CENTRAL & SOUTH WEST CORP, 10-K, 2000-03-22

CENTRAL & SOUTH WEST CORP
10-K, 2000-03-22
ELECTRIC SERVICES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

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

For the Transition Period from ________ to _______

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, Texas 75202-1234
(214) 777-1000

0-346 Central Power and Light Company 74-0550600
(A Texas Corporation)
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
(361) 881-5300

0-343 Public Service Company of Oklahoma 73-0410895
(An Oklahoma Corporation)
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(918) 599-2000

1-3146 Southwestern Electric Power Company 72-0323455
(A Delaware Corporation)
428 Travis Street
Shreveport, Louisiana 71156-0001
(318) 673-3000

0-340 West Texas Utilities Company 75-0646790
(A Texas Corporation)
301 Cypress Street
Abilene, Texas 79601-5820
(915) 674-7000

<PAGE>

Securities Registered Pursuant To Section 12(B) Of The Act:
<TABLE>
<CAPTION>

Name of Each Exchange
Registrant Title of Each Class on Which Registered
<S> <C> <C>

Central and South West Corporation Common Stock, $3.50 Par Value New York Stock Exchange, Inc.
Chicago Stock Exchange, Inc.

CPL Capital I 8.00% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A, Liquidation Preference
$25 per Preferred Security

PSO Capital I 8.00% Trust Originated Preferred Securities New York Stock Exchange, Inc.
Series A, Liquidation Preference $25 per
Preferred Security

SWEPCO Capital I 7.875% Trust Preferred Securities, Series A, New York Stock Exchange, Inc.
Liquidation amount $25 per Preferred
Security
</TABLE>

Securities Registered Pursuant To Section 12(G) Of The Act:
<TABLE>
<CAPTION>

Registrant Title of Each Class
<S> <C>

Central Power and Light Company Cumulative Preferred Stock, $100 Par Value

Public Service Company of Oklahoma Cumulative Preferred Stock, $100 Par Value

Southwestern Electric Power Company Cumulative Preferred Stock, $100 Par Value

West Texas Utilities Company Cumulative Preferred Stock, $100 Par Value
</TABLE>

Indicate by check mark whether the Registrants (1) have 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 and (2) have been subject to such filing
requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K:

Central and South West Corporation [X], Central Power and Light Company [X],
Public Service Company of Oklahoma [X], Southwestern Electric Power Company,[X]
and West Texas Utilities Company [X]

Aggregate market value of the Common Stock of Central and South West
Corporation at March 13, 2000 held by non-affiliates was approximately $3.3
billion. Number of shares of Common Stock outstanding at March 13, 2000:
212,652,493. Central and South West Corporation is the sole holder of the common
stock of Central Power and Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company and West Texas Utilities Company.

This combined Form 10-K is separately filed by Central and South West
Corporation, Central Power and Light Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas Utilities Company.
Information contained herein relating to any individual Registrant is filed by
such Registrant on its own behalf. Each Registrant makes no representation as to
information relating to the other Registrants.

<PAGE>

1
TABLE OF CONTENTS

GLOSSARY OF TERMS................................................i

FORWARD-LOOKING INFORMATION......................................v

PART I

ITEM 1. BUSINESS ...............................................1
ITEM 2. PROPERTIES .............................................26
ITEM 3. LEGAL PROCEEDINGS ......................................27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....28

PART II

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS ..........................................2-1
ITEM 6. SELECTED FINANCIAL DATA ................................2-2
Registrants
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ..........................2-2
Registrants
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................................2-2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............2-2
Registrants
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ..........................2-155

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS ..3-1
ITEM 11. EXECUTIVE COMPENSATION ...............................3-10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ...................................................3-26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......3-29

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K ..................................................4-1

i
<PAGE>

GLOSSARY OF TERMS
The following abbreviations or acronyms used in this Form 10-K are defined
below:

Abbreviation or Acronym Definition
AEP.....................American Electric Power Company, Inc.
AEP Merger .............Proposed Merger between AEP and CSW where CSW would
become a wholly owned subsidiary of AEP
AFUDC ..................Allowance for funds used during construction
AIP.....................Annual Incentive Plan
ALJ ....................Administrative Law Judge
Alpek ..................Alpek S.A. de C.V.
Altamira................CSW International cogeneration project in Altamira,
Tamaulipas, Mexico
Anglo Iron..............Anglo Iron and Metal, Inc.
APBO....................Accumulated Postretirement Benefit Obligation
Arkansas Commission ....Arkansas Public Service Commission
Bankruptcy Code.........Title 11 Of The United States Bankruptcy Code, as
amended
BP Amoco................BP Amoco plc
Btu ....................British thermal unit
Burlington Northern ....Burlington Northern Railroad Company
C3 Communications ......C3 Communications, Inc., Austin, Texas (formerly CSW
Communications, Inc.)
CAAA ...................Clean Air Act/Clean Air Act Amendments
Cajun ..................Cajun Electric Power Cooperative, Inc.
Cash Balance Plan ......CSW's tax-qualified Cash Balance Retirement Plan
CEO ....................Chief Executive Officer
CERCLA .................Comprehensive Environmental Response, Compensation and
Liability Act of 1980
ChoiceCom ..............CSW/ICG ChoiceCom, L.P., a terminated joint venture
between C3 Communications and ICG Communications, Inc.
CLECO ..................Central Louisiana Electric Company, Inc.
CPL ....................Central Power and Light Company, Corpus Christi, Texas
CPL 1997 Final Order ...Final orders received from the Texas Commission in CPL's
rate case Docket No. 14965, including both the order
received on September 10, 1997 and the revised order
received on October 16, 1997
CSW ....................Central and South West Corporation, Dallas, Texas
CSW Credit .............CSW Credit, Inc., Dallas, Texas
CSW Energy .............CSW Energy, Inc., Dallas, Texas
CSW Energy Services ....CSW Energy Services, Inc., Dallas, Texas
CSW International ......CSW International, Inc., Dallas, Texas
CSW Investments ........CSW Investments, an unlimited company organized in the
United Kingdom through which CSW International owns
SEEBOARD
CSW Leasing ............CSW Leasing, Inc., Dallas, Texas
CSW Services ...........Central and South West Services, Inc., Dallas, Texas and
Tulsa, Oklahoma
CSW System .............CSW and its subsidiaries
CSW UK Finance Company..An unlimited company organized in the United Kingdom
through which CSW International owns CSW Investments
CSW UK Holdings.........An unlimited company organized in the United Kingdom
through which CSW International owns CSW UK Finance
Company
CSW U.S. Electric
System...............CSW and the U.S. Electric Operating Companies
DeSoto..................Parish of DeSoto, State of Louisiana pollution control
revenue bond issuing authority
DGEGS ..................Director General of Electricity and Gas Supply
DHMV ...................Dolet Hills Mining Venture
Diversified Electric ...CSW Energy and CSW International
DOE ....................United States Department of Energy
ECOM ...................Excess cost over market
EDC.....................Energy Delivery Company
EITF....................Emerging Issues Task Force
EITF 97-4...............Deregulation of the Pricing of Electricity - Issues
Related to the Application of SFAS Nos. 71 and 101
El Paso ................El Paso Electric Company
EMF ....................Electric and magnetic fields
EnerACT.................EnerACT(TM), Energy Aggregation and Control Technology
Energy Policy Act ......National Energy Policy Act of 1992
EnerShop ...............EnerShopsm Inc., Dallas, Texas
EPA ....................United States Environmental Protection Agency
EPS ....................Earnings per share of common stock
ERCOT ..................Electric Reliability Council of Texas
ERISA ..................Employee Retirement Income Security Act of 1974, as
amended
ESPS....................Electric Supply Pension Scheme
Exchange Act ...........Securities Exchange Act of 1934, as amended
EWG ....................Exempt Wholesale Generator
FCC.....................Federal Communications Commission
FERC ...................Federal Energy Regulatory Commission
FMB ....................First mortgage bond

ii
<PAGE>

GLOSSARY OF TERMS (continued)
The following abbreviations or acronyms used in this Form 10-K are defined
below:

Abbreviation or Acronym Definition
FUCO ...................Foreign utility company as defined by the Holding
Company Act
Guadalupe...............Guadalupe-Blanco River Authority pollution control
revenue bond issuing authority
HL&P ...................Houston Lighting & Power Company
Holding Company Act ....Public Utility Holding Company Act of 1935, as amended
HVdc ...................High-voltage direct-current
IPP ....................Independent power producer
IBEW ...................International Brotherhood of Electrical Workers
ISO ....................Independent system operator
ITC ....................Investment tax credit
Joint Proxy Statement...The Notice of Annual Meeting and Joint Proxy Statement
of American Electric Power Company, Inc. and Central and
South West Corporation
July 1999 SWEPCO Plan...The amended plan of reorganization for Cajun filed by
the Members Committee and SWEPCO on July 28, 1999 with
the U.S. Bankruptcy Court for the Middle District of
Louisiana
KW .....................Kilowatt
KWH ....................Kilowatt-hour
LIBOR...................London Inter-Bank Overnight Rate
LIFO ...................Last-in first-out (inventory accounting method)
Louisiana Commission ...Louisiana Public Service Commission
LTIP ...................Amended and Restated 1992 Long-Term Incentive Plan
Matagorda ..............Matagorda County Navigation District Number One (Texas)
pollution control revenue bond issuing authority
Mcfs ...................Thousand cubic feet of gas
MD&A ...................Management's Discussion and Analysis of Financial
Condition and Results of Operations
MDEQ ...................Mississippi Department of Environmental Quality
MGP ....................Manufactured gas plant or coal gasification plant
Mirror CWIP ............Mirror construction work in progress
Mississippi Power ......Mississippi Power Company
MMbtu ..................Million Btu
MW .....................Megawatt
MWH ....................Megawatt-hour
Named Executive
Officers..............The CEO and the four most highly compensated Executive
Officers, as defined by regulation
National Grid ..........National Grid Group plc
NEIL ...................Nuclear Electric Insurance Limited
NLRB ...................National Labor Relations Board
NRC ....................Nuclear Regulatory Commission
OASIS ..................Open access same time information system
OEFA....................Oklahoma Environmental Finance Authority pollution
control revenue bond issuing authority
OFGEM...................Office of Gas and Electricity Markets
Oklahoma Commission ....Corporation Commission of the State of Oklahoma
Oklaunion ..............Oklaunion Power Station Unit No. 1
OPEB ...................Other postretirement benefits (other than pension)
PCB ....................Polychlorinated biphenyl
PCRB....................Pollution control revenue bond
PGC.....................Power Generation Company
Phillips................Phillips Petroleum Company
PowerShare .............CSW's PowerShareSM Dividend Reinvestment and Stock
Purchase Plan
PRP ....................Potentially responsible party
PSO ....................Public Service Company of Oklahoma, Tulsa, Oklahoma
PSO 1997 Rate Settlement
Agreement.............Joint stipulation agreement reached by PSO and other
parties to settle PSO's rate inquiry
PURPA...................Public Utility Regulatory Policies Act of 1978
QF......................Qualifying Facility as defined in PURPA
RCRA....................Federal Resource Conservation and Recovery Act of 1976
Red River...............Red River Authority of Texas pollution control revenue
bond issuing authority
Registrant(s) ..........CSW, CPL, PSO, SWEPCO and WTU
RESCTA .................Retail Electric Supplier Certified Territory Act
REP.....................Retail Electric Provider
Retirement Savings Plan.CSW's employee retirement savings plan
Rights Plan ............Stockholders Rights Agreement between CSW and CSW
Services, as Rights Agent
RTO.....................Region Transmission Organization
Sabine..................Sabine River Authority of Texas pollution control
revenue bond issuing authority
SAR ....................Stock Appreciation Right
SEC ....................United States Securities and Exchange Commission
SEEBOARD ...............SEEBOARD Group plc, Crawley, West Sussex, United Kingdom
SEEBOARD U.S.A..........CSW's investment in SEEBOARD consolidated and converted
to U.S. Generally Accepted Accounting Principles

iii
<PAGE>

GLOSSARY OF TERMS (continued)
The following abbreviations or acronyms used in this Form 10-K are defined
below:

Abbreviation or Acronym Definition
SERP....................Special Executive Retirement Plan
SFAS....................Statement of Financial Accounting Standards
SFAS No. 34.............Capitalization of Interest Cost
SFAS No. 52 ............Foreign Currency Translation
SFAS No. 71 ............Accounting for the Effects of Certain Types of
Regulation
SFAS No. 87.............Employers' Accounting for Pensions
SFAS No. 88.............Employers' Accounting for Settlements and Curtailments
of Defined Pension Plans and for Termination Benefits
SFAS No. 101............Regulated Enterprises - Accounting for the
Discontinuation of Application of SFAS No. 71
SFAS No. 106 ...........Employers' Accounting for Postretirement Benefits Other
than Pensions
SFAS No. 115 ...........Accounting for Certain Investments in Debt and Equity
Securities
SFAS No. 121............Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of
SFAS No. 123 ...........Accounting for Stock-Based Compensation
SFAS No. 130 ...........Reporting Comprehensive Income
SFAS No. 131 ...........Disclosure about Segments of an Enterprise and Related
Information
SFAS No. 132 ...........Employers' Disclosures about Pensions and Other
Postretirement Benefits
SFAS No. 133 ...........Accounting for Derivative Instruments and Hedging
Activities
SFAS No. 137............Deferral of the Effective Date of Statement No. 133
SPP ....................Southwest Power Pool
Siloam Springs..........City of Siloam Springs, Arkansas pollution control
revenue bond issuing authority
STP ....................South Texas Project nuclear electric generating station
STPNOC .................STP Nuclear Operating Company, a non-profit Texas
corporation, jointly owned by CPL, HL&P, City of Austin,
and City of San Antonio
SWEPCO .................Southwestern Electric Power Company, Shreveport,
Louisiana
Texas Commission .......Public Utility Commission of Texas
Texas Electric Operating
Companies............CPL, SWEPCO and WTU
Texas Legislation.......Texas Senate Bill 7 relating to deregulation of electric
utility industry
Titus County............Titus County Fresh Water Supply District No. 1 pollution
control revenue bond issuing authority
TNRCC...................Texas Natural Resource Conservation Commission
Transok.................Transok, Inc. and subsidiaries
Trust Preferred
Securities............Collective term for securities issued by business trusts
of CPL, PSO and SWEPCO classified on the balance sheet
as "Certain Subsidiary (or CPL/PSO/SWEPCO)-obligated,
mandatorily redeemable preferred securities of
subsidiary trusts holding solely Junior Subordinated
Debentures of such Subsidiaries (or CPL/PSO/SWEPCO)"
U.K. Electric...........SEEBOARD U.S.A.
Union Pacific ..........Union Pacific Railroad Company
U.S. Electric Operating Companies or
U.S. Electric .....CPL, PSO, SWEPCO and WTU
UWUA....................Utility Workers Union of America
Vale ...................Empresa De Electricidade Vale Paranapanema SA, a
Brazilian Electric Distribution Company
Valero..................Valero Refining Company-Texas, Valero Refining Company
and Valero Energy Company
WTU ....................West Texas Utilities Company, Abilene, Texas
Yorkshire ..............Yorkshire plc, a regional electricity company in the
United Kingdom

iv
<PAGE>

FORWARD-LOOKING INFORMATION

This report made by CSW and its U.S. Electric Operating Companies contains
forward-looking statements within the meaning of Section 21E of the Exchange
Act. Although CSW and each of its subsidiaries believe that their expectations
are based on reasonable assumptions, any such statements may be influenced by
factors that could cause actual outcomes and results to be materially different
from those projected. Important factors that could cause actual results to
differ materially from those in the forward-looking statements include, but are
not limited to:

- - increased competition and electric utility industry restructuring in the
United States,
- - the impact of the proposed AEP Merger, including any regulatory
conditions imposed on the merger or the inability to consummate the AEP
Merger, or other merger and acquisition activity,
- - federal and state regulatory developments and changes in law which may have
a substantial adverse impact on the value of CSW System assets,
- - the impact of general economic changes in the United States and in
countries in which CSW either currently has made or in the future may make
investments,
- - timing and adequacy of rate relief,
- - adverse changes in electric load and customer growth,
- - climatic changes or unexpected changes in weather patterns,
- - changing fuel prices, generating plant and distribution facility
performance,
- - decommissioning costs associated with nuclear generating facilities,
- - costs associated with any year 2000 computer-related failure(s) either
within the CSW System or supplier failures that adversely affect the CSW
System,
- - uncertainties in foreign operations and foreign laws affecting CSW's
investments in those countries,
- - the effects of retail competition in the natural gas and electricity
distribution and supply businesses in the United Kingdom, and
- - the timing and success of efforts to develop domestic and international
power projects.

In the non-utility area, the previously mentioned factors apply and also
include, but are not limited to:

- - the ability to compete effectively in new areas, including
telecommunications and other energy-related services, and
- - evolving federal and state regulatory legislation and policies that may
adversely affect those industries generally or the CSW System's
business in areas in which it operates.

v
<PAGE>

PART I

ITEM 1. BUSINESS.

CSW, incorporated under the laws of Delaware in 1925, is a Dallas-based
public utility holding company registered under the Holding Company Act. CSW
owns all of the outstanding shares of common stock of the U.S. Electric
Operating Companies, CSW Services, CSW Credit, CSW Energy, CSW International, C3
Communications, EnerShop, and CSW Energy Services, and indirectly owns all of
the outstanding share capital of SEEBOARD. In addition, CSW owns 80% of the
outstanding shares of common stock of CSW Leasing. In 1999, CSW's operating
segments, including its four registrants that form the U.S. Electric segment,
contributed the following percentages to aggregate operating revenues, operating
income and net income.

U.S. U.K.
CPL PSO SWEPCO WTU Electric Electric Other Total
----------------------------------------------------------
Operating 26% 13% 17% 8% 64% 31% 5% 100%
Revenues
Operating 35% 15% 14% 8% 72% 23% 5% 100%
Income
Net Income (1) 37% 15% 18% 7% 77% 24% (1)% 100%
(1) Net Income before Extraordinary Items

The relative contributions of the U.S. Electric, U.K. Electric and
Diversified Electric segments and other non-utility subsidiaries to the
aggregate operating revenues, operating income and net income differ from year
to year due to variations in weather, fuel costs, timing and amount of rate
changes and other factors, including but not limited to changes in business
conditions and the results of non-utility businesses. Sales of electricity by
the U.S. Electric Operating Companies tend to increase during warmer summer
months and, to a lesser extent, cooler winter months, because of higher demand
for power. The sale of electricity by the U.K. Electric segment tends to
increase during colder winter months because of a higher demand for power. For
additional detail related to CSW's reportable business segments, see ITEM 8. -
NOTE 14. BUSINESS SEGMENTS. For financial results showing CSW's seasonality, see
ITEM 8. - NOTE 19. QUARTERLY INFORMATION.

The CSW System is subject to the jurisdiction of the SEC under the Holding
Company Act with respect to the issuance, acquisition and sale of securities,
the acquisition and sale of utility assets, the acquisition of or any interest
in any other business and accounting practices, including certain affiliate
transactions, and other matters. See RATES AND REGULATION below, and ITEM 7.
MD&A for additional information regarding the Holding Company Act.

PROPOSED AEP MERGER

Background Information
On December 22, 1997, CSW and AEP announced that their boards of directors
had approved a definitive merger agreement for a tax-free, stock-for-stock
transaction creating a company with a total market capitalization of
approximately $28 billion at that time. At December 31, 1999, the total market
capitalization of the combined company would have been $19 billion ($9 billion
in equity; $10 billion in debt). The combined company will serve more than 4.7
million customers in 11 states and approximately 4 million customers outside the
United States. On May 27, 1998, AEP shareholders approved the issuance of the
additional shares of stock required to complete the merger. On May 28, 1998, CSW
stockholders approved the merger. On December 16, 1999, the AEP merger agreement
was amended to extend the date of the agreement to June 30, 2000, after which
either party may terminate the agreement.

1
<PAGE>

Under the merger agreement, each common share of CSW will be converted
into 0.6 share of AEP common stock. Based upon AEP's closing price immediately
prior to the merger announcement, this represented a premium of 20% over the CSW
closing price, and AEP would have issued approximately $6.6 billion in stock to
CSW stockholders to complete the transaction. At December 31, 1999, AEP would
have issued approximately $4.1 billion in stock to CSW stockholders to complete
the transaction. CSW plans to continue to pay dividends on its common stock
until the closing of the AEP Merger at approximately the same times and rates
per share as in 1999, subject to the continuing evaluation of CSW's earnings,
financial condition and other factors by the CSW board of directors.

Under the merger agreement, there will be no changes required with respect
to the public debt issues, the outstanding preferred stock or the Trust
Preferred Securities of CSW's subsidiaries.

The electric systems of AEP and CSW will operate on an integrated and
coordinated basis as required by the Holding Company Act. Any fuel savings
resulting from the coordinated operation of the combined company will be passed
on to customers.

The merger agreement contains covenants and agreements that restrict the
manner in which the parties may operate their respective businesses until the
time of closing of the merger. In particular, without the prior written consent
of AEP, CSW may not engage in a number of activities that could affect its
sources and uses of funds. Pending closing of the merger, CSW's and its
subsidiaries' strategic investment activity, capital expenditures and non-fuel
operating and maintenance expenditures are restricted to specific agreed upon
projects or agreed upon amounts. In addition, prior to consummation of the
merger, CSW and its subsidiaries are restricted from: (i) issuing shares of
common stock other than pursuant to employee benefit plans; (ii) issuing shares
of preferred stock or similar securities other than to refinance existing
obligations or to fund permitted investment or capital expenditures; and (iii)
incurring indebtedness other than pursuant to existing credit facilities, in the
ordinary course of business or to fund permitted projects or capital
expenditures. These restrictions are not expected to limit the ability of CSW
and its subsidiaries to make investments and expenditures in amounts previously
budgeted. (The foregoing statements constitute forward-looking statements within
the meaning of Section 21E of the Exchange Act. Actual results may differ
materially from such projected information due to changes in the underlying
assumptions. See FORWARD-LOOKING INFORMATION).

Merger Regulatory Approval
The merger is conditioned, among other things, upon the approval of
several state and federal regulatory agencies. In order to be closed, the merger
must satisfy many conditions, including the condition that it must be accounted
for as a pooling of interests. The parties may not waive some of these
conditions. AEP and CSW have initiated the process of seeking regulatory
approvals, but there can be no assurance as to when, on what terms or whether
the required approvals will be received. The proposed AEP Merger has a targeted
completion date in the second quarter of 2000. However, there can be no
assurance that the AEP Merger will be consummated.

See ITEM 7. MD&A and ITEM 8. - NOTE 15. PROPOSED AEP MERGER.

2
<PAGE>

U.S. ELECTRIC

The U.S. Electric Operating Companies generate, purchase, transmit,
distribute and sell electricity. The U.S. Electric Operating Companies serve
approximately 1.8 million customers in one of the largest combined service
territories in the United States covering approximately 152,000 square miles in
portions of Texas, Oklahoma, Louisiana and Arkansas. The customer base includes
a mix of residential, commercial and diversified industrial customers. CPL and
WTU operate in portions of south and central west Texas, respectively. PSO
operates in portions of eastern and southwestern Oklahoma, and SWEPCO operates
in portions of northeastern Texas, northwestern Louisiana and western Arkansas.
Information concerning each of the U.S. Electric Operating Companies for 1999 is
presented in the following table.

Estimated
Estimated Service Average Rural Electric
State and Year Population Territory Number of Municipal Cooperatives
Registrant Incorporation Served (sq. miles) Customers Customers Served
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

CPL Texas - 1945 1,830,000 44,000 661,100 1 4
PSO Oklahoma - 1913 1,113,000 30,000 490,900 2 2
SWEPCO Delaware - 1912 942,000 25,000 421,900 3 9
WTU Texas - 1927 387,000 53,000 189,100 4 13
</TABLE>

The largest cities in CPL's service territory are Corpus Christi, Laredo
and McAllen. The economic base of CPL's service territory includes
manufacturing, mining, agricultural, transportation and public utilities
sectors. Major activities in these sectors include oil and gas extraction, food
processing, apparel, metal refining, chemical and petroleum refining, plastics
and machinery equipment. Contracts with substantially all large industrial
customers provide for both demand and energy charges. Demand charges continue
under such contracts even during periods of reduced industrial activity, thus
mitigating the effect of reduced activity on operating income.

The largest cities in PSO's service territory are Tulsa, Lawton, Broken
Arrow and Bartlesville. The economic base of PSO's service territory includes
petroleum products, manufacturing and agriculture. The principal industries in
the territory include natural gas and oil production, oil refining, steel
processing, aircraft maintenance, paper manufacturing and timber products,
glass, chemicals, cement, plastics, aerospace manufacturing, telecommunications
and rubber goods.

The largest cities in SWEPCO's service territory are Shreveport/Bossier
City, Longview and Texarkana. The economic base of SWEPCO's service territory
includes mining, manufacturing, chemical products, petroleum products,
agriculture and tourism. The principal industries in the territory include
natural gas and oil production, petroleum refining, manufacturing of pulp and
paper, chemicals, food processing and metal refining. The territory also has
several military installations, colleges and universities.

The largest cities in WTU's service territory are Abilene and San Angelo.
The economic base of WTU's service territory includes agricultural businesses,
such as the production of cattle, sheep, goats, cotton, wool, mohair and feed
crops. Significant gains have been made in economic diversification through
value added processing of these products. The natural resources of the territory
include oil, natural gas, sulfur, gypsum and ceramic clays. Important
manufacturing and processing plants served by WTU produce cottonseed products,
oil products, electronic equipment, precision and consumer metal products, meat
products, gypsum products and carbon fiber products. The territory also has
several military installations and state correctional institutions.

The U.S. Electric Operating Companies operate on an interstate basis to
facilitate exchanges of power. PSO and WTU are interconnected through the 200 MW
North HVdc transmission interconnection located at Vernon, Texas. SWEPCO and CPL
are interconnected through the 600 MW East HVdc transmission interconnection
located at Pittsburg, Texas.

3
<PAGE>

CPL and WTU are members of the ERCOT power grid that operates in Texas.
Other ERCOT members include Texas Utilities Electric Company, HL&P, Texas
Municipal Power Agency, Lower Colorado River Authority, the municipal systems of
San Antonio, Austin and Brownsville, the South Texas and Medina Electric
Cooperatives, and several other interconnected systems and cooperatives. PSO and
SWEPCO are members of the SPP power grid that includes 12 investor-owned
utilities, 7 municipalities, 7 cooperatives, 3 state agencies and 1 federal
agency as well as IPPs and power marketers operating in the states of Arkansas,
Kansas, Louisiana, Oklahoma and parts of Mississippi, Missouri, New Mexico and
Texas. ERCOT members interchange power and energy with one another on a firm,
economy and emergency basis, as do the members of the SPP.

CSW Services performs, at cost, various accounting, engineering, tax,
legal, financial, electronic data processing, centralized economic dispatching
of electric power and other services for the CSW System, primarily for the U.S.
Electric Operating Companies. The U.S. Electric Operating Companies are
functionally organized into power generation, energy delivery and energy
services business units, which are centrally managed by CSW Services. Currently,
CSW is developing management information systems to report segment information
along these business lines. See RECENT DEVELOPMENTS AND TRENDS - Texas Business
Separation Plan for an explanation of CSW's future plans to unbundle its
vertically integrated electric services.

U.K. ELECTRIC

SEEBOARD is one of the 12 regional electricity companies formed as a
result of the restructuring and subsequent privatization of the United Kingdom
electricity industry in 1990. CSW acquired indirect control of SEEBOARD in April
1996. SEEBOARD's principal businesses are the distribution and supply of
electricity. In addition, SEEBOARD is engaged in other businesses, including gas
supply, electricity generation, and electrical contracting.

SEEBOARD's service area covers approximately 3,000 square miles in
Southeast England. The service area extends from the outlying areas of London to
the English Channel, and includes large towns such as Kingston-upon-Thames,
Croydon, Crawley, Maidstone, Ashford and Brighton, as well as substantial rural
areas. The area has a population of approximately 4.7 million people with
significant portions of the area, such as south London, having a high population
density. Over the past 25 years, the services sector of the area's economy has
grown in importance, while the industrial sector has declined. Considerable
commercial development has occurred in a number of towns in the area over the
last ten years, in particular in the areas around Gatwick Airport and the
English Channel ports.

In 1998, the electricity market in the U.K. began a phased opening of
competition, allowing domestic and small business customers in selected areas to
choose their electric suppliers. During 1999, competition was extended to the
entire country. SEEBOARD became one of the first regional electricity companies
to compete in the open marketplace, with part of its service area being opened
to competition in October 1998. SEEBOARD is actively competing to retain its
existing customers and win new customers in other regions.

In a joint venture, SEEBOARD Powerlink won a 30-year contract for $1.6
billion to operate, maintain, finance and renew the high-voltage power
distribution network of the London Underground, the largest metropolitan rail
system in the world. SEEBOARD Powerlink will be responsible for distributing
high voltage electricity supply to all 270 London Underground stations and to
some 250 miles of the rail system's track. SEEBOARD's partners in the Powerlink
consortium are an international electrical engineering group and an
international cable and construction group.

On June 30, 1999, SEEBOARD purchased the 50% interest in Beacon Gas held
by BP Amoco. Beacon Gas was a joint venture between SEEBOARD and BP Amoco set up
for the supply of gas.

4
<PAGE>

See RATES AND REGULATION - U.K. ELECTRIC and ITEM 8. NOTE 2. LITIGATION
AND REGULATORY PROCEEDINGS - Regulatory Price Proposal for SEEBOARD for
additional information related to scheduled changes in SEEBOARD's prices and
expected effects thereof.

OTHER CSW BUSINESS OPERATIONS

CSW continually seeks opportunities to expand its non-utility business in
areas related to energy and energy services. This expansion frequently occurs
through strategic domestic and international acquisitions, through marketing
initiatives inside and outside of the service territories of the U.S. Electric
Operating Companies and through new business investments. Acquisitions of any
new assets, or development of any new business opportunities, must meet defined
criteria, including the potential to lower CSW System costs, increase long-term
efficiency and competitiveness, and provide an acceptable return on investment
to CSW. See ITEM 7. MD&A, PROPOSED AEP MERGER and ITEM 8. NOTE 15. PROPOSED AEP
MERGER for information related to covenants and restrictions on certain business
activities.

Diversified Electric

CSW Energy
CSW Energy presently owns interests in seven operating power projects
totaling 1,308 MW which are located in Colorado, Florida and Texas. In addition
to these projects, CSW Energy has other projects in various stages of
development.

CSW Energy began construction in August 1998 of a 500 MW power plant,
known as Frontera, in the Rio Grande Valley, near the city of Mission, Texas.
The natural gas-fired facility began simple cycle operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in early 2000.
Pursuant to AEP's and CSW's stipulated agreement with several intervenors in the
state of Texas related to the AEP Merger, CSW Energy may sell 250 MW of Frontera
upon completion of the merger, subject to certain conditions. See ITEM 7. MD&A,
PROPOSED AEP MERGER and ITEM 8. NOTE 15. PROPOSED AEP MERGER for additional
information.

CSW Energy also has entered into an agreement with Eastman Chemical
Company to construct and operate a 440 MW cogeneration facility in Longview,
Texas. This facility will be known as the Eastex Cogeneration Project.
Construction of the facility began in the fourth quarter of 1999, with expected
operation in early 2001. CSW Energy will sell excess electricity generated by
the plant in the wholesale electricity market.

In October 1999, GE Capital Structured Finance Group purchased 50% of the
equity ownership of Sweeny Cogeneration Limited Partnership. CSW Energy's
after-tax earnings from the proceeds of the transaction were approximately $33
million. The agreement between CSW Energy and GE Capital Structured Finance
Group provides for additional payments to CSW Energy subject to completion of a
planned expansion of the Sweeny cogeneration facility, which may be operational
in the fourth quarter of 2000.

CSW International
CSW International pursues investment opportunities in EWGs and FUCOs and
currently holds investments in the United Kingdom, Mexico and South America.

5
<PAGE>

million construction financing. Both the guarantee and the construction
financing are denominated in pounds sterling. The U.S. dollar equivalent at
December 31, 1999 would be $31 million and $308 million respectively, using a
conversion rate of (pound)1.00 equals $1.62. The permanent financing is
unconditionally guaranteed by the project. Construction of the project began in
March 1999, and commercial operation is expected to begin in late 2000.

