<PAGE>
 
                                                                   EXHIBIT 4.2-B

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                        HOUSTON LIGHTING & POWER COMPANY

                                       to

                        THE BANK OF NEW YORK, as Trustee



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

                          SUPPLEMENTAL INDENTURE No. 2

                          Dated as of February 1, 1997

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



           8.257% Junior Subordinated Deferrable Interest Debentures

                                    Series B
                                  $103,093,000


===============================================================================
                                        
<PAGE>
 
                        HOUSTON LIGHTING & POWER COMPANY

                          SUPPLEMENTAL INDENTURE No. 2

                                  $103,093,000

           8.257% Junior Subordinated Deferrable Interest Debentures
                                    Series B


     SUPPLEMENTAL INDENTURE No. 2, dated as of February 1, 1997, between HOUSTON
LIGHTING & POWER COMPANY, a Texas corporation (the "Company"), and THE BANK OF
NEW YORK, a New York banking corporation, as Trustee (the "Trustee").


                                    Recitals
                                    --------

     The Company has heretofore executed and delivered to the Trustee a Junior
Subordinated Indenture, dated as of February 1, 1997 (the "Indenture"),
providing for the issuance from time to time of series of the Company's
Securities.

     Section 3.1 of the Indenture provides that various matters with respect to
any series of Securities issued under the Indenture may be established in an
indenture supplemental to the Indenture.

     Section 9.1(3) of the Indenture provides that the Company and the Trustee
may enter into an indenture supplemental to the Indenture to establish the form
or terms of Securities of any series as permitted by Section 2.1 or 3.1 of the
Indenture.

     For and in consideration of the premises and the issuance of the series of
Securities provided for herein, it is mutually covenanted and agreed, for the
equal and proportionate benefit of the Holders of the Securities of such series,
as follows:

                                   ARTICLE 1

                      Relation to Indenture; Definitions

     Section 1.1.  This Supplemental Indenture No. 2 constitutes an integral
part of the Indenture.

     Section 1.2.  For all purposes of this Supplemental Indenture No. 2:

                                       2
<PAGE>
 
     (1) Capitalized terms used herein shall have the meanings specified herein
or in the Indenture or in the Amended and Restated Trust Agreement, dated as of
February 1, 1997, among the Company, as Depositor, The Bank of New York, as
Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the
Administrative Trustees named therein, as the case may be.

     (2) "Securities Trust" means HL&P Capital Trust II, a statutory business
trust formed by the Company under Delaware law to issue Preference Securities,
the proceeds of which will be used to purchase the Securities.

     (3) "Original Issue Date" means February 4, 1997.

     (4) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture No. 2; and

     (5) The terms "herein", "hereof", "hereunder" and other words of similar
import refer to this Supplemental Indenture No. 2.

                                   ARTICLE 2

                            The Series of Securities

     Section 2.1.  Title of the Securities.  There shall be a series of
Securities designated the "8.257% Junior Subordinated Deferrable Interest
Debentures, Series B" (the "Series B Securities").

     Section 2.2.  Limitation on Aggregate Principal Amount; Date of Series B
Securities.   The aggregate principal amount of the Series B Securities shall be
limited to $103,093,000; provided, however, that the authorized aggregate
principal amount of the Series B Securities may be increased above such amount
by a Board Resolution to such effect.  Each Series B Security shall be dated the
date of its authentication.

     Section 2.3.  Stated Maturity.  The Stated Maturity of the Series B
Securities shall be February 1, 2037; provided, if a Tax Event occurs, then the
Company will have the right (a) prior to the dissolution of the Securities
Trust, to advance the Stated Maturity of the Series B Securities to the minimum
extent required, but not less than 19 and one-half years from the date of the
Original Issue Date, or (b) to dissolve the Securities Trust (if not previously
dissolved) and advance the Stated Maturity of the Series B Securities to the
minimum extent required, but not less than 19 and one-half years from the

                                       3
<PAGE>
 
date of the Original Issue Date, in each case such that in the opinion of
counsel to the Company, after advancing the Stated Maturity, interest paid on
the Series B Securities will be deductible for federal income tax purposes.

