Net cash provided by operating activities......       53,340     14,672

Investing activities:
   Construction expenditures..........................      (18,601)   (32,359)
   Allowance for equity funds used during construction           (3)         5
   Cost of disposition of property, plant and equipment      (1,013)         -
   Purchase of other investments......................          (62)      (707)
                                                            -------    -------
       Net cash used in investing activities..........      (19,679)   (33,061)

Financing activities:
   Redemption of long-term notes and bonds............            -    (14,755)
   Short-term borrowings - net........................       (2,982)    65,750
   Dividends on common stock..........................      (22,546)   (22,506)
                                                            -------    -------
       Net cash provided by (used in) financing 
          activities .................................      (25,528)    28,489
                                                            -------     ------
       Net increase in cash and temporary cash
          investments ................................        8,133     10,100
       Cash and temporary cash investments at beginning
          of period ..................................          986     40,609
                                                                ---     ------
       Cash and temporary cash investments at end of
          period .....................................     $  9,119   $ 50,709
                                                           ========   ========



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


                                       12

<PAGE>


                   NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


1.  Summary of Significant Accounting Policies (NCE, PSCo and SPS)

      Effective August 1, 1997,  following the receipt of all required state and
Federal  regulatory  approvals,  PSCo and SPS  merged in a  tax-free  "merger of
equals"   transaction  and  became   wholly-owned   subsidiaries  of  NCE.  Each
outstanding share of PSCo common stock was canceled and converted into the right
to receive  one share of NCE common  stock,  and each  outstanding  share of SPS
common stock was canceled  and  converted  into the right to receive 0.95 of one
share of NCE common  stock.  Effective  with the  Merger,  certain  utility  and
non-utility   subsidiaries  were  transferred  within  NCE's  common  controlled
subsidiaries.  The common stock of Quixx and UE, former SPS  subsidiaries,  were
transferred  through the sale by SPS of the common stock of such subsidiaries at
net book value,  aggregating  approximately $119.0 million, to NC Enterprises in
exchange for notes payable of NC  Enterprises.  Subsidiaries  of PSCo (Cheyenne,
WGI, e prime and Natural Fuels) were  transferred by a declaration of a dividend
of the subsidiaries' stock, at net book value,  aggregating  approximately $49.9
million to NCE. NCE subsequently made a capital  contribution of the e prime and
Natural Fuels common stock, at net book value,  aggregating  approximately $29.5
million to NC Enterprises.

      The NCE consolidated condensed financial statements reflect the accounting
for the  Merger as a pooling  of  interests.  The  Company's  1997  consolidated
condensed statements of income and cash flows include the consolidated financial
statements for both PSCo and SPS for the three months ended March 31, 1997.

Business, Utility Operations and Regulation

      NCE is a  registered  holding  company  under the  PUHCA  and its  utility
subsidiaries (PSCo, SPS and Cheyenne) are engaged principally in the generation,
purchase,  transmission,  distribution  and  sale  of  electricity  and  in  the
purchase,  transmission,  distribution,  sale and transportation of natural gas.
Both the Company and its subsidiaries  are subject to the regulatory  provisions
of the PUHCA. The utility subsidiaries are subject to regulation by the FERC and
state utility commissions in Colorado,  Texas, New Mexico,  Wyoming,  Kansas and
Oklahoma.  Over 90% of the  Company's  revenues are derived  from its  regulated
utility operations.

      Regulatory Assets and Liabilities

      The Company's regulated subsidiaries prepare their financial statements in
accordance  with the provisions of SFAS 71, as amended.  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.



                                       13
<PAGE>


       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

      The  following   regulatory  assets  are  reflected  in  the  accompanying
condensed consolidated balance sheets (in thousands):

March 31, 1998                              NCE           PSCo            SPS
                                          ------         ------         -----

Income taxes .......................     $158,889       $80,816       $78,604
Nuclear decommissioning costs.......       75,252        75,252              -
Employees' postretirement benefits
  other than pensions ..............       61,613        58,620          2,993
Early retirement costs..............        5,703         4,430          1,273
Employees' postemployment 
  benefits (Note 3) ................       24,335        23,835              -
Demand-side management costs........       41,898        37,824          4,074
Unamortized debt reacquisition costs       35,824        17,285         17,960
Thunder Basin judgment (Note 3).....        4,921             -          4,921
Other...............................        9,483         2,145          7,339
                                           ------        ------         ------
  Total.............................     $417,918      $300,207       $117,164
                                         ========      ========       ========

December 31, 1997                           NCE           PSCo            SPS
                                          ------         ------         -----

Income taxes........................     $162,985       $84,356        $79,161
Nuclear decommissioning costs.......       76,881        76,881              -
Employees' postretirement benefits
  other than pensions...............       63,023        59,995          3,028
Early retirement costs..............        8,008         6,645          1,363
Employees' postemployment 
  benefits (Note 3) ................       24,455        23,932              -
Demand-side management costs........       42,503        38,518          3,985
Unamortized debt reacquisition costs       36,717        17,791         18,344
Thunder Basin judgment (Note 3).....        5,912             -          5,912
Other...............................        9,991         2,540          7,451
                                           ------        ------         ------
  Total.............................     $430,475      $310,658       $119,244
                                         ========      ========       ========

      The regulatory assets of the Company's regulated  subsidiaries as of March
31, 1998 and December 31, 1997 are reflected in rates charged to customers  over
periods  ranging  from two to thirty  years.  The Company  believes  its utility
subsidiaries will continue to be subject to rate regulation. 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's  subsidiaries  could be required to  write-off  their  regulatory
assets, determine any impairment to other assets resulting from deregulation and
write-down any impaired assets to their estimated fair value, which could have a
material adverse effect on NCE's, PSCo's and SPS's financial  position,  results
of operations or cash flows.

      On January  27,  1997,  the CPUC  issued its order on PSCo's 1996 gas rate
case. The CPUC allowed  recovery of  postemployment  benefit costs on an accrual
basis under SFAS 112 and denied  amortization of the approximately  $8.9 million
regulatory  asset recognized upon the adoption of SFAS 112. PSCo has appealed in
the Denver District Court the decision related to this issue. PSCo believes that
it will be  successful  on appeal and that the  associated  regulatory  asset is
realizable.  On April 1, 1998, in connection  with PSCo's  earnings test filing,
PSCo has requested  approval to recover its electric  jurisdictional  portion of
the  postemployment  benefit costs regulatory asset totaling  approximately  $15
million over three years. PSCo believes that it will be allowed recovery of SFAS
112 costs on an accrual basis. If PSCo is ultimately  unsuccessful in its appeal
of the gas rate case  decision  and/or in its  request to recover  its  electric
jurisdictional  regulatory asset, all unrecoverable  amounts will be written off
(see Note 3. Regulatory Matters - Electric  Department Earnings Test and Quality
of Service Plan).


                                       14

<PAGE>

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)


      As of March 31, 1998,  SPS has  approximately  $4.9 million in  regulatory
assets  associated with the Thunder Basin judgment.  The judgment amount paid is
recoverable from customers subject to review by various regulatory agencies (see
Note 3. Regulatory Matters - Electric and Gas Cost Adjustment Mechanisms).

Non-utility Subsidiaries and International Investments

      The  Company's  non-utility   subsidiaries  are  principally  involved  in
engineering, design and construction management,  non-regulated energy services,
including  gas and power  marketing,  the  management of real estate and certain
life  insurance  policies,  the financing of certain  current assets of PSCo and
investments in  cogeneration  facilities,  electric  wholesale  generators and a
foreign utility company. The Company's international  investments are subject to
regulation  in the  countries  in which such  investments  are made (see Note 2.
Investment in Yorkshire Power). Financial statements of foreign subsidiaries are
translated into U.S.  dollars at current  exchange  rates,  except for revenues,
costs and expenses which are translated at average current exchange rates during
each reporting period.

Statements of Cash Flows - Non-cash Transactions:

      Effective  February 26, 1998,  the Company  issued  222,362  shares of its
common  stock,  valued at the market price on date of issuance of  approximately
$10 million to the Employees' Savings and Stock Ownership Plan of Public Service
Company of Colorado and Participating Subsidiary Companies. Prior to the Merger,
during 1997,  PSCo issued  250,058  shares of its common stock to the Employees'
Savings and Stock  Ownership  Plan of Public  Service  Company of  Colorado  and
Participating  Subsidiary  Companies  valued  at the  market  price  on  date of
issuance of  approximately  $10  million.  The  estimated  issuance  values were
recognized in other operating expenses during the respective preceding years.

      On March 31, 1998,  PSCo sold its common stock  investment  in NCI (at net
book value of approximately  $292.6 million) to NC Enterprises,  a subsidiary of
NCE.  Consideration  paid by NC  Enterprises  for such sale was a 20 year  7.02%
promissory note (see Note 2. Investment in Yorkshire Power).

Comprehensive Income

      The Company and its subsidiaries adopted Statement of Financial Accounting
Standards No. 130 Reporting Comprehensive Income, effective January 1, 1998. The
individual  and  cumulative  components  of other  comprehensive  income are not
material to the Company and its subsidiaries.

General

      See Note 1. of the Notes to  Consolidated  Financial  Statements in NCE's,
PSCo's and SPS' 1997 Annual  Report on Form 10-K for a summary of the  companies
and their  subsidiaries  significant  accounting  policies.  Certain  prior year
amounts have been reclassified to conform to the current year's classification.

2. Investment in Yorkshire Power (NCE and PSCo)

      During the second quarter of 1997,  Yorkshire Power, a subsidiary  equally
owned by PSCo, through NCI, and AEP, acquired  indirectly all of the outstanding
ordinary shares of Yorkshire Electricity,  a United Kingdom regional electricity
company.  NCI accounts for its  investment  in Yorkshire  Power using the equity
method.  Yorkshire  Power's  results of  operations  include  100% of  Yorkshire
Electricity's  results since April 1, 1997.  NCI's equity  earnings in Yorkshire
Power is 50%, the same as its ownership share.

      The total  consideration  paid by Yorkshire Power was  approximately  $2.4
billion (1.5 billion pounds sterling). The acquisition was financed by Yorkshire
Power through a combination of approximately 25% equity and 75% debt,  including
the assumption of the existing debt of Yorkshire Electricity.  The funds for the

                                       15

<PAGE>

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)


acquisition were obtained from PSCo's and AEP's investment in Yorkshire Power of
approximately  $360  million  (220  million  pounds  sterling)  each,  with  the
remainder obtained by Yorkshire Power through the issuance of non-recourse debt.
PSCo funded its entire equity investment in Yorkshire Power through $250 million
of  publicly  issued  secured  medium-term  notes with  varying  maturities  and
drawings  of  approximately  $110  million  on its  short-term  lines of  credit
pursuant to its short-term credit agreement with Bank of America, as agent.

