<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 1996
COMMISSION REGISTRANT, STATE OF INCORPORATION, I.R.S. EMPLOYER
FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ---------------------------- ------------------
1-1443 CENTRAL AND SOUTH WEST CORPORATION 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, TX 75202-1234
(214) 777-1000
<PAGE> 2
Item 5. Other Events.
Recent Developments
Summary Unaudited Results of 1995 Operations. Central and South West
Corporation's (the "Company") earnings for 1995 increased to $402 million ($2.10
per share) from $394 million ($2.08 per share) in 1994 primarily due to
increased electric revenues from customer growth and increased usage and lower
operations and maintenance expenses. Retail kilowatt hour ("kwh") sales from
United States operations in 1995 increased 2.5% over 1994, reflecting kwh sales
growth in all customer classes. In addition, November and December earnings
from the SEEBOARD plc ("SEEBOARD") acquisition contributed to the increase
during 1995. Partially offsetting these factors were higher depreciation and
interest costs and lower earnings from Mirror Construction Work in Progress
("Mirror CWIP") at Central Power and Light Company ("CPL"). See "-- CPL Rate
Review" below. Significant one-time items also affecting earnings for 1995
included the Settlement Agreement filed by CPL with the Public Utility
Commission of Texas (the "Texas Commission") to settle certain CPL regulatory
matters, the termination of the Company's proposed merger with El Paso Electric
Company, tax adjustments and adjustments to charges taken in connection with
the restructuring of the Company's electric operating subsidiaries (the
"Electric Operating Companies") under a new business unit called CSW Electric
and the centralization of many common service functions into Central and South
West Services, Inc. in 1993 and 1994 (the "Restructuring").
The Company's consolidated earnings for the three-month period ended
December 31, 1995 were $62 million ($.32 per share) compared to $64 million
($.33 per share) for the same period of 1994. Earnings for the quarter ended
December 31, 1995 decreased primarily due to decreased earnings from Mirror
CWIP and allowance for funds used during construction and increased
depreciation and amortization. Also contributing to the decrease were the
adjustments taken in 1994 to the 1993 Restructuring charges. The decrease in
the last quarter of 1995 was offset in part by the Company's share of earnings
from the Company's equity interest in SEEBOARD.
Transok. The Company recently announced that it will explore strategic
alternatives for its natural gas pipeline and marketing subsidiary, Transok,
Inc. ("Transok"), including a possible sale. Transok owns one of the largest
intrastate pipeline systems in the United States. It was created in 1955 to
supply natural gas to the electric generating stations of the Company's
subsidiary, Public Service Company of Oklahoma. Its operations have grown to
include natural gas transmission, storage, marketing, gathering and processing.
In 1995, Transok had revenues of $721 million, operating income of $39 million
and net income of $25 million. As of December 31, 1995, Transok had total
assets of $766 million.
CPL Rate Review. On November 6, 1995, CPL filed with the Texas
Commission a request to increase its retail base rates by $71 million and
reduce its annual retail fuel factors by $17 million. The net effect of these
proposals would be an increase of $54 million, or 4.6%, of total retail
revenues based on a test year ended June 30, 1995. CPL is not seeking interim
rate relief but will implement bonded rates in May 1996, the earliest date
permitted by law. CPL also is seeking to reconcile $229 million of fuel costs
incurred during the period July 1, 1994 through June 30, 1995. CPL's previous
request to reconcile fuel costs from March 1, 1990 to June 30, 1994 in Docket
No. 13650 was consolidated with its then current rate review. If the requested
increase and other adjustments in rate structure are approved, CPL will commit
not to increase its base rates prior to January 1, 2001, subject to certain
force majeure events. A final decision on the rate request is not anticipated
from the Texas Commission prior to December 1996.
CPL is requesting this rate review primarily as a result of the
expiration of the amortization of Mirror CWIP liability. The Mirror CWIP
liability was amortized to income in declining amounts over a five-year period
from 1991 through 1995 pursuant to rate settlements reached by CPL in 1990 and
1991. In 1995, Mirror CWIP provided $41 million in non-cash earnings at CPL.
Also included in the request are proposals by CPL to accelerate recovery of
nuclear and regulatory assets as a way to proactively address certain assets
that could be unrecoverable or stranded in a more competitive environment. In a
preliminary order issued December 21, 1995, the Texas Commission expanded the
scope of the rate review to address certain competitive issues facing the
electric utility industry. Competitive issues will be addressed by CPL in a
supplemental filing due April 1, 1996, and include issues relating to (i) the
calculation of rates on a unbundled or functional basis (i.e., generation,
transmission and distribution), (ii) the excess of the current book value of
CPL's generating assets over the market value of such assets and the future
recovery of such excess, (iii) the application of performance based ratemaking,
(iv) potential revisions in the methodology
<PAGE> 3
of reconciling and recovering fuel costs and (v) the Texas Commission's
authority to introduce competition in the electric utility industry under
existing law. The Company cannot predict the ultimate outcome of CPL's rate
request.
Regulatory and Competitive Environment. Amendments to the Public
Utility Regulatory Act of the State of Texas ("PURA"), the legal foundation of
electric regulation in Texas, became effective on September 1, 1995. Among
other things, the amendments deregulate the wholesale bulk power market in the
Electric Reliability Council of Texas ("ERCOT"), permit pricing flexibility for
utilities facing competitive challenges, provide for a market-driven integrated
resource planning process and mandate comparable open access transmission
service.
PURA also requires that the Texas Commission adopt a rule on
comparable open transmission access by March 1, 1996. In conjunction with this
rulemaking proceeding (Docket No. 14045), Texas Commission Chairman Pat Wood
issued a proposal on September 6, 1995 for the purpose of maximizing
competition in the ERCOT wholesale bulk power market. The proposal calls for
the functional unbundling of integrated utilities where distribution entities
could purchase their power requirements from any generator or set of generators
in ERCOT. Those generators which are currently regulated would be deregulated
after provisions are in place to recover stranded costs. The proposal has been
assigned to a separate proceeding (Docket No. 15000), but the Texas Commission
has not yet developed a schedule for pursuing this docket. The Company believes
this docket may provide the vehicle for the Texas Commission and other
interested parties to develop positions on industry restructuring before the
Texas Legislature convenes in January 1997. The Company cannot predict the
ultimate outcome of Docket No. 15000 or its potential impact on the Electric
Operating Companies.
The Company is unable to predict the ultimate outcome or impact of
competitive forces on the electric industry or the Company and its
subsidiaries. As the wholesale and retail electricity markets become more
competitive, however, the principal factor determining success is likely to be
price, and to a lesser extent, reliability, availability of capacity, and
customer service.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTRAL AND SOUTH WEST CORPORATION
Date: January 30, 1996
By: /s/ Wendy G. Hargus
Wendy G. Hargus
Controller