     Section 2.4.  Interest and Interest Rates.  The rate of interest on each
Series B Security shall be 8.257% per annum, accruing from February 4, 1997 and,
subject to Section 2.5, interest shall be payable, semi-annually in arrears, on
February 1 and August 1 of each year (each such date, an "Interest Payment
Date"), commencing August 1, 1997.  The rate of any Additional Interest that
shall accrue on each Series B Security shall be at the same rate per annum as
the interest rate on such Series B Security, compounded semi-annually.  The
amount of interest payable for any period shall be computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
partial period shall be computed on the basis of a 360-day year of twelve 30-day
months and the number of days elapsed in a partial month. In the event that any
date on which interest is payable on a Series B Security is not a Business Day,
then a payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
shall be paid to the Person in whose name such Series B Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest installment. In the event interest payable on any
Series B Security is not punctually paid or duly provided for on any Interest
Payment Date, such interest shall forthwith cease to be payable to the Holder on
the applicable Regular Record Date and shall either (i) be paid to the Person in
whose name such Series B Security (or one or more Predecessor Securities) is
registered at the close of business on the Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of the Series B Securities not less than 10 days prior to such
Special Record Date, or (ii) be paid to the Holder at such time in such lawful
manner not inconsistent with the requirements of any securities exchange, the
Nasdaq National Market or other applicable interdealer quotation system or self-
regulatory organization on which the Series B Securities may be listed, and upon
such notice as may be required by such exchange or other self-regulatory
organization, all as more fully provided in the Indenture.

                                       4
<PAGE>
 
     Section 2.5.  Extension of Interest Payment Period.  (a)  So long as no
Event of Default has occurred and is continuing, the Company shall have the
right, at any time and from time to time during the term of the Series B
Securities, from time to time, to defer the payment of interest on the Series B
Securities for up to 10 consecutive semi-annual periods with respect to each,
during which Extension Periods the Company shall have the right to make partial
payments of interest on any Interest Payment Date; provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Series B
Securities.  At the end of any such Extension Period the Company shall pay all
interest then accrued and unpaid on the Securities (together with Additional
Interest thereon, if any, to the extent permitted by applicable law), provided,
that during any such Extension Period, the Company will not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal or of interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Series B Securities or make any guarantee
payments with respect to any guarantee by the Company or the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or junior
in interest to the Securities (other than (a) dividends or distributions in
capital stock of the Company, (b) any declaration of a dividend under a Rights
Plan or in connection with the implementation of a Rights Plan, the issuance of
capital stock of the Company under a Rights Plan or the redemption or repurchase
of any such rights distributed pursuant to a Rights Plan, (c) payments under the
HL&P Guarantee and (d) purchases of Common Stock or rights related to the
issuance of Common Stock under any of the Company's benefit plans for its
directors, officers or employees, related to the issuance of Common Stock or
rights under a dividend reinvestment and stock purchase plan or related to the
issuance of Common Stock (or securities convertible into or exchangeable for
common stock) as consideration in an acquisition transaction that was entered
into prior to the commencement of such Extension Period). Prior to the
termination of any such Extension Period, the Company may further defer the
payment of interest on the Series B Securities, provided that no Extension
Period shall exceed 10 consecutive semi-annual periods or extend beyond the
Stated Maturity of the Series B Securities. Upon termination of any such
Extension Period and upon the payment of all accrued and unpaid, including
Additional Interest, if any, then due, the Company may elect to begin a new
Extension Period, subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. The Company
shall give the Property Trustee,

                                       5
<PAGE>
 
the Administrative Trustees and the Trustee notice of its election to begin any
such Extension Period at least one Business Day prior to the earliest of (i) the
date the Distributions on the Capital Securities would have been payable except
for the election to begin such Extension Period, (ii) the date the
Administrative Trustees are required to give notice to any securities exchange,
the Nasdaq National Market or other applicable stock exchange or automated
quotation system or to holders of such Capital Securities of the record date for
such Distributions or (iii) the date such Distributions are payable, but in any
event not less than one Business Day prior to such record date.  The Trustee
shall promptly give notice of the Company's election to begin any such Extension
Period to the holders of the outstanding Capital Securities.

     Section 2.6.  Place of Payment.  The Place of Payment where the Securities
may be presented or surrendered for payment, where the Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Series B Securities and the
Indenture may be served shall be the Corporate Trust Office of the Trustee.