     As approved by the SEC on May 14, 1998 under the PUHCA, effective March 31,
1998,  PSCo sold its common stock  investment in NCI to NC  Enterprises,  an NCE
subsidiary.  NCI's  primary  investment  is Yorkshire  Power.  PSCo  received as
consideration  a 20 year  promissory  note from NC  Enterprises in the amount of
approximately  $292.6  million.  Annual  interest  payments are required for the
first three years followed by principal and interest  payments for the remaining
seventeen  years.  The interest  rate on the note is 7.02%.  NCE intends to make
additional capital contributions to NC Enterprises to provide the necessary cash
flow requirements to make payments on the promissory note to PSCo.

      Summarized  income statement  information for the three months ended March
31, 1998 is presented below (in millions):

    Yorkshire Power:
      Operating revenues.......................    $  663.2
                                                   --------

      Operating income.........................        89.7
                                                   --------

      Net income (1)...........................    $    6.9
                                                   ========

      NCI's equity in earnings of Yorkshire Power  $    3.4
                                                   ========

  (1)Includes a penalty,  which was  applicable to all United  Kingdom  regional
     electricity  utilities,  designed to recognize  the effects of the delay in
     implementation  of full  competition for the period April 1998 to September
     1998 (Yorkshire Power's portion was $8.3 million).

      The  unaudited pro forma  financial  information  presented  below for NCE
assumes  that  Yorkshire  Power was  acquired on January 1, 1997.  The pro forma
adjustments include recognition of equity in the estimated earnings of Yorkshire
Power, an adjustment for interest expense on debt associated with the investment
in Yorkshire Power and related income taxes. The estimated earnings of Yorkshire
Power were based on historical earnings of Yorkshire  Electricity,  prior to its
acquisition by Yorkshire Power,  adjusted for the estimated  effects of purchase
accounting (including the amortization of goodwill), conversion to United States
generally  accepted  accounting  principles,  interest expense on debt issued by
Yorkshire Power associated with the acquisition and related income taxes.  Sales
of electricity are affected by seasonal  weather  patterns and,  therefore,  the
results of Yorkshire Power/Yorkshire  Electricity will not be distributed evenly
during the year. Equity in earnings of Yorkshire Power has been converted at the
average  exchange rates for the quarter ended March 31, 1998 and March 31, 1997,
of $1.646/pound and $1.632/pound, respectively.


                                       16
<PAGE>

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)


      Based on the  above  assumptions,  shown  below  is  unaudited  pro  forma
financial  information  for the three  months  ended March 31, 1998 and 1997 (in
millions, except per share amounts):

                                                      NCE Earnings
                                             Available for
                                             common stock     Per share (1)
                                             ------------     -------------
                                              1998   1997     1998    1997
                                              ----   ----     ----    ----

Net income.............................      $86.1  $ 78.2    $0.78   $0.75
                                                              =====   =====
Pro forma adjustments:

  Equity in earnings of
   Yorkshire Power, net of
   U.S. tax benefits (2)...............          -   (10.1)

  Interest expense, net of tax.........          -    (3.5)
                                             -----   ------
Pro forma result.......................      $86.1  $ 64.6    $0.78   $0.62
                                             =====  ======    =====   =====

  (1) Based on the weighted average number of common shares  outstanding for the
      period.
  (2) The first quarter of 1997 amount includes $24.0 million ($17.9 million
      after-tax) of write-offs related to certain  computer  development  costs,
      acquisition  expenses  and  costs   incurred  for  the   preparation   for
      deregulation.

      The unaudited pro forma  financial  information  presented  below for PSCo
assumes  that  NCI  (primarily  representing  Yorkshire  Power)  was  sold to NC
Enterprises  effective  January 1, 1997.  NCI was formed in connection  with the
investment  in  Yorkshire  Power and had no  operations  during the first  three
months of 1997.  The pro forma  adjustments  represent  the removal of NCI's net
income  from PSCo for the first  quarter of 1998 and the  inclusion  of interest
income, net of tax, from the promissory note to PSCo from NC Enterprises.

      Based  upon the above  assumptions,  shown  below is  unaudited  pro forma
financial information for the three months ended March 31, 1998 (in millions):

                                                               PSCo
                                                             Earnings
                                                               1998
                                                               ----

Net income...............................................     $ 68.9

Pro forma adjustments:

  NCI's net income ......................................       (2.8)
  Interest income from promissory note, net of tax.......        3.3
                                                              ------

Pro forma result.........................................     $ 69.4
                                                              ======

3. Regulatory Matters (NCE, PSCo and SPS)

Merger Rate Filings

      The discussion below summarizes the significant  conditions imposed by the
state utility regulatory  commissions in Colorado,  Texas, New Mexico,  Wyoming,
Oklahoma and Kansas in their respective approvals of the Merger.

                                       17

<PAGE>

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)


PSCo

      The CPUC decision approving the Merger established a five-year performance
based  regulatory  plan and  acknowledged  that  the  Merger  was in the  public
interest.  The major provisions of the decision  include the following,  some of
which are discussed in other sections of this note:

    - a $6 million annual electric rate reduction, which was instituted October
      1, 1996,  followed by an  additional  $12  million  annual  electric  rate
      reduction  effective with the  implementation of new gas rates on February
      1, 1997;
    - an annual electric  department earnings test with the sharing of earnings
      in excess of an 11% return on equity for the calendar years  1997-2001 and
      the implementation of a Quality of Service Plan;
    - a freeze in base electric rates for the period through  December 31, 2001
      with the  flexibility to make certain other rate changes,  including those
      necessary   to  allow  for  the   recovery  of  DSM,   QF   capacity   and
      decommissioning costs. The freeze in base electric rates does not prohibit
      PSCo from filing a general rate case or deny any party the  opportunity to
      initiate a complaint or show cause proceeding; and
    - the replacement of the ECA with an ICA.

      Subsequent to the CPUC's decision  approving the Merger, the CPUC approved
the recovery of merger costs,  amortized  from the effective  date of the Merger
through  December  31,  2001.  PSCo has  expensed  merger  costs as incurred and
recovery of such costs will be  reflected in the  electric  department  earnings
test,  discussed  below in  Electric  Department  Earnings  Test and  Quality of
Service Plan.  Merger costs  attributable to Colorado gas retail  customers were
included  in the gas rate case  approved  by the CPUC,  discussed  below in Rate
Cases- PSCo Retail Gas.

SPS

      Under the  various  regulatory  commission  approvals,  SPS is required to
provide  credits to  customers  over five  years for  one-half  of the  measured
non-fuel  operation and maintenance  expense savings associated with the Merger.
SPS will provide  guaranteed  minimum annual  credits to retail  customers of $3
million in Texas,  $1.2 million in New Mexico,  $100,000 in Oklahoma and $10,000
in Kansas and $1.5 million to wholesale customers.

Cheyenne

      The WPSC  approved the Merger on August 16, 1996.  Cheyenne  agreed not to
file a retail  electric rate case for two years after the Merger is consummated.
Cheyenne  expects to file a combined gas and electric rate case with the WPSC in
1999 after the two year moratorium expires.

Rate Cases

PSCo
Retail - Gas

      On June 5, 1996, PSCo filed a retail rate case with the CPUC requesting an
annual increase in its jurisdictional  gas department  revenues of approximately
$34  million.   In  early  1997,  the  CPUC  approved  an  overall  increase  of
approximately $18 million with an 11.25% return on equity, effective February 1,
1997 and as  modified  on May 15,  1997.  The CPUC  disallowed  the  recovery of
certain  postemployment  benefit  costs under SFAS 112 and  imputed  anticipated
merger  related  savings net of costs  related to the gas business  (see Note 1.
Summary of  Significant  Accounting  Policies).  PSCo filed a petition  with the
Denver District Court appealing the CPUC's decision.  A decision from the Denver
District Court is expected in the last half of 1998.


                                       18
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)


SPS

New Mexico

      On November 17, 1997, the NMPUC issued an order investigating SPS's rates.
In the order, the NMPUC  determined that because of the rapid changes  occurring
in the  electric  industry  there is a need for the NMPUC to  require  rate case
filings  by the  major  electricity  suppliers  who have not  adopted  a plan to
provide  retail  open  access  and  customer  choice of  suppliers.  SPS filed a
compliance filing on May 5, 1998, proposing a $1.7 million annual rate reduction
for certain retail customers in New Mexico,  which incorporates the $1.2 million
guaranteed minimum annual credits, discussed above.

Wholesale - FERC

      On December  19,  1989,  the FERC issued its final order  regarding a 1985
wholesale rate case. SPS 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  SPS's claim of an offsetting
cost and  limiting  the FERC's  actions.  The FERC issued its Order on Remand in
July  1992,  the  required  filings  were made and a hearing  was  completed  in
February  1994. In October 1994, the  administrative  law judge ("ALJ") issued a
favorable  initial  decision  that,  if approved by the FERC,  would result in a
substantial revenue recovery for SPS. Negotiated  settlements with SPS's partial
requirements  customers  and TNP  were  approved  by the  FERC in July  1993 and
September  1993,  respectively,  and SPS received  approximately  $2.8  million,
including  interest.  In a  settlement  with  SPS's New  Mexico  rural  electric
cooperative  customers,  SPS  received  approximately  $7.0  million,  including
interest.  The FERC approved this settlement in July 1995.  Resolutions of these
matters  with the  remaining  wholesale  customers,  the  Golden  Spread  member
cooperatives and Lyntegar Electric  Cooperative,  have not been achieved. On May
5, 1998, the FERC issued its opinion  substantially  modifying the ALJ's initial
decision,  raising  issues  which may lower  amounts  previously  expected to be
recoverable from wholesale customers. SPS is evaluating the impact of the FERC's
order.

Cheyenne

      On May 12,  1997,  Cheyenne  filed  an  application  with  the WPSC for an
overall annual increase in retail gas revenues of  approximately  $1.25 million.
On September  23, 1997,  the WPSC approved an increase in retail gas revenues of
approximately  $1.19 million with an 11.71% return on equity,  effective October
1, 1997.

Electric and Gas Cost Adjustment Mechanisms

PSCo

      During 1994 and 1995,  the CPUC  conducted  several  proceedings to review
issues  related to the ECA.  The CPUC opened a docket to review  whether the ECA
should be  maintained in its then present form,  altered or  eliminated,  and on
January 8, 1996,  combined this docket with the merger docket  discussed  above.
The CPUC  decision on the Merger  modified and replaced the ECA with an ICA. The
ICA, which became  effective  October 1, 1996,  allows for a 50%/50%  sharing of
certain  fuel and energy  cost  increases  and  decreases  among  customers  and
shareholders.  As of March  31,  1998,  PSCo  has  deferred  approximately  $1.2
million,  as recoverable fuel and energy costs.  Management does not believe the
cost  adjustment  mechanism  will have a  significant  impact  on the  Company's
results of operations, financial position or cash flows.