Through November 1999, CSW International had purchased a 36% equity
interest in Vale for $80 million. In 1998, CSW International also extended $100
million of debt convertible into equity in Vale. In December of 1999, CSW
International converted $69 million of that $100 million of debt into equity,
thereby raising its equity interest in Vale to 44%. CSW International
anticipates converting the remaining debt to equity over the next two years. See
ITEM 7. MD&A - DIVERSIFIED ELECTRIC - CSW International for additional
information about these investments.

As of December 31, 1999, CSW International had invested $110 million in
common stock of a Chilean electric company.

Energy Services

C3 Communications
C3 Communications has two active business units, C3 Networks and C3
Utility Automation. C3 Networks offers wholesale, high capacity, long-haul
regional and metropolitan fiber and collocation services to telecommunications
carriers and Internet service providers in Texas and Louisiana.

C3 Networks has approximately 1,500 miles of fiber network in Texas and
Louisiana and offers collocation services to carriers and Internet service
providers through sites in Dallas, Houston, Austin, San Antonio, Abilene, San
Angelo, Corpus Christi, Harlingen, Laredo, and McAllen, Texas and Tulsa,
Oklahoma.

C3 Communications plans to expand existing Texas and Louisiana routes and
to expand its fiber network to include Oklahoma and Arkansas. The network
expansion is expected to include additional sites in Victoria, Longview and
Bryan, Texas; Shreveport and Monroe, Louisiana; Lawton and Oklahoma City,
Oklahoma and Fayetteville and Fort Smith, Arkansas. C3 Communications also plans
to add two additional products to its offerings: cost-effective, reliable
wholesale Internet access and wholesale managed modem services.

C3 Utility Automation services include meter reading, validation and
settlement services; automated meter reading equipment sales and leasing; energy
information services and equipment sales and services. In 1999, C3
Communications launched a new energy information service, PurView(TM). In
addition, EnerACT(TM) advisory services, was transferred from EnerShop to better
align products and marketing. PurView(TM) is a service for collecting meter data
and interactively viewing and analyzing consumption information over the
Internet. EnerACT(TM), transferred from EnerShop, is an energy information and
advisory service for multi-site building owners and managers who want to
increase property value, control operating expenses and prepare for utility
deregulation. Additionally, C3 Utility Automation shifted away from efforts to
sell large-scale capital intensive mass-market automated meter reading
deployments in favor of more distributed methods for collecting meter data and
providing energy information services. While currently providing service for
over 90,000 direct access customers in California, C3 Communications plans to
leverage its experience providing meter data services by expanding into eight
other states where electric restructuring allows competition for metering
services.

C3 Communications believes that electric industry restructuring will
continue to fuel interest in its energy information services. Evaluation of
partnerships and acquisitions will also be a key element of growth for C3
Communications in 2000. The foregoing statement constitutes a forward-looking
statement within the meaning of Section 21E of the Exchange Act. Actual results

6
<PAGE>

may differ materially from such projected information due to changes in the
underlying assumptions. See FORWARD-LOOKING INFORMATION.

EnerShop
EnerShop's two product lines in 1999 were performance contracting and
EnerACT(TM) advisory services until August 1999, when EnerACT(TM) was
transferred to C3 Communications to better align products and marketing.

EnerShop continues to provide energy services to customers in Texas and
Louisiana that are designed to help reduce customers' operating costs through
increasing energy efficiency and improving equipment operations. EnerShop
utilizes the skills of local trade allies in offering services that include
energy and facility analysis, project management, engineering design, equipment
procurement and construction and performance monitoring.

Business Ventures
The CSW Services' Business Ventures is comprised of companies that pursue
energy-related businesses. Projects include providing energy management systems,
electric substation automation software and the marketing and distribution of
electric bikes and associated accessories under the TotalEV(TM) name.

In late 1997, CSW Energy Services was launched to explore the electric
utility industry's emerging retail supply markets as they were deregulated on a
state-by-state basis. In January 1999, CSW Energy Services announced that it was
ceasing its business as a retail electric supplier and that it would assign its
existing electricity supply contracts to other suppliers or terminating them. In
the fourth quarter of 1999, the CSW Business Ventures group's investment in an
energy-related company that provides staffing services for nuclear power plants
was transferred from PSO to CSW Energy Services.

Other Diversified
CSW Credit was originally formed to purchase, without recourse, accounts
receivable from the U.S. Electric Operating Companies to reduce working capital
requirements. In addition, because CSW Credit's capital structure is more highly
leveraged than that of the U.S. Electric Operating Companies, CSW's overall cost
of capital is lower. Subsequent to its formation, CSW Credit's business has
expanded to include the purchase, without recourse, of accounts receivable from
certain non-affiliated utilities, subject to limitations imposed by the SEC
under the Holding Company Act.

CSW Leasing, Inc. is a subsidiary which is 80% owned by CSW, and makes
investments in leveraged leases of transportation equipment.

COMPETITION AND INDUSTRY CHALLENGES

Competitive forces at work in the electric utility industry are affecting
the CSW System and electric utilities generally. Current legislative and
regulatory initiatives are aimed at creating greater competition in both the
wholesale and retail markets in the future. See ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS - Electric Utility Restructuring Legislation for further
information. As competition in the industry increases, the U.S. Electric
Operating Companies will have the opportunity to seek new customers and at the
same time will be at risk of losing customers to other competitors.
Additionally, the U.S. Electric Operating Companies will continue to compete
with suppliers of alternative forms of energy, such as natural gas, fuel oil and
coal, some of which may be cheaper than electricity. As a whole, the U.S.
Electric Operating Companies believe that their prices for electricity and the
quality and reliability of their service currently place them in a position to
compete effectively in the marketplace. In light of these anticipated changes,
CSW continues to seek opportunities to expand its business operations that are
not regulated by state utility commissions (The foregoing statement constitutes
a forward-looking statement within the meaning of Section 21E of the Exchange

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<PAGE>

Act. Actual results may differ materially from such projected information due to
changes in the underlying assumptions. See FORWARD-LOOKING INFORMATION).

To address the anticipated changes in the electric utility industry and to
properly align its business operations with its non-regulated activities, CSW
manages its business operations in five distinct lines of business. These
business lines fall into both the regulated and non-regulated categories. In
addition, given the expected restructuring of the utility industry, certain
aspects of the business lines will eventually cease to be regulated.
Consequently, CSW's operating structure is designed to accommodate both the
current business environment as well as the anticipated future environment. The
five business lines are: (i) power generation; (ii) energy delivery; (iii)
energy services; (iv) international energy operations; and (v)
telecommunications. Currently, CSW is developing management information systems
to report segment information along these business lines.

Code of Conduct Under Customer Choice
Legislation was enacted in Arkansas and Texas in 1999 to restructure the
electric utility industry in those states. These two new laws require that the
CSW System begin to operate its utilities as separate power generation entities,
retail electric providers and transmission and distribution entities. Power
generation entities and retail electric providers will be non-regulated;
transmission and distribution entities will continue to be regulated. On or
before September 1, 2000, the Texas operations of each of the U.S. Electric
Operating Companies will separate their regulated and non-regulated utility
activities.

The purpose of these laws and the separation they impose is to create
financial and informational firewalls between regulated and non-regulated
activities of the CSW System so that competitive sensitive information cannot be
shared by regulated and non-regulated entities.

In order to comply with the new Texas and Arkansas laws, the Registrants
will follow a "code of conduct," which requires the non-regulated business
activities to be separate from the regulated activities. Transactions between
the regulated and non-regulated activities will be subject to an
information-sharing "firewall" and the requirement to act on an arm's-length
basis.

For additional information regarding competition and industry challenges,
including legislative initiatives at both the state and federal level, see ITEM
7. MD&A - RECENT DEVELOPMENTS AND TRENDS - Competition and Industry Challenges -
Code of Conduct Under Customer Choice and ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS.

RATES AND REGULATION

The CSW System is subject to the jurisdiction of the SEC under the Holding
Company Act with respect to the issuance of securities, certain acquisition and
divestiture activities, certain affiliate transactions and other matters. The
Holding Company Act generally limits the operations of a registered holding
company to that of a single integrated public utility system, plus such
additional businesses as are functionally related to such system. The U.S.
Electric Operating Companies have been classified as public utilities under the
Federal Power Act. Accordingly, the FERC has jurisdiction, in certain respects,
over their electric utility facilities and operations wholesale rates, and
certain other matters. The U.S. Electric Operating Companies are subject to the
jurisdiction of various state commissions as to retail rates, accounting
matters, standards of service and, in some cases, issuances of securities,
certification of facilities and extensions or divisions of service territories.
For a discussion of regulation by the various environmental agencies that
applies to the CSW System, see ENVIRONMENTAL MATTERS below.

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U.S. Electric

Franchises
The U.S. Electric Operating Companies hold franchises to provide electric
service in various municipalities within their service areas. These franchises
have varying provisions and expiration dates, including, in some cases,
termination and buy-out provisions. CSW considers the franchises of the U.S.
Electric Operating Companies to be adequate for the conduct of their business.
However, due to electric utility restructuring legislation, which is phasing in
competition to retail markets in Arkansas and Texas, the U.S. Electric Operating
Companies expect additional competition in their franchise areas. See ITEM 7.
MD&A - Securitization of Generation-related Regulatory Assets and Stranded Costs
and ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility
Restructuring Legislation for additional information on electric utility
restructuring.

Texas Rates - CPL, SWEPCO and WTU
The Texas Commission has original jurisdiction over retail rates in the
unincorporated areas of Texas. The governing bodies of incorporated
municipalities have original jurisdiction over rates within their incorporated
limits. Municipalities may elect, and some have elected, to surrender this
original jurisdiction to the Texas Commission. The Texas Commission has
appellate jurisdiction over rates set by incorporated municipalities.

In Texas, electric service areas are approved by the Texas Commission. A
given tract in a utility's overall service area may be certificated to one
utility, to one of several competing electric cooperatives or investor owned
utilities, to one of the competing municipal electric systems, or it may be
certificated to two or more of these entities. The Texas Commission has changed
these certificated areas only slightly since 1976.

Effective with the passage of the Texas Legislation, in areas in which
each certificated retail electric utility is providing customer choice, the
Texas Commission, if requested by a retail electric utility, shall examine all
areas within the service area of the retail electric utility that are also
certificated to one or more other retail electric utilities and amend the
certificates so that only one retail electric utility is certificated to provide
distribution services in any such area.

Three parties have filed applications at the Texas Commission requesting
authority to provide retail electric service in CPL's currently certificated
areas. Two of the parties requested that the Texas Commission order CPL to
permit them to use CPL's distribution facilities, which management believes to
be unlawful. Hearings on the matter were held in December 1999, and a final
order is anticipated in the second quarter of 2000. A third party sought to
operate as a distribution utility serving an economic development project, part
of which was in CPL's certificated territory. CPL and the third party entered
into a settlement agreement ending the dispute. The settlement provided that the
other party could serve the area, but would reimburse CPL on a per KW basis for
any stranded costs to the new system.

In a separate docket, the Texas Commission has determined that three large
naval bases, which are currently served as industrial customers by CPL, may
qualify as wholesale customers. A second phase of the proceeding has been
docketed to analyze all issues pertinent to the bases being able to take
electric service from other wholesale providers. Among the issues to be
addressed is the extent to which the U.S. Navy would have to compensate CPL for
costs that may be stranded if the naval facilities were to obtain electric
service from another wholesale provider. The procedural schedule has been
suspended to allow the parties time to finalize a settlement agreement.

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<PAGE>

Oklahoma Rates - PSO
PSO currently is subject to the jurisdiction of the Oklahoma Commission
with respect to retail prices. Pursuant to authority granted under RESCTA, the
Oklahoma Commission established service territorial boundary maps in all
unincorporated areas for all regulated retail electric suppliers serving
Oklahoma. In accordance with RESCTA, a retail electric supplier may not extend
retail electric service into the certified territory of another supplier, except
to serve its own facilities or to serve a new customer with an initial full load
of 1,000 KW or more. RESCTA provides that when any territory certified to a
retail electric supplier or suppliers is annexed and becomes part of an
incorporated city or town, the certification becomes null and void. However,
once established in the annexed territory, a supplier may generally continue to
serve within the annexed area. See ITEM 7. MD&A, RECENT DEVELOPMENTS AND TRENDS.

Arkansas and Louisiana Rates - SWEPCO
SWEPCO is subject to the jurisdiction of the Arkansas Commission and
Louisiana Commission with respect to retail rates, as well as the Texas
Commission as described above. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - Electric Utility Restructuring Legislation for information on
electric utility restructuring.

Nuclear Regulation - CPL
Ownership of an interest in a nuclear generating unit exposes CPL and,
indirectly, CSW to regulation not common to a fossil fuel generating unit. Under
the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974,
operation of nuclear plants is intensively regulated by the NRC, which has broad
power to impose licensing and safety-related requirements. Along with other
federal and state agencies, the NRC also has extensive regulations pertaining to
the environmental aspects of nuclear reactors. The NRC has the authority to
impose fines and/or shut down a unit until compliance is achieved, depending
upon its assessment of a particular situation. For additional information
regarding STP, see ITEM 7. MD&A.

U.K. Electric

SEEBOARD Rates and Franchise Area
The distribution and supply businesses of SEEBOARD are principally
regulated by the Electricity Act of 1989 and by the conditions contained in
SEEBOARD's public electricity supply license. The public electricity supply
license generally continues until at least 2025, although it may be revoked upon
25 years' prior notice after 2000. In addition, the public electricity supply
license may be revoked by the United Kingdom's Secretary of State in certain
specified circumstances. Prior to October 1998, SEEBOARD had the sole right to
supply substantially all of the consumers in its authorized area, except where
demand exceeded 100 KW. However, since October 1998, on a phased-in basis,
SEEBOARD no longer has monopoly supply rights in its franchise area. At December
31, 1999, 15% of SEEBOARD's domestic customers had elected to switch to an
alternative supplier.

Most of the income of the distribution business is regulated by a formula
set by the DGEGS based upon, among other factors, the United Kingdom Retail
Price Index. The formula generally sets a cap on the average price per unit of
electricity distributed, with allowed annual increases based upon changes in the
United Kingdom Retail Price Index minus a percentage factor set from time to
time by the DGEGS. The prices charged by SEEBOARD in its franchise supply
business are also determined from a formula set from time to time by the DGEGS.
However, as competition increases, the regulatory cap is likely to be removed.
The formula provides for a price cap derived from the forecast electricity
purchase costs, transmission charges, distribution costs and overheads, together
with an allowed margin as determined by the DGEGS. All holders of a second-tier
license, including SEEBOARD, who supply electricity to non-franchise customers
must pay charges to the host regional electricity company for the use of its
distribution network.

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In 1999, OFGEM completed its review of price controls for both the
distribution and supply businesses. Despite SEEBOARD being identified as one of
the three most efficient electricity suppliers, OFGEM's final proposals will
result in substantial reductions in revenue for the distribution business,
effective from April 1, 2000, for five years. In addition, supply prices to
retail customers will be capped from April 1, 2000, for two years. Overall,
these changes to the supply business are viewed as broadly neutral to earnings.
A year-end study of projected SEEBOARD cash flows demonstrated that the recorded
value of goodwill was not impaired by these regulatory developments. See ITEM 8.
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information related
to the review of SEEBOARD's prices.

FUEL RECOVERY - U.S. ELECTRIC

The recovery of fuel costs from retail customers by the U.S. Electric
Operating Companies is subject to regulation by the state utility commissions in
the states in which they operate. All of the contracts of the U.S. Electric
Operating Companies with their wholesale customers contain FERC approved
fuel-adjustment provisions for recovery of fuel costs.

Texas Fuel Recovery - CPL, SWEPCO and WTU
Electric utilities in Texas, including CPL, SWEPCO and WTU, are not
allowed to make automatic adjustments to recover changes in fuel costs from
retail customers. A utility is allowed to recover its known or reasonably
predictable fuel costs through a fixed fuel factor. The Texas Commission
established procedures whereby each utility under its jurisdiction may petition
to revise its fuel factor every six months according to a specified schedule.
Fuel factors may also be revised in the case of emergencies or in a general rate
proceeding. Fuel factors are in the nature of temporary rates and the utility's
collection of revenues by such factors is subject to adjustment at the time of a
fuel reconciliation. Under these procedures, at its semi-annual adjustment date,
a utility is required to petition the Texas Commission for a surcharge or to
make a refund when it has materially under- or over-collected its fuel costs and
projects that it will continue to materially under- or over-collect. Material
under- or over-collections including interest are defined as variances of four
percent or more of the most recent Texas Commission adopted annual estimated
fuel cost for the utility. A utility does not have to revise its fuel factor
when requesting a surcharge or refund. An interim emergency fuel factor order
must be issued by the Texas Commission within 30 days after such petition is
filed by the utility. Final reconciliation of fuel costs is made through a
reconciliation proceeding, which may contain a maximum of three years and a
minimum of one year of reconcilable data, and must be filed with the Texas
Commission no later than six months after the end of the period to be
reconciled. In addition, a utility must include a reconciliation of fuel costs
in any general rate proceeding regardless of the time since its last fuel
reconciliation proceeding. Any fuel costs that are determined to be unreasonable
in a reconciliation proceeding are not recoverable from retail customers.

Beginning January 1, 2002, fuel costs will not be subject to Texas
Commission fuel reconciliation proceedings. Pursuant to the Texas Legislation,
after January 1, 2002, the date that retail customer choice commences, each
electric utility will file a final fuel reconciliation for the period ending
December 31, 2001. These final fuel balances will be included in each company's
true-up proceeding in 2004. See ITEM 7. MD&A - Securitization of
Generation-related Regulatory Assets and Stranded Costs and ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation.

Oklahoma Fuel Recovery - PSO
In general, MWH sales to PSO's retail customers are made at rates which
include a service level fuel cost adjustment factor reflecting the difference
between projected fuel and purchased power costs and the fuel rate embedded in
PSO's base rates. The factors are determined twice each year and are based upon
projected fuel, natural gas transportation, and purchased power costs. Any
difference between projected and actual costs is included in the fuel recovery
calculation for future periods. Oklahoma law requires that an examination of

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PSO's retail fuel cost adjustment factor is performed annually by the Oklahoma
Commission, which approves the utility's embedded fuel rate per KWH.

Arkansas and Louisiana Fuel Recovery - SWEPCO
SWEPCO's fuel recovery mechanisms are subject to the jurisdiction of the
Arkansas Commission and the Louisiana Commission. SWEPCO's retail rates
currently in effect in Louisiana are adjusted based on SWEPCO's cost of fuel in
accordance with a fuel cost adjustment which is applied to each billing month
based on the second previous month's average cost of fuel. Provision for any
over- or under-recovery of fuel costs is allowed under an automatic fuel clause.

A new SWEPCO fuel adjustment rider, as approved by the Arkansas
Commission, was implemented in December 1999. Under this fuel adjustment rider,
an annual fuel cost factor is developed each year based on the previous year's
actual fuel cost. This factor is then applied to each billing month's sales,
which allows SWEPCO to recover fuel costs from its customers. Any difference
between actual fuel cost for the month and the revenues collected from
customers, including interest, will be included in the determination of the
annual factor for the following year.

Recoverability of Fuel Costs
Under current regulation, the U.S. Electric Operating Companies recover
all their material fuel costs from their customers. The inability of any of the
U.S. Electric Operating Companies to recover its fuel costs under the procedures
described above could have a material adverse effect on such company's results
of operations and financial condition.

See ITEM 7. MD&A and ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS
for further information with respect to regulatory, rate and fuel proceedings.

FUEL SUPPLY AND PURCHASED POWER - U.S. ELECTRIC

The U.S. Electric Operating Companies' net dependable summer rating, power
generation capabilities and the type of fuel used are set forth in ITEM 2.
PROPERTIES. Information concerning energy sources and cost data for the years
1997 through 1999 is presented in the following tables. In addition, detailed
fuel cost and consumption information for 1999 is also presented.

CSW
Source of Energy (based on MW) 1999 1998 1997
-------------------------------
Natural Gas 39% 38% 36%
Coal 38 39 41
Lignite 7 8 9
Nuclear 7 7 7
-------------------------------
Total Generated 91 92 93
Purchased Power 9 8 7
-------------------------------
Total 100% 100% 100%
-------------------------------
Fuel Cost data
Average Btu per net KWH 10,470 10,514 10,405
Cost per MMbtu $1.78 $1.67 $1.83
Cost per KWH generated 1.86(cent)1.75(cent)1.90(cent)
Cost, including purchased power, as a percentage
of revenue 37.8% 37.3% 38.1%

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CPL
Source of Energy (based on MW) 1999 1998 1997
-------------------------------
Natural Gas 49% 51% 50%
Coal 20 20 18
Nuclear 20 21 22
-------------------------------
Total Generated 89 92 90
Purchased Power 11 8 10
-------------------------------
Total 100% 100% 100%
-------------------------------
Fuel cost data
Average Btu per net KWH 10,637 10,563 10,386
Cost per MMbtu $1.72 $1.59 $1.83
Cost per KWH generated 1.82(cent)1.68(cent)1.90(cent)
Cost, including purchased power, as a percentage
of revenue 31.8% 30.3% 32.9%

PSO
Source of Energy (based on MW)
Natural Gas 45% 43% 39%
Coal 37 43 48
-------------------------------
Total Generated 82 86 87
Purchased Power 18 14 13
-------------------------------
Total 100% 100% 100%
-------------------------------
Fuel cost data
Average Btu per net KWH 10,298 10,272 10,264
Cost per MMbtu $1.96 $1.77 $1.98
Cost per KWH generated 2.02(cent)1.82(cent)2.03(cent)
Cost, including purchased power, as a percentage
of revenue 45.9% 47.1% 46.4%

SWEPCO
Source of Energy (based on MW)
Natural Gas 17% 15% 12%
Coal 52 51 52
Lignite 21 23 26
-------------------------------
Total Generated 90 89 90
Purchased Power 10 11 10
-------------------------------
Total 100% 100% 100%
-------------------------------
Fuel cost data
Average Btu per net KWH 10,380 10,544 10,554
Cost per MMbtu $1.66 $1.63 $1.69
Cost per KWH generated 1.72(cent)1.72(cent)1.79(cent)
Cost, including purchased power, as a percentage
of revenue 43.2% 42.7% 43.4%

WTU
Source of Energy (based on MW)
Natural Gas 41% 42% 37%
Coal 31 33 36
---------------------------
Total Generated 72 75 73
Purchased Power 28 25 27
----------------------------
Total 100% 100% 100%
----------------------------
Fuel cost data
Average Btu per net KWH 10,599 10,828 10,275
Cost per MMbtu $1.98 $1.83 $1.98
Cost per KWH generated 2.10(cent)1.98(cent)2.03(cent)
Cost, including purchased power, as a percentage
of revenue 42.0% 40.2% 42.6%

13
<PAGE>

1999 Cost 1999 Consumption
Fuel Type per MMbtu (millions)
- --------------------------------------------------------------------------------
MMbtus Mcfs Tons
CSW
Natural gas $2.43 296 289
Coal 1.39 272 16
Lignite 1.21 57 4
Nuclear .42 51
Composite 1.78

CPL
Natural gas $2.34 132 129
Coal 1.36 52 3
Nuclear .42 51
Composite 1.72

PSO
Natural gas $2.57 81 80
Coal 1.20 67 4
Composite 1.96

SWEPCO
Natural gas $2.46 46 44
Coal 1.53 127 8
Lignite 1.21 57 4
Composite 1.66

WTU
Natural gas $2.44 37 36
Coal 1.29 26 1
Composite 1.98

Natural Gas
CSW Services purchased approximately 289 billion cubic feet of natural gas
during 1999 for the U.S. Electric Operating Companies, which ranks them as the
third largest consumer of natural gas in the United States. A majority of the
gas fired electric generation plants are connected to at least two natural gas
pipelines, which provides greater access to competitive supplies and improves
reliability. Natural gas requirements for each plant are supplied by a portfolio
of long-term and short-term gas purchase and transportation agreements which are
acquired on a competitive basis and are based on market prices.

Coal and Lignite
The U.S. Electric Operating Companies purchase coal from a number of
suppliers. In 1999, the U.S. Electric Operating Companies purchased
approximately 73% of their total coal purchases under long-term contracts with
the balance procured on the spot market. The coal for the plants comes primarily
from Wyoming and Colorado mines, which are located between 1,000 and 1,700 rail
miles from the generating plants.

Oklaunion - CPL, PSO and WTU
The jointly-owned Oklaunion plant purchases coal under a coal supply
contract with Caballo Coal Company which accounts for approximately 64% of the
total 1999 Oklaunion coal requirements for CPL, PSO and WTU with the balance
procured on the spot market. As of December 31, 1999, CPL's share of the
year-end 1999 coal inventory at Oklaunion was approximately 35,000 tons,
representing a 46-day supply. PSO's share was approximately 75,000 tons,

14
<PAGE>

representing a 50-day supply. WTU's share was approximately 270,000 tons,
representing a 52-day supply.

Coleto Creek - CPL
CPL has a coal supply agreement with Colowyo Coal Company covering
approximately 50% of the coal requirements of its Coleto Creek plant. The
balance of the plant's coal deliveries came from spot market purchases of Powder
River Basin and Colorado coal that was delivered under one spot market rail
transportation agreement. Additionally, approximately 80,000 tons of spot coal
were purchased and transported via truck to the plant. At December 31, 1999, CPL
had approximately 556,000 tons of coal in inventory at Coleto Creek,
representing a 74-day supply.

During 2000, CPL intends to purchase Powder River Basin coal on the spot
market for approximately 50% of the Coleto Creek plant requirements and will
transport such coal pursuant to a rail transportation agreement with Union
Pacific. The remainder of CPL's coal will be purchased from multiple Colorado
suppliers. This coal will also be transported by Union Pacific. Union Pacific is
currently the only rail carrier with access to the Coleto Creek plant. In 1994,
CPL instituted a proceeding at the Interstate Commerce Commission requesting a
reasonable rate for the 16 miles from Victoria, Texas to Coleto Creek. Southern
Pacific Transportation Company moved to dismiss the complaint and, in a decision
issued December 31, 1996, the Surface Transportation Board of the U.S.
Department of Transportation, successor to the Interstate Commerce Commission,
granted the motion. CPL appealed this decision to the U.S. Court of Appeals for
the Eighth Circuit. On February 10, 1999, the U.S. Court of Appeals for the
Eighth Circuit issued a ruling upholding the Surface Transportation Board's
decision in the case. Subsequently, the Western Coal Traffic League, of which
CPL is a member, appealed the eighth circuit court's decision to the U.S.
Supreme Court. On October 18, 1999, the U.S. Supreme Court denied Western Coal
Traffic League's appeal, bringing the legal proceeding to a close.

Northeastern Station - PSO
PSO has a long-term contract with Kennecott Energy Corporation, which
substantially covers the coal supply for PSO's Northeastern Station coal units.
Coal delivery is by unit trains from mines located in the Gillette, Wyoming
vicinity, a distance of about 1,100 rail miles from the Northeastern Station.
PSO owns sufficient railcars for operation of six unit trains. Coal is
transported to the Northeastern Station pursuant to a long-term contract with
Burlington Northern. The plant at Northeastern station is also equipped to
accept deliveries from Union Pacific. At December 31, 1999, PSO had
approximately 851,000 tons of coal in inventory at Northeastern Station,
representing a 71-day supply.

Welsh and Flint Creek - SWEPCO
The long-term coal supply for SWEPCO's Welsh plant and its 50% owned Flint
Creek plant is provided under a contract with Cyprus Amax Minerals Company. Coal
under this contract is mined near Gillette, Wyoming, a distance of about 1,500
and 1,100 miles, respectively, from the Welsh and Flint Creek plants. Coal is
delivered to the plants under rail transportation contracts with Burlington
Northern and the Kansas City Southern Railroad Company, which expire on dates
ranging between 2001 and 2006. SWEPCO owns or leases, under long-term leases,
sufficient railcars and spares for the operation of 15 unit trains. SWEPCO has
supplemented its railcar fleet from time to time with short-term leases. At
December 31, 1999, SWEPCO had coal inventories of approximately 1,479,000 tons
at Welsh, representing a 74-day supply, and approximately 556,000 tons at Flint
Creek, representing a 74-day supply. See ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS and NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES for
additional information.

Pirkey and Dolet Hills - SWEPCO
SWEPCO has acquired lignite leases covering approximately 27,000 acres
near the Henry W. Pirkey power plant. Sabine Mining Company is the contract
miner of these reserves. At December 31, 1999, approximately 280,000 tons of
lignite were in SWEPCO's inventory at the Pirkey plant representing a 22-day
supply. Another 25,000 acres are jointly leased in equal portions by SWEPCO and
CLECO in the Dolet Hills area of Louisiana near the Dolet Hills Power Plant. The

15
<PAGE>

DHMV is the contract miner for these reserves. At December 31, 1999, SWEPCO had
160,000 tons of lignite in inventory at the Dolet Hills plant, representing a
28-day supply. SWEPCO believes the acreage under lease in these areas contains
sufficient reserves to cover the anticipated lignite requirements for the
estimated useful lives of the lignite-fired units. For a discussion related to
SWEPCO Dolet Hills litigation see ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - SWEPCO Lignite Mining Agreement Litigation.

Nuclear Fuel - CPL
The supply of fuel for STP involves a complex process. This process
includes the acquisition of uranium concentrate, the conversion of uranium
concentrate to uranium hexafluoride, the enrichment of uranium hexafluoride into
the isotope U235, the fabrication of the enriched uranium into fuel rods and
incorporation of fuel rods into fuel assemblies. The fuel assemblies are the
final product loaded into the reactor core. This process requires that fuel
decisions be made years in advance of the actual need to refuel the reactor.
Fuel requirements for STP are being handled by the STPNOC.

Outages are necessary approximately every 18 months for refueling. Because
STP's fuel costs are significantly lower than any other CPL units, CPL's average
fuel costs are expected to be higher whenever a STP unit is out of service for
refueling or maintenance.

CPL and the other STP participants have entered into contracts with
suppliers for 100% of the uranium concentrate required for the operation of both
STP units through December 2002, with additional contracts to provide 54% of the
uranium concentrate needed for STP through 2004. In addition, CPL and the other
STP participants have entered into contracts with suppliers for 100% of the
nuclear fuel conversion service required for the operation of both STP units
through October 2001, with additional contracts to provide at least 40% of the
conversion service needed for STP through 2005. Enrichment contracts were
secured for a 30-year period from the initial operation of each unit. The STP
participants have canceled the enrichment contract for requirements after
October 2000. The participants believe that other, lower cost options will be
available in the future. CPL and the other STP participants have entered into
contracts to provide for 100% of enrichment services from October 2000 to
December 2004, with additional contracts to provide at least 40% of enrichment
services through 2006. Also, fuel fabrication services have been contracted for
operation through 2005 for Unit 1 and 2006 for Unit 2. Although CPL and the
other STP owners cannot predict the availability of uranium and related
services, CPL and the other STP owners do not currently expect to have
difficulty obtaining uranium and related services required for the remaining
years of STP operation.

The Energy Policy Act has provisions for the recovery of a portion of the
costs associated with the decommissioning and decontamination of the gaseous
diffusion plants used in the enrichment process. These costs are being recovered
on the basis of enrichment services purchased by utilities from the DOE prior to
October 1992. The total annual assessment for all domestic utilities is limited
to $150 million per federal fiscal year through October 2007. The STP assessment
will be approximately $2.0 million each year with CPL's share being 25.2% of the
annual STP assessment.

The Nuclear Waste Policy Act of 1982, as amended, required the DOE to
develop a permanent high level waste disposal facility for the storage of spent
nuclear fuel by 1998. The DOE last estimated that the permanent facility will
not be available until 2010. The DOE will take possession of all spent fuel
generated at STP as a result of a contract CPL and other STP participants have
entered into with the DOE. STP has on-site storage facilities with the
capability to store all the spent nuclear fuel generated by the STP units over
their lives. Therefore, the DOE delay in providing the disposal facility will
not affect the operation of the STP units. Under provisions of the Nuclear Waste
Policy Act of 1992, a one-mill per KWH assessment on electricity generated and
sold from nuclear reactors funds the DOE waste disposal program.

Risks of substantial liability could arise from the operation of STP and
from the use, handling, disposal and possible radioactive emissions associated
with nuclear fuel. While CPL carries insurance, the availability, amount and

16
<PAGE>

coverage is limited and may become more limited in the future. The available
insurance may not cover all types or amounts of loss or expense which may be
experienced in connection with the ownership of STP. See ITEM 8. NOTE 3.
COMMITMENTS AND CONTINGENT LIABILITIES for information relating to nuclear
insurance.