     Section 2.7.  Redemption.  The Company has the right to redeem the Series B
Securities (i) on or after February 4, 2007, in whole at any time or in part
from time to time, or (ii) prior to February 4, 2007, in whole (but not in part)
within 90 days following the occurrence of a Special Event, in each case subject
to the provisions of Article XI of the Indenture.

     The Redemption Price, in the case of a redemption under (i) above, shall
equal the following prices expressed in percentages of the principal amount
hereof, plus accrued and unpaid interest, including Additional Interest, if any,
to the Redemption Date.  If redeemed during the 12 month period beginning
February 4:

     Year               Percentage

     2007 ............. 104.1285%
     2008 ............. 103.7157%
     2009 ............. 103.3028%
     2010 ............. 102.8810%
     2011 ............. 102.4771%
     2012 ............. 102.0643%
     2013 ............. 101.6514%
     2014 ............. 101.2386%
     2015 ............. 100.8257%
     2016 ............. 100.4129%
 

                                       6
<PAGE>
 
and at 100% on or after February 4, 2017.

     The Redemption Price, in the case of a redemption following a Special Event
as described under (ii) above, shall equal the Make-Whole Amount plus accrued
and unpaid interest, including Additional Interest, if any, to the Redemption
Date.  The "Make-Whole Amount" shall be equal to the greater of (i) 100% of the
principal amount of the Series Securities or (ii) as determined by a Quotation
Agent (as defined below), the sum of the present values of the principal amount
and premium payable as part of the Redemption Price with respect to an optional
redemption of such Series B Security on February 4, 2007, together with
scheduled payments of interest from the Redemption Date to February 4, 2007 (the
"Remaining Life"), in each case discounted to the Redemption Date on a semi-
annual basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined below).

     "Adjusted Treasury Rate" means with respect to any Redemption Date, the
Treasury Rate (as defined below) plus (i) 1.10% if such Redemption Date occurs
on or before February 4, 1998 or (ii) .50% if such Redemption Date occurs after
February 4, 1998.

     "Treasury Rate" means (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Remaining Life (if no maturity is within
three months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue
(as defined below), calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price (as defined below) for such Redemption Date. The Treasury Rate
shall be calculated on the third Business Day preceding the Redemption Date.

                                       7
<PAGE>
 
     "Comparable Treasury Issue" means, with respect to any Redemption Date, the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life.  If no United States Treasury security has a maturity which is within a
period from three months before to three months after February 4, 2007, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.

     "Comparable Treasury Price" means (i) the average of five Reference
Treasury Dealer Quotations (as defined below) for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(ii) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.

     "Quotation Agent" means Goldman, Sachs & Co. and its successors; provided,
however, that if the foregoing shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
shall substitute therefor another Primary Treasury Dealer.

     "Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Company.

     "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.

     Section 2.8.  Distribution of Series B Securities. At any time, the Company
may terminate the Securities Trust and cause the Series B Securities to be
distributed to Holders of the Trust Securities in liquidation of the Securities
Trust.

     Section 2.9.  Denomination.  The Series B Securities shall be in registered
form without coupons and shall be issuable in denominations of $1,000 and
integral multiples thereof.

                                       8
<PAGE>
 
     Section 2.10.  Currency.  Principal and interest on the Series B Securities
shall be payable in Dollars.

     Section 2.11.  Form of Securities.  The Series B Securities shall be
substantially in the form attached as Exhibit A hereto.

     Section 2.12.  Securities Registrar and Paying Agent.  The Trustee shall
initially serve as Series B Securities Registrar and Paying Agent.

     Section 2.13.  Sinking Fund Obligations.  The Company has no obligation to
redeem or purchase any Securities pursuant to any sinking fund or analogous
requirement or upon the happening of a specified event or at the option of a
Holder thereof.


                                   ARTICLE 3

                            Miscellaneous Provisions

     Section 3.1.  The Indenture, as supplemented and amended by this
Supplemental Indenture No 2, is in all respects hereby adopted, ratified and
confirmed.

     Section 3.2.  This Supplemental Indenture No. 2 may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

     Section 3.3.  THIS SUPPLEMENTAL INDENTURE NO. 2 AND EACH SERIES B SECURITY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

                                       9
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 2 to be duly executed, as of the day and year first written above.