      The CPUC had a docket to review and prescribe a  standardized  GCA process
to determine the prudence of gas commodity and pipeline  delivery  service costs
incurred by gas  utilities.  Other  issues  addressed  in this  docket  included
whether the GCA should be maintained in its present form, altered or eliminated.
The CPUC issued an order on May 7, 1997,  which  provides for the current GCA to
be maintained and the adoption of certain  standardized  filing and gas purchase
reporting  requirements.  In early  1998,  the CPUC  issued  another  Notice  of
Proposed  Rulemaking  seeking


                                       19
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

comments  on various  customer  notice  and  reporting  requirements  related to
changes in gas costs.  On March 25, 1998,  the CPUC  decision was issued with no
material changes to the GCA.

SPS

Texas

      A PUCT  substantive rule requires  periodic  examination of SPS'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.
Under the PUCT's  regulations,  SPS is required to file an  application  for the
Commission to retrospectively review, at least every three years, the operations
of a utility's electricity generation and fuel management  activities.  SPS will
file a reconciliation in 1998 for the generation and fuel management  activities
totaling  approximately  $690 million,  for the period from January 1995 through
December  1997.  For this same period,  SPS had  approximately  $21.2 million in
underrecovered  fuel  costs  associated  with  the  Texas  retail  jurisdiction.
Currently,  Texas retail customers are being surcharged for  approximately  $6.4
million of such  underrecovered  fuel costs. This surcharge does not include the
Thunder Basin judgment discussed below.

      On  May  1,  1995,  SPS  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 SPS 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  SPS to pass  through  to  customers  100% of
margins from non-firm  off-system  opportunity  sales as of January 1995.  Prior
PUCT  rulings  had  allowed  SPS to retain 25% of these  margins.  The 100% flow
through is required by PUCT rules,  absent a waiver.  A motion for  rehearing on
the fuel  disallowance  (which was adjusted to $1.9  million)  was  subsequently
denied by the PUCT and SPS was  ordered  to flow  through  100% of the  non-firm
off-system sales margin effective with the first billing cycle after the date of
the order.  Upon appeal by SPS to the Travis County  District Court in May 1996,
the PUCT's  decision on the disallowed  fuel costs was upheld.  SPS appealed the
decision  and on January  29,  1998 the Texas  Court of Appeals  upheld the PUCT
decision to disallow fuel costs.  On March 16, 1998,  SPS filed an appeal to the
Supreme Court of Texas.

      SPS was named as a defendant in a case entitled Thunder Basin Coal Co. vs.
Southwestern  Public Service Co., No.  93-CV304B (D. Wyo.). On November 1, 1994,
the jury  returned a verdict in favor of Thunder  Basin and  awarded  damages of
approximately  $18.8  million.  SPS 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.  SPS filed a motion  for  rehearing  which was
denied. In February 1997, SPS recorded the liability for the judgment  including
interest and court costs. The amount of approximately  $22.3 million was paid in
April 1997.

      On September 17, 1996, the FERC issued an order  granting SPS  conditional
approval  to  collect  the FERC  jurisdictional  portion  of the  Thunder  Basin
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,  SPS  filed a  request  with the  PUCT to  surcharge
undercollected fuel and purchased power expenses, which included $9.1 million of
the Thunder Basin  judgment.  In November 1997, the PUCT issued a decision which
denied  recovery of the judgment  through a  surcharge,  on the grounds that the
costs are not  classified  as fuel costs.  In 1997,  SPS expensed  approximately
$12.1  million of the Texas retail  jurisdictional  portion of the Thunder Basin
judgment and recognized an equal amount as deferred  revenue in  anticipation of
future recovery through the fuel reconciliation proceeding.

      SPS believes that recovery of the Thunder Basin costs for the Texas retail
jurisdiction will be approved in a fuel  reconciliation  proceeding in 1998, but
cannot predict the ultimate outcome.  Under the PUCT regulations,  a utility may
recover  eligible  fuel  expenses  or  fuel-related  expenses,  which  result in
benefits to customers that exceed the costs that customers  would otherwise have
to pay.  The Thunder  Basin costs  resulted in total net savings to customers of
$8.9 million,  of which $4.8 million net savings is attributable to Texas retail
jurisdictional customers.



                                       20
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)


Electric Department Earnings Test and Quality of Service Plan

PSCo

      The CPUC's  decision  on the Merger  implemented  an  electric  department
earnings  test with the sharing of earnings in excess of an 11% return on equity
for the calendar years 1997-2001 as follows:

           Electric Department      Sharing of Excess Earnings
           Return on Equity        Customers        Shareholders
           ----------------        ---------        ------------
               11-12%               65%              35%
               12-14%               50%              50%
               14-15%               35%              65%
             over 15%              100%               0%

      The CPUC's  decision on the Merger also  implemented a QSP which  provides
for bill  credits  totaling up to $5 million in year one and  increasing  to $11
million in year five,  if PSCo does not  achieve  certain  performance  measures
relating to electric reliability,  customer complaints and telephone response to
inquiries.  On  October  15,  1997,  the CPUC  issued  an order  addressing  the
implementation  of a reward mechanism in the QSP which provides up to $3 million
of annual  rewards if PSCo achieves  certain  performance  measures  relating to
electric reliability.

      On April 1, 1998, PSCo filed with the CPUC its proposed Performanced-Based
Regulatory  Plan adjustment for calendar year 1997. This adjustment will provide
the means for implementing the sharing  mechanism for the customers'  portion of
earnings over PSCo's  authorized  return on equity threshold  resulting from the
1997 electric  department earnings test, net of QSP reward earned revenue. As of
December 31, 1997,  PSCo  recorded an estimated  customer  refund  obligation of
approximately  $16.4 million  related to the 1997 electric  department  earnings
test, net of QSP rewards. As of March 31, 1998, PSCo has recorded a liability of
approximately $5.6 million for the 1998 electric department earnings test.

4. Commitments and Contingencies (NCE, PSCo and SPS)

Environmental Issues

      The Company  and its  subsidiaries  are  subject to various  environmental
laws, including  regulations governing air and water quality and the storage and
disposal of hazardous or toxic wastes. The Company and its subsidiaries  assess,
on an ongoing basis,  measures to ensure  compliance  with laws and  regulations
related  to air and water  quality,  hazardous  materials  and  hazardous  waste
compliance and remediation activities.

Environmental Site Cleanup

      As described below, PSCo has been or is currently  involved with the clean
up of contamination from certain hazardous substances.  In all situations,  PSCo
is pursuing or intends to pursue  insurance  claims and believes it will recover
some portion of these costs through such claims. Additionally, where applicable,
PSCo  intends to pursue  recovery  from other  Potentially  Responsible  Parties
("PRPs"). To the extent such costs are not recovered, PSCo currently believes it
is  probable  that such  costs will be  recovered  through  the rate  regulatory
process.  To the extent any costs are not recovered  through the options  listed
above,  PSCo would be required to  recognize  an expense for such  unrecoverable
amounts.

      Under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), the U.S. Environmental Protection Agency ("EPA") identified, and
a  Phase  II   environmental   assessment   revealed,   low  level,   widespread
contamination from hazardous  substances at the Barter Metals Company ("Barter")
properties located in



                                       21
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

central Denver.  For an estimated 30 years, PSCo sold scrap metal and electrical
equipment to Barter for  reprocessing.  PSCo has  completed  the cleanup of this
site at a cost of approximately  $9 million and has received  responses from the
Colorado Department of Public Health and Environment  ("CDPHE")  indicating that
no further action is required related to these  properties.  On January 3, 1996,
in a lawsuit by PSCo against its insurance providers,  the Denver District Court
entered  final  judgment  in favor of PSCo in the  amount  of $5.6  million  for
certain  cleanup  costs at Barter.  Several  appeals and cross appeals have been
filed  by one of the  insurance  providers  and  PSCo in the  Colorado  Court of
Appeals.  The insurance  provider has posted  supersedeas bonds in the amount of
$9.7 million ($7.7 million  attributable  to the Barter  judgment).  On July 10,
1997,  the Colorado  Court of Appeals  overturned  the  previously  awarded $7.7
million judgment on the basis that the jury had not been properly  instructed by
the Judge regarding a narrow issue associated with certain policies. Previously,
PSCo had received  certain  insurance  settlement  proceeds from other insurance
providers for Barter and other  contaminated  sites and a portion of those funds
remains to be allocated to this site by the trial court. In addition,  in August
1996, PSCo filed a lawsuit against four PRPs seeking  recovery of certain Barter
related costs.  Settlement has been achieved with two smaller PRP's. On December
16, 1997,  the U. S.  District  Court awarded  summary  judgment in favor of the
remaining  PRPs,  on the basis PSCo failed to follow  CERCLA  guidelines  in the
cleanup.  On January 15, 1998,  PSCo  appealed the summary  judgment to the U.S.
Court of Appeals. In March 1998, PSCo sold the remaining Barter properties,  and
the total proceeds of were $1.2 million.

      PCB presence was identified in the basement of an historic office building
located in downtown Denver.  The Company was negotiating the future cleanup with
the current owners; however, on October 5, 1993, the owners filed a civil action
against  PSCo in the Denver  District  Court.  The action  alleged that PSCo was
responsible  for the PCB  releases and  additionally  claimed  other  damages in
unspecified  amounts.  On August 8, 1994,  the Denver  District  Court entered a
judgment  approving a $5.3  million  offer of  settlement  between  PSCo and the
building owners resolving all claims. In December 1995, complaints were filed by
PSCo against all applicable  insurance carriers in the Denver District Court. On
June 30,  1997,  the Court ruled in favor of the  carriers  on summary  judgment
motions  addressing late notice and other issues. On August 27, 1997, PSCo filed
an appeal of the decision with the Colorado Court of Appeals.  Two carriers were
excluded from this proceeding; subsequently, one carrier received approval to be
dismissed on the same basis as the other carriers. In March 1998, PSCo reached a
settlement with the remaining  carrier.  The Company is pursuing the recovery of
$3.3 million net costs in the  electric  department  earnings  test over a three
year period.

      In addition to these sites, PSCo has identified  several other sites where
clean up of hazardous substances may be required.  While potential liability and
settlement costs are still under  investigation  and negotiation,  PSCo believes
that the resolution of these matters will not have a material  adverse effect on
PSCo's  financial  position,  results of  operations  or cash flows.  PSCo fully
intends  to pursue the  recovery  of all  significant  costs  incurred  for such
projects through insurance claims and/or the rate regulatory process.