Governmental Regulation
The price and availability of each of the foregoing fuel types are
significantly affected by governmental regulation. Any inability in the future
to obtain adequate fuel supplies or adoption of additional regulatory measures
restricting the use of such fuels for the generation of electricity might affect
the U.S. Electric Operating Companies' ability to economically meet the needs of
their customers. Such regulatory measures could require the U.S. Electric
Operating Companies to supplement or replace, prior to normal retirement,
existing generating capability with units using other fuels. This would be
difficult to accomplish quickly, would require substantial additional
expenditures for construction and could have a significant adverse effect on the
financial condition and results of operations of CSW and/or any of the U.S.
Electric Operating Companies.

The Registrants are unable to predict the future cost of fuel. (The
foregoing statements constitute forward-looking statements within the meaning of
Section 21E of the Exchange Act. Actual results may differ materially from such
projected information due to changes in the underlying assumptions. See
FORWARD-LOOKING INFORMATION). See ITEM 7. MD&A and ITEM 8. NOTE 2. LITIGATION
AND REGULATORY PROCEEDINGS for additional information concerning fuel costs.

Power Purchases and Sales
The U.S. Electric Operating Companies serve various municipalities,
electric cooperatives and public power authorities. The U.S. Electric Operating
Companies exchange power with various neighboring electric systems and engage in
electric interchanges with each other. In addition, they contract with certain
suppliers, including power marketers and independent power producers for the
purchase or sale of capacity, firm energy, responsive reserves and other
wholesale services.

CPL - Wholesale Customers
Certain CPL wholesale customers have given notice of their intent to
terminate their contracts when they expire in 2001 through 2004. During 1999,
these customers represented 3% of CPL's total electric operating revenues.

ENVIRONMENTAL MATTERS

The CSW System is subject to regulation with respect to air and water
quality, solid waste standards and other environmental matters. These
authorities have continuing jurisdiction in most cases to require modifications
in facilities and operations. Any such changes in environmental statutes or
regulations could require substantial additional expenditures to modify the CSW
System's facilities and operations and could have a material adverse effect on
the results of operations and financial condition of CSW and/or any of the U.S.
Electric Operating Companies. Violations of environmental statutes or
regulations can result in fines and other costs. See FORWARD-LOOKING
INFORMATION.

EMFs
Research is ongoing whether exposure to EMFs may result in adverse health
effects. Although earlier studies suggested some correlation between EMFs and
adverse health effects, the research to date has not established a
cause-and-effect relationship between EMFs and adverse health effects from
electric lines. Recently, more comprehensive studies have failed to show any
correlation. CSW cannot predict the impact on CSW or the electric utility
industry if further investigations or proceedings were to establish that the
present electricity delivery system is contributing to increased risk or
incidence of health problems.

17
<PAGE>

Other Environmental Matters
From time to time the Registrants become aware of various other
environmental issues or are named as parties to various other legal claims,
actions, complaints or other proceedings related to environmental matters.
Management does not expect disposition of any such pending environmental
proceedings to have a material adverse effect on the results of operations or
financial condition of CSW and/or any of the U.S. Electric Operating Companies.

See ITEM 7. MD&A, ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS
and NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES for additional information
relating to environmental matters.

U.S. ELECTRIC ENVIRONMENTAL MATTERS

Air Quality
Air quality standards and emission limitations are subject to the
jurisdiction of state regulatory authorities in each state in which the CSW
System operates, with oversight by the EPA. In accordance with regulations of
these state authorities, permits are required for all generating units on which
construction is commenced or which are substantially modified after the
effective date of the applicable regulations.

In 1990, the U.S. Congress amended the Clean Air Act. CAAA places
restrictions on the emission of sulfur dioxide from gas-, coal- and
lignite-fired generating plants. Beginning in the year 2000, the U.S. Electric
Operating Companies will be required to hold allowances in order to emit sulfur
dioxide. The EPA issues allowances to owners of existing generating units based
on historical operating conditions. Based on the CSW U.S. Electric System
facilities plan, CSW believes that the allowances of the U.S. Electric Operating
Companies are adequate to meet their needs through 2008. Public and private
markets are developing for trading of excess allowances.

The CAAA also directed the EPA to issue regulations governing nitrogen
oxide emissions and requiring government studies to determine what controls, if
any, should be imposed on utilities to control toxic air emissions. The acid
rain rules have not been released. Accordingly, the impact of any such rules on
CSW and the U.S. Electric Operating Companies cannot be determined at this time.

Under the CAAA rules for nitrogen oxide control for coal units, the U.S.
Electric Operating Companies have elected alternate standards for their units
under an optional provision regarding emission limits. This will eliminate any
capital expenses through 2007, if the alternate standards are met.

Texas passed legislation in 1999 to have older units, which were
grandfathered under the CAAA, operate under permits and reduce emissions by 50%
based on 1997 emission levels. The U.S. Electric Operating Companies' compliance
cost for Texas grandfathered units are estimated to be from $3 million to $10
million. Approximately $1.6 million has been spent on compliance through
December 31, 1999. The deadline for compliance with the legislation on the
grandfathered units is May 2003.

The EPA recently promulgated revised, more stringent ambient air quality
standards for ozone and particulates. While these standards do not mandate
emission constraints or reductions for facilities such as electricity generating
power plants, they may result in more areas being designated as non-attainment
for these two pollutants. States will be required to develop strategies to
achieve compliance in these areas, strategies that may include lower emission
levels for electricity generating power plants, possibly including facilities
within the CSW System. The impact, if any, on CSW or the U.S. Electric Operating
Companies cannot yet be determined, but the impact could be to significantly
raise operations and maintenance costs of the U.S. Electric Operating Companies.

18
<PAGE>

At the Kyoto, Japan Conference on Global Warming held in December 1997,
U.S. representatives agreed to a treaty which could require new limitations on
"greenhouse gases" from power plants. CSW and the U.S. Electric Operating
Companies could be affected if this treaty, in its present form, is approved by
the United States Congress. The impact, if any, on CSW or the U.S. Electric
Operating Companies cannot be determined because most of the greenhouse gas
emission reduction would come from coal generation that would have to be
switched to natural gas or retired. During 1999, 50% of the U.S. Electric
Operating Companies' MWH generation and 33% of its installed generating capacity
at December 31, 1999 was coal and lignite.

Water Quality
Water quality is subject to the jurisdiction of each of the state
regulatory authorities in which the U.S. Electric Operating Companies operate as
well as the EPA. These authorities have jurisdiction over all wastewater
discharges into state waters, establish water quality standards and issue waste
control permits covering discharges which might affect the quality of state
waters. The EPA has jurisdiction over point source discharges through the
National Pollutant Discharge Elimination System provisions of the Clean Water
Act.

RCRA and CERCLA
The RCRA and the Arkansas, Louisiana, Oklahoma and Texas solid waste rules
provide for comprehensive control of all solid wastes from generation to final
disposal. The appropriate state regulatory authorities in the states in which
the U.S. Electric Operating Companies operate have received authorization from
the EPA to administer the RCRA solid waste control program for their respective
states.

The operations of the U.S. Electric Operating Companies, like those of
other utility systems, generally involve the use and disposal of substances
subject to environmental laws. CERCLA, the federal "Superfund" law, addresses
the cleanup of sites contaminated by hazardous substances. Superfund requires
that PRPs fund remedial actions regardless of fault or the legality of past
disposal activities. PRPs include owners and operators of contaminated sites and
transporters and/or generators of hazardous substances. Many states have similar
laws. Theoretically, any one PRP can be held responsible for the entire cost of
a cleanup. Typically, however, cleanup costs are allocated among PRPs.

CSW's subsidiaries incur significant costs for the handling,
transportation, storage and disposal of hazardous and non-hazardous waste
materials. Unit costs for waste classified as hazardous exceed by a substantial
margin unit costs for waste classified as non-hazardous.

The U.S. Electric Operating Companies, like other electric utilities,
produce combustion and other generation by-products, such as ash, sludge, slag,
low-level radioactive waste and spent nuclear fuel. The U.S. Electric Operating
Companies own distribution poles treated with creosote or other substances. The
EPA currently exempts coal combustion by-products from regulation as hazardous
wastes. Distribution poles treated with creosote or other substances are not
expected to exhibit characteristics that would cause them to be hazardous waste.
In connection with their operations, the U.S. Electric Operating Companies also
have used asbestos, PCBs and materials classified as hazardous waste. If
additional by-products or other materials generated or used by companies in the
CSW U.S. Electric System were reclassified as hazardous wastes, or other new
laws or regulations concerning hazardous wastes were put into effect, CSW System
disposal and remedial costs could increase materially.

EPA Toxic Release Inventory Initiative
Beginning July 1, 1999, the EPA requires electric utilities to report the
amount of certain chemicals released by coal-fired power plants under its Toxic
Release Inventory Initiative. The regulations currently require nearly 30,000
facilities nationwide to report their annual emissions of certain chemicals. The
Toxic Release Inventory Initiative allows the public to access information on
the types and quantities of listed chemicals that are released. The Toxic
Release Inventory regulations require reports on the amounts of materials
disposed of, transferred offsite, recovered and recycled.

19
<PAGE>

U.K. ELECTRIC ENVIRONMENTAL MATTERS

SEEBOARD's operations are subject to regulation with respect to water
quality standards and other environmental matters by various authorities within
the United Kingdom. Under certain circumstances, these authorities may require
modifications to SEEBOARD's facilities and operations and/or impose fines and
other costs for violations of applicable statutes and regulations. From time to
time SEEBOARD is made aware of various environmental issues or is named as a
party to various legal claims, actions, complaints or other proceedings related
to environmental matters. Management does not expect disposition of any such
pending environmental proceedings to have a material adverse effect on CSW's
consolidated results of operations or financial condition.

OPERATING INFORMATION - CSW SYSTEM

CSW
(excludes SEEBOARD)
1999 1998 1997
---------------------------
Kilowatt-hour sales (millions)
Residential 18,997 19,757 17,995
Commercial 15,641 15,554 14,546
Industrial 21,232 21,481 21,087
Other retail 1,936 1,906 1,705
---------------------------
Sales to retail customers 57,806 58,698 55,333
Sales for resale 8,996 8,296 7,824
---------------------------
Total 66,802 66,994 63,157
---------------------------

Average number of electric customers (thousands)
Residential 1,500 1,480 1,462
Commercial 227 218 214
Industrial 21 22 23
Other retail 15 15 13
---------------------------
Total 1,763 1,735 1,712
---------------------------

Revenue per KWH
Residential 6.64(cent)6.60(cent)6.96(cent)
Commercial 5.74 5.71 6.13
Industrial 3.76 3.62 3.85
Sales for Resale 3.43 3.16 3.11

Peak Load and Capability
Net system capability (MW) (1) 15,525 14,839 14,290
Maximum coincident system demand (MW) 14,066 13,718 13,105
Percentage increase in peak demand over prior
period 2.5% 4.7% 3.9%
Generation at time of peak (MW) 13,220 13,012 12,817
Percent of peak demand generated 94.0% 94.9% 97.8%
Net purchases at time of peak (MW) 846 706 288
Percent of net purchases at time of peak 6.0% 5.2% 2.2%
Date of maximum coincident system demand August12 July 27 July 28

The preceding table sets forth: (i) the net system capability, including the net
amounts of contracted purchases and contracted sales, at the time of peak
demand; (ii) the maximum coincident system demand on a one-hour integrated
basis, exclusive of sales to other electric utilities; and (iii) the respective
amounts and percentages of peak demand generated and net purchases and sales.

(1) Excludes 85 MW of system capability in storage in 1998 and 310 MW of
system capability in storage and 156 MW of system capability under repair
in 1997.

20
<PAGE>

CPL

1999 1998 1997
---------------------------
Kilowatt-hour sales (millions)
Residential 7,248 7,167 6,771
Commercial 5,256 5,122 4,846
Industrial 8,219 8,350 7,999
Other retail 580 553 486
---------------------------
Sales to retail customers 21,303 21,192 20,102
Sales for resale 1,813 1,867 1,737
---------------------------
Total 23,116 23,059 21,839
---------------------------

Average number of electric customers
Residential 563,200 550,000 538,700
Commercial 88,200 82,000 79,700
Industrial 5,300 5,500 5,600
Other 4,400 4,500 3,900
---------------------------
Total 661,100 642,000 627,900
---------------------------

Revenue per KWH
Residential 7.46(cent)7.35(cent)7.99(cent)
Commercial 7.49 7.37 8.26
Industrial 4.02 3.71 4.13
Sales for resale 4.18 3.57 4.06

Peak Load and Capability
Net system capability (MW) (1) 4,773 4,542 4,319
Maximum coincident system demand (MW) 4,454 4,537 4,232
Percentage increase/(decrease) in peak demand (1.8)% 7.2% 4.6%
over prior period
Generation at time of peak (MW) 4,200 3,688 4,227
Percent of peak demand generated 94.3% 81.3% 99.9%
Net purchases at time of peak (MW) 254 849 5
Percent of net purchases at time of peak 5.7% 18.7% 0.1%
Date of maximum coincident system demand August 5 August 13 August 20

(1) Excludes 60 MW of system capability in storage in 1997.

<PAGE>

PSO

1999 1998 1997
-----------------------------
Kilowatt-hour sales (millions)
Residential 5,336 5,772 5,054
Commercial 5,057 5,091 4,698
Industrial 4,972 4,873 4,714
Other retail 251 265 192
-----------------------------
Sales to retail customers 15,616 16,001 14,658
Sales for resale 1,005 861 958
-----------------------------
Total 16,621 16,862 15,616
-----------------------------

Average number of electric customers
Residential 427,600 423,300 419,600
Commercial 56,800 56,100 55,300
Industrial 4,900 5,000 5,100
Other 1,600 1,600 1,400
-----------------------------
Total 490,900 486,000 481,400
-----------------------------

Revenue per KWH
Residential 5.52(cent)5.70(cent)5.88(cent)
Commercial 4.48 4.64 4.82
Industrial 3.24 3.34 3.44
Sales for Resale 3.90 3.18 3.23

Peak Load and Capability
Net system capability (MW) (1) 4,022 4,042 3,882
Maximum coincident system demand (MW) 3,800 3,683 3,474
Percentage increase in peak demand over 3.2% 6.0% 3.4%
prior period
Generation at time of peak (MW) 3,732 3,048 3,376
Percent of peak demand generated 98.2% 82.8% 97.2%
Net purchases at time of peak (MW) 68 635 98
Percent of net purchases at time of peak 1.8% 17.2% 2.8%
Date of maximum coincident system demand August 11 September 4 July 28

(1) Excludes 85 MW of system capability in storage in 1998 and 250 MW of system
capability in storage in 1997.

<PAGE>

SWEPCO

1999 1998 1997
---------------------------
Kilowatt-hour sales (millions)
Residential 4,735 5,052 4,549
Commercial 4,033 4,039 3,780
Industrial 6,807 6,929 6,968
Other retail 474 467 445
---------------------------
Sales to retail customers 16,049 16,487 15,742
Sales for resale 7,522 6,449 6,791
---------------------------
Total 23,571 22,936 22,533
---------------------------

Average number of electric customers
Residential 360,600 358,600 356,600
Commercial 52,800 51,800 50,800
Industrial 5,600 5,800 5,800
Other 2,900 2,800 2,700
---------------------------
Total 421,900 419,000 415,900
---------------------------

Revenue per KWH
Residential 6.22(cent)6.23(cent)6.37(cent)
Commercial 4.91 4.90 5.08
Industrial 3.75 3.66 3.78
Sales for Resale 2.29 2.17 2.16

Peak Load and Capability
Net system capability (MW) 5,028 4,559 4,636
Maximum coincident system demand (MW) 4,463 4,372 4,157
Percentage increase in peak demand over prior 2.1% 5.2% 3.5%
period
Generation at time of peak (MW) 3,970 4,414 3,839
Percent of peak demand generated 89.0% 101.0% 92.4%
Net purchases (sales) at time of peak (MW) 493 (42) 318
Percent of net purchases (sales) at time of 11.0% (1.0)% 7.6%
peak
Date of maximum coincident system demand August 11 July 29 July 28

23
<PAGE>

WTU

1999 1998 1997
--------------------------------
Kilowatt-hour sales (millions)
Residential 1,679 1,766 1,622
Commercial 1,295 1,302 1,223
Industrial 1,234 1,329 1,406
Other retail 630 621 580
--------------------------------
Sales to retail customers 4,838 5,018 4,831
Sales for resale 2,784 2,622 2,504
--------------------------------
Total 7,622 7,640 7,335
--------------------------------

Average number of electric customers
Residential 148,300 147,600 146,900
Commercial 28,900 28,400 27,800
Industrial 5,500 5,800 6,000
Other 6,400 6,200 6,000
--------------------------------
Total 189,100 188,000 186,700
--------------------------------

Revenue per KWH
Residential 7.89(cent) 7.60(cent)7.68(cent)
Commercial 6.08 5.85 5.99
Industrial 4.23 3.89 4.05
Sales for Resale 3.71 3.72 3.55

Peak Load and Capability
Net system capability (MW) (1) 1,702 1,696 1,453
Maximum coincident system demand (MW) 1,508 1,591 1,481
Percentage increase/(decrease) in peak (5.2)% 7.4% 3.3%
demand over prior period
Generation at time of peak (MW) 1,350 1,357 865
Percent of peak demand generated 89.5% 85.3% 58.4%
Net purchases at time of peak (MW) 158 234 616
Percent of net purchases at time of peak 10.5% 14.7% 41.6%
Date of maximum coincident system demand August 19 August 3 September 17

(1) Excludes 156 MW of system capability under repair in 1997.

24
<PAGE>

EMPLOYEES

The total number of employees in the CSW System at December 31, 1999 was
10,928 as shown in the table below. Of the employees listed below, 575 of the
positions at PSO and 789 of the positions at SWEPCO are covered under collective
bargaining agreements with the IBEW. In addition, 2,245 employees at SEEBOARD
are covered by collective bargaining agreements with several different unions.
For information related to ongoing union negotiations at PSO, reference is made
to ITEM 7. MD&A.

CSW SYSTEM EMPLOYEES

CPL 1,558
PSO 1,127
SWEPCO 1,377
WTU 907
-----------
U.S. Electric Total 4,969
-----------
U.K. Electric 3,828
Diversified Electric 215
Other (including CSW Services) 1,911
-----------
10,923
-----------

25
<PAGE>

ITEM 2. PROPERTIES.

U.S. ELECTRIC

The total capacity (MW, net dependable summer rating) of each of the U.S.
Electric Operating Companies, as of December 31, 1999 is shown in the following
table. The U.S. Electric Operating Company properties are all located in either
Arkansas, Louisiana, Oklahoma or Texas.

Natural Coal MW Lignite Nuclear Other Total
Company Stations(a) Gas MW MW MW MW(b) MW(c)
- --------------------------------------------------------------------------------
CPL 12 3,188 686 630 6 4,510
PSO 8 2,867 1,008 25 3,900
SWEPCO 9 1,795 1,848 842 4,485
WTU 11 1,005 377 11 1,393
--------------------------------------------------------------
CSW 40 8,855 3,919 842 630 42 14,288
--------------------------------------------------------------

(a) CSW owns 38 power stations. CPL, PSO and WTU each reflect their joint
ownership of the Oklaunion power station in their respective ownership
count.
(b) Some plants have the capability to burn oil in combination with gas.
However, the use of oil in facilities primarily designed to burn gas
results in increased maintenance expense and a slight reduction in
capacity. PSO and WTU have 25 MW and 11 MW, respectively, of facilities
primarily designed to burn oil. CPL has 6 MW of hydroelectric generation.
(c) Data reflects only the U.S. Electric Operating Companies' portion of plants
which are jointly owned with non-affiliates. For additional information
concerning jointly owned facilities see ITEM 8. NOTE 6. JOINTLY OWNED
ELECTRIC UTILITY PLANT.

All of the generating facilities described above are located on land owned by
the U.S. Electric Operating Companies or, in the case of jointly owned
facilities, jointly with other participants. The U.S. Electric Operating
Companies' electric transmission and distribution facilities are mostly located
over or under highways, streets and other public places or property owned by
others, for which permits, grants, easements or licenses have been obtained
(which the U.S. Electric Operating Companies believe to be satisfactory, but
without examination of underlying land titles). The principal plants and
properties of the U.S. Electric Operating Companies are subject to the liens of
the first mortgage indentures under which the U.S. Electric Operating Companies'
FMBs are issued.

<PAGE>

DIVERSIFIED ELECTRIC

In addition to the generating facilities described above, CSW has
ownership interests in other electrical generating facilities, both foreign and
domestic. Information concerning these facilities at December 31,1999 is listed
below.

Capacity Ownership
Company Location Total Interest Status
-------------------------------------------------
Operating Facilities - United States
Brush II CSW Energy Colorado 68 47% QF
Ft. Lupton CSW Energy Colorado 272 50% QF
Mulberry CSW Energy Florida 120 50% QF
Orange Cogen CSW Energy Florida 103 50% QF
Newgulf CSW Energy Texas 85 100% EWG
Sweeny (1) CSW Energy Texas 330 50% QF
Frontera (2) CSW Energy Texas 330 100% EWG
---------
1,308
---------
Operating Facilities -
International
CSW United
Medway International Kingdom 675 37.5% n/a
CSW
Altamira International Mexico 109 50% FUCO
---------
784
---------

(1)During 2000, additional development at the Sweeny facility is expected to
add approximately 150 MW to current capacity.
(2)Frontera was operational during the summer of 1999 with a capacity of 330 MW.
During the fourth quarter of 1999, construction continued to bring the plant
to combined cycle operation in the second quarter of 2000 at which time the
facility is expected to have a capacity of 500 MW.

CAPITAL EXPENDITURES

The CSW System, including the U.S. Electric Operating Companies, maintains
a continuing construction program, the nature and extent of which is based upon
current and estimated demands upon the system. In addition, the CSW System
requires capital to invest in new enterprises, either through equity investments
or loans to projects, when deemed appropriate. See ITEM 7. MD&A for detailed
information related to historical and projected capital expenditures. See ITEM
7. MD&A - PROPOSED AEP MERGER and ITEM 8. NOTE 15. - PROPOSED AEP MERGER for a
discussion of capital expenditures limitations related to the AEP Merger.

ITEM 3. LEGAL PROCEEDINGS.

The Registrants are parties to various legal claims, actions and
complaints arising in the normal course of business which are not described
herein. Management does not expect disposition of these matters to have a
material adverse effect on any of the Registrants' results of operations or
financial condition. See ITEM 1. BUSINESS, ITEM 7. MD&A and ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS for information relating to pending legal,
environmental and regulatory proceedings.

27
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

CSW None.
CPL None.
PSO None.
SWEPCO None.
WTU None.

28
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

CSW COMMON STOCK INFORMATION
<TABLE>
<CAPTION>

1999 1998
Market Price Dividends Market Price Dividends
High Low Paid High Low Paid
------------------------------ -----------------------------------
<S> <C> <C> <C> <C> <C> <C>

First Quarter $28 $23 7/16 43.5(cent) $27 13/16 $26 1/4 43.5(cent)
Second Quarter 26 3/16 23 5/16 43.5 27 5/8 25 5/8 43.5
Third Quarter 23 1/2 20 7/8 43.5 28 3/4 25 1/4 43.5
Fourth Quarter 22 1/2 19 9/16 43.5 30 1/16 27 3/8 43.5

</TABLE>

CSW's common stock is traded under the ticker symbol "CSR" and listed on
the New York Stock Exchange, Inc. and Chicago Stock Exchange, Inc. Market prices
were obtained from the composite listing of all closing prices on CSW common
stock trades as reported on Bloomberg Financial Commodities News.

CSW plans to continue to pay dividends on its common stock until the
closing of the AEP Merger at approximately the same times and rates per share as
were paid during 1999, subject to continuing evaluation of CSW's earnings,
financial condition, and other factors by the CSW board of directors.
Traditionally, the CSW board of directors has declared dividends to be payable
on the last business day of February, May, August and November.

In January 2000, CSW's board of directors elected to maintain the
quarterly dividend for the quarter ended December 31, 1999, payable on March 1,
2000, to stockholders of record on February 5, 2000, at $0.435 per share, or an
indicated rate of $1.74 per year. As a result, CSW anticipates the payment of
the second quarter dividend to shareholders of record on or about May 5, 2000
unless the merger closes prior to that date.

There were approximately 53,000 record holders of CSW's common stock as of
March 13, 2000. See ITEM 8. NOTE 12. COMMON STOCK for information on CSW common
stock.

U.S. ELECTRIC COMMON STOCK INFORMATION

All of the outstanding shares of common stock of the U.S. Electric
Operating Companies are owned by CSW. Consequently, there is no market for their
common stock. Cash dividends declared and paid by the U.S. Electric Operating
Companies to CSW on their respective common stock for 1999 and 1998 are
presented in the following table.

CPL PSO SWEPCO WTU
-----------------------------------------------------
(thousands)

1999 $148,000 $65,000 $96,000 $28,000
1998 249,000 69,000 120,000 40,000

Reference is made to the page numbers in the table below for the location of the
following items:

2-1
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See ITEM 7. MD&A - RISK MANAGEMENT and ITEM 8. NOTE 1. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, NOTE 7. FINANCIAL INSTRUMENTS and
NOTE 18. SOUTH AMERICAN INVESTMENTS.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Page Number
CSW CPL PSO SWEPCO WTU
-------------------------------------
Selected Financial Data 2-4 2-101 2-115 2-129 2-143
Combined MD&A (1) 2-5 2-5 2-5 2-5 2-5
Results of Operations 2-36 2-102 2-116 2-130 2-144
Quantitative and Qualitative Disclosures 2-2 2-2 2-2 2-2 2-2
About Market Risk
Financial Statements and Supplementary Data 2-40 2-105 2-119 2-133 2-146
Report of Independent Public Accountants 2-96 2-112 2-126 2-140 2-153
Report of Management 2-99 2-113 2-127 2-141 2-154

(1) CSW combines the MD&A sections of the Registrants except for the Results
of Operations which are located at the page numbers indicated in the table
above.

2-2
<PAGE>

CENTRAL AND SOUTH WEST
CORPORATION

2-3
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data for each of the five years ended
December 31 is provided to highlight significant trends in the financial
condition and results of operations for CSW. CSW reported an extraordinary loss
at SWEPCO and WTU in 1999 resulting from legislation enacted in Arkansas and
Texas under which the electric generation portion of CPL's, SWEPCO's and WTU's
business in those states no longer meet the criteria to apply SFAS No. 71. CSW
also recorded an extraordinary item at CPL in 1999 for the loss on reacquired
debt from two debt issues related to generation assets and the discontinuance of
SFAS No. 71. CSW recorded the United Kingdom windfall profits tax in the third
quarter of 1997 as an extraordinary item. CSW sold Transok in 1996. Accounting
rules require the classification of both the sale and the actual operating
results prior to such sale as discontinued operations. In addition to these
reclassifications, certain other financial statement items for prior years have
been reclassified to conform to the 1999 presentation.

1999 (1) 1998 (1) 1997 (1) 1996 1995
------------------------------------------------
(millions, except per share and ratio data)
INCOME STATEMENT DATA
Revenues $5,537 $5,482 $5,268 $5,155 $3,143
Income from continuing
operations 469 440 329 297 377
Income before extraordinary items 469 440 329 429 402
Net income for common stock 455 440 153 429 402
Basic and diluted EPS from
continuing operations $2.21 $2.07 $1.55 $1.43 $1.97

Basic and diluted EPS before
extraordinary items $2.21 $2.07 $1.55 $2.15 $2.20

Basic and diluted EPS $2.14 $2.07 $0.72 $2.07 $2.10
Dividends paid per share of
common stock $1.74 $1.74 $1.74 $1.74 $1.72
Average common shares
outstanding 212.6 212.4 212.1 207.5 191.7

BALANCE SHEET DATA
Assets $14,162 $13,897 $13,616 $13,512 $14,055
Long-term obligations (2) 4,156 4,273 4,424 4,237 4,134
Capitalization ratios
Common stock equity 47% 45% 44% 46% 42%
Preferred stock -- 2 2 4 4
Trust Preferred Securities 4 4 4 -- --
Long-term debt 49 49 50 50 54

(1)See CENTRAL AND SOUTH WEST CORPORATION - RESULTS OF OPERATIONS for
factors affecting earnings.
(2)Long-term obligations include long-term debt, Trust Preferred Securities and
preferred stock subject to mandatory redemption.

2-4
<PAGE>

REGISTRANTS' COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND CENTRAL AND SOUTH WEST CORPORATION'S RESULTS OF OPERATIONS

Reference is made to CSW's Consolidated Financial Statements and related
Notes to Consolidated Financial Statements and Selected Financial Data. The
information contained therein should be read in conjunction with, and is
essential in understanding, the following discussion and analysis. The RESULTS
OF OPERATIONS of CSW and the U.S. Electric Operating Companies precede their
financial statements.

OVERVIEW

The electric utility industry is changing rapidly as it is becoming more
competitive. In anticipation of increasing competition and fundamental changes
in the industry, CSW's management is implementing a strategic plan designed to
help position CSW to be competitive in this rapidly changing environment and in
developing a global energy business.

CSW has undertaken key initiatives in the implementation of this overall
strategy. The centerpiece of these initiatives is the proposed merger between
AEP and CSW that was announced in December 1997 pursuant to which CSW would
become a wholly owned subsidiary of AEP. The proposed merger would join two
companies which are low cost providers of electricity and is expected to achieve
greater economies of scale than either company could achieve on its own. In
addition, CSW International continues to make investments in South America.
These initiatives are discussed in more detail below and elsewhere in this
report. See RECENT DEVELOPMENTS AND TRENDS - PROPOSED AEP MERGER and OTHER
INITIATIVES - DIVERSIFIED ELECTRIC.

Most states have considered the adoption of various legislative and
regulatory initiatives to restructure the electric utility industry and enact
retail competition, and several states, like Texas and Arkansas, have already
passed legislation that requires the implementation of retail access for
customers. In response to these changes, the CSW System is developing strategies
to appropriately deal with the changing environment. For example, the Texas
Electric Operating Companies have recently filed an unbundling plan in response
to legislation recently enacted in Texas. See RECENT DEVELOPMENTS AND TRENDS -
Industry Restructuring Initiatives in Arkansas, Oklahoma, Louisiana and Texas,
Texas Business Separation Plan and Securitization of Generation-related
Regulatory Assets and Stranded Costs.

CSW believes that compared to other electric utilities, the CSW System is
well positioned to capitalize on the opportunities resulting from an
increasingly deregulated and competitive market for the generation, transmission
and distribution of electricity. The CSW System should benefit from economies of
scale by virtue of its size and is a reliable and relatively low-cost provider
of electric power in its service area. Specifically, CSW will seek competitive
advantages through its diverse and stable customer base, competitive prices for
electricity, diversified fuel mix, extensive transmission interconnections,
diversity of regulation and financial flexibility. See RECENT DEVELOPMENTS AND
TRENDS for additional information. (The foregoing discussion contains
forward-looking statements within the meaning of Section 21E of the Exchange
Act. Actual results may differ materially from such projected information due to
changes in the underlying assumptions. See FORWARD-LOOKING INFORMATION).

2-5
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Overview of Operating, Investing and Financing Activities
Net cash inflows from operating activities decreased $139 million to $803
million for the twelve month period ended December 31, 1999 compared to the same
period last year due primarily to increased payments on accounts payable, less
favorable fuel recovery positions and higher levels of fuel inventories related
to year 2000 contingency plans. Partially offsetting the decrease in cash flows
from operating activities was a lower change in accounts receivable balance in
1999 compared to 1998. Further offsetting the decrease in cash flows from
operating activities was the absence in 1999 of a refund paid to CPL customers
in 1998.

Net cash outflows from investing activities increased $123 million to $758
million during the twelve months ended December 31, 1999 compared to the same
period a year ago. The increase in net cash outflows from investing activities
was due primarily to higher levels of construction spending in 1999 at the U.S.
Electric Operating Companies and SEEBOARD. Also contributing to the increase in
cash outflows from investing activities were two transactions that occurred in
1998: (1) the sale of a portion of C3 Communication's interest in ChoiceCom and,
(2) the payment by CSW International's Altamira partner, Alpek, of a 50%
obligation related to the power plant project. The increase in net cash outflows
from investing activities was partially offset by cash inflows related to the
sale of a 50% interest in CSW Energy's Sweeny plant. Also partially offsetting
the increase in cash outflows from investing activities was the absence in 1999
of CSW International loans to Vale.