                         HOUSTON LIGHTING & POWER COMPANY



                         By: /s/ LINDA GEIGER
                            ______________________________________
                             Name: Linda Geiger
                             Title: Authorized Agent



                         THE BANK OF NEW YORK, as Trustee



                         By: /s/ REMO J. REALE
                            ______________________________________
                             Name: Remo J. Reale
                             Title: Assistant Vice President

                                       10
<PAGE>
 
                                   Exhibit A
                                   ---------


                           [FORM OF FACE OF SECURITY]


          IF THE SECURITY IS TO BE A GLOBAL SECURITY - This Security is a Global
Security within the meaning of the Indenture hereinafter referred to and is
registered in the name of The Depository Trust Company (the "Depository") or a
nominee of the Depository.  This Security is exchangeable for Securities
registered in the name of a person other than the Depository or its nominee only
in the limited circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the Depository to
a nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository) may be registered except in limited
circumstances.

          Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to Houston Lighting &
Power Company or its agent for registration of transfer, exchange or payment,
and any Security issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of The Depository Trust
Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.


                        HOUSTON LIGHTING & POWER COMPANY

           8.257% Junior Subordinated Deferrable Interest Debentures
                                    Series B


No.  _______________                            $____________


          HOUSTON LIGHTING & POWER COMPANY, a corporation organized and existing
under the laws of Texas (hereinafter called the "Company"), which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ___________, or registered assigns,
the principal sum of _____________ Dollars on February 1, 2037; provided, if a
Tax Event occurs, then the Company will have the right (a) prior to the
dissolution of the Securities Trust, to advance the Stated Maturity of the
Securities to the minimum extent required, but not less than 19 and one-half
years from the

                                      A-1
<PAGE>
 
date of Original Issue Date, or (b) to dissolve the Securities Trust (if not
previously dissolved) and advance the Stated Maturity of the Securities to the
minimum extent required, but not less than 19 and one-half years from the date
of Original Issue Date, in each case such that in the opinion of counsel to the
Company, after advancing the maturity date, interest paid on the Securities will
be deductible for federal income tax purposes. The Company further promises to
pay interest on said principal sum from February 4, 1997 or from the most recent
interest payment date (each such date, an "Interest Payment Date") on which
interest has been paid or duly provided for, semi-annually (subject to deferral
as set forth herein) in arrears on February 1 and August 1 of each year,
commencing August 1, 1997, at the rate of 8.257% per annum, until the principal
hereof shall have become due and payable, plus Additional Interest, if any,
until the principal hereof is paid or duly provided for or made available for
payment and on any overdue principal and (without duplication and to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the rate of 8.257% per annum, compounded
semi-annually. The amount of interest payable for any period will be computed on
the basis of twelve 30-day months and a 360-day year. The amount of interest
payable for any partial period shall be computed on the basis of a 360-day year
of twelve 30-day months and the days elapsed in any partial month. In the event
that any date on which interest is payable on this Security is not a Business
Day, then a payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable.  A "Business Day" shall mean any
day other than (i) a Saturday or Sunday, (ii) a day on which banking
institutions in the City of New York are authorized or required by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office of the Trustee or with respect to the Securities of this series initially
issued to any HL&P Trust the principal office of the Property Trustee under the
Trust Agreement is closed for business. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities, as defined in the Indenture) is registered
at the close of business on the Regular Record Date for such interest
installment, which shall be the close of business on the Business Day next
preceding such Interest Payment Date. Any such interest installment not so

                                      A-2
<PAGE>
 
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange, the Nasdaq National Market or other
applicable interdealer quotation system or self-regulatory organization on which
the Securities of this series may be listed or traded, and upon such notice as
may be required by such exchange or other self-regulatory organization, all as
more fully provided in said Indenture.