Other Environmental Matters

      Under the Clean Air Act  Amendments  of 1990  ("CAAA"),  coal fueled power
plants are required to reduce SO2 and NOx emissions to specified  levels through
a phased  approach.  PSCo's and SPS's  facilities  must comply with the Phase II
requirements,  which  will be  effective  in the  year  2000.  Currently,  these
regulations  permit  compliance  with SO2  emission  limitations  by  using  SO2
allowances  allocated  to  plants  by the EPA,  using  allowances  generated  by
reducing  emissions at existing  plants and by using  allowances  purchased from
other  companies.  The Company  expects to meet the Phase II emission  standards
placed on SO2  through the  combination  of: a) use of low sulfur  coal,  b) the
operation of air quality control equipment on certain generation facilities, and
c) allowances issued by the EPA and purchased from other companies. PSCo and SPS
will be  required to modify  certain  boilers by the year 2000 to reduce the NOx
emissions in order to comply with Phase II requirements.  The estimated Phase II
costs for future plant  modifications  to meet NOx requirements is approximately
$14.4 million for PSCo's Cherokee Unit 1 and 2 and Arapahoe Unit 3.

      SPS installed two new gas turbines at its Cunningham  Station in 1997. The
two  gas  turbine  units  have  undergone   performance   testing  to  meet  the
requirements of the air quality permit. The test results indicated the units may



                                       22
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

not be in compliance with certain emission limitations.  SPS is working with the
vendor and the New Mexico Environmental Department to ensure compliance with all
permit limits.

      PSCo has announced its  intention to spend  approximately  $211 million on
its Denver and Boulder  Metro area  coal-fueled  power plants to further  reduce
such emissions below the required  regulatory  levels  discussed above, but will
only do so if the following  three  conditions are met: 1) the Colorado  General
Assembly  and the  CPUC  approve  recovery  of  these  costs,  2)  PSCo  obtains
flexibility  in  operating  the  plants  and 3) PSCo  is  assured  the  emission
reduction plan is sufficient to meet future state requirements for 15 years.

Hayden Steam Electric Generating Station

      On May 21, 1996, PSCo and the other joint owners of Hayden Station reached
an agreement resolving  violations alleged in complaints filed by a conservation
organization,  the  CDPHE and the EPA  against  the  joint  owners.  PSCo is the
operator  and owns an average  undivided  interest of  approximately  53% of the
station's two generating  units. In connection  with the  settlement,  the joint
owners of the Hayden station were required to install emission control equipment
of approximately $130 million (PSCo's portion is approximately $70 million). The
settlement  included  stipulated future penalties for failure to comply with the
terms  of the  agreement,  including  specific  provisions  related  to  meeting
construction  deadlines  associated with the installation of additional emission
control  equipment  and  complying  with  particulate,  SO2  and  NOx  emissions
limitations.  In  August  1996,  the U.S.  District  Court for the  District  of
Colorado  entered the  settlement  agreement  which  effectively  resolved  this
litigation.  The Company is completing the  installation of the emission control
equipment.

Craig Steam Electric Generating Station

      On October 9, 1996, a conservation  organization  filed a complaint in the
U.S.  District  Court  pursuant to  provisions of the Federal Clean Air Act (the
"Act") against the joint owners of the Craig Steam Electric  Generating  Station
located in western Colorado.  Tri-State Generation and Transmission Association,
Inc. is the operator of the Craig  station and PSCo owns an  undivided  interest
(acquired  in  April  1992)  in  each  of  two  units  at the  station  totaling
approximately  9.7%. The plaintiff alleged that: 1) the station exceeded the 20%
opacity  limitations in excess of 14,000 six minute  intervals during the period
extending from the first quarter of 1991 through the second quarter of 1996, and
2) the owners failed to operate the station in a manner consistent with good air
pollution  control  practices.  The complaint seeks,  among other things,  civil
monetary  penalties and injunctive  relief. The Act provides for penalties of up
to $25,000  per day per  violation,  but the level of  penalties  imposed in any
particular  instance  is  discretionary.  A  settlement  conference  was held in
February 1998, although no settlement was reached. Resolution of this matter may
require installation of emission control equipment.  Management does not believe
that this  potential  liability,  the future impact of this  litigation on plant
operations,  or any related cost will have a material  adverse  impact on PSCo's
financial position, results of operations, or cash flows.

Pepsi Center

      Hazardous substances resulting from manufactured gas plant operations have
been  identified  at  the  site  of the  Pepsi  Center,  a  sports  arena  under
construction in lower downtown  Denver.  The site owners have  approached  PSCo,
seeking  recovery of most of the costs of cleanup of the site.  Total  estimated
soil  cleanup  costs  range from $1-2  million.  The  estimate  does not include
potential costs to clean up affected ground water contamination,  if any exists.
PSCo's insurance carriers have been notified.

Fort St. Vrain

      In 1989, PSCo announced its decision to end nuclear operations at Fort St.
Vrain.   Defueling  of  the  reactor  to  the  Independent  Spent  Fuel  Storage
Installation  ("ISFSI") was completed in June 1992. In March 1996,  PSCo and the
decommissioning   contractors   announced  that  the  physical   decommissioning
activities  at the  facility  had been  completed.  The final  site  survey  was
completed  in late October  1996.  On August 5, 1997,  the NRC  approved  PSCo's
request to


                                       23
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

terminate the Part 50 license. This concluded the decommissioning  activities as
the facilities and site were released for unrestricted use.

      On February 9, 1996, PSCo and the DOE entered into an agreement  resolving
all the  defueling  issues.  As part of this  agreement,  PSCo has agreed to the
following:  1) the DOE assumed title to the fuel currently  stored in the ISFSI,
2) the DOE will assume title to the ISFSI and will be responsible for the future
defueling and decommissioning of the facility, 3) the DOE agreed to pay PSCo $16
million  for the  settlement  of  claims  associated  with the  ISFSI,  4) ISFSI
operating and maintenance costs,  including  licensing fees and other regulatory
costs, will be the  responsibility of the DOE, and 5) PSCo provided to the DOE a
full and complete  release of claims  against the DOE resolving all  contractual
disputes  related to  storage/disposal  of Fort St. Vrain spent nuclear fuel. On
December 17, 1996,  the DOE submitted a request to the NRC to transfer the title
of the ISFSI.  This  request is being  reviewed by the NRC and PSCo  anticipates
approval in late-1998.

      Under  the   Price-Anderson   Act,  PSCo  remains   subject  to  potential
assessments  levied in response to any  nuclear  incidents  prior to early 1994.
PSCo continues to maintain primary  commercial  nuclear  liability  insurance of
$100  million for the Fort St.  Vrain site and the  adjoining  ISFSI.  PSCo also
maintains   coverage   of  $20.4   million  to  provide   property   damage  and
decontamination protection in the event of an accident involving the ISFSI.

Employee Matters

      Several employee  lawsuits have been filed against PSCo involving  alleged
discrimination  or workers'  compensation  issues  which have arisen  during the
normal course of business.  Also, lawsuits have been filed against PSCo alleging
breach of certain fiduciary duties to employees.  The plaintiffs lawsuits are in
various stages of litigation and/or appeal(s), including settlement discussions,
with the appropriate state and federal judicial courts. PSCo intends to contest,
or is actively contesting,  all such lawsuits, and believes the ultimate outcome
will not have a material adverse impact on PSCo's financial position, results of
operations or cash flows.

      During 1996,  ninety former  Information  Technology and Systems  ("IT&S")
employees filed a lawsuit against the Company.  The complaint  alleged that PSCo
unfairly  amended its severance plan in connection with a restructuring  in late
1994 to exclude the IT&S function/positions that were outsourced to a subsidiary
of IBM,  effective February 1, 1995. On June 16, 1997, the Denver District Court
issued  a  decision  in  favor  of  the  former  IT&S   employees   and  awarded
approximately  $1.6 million in severance costs and, in a judgment on October 10,
1997, the former IT&S employees were awarded interest and attorney fees as well,
making the total judgment against PSCo $2.1 million. An additional case with 153
former IT&S employees was filed asserting  identical claims.  Settlement on both
cases was achieved in early 1998.  During  1997,  PSCo  accrued  related  costs,
including  estimated  interest and attorney  fees. In early 1998, two additional
lawsuits,  asserting  identical  claims,  were  filed on behalf of a total of 26
former IT&S employees.

Year 2000 Costs

      The Company has further  refined its initial  estimates and now expects to
incur costs of  approximately  $35-40 million during 1998 and 1999 to modify its
computer  software,  hardware and other  automated  systems  used in  operations
enabling  proper  data  processing  relating  to the year 2000 and  beyond.  The
majority  of these  costs will be  incurred  by or  allocated  to the  Company's
operating  utilities,  primarily PSCo and SPS. 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. If such modifications and conversions
are not completed on a timely  basis,  the year 2000 problem may have a material
impact on the operations of the Company.  Management  does not anticipate  these
activities  will  have a  material  adverse  impact on the  financial  position,
results of operations or cash flows of the Company or its subsidiaries.



                                       24
<PAGE>
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

5.  Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust
Holding Solely Subordinated Debentures (NCE, PSCo and SPS)

   In October 1996,  Southwestern Public Service Capital I, a wholly-owned trust
of SPS,  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 SPS's 7.85% Deferrable Interest Subordinated Debentures,  Series A due
September 1, 2036.

   In May 1998, PSCo Capital Trust I, a wholly-owned  trust of PSCo, issued in a
public offering $194 million of its 7.60% Trust Originated Preferred Securities.
The sole asset of the trust is $200  million  principal  amount of PSCo's  7.60%
Deferrable Interest Subordinated Debentures due June 30, 2038. The proceeds from
the issuance of the sale of the 7.60% Trust Originated Preferred Securities will
be used to redeem all of PSCo's  outstanding  preferred stock  (totaling  $181.8
million at March 31, 1998) on June 10, 1998.

6.  Management's Representations (NCE, PSCo and SPS)

   In the opinion of the registrants,  the accompanying  unaudited  consolidated
condensed  financial  statements  for NCE, PSCo and SPS include all  adjustments
necessary for the fair presentation of the financial position of the Company and
its  subsidiaries  at March 31,  1998 and  December  31, 1997 and the results of
operations  and cash flows for the three  months  ended March 31, 1998 and 1997.
The  consolidated  condensed  financial  information and notes thereto should be
read in  conjunction  with  the  consolidated  financial  statements  and  notes
included in the combined 1997 Form 10-K for NCE, PSCo and SPS.

   Because of seasonal  and other  factors,  the results of  operations  for the
three  months  ended  March 31,  1998  should not be taken as an  indication  of
earnings for all or any part of the balance of the year.



                                       25
<PAGE>




                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


TO NEW CENTURY ENERGIES, INC.:

We have reviewed the accompanying  consolidated  condensed  balance sheet of New
Century Energies, Inc. (a Delaware corporation) and subsidiaries as of March 31,
1998, and the related consolidated condensed statements of income and cash flows
for the  three-month  periods  ended  March 31, 1998 and 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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the  consolidated  balance sheet of New Century  Energies,  Inc. and
subsidiaries as of December 31, 1997 (not presented herein),  and, in our report
dated February 13, 1998, we expressed an unqualified  opinion on that statement.
In our  opinion,  the  information  set forth in the  accompanying  consolidated
condensed  balance  sheet as of December  31,  1997,  is fairly  stated,  in all
material respects,  in relation to the consolidated  balance sheet from which it
has been derived.