Net cash inflows from financing activities for the twelve months ended
December 31, 1999 were $71 million, a $296 million increase compared to a cash
outflow of $225 million for the same period in 1998. The increase in net cash
flows from financing activities was due primarily to higher proceeds from the
issuance of long-term debt and a higher level of change in short-term debt. Also
contributing to the increase in cash inflows from financing activities was the
absence in 1999 of the repayment of a $60 million variable rate bank loan at CSW
Services and the redemption of $28 million of preferred stock at SWEPCO.
Partially offsetting the increase in net cash inflows was a higher level of
long-term debt maturities and reacquisitions in 1999 compared to 1998 as well as
the redemption of $160 million of preferred stock at CPL.

The non-cash impacts of exchange rate differences on the translation of
foreign currency denominated assets and liabilities were recorded on a separate
line on the cash flow statement.

Internally Generated Funds
Internally generated funds, which consist of cash flows from operating
activities less common and preferred stock dividends, should meet most of the
capital requirements of the CSW System. However, CSW's strategic initiatives,
including expanding CSW's core electric utility and non-utility businesses
through acquisitions or otherwise, may require additional capital from external
sources. For a description of certain restrictions on CSW's ability to raise
capital from external sources, see ITEM 7. MD&A, PROPOSED AEP MERGER and ITEM 8.
NOTE 15. PROPOSED AEP MERGER. Productive investment of net funds from operations
in excess of capital expenditures and dividend payments is necessary to enhance
the long-term value of CSW for its investors. CSW is continually evaluating the
best use of internally generated funds, which totaled $426 million, $564 million
and $343 million for 1999, 1998 and 1997, respectively. The amounts of
internally generated funds for the U.S. Electric Operating Companies are
detailed in the following table.

2-6
<PAGE>

1999 1998 1997
--------------------------------
(millions)
CPL
Internally Generated Funds $147 $183 $172
Construction Expenditures Provided by
Internally Generated Funds 70% 148% 136%

PSO
Internally Generated Funds $47 $124 $62
Construction Expenditures Provided by
Internally Generated Funds 46% 180% 78%

SWEPCO
Internally Generated Funds $59 $105 $108
Construction Expenditures Provided by
Internally Generated Funds 53% 127% 100%

WTU
Internally Generated Funds $38 $20 $69
Construction Expenditures Provided by
Internally Generated Funds 77% 53% 217%

On December 2, 1999, OFGEM published its final price proposals from its
United Kingdom electricity distribution review. OFGEM has proposed revenue
reductions in SEEBOARD's distribution business of 21%. In addition, OFGEM has
proposed the reallocation of a further 12% of costs out of SEEBOARD's
distribution business into its supply business. These proposals were accepted on
December 20, 1999, and will take effect on April 1, 2000, and remain in effect
for five years. OFGEM's proposals will reduce net income for SEEBOARD in the
year 2000 by approximately $40 million, dependent upon the level of further cost
reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A., its United Kingdom business segment, was $113
million for the twelve months ended December 31, 1999.

OFGEM's price proposals for SEEBOARD will have a material adverse effect
on the future results of operations of SEEBOARD U.S.A. and CSW, but are not be
expected to adversely affect the financial condition of CSW.

Capital Expenditures
The CSW System's need for capital results primarily from its construction
of facilities to provide reliable electric service to its customers. The
historical capital requirements of the CSW System have been primarily for the
construction of electric utility plant. However, current projected capital
expenditures are expected to be primarily for existing production, transmission
and distribution systems and for various non-utility investments. The U.S.
Electric Operating Companies maintain a continuing construction program, the
nature and extent of which is based upon current and estimated future demands
upon the system. Planned construction expenditures for the U.S. Electric
Operating Companies for the next three years are primarily to improve and expand
production, transmission and distribution facilities. These improvements will be
required to meet the anticipated needs of new customers and the growth in the
requirements of existing customers. These improvements will be funded primarily
through internally generated funds. However, some long-term financing will
likely be required.

2-7
<PAGE>

of common stock by CSW has also been a source of capital. CSW Energy and CSW
International typically use various forms of non-recourse project financing to
provide a portion of the capital required for their respective projects as well
as utilizing long-term debt for other investments. Although CSW and each of the
U.S. Electric Operating Companies expect to fund the majority of their
respective capital expenditures for their existing utility systems through
internally generated funds, for any significant investment or acquisition,
additional funds from the capital markets may be required. For a description of
certain restrictions on CSW's ability to make investments and raise capital from
external sources, including through the issuance of common stock, see ITEM 7.
MD&A PROPOSED AEP MERGER and ITEM 8. NOTE 15. PROPOSED AEP MERGER.

The historical and estimated capital expenditures for the CSW System,
including the U.S. Electric Operating Companies, SEEBOARD and other operations
are shown in the CAPITAL EXPENDITURES table. The amounts include construction
expenditures for the U.S. Electric Operating Companies and, for SEEBOARD and
CSW's other operations, construction expenditures and net equity investments.
The majority of the capital expenditures for the U.S. Electric Operating
Companies for 1997 through 1999 were spent on transmission and distribution
facilities. It is anticipated that the majority of the estimated capital
expenditures for 2000 through 2002 will be for production, transmission and
distribution facilities. For a description of certain restrictions on CSW's
ability to make capital expenditures, including through the issuance of common
stock, see PROPOSED AEP MERGER. (The table and statements below contain
forward-looking information within the meaning of Section 21E of the Exchange
Act. Actual results may differ materially from such projected information due to
changes in the underlying assumptions. See FORWARD-LOOKING INFORMATION).

CAPITAL EXPENDITURES
Estimated Expenditures
1997 1998 1999 2000 2001 2002
- -------------------------------------------- --------------------------------
(millions including AFUDC)

CSW $901 $669 $774 $1,071 $817 $643
CPL 130 127 215 229 266 191
PSO 82 71 105 174 121 86
SWEPCO 110 86 113 159 163 137
WTU 33 38 50 55 71 72

Estimated capital expenditures for 2000 - 2002 do not include
expenditures for acquisition-type investments.

Although CSW does not believe that the U.S. Electric Operating Companies
will require substantial additions of generating capacity over the next several
years, the U. S. Electric's internal resource plan presently anticipates that
any additional capacity needs will come from a variety of sources including
power purchases.

Inflation
Annual inflation rates, as measured by the U. S. Consumer Price Index,
have averaged approximately 2.0% during the three years ended December 31, 1999.
CSW believes that inflation, at this level, does not materially affect CSW's
results of operations or financial position. However, under existing regulatory
practice, only the historical cost of plant is recoverable from customers. As a
result, cash flows designed to provide recovery of historical plant costs may
not be adequate to replace plant in future years.

2-8
<PAGE>

opportunistically or when required. CSW continually monitors the capital markets
for opportunities to lower its cost of capital through refinancing activities.
The estimated embedded cost of long-term debt for CSW and the U.S. Electric
Operating Companies at December 31, 1999, is shown below.

CSW 7.0%
CPL 6.4
PSO 6.4
SWEPCO 6.9
WTU 6.6

CSW can issue common stock, either through the purchase and reissuance of
shares from the open market or by issuing original shares, to fund its LTIP,
stock option plan, PowerShare plan and Retirement Savings Plan. CSW began
funding these plans through open market purchases on April 1, 1997. CPL has
shelf registration statements on file for the issuance of up to $60 million of
FMBs and up to $75 million of preferred stock. PSO has a shelf registration
statement on file for the issuance of up to $35 million of senior notes. SWEPCO
has a shelf registration statement on file for the issuance of up to $250
million of senior notes, of which $150 million was issued in the first quarter
of 2000. For a description of certain restrictions on CSW's ability to raise
capital from external sources, see PROPOSED AEP MERGER.

The current securities ratings for each of the Registrants is presented in
the following table, including the securities rating on the Trust Preferred
Securities issued by CPL Capital I, PSO Capital I and SWEPCO Capital I.

Moody's Duff & Phelps Standard & Poor's
---------------------------------------
CPL
First mortgage bonds A3 A A
Senior unsecured Baa1 A- A-
Preferred stock Baa1 BBB+ BBB+
Trust preferred (CPL Capital I) Baa1 BBB+ BBB+
Junior subordinated deferrable
Interest debentures Baa2 -- --

PSO
First mortgage bonds A1 AA- AA-
Senior unsecured A2 A+ A
Preferred stock a3 A+ A-
Trust preferred (PSO Capital I) a2 A+ A-
Junior subordinated deferrable
Interest debentures A3 -- --

SWEPCO
First mortgage bonds Aa3 AA AA-
Senior unsecured A1 AA- A
Preferred stock a1 AA- A-
Trust preferred (SWEPCO Capital I) aa3 AA- A-
Junior subordinated deferrable
Interest debentures A2 -- --

WTU
First mortgage bonds A2 A+ A
Senior unsecured A3 -- A-
Preferred stock a3 A BBB+

CSW
Commercial paper P-2 D-2 A-2

These securities ratings may be revised or withdrawn at any time, and each
rating should be evaluated independently of any other rating.

2-9
<PAGE>

Long-Term Financing
On May 1, 1999, $100 million of CPL's 7.50% Series JJ FMBs matured, and on
December 1, 1999, $25 million of CPL's 7.125% Series DD FMBs matured. In June
1999, CPL reacquired $25 million of its 7.50% Series II FMBs, due April 1, 2023,
and in November and December 1999, CPL called $75 million of its money market
preferred stock and $85 million of its Series A and Series B preferred stock,
each at par.

In November 1999, CPL issued $200 million of unsecured floating rate notes
maturing November 23, 2001 and callable at par November 23, 2000. The interest
rate will reset quarterly at the then current three-month LIBOR plus 0.60%.

The reacquisition, redemptions and maturities were funded with short-term
debt and with proceeds from the issuance of the floating rate notes.

In November and December 1999, Matagorda County Navigation District No. 1
(Texas) sold for the benefit of CPL $111.7 million of 4.90% Series 1999A and $50
million of 4.95% Series 1999B unsecured tax exempt PCRBs. The bonds mature in
2030 but will be subject to remarketing and an interest rate reset in two years.
The proceeds were used to refund $111.7 million aggregate principal amount of
outstanding 7.50% Series T due December 15, 2014 and will be used to refund $50
million aggregate principal amount of outstanding 7.50% Series AA due March 21,
2020.

On January 1, 1999, $25 million of PSO's 7.25% Series K, FMBs matured. In
July 1999, the Oklahoma Development Finance Authority sold for the benefit of
PSO $33.7 million of 4.875% unsecured tax exempt PCRBs. The bonds mature in
fifteen years but will be subject to remarketing and an interest rate reset in
five years. In August 1999, the proceeds were used to refund $33.7 million
aggregate principal amount of outstanding Oklahoma Environmental Finance
Authority 5.9% Series A bonds due December 1, 2007.

On September 1, 1999, $40 million of SWEPCO's 6.125% Series W FMBs
matured.

On February 16, 2000, CPL sold $150 million of unsecured floating rate
notes. The bonds will have a two-year final maturity of February 22, 2002, but
may be redeemed at par after one year. The interest rate will reset quarterly at
the then current three-month LIBOR plus 0.45%. The initial rate, which was set
February 18, 2000, was 6.56%. Net proceeds of $149.6 million will be used to
refund $100 million of FMBs maturing April 1, 2000 and repay a portion of
short-term debt. CPL is replacing FMBs with unsecured debt, which provides more
financial flexibility as CPL unbundles its electric operations.

In the first quarter of 2000, SWEPCO sold $150 million of unsecured
floating rate notes. The notes will have a two-year final maturity at March 1,
2002, but may be redeemed at par after one year. The interest rate will reset
quarterly at the then current three-month LIBOR plus 0.23%. The initial rate,
which was set March 1, 2000, was 6.34%. Net proceeds of $149.6 million will be
used to refund $45 million of FMBs maturing April 1, 2000 and repayment of a
portion of outstanding short-term indebtedness.

2-10
<PAGE>

December 31, 1999, CSW had $1.3 billion outstanding in short-term borrowings.
The maximum amount of short-term borrowings outstanding during the year, which
had a weighted average interest yield for the year of 5.5%, was $1.4 billion
during December 1999. Information concerning short-term borrowings for each of
the U.S. Electric Operating Companies is presented in the following table.

Borrowing
Borrowing Limit at date
Limit at of Maximum Maximum Date of Maximum
December 31, 1999 Borrowed Borrowed Borrowed
--------------------------------------------------------------
(millions)

CPL $600 $600 $322 December 31, 1999
PSO 300 300 79 April 30, 1999
SWEPCO 250 250 141 December 31, 1999
WTU 165 165 26 March 3, 1999

CSW Credit purchases, without recourse, the accounts receivable of the
U.S. Electric Operating Companies and certain non-affiliated electric utility
companies. The sale of accounts receivable provides the U.S. Electric Operating
Companies with cash immediately, thereby reducing working capital needs and
revenue requirements. In addition, CSW Credit's capital structure contains
greater leverage than that of the U.S. Electric Operating Companies, so CSW's
cost of capital is lowered. CSW Credit issues commercial paper to meet its
financing needs. At December 31, 1999, CSW Credit had a $1.2 billion revolving
credit agreement, secured by the assignment of its receivables, to back up its
commercial paper program, which had $754 million outstanding. The $1.2 billion
facility will expire on June 23, 2000.

The maximum amount of such commercial paper outstanding during the year,
which had a weighted average interest yield for the year of 5.3%, was $1.0
billion during August 1999. The average and year-end amounts of accounts
receivable sold during 1999 by the U.S. Electric Operating Companies to CSW
Credit are shown in the following table.

1999 1999
Average End of Year
-----------------------
(millions)

CPL $139 $107
PSO 78 61
SWEPCO 97 73
WTU 44 26

CSW Energy and CSW International
CSW Energy has authority from the SEC to expend up to $250 million for
general development activities related to qualifying facilities and independent
power facilities. CSW Energy may seek specific authority to spend additional
amounts on certain projects subject to limitations contained in the AEP merger
agreement. See ITEM 8. NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES, for a
discussion of CSW's investments and commitments in CSW Energy projects at
December 31, 1999.

In January 1997, CSW received authority from the SEC under the Holding
Company Act to spend an amount up to 100% of consolidated retained earnings on
EWG or FUCO investments, subject to certain restrictions. As of December 31,
1999, CSW had invested an amount equal to 54% of consolidated retained earnings,
as defined by Rule 53 of the Holding Company Act, on EWG and FUCO investments.
For a description of certain restrictions on the ability of CSW and its

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subsidiaries to make capital expenditures in respect of QFs and independent
power facilities and to make EWG and FUCO investments, see PROPOSED AEP MERGER.

RECENT DEVELOPMENTS AND TRENDS

PROPOSED AEP MERGER

On December 22, 1997, CSW and AEP announced that their boards of directors
had approved a definitive merger agreement for a tax-free, stock-for-stock
transaction. The combined company would serve more than 4.7 million customers in
11 states and approximately 4 million customers outside the United States. On
May 27, 1998, AEP shareholders approved the issuance of the additional shares of
stock required to complete the merger. On May 28, 1998, CSW stockholders
approved the merger. On December 16, 1999, the merger agreement was amended to
extend the term of the agreement to June 30, 2000. After June 30, 2000, either
party may terminate the merger agreement if the merger has not been consummated.

AEP is subject to the information requirements of the Securities and
Exchange Act of 1934, as amended, and in accordance therewith, files reports and
other information with the SEC. For additional information related to AEP, see
AEP's Current Reports on Form 8-K, its Quarterly Reports on Form 10-Q and its
Annual Report on Form 10-K and the documents referenced therein.

Under the AEP merger agreement, each common share of CSW will be converted
into 0.6 share of AEP common stock. CSW stockholders will own approximately 40%
of the combined company. CSW plans to continue to pay dividends on its common
stock until the closing of the AEP Merger at approximately the same times and
rates per share as in 1999, subject to the continuing evaluation of CSW's
earnings, financial condition and other factors by the CSW board of directors.

Under the AEP merger agreement, there will be no changes required with
respect to the public debt issues, the outstanding preferred stock or the Trust
Preferred Securities of CSW's subsidiaries.

AEP and CSW anticipate net savings related to the merger of approximately
$2 billion over a 10-year period from the elimination of duplication in
corporate and administrative programs, greater efficiencies in operations and
business processes, increased purchasing efficiencies and the combination of the
two work forces. As a result of the approved settlement and agreement with the
state commissions in CSW and AEP's respective service territories, AEP and CSW
have agreed to guarantee that approximately 55% of those savings will be passed
through to their customers. AEP and CSW continue to seek opportunities for
additional savings and expect to realize significant additional savings based
upon the work of the merger transitions teams over the last two years. The
preceding discussion constitutes forward-looking information within the meaning
of Section 21E of the Exchange Act. Actual results may differ materially from
such projected information. See FORWARD-LOOKING INFORMATION.

The electric systems of AEP and CSW will operate on an integrated and
coordinated basis as required by the Holding Company Act. AEP and CSW project
fuel savings of approximately $98 million over a 10-year period resulting from
the coordinated operation of the combined company, which will be passed through
to customers.

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subsidiaries' strategic investment activity, capital expenditures and non-fuel
operating and maintenance expenditures are limited to specific agreed upon
projects and in agreed upon amounts. In addition, prior to consummation of the
merger, CSW and its subsidiaries are restricted from:

- - Issuing shares of common stock other than pursuant to employee benefit
plans;

- - Issuing shares of preferred stock or similar securities other than to
refinance existing obligations or to fund permitted investment or capital
expenditures; and

- - Incurring indebtedness other than pursuant to existing credit facilities, in
the ordinary course of business, or to fund permitted projects or capital
expenditures. These limitations do not preclude CSW and its subsidiaries from
making investments and expenditures in amounts previously budgeted.

Cook Nuclear Plant
On June 25, 1999, AEP announced a comprehensive plan to restart the idle
Cook nuclear power plant. Unit 2 is scheduled to return to service in April
2000, and Unit 1 is scheduled to return to service in September 2000. AEP stated
that its announcement follows a comprehensive systems readiness review of all
operating systems at Cook nuclear power plant and a cost/benefit analysis of
whether to restart the plant or shut it down completely. Plant officials
originally shut down both units of the facility, located in Bridgman, Michigan,
in September 1997 because of questions raised during a design inspection by the
NRC. AEP estimated that its costs to restart the idle plant should be
approximately $574 million, of which $373 million has been spent through
December 31, 1999.

On February 24, 2000, AEP announced a three-week delay in the planned
April 1, 2000 restart. The delay is due to issues encountered during testing of
equipment necessary for core reload and power operations of its Cook Unit 2. The
testing process continues and may still encounter additional items that could
extend the delay.

Merger Regulatory Approvals
The merger is conditioned, among other things, upon the approval of
several state and federal regulatory agencies. Some of the merger conditions
cannot be waived.

State Regulatory Commissions
The U.S. Electric Operating Companies have received approval for the
merger from their respective state regulatory commissions in Arkansas,
Louisiana, Oklahoma and Texas.

FERC
On April 30, 1998, AEP and CSW jointly filed a request with the FERC for
approval of their proposed merger. On May 25, 1999, AEP and CSW announced they
had reached a settlement with the FERC trial staff resolving competition and
rate issues that related to the proposed merger. On July 13, 1999, AEP and CSW
reached an additional settlement with the FERC trial staff resolving energy
exchange pricing issues. The settlements were submitted to the FERC for
approval. Hearings at the FERC concluded on July 19, 1999. On November 23, 1999,
the ALJ who presided over the FERC merger hearing issued a recommendation to the
FERC that the merger be approved and found that the proposed merger is in the
public interest.

On March 15, 2000, the FERC conditionally approved the merger. Conditions
placed on the merger include:

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- - Transfer operational control of AEP's east and west transmission
systems to a fully-functioning, FERC-approved regional transmission
organization by December 15, 2001, which is the same implementation
date included in the FERC's general order for regional transmission
organizations that applies to all transmission-owning utilities.

- - Two interim transmission-related mitigation measures consisting of
market monitoring and independent calculation and posting of available
transmission capacity to monitor the operation of AEP's east
transmission system.

- - Divestiture of 550 MW of generating capacity comprised of 300 MW of
capacity in SPP and 250 MW of capacity in ERCOT. The FERC will
require AEP and CSW to divest their entire ownership interest in the
generating facilities that are to be divested. Alternatively, AEP
and CSW may choose to divest the same or greater amount of capacity
from different generating plants in their entirety. However, such
generating plants must be of similar cost, operation and location
characteristics of generating plants AEP and CSW originally proposed.

- - AEP and CSW must complete divestiture of the ERCOT capacity by March
15, 2001 and divestiture of the SPP capacity by July 1, 2002.

The FERC found that certain energy sales in SPP and ERCOT would be
reasonable and effective interim mitigation measures until completion of the
required SPP and ERCOT divestitures. The FERC will require the proposed interim
energy sales to be in effect when the merger is consummated.

AEP and CSW must notify the FERC by March 30, 2000 whether they accept the
condition that they transfer operational control of their transmission
facilities to a fully-functioning, FERC-approved regional transmission
organization by December 15, 2001 and the condition requiring the interim
mitigation measures. If AEP and CSW accept the conditions, then AEP and CSW must
make a compliance filing at least 60 days prior to consummation of the merger
describing their plan to implement the interim mitigation measures. AEP and CSW
intend to make this compliance filing on a date that would permit completion of
the merger in the second quarter of 2000. AEP and CSW believe they can address
the conditions.

NRC
On June 19, 1998, CPL filed a license transfer application with the NRC
requesting the NRC's consent to the indirect transfer of control of CPL's
interests in the NRC licenses issued for STP from CSW to AEP. CPL would continue
to own its 25.2% interest in STP, and CPL's name would remain on the NRC
operating license. On November 5, 1998, the NRC approved the license transfer
application with a condition that the merger must be completed by December 31,
1999. The NRC has extended the condition relating to completion of the merger to
June 30, 2000.

Other Federal
On October 13, 1998, AEP and CSW jointly filed an application with the SEC
for approval of the proposed merger. The SEC merger filing requests approval of
the merger and related transactions and outlines the expected combined company
benefits of the merger to AEP and CSW customers and shareholders. Since then,
AEP and CSW have filed several amendments to the application. Several parties
have filed petitions opposing the proposed merger at the SEC which have not been
withdrawn.

On July 29, 1999, applications were made with the FCC to authorize the
transfer of control of licenses of several CSW entities to AEP. In February
2000, the FCC authorized the transfer which will be effective upon the
completion of the proposed merger.

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<PAGE>

On July 26, 1999, AEP and CSW submitted filings to the Department of
Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On
February 2, 2000, AEP and CSW announced that their proposed merger received
antitrust clearance from the Department of Justice.

United Kingdom
CSW has a 100% interest in SEEBOARD, and AEP has a 50% interest in
Yorkshire. The proposed merger of CSW into AEP would result in common ownership
of these United Kingdom entities. On January 25, 2000, the United Kingdom's
Department of Trade and Industry approved the common ownership of the United
Kingdom entities that would result from the proposed merger, subject to certain
conditions concerning the separate operation of their respective distribution
and supply businesses.

Other
On April 20, 1999, AEP reached a settlement with the Indiana Utility
Regulatory Commission staff addressing matters pertinent to Indiana regarding
the proposed merger. The Indiana Utility Regulatory Commission approved the
settlement on April 26, 1999. The settlement agreement resulted from an
investigation of the proposed merger between AEP and CSW initiated by the
Indiana Utility Regulatory Commission.

On April 21, 1999, AEP and CSW announced that they had reached separate
settlements with six wholesale customers that address issues related to the
proposed merger.

On April 28, 1999, AEP and CSW announced that they ratified a settlement
agreement with local unions of the IBEW representing employees of AEP and CSW.
The settlement agreement covered issues related to the pending merger between
AEP and CSW. As part of the settlement, the IBEW local unions have withdrawn
their opposition to the merger.

On May 26, 1999, AEP and CSW announced that they had reached a settlement
agreement with the Kentucky Attorney General and several AEP customers in
Kentucky addressing matters pertinent to Kentucky regarding the pending merger
between AEP and CSW. The Kentucky Public Service Commission has approved the
settlement.

On August 6, 1999, AEP announced that it had ratified a settlement
agreement with local unions of the UWUA representing employees of AEP. The
settlement agreement covered issues raised in the pending merger between AEP and
CSW. As part of the settlement, the UWUA local unions will not oppose the
merger.

On October 21, 1999, the Public Utility Commission of Ohio issued a
decision stating that it will notify the FERC that it is no longer opposed to
AEP's proposed merger with CSW and that it will no longer seek conditions to the
merger.

AEP and CSW also have reached settlements with the Missouri Public Service
Commission, the Michigan Public Service Commission and various wholesale
customers and intervenors in the FERC merger proceeding.

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<PAGE>

no assurance as to when, on what terms or whether the required approvals will be
received. After June 30, 2000, either CSW or AEP may terminate the merger
agreement if all of the conditions to its obligation to close have not been
satisfied. There can be no assurance that the AEP Merger will be consummated.

Merger Costs
As of December 31, 1999, CSW had deferred $43 million in costs related to
the AEP Merger on its consolidated balance sheet, which will be charged to
expense if AEP and CSW do not complete their proposed merger. If the merger is
consummated, such costs would be recovered in rates pursuant to merger sharing
provisions contained in the state settlement agreements.

See ITEM 8. NOTE 15. PROPOSED AEP MERGER.

COMPETITION AND INDUSTRY CHALLENGES

Competitive forces at work in the electric utility industry are affecting
the CSW System and other electric utilities, generally. Increased competition
facing electric utilities is driven by complex economic, political and
technological factors. These factors have resulted in legislative and regulatory
initiatives that are likely to result in even greater competition at both the
wholesale and retail levels in the future. As competition in the industry
increases, the U.S. Electric Operating Companies will have the opportunity to
seek new customers and at the same time be at risk of losing customers to other
competitors. Additionally, the U.S. Electric Operating Companies will continue
to compete with suppliers of alternative forms of energy, such as natural gas,
fuel oil and coal, some of which may be less expensive than electricity. In the
United Kingdom, the franchised electricity supply business opened to full
competition on a phased-in basis beginning October 1998. As a result, SEEBOARD
is able to seek new customers while risking the loss of existing customers to
other competitors. CSW believes that, overall, its prices for electricity and
the quality and reliability of its service currently place it in a position to
compete effectively in the energy marketplace. (The foregoing statement
constitutes a forward-looking statement within the meaning of Section 21E of the
Exchange Act. Actual results may differ materially from such projected
information due to changes in the underlying assumptions. See FORWARD-LOOKING
INFORMATION). See RATES AND REGULATORY MATTERS for a discussion of several
current issues affecting the CSW System.

Electric industry restructuring and the development of competition in the
generation and sale of electric power requires resolution of several important
issues, including, but not limited to:

- - Who will bear the costs of prudent utility investments or past
commitments incurred under traditional cost-of-service regulation that
will not be economically viable in a competitive environment, sometimes
referred to as stranded costs;

- - Whether all customers have access to the benefits of competition;

- - How, and by whom, the rules of competition will be established;

- - What the impact of deregulation will be on conservation, environmental
protection and other regulator-imposed programs; and

- - How transmission system reliability will be ensured.

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<PAGE>

including the proposals' competitive position and treatment of stranded utility
investment, primarily at CPL, resulting from such proposals. In CSW's service
territory, the states of Arkansas and Texas have passed legislation addressing
most of these issues while work continues on the remaining issues. The U.S.
Electric Operating Companies believe they are in a position to compete
effectively in a deregulated, more competitive marketplace. However, if events
and circumstances arise in the future that would indicate all costs previously
incurred are not recoverable from customers, then the U.S. Electric Operating
Companies may be required by existing accounting standards to recognize
potentially significant losses from unrecovered costs. (The foregoing statement
constitutes a forward-looking statement within the meaning of Section 21E of the
Exchange Act. Actual results may differ materially from such projected
information due to changes in the underlying assumptions. See FORWARD-LOOKING
INFORMATION). See Regulatory Accounting for additional information. See ITEM 8.
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation for information on electric utility restructuring.

Wholesale Electric Competition in the United States
The Energy Policy Act, which was enacted in 1992, significantly altered
the way in which electric utilities compete. The Energy Policy Act created
exemptions from regulation under the Holding Company Act and permits utilities,
including registered utility holding companies and non-utility companies, to own
EWGs.

EWGs are wholesale power producers that are free from most federal and
state regulation, including restrictions under the Holding Company Act. These
provisions enable broader participation in wholesale power markets by reducing
regulatory hurdles to such participation.

The Energy Policy Act also allows the FERC, on a case-by-case basis and
with certain restrictions, to order wholesale transmission access and to order
electric utilities to enlarge their transmission systems. A FERC order requiring
a transmitting utility to provide wholesale transmission service must include
provisions generally that permit the utility to recover from the FERC applicant
all of the costs incurred in connection with the transmission services and any
enlargement of the transmission system and associated services.

Wholesale energy markets, including the market for wholesale electric
power, have been increasingly competitive since enactment of the Energy Policy
Act. The U.S. Electric Operating Companies must compete in the wholesale energy
markets with other public utilities, cogenerators, QFs, EWGs and others for
sales of electric power. While CSW believes the Energy Policy Act will continue
to make the wholesale markets more competitive, CSW is unable to predict how the
Energy Policy Act will ultimately impact the U.S. Electric Operating Companies.

FERC Orders No. 888 and No. 889
The FERC issued Order No. 888 in 1996, which is the final comparable open
access transmission service rule. The provisions of FERC Order No. 888 provide
for comparable transmission service between utilities and their transmission
customers by requiring utilities to take transmission service under their open
access tariffs for wholesale sales and purchases and by requiring utilities to
rely on the same transmission information that their transmission customers rely
on to make wholesale purchases and sales.

In addition, the Texas Commission adopted amendments to its transmission
rule in 1999 that requires 100% postage stamp pricing in ERCOT which began in
September 1999. Postage stamp pricing is fixed rate pricing regardless of
transmission distance traveled. CPL and WTU began recording transmission
revenues and expenses in accordance with the Texas Commission's transmission
rule on January 1, 1997.

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<PAGE>

In 1996, the FERC issued Order No. 889 requiring transmitting utilities to
establish and operate an OASIS for the dissemination of information regarding
available transfer capability for their respective transmission systems. The
OASIS is an on-line information system that provides the same information about
the utility's transmission system to all transmission customers. The U.S.
Electric Operating Companies utilize, and participate in the OASIS systems for
ERCOT and SPP. FERC Order No. 889 also created standards of conduct requiring
utilities to operate any wholesale power sales business separately from their
transmission operations. The standards of conduct are designed to ensure that
utilities and their affiliates, as sellers of power, do not have preferential
access to information about wholesale transmission prices and availability.

Independent System Operators
On December 20, 1999, the FERC issued Order No. 2000 relating to RTOs.
FERC Order No. 2000 describes the characteristics that an RTO should have as
well as the functions an RTO should perform. Every jurisdictional utility
must file at the FERC either:

- - A proposal to participate in an RTO;

- - A petition asking whether a proposed transmission entity would qualify
as an RTO, or

- - An alternative filing describing the utility's efforts to participate in an
RTO and the reasons those efforts were unsuccessful.

Such filings must be made by October 15, 2000 for utilities that are not
members of a FERC approved ISO. Utilities that are members of a FERC approved
ISO have until January 15, 2001, to file with the FERC demonstrating compliance
of their ISOs with FERC Order 2000. On December 30, 1999, the SPP filed at the
FERC a proposal for recognition as an ISO and an RTO. In addition, on September
7, 1999, the SPP submitted various tariff revisions to the FERC that resulted in
an SPP open access tariff offering all of the services required by FERC Order
No. 888 as of February 1, 2000.

Retail Electric Competition in the United States
Most states have considered the adoption of various legislative and
regulatory initiatives to restructure the electric utility industry and enact
retail competition, and several states have already passed legislation that
requires the implementation of retail access for customers.

Industry Restructuring Initiatives in Arkansas, Oklahoma, Louisiana and
Texas
Several initiatives to restructure the electric utility industry and enact
retail competition legislation have been undertaken in the four states in which
the U.S. Electric Operating Companies operate. Arkansas, Oklahoma and Texas have
enacted restructuring legislation.

Arkansas
In April 1999, legislation was enacted for electric utility restructuring
in Arkansas. Some major provisions of that legislation include:

- - Retail competition begins January 1, 2002. The Arkansas Commission can
delay implementation, but not beyond June 30, 2003.

- - Companies with transmission lines must operate those facilities through
a transmission organization approved by FERC.

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- - A one-year rate freeze after restructuring will be implemented for
default service customers of companies that do not apply for stranded
cost recovery. A three-year rate freeze will be implemented for
companies with stranded costs.

- - The Arkansas Commission has authority to address market power issues.