          So long as no Event of Default has occurred and is continuing, the
Company shall have the right at any time during the term of this Security, from
time to time, to defer the payment of interest on such Security for up to 10
consecutive semi-annual periods with respect to each deferral period (each an
"Extension Period"); provided, however, that no Extension Period may extend the
Stated Maturity of the Security.  During such Extension Periods the Company
shall have the right to make partial payments of interest on any Interest
Payment Date, and at the end of which the Company shall pay all interest then
accrued and unpaid (together with Additional Interest thereon to the extent
permitted by applicable law); provided that during any such Extension Period,
the Company will not, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock or (ii) make any payment of principal or of interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to this Security or make
any guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Securities (other than (a) dividends or
distributions in Capital Stock of the Company, (b) any declaration of a dividend
under a Rights Plan or in connection with the implementation of a Rights Plan,
the issuance of capital stock of the Company under a Rights Plan or the
redemption or repurchase of any such rights distributed pursuant to a Rights
Plan, (c) payments under any HL&P Guarantee and (d) purchases of Common Stock
related to the issuance of Common Stock under any of the Company's benefit plans
for its directors, officers or employees, related to the issuance of Common
Stock or rights under a dividend reinvestment and stock purchase plan or related
to the issuance of Common Stock (or securities convertible into

                                      A-3
<PAGE>
 
or exchangeable for common stock) as consideration in an acquisition transaction
that was entered into prior to the commencement of such Extension Period). Prior
to the termination of any such Extension Period, the Company may further extend
the interest payment period, provided that no Extension Period shall exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of this
Security. Upon the termination of any such Extension Period and upon the payment
of all accrued and unpaid interest and any Additional Interest then due, the
Company may elect to begin a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period
except at the end thereof. The Company shall give the Property Trustee, the
Administrative Trustees and the Trustee notice of its election to begin an
Extension Period at least one Business Day prior to the earliest of (i) the date
the Distributions on the Capital Securities would have been payable except for
the election to begin such Extension Period, (ii) the date the Administrative
Trustees are required to give notice to any securities exchange, the Nasdaq
National Market or other applicable stock exchange or automated quotation system
or self-regulatory organization or to holders of such Capital Securities of the
record date for such Distributions or (iii) the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date.

          Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the United States, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that except in the case of a Global Security
at the option of the Company payment of interest may be made (i) by check mailed
to the address of the Person entitled thereto as such address shall appear in
the Securities Register or (ii) by wire transfer in immediately available funds
at such place and to such account as may be designated in writing by the Person
entitled thereto as specified in the Securities Register.

          The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payments to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto.  Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his

                                      A-4
<PAGE>
 
attorney-in-fact for any and all such purposes.  Each Holder hereof, by his
acceptance hereof, waives all notice of the acceptance of the subordination
provisions contained herein and in the Indenture by each holder of Senior Debt,
whether not outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.

          Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

          Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                      A-5
<PAGE>
 
          IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.


                         HOUSTON LIGHTING & POWER COMPANY



                         By:______________________________________
                             Authorized Officer


Attest:   __________________________
          [Secretary]


Dated:


          This is one of the Securities referred to in the within mentioned
Indenture.



                         THE BANK OF NEW YORK, as Trustee



                         By:______________________________________
                             Authorized Signatory


                                      A-6
<PAGE>
 
                         [FORM OF REVERSE OF SECURITY]


          This Security is one of a duly authorized issue of securities of the
Company (hereinafter called the "Securities"), issued and to be issued in one or
more series under a Junior Subordinated Indenture, dated as of February 1, 1997
(herein called the "Indenture"), between the Company and The Bank of New York,
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights,  duties and immunities thereunder of the Trustee, the
Company and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.  This Security is
one of the series designated on the face hereof, limited in aggregate principal
amount to $103,093,000.

          All terms used in this Security that are defined in the Indenture or
in the Amended and Restated Trust Agreement, dated as of February 1, 1997 (the
"Trust Agreement"), for the Securities Trust among Houston Lighting & Power
Company, as Depositor, and the Trustees named therein, shall have the meanings
assigned to them in the Indenture or the Trust Agreement, as the case may be.

          The Company has the right to redeem this Security (i) on or after
February 4, 2007, in whole at any time or in part from time to time, or (ii)
prior to February 4, 2007, in whole (but not in part) within 90 days following
the occurrence of a Special Event, in each case subject to the provisions of
Article XI of the Indenture.