                                                        ARTHUR ANDERSEN LLP

Denver, Colorado,
May 14, 1998


                                       26
<PAGE>



                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


TO PUBLIC SERVICE COMPANY OF COLORADO:

We have reviewed the accompanying consolidated condensed balance sheet of Public
Service  Company of Colorado (a Colorado  corporation)  and  subsidiaries  as of
March 31, 1998, and the related consolidated  condensed statements of income and
cash flows for the  three-month  periods  ended March 31,  1998 and 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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the consolidated balance sheet of Public Service Company of Colorado
and  subsidiaries  as of December 31, 1997 (not presented  herein),  and, in our
report  dated  February 13, 1998,  we expressed an  unqualified  opinion on that
statement.  In our  opinion,  the  information  set  forth  in the  accompanying
consolidated  condensed balance sheet as of December 31, 1997, is fairly stated,
in all material  respects,  in relation to the  consolidated  balance sheet from
which it has been derived.


                                                        ARTHUR ANDERSEN LLP

Denver, Colorado,
May 14, 1998



                                       27
<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 March 31, 1998, and the related
condensed  statements of income and cash flows for the three-month periods ended
March 31, 1998 and 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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the  balance  sheet of  Southwestern  Public  Service  Company as of
December 31, 1997 (not presented herein),  and, in our report dated February 13,
1998, we expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1997, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.


                                                        ARTHUR ANDERSEN LLP

Denver, Colorado,
May 14, 1998



                                       28
<PAGE>


Item 2.  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations (NCE, PSCo and SPS)

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

Earnings

      Earnings per share were $0.78 for the first quarter of 1998 as compared to
$0.75  for the  first  quarter  of 1997.  The  higher  earnings  were  primarily
attributable  to moderate  increases  in electric and gas sales  resulting  from
continued  customer  growth.  The  increased  sales were  mitigated to a certain
degree by mild weather experienced during the current period.

Electric Operations

      The following table details the change in electric  operating revenues and
energy  costs for the first  quarter of 1998 as  compared  to the same period in
1997.
                                                      Increase (Decrease)
                                                      -------------------
                                                    (Thousands of Dollars)
Electric operating revenues:
 Retail...............................................     $ 4,065
 Wholesale............................................         471
 Non-regulated power marketing........................       9,716
 Other (including unbilled revenues and provision for
    rate refunds) ....................................      (2,621)
                                                            ------ 
  Total revenues......................................      11,631
Fuel used in generation...............................      (7,960)
Purchased power.......................................      21,031
                                                           -------
  Net decrease in electric margin.....................     $(1,440)
                                                           =======

      The following table compares  electric Kwh sales by major customer classes
for the first quarter of 1998 and 1997.
                                              Millions of Kwh Sales
                                                 1998       1997   %Change *
                                                 ----       ----   ---------
Residential ...............................     2,680     2,620      2.3%
Commercial and Industrial  ................     6,592     6,502      1.4
Public Authority ..........................       181       179      0.9
                                                -----     -----
  Total Retail.............................     9,453     9,301      1.6
Wholesale..................................     2,736     2,291     19.4
Non-regulated power marketing..............       823       367      **
                                                -----     -----
Total......................................    13,012   11,959       8.8
                                               ======   ======

*  Percentages are calculated using unrounded amounts
** Percentage  change is  significant,  but  presentation of the amount is not
meaningful

      Electric  margin  decreased  slightly in the first  quarter of 1998,  when
compared to the first  quarter of 1997,  despite a 1.6% increase in total retail
sales and an 8.8% increase in total sales.  PSCo's  recognition  of an estimated
customer  refund  obligation  (approximately  $5.6 million in the first  quarter
1998,  while no obligation was recorded in the first quarter 1997) in connection
with the earnings  sharing in excess of 11% return on equity which  resulted for
the  settlement of the Merger  proceedings  in Colorado (see Note 3.  Regulatory
Matters in Item 1.  FINANCIAL  STATEMENTS)  and PSCo's  retail  rate  reductions
(approximately  $1.6  million)  implemented  in  February  1997 were the primary
contributors to the decrease.  PSCo's higher non-firm  wholesale  electric sales
contributed to increased revenues, but had little impact on electric margin. SPS
for the same  period  had  lower  wholesale  revenues  attributable  to mild wet
weather during the first quarter of 1998 negating the need for irrigation.

                                       29
<PAGE>

      The Company's regulated  subsidiaries had cost adjustment mechanisms which
recognize the majority of the effects of changes in fuel used in generation  and
purchased power costs and allow recovery of such costs on a timely basis. PSCo's
ICA,  which  allows  for a 50%/50%  sharing  of  certain  fuel and  energy  cost
increases and decreases among customers and shareholders,  did not significantly
impact  electric  margin  for the  first  quarter  of 1998 or 1997  (see Note 3.
Regulatory Matters in Item 1. FINANCIAL STATEMENTS).

      Fuel used in  generation  expense  decreased  approximately  $8.0  million
during the first quarter of 1998 as compared to the same quarter in 1997.  Lower
prices of coal and natural gas at SPS were offset by increased generation levels
at PSCo.

      Purchased  power  expense  increased  during the first quarter of 1998, as
compared  to the same  quarter in 1997,  primarily  due to an  increase in power
marketing activities at the Company's non-regulated subsidiaries.

Gas Operations

      The following  table details the change in revenues from gas sales and gas
purchased  for resale  for the first  quarter  of 1998 as  compared  to the same
period in 1997.
                                                     Increase (Decrease)
                                                     -------------------
                                                   (Thousands of Dollars)

Revenues from gas sales (including unbilled revenues).     $26,806
Gas purchased for resale..............................      17,923
                                                           -------
 Net increase in gas sales margin.....................     $ 8,883
                                                           =======

      The following table compares gas Dth deliveries by major customer  classes
for the first quarter of 1998 and 1997.
                                      Millions of Dth Deliveries
                                      --------------------------
                                                1998    1997    % Change *
                                                ----    ----    ----------
Residential................................     39.9    39.6       1.0%
Commercial.................................     19.3    21.3      (9.5)
Non-regulated gas marketing................     16.4    15.6       4.7
                                               -----   -----
  Total Sales..............................     75.6    76.5      (1.2)
Transportation.............................     27.5    25.2       9.3
                                               -----   -----
  Total....................................    103.1   101.7       1.4
                                               =====   =====

*  Percentages are calculated using unrounded amounts

      Gas sales margin increased during the first quarter of 1998, when compared
to the first  quarter  of 1997,  primarily  due to an  increase  in PSCo's  base
revenues associated with the higher rates effective February 1, 1997,  resulting
from the 1996 rate case (see Note 3. Regulatory Matters in Item 1.
FINANCIAL STATEMENTS).

      Gas  transportation,  gathering and  processing  revenues  increased  $1.3
million during the first quarter of 1998,  when compared to the first quarter of
1997,  primarily due to higher  transportation rates effective February 1, 1997,
resulting from the Company's 1996 rate case (see Note 3.  Regulatory  Matters in
Item 1. FINANCIAL STATEMENTS).

      PSCo and  Cheyenne  have in place a GCA  mechanism  for natural gas sales,
which  recognizes  the  majority  of the  effects  of changes in the cost of gas
purchased  for resale and adjusts  revenues to reflect such changes in cost on a
timely  basis.  As a result,  the  changes  in  revenues  associated  with these
mechanisms during the first quarter of 1998, as compared to the first quarter of
1997, had little impact on net income.  However,  the  fluctuations in gas sales
impact  the  amount  of gas the  Company's  gas  utilities  must  purchase  and,
therefore,  along with the  increases and decreases in the per-unit cost of gas,
affect total gas purchased for resale.  The higher per-unit



                                       30
<PAGE>

average cost of gas during the first quarter of 1998,  along with an increase in
the  quantity  of gas  purchased,  contributed  to the  increase  in cost of gas
purchased for resale.

Non-Fuel Operating Expenses and Other Income and Deductions

      Other  operating and maintenance  expenses  increased $12.6 million during
the first quarter of 1998, as compared to the same period in 1997, primarily due
to higher operating costs from  non-regulated  operations and higher advertising
costs,  offset, in part, by lower labor and employee benefit costs  attributable
to the Company's overall costs containment efforts.

      Other income and deductions  increased  approximately  $6.1 million during
the first quarter of 1998, when compared to the first quarter of 1997, primarily
due to the  recognition of equity  earnings in Yorkshire Power and a decrease in
merger expenses.

      Interest charges  increased $2.4 million during the first quarter of 1998,
when  compared  to the  same  quarter  in 1997,  primarily  due to  interest  on
borrowings  utilized  to  finance  capital   expenditures  and  the  April  1997
investment in Yorkshire  Power (see Note 2 Investment in Yorkshire Power in Item
1. FINANCIAL STATEMENTS).

Commitments and Contingencies

      Issues  relating to regulatory  matters,  environmental  issues,  employee
lawsuits and Year 2000 costs are discussed in Notes 3 and 4 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,  the Company  expects to incur costs of
approximately  $35-40  million  over the next two years to modify  its  computer
software,  hardware  and other  automated  systems used in  operations  enabling
proper data  processing  relating to the year 2000 and beyond.  The  majority of
these  costs  will  be  incurred  by or  allocated  to the  Company's  operating
utilities, primarily PSCo and SPS. 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.  If such modifications and conversions are not
completed on a timely basis, the year 2000 problem may have a material impact on
the operations of the Company.  Management does not anticipate  these activities
will have a  material  adverse  impact on the  financial  position,  results  of
operations or cash flows of the Company or its subsidiaries.

Common Stock Dividend

      During  the first  quarter,  the Board of  Directors  approved a $0.58 per
share dividend  payable to  shareholders  of the Company.  The Company's  common
stock  dividend  level is dependent  upon the Company's  results of  operations,
financial position,  cash flows and other factors. The Board of Directors of the
Company  will  continue to  evaluate  the common  stock  dividend on a quarterly
basis.

Liquidity and Capital Resources

Cash Flows - Three Months Ended March 31
                                                1998        1997    Increase
                                                ----        ----    --------
Net cash provided by operating 
  activities (in millions) .............       $207.8       $79.9     $127.9

      Cash provided by operating  activities  increased during the first quarter
of 1998,  when  compared  to the first  quarter  of 1997,  primarily  due to the
decrease in payments to gas suppliers  resulting from lower gas costs during the
first  quarter of 1998 as  compared to the first  quarter of 1997.  A portion of
these lower gas costs have been  deferred  through the GCA and have  reduced the
amount to be recovered from customers in the future.

                                       31
<PAGE>

                                                1998         1997      Increase
                                                ----         ----      --------
Net cash used in investing 
  activities (in millions) ............       $(122.3)     $(85.6)      $(36.7)

      Cash used in investing  activities increased during 1998, when compared to
1997, primarily due to an increase in construction expenditures and the purchase
of certain leased assets.