Oklahoma
In 1997, the Oklahoma legislature passed restructuring legislation
providing for retail access by July 1, 2002. That legislation called for a
number of studies to be completed on a variety of restructuring issues,
including independent system operator, technical, financial, transition and
consumer issues. The study on independent system operator issues was completed
in January 1998.

In 1998, the Oklahoma Legislature passed Senate Bill 888, which
accelerated the schedule for completion of the remaining studies to October
1999. Those studies were conducted under the direction of the Legislative Joint
Electric Utility Task Force. The task force organized the study effort into
several working groups, which were directed to evaluate assigned issues. On
October 1, 1999, the task force completed its report to the Oklahoma
Legislature based on the work performed by these working groups. The report
primarily is a compilation of the positions taken by the various parties
participating in the working groups. The information, in the report, is
expected to be used in the development of additional industry legislation
during the 2000 legislative session.

Several additional electric industry restructuring bills have been filed
in the 2000 Oklahoma Legislative session. The proposed bills generally
supplement the industry restructuring legislation previously enacted in
Oklahoma. CSW is unable to predict what, if any, additional legislation will be
passed on industry restructuring.

Louisiana
In 1998, a special legislative committee created by the Louisiana Senate
studied the impact of retail competition on the state of Louisiana. No
legislation was enacted as a result of that effort. In addition, during 1998
and 1999, the Louisiana Commission conducted a proceeding to study
restructuring and retail competition. Since the Louisiana Commission is a
constitutionally created body, it can implement industry restructuring on its
own without additional legislation. Parties submitted comments, and hearings
were held on a number of specific restructuring topics. Also, as a part of that
proceeding, utilities filed rate unbundling information with the Louisiana
Commission staff.

As a result of those hearings, the Louisiana Commission staff released its
report on industry restructuring, including its recommendations regarding
retail competition in Louisiana. In its report, the Louisiana Commission staff
recommended that electric industry restructuring should not proceed at this
time because it is not in the public interest. However, the Louisiana
Commission staff proposed a restructuring plan as an alternative, in the event
the Louisiana Commission decides to move forward with electric industry
restructuring and competition. The Louisiana Commission voted to begin
additional study and analysis of the issues associated with restructuring and
has adopted a procedural schedule that will result in a final restructuring
plan by January 1, 2001.

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<PAGE>

commercial customers, additional rate reductions for low income customers and a
number of customer protections. Rural electric cooperatives and municipal
electric systems can choose whether to participate in retail competition.

Some of the key provisions of the legislation include:

- - Each utility must unbundle its business activities into a retail
electric provider, a power generation company and a transmission and
distribution utility. Beginning January 1, 2002, retail customers of
investor-owned electric companies will be able to choose their retail
electric provider. The affiliated retail electric provider of the
utility that serves the customer on December 31, 2001 will serve the
customer unless the customer chooses another retail electric
provider. Delivery of the electricity will continue to be the
responsibility of the transmission and distribution utility company
at regulated prices.

- - Retail electric cooperatives and municipal electric systems can choose
whether to participate in retail competition.

- - Investor-owned utilities must freeze their rates effective September 1,
1999, through the start of competition on January 1, 2002.
Investor-owned utilities at January 1, 2002 will lower rates for
residential and small commercial customers by 6%. This reduced rate is
known as the "Price to Beat," which will be available to those
customers for five years.

- - The legislation establishes a system benefit fund for low-income
customer assistance, customer education and to offset reductions in
school property tax revenues. The fund will be funded through a charge
on retail electric providers that can be set by the Texas Commission up
to $0.65 per MWH.

- - Electric utilities are allowed to recover all of their net, verifiable,
non-mitigable stranded costs that otherwise may not be recoverable in
the future competitive market. A majority of those regulatory assets
and stranded costs can be recovered through securitization, which is a
financing to recover generation-related regulatory assets and stranded
costs through the use of debt that lowers the carrying cost of assets
compared to conventional utility financing methods.

- - Each year during the 1999 through 2001 rate freeze period, utilities
with stranded costs are required to apply any earnings in excess of the
most recently approved cost of capital (if issued on or after January
1, 1992) to reduce stranded costs. Utilities without stranded costs
must either flow such amounts back to customers or make capital
expenditures to improve transmission or distribution facilities or to
improve air quality.

- - The affiliated power generation company of the utility that serves the
customer on December 31, 2001 will be required to auction entitlements
to at least 15% of its generating capacity for five years or until 40%
of the residential and small commercial consumption of electricity in
the utility's service area is provided by nonaffiliated retail electric
providers.

- - Grandfathered power plants, those built or started prior to
implementation of the Texas Clean Air Act of 1972, must reduce
emissions of nitrogen oxide by 50% and sulfur dioxide by 25% by May
2003. The law also requires an additional 2,000 MW of renewable power
generation in Texas by 2009 from retail electric providers, municipally
owned utilities and electric cooperatives.

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- - A legislative oversight committee will monitor the implementation and
effectiveness of electric utility restructuring and make
recommendations for any necessary further legislative action.

The Texas Commission has established numerous rulemakings and other
processes to address various issues associated with the restructuring
legislation and to provide for further guidance regarding implementation of the
restructuring.

Restructuring Readiness
CSW has initiated a restructuring readiness effort to prepare for
competition in the states served by the U.S. Electric Operating Companies. This
effort includes the development and implementation of a business separation plan
and the system and process changes required to prepare for competition. The
business separation plan filed with the Texas Commission in January, 2000, is
discussed below. An analysis of the processes and systems in place and those
needed in the future has been completed, and CSW is beginning the implementation
phase of the restructuring readiness effort.

Texas Business Separation Plan
On January 10, 2000, CSW filed with the Texas Commission its business
separation plan required by the Texas Legislation on electric utility
restructuring. The business separation plan describes the approach proposed by
CSW to unbundle the business activities of each of its Texas Electric Operating
Companies into three entities: the PGC, the EDC and the REP. Under CSW's
business separation plan, all three new entities would continue to be owned by
CSW. The PGC would own a CPL PGC and a WTU PGC. The EDC would own CPL, WTU and
SWEPCO EDCs. Although the plan is directed to meet the requirements of the Texas
Legislation, CSW expects the plan will also meet the restructuring requirements
anticipated to be enacted in Arkansas, Louisiana and Oklahoma.

As a result of rulings by the Texas Commission on March 16, 2000, CSW's
unbundling will include full structural separations for CPL and WTU by January
1, 2002. This includes the structural separation of the management and control
of the EDCs from the PGCs as well as the creation of a separate REP. For CPL and
WTU, unbundling will require that legal ownership of generation, transmission
and distribution assets will be separated and transferred to or vested in new
entities , the CPL and WTU PGCs and EDCs, respectively. The CPL and WTU EDC's
would be regulated utilities under Texas law. Office systems, computer systems,
accounting systems and similar equipment would be segregated and an employee
code of conduct would restrict information exchanges between employees of the
regulated entities and the other business units. Because SWEPCO also is
regulated in Arkansas and Louisiana, the Texas Commission deferred its decision
on the appropriate separation for SWEPCO until interested parties have an
opportunity to discuss issues that could result in a separation plan acceptable
in each state. CSW believes that its total cost to restructure the CSW System,
which includes costs for the EDC, PGC and REP, in implementing retail
competition in its service territory is approximately $200 million, including
refinancing costs of approximately $70 million. Recognition in rates of the
Texas jurisdictional EDC portion of these costs will be sought in the Texas
Electric Operating Companies' cost unbundling filings to establish new EDC
regulated rates during the year 2000.

Code of Conduct Under Customer Choice
Legislation was enacted in Arkansas and Texas in 1999 to restructure the
electric utility industry in those states. These two new laws require that the
CSW System begin to operate its utilities as separate power generation entities,
retail electric providers and transmission and distribution entities. Power
generation entities and retail electric providers will be non-regulated;
transmission and distribution entities will continue to be regulated. On or
before September 1, 2000, the Texas operations portion of each of the U.S.
Electric Operating Companies will functionally separate their regulated and
non-regulated utility activities.

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In order to comply with the new Arkansas and Texas laws, the Registrants
will follow a "code of conduct," which requires the non-regulated business
activities to be separate from the regulated activities. Transactions between
the regulated and non-regulated activities are subject to an information-sharing
"firewall" and the requirement to act on an arm's-length basis.

Other
Management cannot predict the ultimate outcome of the initiatives
concerning restructuring and retail competition in Arkansas, Louisiana, Oklahoma
and Texas, or their ultimate impact on results of operations, financial
condition, or competitive position of CSW and the U.S. Electric Operating
Companies.

Holding Company Act and Electric Industry Restructuring Legislation
In 1995, the SEC issued a report to the U.S. Congress advocating repeal
of the Holding Company Act, which restricts certain activities of CSW and other
registered holding companies, finding the Holding Company Act anachronistic and
duplicative of other federal and state regulatory regimes.

HR 2944, "The Electricity Competition and Reliability Act," was reported
by the House Commerce Subcommittee on Energy and Power on October 27, 1999. If
enacted, the legislation would repeal the Holding Company Act twelve months
after the bill is signed into law and clarifies that states have the authority
to order retail competition without a federal mandate.

The U.S. Congress continues to consider legislative initiatives, which
provide for the restructuring and/or deregulating of the electric utility
industry. Several similar bills have been introduced in the 106th Congress. Most
of the bills seek to clarify state authority to mandate retail choice, repeal
the Holding Company Act, repeal the Public Utility Regulatory Policies Act of
1978, expand FERC authority over public power entities, address transmission
reliability and other issues. Management cannot predict the ultimate outcome of
any legislative initiatives.

Regulatory Accounting
Consistent with industry practice and the provisions of SFAS No. 71, which
allows for the recognition of regulatory assets, the U.S. Electric Operating
Companies have recognized significant regulatory assets and liabilities. As a
result of legislation passed in Arkansas and Texas, the retail electricity
generation business of CPL, SWEPCO and WTU, in those jurisdictions, no longer
meets the criteria to apply SFAS No. 71. Instead, the principles of SFAS No.
101, as interpreted by EITF 97-4, have been applied. Management believes that
CPL, SWEPCO and WTU currently meet the criteria for following SFAS No. 71 for
the remainder of their electric utility business.

Additional non-cash write-offs of regulatory assets and liabilities would
be required if additional portions of the electric utility business of the U.S.
Electric Operating Companies no longer meet the criteria for applying SFAS No.
71, absent a means of recovering such assets or settling such liabilities. For
additional information regarding regulatory accounting, reference is made to
ITEM 8. NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

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Securitization of Generation-related Regulatory Assets and Stranded Costs
Electric utilities under the Texas Legislation are allowed to recover
generation-related regulatory assets and stranded costs that otherwise may not
be recoverable in the future competitive market. All or a majority of those
costs can be refinanced through securitization, which is a financing structure
designed to provide lower financing costs than is available through the
conventional utility cost of capital model. The securitized amounts are then
recovered through a non-bypassable wires charge. On October 18, 1999, CPL filed
an application with the Texas Commission to securitize approximately $1.27
billion of its retail generation-related regulatory assets and approximately $47
million in other qualified costs. The Texas Commission held hearings on December
7 and 8, 1999 on CPL's securitization application.

On February 10, 2000, the Texas Commission tentatively approved a
settlement, which will permit CPL to securitize approximately $764 million of
regulatory assets. The Texas Commission is expected to grant final approval by
March 27, 2000. If approval is received from the Texas Commission, CPL expects
to issue the securitization bonds in 2000, depending on market conditions and
the timing of any appeals of the Texas Commission order.

The settlement calls for CPL to reduce its proposed amount to be
securitized from $1.27 billion to approximately $764 million of regulatory
assets plus an estimated $29 million of other qualified costs. The settlement
also calls for $290 million of the amount originally requested to be included in
the calculation of stranded costs in CPL's April 2000 transmission and
distribution cost filing. This filing will establish stranded costs, of which
75% can be securitized and 25% can be recovered through a competitive transition
charge.

The securitization amount was reduced by $186 million from the amount
originally requested to reflect customer benefits associated with accumulated
deferred income taxes. CPL previously had proposed to flow these benefits back
to customers over a 14-year term of the bonds.

CPL could issue the bonds associated with securitization as early as April
2000, depending on timing of receipt of a non-appealable financing order from
the Texas Commission and depending on market conditions. A second phase of
securitization could occur when the Texas Commission makes a preliminary
determination of stranded costs, currently expected to occur in the first half
of 2001. CPL's stranded costs are subject to a final determination by the Texas
Commission in 2004.

Under the provisions of EITF 97-4, CPL's generation-related net regulatory
assets were transferred to the transmission and distribution portion of the
business and will be amortized as they are recovered through charges to
customers. Management currently believes all generation-related regulatory
assets for CPL will be recovered as provided under the Texas Legislation. If
future events were to occur that made the recovery of these assets no longer
probable, CPL would write-off any non-recoverable portion of such assets as a
non-cash charge to earnings.

CPL believes it will also have stranded costs, which are the excess of net
book value of generation assets as defined over the market value of those
assets. CPL's amount of regulatory assets and stranded costs are subject to a
final determination by the Texas Commission in 2004. The Texas Legislation
provides that all such finally determined stranded costs will be recovered.
Since SWEPCO and WTU are not expected to have net stranded costs, all
generation-related non-recoverable net regulatory assets were written off and
are reflected on their statements of income as an extraordinary loss in 1999.
See ITEM 8. NOTE 16. EXTRAORDINARY ITEMS.

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CPL, SWEPCO and WTU performed an accounting impairment analysis of
generation assets under SFAS No. 121 at September 30, 1999, and concluded there
was no impairment of generation assets at that time. An impairment analysis
involves estimating future net cash flows arising from the use of an asset. If
the net cash flows exceed the net book value of the asset, then there is no
impairment of the asset for accounting purposes. CPL, SWEPCO and WTU will
continue to review their assets for potential impairment if events or changes in
circumstances indicate the carrying cost of an asset may not be recoverable.

Beginning January 1, 2002, fuel costs will not be subject to Texas
Commission fuel reconciliation proceedings. Consequently, CPL, SWEPCO, and WTU
will file a final fuel reconciliation with the Texas Commission reconciling fuel
costs through the period December 31, 2001. These final fuel balances will be
included in each company's true-up proceeding in 2004.

PSO Union Negotiations
In March 1999, PSO and its Local Union 1002 of the IBEW reached an
agreement for contract negotiations, which began in July 1996. In December 1996,
PSO had implemented portions of its then final proposal after declaring an
impasse. The principal issue of disagreement involved PSO's need for flexibility
in a deregulated environment. In April 1997, Oklahoma's governor signed into law
an electric industry restructuring bill. The law mandates the implementation of
retail competition to begin on July 1, 2002. Following the passage of the law,
PSO negotiated a new contract with the union. The new contract allows PSO to be
in a better position to compete in a deregulated environment. The effective date
of the new agreement was April 4, 1999, and it will remain in effect until
September 30, 2000. As a result of the agreement, the union agreed to withdraw
its opposition to the AEP Merger proceedings.

In October 1998, PSO received an adverse ruling from a NLRB ALJ on the
union's unfair labor practice charge against PSO. The ALJ ruled that PSO did
negotiate in good faith but that PSO's position on some issues was too harsh,
and therefore the December 1996 implementation of PSO's then final proposal
should be rolled back and employees made whole from that date. The ALJ upheld
PSO's right to cease collecting union dues through payroll deductions.
Additionally, the ALJ ruled that PSO improperly solicited employees to withdraw
from the union. In December 1998, PSO appealed the ALJ's ruling to the NLRB. In
June 1999, PSO made a settlement offer to the union to resolve the pending
charges against PSO. The union rejected this offer and indicated it would wait
for a ruling from the NLRB before deciding on further action. Should PSO receive
an adverse ruling from the NLRB, PSO will have the option of appealing that
decision to a circuit court. At this time, PSO cannot predict the ultimate
outcome of the NLRB matter. However, PSO believes that it will not have a
material adverse effect on its results of operations or financial condition. The
preceding discussion constitutes forward-looking information within the meaning
of Section 21E of the Exchange Act. Actual results may differ materially from
such projected information. See FORWARD-LOOKING INFORMATION.

WTU Changes in Operations
On February 22, 2000, WTU announced that as a result of an operational
review, the WTU Merchandise Program was being discontinued as of September 30,
2000, since the merchandise program no longer fits WTU's business strategy.
Under the merchandise program, WTU sold electric appliances and other items at
local offices across the WTU service territory.

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WTU also announced that as part of the operational review, bill payments
and other traditional customer transactions would no longer be accepted at local
offices as of September 30, 2000. Due to improvements in technology, WTU offers
bill payment service through the Internet as well as other alternative payment
programs.

WTU estimates that 65 employees will be affected by the changes in
operations, including 49 merchandise employees. Although WTU has not completed
its analysis, the cost of these changes is not expected to have a material
adverse effect on WTU's results of operations or financial condition.

SEEBOARD - Third Party Pension Litigation
In the U.K., National Grid and National Power PLC have been involved in
continuing litigation regarding their use of actuarial surpluses disclosed in
the 1992 and 1995 valuations of the electricity industry's occupational pension
plan, the ESPS. A High Court decision in favor of the National Grid and National
Power PLC was appealed. On February 10, 1999, the U.K. Court of Appeal ruled
that the particular arrangements made by these corporations to dispose of part
of the surplus were invalid due to procedural defects. This decision was
confirmed at a later hearing of the U.K. Court of Appeal held in May 1999. The
National Grid has appealed to the House of Lords, the highest court of appeal in
the U.K., and a decision is expected in late 2000 or early 2001. The final
outcome of this appeal cannot presently be determined.

SEEBOARD employees are members of the ESPS, and SEEBOARD has made similar
use of actuarial surpluses disclosed in the 1992 and 1995 valuations. As a
result of subsequent legal clarification of certain issues arising from the
hearing held in May 1999, the potential impact of the ruling on SEEBOARD has
increased. The amount of the payments cancelled by SEEBOARD in recognition of
these surpluses amounts to approximately $78 million, excluding any accrued
interest.

The U.K. Court of Appeal did not order the National Grid or National Power
PLC to make payment into the ESPS, and the court indicated that any requirement
to make such payments would be harsh since the relevant sections of the ESPS
already have a surplus. In the event the court decides a payment by SEEBOARD
into the ESPS is necessary, such a payment is likely to create additional
pension fund surplus, which SEEBOARD would be able to utilize over the next
several years to reduce pension expense.

Management is unable currently to predict the amount of any payment that
it may be required to make to ESPS, but the payment should not have a material
adverse affect on CSW's results of operations or financial condition.

The foregoing discussion constitutes forward-looking information within
the meaning of Section 21E of the Exchange Act. Actual results may differ
materially from such projected information. See FORWARD - LOOKING INFORMATION.

RATES AND REGULATORY MATTERS

U.S. ELECTRIC

CPL Rate Review - Docket No 14965
In November 1995, CPL filed with the Texas Commission a request to
increase its retail base rates by $71 million. On October 16, 1997, the Texas
Commission issued the CPL 1997 Final Order which lowered the annual retail base
rates of CPL by approximately $19 million, or 2.5%, from CPL's rate level
existing prior to May 1996. The Texas Commission also included a "glide path"
rate methodology in the CPL 1997 Final Order pursuant to which CPL's annual

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rates were reduced by $13 million beginning May 1, 1998 with an additional
reduction of $13 million on May 1, 1999.

CPL filed an appeal of the CPL 1997 Final Order to the State District
Court of Travis County to raise several issues related to the rate case. The
primary issues include: (i) the classification of $800 million of invested
capital in STP as ECOM which was also assigned a lower return on equity than
non-ECOM property; (ii) the Texas Commission's use of the "glide path" rate
reduction methodology applied on May 1, 1998 and May 1, 1999; and (iii) the $18
million of disallowed affiliate expenses from CSW Services. As part of the
appeal, CPL sought a temporary injunction to prohibit the Texas Commission from
implementing the "glide path" rate reduction methodology. The court denied the
temporary injunction and the "glide path" rate reduction was implemented in May
1998 and May 1999. Hearings on the appeal were held during the third quarter of
1998, and a judgment was issued in February 1999 affirming the Texas Commission
order, except for a consolidated tax issue in the amount of $6 million, which
was remanded to the Texas Commission. CPL filed an appeal of this most recent
order to the Third District of Texas Court of Appeals and management is unable
to predict how the final resolution of these issues will ultimately affect CSW's
and CPL's results of operations and financial condition.

On May 4, 1999, AEP and CSW announced that they had reached a stipulated
agreement with the General Counsel of the Texas Commission and other intervenors
in the state of Texas related to the AEP/CSW merger case. The Texas Commission
approved the AEP Merger in early November 1999. If the AEP Merger is ultimately
consummated, CSW will withdraw its appeal with respect to the "glide path" rate
reduction methodology as discussed above as issue "(ii)" but will continue
seeking the appeal of issues "(i) and (iii)" as discussed above. See ITEM 8.
NOTE 15. PROPOSED AEP MERGER for a discussion of the stipulated agreement.

See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for information
on the CPL 1997 Final Order.

SWEPCO Louisiana Rate Review
In December 1997, the Louisiana Commission announced it would review
SWEPCO's rates and service. In October 1999, SWEPCO and the staff of the
Louisiana Commission reached an Agreement and Stipulation, which was filed on
October 14, 1999. The significant provisions of the Agreement and Stipulation
are as follows:

- - SWEPCO's Louisiana retail jurisdictional revenues were reduced by $11
million, effective with the December 1999 billing cycle;

- - SWEPCO is allowed to earn an 11.1% return on common equity;

- - SWEPCO is allowed to recover certain regulatory assets totaling $7.1
million;

- - SWEPCO will be subject to a two-year base rate freeze, which includes
force majeure provisions; and

- - SWEPCO will be allowed to increase depreciation rates for transmission,
distribution and generation plant.

The Louisiana Commission approved the Agreement and Stipulation in
November 1999 which was implemented in December 1999.

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SWEPCO Arkansas Rate Review
In July 1998, the Arkansas Commission began a review of SWEPCO's earnings.
On July 30, 1999, SWEPCO entered into a settlement agreement with the general
staff of the Arkansas Commission and the Arkansas Attorney General's Office. The
settlement agreement reduces SWEPCO's Arkansas annual revenues by $5.4 million
or 3%. Additionally, the stipulation and settlement agreement provides for a
10.75% return on common equity, an increase in depreciation rates, and an
agreement by SWEPCO not to seek recovery of generation-related stranded costs.

On September 23, 1999, the Arkansas Commission issued an order approving
the stipulation and settlement agreement. On October 25, 1999, SWEPCO filed
compliance rate tariffs with the Arkansas Commission, which are consistent with
the Arkansas Commission order. The provisions of the settlement agreement were
implemented in December 1999.

Other
Reference is made to ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS
for information regarding fuel proceedings at CPL, SWEPCO and WTU.

U.K. ELECTRIC

SEEBOARD Recent Regulatory Actions
Following the commencement of the phased-in opening of the United Kingdom
domestic and small business electricity market to competition, since September
1998, many customers are now able to choose their electricity supplier. SEEBOARD
competes for customers in its own area as well as throughout the rest of the
United Kingdom. The DGEGS has allowed a significant portion of the system
development costs associated with the introduction of competition to be
recovered by the regional electricity companies through a charge to all
customers over the next five years. The DGEGS has also announced price
restraints which set a maximum amount that existing electricity supply companies
can charge their domestic and small business customers, taking into account its
view of future electricity purchase costs. For SEEBOARD, these price restraints
reduced prices in real terms by 6% for the regulatory year ending March 31,
1999, and a further 3% for the following regulatory year ending March 31, 2000.

Regulatory Price Proposal for SEEBOARD
On December 2, 1999, OFGEM published its final price proposals from its
United Kingdom electricity distribution review. OFGEM has proposed revenue
reductions in SEEBOARD's distribution business of 21%. In addition, OFGEM has
proposed the reallocation of a further 12% of costs out of SEEBOARD's
distribution business into its supply business. These proposals were accepted on
December 20, 1999, and will take effect on April 1, 2000, and remain in effect
for five years. OFGEM's proposals will reduce net income for SEEBOARD in the
year 2000 by approximately $40 million, dependent upon the level of further cost
reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A., its United Kingdom business segment, was $113
million for the twelve months ended December 31, 1999.

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two years from April 1, 2000. Overall, these proposals are expected to have a
broadly neutral effect on the results of SEEBOARD U.S.A.

In the fourth quarter of 1999, a rating agency downgraded SEEBOARD's
credit rating to BBB+ due to recent U.K. regulatory action.

OTHER INITIATIVES

As described in OVERVIEW, a vital part of CSW's future strategy involves
initiatives that are outside of the traditional United States electric utility
industry due to increasing competition and fundamental changes in this industry.
In addition, lower anticipated growth rates in CSW's core United States electric
utility business combined with the previously mentioned industry factors have
resulted in CSW pursuing other initiatives. These initiatives have taken a
variety of forms; however, they are all consistent with the overall plan for CSW
to develop a global energy business. CSW has restrictions on the amounts it may
invest under the AEP merger agreement. While CSW believes that such initiatives
are necessary to maintain its competitiveness and to supplement its growth in
the future, the Holding Company Act may impede or delay its ability to
successfully pursue such initiatives. (The foregoing statement constitutes a
forward-looking statement within the meaning of Section 21E of the Exchange Act.
Actual results may differ materially from such projected information due to
changes in the underlying assumptions. See FORWARD-LOOKING INFORMATION). See
OVERVIEW and RECENT DEVELOPMENTS AND TRENDS.

DIVERSIFIED ELECTRIC

CSW Energy began construction in August 1998 of a 500 MW power plant,
known as Frontera, in the Rio Grande Valley, near the city of Mission, Texas.
The natural gas-fired facility began simple cycle operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in early 2000.
Pursuant to AEP's and CSW's stipulated agreement with several intervenors in the
state of Texas related to the AEP Merger, CSW Energy may sell 250 MW of Frontera
upon completion of the merger. See ITEM 7. - MD&A, PROPOSED AEP MERGER and ITEM
8. NOTE 15. PROPOSED AEP MERGER for additional information.

CSW Energy also has entered into an agreement with Eastman Chemical
Company to construct and operate a 440 MW cogeneration facility in Longview,
Texas. This facility will be known as the Eastex Cogeneration Project.
Construction of the facility began in the fourth quarter of 1999, with expected
operation in early 2001. Excess electricity generated by the plant will be sold
by CSW Energy in the wholesale electricity market.

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In October 1999, GE Capital Structured Finance Group purchased 50% of the
equity ownership of Sweeny Cogeneration Limited Partnership. CSW Energy's
after-tax earnings from the proceeds of the transaction were approximately $33
million and were recorded in the fourth quarter of 1999. The agreement between
CSW Energy and GE Capital Structured Finance Group also provides for additional
payments to CSW Energy, subject to completion of a planned expansion of the
Sweeny cogeneration facility, which may be operational in the fourth quarter of
2000.

The preceding discussion contains forward-looking information within the
meaning of Section 21E of the Exchange Act. Actual results may differ materially
from such projected information due to changes in the underlying assumptions.
See FORWARD-LOOKING INFORMATION.

CSW International
CSW International was organized to pursue investment opportunities in EWGs
and FUCOs and currently holds investments in the United Kingdom, Mexico and
South America.

CSW International and its 50% partner, Scottish Power plc have entered
into a joint venture to construct and operate the South Coast power project, a
400 MW combined cycle gas turbine power station in Shoreham, United Kingdom. CSW
International has guaranteed approximately (pound)19 million of the (pound)190
million construction financing. Both the guarantee and the construction
financing are denominated in pounds sterling. The U.S. dollar equivalent at
December 31, 1999 would be $31 million and $308 million respectively, using a
conversion rate of (pound)1.00 equals $1.62. The permanent financing is
unconditionally guaranteed by the project. Construction of the project began in
March 1999, and commercial operation is expected to begin in late 2000.

Through November 1999, CSW International had purchased a 36% equity
interest in Vale for $80 million. CSW International also extended $100 million
of debt convertible into equity in Vale in 1998. In December 1999, CSW
International converted $69 million of that $100 million into equity, thereby
raising its equity interest in Vale to 44%. CSW International anticipates
converting the remaining debt into equity over the next two years.

In January 1999, amid market instability, the Brazilian government
abandoned its policy of pegging the Brazilian Real in a range against the U.S.
dollar. This action resulted in a 49% devaluation of the Brazilian currency by
the end of December 1999. Vale is unfavorably affected by the devaluation due
primarily to the revaluation of foreign denominated debt.

CSW International has a put option, which, if exercised, requires Vale to
purchase CSW International shares at a minimum price equal to the U.S. dollar
equivalent of the purchase price for Vale. As a result of the put option
arrangement, CSW International's investment carrying amount will not be reduced
below the put option value unless there is deemed to be a permanent impairment.
Pursuant to this arrangement, CSW International will not recognize its
proportionate share of any future earnings until its proportionate share of any
losses of Vale is recognized. At December 31, 1999, CSW International had
deferred losses, after tax, of approximately $21 million related to its Vale
investment. CSW International views its investment in Vale as a long-term
investment, which has significant long-term value. Management will continue to
closely evaluate the changes in the Brazilian economy and its impact on CSW
International's investment in Vale.

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the carrying value of this investment has been reflected in Other Comprehensive
Income in CSW's Consolidated Statements of Stockholders' Equity. Management
views its investment in Chile as a long-term investment strategy and believes
this investment continues to have significant long-term value and that it is
recoverable. Management will continue to closely evaluate the changes in the
South American economy and its impact on CSW International's investment in the
Chilean electric company.

In addition to these projects, CSW Energy and CSW International have other
projects in various stages of development. CSW, CSW Energy and CSW International
have provided letters of credit and guarantees on behalf of CSW Energy and CSW
International projects of approximately $62 million, $41 million and $233
million, respectively, as of December 31, 1999.

ENERGY SERVICES

In 1999, C3 Utility Automation launched a new energy information service,
PurView(TM). In addition, EnerACT(TM) advisory services was transferred from
EnerShop to better align products and marketing. PurView(TM) is a service for
collecting meter data and interactively viewing, manipulating and analyzing
consumption information over the Internet. EnerACT(TM) is an energy information
and advisory service for multi-site building owners and managers.

C3 Communications believes that electric utility industry restructuring
will continue to fuel interest in its energy information services. Evaluation of
partnerships and acquisitions will also be a key element of growth for C3
Communications in 2000. The foregoing statement constitutes a forward-looking
statement within the meaning of Section 21E of the Exchange Act. Actual results
may differ materially from such projected information due to changes in the
underlying assumptions. See FORWARD-LOOKING INFORMATION).

EnerShop continues to provide energy services to customers in Texas and
Louisiana that help reduce customers' operating costs through increased energy
efficiencies and improved equipment operations. EnerShop utilizes the skills of
local trade allies in offering services that include energy and facility

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analysis, project management, engineering design, equipment procurement and
construction and performance monitoring.

In late 1997, CSW Energy Services was launched to explore the electric
utility industry's emerging retail supply markets as they were deregulated on a
state-by-state basis. In January 1999, CSW Energy Services announced that it was
ceasing its business as a retail electric supplier and that it would assign its
existing electricity supply contracts to other suppliers or terminate them. In
the fourth quarter of 1999, the CSW Business Ventures group's investment in an
energy-related company that provides staffing services for nuclear power plants
was transferred from PSO to CSW Energy Services.

SOUTH TEXAS PROJECT

CPL owns 25.2% of STP, a two-unit nuclear power plant that is located near
Bay City, Texas. Reliant Energy Resources Corporation owns 30.8%, the City of
San Antonio owns 28.0%, and the City of Austin owns 16.0% of STP. STP Unit 1 was
placed in service in August 1988, and STP Unit 2 was placed in service in June
1989. In November 1997, STPNOC assumed the duties of STP operator. Each of the
four STP co-owners are represented on the STPNOC board of directors.

STP Unit 1 and Unit 2 were removed temporarily from service during 1999
for scheduled refueling and ten-year inspection outages. During 1999, Units 1
and 2 operated at net capacity factors of 88.0% and 89.4%, respectively.

For additional information regarding STP and the accounting for the
decommissioning of STP, see ITEM 8. NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES and ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS.

ENVIRONMENTAL MATTERS

The operations of the CSW System, like those of other utility systems,
generally involve the use and disposal of substances subject to environmental
laws. CERCLA, the federal "Superfund" law, addresses the cleanup of sites
contaminated by hazardous substances. Superfund requires that PRPs fund remedial
actions regardless of fault or the legality of past disposal activities. PRPs
include owners and operators of contaminated sites and transporters and/or
generators of hazardous substances. Many states have similar laws. Legally, any
one PRP can be held responsible for the entire cost of a cleanup. Usually,
however, cleanup costs are allocated among PRPs.