          The Redemption Price, in the case of a redemption under (i) above,
shall equal the following prices expressed in percentages of the principal
amount hereof, plus accrued and unpaid interest, including Additional Interest,
if any, to the Redemption Date.  If redeemed during the 12 month period
beginning February 4:

                Year               Percentage

                2007 ............. 104.1285%
                2008 ............. 103.7157%
                2009 ............. 103.3028%
                2010 ............. 102.8810%
                2011 ............. 102.4771%
                2012 ............. 102.0643%
                2013 ............. 101.6514%
                2014 ............. 101.2386%
                2015 ............. 100.8257%
                2016 ............. 100.4129%

                                      A-7
<PAGE>
 
and at 100% on or after February 4, 2017.

          The Redemption Price, in the case of a redemption following a Special
Event, as described under (ii) above, shall equal the Make-Whole Amount plus
accrued and unpaid interest, including Additional Interest, if any, to the
Redemption Date.  The "Make-Whole Amount" shall be equal to the greater of (i)
100% of the principal amount hereof or (ii) as determined by a Quotation Agent
(as defined below), the sum of the present values of the principal amount and
premium payable as part of the Redemption Price with respect to an optional
redemption hereof on February 4, 2007, together with scheduled payments of
interest from the Redemption Date to February 4, 2007 (the "Remaining Life"), in
each case discounted to the Redemption Date on a semi-annual basis (assuming a
360-day year consisting of 30-day months) at the Adjusted Treasury Rate (as
defined below).

          "Adjusted Treasury Rate" means with respect to any Redemption Date,
the Treasury Rate (as defined below) plus (i) 1.10% if such Redemption Date
occurs on or before February 4, 1998  or (ii) .50% if such Redemption Date
occurs after February 4, 1998.

          "Treasury Rate" means (i) the yield, under the heading which
represents the average for the immediately prior week, appearing in the most
recently published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Remaining Life (if
no maturity is within three months before or after the Remaining Life, yields
for the two published maturities most closely corresponding to the Remaining
Life shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not published
during the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue (as defined below), calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price (as defined below) for such Redemption
Date. The Treasury Rate shall be calculated on the third Business Day preceding
the Redemption Date.

                                      A-8
<PAGE>
 
          "Comparable Treasury Issue" means, with respect to any Redemption
Date, the United States Treasury security selected by the Quotation Agent as
having a maturity comparable to the Remaining Life that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
Remaining Life.  If no United States Treasury security has a maturity which is
within a period from three months before to three months after February 4, 2007,
the two most closely corresponding United States Treasury securities shall be
used as the Comparable Treasury Issue, and the Treasury Rate shall be
interpolated or extrapolated on a straight-line basis, rounding to the nearest
month using such securities.

          "Comparable Treasury Price" means (i) the average of five Reference
Treasury Dealer Quotations (as defined below) for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(ii) if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such Quotations.

          "Quotation Agent" means Goldman, Sachs & Co. and their successors;
provided, however, that if the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer.

          "Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Company.

          "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.

          Each Security of this series that shall be subject to a partial
redemption shall be redeemable only in the amount of $1000 or, in the case the
Securities of this Series are issued to the Securities Trust, $1000, or integral
multiples thereof.

          In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.

                                      A-9
<PAGE>
 
          If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.

          The Indenture contains provisions for satisfaction and discharge of
the entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth in the Indenture.

          The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture.  The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.  Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.

          As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, in the case of
the Securities of a series issued to the Securities Trust, if, upon an Event of
Default, the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series fail to declare the principal amount
(or, if the Securities of that series are Discount Securities, such portion of
the principal amount as may be specified in the terms of that series) of all the
Securities of that series to be immediately due and payable, the

                                     A-10
<PAGE>
 
holders of at least 25% in aggregate liquidation amount of the corresponding
series of Capital Securities then outstanding shall have such right by a notice
in writing to the Company and the Trustee; and upon any such declaration such
principal amount (or specified amount) of and the accrued interest (including
any Additional Interest) on all the Securities of such series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article Thirteen of the Indenture.

          No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

          As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2 of
the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.  No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

          Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

          The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of such series of a different authorized denomination, as
requested by the Holder surrendering the same.

                                     A-11
<PAGE>
 
          The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States federal, state and local
tax purposes it is intended that this Security constitute indebtedness.

          THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.

                                     A-12