                                                1998         1997     Decrease
                                                ----         ----     --------
Net cash provided by (used in) financing
  activities (in millions) .............     $ (82.1)      $374.8      $(456.9)

      Cash provided by financing activities decreased during 1998, when compared
to 1997,  primarily due to PSCo's  issuance of medium-term  notes in January and
March 1997. The proceeds from the $75 million  financing by PSCo in January 1997
and the  $250  million  financing  by  PSCo  in  March  1997  were  used to fund
construction  expenditures  and the investment in Yorkshire  POWER.  See Note 2.
Investment in Yorkshire Power in Item 1. FINANCIAL STATEMENTS.

Financing Activities

Long-Term Debt

      In April 1998, PSCo issued $250 million of 6% First Collateral Trust Bonds
due April 15, 2003. The proceeds will be used for general corporate purposes and
to repay short-term and other debt incurred for such purposes.

Obligated Mandatorily Redeemable Preferred Securities

      In May 1998, PSCo Capital Trust I, a wholly-owned trust of PSCo, issued in
a  public  offering  $194  million  of  its  7.60%  Trust  Originated  Preferred
Securities.  The sole  asset of the trust is $200  million  principal  amount of
PSCo's 7.60% Deferrable Interest Subordinated  Debentures due June 30, 2038. The
proceeds from the issuance of the sale of the 7.60% Trust  Originated  Preferred
Securities  will be used to redeem  all of PSCo's  outstanding  preferred  stock
(totaling $181.8 million at March 31, 1998) on June 10, 1998.

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.


                                       32
<PAGE>


PSCo's  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,  PSCo and SPS  merged in a  tax-free  "merger of
equals"  transaction  and became  wholly-owned  subsidiaries  of NCE, which is a
registered  holding company under PUHCA. This transaction was accounted for as a
pooling  of  interests  for  accounting  purposes.  Effective  with the  Merger,
Cheyenne,  WGI, e prime and Natural Fuels were transferred by a declaration of a
dividend  of  the   subsidiaries'   stock,   at  net  book  value,   aggregating
approximately   $49.9  million,   to  NCE.  NCE  subsequently   made  a  capital
contribution  of the e prime and Natural Fuels common stock,  at net book value,
aggregating approximately $29.5 million, to NC Enterprises.  See Note 1. Summary
of  Significant   Accounting  Policies  in  Item  1.  FINANCIAL  STATEMENTS  for
additional  discussion  regarding PSCo, the Merger and the transfer of Cheyenne,
WGI, e prime and Natural Fuels. The  consolidated  statements of income and cash
flows for the  three  months  ended  March  31,  1997  reflect  the  results  of
operations  of  Cheyenne,  WGI,  e prime  and  Natural  Fuels.  Where  relevant,
additional  information has been presented to discuss the impact of the transfer
of these subsidiaries.

Earnings Available for Common Stock

      Earnings  increased  approximately  10% to  $66.0  million  for the  first
quarter of 1998, as compared to $59.9 million for the first quarter of 1997. The
increase was primarily  attributable to an increase in the gas margin  resulting
from an increase in rates which were effective February 1, 1997, and lower labor
and employee  benefit  costs and other  general  reductions  resulting  from the
Merger and continued cost containment efforts.

Electric Operations

      The following table details the change in electric  operating revenues and
energy costs for the three months ended March 31, 1998,  as compared to the same
period in 1997 (in thousands of dollars).

                                                   Increase (Decrease)
                                                   -------------------
                                                          Cheyenne
                                               PSCo Only  &e prime Consolidated
                                               ---------  -------- ------------
Electric operating revenues:
 Retail.....................................   $  7,956   $ (9,612)  $ (1,656)
 Wholesale - regulated......................     11,719          -     11,719
 Non-regulated power marketing..............          -     (5,648)    (5,648)
 Other (including unbilled revenues and
   provision for rate refunds)..............     (2,927)        95     (2,832)
                                                 ------         --     ------
  Total revenues............................     16,748    (15,165)     1,583
Fuel used in generation.....................      6,368          -      6,368
Purchased power.............................     14,115    (12,684)     1,431
                                                -------   --------    -------
  Net decrease  in electric margin..........    $(3,735)  $ (2,481)  $ (6,216)
                                                ========  ========   ========

       The following table compares electric Kwh sales by major customer classes
for the three months ended March 31, 1998 and 1997.

                                   Millions of Kwh Sales       % Change *
                                   --------------------        ----------
                                      1998     1997      Consolidated  PSCo Only
                                      ----     ----      ------------  ---------
Residential .....................     1,856    1,867        (0.6)%     2.7%
Commercial and Industrial  ......     3,755    3,842        (2.3)      1.9
Public Authority ................        47       48        (1.6)       .8
                                      -----   ------
  Total Retail...................     5,658    5,757        (1.7)      2.2
Wholesale - Regulated............     1,493      850        75.6      75.6
Non-regulated Power Marketing....         -      367        **         -
                                      -----   ------
Total............................     7,151    6,974         2.5      11.9
                                      =====   ======

*  Percentages are calculated using unrounded amounts
** Percentage  change is  significant,  but  presentation of the amount is not
   meaningful

                                       33
<PAGE>

      Electric  margin  decreased in the first quarter of 1998, when compared to
the first  quarter of 1997,  primarily  due to the  recognition  of an estimated
customer refund obligation  (approximately  $5.6 million in the first quarter of
1998  while no  obligation  was  recognized  in the  first  quarter  of 1997) in
connection  with the  earnings  sharing in excess of 11% return on equity  which
resulted from the settlement of the Merger  proceedings in Colorado (see Note 3.
Regulatory  Matters  in Item  1.  FINANCIAL  STATEMENTS)  and  the  retail  rate
reductions  (approximately $1.6 million)  implemented in February 1997. Electric
margin,  however, was favorably impacted by an overall increase in PSCo's retail
sales of 2.2% resulting  primarily from customer growth of  approximately  2.8%.
Higher  wholesale  electric  sales  also  contributed  to  increased   operating
revenues, however, the margin on such sales is minimal.

      PSCo has cost  adjustment  mechanisms  which recognize the majority of the
effects of changes in fuel used in  generation  and  purchased  power  costs and
allow  recovery of such costs on a timely basis.  PSCo's ICA, which allows for a
50%/50%  sharing of certain fuel and energy cost  increases and decreases  among
customers and shareholders, did not significantly impact the electric margin for
the first  quarter  of 1998 or 1997 (see Note 3.  Regulatory  Matters in Item 1.
FINANCIAL STATEMENTS).

      Fuel used in  generation  expense  increased  approximately  $6.4  million
during the first quarter of 1998, as compared to the same quarter in 1997 due to
increased generation levels at PSCo's power plants.

      Purchased  power expense  increased  slightly  during the first quarter of
1998,  as compared to the same  quarter in 1997,  primarily  due to purchases to
meet increased wholesale requirements and other customer demands.

Gas Operations

      The following  table details the change in revenues from gas sales and gas
purchased  for resale for the first  quarter of 1998,  as  compared  to the same
period in 1997 (in thousands of dollars).

                                                   Increase (Decrease)
                                                    -----------------
                                                       Cheyenne
                                                     Natural Fuels
                                                        WGI &
                                        PSCo Only      e prime      Consolidated
                                        ---------      -------      ------------
Revenues from gas sales
  (including unbilled revenues) ......   $28,760      $ (56,055)     $ (27,295)
Gas purchased for resale..............    21,926        (52,433)       (30,507)
                                          ------       --------       --------
  Net increase(decrease)in gas
   sales margin.......................    $6,834      $  (3,622)     $   3,212
                                          ======      =========      =========

      The following table compares gas Dth deliveries by major customer  classes
for the first quarter of 1998 and 1997.

                                Millions of Dth Deliveries        % Change *
                                      1998      1997     Consolidated  PSCo Only
                                      ----      ----     ------------  ---------
Residential...................        38.8      39.6          (1.8)%     0.9%
Commercial....................        18.4      21.3         (13.7)    (10.4)
Non-regulated gas marketing...           -      15.6          **         -
                                     -----      ----
  Total sales.................        57.2      76.5         (25.2)     (3.0)
Transportation, gathering and
  processing .................        23.3      25.2         (7.6)      13.3
                                     -----      ----

  Total.......................        80.5     101.7        (20.8)       1.2
                                     =====     =====

*  Percentages are calculated using unrounded amounts
** Percentage  change is  significant,  but  presentation of the amount is not
   meaningful

      Gas sales margin increased during the first quarter of 1998, when compared
to the first  quarter  of 1997,  primarily  due to an  increase  in PSCo's  base
revenues associated with the higher rates effective February 1, 1997,



                                       34
<PAGE>

resulting from the 1996 rate case. This increase was offset,  in part, by a 3.0%
decrease in sales which resulted from warmer weather during the first quarter of
1998 despite a 2.7% increase in customers.

      Gas   transportation,   gathering  and   processing   revenues   increased
approximately  $1.2 million  during the first quarter of 1998,  when compared to
the  first  quarter  of  1997,  primarily  due to  higher  transportation  rates
effective February 1, 1997, resulting from PSCo's 1996 rate case and an increase
in transport  deliveries.  The increase in transport  deliveries continues to be
impacted by the shifting of various commercial customers to transport customers.

      PSCo has in place a GCA mechanism for natural gas sales,  which recognizes
the majority of the effects of changes in the cost of gas  purchased  for resale
and adjusts  revenues to reflect  such changes in cost on a timely  basis.  As a
result,  the changes in revenues  associated  with these  mechanisms  during the
first  quarter of 1998,  as  compared to the first  quarter of 1997,  had little
impact on net income.  However,  the fluctuations in gas sales impact the amount
of gas PSCo must purchase and, therefore, along with the increases and decreases
in the per-unit cost of gas,  affect total gas  purchased for resale.  The lower
per-unit  average  cost of gas  during the first  quarter of 1998,  along with a
decrease in the quantity of gas  purchased,  contributed to the decrease in cost
of gas purchased for resale.

Non-Fuel Operating Expenses and Other Income and Deductions

      Other  operating and maintenance  expenses  decreased  approximately  $4.2
million  during the first  quarter of 1998,  as compared to the first quarter of
1997.  Excluding  the effects of the sale of Cheyenne,  WGI, e prime and Natural
Fuels,  other operating and maintenance  expenses  decreased  approximately $3.1
million  due to lower  labor  and  employee  benefit  costs  and  other  general
reductions resulting from the Merger.

      Taxes other than income taxes decreased  approximately $2.5 million during
the first quarter of 1998,  as compared to the first quarter of 1997.  Excluding
the effects of the sale of Cheyenne, WGI, e prime and Natural Fuels, taxes other
than income taxes decreased  approximately  $2.0 million  primarily due to lower
property tax accruals.