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contributed by the U.S. Electric Operating Company, the estimated amount of
costs allocated to the U.S. Electric Operating Company and the participation of
other parties. (The foregoing statements constitute forward-looking statements
within the meaning of Section 21E of the Exchange Act. Actual results may differ
materially from such projected information due to changes in the underlying
assumptions. See FORWARD-LOOKING INFORMATION). See ITEM 8. NOTE 2. LITIGATION
AND REGULATORY PROCEEDINGS and ITEM 8. NOTE 3. COMMITMENTS AND CONTINGENT
LIABILITIES for additional discussion regarding environmental matters.

At the Kyoto, Japan Conference on Global Warming held in December 1997,
U.S. representatives agreed to a treaty which could require new limitations on
"greenhouse gases" from power plants. CSW and the U.S. Electric Operating
Companies could be affected if this treaty, in its present form, is approved by
the United States Congress. The impact, if any, on CSW or the U.S. Electric
Operating Companies cannot be determined because most of the greenhouse gas
emission reduction would come from coal generation that would have to be
switched to natural gas or retired. During 1999, 50% of the U.S. Electric
Operating Companies' MWH generation of which, at December 31, 1999, 33% of its
installed generating capacity was coal and lignite.

RISK MANAGEMENT

In 1997, CSW's board of directors adopted a risk management resolution
authorizing CSW to engage in currency, interest rate and energy spot and forward
transactions and related derivative transactions on behalf of CSW with foreign
and domestic parties as deemed appropriate by executive officers of CSW. The
risk management program is necessary to meet the growing demands of CSW's
customers for competitive prices and price stability, to enable CSW to compete
in a deregulated power industry, to manage the risks associated with domestic
and foreign investments and to take advantage of strategic investment
opportunities.

The U.S. Electric Operating Companies experience commodity price exposures
related to the purchase of fuel supplies for the generation of electricity and
for the purchase of power and energy from other generation sources. Contracts
that provide for the future delivery of these commodities can be considered
forward contracts which contain pricing and/or volume terms designed to
stabilize the cost of the commodity. Consequently, the U.S. Electric Operating
Companies manage their price exposure for the benefit of customers by balancing
their commodity purchases through a combination of long-term and short-term or
spot market agreements.

In response to the development of a more competitive electric energy
market, CSW has received regulatory approval, which authorizes the U.S. Electric
Operating Companies to conduct a pilot program offering power sales agreements
at tariffed rates with a fixed fuel cost. To offset the commodity price risk
associated with these contracts, CSW has purchased natural gas swaps and futures
contracts. These arrangements cover estimated natural gas deliveries beginning
in January 2000 and continuing for the remainder of 2000. Natural gas volumes
purchased to serve these contracts, for which CSW has secured swap or futures
contracts, represents approximately 1% of annual natural gas purchases.

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Based on year-end contractual commitments, CSW's natural gas futures and
swap contracts and electricity forward contracts that are sensitive to changes
in commodity prices include fair value of assets of $157,260 and fair value of
liabilities of $396,440. These swap and future contracts hedge their related
commodity price exposure for 2000. Cash outflows on the swap agreements should
be offset by increased margins on electricity sales to customers under tariffed
rates with fixed fuel costs. The electricity forward contracts hedge a portion
of CSW's energy requirements through February 2000. The average contract price
for forward purchases is $30 per MWH and $2.32 per MMbtu. The average price for
natural gas futures contracts is $2.47 per MMbtu and $2.37 per MMbtu for swaps.

SEEBOARD has entered into contracts for differences to reduce exposure to
fluctuations in the price of electricity purchased from the United Kingdom's
electricity power pool. This pool was established at privatization of the United
Kingdom's electric industry for the bulk trading of electricity between
generators and suppliers. At December 31, 1999, the gross value of such
contracts for differences was approximately 83% of the expected power purchases
for 2000.

CSW has, at times, been exposed to currency and interest rate risks which
reflect the floating exchange rate that exists between the U.S. dollar and the
British pound. CSW has utilized certain risk management tools to manage adverse
changes in exchange rates and to facilitate financing transactions resulting
from CSW's acquisition of SEEBOARD. At December 31, 1999, CSW had positions in
two cross currency swap contracts. The following table presents information
relating to these contracts. The fair value of cross currency swaps reflect
third party valuations calculated using proprietary pricing models. Based on
these valuations, CSW's position in these cross currency swaps represented an
unrealized loss of $41.8 million at December 31, 1999. This unrealized loss is
offset by unrealized gains related to the underlying transactions being hedged.
CSW expects to hold these contracts to maturity. At current exchange rates, this
liability is included in long-term debt on CSW's consolidated balance sheet at a
carrying value of approximately $418 million.

Expected Expected Cash
Cash Inflows Outflows
Contract Maturity Date (Maturity Value) (Market Value)
- --------------------------------------------------------------------------------
(millions)
Cross currency swaps August 1, 2001 $200 $213
Cross currency swaps August 1, 2006 $200 $229

For information related to currency risk in South America see OTHER
INITIATIVES, DIVERSIFIED ELECTRIC, CSW International and ITEM 8. NOTE 18.
SOUTH AMERICAN INVESTMENTS. For information on commodity contracts see ITEM
8. NOTE 7. FINANCIAL INSTRUMENTS.

OTHER MATTERS

Year 2000
On a system-wide basis, CSW initiated and implemented a year 2000 project
to prepare internal computer systems and applications for the year 2000. These
systems and applications include management information systems that support
business operations such as customer billing, payroll, inventory and
maintenance. Other systems with computer-based controls such as
telecommunications, elevators, building environmental management, metering,
plant, transmission, distribution and substations were included in this project
as well.

2-33
<PAGE>

Cost to Address Year 2000 Issues
As of December 31, 1999, cost incurred for the year 2000 project amounted
to approximately $33 million, including $21 million in 1999. Remaining
activities are expected to cost an additional $3 million in the first quarter of
2000.

In the first quarter of 1999, a software version upgrade to provide
contract management features to the materials management information system was
deferred until 2000 in order to minimize risk. The financial impact of this
deferral was minimal, as minor enhancements to the current design provided an
alternative, interim solution for the needed functionality. The deferred system
upgrade is now scheduled for implementation in the May to November 2000 time
frame. No other planned CSW computer information system projects were affected
by the year 2000 project, even though a moratorium was implemented during the
month of December 1999 to further minimize risk. Accordingly, no estimate was
made for the financial impact of any future projects foregone due to resources
allocated to the year 2000 project.

Contingency Plans
Contingency plans have been in place in CSW's domestic electric operation
for years to address problems resulting from weather. These plans were updated
to include year 2000 issues. Contingency planning is engineered into the
transmission and distribution systems as it is designed with the capability to
bypass failed equipment. A margin of power generation reserve above what is
needed is normally maintained. This reserve is a customary operating contingency
plan that allows CSW to operate normally even when a power plant unexpectedly
quits operating. Backup supplies of fuels are normally maintained at CSW power
plants. Natural gas plants have fuel oil as a backup and multiple pipelines
provide redundant supplies. At coal plants about 40 to 45 days of extra coal is
kept on hand.

SEEBOARD also has well established contingency plans to address problems
resulting from weather. These plans are covered effectively within the
distribution and customer service business areas and were updated to include
year 2000 scenarios.

Transition Results to Date
The results of the readiness activities described in the foregoing have
all been positive. The CSW System completed the year 2000 transition without any
year 2000 related electric system problems. The business support systems in each
of CSW and its subsidiaries also made the transition from 1999 to 2000 without
any year 2000 related impact on the operations they support or the customers
they serve. CSW continues to closely monitor its electric and business support
systems.

Portions of the preceding discussion contain forward-looking information
within the meaning of Section 21E of the Exchange Act. Actual results may differ
materially from such projected information due to changes in the underlying
assumptions. See FORWARD-LOOKING INFORMATION.

NEW ACCOUNTING STANDARDS

2-34
<PAGE>

earnings unless specific hedge accounting criteria are met. CSW has established
a project team to implement SFAS No. 133. CSW has not yet quantified the effects
of adopting SFAS No. 133 on its financial statements, although application of
SFAS No. 133 could increase volatility in earnings and other comprehensive
income. See NOTE 17. NEW ACCOUNTING STANDARDS.

2-35

<PAGE>

CENTRAL AND SOUTH WEST CORPORATION
RESULTS OF OPERATIONS

Reference is made to CSW's Consolidated Financial Statements, Notes to
Consolidated Financial Statements and Selected Financial Data. Referenced
information should be read in conjunction with, and is essential to
understanding, the following discussion and analysis. CSW's results fluctuate,
in part, with the weather. Also, other than certain one-time items, as discussed
throughout the results of operations, CSW's income statement line items as a
percentage of total revenues remain fairly consistent, due primarily to the
regulatory environment in which CSW operates. The preceding discussion contains
forward-looking information within the meaning of Section 21E of the Exchange
Act. Actual results may differ materially from such projected information due to
changes in the underlying assumptions. See FORWARD-LOOKING INFORMATION.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND 1998

CSW's earnings increased to $455 million in 1999 from $440 million in
1998. CSW's return on average common stock equity was 12.8% in 1999 compared to
12.4% in 1998. The primary reason for the higher earnings and higher return on
average common stock equity was the previously planned sale of 50% of CSW's 100%
equity ownership interest in a cogeneration partnership. CSW's after-tax
earnings recorded in the fourth quarter of 1999 from the proceeds of the
transaction were $33 million. Earnings also increased due to the absence in 1999
of a charge for accelerated capital recovery of STP and the absence of asset
write-offs at several of CSW's business segments recorded in 1998.

Partially offsetting the higher earnings was higher operations and
maintenance expense at SEEBOARD, CSW Energy and the U.S. Electric Operating
Companies. Also partially offsetting the higher earnings was a charge to
earnings at CPL, SWEPCO and WTU that was made to reflect the excess earnings
provision of the Texas Legislation enacted in 1999. Another factor partially
offsetting higher 1999 earnings was the extraordinary loss resulting from
legislation enacted in Texas and Arkansas under which the electricity generation
portion of CPL's, SWEPCO's and WTU's business in those states no longer meets
the criteria to apply SFAS No. 71. See ITEM 7. MD&A - Securitization of
Generation-related Regulatory Assets and Stranded Cost, ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation and NOTE 16. EXTRAORDINARY ITEMS for additional information.

Operating revenues increased $55 million in 1999 compared to 1998. The revenue
variances are shown in the following table.

1999 REVENUE VARIANCES
Increase (decrease) from prior year, millions

U.S. Electric
KWH Sales, Weather-Related $(64)
KWH Sales, Growth and Usage 65
Fuel Revenue 37
Sales for Resale 22
Other Electric (24)
------------
36
United Kingdom (64)
Other Diversified 83
------------
$55
------------

2-36
<PAGE>

U.S. Electric revenues increased $36 million, or 1% in 1999 compared to
1998. Retail U.S. Electric revenues increased due to higher customer usage and
growth and higher off-system sales. An increase in fuel revenues due to higher
fuel prices and purchased power expense, discussed below, also contributed to
the higher revenues. Milder weather in 1999 when compared to the previous year
partially offset the increase in revenues. MWH sales decreased 1.5% due
primarily to a decrease in sales to the residential customer class as a result
of the milder weather.

United Kingdom revenues decreased $64 million in 1999 compared to 1998 due
to lower sales volumes in the business market and the loss of domestic customers
following the opening of the electricity market to competition. Also
contributing to the decrease in U.K. electric revenues were the absence in
revenues in 1999 from SEEBOARD's retail business, which was sold in June 1998,
and unfavorable British pound to U.S. dollar exchange rate movements. Other
diversified revenues increased $83 million in 1999 compared to 1998 due
primarily to increased business activity at CSW Energy.

During 1999 and 1998, the U.S. Electric Operating Companies generated 86%
and 92% of their electric energy requirements, respectively. U.S. Electric fuel
expense decreased $14 million in 1999 compared to 1998 due primarily to a $41
million decrease in the recovery of deferred fuel costs that resulted from a
significant difference in fuel factors used to recover fuel expense from
customers at PSO. The decrease in fuel expense was offset in part by an increase
in fuel prices to $1.78 per MMbtu in 1999 from $1.67 per MMbtu in 1998. U.S.
Electric purchased power expense increased $46 million, or 41% due primarily to
an increase in economy energy purchases.

United Kingdom cost of sales decreased $71 million in 1999 compared to
1998 due primarily to a lower level of sales of electricity and the absence in
1999 of cost of sales for SEEBOARD's retail business and a lower British pound
to U.S. dollar exchange rate compared to 1998.

Other operating expense increased $27 million in 1999 compared to 1998 due
in part to increased expenses at SEEBOARD. Expenses increased at SEEBOARD as a
result of additional operating costs from SEEBOARD's Powerlink joint venture to
operate and maintain the electricity assets for the London Underground Rail
System as well as increased expenses associated with operating in the
competitive electricity market in the United Kingdom. CSW Energy's operating
expenses also increased as a result of increased business activity at several of
its plants. Operating expenses increased at the U.S. Electric Operating
Companies due primarily to a settlement with a transmission service provider and
increased power plant operating costs. Maintenance expense increased $31 million
due primarily to increased expenses associated with the 10-year inspection of
STP Unit 1 and 2, higher scheduled maintenance at other CSW System power plants
and higher tree trimming expenses.

Depreciation and amortization expense increased $31 million in 1999 due
primarily to accelerated capital cost recovery under the excess earnings
provisions of the Texas Legislation, as well as increases in depreciable
property.

Other income and deductions increased to $59 million in 1999 from $42
million in 1998 due primarily to gains from the sale of investments at SEEBOARD
and interest income recognized by CSW Energy related to the Sweeny power plant.
The gain was offset, in part, by the absence in 1999 of the gain from the sale
of investments by C3 Communications in 1998. Long-term interest expense
decreased $11 million in 1999 due primarily to the maturity and reacquisition of
long-term debt.

The extraordinary losses resulted from legislation enacted in Arkansas and
Texas under which the electricity generation portion of CPL's, SWEPCO's and
WTU's business in those states no longer meet the criteria to apply SFAS No. 71.

2-37
<PAGE>

These legislative changes resulted in an extraordinary loss at SWEPCO and WTU,
which had a cumulative effect of decreasing net income by $8.0 million. These
legislative changes also resulted in an extraordinary loss at CPL of $6.0
million associated with a loss on reacquired debt and the discontinuance of SFAS
No. 71.See ITEM 7. MD&A - Securitization of Generation-related Regulatory Assets
and Stranded Costs.and ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS -
Electric Utility Restructuring Legislation, and NOTE 16. EXTRAORDINARY ITEMS for
additional information.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997

CSW's earnings increased to $440 million in 1998 from $153 million in
1997. CSW's return on average common stock equity was 12.4% in 1998 compared to
4.2% in 1997. The primary reason for the higher earnings and higher return on
average common stock equity was the absence in 1998 of the accrual of $176
million for the one-time United Kingdom windfall profits tax. Hotter than normal
summer weather and increased customer growth and usage at the U.S. Electric
Operating Companies were also factors in the increase in earnings over 1997.
Additionally, the sale of a telecommunications partnership interest in 1998 and
a decrease in the United Kingdom corporate tax rate contributed to the earnings
increase. The absence of the impact of CSW's final settlement of litigation with
El Paso in 1997 contributed to the increase in earnings in 1998 as well. Also
contributing to the increase in earnings was the absence in 1998 of the effect
of both the PSO 1997 Rate Settlement Agreement and the CPL 1997 Final Order. See
ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information
on the CPL 1997 Final Order and the PSO 1997 Rate Settlement Agreement. See ITEM
8. NOTE 16. EXTRAORDINARY ITEMS for additional information on the windfall
profits tax. Partially offsetting the higher earnings was a charge for
accelerated capital recovery of STP and asset write-offs at several of CSW's
business segments.

Operating revenues increased $214 million in 1998 compared to 1997. The revenue
variances are shown in the following table.

1998 REVENUE VARIANCES
Increase (decrease) from prior year, millions

U.S. Electric
KWH Sales, Weather-Related $72
KWH Sales, Growth and Usage 53
Fuel Revenue 31
Sales for Resale 6
Other Electric 5
-----------
167
United Kingdom (101)
Other Diversified 148
-----------
$214
-----------

U.S. Electric revenues increased $167 million, or 5%, in 1998 compared to
1997. Retail MWH sales increased 6% with increases in all customer classes. U.S.
Electric revenues increased due primarily to higher MWH sales resulting from
hotter than normal summer weather and increased customer usage and growth. An
increase in fuel revenues due to an increase in fuel expense, discussed below,
also contributed to the higher revenues. United Kingdom revenues decreased $101
million, or 5%, in 1998 compared to 1997 due to the loss of revenues associated
with the sale of its retail stores in the second quarter of 1998 and the effect
of price control on the supply business. Other diversified revenues increased
$148 million in 1998 compared to 1997 due primarily to increased revenues from
CSW Energy, CSW Credit and EnerShop.

2-38
<PAGE>

During 1998 and 1997 the U.S. Electric Operating Companies generated 92%
and 93% of their electric energy requirements, respectively. U.S. Electric fuel
expense increased $13 million in 1998 compared to 1997 due primarily to
increased generation offset in part by a decrease in fuel prices to $1.67 per
MMbtu in 1998 from $1.83 per MMbtu in 1997. United Kingdom cost of sales
decreased $87 million in 1998 compared to 1997 due primarily to lower cost of
sales associated with the sale of SEEBOARD's retail stores and a decrease in the
cost of purchased power reflecting lower business volumes.

Other operating expense increased $48 million in 1998 compared to 1997 due
in part to a CSW Energy power plant that went into service in February 1998. The
increase in other operating expense was offset in part by the absence in 1998 of
the settlement of litigation with El Paso which increased other operating
expense $35 million in 1997. Further offsetting the increase in other operating
expense in 1998 was the absence of the $12 million impact of the CPL 1997 Final
Order and the $4 million impact of the PSO 1997 Rate Settlement Agreement. See
ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information
on the CPL 1997 Final Order and the PSO 1997 Rate Settlement Agreement. Also
partially offsetting the increase in other operating expense was reduced pension
expense in 1997 resulting from changes made to the pension plan for CSW's
domestic employees. See ITEM 8. NOTE 5. BENEFIT PLANS for additional information
related to the changes in the pension plan.

Depreciation and amortization expense increased $24 million, or 5% in 1998
due primarily to accelerated recovery of ECOM property recorded in 1998 related
to the CPL 1997 Final Order, a charge for accelerated capital recovery of STP,
as well as increases in depreciable property. Income tax expense increased $52
million due primarily to higher pre-tax income.

Other income and deductions increased to $42 million in 1998 from $32
million in 1997 due primarily to the sale of a telecommunications partnership
interest. Long-term interest expense decreased $22 million in 1998 due primarily
to the prepayment of a $60 million variable rate bank loan due December 1, 2001;
the maturity of $200 million of CPL FMBs on October 1, 1997 and $28 million of
CPL FMBs on January 1, 1998; and the redemption of $91 million of FMBs of
certain of the U.S. Electric Operating Companies on September 1, 1998. See ITEM
8. NOTE 8. LONG-TERM DEBT for additional information on the redemption of these
securities. Short-term debt was used to prepay the variable rate bank loan in
two $30 million installments on January 28, 1998 and April 27, 1998. Short-term
borrowings and internal cash generation were used to fund the maturities and
redemption of the previously mentioned FMBs. Short-term and other interest
expense increased $35 million in 1998 when compared to 1997 due primarily to
higher levels of short-term borrowings. Distributions on Trust Preferred
Securities increased interest and other charges by $10 million in 1998. The
Trust Preferred Securities were outstanding for all of 1998, while they were
outstanding for only part of 1997. See ITEM 8. NOTE 10. TRUST PREFERRED
SECURITIES for additional information on these securities.

2-39

<PAGE>

Consolidated Statements of Income
Central and South West Corporation
- --------------------------------------------------------------------------------
For the Years Ended December 31,
---------------------------------
1999 1998 1997
-------- ------- --------
($ in millions, except share amounts)
Operating Revenues
U.S. Electric $ 3,524 $ 3,488 $ 3,321
United Kingdom 1,705 1,769 1,870
Other diversified 308 225 77
-------- ------- --------
5,537 5,482 5,268
-------- ------- --------
Operating Expenses and Taxes
U.S. Electric fuel 1,176 1,190 1,177
U.S. Electric purchased power 157 111 89
United Kingdom cost of sales 1,133 1,204 1,291
Other operating 1,056 1,029 981
Maintenance 200 169 152
Depreciation and amortization 552 521 497
Taxes, other than income 193 189 195
Income taxes 204 203 151
-------- ------- --------
4,671 4,616 4,533
-------- ------- --------
Operating Income 866 866 735
-------- ------- --------

Other Income and Deductions
Other 78 60 26
Non-operating income taxes (19) (18) 6
-------- ------- --------
59 42 32
-------- ------- --------
Income Before Interest and Other Charges 925 908 767
-------- ------- --------

Interest and Other Charges
Interest on long-term debt 300 311 333
Distributions on Trust Preferred Securities 27 27 17
Interest on short-term debt and other 119 121 86
Preferred dividend requirements of subsidiaries 7 8 12
Gain (Loss) on reacquired preferred stock 3 1 (10)
-------- ------- --------
456 468 438
-------- ------- --------

Income before Extraordinary Items 469 440 329
-------- ------- --------

Extraordinary loss - Discontinuance of SFAS
No. 71(net of tax of $5) (8) -- --
Extraordinary loss - Loss on Reacquired Debt
(net of tax of $3) (6) -- --
Extraordinary loss - United Kingdom windfall
profits tax -- -- (176)
-------- ------- --------

Net Income for Common Stock $ 455 $ 440 $ 153
======== ======= ========

Average Common Shares Outstanding 212.6 212.4 212.1

Basic and Diluted EPS before Extraordinary Items $2.21 $2.07 $1.55
Basic and Diluted EPS from Extraordinary Items (0.07) -- (0.83)
-------- ------- --------
Basic and Diluted EPS $2.14 $2.07 $0.72
======== ======= ========

Dividends Paid per Share of Common Stock $1.74 $1.74 $1.74
======== ======= ========

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

2-40
<PAGE>

Consolidated Statements of Stockholders' Equity
Central and South West Corporation
(millions)
<TABLE>
<CAPTION>

Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income(Loss) Total
-------------------------------------------- -------
<S> <C> <C> <C> <C> <C>

Beginning Balance -- January 1, 1997 $740 $1,022 $1,967 $73 $3,802
Sale of common stock 3 17 -- -- 20
Common stock dividends -- -- (369) -- (369)
-------
3,453
Comprehensive Income:
Foreign currency translation adjustment
(net of tax of $23) -- -- -- (48) (48)
Unrealized loss on securities
(net of tax of $0.3) -- -- -- (1) (1)
Minimum pension liability (net of
tax of $0.3) -- -- -- (1) (1)
Net Income -- -- 153 -- 153
-------
Total comprehensive income 103
------------------------------------------ -------
Ending Balance -- December 31, 1997 $743 $1,039 $1,751 $23 $3,556
========================================== =======

Beginning Balance -- January 1, 1998 $743 $1,039 $1,751 $23 $3,556
Sale of common stock 1 10 -- -- 11
Common stock dividends -- -- (370) -- (370)
Other -- -- 2 -- 2
-------
3,199

Comprehensive Income:
Foreign currency translation
adjustment (net of tax of $2) -- -- -- 7 7
Unrealized loss on securities
(net of tax of $8) -- -- -- (14) (14)
Adjustment for gain included in net
income (net of tax $4) -- -- -- (7) (7)
Minimum pension liability (net of
tax of $0.6) -- -- -- (1) (1)
Net Income -- -- 440 -- 440
-------
Total comprehensive income 425

------------------------------------------ -------
Ending Balance -- December 31, 1998 $744 $1,049 $1,823 $8 $3,624
========================================== =======

Beginning Balance -- January 1, 1999 $744 $1,049 $1,823 $8 $3,624
Sale of common stock -- 1 -- -- 1
Common stock dividends -- -- (370) -- (370)
Other -- 1 (2) -- (1)
-------
3,254
Comprehensive Income:
Foreign currency translation
adjustment (net of tax of $15) -- -- -- (28) (28)
Minimum pension liability (net of
tax of $0.7) -- -- -- 2 2
Net Income -- -- 455 -- 455
-------
Total comprehensive income 429

------------------------------------------ -------
Ending Balance -- December 31, 1999 $744 $1,051 $1,906 ($18) $3,683
========================================== =======
</TABLE>

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

2-41
<PAGE>

Consolidated Balance Sheets
Central and South West Corporation
- ------------------------------------------------------------------------
As of December 31,
--------------------
1999 1998
--------- ---------
(millions)
ASSETS
Fixed Assets
Electric
Production $ 5,901 $ 5,887
Transmission 1,663 1,594
Distribution 4,896 4,681
General 1,437 1,380
Construction work in progress 205 166
Nuclear fuel 227 207
------- -------
14,329 13,915
Other diversified 353 333
------- -------
14,682 14,248
Less - Accumulated depreciation and amortization 6,008 5,652
------- -------
8,674 8,596
------- -------
Current Assets
Cash and temporary cash investments 270 157
Special deposits for reacquisition of long-term debt 50 --
Accounts receivable 1,140 1,110
Materials and supplies, at average cost 149 191
Electric utility fuel inventory 129 90
Under-recovered fuel costs 52 4
Notes receivable 53 109
Prepayments and other 84 90
------- -------
1,927 1,751
------- -------
Deferred Charges and Other Assets
Regulatory assets 219 1,113
Regulatory assets designated for securitization 953 --
Other non-utility investments 454 432
Securities available for sale 62 66
Benefit costs 202 185
Goodwill 1,330 1,402
Other 341 352
------- -------
3,561 3,550
------- -------
$14,162 $13,897
======= =======

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

2-42
<PAGE>

Consolidated Balance Sheets
Central and South West Corporation
- ---------------------------------------------------------------------------
As of December 31,
----------------------
1999 1998
-------- --------
CAPITALIZATION AND LIABILITIES (millions)
Capitalization
Common stock: $3.50 par value
Authorized shares: 350.0 million shares
Issued and outstanding: 212.6 million shares
in 1999 and 212.6 million shares in 1998 $ 744 $ 744
Paid-in capital 1,051 1,049
Retained earnings 1,906 1,823
Accumulated other comprehensive income (18) 8
-------- --------
3,683 47% 3,624 45%
------------- -------------

Preferred Stock 18 --% 176 2%
Certain Subsidiary-obligated, mandatorily redeemable
preferred securities of subsidiary trusts holding
solely Junior Subordinated Debentures of such
Subsidiaries 335 4% 335 4%
Long-term debt 3,821 49% 3,938 49%
------------- -------------
Total Capitalization 7,857 100% 8,073 100%
------------- -------------

Current Liabilities
Long-term debt due within twelve months 256 169
Short-term debt 1,346 811
Short-term debt - CSW Credit 754 749
Loan notes 24 32
Accounts payable 581 624
Accrued taxes 187 190
Accrued interest 64 84
Other 175 218
-------- --------
3,387 2,877
-------- --------
Deferred Credits
Accumulated deferred income taxes 2,431 2,410
Investment tax credits 254 267
Other 233 270
-------- --------
2,918 2,947
-------- --------
$14,162 $13,897
======== ========

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

2-43
<PAGE>

Consolidated Statements of Cash Flows
Central and South West Corporation
- --------------------------------------------------------------------------------
For the Years Ended December 31,
--------------------------------
1999 1998 1997
-------- ------ -------
(millions)
OPERATING ACTIVITIES
Net income for common stock $ 455 $ 440 $ 153
Non-cash Items and Adjustments
Depreciation and amortization 580 552 529
Deferred income taxes and investment
tax credit 24 (56) 110
Preferred stock dividends 7 8 12
Gain on reacquired preferred stock 3 1 (10)
Charges for investments and assets -- 39 53
Extraordinary loss - Discontinuance of
SFAS No. 71 8 -- --
Extraordinary loss - Loss on Reacquired
Debt 6 -- --
Gain on sale of investments (35) (13) --
Changes in Assets and Liabilities
Accounts receivable (49) (187) (140)
Accounts payable (19) 69 59
Accrued taxes -- 20 (153)
Fuel recovery (75) 109 (37)
Fuel inventory (38) (25) 37
Other (64) (15) 113
----- ----- -----
803 942 726
----- ----- -----
INVESTING ACTIVITIES
Construction expenditures (639) (492) (507)
Disposition of plant (1) (5) 6
CSW Energy/CSW International projects (182) (184) (382)
Cash proceeds from sale of investments 80 56 --
Other (16) (10) (21)
----- ----- -----
(758) (635) (904)
----- ----- -----
FINANCING ACTIVITIES
Common stock sold 1 11 20
Proceeds from issuance of long-term debt 500 154 --
Reacquisition/Maturity of long-term debt (342) (182) (253)
Redemption of preferred stock (160) (28) (114)
Trust Preferred Securites sold -- -- 323
Special deposits for reacquisitions of
long-term debt (50) -- --
Other financing activities (41) (4) (3)
Change in short-term debt 541 202 414
Payment of dividends (378) (378) (383)
----- ----- -----
71 (225) 4
----- ----- -----

Effect of exchange rate changes on cash and cash
equivalents (3) -- (5)
----- ----- -----

Net Change in Cash and Cash Equivalents 113 82 (179)
Cash and Cash Equivalents at Beginning of Year 157 75 254
----- ----- -----
Cash and Cash Equivalents at End of Year $ 270 $ 157 $ 75
===== ===== =====

SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 466 $ 446 $ 413
===== ===== =====
Income taxes paid $ 175 $ 258 $ 412
===== ===== =====

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

2-44
<PAGE>

CENTRAL AND SOUTH WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations
CSW is a registered holding company under the Holding Company Act subject
to regulation by the SEC. The U.S. Electric Operating Companies are also
regulated by the SEC under the Holding Company Act.

The principal business of the U.S. Electric Operating Companies is the
generation, transmission, and distribution of electric power and energy. These
companies are subject to regulation by the FERC under the Federal Power Act and
follow the Uniform System of Accounts prescribed by the FERC. They are subject
to further regulation with regard to rates and other matters by state regulatory
commissions as follows: CPL and WTU are subject to the Texas Commission; PSO is
subject to the Oklahoma Commission; and SWEPCO is subject to the Arkansas,
Louisiana, Oklahoma and Texas Commissions.

The principal business of SEEBOARD is the distribution and supply of
electricity and gas in South East England. SEEBOARD is subject to rate
regulation by the DGEGS.

In addition to electric utility operations, CSW has subsidiaries involved
in a variety of business activities. CSW Energy and CSW International pursue
cogeneration and other energy-related ventures. CSW Credit factors the accounts
receivable of affiliated and non-affiliated companies. C3 Communications pursues
telecommunications projects. CSW Leasing has investments in leveraged leases.
EnerShop offers energy-management services. CSW Energy Services pursued retail
energy markets outside of CSW's traditional service territory, until these
activities were discontinued in early 1999. In the fourth quarter of 1999, CSW
Energy Services began operating a staffing services company for electric utility
nuclear power plants, which was previously a PSO investment.

The more significant accounting policies of the CSW System are summarized
below.

Principles of Consolidation
The consolidated financial statements include the accounts of CSW and its
subsidiary companies. The consolidated financial statements for CPL, PSO and
SWEPCO include their respective capital trusts. All significant intercompany
transactions have been eliminated.

Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities along
with disclosure of contingent liabilities at the date of financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Fixed Assets and Depreciation
U.S. Electric fixed assets are stated at the original cost of
construction, which includes the cost of contracted services, direct labor,
materials, overhead items and allowances for borrowed and equity funds used
during construction. SEEBOARD's fixed assets are stated at their original fair

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<PAGE>

market value which existed on the date of acquisition plus the original cost of
property acquired or constructed since the acquisition, less disposals.

Provisions for depreciation of plant are computed using the straight-line
method, generally at individual rates applied to the various classes of
depreciable property. The annual average consolidated composite rates of the
Registrants are presented in the following table.

CSW CPL PSO SWEPCO WTU
--------------------------------------------------
1999 3.3% 3.1% 3.1% 3.3% 3.3%
1998 3.4% 3.0% 3.1% 3.3% 3.2%
1997 3.4% 3.0% 3.3% 3.2% 3.3%

CPL Nuclear Decommissioning of STP
At the end of STP's service life, decommissioning is expected to be
accomplished using the decontamination method, which is one of the techniques
acceptable to the NRC. Using this method, the decontamination activities occur
as soon as possible after the end of plant operations. Contaminated equipment is
cleaned and removed to a permanent disposal location, and the site is generally
returned to its original condition.