      Other income and deductions  increased  approximately  $3.4 million during
the first quarter of 1998, when compared to the first quarter of 1997, primarily
due to the recognition of equity earnings in Yorkshire Power ($3.4 million).  On
March 31,  1998,  NCI and its  subsidiaries,  including  Yorkshire  Power,  were
transferred  through the sale by PSCo of all the outstanding common stock at net
book value (approximately  $292.6 million),  to NC Enterprises,  an intermediate
holding company for NCE, and received as consideration a promissory note from NC
Enterprises.  See Note 2.  Investment  in Yorkshire  Power in Item 1.  FINANCIAL
STATEMENTS.  Merger and business integration costs decreased  approximately $1.7
million in the first  quarter of 1998, as compared to the first quarter of 1997.
Miscellaneous income and deductions-net,  changed primarily due to a decrease in
interest  income as a result  of higher  investment  balances  during  the first
quarter  of 1997  from  the  proceeds  of  financings  for the  Yorkshire  Power
investment.

      Interest  charges  increased  approximately  $1.2 million during the first
quarter of 1998,  as compared  to the first  quarter of 1997,  primarily  due to
interest on borrowings  utilized to finance capital  expenditures  and the April
1997 investment in Yorkshire Power (see Note 2. Investment in Yorkshire Power in
Item 1. FINANCIAL STATEMENTS).

Commitments and Contingencies

       See  Note  4.  Commitments  and  Contingencies  in  Item  1.  FINANCIAL
STATEMENTS.


                                       35
<PAGE>


Liquidity and Capital Resources

Cash Flows - Three Months Ended March 31
                                                  1998        1997      Increase
                                                  ----        ----      --------
Net cash provided by operating activities 
  (in millions) ..........................       $177.7       $68.2      $109.5

      Cash provided by operating  activities  increased during the first quarter
of 1998,  when  compared  to the first  quarter  of 1997,  primarily  due to the
decrease in payments to gas suppliers  resulting from lower gas costs during the
first  quarter of 1998 as  compared to the first  quarter of 1997.  A portion of
these lower gas costs have been  deferred  through the GCA and have  reduced the
amount to be recovered from customers in the future.

                                                  1998        1997      Increase
                                                  ----        ----      --------
Net cash used in investing activities 
  (in millions) .........................       $(101.0)     $(52.5)    $ (48.5)

      Cash used in investing  activities  increased  during the first quarter of
1998,  when  compared  to the first  quarter  of 1997,  primarily  due to higher
construction expenditures and the purchase of certain leased assets.

                                                  1998        1997      Increase
                                                  ----        ----      --------
Net cash provided by(used in)financing
   activities (in millions) .............       $ (75.9)     $343.3     $(419.2)

      Cash provided by financing  activities  decreased during the first quarter
of 1998,  when  compared  to the first  quarter  of 1997,  primarily  due to the
issuance  of $75 million and $250  million of  medium-term  notes in January and
March 1997,  respectively.  The proceeds from these financings were used to fund
PSCo's  construction  program and the investment in Yorkshire Power. See Note 2.
Investment in Yorkshire Power in Item 1. FINANCIAL STATEMENTS.

Financing Activities Subsequent to March 31, 1998

      Discussion relating to PSCo's financing activities subsequent to March 31,
1998, is covered under "Financing  Activities" in NCE's Management's  Discussion
and Analysis of Financial Condition and Results of Operations.


                                       36
<PAGE>


SPS's 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,  SPS 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 PUHCA. This transaction was accounted for as a
pooling of interests for accounting  purposes.  Effective with the Merger, Quixx
and UE, previously wholly-owned subsidiaries,  were transferred through the sale
by SPS of all of the outstanding  common stock of such  subsidiaries at net book
value, to NC Enterprises, an intermediate holding company of NCE. The statements
of income and cash flows for the three  months  ended March 31, 1997 reflect the
results of operations of Quixx and UE.

Earnings Available for Common Stock

      Earnings  available  for common stock were $18.1 million and $18.2 million
during  the first  quarter  of 1998 and  1997,  respectively.  Operating  income
decreased  slightly with the sale of Quixx and UE and lower merger related costs
favorably impacted net income.

Operating Revenues

Electric Operations

      Substantially  all of SPS's  operating  revenues  result  from the sale of
electric energy.  The principal  factors  impacting  revenues are the amount and
price of energy  sold.  The  following  table  details  the  change in  electric
operating revenues and energy costs for the three months ended March 31, 1998 as
compared to the same period in 1997 (thousands of dollars).

                                            Increase (Decrease)
                                            ------------------
     Electric operating revenues:
      Retail..............................        $(3,884)
      Wholesale...........................        (11,248)
      Other (including unbilled revenues).            369
                                                  -------
        Total revenues....................        (14,763)
     Fuel used in generation..............        (14,328)
     Purchased power......................         (2,566)
                                                  -------
        Net increase in electric margin...        $ 2,131
                                                  =======

      The following table compares  electric Kwh sales by major customer classes
for the three months ended March 31, 1998 and 1997.

                                      Millions of Kwh Sales
                                        1998        1997        % Change*
                                        ----        ----        ---------
      Residential ............           764         753           1.4%
      Commercial  ............           663         682          (2.9)
      Industrial  ............         2,014       1,978           1.9
      Public Authority .......           132         131           1.0
                                       -----       -----
        Total Retail..........         3,573       3,544           0.8
      Wholesale...............         1,243       1,441         (13.7)
                                       -----       -----
      Total...................         4,816       4,985          (3.4)
                                       =====       =====

* Percentages are calculated using unrounded amounts.

                                       37
<PAGE>

      Electric  operating  revenues  decreased  $14.8 million or 6.9% during the
three  months ended March 31,  1998,  when  compared to the same period in 1997,
primarily  due to lower  wholesale  revenues and $1.1 million of merger  savings
passed on to customers.  The decrease in wholesale revenues is attributable to a
lower average  selling price per Kwh and a decrease in Kwh sales  resulting from
mild wet weather in 1998. Under the various state regulatory  approvals,  SPS 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.  SPS 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, $10,000 in Kansas and $1.5 million to wholesale customers.

      Fuel used in generation  expense  decreased  $14.3 million or 13.7% during
the first quarter of 1998,  when compared to the same period in 1997,  primarily
due to lower  prices of coal and  natural  gas.  The  decrease  in coal costs is
primarily  due  to  the  expiration  of a  coal  supply  contract  in  1997  and
negotiation  with a new  supplier  in 1998  for  consumption  at the  Harrington
generating station.  Cost of natural gas used in generation  decreased,  largely
due to the decrease in the market price of gas.  Flexibility in the  procurement
of gas supply  under the spot  market has  provided  for lower gas costs for the
first  quarter  of  1998.  SPS  purchased  approximately  48% of its gas  supply
requirements  on the  spot  market  during  this  first  quarter  of  1998.  SPS
generation levels for 1998 and 1997 were comparable.

      SPS has fuel cost  adjustment  mechanisms  which recognize the majority of
the effects of changes in fuel used in generation and purchased  power costs and
allow  recovery  of such costs on a timely  basis.  As a result,  the changes in
revenues associated with these mechanisms during the first quarter of 1998, when
compared to the first quarter of 1997, had little impact on net income.

      Purchased  power  decreased $2.6 million during the first quarter of 1998,
when compared to the same period in 1997,  primarily due to decreased  wholesale
purchases.  SPS  generates  substantially  all of its power for sale to its firm
retail and wholesale  customers and sells non-firm energy as the market demands.
Similarly, SPS purchases low-cost non-firm energy when available.

Other Operating Revenues

      Other operating  revenues  decreased $6.8 million during the first quarter
of 1998, when compared to the same period in 1997,  primarily due to the sale of
Quixx and UE in connection with the Merger as discussed above.

Non-Fuel Operating Expenses

      Other operating and maintenance expenses decreased $2.6 million during the
first  quarter of 1998 as  compared to the same  period in 1997.  Excluding  the
effects of the sale of Quixx and UE, other  operating and  maintenance  expenses
increased $1.8 million,  primarily due to higher operation and maintenance costs
at one of  SPS's  steam  plants  that  was  non-operational  in  March  1998 and
increased costs associated with demand side management programs.

      Income  taxes  increased  $0.9 million  during the first  quarter of 1998,
primarily  due to higher  pre-tax  income,  when  compared to the same period in
1997.   Additional   income  tax  expense  was  recognized  in  both  years  for
non-deductible  merger costs resulting in an effective  income tax for the first
quarter of 38.2% in 1998 and 36.1% in 1997.

Other Income and Deductions

      Other  income  and  deductions  increased  $3.6  million  during the first
quarter of 1998, as compared to the same period in 1997,  primarily due to lower
1998 merger and business integration expenses and higher interest income related
to the note receivable from NC Enterprises for the sale of Quixx and UE.

                                       38
<PAGE>

                         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

      Part 1.  See Note 4.  Commitments and Contingencies in Item 1, Part 1.

Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

      4(a)  Supplemental  Indenture  dated as of April 1, 1998,  establishing  a
            series of PSCo First Mortgage Bonds under the Indenture  dated as of
            December 31, 1939.
      4(b)  Supplemental Indenture No. 7 dated as of April 1, 1998, establishing
            a series of PSCo First  Collateral  Trust Bonds under the  Indenture
            dated as of October 1, 1993.

      12(a) Computation of Ratio of Consolidated  Earnings to Consolidated Fixed
            Charges for PSCo is set forth at page 41 herein.
      12(b) Computation of Ratio of Consolidated Earnings to Consolidated
            Combined Fixed Charges and Preferred Stock Dividends for PSCo is
            set forth at page 42 herein.
      12(c) Computation of Ratio of Consolidated  Earnings to Consolidated Fixed
            Charges for SPS is set forth at page 43 herein.

      15(a) Letter  from  Arthur  Andersen  LLP  regarding   unaudited   interim
            information is set forth at page 44 herein for NCE.
      15(b) Letter  from  Arthur  Andersen  LLP  regarding   unaudited   interim
            information is set forth at page 45 herein for PSCo.
      15(c) Letter  from  Arthur  Andersen  LLP  regarding   unaudited   interim
            information is set forth at page 46 herein for SPS.

      27(a)  Financial  Data  Schedule  for  NCE as of  March  31,  1998.
      27(b)  Financial  Data  Schedule for PSCo as of March 31, 1998.
      27(c)  Financial  Data Schedule for SPS as of March 31, 1998.

(b)    Reports on Form 8-K

The following reports on Form 8-K were filed by PSCo since the  beginning of the
first quarter of 1998.

   - A report on Form 8-K dated  April  28,  1998,  was filed by PSCo on April
   28, 1998. The item reported was Item 5. Other Events: Filing of Bond Purchase
   Contract, dated as of April 15, 1998.

    - A report on Form 8-K dated April 30, 1998,  was filed by PSCo on April 30,
   1998.  The item  reported  was Item 5. Other  Events:  Selected  consolidated
   financial information for PSCo was presented for the three months ended March
   31, 1998 and 1997 and for the years ended December 31, 1997, 1996 and 1995.

    - A report on Form 8-K/A dated April 30,  1998,  was filed by PSCo on May 1,
   1998.  The item  reported  was Item 5. Other  Events:  Selected  consolidated
   financial information for PSCo was presented for the three months ended March
   31, 1998 and 1997 and for the years ended December 31, 1997, 1996 and 1995.

    - A report on Form 8-K dated May 6, 1998 was filed by PSCo on May 14,1998.
    The item reported was Item 5. Other Events: Filing of an underwriting
    Agreement and other documents in connection with a financing.

                                       39
<PAGE>


                          NEW CENTURY ENERGIES, INC.
                                  SIGNATURE

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, New Century Energies,  Inc. has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized on the
14th day of May, 1998.

                                          NEW CENTURY ENERGIES, INC.

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



                      PUBLIC SERVICE COMPANY OF COLORADO
                                  SIGNATURE

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  Public  Service  Company of Colorado has duly caused this
report to be signed on its behalf by the undersigned,  thereunto duly authorized
on the 14th day of May, 1998.


                                            PUBLIC SERVICE COMPANY OF COLORADO

                                          By   /s/Brian P. Jackson
                                          ---------------------------------
                                                Brian P. Jackson
                                          Senior Vice President, Finance and
                                           Administrative Services and
                                                Chief Financial Officer



                     SOUTHWESTERN PUBLIC SERVICE COMPANY
                                  SIGNATURE

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  Southwestern  Public Service Company has duly caused this
report to be signed on its behalf by the undersigned,  thereunto duly authorized
on the 14th day of May, 1998.


                                           SOUTHWESTERN PUBLIC SERVICE COMPANY

                                          By   /s/Brian P. Jackson
                                          ---------------------------------
                                                Brian P. Jackson
                                          Senior Vice President, Finance and
                                           Administrative Services and
                                             Chief Financial Officer

                                       40
<PAGE>



                                EXHIBIT INDEX

4(a)  Supplemental Indenture dated as of April 1, 1998, establishing a series of
      PSCo First  Mortgage  Bonds under the  Indenture  dated as of December 31,
      1939.

4(b)  Supplemental  Indenture  No. 7 dated as of April 1, 1998,  establishing  a
      series of PSCo First  Collateral  Trust Bonds under the Indenture dated as
      of October 1, 1993.

12(a) Computation  of Ratio  of  Consolidated  Earnings  to  Consolidated  Fixed
      Charges for PSCo is set forth at page 41 herein.

12(b) Computation of Ratio of  Consolidated  Earnings to  Consolidated  Combined
      Fixed Charges and Preferred  Stock Dividends for PSCo is set forth at page
      42 herein.

12(c) Computation  of Ratio  of  Consolidated  Earnings  to  Consolidated  Fixed
      Charges for SPS is set forth at page 43 herein.

15(a) Letter from Arthur Andersen LLP regarding unaudited interim information is
      set forth at page 44 herein for NCE.

15(b) Letter from Arthur Andersen LLP regarding unaudited interim information is
      set forth at page 45 herein for PSCo.

15(c) Letter from Arthur Andersen LLP regarding unaudited interim information is
      set forth at page 46 herein for SPS.

27(a) Financial Data Schedule for NCE as of March 31, 1998.

27(b) Financial Data Schedule for PSCo as of March 31, 1998.

27(c) Financial Data Schedule UT for SPS as of March 31, 1998.


                                       41
<PAGE>


                                                                 EXHIBIT 12(a)

                      PUBLIC SERVICE COMPANY OF COLORADO
                               AND SUBSIDIARIES

                 COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS
                         TO CONSOLIDATED FIXED CHARGES

           (not covered by Report of Independent Public Accountants)



                                                    Three Months Ended
                                                        March 31,
                                                      1998       1997
                                                      ----       ----
                                           (Thousands of Dollars, except ratios)

Fixed charges:
   Interest on long-term debt...................     $27,600    $26,906
   Interest on borrowings against corporate-owned
      life insurance contracts...................     11,671     10,736
   Other interest................................      5,653      3,939
   Amortization of debt discount and expense less
      premium ...................................        978        928
   Interest component of rental expense.........       2,061      2,583
                                                      ------     ------

     Total .....................................     $47,963    $45,092
                                                     =======    =======

Earnings (before fixed charges and taxes on income):
   Net income...................................     $68,897    $62,881
   Fixed charges as above.......................      47,963     45,092
   Provisions for Federal and state taxes on 
     income, net of investment tax credit
     amortization...............................      36,818     35,317
                                                     -------     ------

     Total......................................    $153,678   $143,290
                                                    ========   ========

Ratio of earnings to fixed charges..............        3.20       3.18
                                                      ======     ======

                                       42
<PAGE>



                                                                 EXHIBIT 12(b)

                      PUBLIC SERVICE COMPANY OF COLORADO
                               AND SUBSIDIARIES

                 COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS
     TO CONSOLIDATED COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

           (not covered by Report of Independent Public Accountants)



                                                   Three  Months Ended
                                                       March 31,
                                                    1998      1997
                                                    ----      ----
                                         (Thousands of Dollars, except ratios)

Fixed charges and preferred stock dividends:
   Interest on long-term debt....................  $27,600   $26,906
   Interest on borrowings against corporate-owned
      life insurance contracts...................   11,671    10,736
   Other interest................................    5,653     3,939
   Amortization of debt discount and expense less
      premium ...................................      978       928
   Interest component of rental expense..........    2,061     2,583
   Preferred stock dividend requirement..........    2,929     2,943
   Additional preferred stock dividend requirement   1,565     1,653
                                                     -----     -----

     Total ....................................    $52,457   $49,688
                                                   =======   =======

Earnings (before fixed charges and taxes on income):
   Net income....................................  $68,897   $62,881
   Interest on long-term debt....................   27,600    26,906
   Interest on borrowings against corporate-owned
      life insurance contracts...................   11,671    10,736
   Other interest................................    5,653     3,939
   Amortization of debt discount and expense less
      premium ...................................      978       928
   Interest component of rental expense..........    2,061     2,583
   Provisions for Federal and state taxes on income,
   net of investment tax credit amortization.....   36,818    35,317
                                                    ------   -------

     Total....................................... $153,678  $143,290
                                                  ========  ========

Ratio of earnings to fixed charges
  and preferred stock dividends................      2.93      2.88
                                                     ====      ====


                                       43
<PAGE>


                                                                 EXHIBIT 12(c)

                      SOUTHWESTERN PUBLIC SERVICE COMPANY
                               AND SUBSIDIARIES

                 COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS
                         TO CONSOLIDATED FIXED CHARGES

           (not covered by Report of Independent Public Accountants)



                                                    Three Months Ended
                                                        March 31,
                                                      1998       1997
                                                      ----       ----
                                           (Thousands of Dollars, except ratios)

Fixed charges:
   Interest on long-term debt.....................     $10,943    $11,025
   Dividends on SPS obligated mandatorily redeemable
      preferred securities........................       1,963      1,963
   Other interest.................................       2,579      1,026
   Amortization of debt discount and expense less
      premium ....................................         561        562
   Interest component of rental expense...........         202        311
                                                        ------     ------

     Total .......................................     $16,248    $14,887
                                                       =======    =======

Earnings (before fixed charges and taxes on income):
   Net income.....................................     $18,139    $18,218
   Fixed charges as above.........................      16,248     14,887
   Provisions for Federal and state taxes on income,
   net of investment tax credit amortization......      11,225     10,292
                                                      --------   --------

     Total........................................     $45,612    $43,397
                                                       =======    =======

Ratio of earnings to fixed charges................        2.81       2.92
                                                        ======     ======


                                       44
<PAGE>



                                                                 EXHIBIT 15(a)

May 14, 1998


New Century Energies, Inc.:

      We are aware that New Century Energies, Inc. has incorporated by reference
in its Registration  Statement (Form S-8, File No. 333-28639)  pertaining to the
Omnibus  Incentive  Plan;  its  Registration   Statement  (Form  S-3,  File  No.
333-28637) pertaining to the Dividend Reinvestment and Cash Payment Plan and its
Registration  Statement  (Form  S-3,  File  No.  333-40361)  pertaining  to  the
registration of NCE Common Stock,  its Form 10-Q for the quarter ended March 31,
1998,  which  includes  our report dated May 14,  1998,  covering the  unaudited
consolidated  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



                                       45
<PAGE>



                                                                 EXHIBIT 15(b)

May 14, 1998


Public Service Company of Colorado:

      We are aware that Public Service  Company of Colorado has  incorporated by
reference in its Registration Statement (Form S-3, File No. 33-62233) pertaining
to the Automatic  Dividend  Reinvestment  and Common Stock  Purchase  Plan;  its
Registration  Statement (Form S-3, File No.  33-37431) as amended on December 4,
1990,  pertaining  to the  shelf  registration  of  Public  Service  Company  of
Colorado's First Mortgage Bonds; its Registration  Statement (Form S-8, File No.
33-55432)  pertaining to the Omnibus Incentive Plan; its Registration  Statement
(Form S-3, File No.  33-51167)  pertaining to the shelf  registration  of Public
Service Company of Colorado's  First  Collateral  Trust Bonds;  its Registration
Statement (Form S-3, File No. 33-54877)  pertaining to the shelf registration of
Public Service Company of Colorado's First Collateral Trust Bonds and Cumulative
Preferred Stock and its  Registration  Statement (Form S-3, File No.  333-47485)
pertaining to the  registration of PSCo Capital Trust I's Preferred  Securities,
Public Service Company of Colorado's First  Collateral Trust Bonds,  Senior Debt
Securities and Subordinated Debt Securities, its Form 10-Q for the quarter ended
March 31, 1998,  which  includes  our report  dated May 14,  1998,  covering the
unaudited   consolidated   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




                                       46
<PAGE>



                                                                 EXHIBIT 15(c)
May 14, 1998


Southwestern Public Service Company:

      We are aware that Southwestern  Public Service Company has incorporated by
reference  in  its  Registration   Statement  (Form  S-3,  File  No.  333-05199)
pertaining to  Southwestern  Public Service  Company's  Preferred Stock and Debt
Securities;  its Registration Statement (Form S-8, File No. 33-27452) pertaining
to  Southwestern  Public  Service  Company's  1989 Stock  Incentive Plan and its
Registration  Statement (Form S-8, File No. 33-57869) pertaining to Southwestern
Public Service  Company's  Employee  Investment  Plan and  Non-Qualified  Salary
Deferral  Plan,  its Form  10-Q for the  quarter  ended  March 31,  1998,  which
includes  our  report  dated May 14,  1998,  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


                                       47
<PAGE>