CPL's decommissioning costs are accrued and funded to an external trust
over the expected service life of the STP units. The existing NRC operating
licenses will allow the operation of STP Unit 1 until 2027 and Unit 2 until
2028. CPL pays annual decommissioning costs based on the estimated future cost
to decommission STP, including escalation for expected inflation to the expected
time of decommissioning.

CPL estimates its portion of the costs of decommissioning STP to be $289
million in 1999 dollars based on a study completed in 1999. CPL is accruing and
recovering these decommissioning costs through rates based on the service life
of STP at a rate of $8.2 million per year. The funds are deposited with a
trustee under the terms of an irrevocable trust and are reflected in CPL's
consolidated balance sheets as Nuclear decommissioning trust, with a
corresponding amount accrued in Accumulated depreciation. On CSW's consolidated
balance sheets, the irrevocable trust is included in Deferred Charges and Other
Assets, Other, with a corresponding amount accrued in Accumulated depreciation.
In CSW's and CPL's consolidated statements of income, the income related to the
irrevocable trust is recorded in Other Income and Deductions, Other. In CPL's
consolidated statements of income, the interest expense related to the
irrevocable trust is recorded in Interest Charges, Interest on short-term debt
and other. In CSW's consolidated statements of income the interest expense
related to the irrevocable trust is recorded in Interest and Other Charges,
Interest on short-term debt and other. At December 31, 1999, the nuclear trust
balance was $86.1 million.

Electric Revenues and Fuel
The U.S. Electric Operating Companies record revenues based upon
cycle-billings. Electric service provided subsequent to billing dates through
the end of each calendar month are accrued for by estimating unbilled revenues
in accordance with industry standards.

CPL, SWEPCO and WTU recover retail fuel costs in Texas as a fixed
component of rates whereby over-recoveries of fuel are payable to customers and
under-recoveries may be billed to customers after Texas Commission approval. The
cost of fuel is charged to expense as incurred, with resulting fuel
over-recoveries and under-recoveries recorded as regulatory liabilities and
assets. PSO recovers fuel costs in Oklahoma through service level fuel cost
adjustment factors, and SWEPCO recovers fuel costs in Arkansas and Louisiana
through automatic fuel recovery mechanisms. The application of these mechanisms
varies by jurisdiction. See ITEM 1. BUSINESS, FUEL RECOVERY - U.S. Electric and
ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS, for further information
about fuel recovery.

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<PAGE>

CPL, PSO and WTU recover fuel costs applicable to wholesale customers,
which are regulated by the FERC, through an automatic fuel adjustment clause.
SWEPCO recovers fuel costs applicable to wholesale customers through formula
rates.

CPL amortizes direct nuclear fuel costs to fuel expense on the basis of a
ratio of the estimated energy used in the core to the energy expected to be
derived from such fuel assembly over its life in the core. In addition to fuel
amortization, CPL also records nuclear fuel expense as a result of other items,
including spent fuel disposal fees assessed on the basis of net MWHs sold from
STP and DOE special assessment fees for decontamination and decommissioning of
the enrichment facilities on the basis of prior usage of enrichment services.

Accounts Receivable
CSW Credit purchases, without recourse, the billed and unbilled accounts
receivable of the U.S. Electric Operating Companies and certain non-affiliated
public utility companies.

Regulatory Assets and Liabilities
For their regulated activities, the U.S. Electric Operating Companies
follow SFAS No. 71, which defines the criteria for establishing regulatory
assets and regulatory liabilities. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - Electric Utility Restructuring Legislation for a discussion of the
continued application of SFAS No. 71 to the Texas Electric Operating Companies.
Regulatory assets represent probable future revenue to the company associated
with certain costs, which will be recovered from customers through the
ratemaking process. Regulatory liabilities represent probable future refunds to
customers. The regulatory assets are currently being recovered in rates or are
probable of being recovered in rates. The unamortized balances are included in
the table below.
<TABLE>
<CAPTION>

CSW CPL(1) PSO SWEPCO WTU
-------- ----------------------------------------------
(millions) (thousands)
<S> <C> <C> <C> <C> <C>

As of December 31, 1999
Regulatory Assets
Deferred plant costs $491 $482,447 $-- $-- $8,354(4)
Mirror CWIP asset 257 256,595 -- -- --
Income tax related
regulatory assets, net 318 356,370 -- 7,128 --
Deferred restructuring
and rate case costs 22 8,451(2) -- 7,383 6,530(4)
OPEBs 2 -- 1,838 -- --
Under-recovered fuel costs 52 30,911 6,469(3) -- 14,652
Loss on reacquired debt 133 78,334 14,880 25,539 14,700
Fuel settlement 7 -- -- 7,130(5) --
Other 11 11,110 -- -- 162
-------- --------- ------- ------- -------
$1,293 $1,224,218 $23,187 $47,180 $44,398
======== ========= ======= ======= =======
Regulatory Liabilities
Refunds due customers $15 $(55) $-- $9,367 $6,000
Income tax related
regulatory liabilities,
net -- -- 32,826 -- 13,057

-------- ----------------------------------------------
$15 $(55) $32,826 $9,367 $19,057
======== ==============================================
</TABLE>

Note: The footnote references to the table above are found on the
following page.

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<PAGE>
<TABLE>
<CAPTION>

CSW CPL PSO SWEPCO WTU
-------- ----------------------------------------------
(millions) (thousands)
<S> <C> <C> <C> <C> <C>

As of December 31, 1998
Regulatory Assets
Deferred plant costs $497 $482,447 $-- $-- $14,910(4)
Mirror CWIP asset 257 256,702 -- -- --
Income tax related
regulatory assets, net 308 360,482 -- -- --
Deferred restructuring
and rate case costs 26 16,236(2) -- -- 9,765(4)
OPEBs 2 -- 2,333 -- --
Under-recovered fuel costs 4 -- -- -- 3,980

Loss on reacquired debt 153 78,944 15,943 36,803 21,307
Fuel settlement 14 -- -- 13,746(5) --
Other 10 9,159 -- -- 1,196
-------- ----------------------------------------------
$1,271 $1,203,970 $18,276 $ 50,549 $51,158
======== ==============================================
Regulatory Liabilities
Refunds due customers $22 $ (498) $15,240(3) $7,239 $(329)
Income tax related
regulatory liabilities,
net -- -- 35,818 4,931 12,088
-------- ----------------------------------------------
$22 $(498) $51,058 $12,170 $11,759
======== ==============================================
</TABLE>

(1)See discussion of Securitization in ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS.
(2)Earning no return, amortized by the end of 2000.
(3)Earning no return, amortized over twelve-month period,
recalculated twice each year.
(4)Earning no return, amortized through 2001.
(5)Earning no return, amortized by the end of 2006.

Under provisions of the Texas Legislation, CPL filed an application with
the Texas Commission to securitize generation-related regulatory assets.
Management believes the unamortized regulatory asset amounts at December 31,
1999 will either be recovered through: (1) regulated rates; (2) stranded cost
recovery; or (3) FERC jurisdictional rates. The legislation provides for
securitization of 100% of regulatory assets and 75% of ECOM. Regulatory assets
in the amount of $763.7 million have been approved for securitization by the
Texas Commission, and a draft order has been prepared in this case. The Texas
Commission has indicated that it expects to issue a final order in late March
2000. The settlement also calls for $290 million of the amount originally
requested to be included in the calculation of stranded costs in CPL's March
2000 transmission and distribution cost filing. The securitization amount was
reduced by $186 million from the amount originally requested to reflect customer
benefits associated with accumulated deferred income taxes. CPL previously had
proposed to flow these benefits back to customers over the 14-year bond term.
See ITEM 7. MD&A Securitization of Generation-related Regulatory Assets and
Stranded Costs and ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS -
Electric Utility Restructuring Legislation for a discussion of CPL's
securitization application and the Texas Legislation.

Discontinuance of SFAS No. 71
Application of SFAS No. 71 was discontinued in 1999 for CPL's and WTU's
generation business in Texas and SWEPCO's generation business in Arkansas and
Texas resulting from legislation passed in those states. See ITEM 7. MD&A -
Securitization of Generation-related Regulatory Assets and Stranded Costs and
ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEDURES - Electric Utility
Restructuring Legislation for additional information. The following table
summarizes the net assets included in Electric Utility Plant related to each
company's generation plant for which the application of SFAS No. 71 was
discontinued, compared to total assets at December 31, 1999.

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<PAGE>

Generation Net Assets
Company For Which Total Assets
SFAS No. 71 Was
Discontinued
------------------------------------------------------------
(millions)
CPL $1,872 $4,848
SWEPCO 226 2,108
WTU 168 861

Goodwill Resulting from SEEBOARD Acquisition
The acquisition of SEEBOARD was accounted for as a purchase
combination. The purchase price has been allocated and is reflected in the
consolidated financial statements. The goodwill, resulting from the SEEBOARD
acquisition, is being amortized on a straight-line basis over 40 years. The
unamortized balance of the SEEBOARD goodwill at December 31, 1999 was $1.3
billion. CSW continually evaluates whether circumstances have occurred that
indicates the remaining useful life of goodwill warrants revision.

Long-Term Contract
In a joint venture, SEEBOARD Powerlink won a 30-year, $1.6 billion
contract to operate, maintain, finance and renew the high-voltage power
distribution network of the London Underground. Revenues from this contract are
recognized under the percentage of completion method in line with progress on
defined contract segments.

Foreign Currency Translation
The financial statements of SEEBOARD U.S.A., which are included in CSW's
consolidated financial statements, have been translated from British pounds to
U.S. dollars in accordance with SFAS No. 52. All asset and liability accounts
are translated at the exchange rate at the end of the period, and all income
statement items are translated at the weighted average exchange rate for the
applicable period. All the resulting translation adjustments are recorded
directly to "Accumulated other comprehensive income" on CSW's Consolidated
Balance Sheets. Cash flow statement items are translated at a combination of
average, historical and current exchange rates. The non-cash impact of the
changes in exchange rates on cash and cash equivalents, resulting from the
translation of items at the different exchange rates, is shown on CSW's
Consolidated Statements of Cash Flows in "Effect of exchange rate changes on
cash and cash equivalents."

One British pound equals the following U.S. dollar amounts:

1999 1998 1997
--------- ---------- -----------
At December 31 $1.62 $1.66 $1.65

Weighted average for the
2 months ended December 31 $1.62 $1.66 $1.58

See ITEM 8. NOTE 18. SOUTH AMERICAN INVESTMENTS for information regarding
CSW's investments in Brazil and Chile.

Cash Equivalents
Cash equivalents are considered to be highly liquid instruments with a
maturity of three months or less. Accordingly, temporary cash investments and
advances to affiliates are considered cash equivalents.

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<PAGE>

Risk Management
CSW has, at times, been exposed to currency and interest rate risks which
reflect the floating exchange rate that exists between the U.S. dollar and the
British pound. CSW has utilized certain risk management tools, including cross
currency swaps, foreign currency futures and foreign currency options, to manage
adverse changes in exchange rates and to facilitate financing transactions
resulting from CSW's acquisition of SEEBOARD.

CSW accounts for these transactions as hedge transactions and any gains
or losses associated with the risk management tools are recognized in the
financial statements at the time the hedge transactions are settled. CSW
believes its credit risk in these contracts is negligible. See ITEM 7. MD&A,
RISK MANAGEMENT, ITEM 8. NOTE 7. FINANCIAL INSTRUMENTS; NOTE 17. NEW
ACCOUNTING STANDARDS and ITEM 8. NOTE 18. SOUTH AMERICAN INVESTMENTS for
additional information.

Securities Available for Sale
CSW accounts for its investments in equity securities in accordance with
SFAS No. 115. The investments have been designated as available for sale, and as
a result are stated at fair value. Unrealized holding gains and losses, net of
related taxes, are included in Accumulated other comprehensive income on CSW's
Consolidated Balance Sheets. Information related to these securities available
for sale as of December 31, 1999 is presented in the following table.

Original Unrealized Holding
Cost Gains / (Losses) Fair Value
---------------------------------------------------------------
(millions)

Securities available for sale $110 $(48) $62

As of December 31, 1999, CSW International has invested $110 million in
stock of a Chilean electric company. The investment is classified as securities
available for sale and accounted for by the cost method. Based on the year-end
market value of the shares and foreign exchange rates, the value of the
investment at December 31, 1999 is $62 million. The reduction in the carrying
value of this investment has been reflected in Accumulated other comprehensive
income in CSW's Consolidated Balance Sheets. Management views its investment in
Chile as a long-term investment strategy and believes this investment continues
to have significant long-term value and that it is recoverable. Management will
continue to closely evaluate the changes in the South American economy and its
impact on CSW International's investment in the Chilean electric company. See
ITEM 8. NOTE 18. SOUTH AMERICAN INVESTMENTS.

Inventory
CPL, PSO and WTU utilize the LIFO method for the valuation of all fossil
fuel inventories. SWEPCO continues to utilize the weighted average cost method
pending approval of the Arkansas Commission to utilize the LIFO method. At
December 31, 1999, none of the U.S. Electric Operating Companies had LIFO
reserves. LIFO reserves are the excess of the inventory replacement cost over
the carrying amount on the balance sheet.

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<PAGE>

Comprehensive Income
Consistent with the requirements of SFAS No. 130, CSW discloses
comprehensive income. Comprehensive income is defined as the change in equity
(net assets) of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. It includes all changes
in equity during a period except those resulting from investments by owners and
distributions to owners.

Components of Other Comprehensive Income
The following table provides the components that comprise the balance
sheet amount in Accumulated other comprehensive income.

Components 1999 1998 1997
----------------------------------------------------------------
(millions)

Foreign Currency Adjustments $6 $34 $27
Unrealized Losses on Securities (20) (20) 1
Minimum Pension Liability (4) (6) (5)
---------------------------
$(18) $8 $23
---------------------------

Segment Reporting
CSW has adopted SFAS No. 131, which requires disclosure of select
financial information by business segment as viewed by the chief operating
decision-maker. See ITEM 8. NOTE 14. BUSINESS SEGMENTS.

Reclassification
Certain financial statement items for prior years have been reclassified
to conform to the 1999 presentation.

2. LITIGATION AND REGULATORY PROCEEDINGS

Litigation Related to the Rights Plan and AEP Merger
Two lawsuits were filed in Delaware state court seeking to enjoin the AEP
Merger. CSW and each of its directors were named as defendants in both cases.
The first suit alleged that the Rights Plan, approved by the CSW Board of
Directors on September 27, 1997, constituted a "poison pill" precluding
acquisition offers and resulting in a heightened fiduciary duty on the part of
the CSW Board of Directors to pursue an auction-type sales process to obtain the
best value for CSW stockholders. The second suit alleged that the AEP Merger was
unfair to CSW stockholders in that it did not recognize the underlying intrinsic
value of CSW's assets and its future profitability. Both suits were dismissed in
1999.

Electric Utility Restructuring Legislation
On June 18, 1999, legislation was signed into law in Texas that will
restructure the electric utility industry in the state. The new law, among
other things,

- - gives Texas customers of investor-owned utilities the opportunity to
choose their electric provider beginning January 1, 2002;

- - provides for the recovery of stranded costs, which are defined as the excess
of net book value of generation assets over the defined market value of
those assets;

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<PAGE>

- - requires reductions in nitrogen oxide and sulfur dioxide emissions;

- - provides a rate freeze until January 1, 2002 followed by a 6% rate reduction
for residential and small commercial customers, an additional rate reduction
for low-income customers and a number of customer protections; and

- - sets certain limits on capacity owned and controlled by power generation
companies.

Rural electric cooperatives and municipal electric systems can choose
whether to participate in retail competition. Delivery of the electricity at
regulated prices will continue to be the responsibility of the local electric
transmission and distribution utility company. Each utility must unbundle its
business activities into a retail electric provider, a power generation company
and a transmission and distribution utility.

CPL, SWEPCO and WTU filed their business separation or "unbundling" plans
with the Texas Commission on January 10, 2000. The filing gives an overview of
how the Texas Electric Operating Companies could separate into three separate
companies to meet the requirements of the Texas Legislation. Specifically, the
filing describes the financial aspects of separating the companies, lists the
functions each of the new business entities will perform, describes how the
companies will physically separate their operations, discusses the accounting
aspects, describes how the companies will handle competitive energy services,
and introduces interim and permanent codes of conduct. The main issues the Texas
Commission will determine in this case are whether CSW's proposed business
separation method and the proposed code of conduct are in compliance with the
Texas Legislation. Other separation issues will be presented in a March 31, 2000
cost unbundling filing. CPL, SWEPCO and WTU expect an order from the Texas
Commission on this case in the second quarter of 2000.

During 1999, legislation was also enacted in Arkansas that will ultimately
restructure the electric utility industry in that state. SWEPCO will file a
business unbundling plan in Arkansas in mid-2000.

The financial statements of the U.S. Electric Operating Companies have
historically reflected the effects of applying the requirements of SFAS No. 71.
Pursuant to those requirements, the U.S. Electric Operating Companies have
recorded regulatory assets and liabilities (probable future revenues and
refunds) to reflect the economic effect of cost-based regulation. When a company
determines that its operations or a segment of its operations no longer meets
the criteria for applying SFAS No. 71, it is required to apply the requirements
of SFAS No. 101. Pursuant to those requirements and further guidance provided in
EITF 97-4, a company is required to write-off regulatory assets and liabilities
related to deregulated operations, unless recovery of such amounts is provided
through rates to be collected in a continuing regulated portion of the company's
operations. Additionally, it is required to determine if any plant assets are
impaired under SFAS No. 121.

As a result of the scheduled deregulation of generation in Texas and
Arkansas, CSW concluded that it should discontinue the application of SFAS No.
71 for the Texas generation portion of the business for CPL and WTU and the
Texas and Arkansas jurisdictional portions of the generation business for
SWEPCO. Consequently, WTU recorded an extraordinary charge to earnings of $5.5
million and SWEPCO recorded an extraordinary charge to earnings of $3.0 million
to reflect the effects of discontinuing the application of SFAS No. 71 and to
write-off net regulatory assets that are not probable of recovery.

The discontinuance of SFAS No. 71 for CPL did not result in a net charge
to earnings as such net regulatory assets, pursuant to the legislation, are
expected to be recovered from transmission and distribution customers through
rates that will continue to be regulated.

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<PAGE>

Electric utilities who have stranded costs under the Texas Legislation are
allowed to recover generation-related regulatory assets that otherwise may not
be recoverable in the future competitive market. All or a majority of those
costs can be refinanced through securitization, which is a financing structure
designed to provide lower financing costs than is available through the
conventional utility cost of capital model. The securitized amounts are then
recovered through a non-bypassable wires charge. On October 18, 1999, CPL filed
an application with the Texas Commission to securitize approximately $1.27
billion of its retail generation-related regulatory assets and approximately $47
million in other qualified costs. CPL expects to issue the securitization bonds
in 2000, depending on market conditions and the timing of an order from the
Texas Commission. Hearings were held in December 1999. CPL reached settlement
agreements which resolved all issues except the role of the Texas Commission's
financial advisor.

On Feburary 10, 2000, the Texas Commission tentatively approved a
settlement, which will permit CPL to securitize approximately $764 million of
regulatory assets. The Texas Commission is expected to grant final approval by
March 27, 2000. The settlement calls for CPL to reduce its proposed amount to be
securitized from $1.27 billion to approximately $764 million of regulatory
assets plus an estimated $29 million of other qualified costs. The settlement
also calls for $290 million of the amount originally requested to be included in
the calculation of stranded costs in CPL's March 2000 transmission and
distribution cost filing. This filing will establish stranded costs, of which
75% can be securitized and 25% can be recovered through a competitive transition
charge. The securitization amount was reduced by $186 million from the amount
originally requested to reflect customer benefits associated with accumulated
deferred income taxes. CPL previously had proposed to flow these benefits back
to customers over the 14-year bond term. A second phase of securitization could
occur when the Texas Commission makes a preliminary determination of stranded
costs, currently expected to occur in the first half of 2001. A non-bypassable
charge will be used to recover additional unsecuritized stranded cost amounts.

Under the provisions of EITF 97-4, CPL's generation-related net regulatory
assets were transferred to the transmission and distribution portion of the
business and will be amortized as they are recovered through charges to
customers. Management currently believes all generation-related regulatory
assets for CPL will be recovered as provided under Texas Legislation. If future
events were to occur that made the recovery of these assets no longer probable,
CPL would write-off any non-recoverable portion of such assets as a non-cash
charge to earnings.

The discontinuance of SFAS No. 71 for CPL's and WTU's Texas generation
business and SWEPCO's Texas and Arkansas generation business requires that these
businesses no longer defer costs or recognize liabilities strictly resulting
from the actions of a regulator. For example, operations and maintenance
expenditures will be expensed as incurred regardless of regulatory treatment. In
addition, the equity component of allowance for funds used during construction
can no longer be accrued for generation-related capital projects. Instead, the
businesses will be required to follow the interest capitalization rules in SFAS
No. 34. SFAS No. 71 also allowed for the deferral of the loss on any reacquired
debt. In December 1999, CPL incurred a loss totaling approximately $8.5 million
that was expensed as an extraordinary item, since CPL is no longer able to apply
the provisions of SFAS No. 71 to its Texas generation-related operations.

CPL's amount of regulatory assets and stranded costs are subject to a
final determination by the Texas Commission in 2004. The Texas Legislation
provides that all such finally determined stranded costs will be recovered.
Since SWEPCO and WTU are not expected to have net stranded costs, all
generation-related non-recoverable net regulatory assets were written off and
reflected on the statement of income as an extraordinary loss. See ITEM 8. NOTE
16. EXTRAORDINARY ITEMS.

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<PAGE>

Additionally, CPL, SWEPCO and WTU performed an accounting impairment
analysis of generation assets under SFAS No. 121 and concluded there was no
impairment of generation assets at that time. An impairment analysis involves
estimating future net cash flows arising from the use of an asset. If the net
cash flows exceed the net book value of the asset, then there is no impairment
of the asset for accounting purposes. CPL, SWEPCO and WTU will continue to
review their assets for potential impairment if events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.

The Texas Legislation also provides that each year during the 1999 through
2001 rate freeze period, utilities with stranded costs are required to apply any
earnings in excess of the most recently approved cost of capital in a company's
last rate case (if issued on or after January 1, 1992) to reduce stranded costs.
As a result, CPL recorded a net charge to earnings of $12.0 million for 1999 to
reflect the impact of this provision. Utilities without stranded costs must
either flow such amounts back to customers or make capital expenditures, at no
charge to customers, to improve transmission or distribution facilities or to
improve air quality. As a result, WTU recorded a net charge to 1999 earnings of
$3.9 million and SWEPCO recorded a net charge of $4.2 million to 1999 earnings
from the effect of the excess earnings under the Texas Legislation. The charges
were based on estimates for the current year and are subject to final
determination by the Texas Commission.

CSW continues to analyze the impact of the electric utility industry
restructuring legislation on the U.S. Electric Operating Companies. The Texas
Commission has established numerous task forces, including representatives from
CPL, SWEPCO and WTU, to address various issues associated with the Texas
Legislation and to provide guidance regarding implementation of restructuring.

As previously discussed, as a result of the Texas Legislation, CPL filed
its application for securitization on October 18, 1999 with the Texas
Commission. CPL, SWEPCO and WTU filed business separation plans with the Texas
Commission on January 10, 2000, and will file excess earnings reports and cost
unbundling plans in March 2000 and CPL will file its ECOM report in March 2000.

Also see ITEM 7. MD&A - RECENT DEVELOPMENTS AND TRENDS, Electric Utility
Restructuring Legislation for a discussion on restructuring legislation.

CPL Rate Review - Docket No. 14965
In November 1995, CPL filed with the Texas Commission a request to
increase its retail base rates by $71 million. On October 16, 1997, the Texas
Commission issued the CPL 1997 Final Order which lowered the annual retail base
rates of CPL by approximately $19 million, or 2.5%, from CPL's rate level
existing prior to May 1996. The Texas Commission also included a "glide path"
rate methodology in the CPL 1997 Final Order pursuant to which CPL's annual
rates were reduced by $13 million beginning May 1, 1998 with an additional
reduction of $13 million on May 1, 1999.

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<PAGE>

reduction methodology applied on May 1, 1998 and 1999; and (iii) the $18 million
of disallowed affiliate expenses from CSW Services. As part of the appeal, CPL
sought a temporary injunction to prohibit the Texas Commission from implementing
the "glide path" rate reduction methodology. The court denied the temporary
injunction and the "glide path" rate reduction was implemented in May 1998 and
May 1999. Hearings on the appeal were held during the third quarter of 1998, and
a judgment was issued in February 1999 affirming the Texas Commission order,
except for a consolidated tax issue in the amount of $6 million, which was
remanded to the Texas Commission.

CPL filed an appeal of this most recent order to the Third District of
Texas Court of Appeals and management is unable to predict how the final
resolution of these issues will ultimately affect CSW's and CPL's results of
operations and financial condition. On May 4, 1999, AEP and CSW announced that
they had reached a stipulated agreement with the General Counsel of the Texas
Commission and other intervenors in the state of Texas related to the AEP/CSW
merger case. The Texas Commission approved the AEP Merger in early November
1999. If the AEP Merger is ultimately consummated, CSW will withdraw its appeal
with respect to the "glide path" rate reduction methodology as discussed above
as issue "(ii)" but will continue seeking the appeal of issues "(i) and (iii)"
as discussed above. See ITEM 8. NOTE 15. PROPOSED AEP MERGER and ITEM 7. MD&A -
PROPOSED AEP MERGER for a discussion on the stipulated agreement.

See ITEM 7. MD&A - RATES AND REGULATORY MATTERS, CPL Rate Review - Docket
No. 14965 for a discussion of the CPL 1997 Final Order.

CPL Deferred Accounting
By orders issued in 1989 and 1990, the Texas Commission authorized CPL to
defer certain STP Unit 1 and Unit 2 costs incurred between the commercial
operation dates of those units and the effective date of rates reflecting the
operation of those units. Upon appeal of the 1989 CPL order, and a related order
involving another utility, the Supreme Court of Texas in 1994 sustained deferred
accounting as an appropriate mechanism for the Texas Commission to use in
preserving the financial integrity of CPL, but remanded CPL's case to the Third
District of Texas Court of Appeals to consider certain substantial evidence
points of error not previously decided by the Third District of Texas Court of
Appeals. On August 16, 1995, the Third District of Texas Court of Appeals
rendered its opinion in the remand proceeding and affirmed the Texas
Commission's order in all respects.

By orders issued in October 1990 and December 1990, the Texas Commission
quantified the STP Unit 1 and Unit 2 deferred accounting costs and authorized
the inclusion of the amortization of the costs and associated return in CPL's
retail rates. These Texas Commission orders were appealed to the Travis County
District Court where the appeals are still pending. Language in the Supreme
Court of Texas' opinion in the appeal of the deferred accounting authorization
case suggests that the appropriateness of including deferred accounting costs in
rates charged to customers is dependent on a finding in the first case in which
the deferred STP costs are recovered through rates that the deferral was
actually necessary to preserve the utility's financial integrity. If in the
appeals of the October 1990 and December 1990 rate orders, the courts decide
that subsequent review under the financial integrity standard is required and
was not made in those orders, such rate orders would be remanded to the Texas
Commission for the purpose of entering findings applying the financial integrity
standard. Pending the ultimate resolution of CPL's deferred accounting issues,
CPL is unable to predict how its deferred accounting orders will ultimately be
resolved by the Texas Commission.

If CPL's deferred accounting matters are not favorably resolved, CSW and
CPL could experience a material adverse effect on their respective results of
operations and financial condition. While CPL's management is unable to predict
the ultimate outcome of these matters, management believes either that CPL will
receive approval of its deferred accounting amounts or that CPL will be
successful in renegotiation of its rate orders, so that there will be no
material adverse effect on CSW's or CPL's results of operation or financial
condition.

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The deferred accounting amounts are included in the amounts to be
securitized as part of the settlement amount approved by the Texas Commission in
its October 18, 1999 securitization filing. See ITEM 7. MD&A - Securitization of
Generation-related Regulatory Assets and Stranded Costs.

CPL Fuel Reconciliation
On December 31, 1998, CPL filed with the Texas Commission an application
to reconcile fuel costs and to request authorization to carry the reconciled
balance forward into the next reconciliation period. During the reconciliation
period of July 1, 1995 through June 30, 1998, CPL incurred $828.5 million in
eligible fuel and fuel-related expenses. The Texas jurisdictional allocation of
such fuel and fuel-related expenses is $783.4 million.

In addition to requesting reconciliation of its fuel and fuel-related
expenses for the reconciliation period, CPL requested authority from the Texas
Commission to recover the reward earned during the reconciliation period under
the performance standard adopted in the CPL 1997 Final Order for CPL's share of
STP. The Texas Commission adopted a three-year average capacity factor of 83%
performance standard for STP in that order. During the reconciliation period,
STP operated at a net capacity factor of 93.1%, resulting in a reward of $19.2
million.

CPL requested authority to recover the Texas portion of 50% of the reward
by including 1/36th of this amount in Texas retail eligible fuel expense each
month for the three-year period following the Texas Commission's order in the
fuel reconciliation case. CPL further requested authority to apply the amounts
of the reward recovered through Texas retail eligible fuel expense toward
additional amortization of its STP deferred accounting regulatory asset. The
remaining 50% of the reward would be "banked" to be used against potential
future penalties or other disallowance of fuel costs. Hearings were held before
an ALJ in June 1999. In July 1999, all parties reached a settlement in
principle. The settlement resolves all disputed issues and includes a
disallowance of $7.44 million recorded in the third quarter of 1999. The
settlement provides for no STP performance reward either now or in the future.
The Texas Commission issued its final order on September 23, 1999 approving the
settlement.

CPL Fuel Factor Filing
In January 2000, CPL filed with the Texas Commission an Application for
Authority to implement an increase in fuel factors of $55.4 million, or 16.5% on
an annual basis effective with the March 2000 billing month. Additionally, CPL
proposed to implement an interim fuel surcharge of $36.5 million, including
accumulated interest over a six-month period to collect its under-recovered fuel
costs beginning in April 2000. CPL entered into a settlement providing for an
increase in fuel factors of $43.3 million or 12.9% and a surcharge of $24.7
million. The settlement will be implemented in March and April 2000.

CPL Municipal Franchise Fee Litigation
In May 1996, the City of San Juan, Texas filed a class action suit in
Hidalgo County, Texas District Court on behalf of all cities served by CPL based
upon CPL's alleged underpayment of municipal franchise fees. The plaintiffs'
third amended petition, filed in January 2000, asserts various contract and tort
claims against CPL as well as certain audit rights. The third amended petition
seeks actual damages of up to $200 million, punitive damages of up to $100
million and attorneys' fees. CPL filed a counterclaim for any overpayment of
franchise fees it may have made as well as its attorneys' fees. CPL also filed a
motion to transfer venue to Nueces County, Texas, and a plea to the jurisdiction
and pleas in abatement asserting that the Texas Commission has primary
jurisdiction over the claims. In May 1996 and December 1996, respectively, the
Cities of Pharr, Texas and San Benito, Texas filed individual suits making
claims virtually identical to those claimed by the City of San Juan. The suit
filed by the City of San Benito has been voluntarily dismissed.

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In January 1997, CPL filed an original petition at the Texas Commission
requesting the Texas Commission to declare its jurisdiction over CPL's
collection and payment of municipal franchise fees. In April 1997, the Texas
Commission issued a declaratory order in which it declined to assert
jurisdiction over the claims of the City of San Juan. CPL appealed the Texas
Commission's decision to the Travis County, Texas District Court, which affirmed
the Texas Commission ruling on February 19, 1999. CPL appealed this ruling to
the Austin Court of Appeals; oral argument was heard on this appeal in November
1999.

After the Texas Commission's order, the Hidalgo County District Court
overruled CPL's plea to the jurisdiction and plea in abatement. In July 1997,
the Hidalgo County District Court entered an order certifying the case as a
class action. CPL appealed this order to the Corpus Christi Court of Appeals. In
February 1998, the Corpus Christi Court of Appeals affirmed the trial court's
order certifying the class. CPL appealed the Corpus Christi Court of Appeals
ruling to the Texas Supreme Court, which declined to hear the case. In August
1998, the Hidalgo County District Court ordered the case to mediation and
suspended all proceedings pending the completion of the mediation. The mediation
was completed in December 1998, but the case was not resolved.

On January 5, 1999, a class notice was mailed to each of the cities served
by CPL. Over 90 of the 128 cities declined to participate in the lawsuit.
However, CPL has pledged that if any final, non-appealable court decision in the
litigation awards a judgement against CPL for a franchise underpayment, CPL will
extend the principles of that decision, with regard to the franchise
underpayment, to the cities that decline to participate in the litigation. The
plaintiffs filed a motion to extend the time for the cities to decide whether to
participate in the lawsuit. In December 1999, the court ruled that the class
would consist of 30 cities, and the plaintiffs' motion to extend the time for
the cities to participate in the lawsuit was withdrawn. The City of Weslaco has
recently joined as an additional class representative.

Although CPL believes that it has substantial defenses to the cities'
claims and intends to defend itself against the cities' claims and pursue its
counterclaims vigorously, CPL cannot predict the outcome of the municipal
franchise fee litigation or its impact on CPL's results of operations or
financial position.

CPL Anglo Iron Litigation
In April 1998, CPL was sued by Anglo Iron in the United States District
Court for the Southern District of Texas, Brownsville Division, for claims
arising from the clean-up of a site owned and operated by Anglo Iron in
Harlingen, Texas. Anglo Iron sought reimbursement pursuant to CERCLA and common
law contribution and indemnity for alleged response and clean-up costs of
$328,139 and damages of $150,000 for "loss of fair market value" of the site. In
1999, the parties settled the case for $137,500, and the case was dismissed with
prejudice.

CPL Sinton Landfill Litigation
CPL, along with over 30 others, was named as a defendant in the district
court in San Patricio County, Texas. The plaintiffs are approximately 500
current and former landowners in the vicinity of a landfill site near Sinton,
Texas. Each plaintiff alleges $10 million property damage and personal injury as
a result of alleged contamination from the site. Plaintiffs made a collective
settlement demand upon CPL for $1.1 million. In January 1999, in exchange for a
de minimus sum, CPL reached an agreement with Browning Ferris Industries, Inc.,
the operator of the site, to indemnify CPL for any judgment or settlement amount
that CPL may owe to the plaintiffs in this case, as well as CPL's attorney's
fees incurred after the agreement. In August 1999, the trial court granted
summary judgment for CPL. The plaintiffs appealed the summary judgment ruling.
Management believes that the ultimate resolution of this matter will not have a
material adverse impact on CSW's or CPL's consolidated results of operations or
financial condition.

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CPL Valero Litigation
In April 1998, Valero filed suit against CPL in Nueces County, Texas
District Court, alleging claims for breach of contract and negligence. Valero's
suit seeks in excess of $11 million as damages for property loss and lost
profits allegedly incurred after an interruption of electricity to its facility
in Corpus Christi, Texas in April 1996. The parties held a settlement conference
in August 1999, but no progress was made toward settlement of the case. The case
is currently in discovery. Management cannot predict the outcome of this
litigation. However, management believes that CPL has valid defenses to Valero's
claims and intends to defend the matter vigorously. Management also believes
that the claims are covered by insurance and that the ultimate resolution of
this matter will not have a material adverse impact on CSW's or CPL's
consolidated results of operations or financial condition.

CPL and WTU Complaint versus Texas Utilities Electric Company (Docket
No. 17285)
A joint complaint filed by CPL and WTU with the Texas Commission asserted
that since January 1, 1997, Texas Utilities Electric Company had been
effectively double charging for transmission service within ERCOT. A proposal
for decision received in February 1998 recommended approval of a proposal by CPL
and WTU to reduce by $15.5 million annually their payments to Texas Utilities
Electric Company. The Texas Commission approved the proposal in September 1998.
Although Texas Utilities Electric Company appealed the Texas Commission final
order, it refunded $26.6 million to CPL and WTU in November 1998. Prior to the
Texas Commission's September 1998 decision, the $15.5 million annual payment to
Texas Utilities Electric Company was allocated to the U.S. Electric Operating
Companies. As a result of this order, the payment continues to be recorded on
CPL's and WTU's books as a reduction to ERCOT transmission expense and there
will be no future expenses recorded on the books of PSO and SWEPCO.

On November 15, 1999, CPL and WTU reached a settlement with Texas
Utilities Electric Company. This settlement resulted in the execution of two new
Transmission Service Agreements retroactive to January 1, 1997. As a result of
this settlement, all pending litigation between Texas Utilities Electric Company
and CSW will be terminated and Texas Utilities Electric Company will withdraw
its appeal in Docket No. 17285. CPL and WTU agreed to pay Texas Utilities
Electric Company $12 million during 2000. The $12 million liability was accrued
on CPL's and WTU's books during the fourth quarter of 1999. CPL accrued $6.4
million and WTU accrued $5.6 million. In addition, the two new Transmission
Service Agreements require CPL and WTU to pay for export transmission service
along with the ERCOT transmission charges approved by the Texas Commission.

Transmission Coordination Agreement
The transmission coordination agreement provides the means by which the
U.S. Electric Operating Companies plan, operate and maintain the four separate
transmission systems as a single unit. The agreement also establishes the method
by which the U.S. Electric Operating Companies allocate revenues received under
open access transmission tariffs. In August 1998, the FERC accepted the
transmission coordination agreement for filing, suspended it for a nominal
period, and made it effective retroactive to January 1, 1997, subject to refund
and investigation. In the fourth quarter of 1998, the U.S. Electric Operating
Companies and supporting intervenor signatories filed an uncontested offer of
settlement. The FERC issued an order on June 18, 1999, accepting the offer of
settlement. The FERC further ordered that appropriate refunds be made to reflect
the terms of the revised transmission coordination agreement. In the second
quarter of 1999, the FERC also issued an order accepting the U.S. Electric
Operating Companies' compliance filing of their open access transmission tariff.
The FERC previously had ordered the compliance filing to review the method by
which certain open access transmission tariff customers were to be charged for
transmission service. As a result of that order, certain changes were made in
the transmission coordination agreement related to the allocation of certain
open access transmission tariff revenues. Each U.S. Electric Operating Company
will be allocated revenue in proportion to each company's respective revenue
requirement for the service it provides under the revised open access
transmission tariff. The U.S. Electric Operating Companies requested and

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received from the FERC a deferral of their refund obligation until the FERC
issues an order accepting the revised transmission coordination agreement.

On October 29, 1999, CSW filed with the FERC a revised transmission
coordination agreement. The revised transmission coordination agreement includes
changes to the original transmission coordination agreement to ensure the
above-mentioned allocation of revenues to each U.S. Electric Operating Company.
In 1999, each of the U.S. Electric Operating Companies recorded the estimated
impact of the reallocation of open access transmission tariff revenues, which
increased CSW's income before taxes by approximately $2.4 million. The earnings
increase was related to additional non-affiliated revenues resulting from the
open access transmission tariff. On December 16, 1999, the FERC accepted the
revised transmission coordination agreement, which is retroactive to January 1,
1997.

PSO Rate Review
In July 1996, the Oklahoma Commission staff filed an application seeking a
review of PSO's earnings and in July 1997 recommended a rate reduction of $76.8
million for PSO.

On October 23, 1997, the Oklahoma Commission issued a final order
approving a stipulated agreement with parties to settle the rate inquiry. The
PSO 1997 Rate Settlement Agreement called for PSO to lower its retail base rates
beginning with the December 1997 billing cycle by approximately $35.9 million
annually, or a 5.3% decrease below the then current level of retail rates. Part
of the rate reduction included a reduction in annual depreciation expense of
approximately $10.9 million. In addition, the PSO 1997 Rate Settlement Agreement
resulted in PSO making a one-time $29 million refund to customers in December
1997.

The PSO 1997 Rate Settlement Agreement also called for PSO to eliminate
or amortize before its next rate filing approximately $41 million in certain
deferred assets, approximately $26 million of which had been expensed in 1996.
The remaining $15 million of deferred assets, which included approximately $9
million of costs incurred for customer energy management incentive programs,
were written off in 1997. The financial impact of the PSO 1997 Rate Settlement
Agreement on PSO's 1997 results of operations was a reduction in revenues of
$31.5 million and a reduction in expenses of $4.1 million which included the
write-off of the previously mentioned deferred assets.

The PSO 1997 Rate Settlement Agreement resulted in a material adverse
effect on PSO's results of operations for 1997 that will have a continuing
impact because of the rate decrease. However, it reduced significant risks for
PSO related to this regulatory proceeding and should allow PSO's rates to remain
competitive for the foreseeable future.

PSO PCB Cases
PSO was named a defendant in petitions filed in state court in Oklahoma in
1996. The petitions allege that the plaintiffs suffered personal injury and fear
future injury as a result of contamination by PCBs from a transformer
malfunction that occurred in April 1982 at the Page Belcher Federal Building in
Tulsa, Oklahoma. Each of the plaintiffs seeks actual and punitive damages in
excess of $10,000. Other claims arising from this incident were settled and the
suits dismissed. During 1999, eleven cases were settled for a nominal amount
covered by PSO's insurance, and two cases were dismissed for failure to
prosecute. At December 31, 1999, nine cases remain pending. Management believes
that PSO has defenses to the remaining cases and intends to defend them
vigorously. Management believes that the remaining claims, excluding claims for
punitive damages, are covered by insurance and that the ultimate resolution of
the remaining lawsuits will not have a material effect on CSW's or PSO's results
of operations or financial condition.

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SWEPCO Louisiana Rate Review
In December 1997, the Louisiana Commission announced it would review
SWEPCO's rates and service. In October 1999, SWEPCO and the staff of the
Louisiana Commission reached an agreement and stipulation, which was filed on
October 14, 1999. The significant provisions of the agreement and stipulation
follow:

- - SWEPCO's Louisiana retail jurisdictional revenues were reduced by $11
million, effective with the December 1999 billing cycle;

- - SWEPCO is allowed to earn an 11.1% return on common equity;

- - SWEPCO is allowed to recover certain regulatory assets totaling $7.1
million;

- - SWEPCO will be subject to a two-year base rate freeze, which includes
force majeure provisions; and

- - SWEPCO will be allowed to increase depreciation rates for transmission,
distribution and general plant.

The Louisiana Commission approved the agreement and stipulation in
November 1999, which was implemented in December 1999.

SWEPCO Arkansas Rate Review
In July 1998, the Arkansas Commission began a review of SWEPCO's earnings.
On July 30, 1999, SWEPCO entered into a settlement agreement with the general
staff of the Arkansas Commission and the Arkansas Attorney General's Office. The
settlement agreement reduces SWEPCO's Arkansas annual revenues by $5.4 million,
or 3%. Additionally, the stipulation and settlement agreement provides for a
10.75% return on common equity, an increase in depreciation rates, and an
agreement by SWEPCO not to seek recovery of generation-related stranded costs.

SWEPCO Fuel Proceeding
In May 1997, SWEPCO filed with the Texas Commission an application to
reconcile fuel costs and implement a 12-month surcharge of fuel cost
under-recoveries. Because of the uncertainty as to when a surcharge may be
implemented, SWEPCO did not propose a surcharge period or a total surcharge
amount, which would include interest through the entire surcharge period.
However, SWEPCO indicated that it had under-recovered Texas jurisdictional fuel
costs of approximately $16.8 million, including interest through December 1996.
Included in the $16.8 million balance are fuel-related litigation expenses of
$5.0 million and an interest return of $2.0 million on the unamortized balance
of a fuel contract termination payment.

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recoverable as fuel expense. Also, the settlement provides that SWEPCO's actions
in litigating and renegotiating certain fuel contracts, together with the
prices, terms and conditions of the renegotiated contracts, were prudent.

On April 8, 1998, the ALJ issued a proposal for decision regarding the
only outstanding issue, recommending that SWEPCO be allowed to include
transmission equalization expense in eligible fuel expense. On May 19, 1998, the
Texas Commission reversed the ALJ and ordered an earnings reduction of
approximately $1.8 million, recorded in the second quarter of 1998. On June 8,
1998, SWEPCO filed a motion for rehearing on the transmission equalization
issue, which was denied through operation of law. After the Texas Commission's
order on May 19, 1998, SWEPCO had still under-recovered its fuel and fuel
related expenses. On July 1, 1998, the Texas Commission issued an order allowing
SWEPCO to surcharge its Texas retail customers $6.9 million of under-recovered
fuel and fuel-related expenses and associated interest. The surcharge began in
July 1998 and ended in June 1999. SWEPCO has filed an appeal regarding this
matter in the State District Court of Travis County, Texas. Management is unable
to predict the ultimate outcome of this litigation. However, SWEPCO has agreed
to withdraw the appeal if the AEP Merger is consummated. See ITEM 8. NOTE 15.
PROPOSED AEP MERGER for additional information.

SWEPCO Interim Fuel Refund
On August 24, 1999, SWEPCO filed an application at the Texas Commission to
make an interim refund of fuel cost over-recoveries of $7.5 million received by
SWEPCO from its Texas retail jurisdictional customers. The application requested
that the refund be made in October 1999. On September 20, 1999, a stipulation
between all parties was filed with the Texas Commission, which preserved
SWEPCO's application to refund $7.5 million to SWEPCO's Texas retail customers.
An order granting interim approval to make the refund in October 1999 was issued
by the hearing examiner on September 24, 1999. SWEPCO began implementing the
refund on customer bills during the first billing cycle of October 1999. On
October 21, 1999, the Texas Commission issued a final order which affirmed
approval to refund the fuel cost over-recoveries.

SWEPCO Lignite Mining Agreement Litigation
SWEPCO and CLECO are each a 50% owner of Dolet Hills Power Station Unit 1
and jointly own lignite reserves in the Dolet Hills area of northwestern
Louisiana. In 1982, SWEPCO and CLECO entered into a lignite mining agreement
with the DHMV, a partnership for the mining and delivery of lignite from a
portion of these reserves.

On April 15, 1997, SWEPCO and CLECO sued DHMV and its partners in the
United States District Court for the Western District of Louisiana seeking to
enforce various obligations of DHMV to SWEPCO and CLECO under the lignite mining
agreement, including provisions relating to the quality of the delivered
lignite, pricing, and mine reclamation practices. On June 15, 1997, DHMV filed
an answer denying the allegations in the suit and filed a counterclaim asserting
various contract-related claims against SWEPCO and CLECO. SWEPCO and CLECO have
denied the allegations contained in the counterclaims. On January 8, 1999,
SWEPCO and CLECO amended the claims against DHMV in the lawsuit to include a
request that the lignite mining agreement be terminated. The parties engaged in
unsuccessful settlement discussions in the third quarter of 1999 and early 2000.
The trial date is May 22, 2000.

Although SWEPCO cannot predict the ultimate outcome of this matter,
management believes that the resolution of this matter will not have a material
effect on SWEPCO's results of operations or financial condition.

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Withdrawal of SWEPCO Cajun Asset Proposal
Cajun filed a petition for reorganization under Chapter 11 of the United
States Bankruptcy Code on December 21, 1994 under the supervision of the United
States Bankruptcy Court for the Middle District of Louisiana. Both SWEPCO and
Louisiana Generating LLC had filed competing plans of reorganization for the
non-nuclear assets of Cajun with the bankruptcy court.

On August 26, 1999, SWEPCO, together with the Cajun Members Committee and
Washington-St. Tammany Electric Cooperative, reached a settlement agreement to
withdraw the jointly filed July 1999 SWEPCO Plan to acquire all of the
non-nuclear assets of Cajun. SWEPCO had deferred approximately $13.0 million in
costs related to the Cajun acquisition on its consolidated balance sheet. Under
the settlement agreement, SWEPCO received $7.5 million on November 8, 1999. The
remaining balance was written off in the third quarter of 1999, resulting in a
$3.7 million after tax charge to earnings.

WTU Fuel Factor and Interim Fuel Surcharge Filing
In March 1998, WTU filed with the Texas Commission an application for
authority to implement an increase in fuel factors of $7.4 million, or 7.3% on
an annual basis. Additionally, WTU proposed to implement a fuel surcharge of
$6.8 million, including accumulated interest over a six-month period to collect
its under-recovered fuel costs. WTU implemented the revised fuel factors with
its June 1998 billing.

In September 1999, WTU filed with the Texas Commission an application for
authority to implement an increase in fuel factors of $13.5 million or 12.2% on
an annual basis. Additionally, WTU proposed to implement an interim fuel
surcharge of $6.5 million, including accumulated interest over a six-month
period to collect its under-recovered fuel costs. WTU proposed to implement the
revised fuel factors with its December 1999 cycle billing. On November 4, 1999,
the Texas Commission approved WTU's application. The order allows an increase in
fuel factors of 12.2% on an annual basis beginning in the billing cycle for
December 1999 and to surcharge customers to recover $6.5 million of
under-recovered fuel costs and associated interest for six months beginning in
the billing cycle for January 2000.

Regulatory Price Proposal for SEEBOARD
On December 2, 1999, OFGEM published its final price proposals from its
United Kingdom electricity distribution review. OFGEM has proposed revenue
reductions in SEEBOARD's distribution business of 21%. In addition, OFGEM has
proposed the reallocation of a further 12% of costs out of SEEBOARD's
distribution business into its supply business. These proposals were accepted on
December 20, 1999 and will take effect from April 1, 2000, and remain in effect
for five years. OFGEM's proposals will reduce net income for SEEBOARD in the
year 2000 by approximately $40 million, dependent upon the level of further cost
reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A., its United Kingdom business segment, was $113
million for the twelve months ended December 31, 1999.

OFGEM also published the final price proposals for the electricity supply
price review. OFGEM has recommended that the price cap for charges levied to
electricity supply domestic and small business customers should be extended for
two years from April 1, 2000. Overall, these proposals are expected to have a
broadly neutral effect on the results of SEEBOARD U.S.A.

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CSW Energy, Texas-New Mexico Power Company Phillips Litigation
In May 1997, equipment operated by an an unrelated third party allegedly
came in contact with a Texas-New Mexico Power Company transmission line
rendering Texas-New Mexico Power Company's Old Ocean switching station
inoperable. As a result, Phillips' refinery, located in Sweeny, Texas, lost
power.

In October 1997, Phillips filed suit against Texas-New Mexico Power
Company in the District Court of Brazoria County, Texas seeking damages in
excess of $36 million associated with the loss of power to its refinery in
Sweeny, Texas. Texas-New Mexico Power Company denies any liability to Phillips.

In June 1999, Sweeny Cogeneration Limited Partnership was notified that
Texas-New Mexico Power Company had joined Sweeny Cogeneration Limited
Partnership as a third party defendant to the pending litigation. Texas-New
Mexico Power Company is claiming that during the construction of Sweeny
Cogeneration Limited Partnership's cogeneration facility, adjacent to Phillips
refinery, Sweeny Cogeneration Limited Partnership modified Texas-New Mexico
Power Company's equipment which was supplying power to the Phillips refinery.
In this connection, Texas-New Mexico Power Company alleges that Sweeny
Cogeneration Limited Partnership was negligent in the construction of the
cogeneration facility.

Sweeny Cogeneration Limited Partnership believes these allegations are
without merit and intends to contest vigorously any claims made against it by
Phillips or Texas-New Mexico Power Company. Management is unable to predict the
ultimate outcome of this pending litigation. If Texas-New Mexico Power Company
prevailed in the litigation, then CSW could experience a material adverse effect
on its results of operations but not on its financial condition.

Other
The Registrants are party to various other legal claims, actions and
complaints arising in the normal course of business. Management does not expect
disposition of these matters to have a material adverse effect on the
Registrants' results of operations or financial condition.

3. COMMITMENTS AND CONTINGENT LIABILITIES

Construction and Capital Expenditures

It is estimated that CSW, including the U.S. Electric Operating Companies,
SEEBOARD and other operations, will spend approximately $1,071 million in
capital expenditures (but excluding capital that may be required for
acquisitions) during 2000. Substantial commitments have been made in connection
with these programs. See ITEM 7. MD&A - LIQUIDITY AND CAPITAL RESOURCES for
expected use of these expenditures.

CPL - $229 million PSO - $174 million SWEPCO - $159 million WTU - $55 million

Fuel and Related Commitments

To supply a portion of their fuel requirements, the U.S. Electric
Operating Companies have entered into various commitments for the procurement of
fuel.

SWEPCO Henry W. Pirkey Power Plant
In connection with the South Hallsville lignite mining contract for its
Henry W. Pirkey Power Plant, SWEPCO has agreed, under certain conditions, to
assume the obligations of the mining contractor. As of December 31, 1999, the
amount SWEPCO may have to assume is $69 million, which is the contractor's
actual obligation outstanding at December 31, 1999.

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guarantees of mine reclamation in the amount of $85 million. Since SWEPCO uses
self-bonding, the guarantee provides for SWEPCO to commit to use its resources
to complete the reclamation in the event the work is not completed by the third
party miner. At December 31, 1999 the cost to reclaim the mine is estimated to
be approximately $36 million.

Other Commitments and Contingencies

CPL Nuclear Insurance
In connection with the licensing and operation of STP, the owners have
purchased nuclear property and liability insurance coverage as required by law,
and have executed indemnification agreements with the NRC in accordance with the
financial protection requirements of the Price-Anderson Act.

The Price-Anderson Act, a comprehensive statutory arrangement providing
limitations on nuclear liability and governmental indemnities, is in effect
until August 1, 2002. The limit of liability under the Price-Anderson Act for
licensees of nuclear power plants is $8.92 billion per incident, effective as of
December 1997. The owners of STP are insured for their share of this liability
through a combination of private insurance amounting to $200 million and a
mandatory industry-wide program for self insurance totaling $9.145 billion. The
maximum amount that each licensee may be assessed under the industry-wide
program of self insurance following a nuclear incident at an insured facility is
$83.9 million per reactor, for any one nuclear incident payable at $10 million
per year per reactor. An additional surcharge of 5% of the maximum may be
payable if the total amount of public claims and legal costs exceeds the limit.
CPL and each of the other STP owners are subject to such assessments, which CPL
and the other owners have agreed will be allocated on the basis of their
respective ownership interests in STP. For purposes of these assessments, STP
has two licensed reactors. CPL owns 25.2% of each reactor.

The owners of STP currently maintain on-site decontamination liability and
property damage insurance in the amount of $2.75 billion provided by NEIL.
Policies of insurance issued by NEIL stipulate that policy proceeds must be used
first to pay decontamination and cleanup costs before being used to cover direct
losses to property. Under project agreements, CPL and the other owners of STP
will share the total cost of decontamination liability and property insurance
for STP, including premiums and assessments, on a pro rata basis, according to
each owner's respective ownership interest in STP.

CPL purchases, for its own account, a NEIL I Business Interruption and/or
Extra Expense policy. This insurance will reimburse CPL for extra expenses
incurred for replacement generation or purchased power as the result of a
covered accident that shuts down production at one or both of the STP Units for
more than 23 consecutive weeks. In the event of an outage which is the result of
the same accident, insurance will reimburse CPL up to 80% of the recovery. The
maximum amount recoverable for a single unit outage is $133.8 million for both
Units 1 and 2. CPL is subject to an additional assessment of up to $1.54 million
for the current policy year in the event that insured losses at a nuclear
facility covered under the NEIL I policy exceed the accumulated funds available
under the policy. CPL renewed its current NEIL I Business Interruption and/or
Extra Expense policy on October 1, 1999.

SWEPCO Rental and Lease Commitments
SWEPCO has entered into various financing arrangements primarily with
respect to coal transportation and related equipment which are treated as
operating leases for rate-making purposes. At December 31, 1999, leased assets
of $45.7 million, less accumulated amortization of $45.7 million, were included
in Electric Utility Plant on the Consolidated Balance Sheets, and at December
31, 1998, leased assets were $45.7 million, less accumulated amortization of
$41.4 million.

2-64
<PAGE>

SWEPCO Biloxi, Mississippi MGP Site
SWEPCO was notified by Mississippi Power in 1994 that it may be a PRP at a
MGP site in Biloxi, Mississippi, which was formerly owned and operated by a
predecessor of SWEPCO. Since then, SWEPCO has worked with Mississippi Power on
both the investigation of the extent of contamination on the site as well as the
subsequent sampling of the site. The sampling results indicated contamination at
the property as well as the possibility of contamination of an adjacent
property. A risk assessment was submitted to the MDEQ, and the MDEQ requested
that a future residential exposure scenario be evaluated for comparison with
commercial and industrial exposure scenarios. However, Mississippi Power and
SWEPCO do not believe that clean-up to a residential scenario is appropriate
since this site has been industrial/commercial for more than 100 years, and
Mississippi Power plans to continue this type of usage. Mississippi Power and
SWEPCO also presented a report to the MDEQ demonstrating that the ground water
on the site was not potable, further demonstrating that clean-up to residential
standards is not necessary. Resolution of this issue is still pending.

A feasibility study was conducted to evaluate remedial strategies and
costs associated with cleanup activities. SWEPCO and Mississippi Power agreed to
a buyout agreement for the amount of $1.5 million, in which SWEPCO received full
indemnification for any liabilities associated with contamination and/or any
clean-up efforts.

SWEPCO Marshall Street Site
SWEPCO owns a tract of land known as the Marshall Street site in
Shreveport, Louisiana, which was previously a MGP site. The City of Shreveport
may acquire the Marshall Street site from SWEPCO to expand its convention
center. In 1999, environmental testing was performed at the site and
contaminants were discovered that could be related to a MGP. SWEPCO is
negotiating with the City of Shreveport to determine under what terms the city
may acquire the Marshall Street site and who would pay for any potential
clean-up costs related to the site. In the fourth quarter of 1999, SWEPCO
accrued $4.0 million for SWEPCO's portion of any potential clean-up costs
related to the Marshall Street site.

SWEPCO Wilkes Power Plant Copper Limit Compliance
The EPA has issued to SWEPCO's Wilkes power plant, an administrative order
for wastewater permit violations related to copper limits. Planned compliance
activities, including activities that have been conducted to determine the
source of copper, were presented by SWEPCO to the EPA during an administrative
meeting, held on August 13, 1998. SWEPCO and the EPA negotiated a $41,500
penalty pending final approval from the EPA.

Clean Air Provisions of the Texas Legislation
The Texas Legislation requires that grandfathered electric generating
facilities be permited to reduce emission levels 50% and provides for a cost
recovery mechanism. Final regulations are still being developed. The estimated
total costs to comply with the expected regulations are approximately $4.2
million, $4.8 million and $10 million for CPL, SWEPCO and WTU, respectively.
Expenditures have begun to meet the requirements of the legislation.

Proposed Regional Control Strategy Regulations
The TNRCC released for comment proposed regulations that, if adopted as
proposed, would require reductions in nitrogen oxide emissions for existing
permited electric generating facilities in the East Texas Region in addition to
the Clean Air provisions of the Texas Legislation discussed above. The final
regulations could be issued in April 2000 with an implementation date of May
2003. The current estimate for compliance with the proposed rules could be as
much as $38 million for CPL and $151 million for SWEPCO in capital projects
costs and as much as $3 million for CPL and $11 million for SWEPCO in additional
annual operating costs.

2-65
<PAGE>

SEEBOARD London Underground Commitment
SEEBOARD has committed (pound)57 million, or $92 million (converted at
(pound)1.00 equals $1.62), for costs associated with its contract related to the
London Underground transportation system. In 1998, SEEBOARD, through its
subsidiary, SEEBOARD Powerlink, signed a $1.6 billion, 30-year contract as a
joint venture partner to operate, maintain, finance and renew the high-voltage
power distribution network of the London Underground.

The U.K. Court of Appeal did not order the National Grid or National Power
PLC to make payment into the ESPS, and the court indicated that any requirement
to make such payments would be extreme since the relevant sections of the ESPS
are already in surplus. In the event that the court finally decides a payment by
SEEBOARD into the ESPS is necessary, such a payment is likely to create
additional pension fund surplus, which the company should then be able to
utilize over the next several years to reduce pension expense.

Diversified Electric - Commitments and Contingencies
In June 1998, the 330 MW Sweeny cogeneration facility, an entity 50% owned
by CSW Energy, obtained permanent project financing. The $149 million of debt,
with an effective interest rate of 7.4%, is unconditionally guaranteed by the
project and is non-recourse to CSW Energy and CSW. Concurrently, the project
repaid its outstanding note to CSW Energy for construction financing.

2-66
<PAGE>

In October 1999, GE Capital Structured Finance Group purchased 50 percent
of the equity ownership of Sweeny Cogeneration Limited Partnership. CSW Energy's
after-tax earnings from the proceeds of the transaction were approximately $33
million and were recorded in the fourth quarter of 1999. The agreement between
CSW Energy and GE Capital Structured Finance Group also provides for additional
payments to CSW Energy subject to completion of a planned expansion of the
Sweeny cogeneration facility.

CSW Energy began construction in August 1998 of a 500 MW power plant,
known as Frontera, in the Rio Grande Valley, near the city of Mission, Texas.
The natural gas-fired facility began simple cycle operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in early 2000.
Pursuant to AEP's and CSW's stipulated agreement with several intervenors in the
state of Texas related to the AEP Merger, CSW Energy may sell 250 MW of
Frontera. See ITEM 8. NOTE 15. PROPOSED AEP MERGER and ITEM 7. MD&A, PROPOSED
AEP MERGER for a discussion including timing of sale.

CSW Energy's Colorado facilities are cogeneration plants with steam as a
by-product of its electricity generation. In February 2000, notice was received
that the lessee of the facilities utilizing the steam had filed for
reorganization under Chapter 11 of the Bankruptcy Code, which could result in
the lessee rejecting the leases. Should that occur, management is positioned to
pursue other lease arrangements. Management believes the resolution of this
matter will not have a material adverse effect on CSW's results of operations or
financial condition.

CSW, CSW Energy and CSW International have provided letters of credit and
guarantees on behalf of CSW Energy and CSW International projects of
approximately $62 million, $41 million, and $233 million, respectively, as of
December 31, 1999.

2-67
<PAGE>

4. INCOME TAXES

CSW files a consolidated United States federal income tax return and
participates in a tax sharing agreement with its subsidiaries. Income tax
includes United States federal income taxes, applicable state income taxes and
SEEBOARD's United Kingdom corporation taxes. Total income taxes differ from the
amounts computed by applying the United States federal statutory income tax rate
to income before taxes for a number of reasons which are presented in the INCOME
TAX RATE RECONCILIATION table below. Information concerning income taxes,
including total income tax expense, the reconciliation between the United States
federal statutory tax rate and the effective tax rate and significant components
of deferred income taxes follow.
<TABLE>
<CAPTION>

--------------------------------------------------
INCOME TAX EXPENSE CSW CPL PSO SWEPCO WTU
-------------------------------------
1999 (millions) (thousands)
<S> <C> <C> <C> <C> <C>

Current (1) $177 $89,112 $20,777 $60,169 $3,328
Deferred (1) 40 19,990 15,198 (17,098) 12,222
Deferred ITC (2) (13) (5,207) (1,791) (4,565) (1,275)
--------------------------------------------------
204 103,895 34,184 38,506 14,275
Included in Other Income and Deductions
Current 18 (5,604) (2,215) (4,826) 858
Deferred 1 318 -- -- --
--------------------------------------------------
19 (5,286) (2,215) (4,826) 858

Included in Extraordinary Item (8) (2,971) -- (1,621) (2,941)

--------------------------------------------------
$215 $95,638 $31,969 $32,059 $12,192
--------------------------------------------------
1998
Included in Operating Expenses and Taxes
Current (1) $253 $128,942 $52,587 $64,463 $28,542
Deferred (1) (38) (8,253) (1,693) (11,850) (6,578)
Deferred ITC (2) (12) (3,858) (1,795) (4,631) (1,321)
--------------------------------------------------
203 116,831 49,099 47,982 20,643
Included in Other Income and Deductions
Current 18 (2,204) (93) (1,868) (454)
--------------------------------------------------
18 (2,204) (93) (1,868) (454)

--------------------------------------------------
$221 $114,627 $49,006 $46,114 $20,189
--------------------------------------------------
1997
Included in Operating Expenses and Taxes
Current (1) $47 $43,600 $14,543 $46,358 $11,765
Deferred (1) 117 35,263 8,498 (1,984) (954)
Deferred ITC (2) (13) (4,819) (2,278) (4,662) (1,321)
--------------------------------------------------
151 74,044 20,763 39,712 9,490
Included in Other Income and Deductions
Current -- (4,271) (2,230) (1,962) (471)
Deferred (6) (779) (50) (260) --
--------------------------------------------------
(6) (5,050) (2,280) (2,222) (471)
--------------------------------------------------
$145 $68,994 $18,483 $37,490 $9,019
--------------------------------------------------
</TABLE>

(1)Approximately $3 million, $14 million and $30 million of CSW's Current
Income Tax Expense was attributable to SEEBOARD U.S.A. operations and was
recognized as United Kingdom corporation tax expense for 1999, 1998 and 1997,
respectively. In addition, approximately $16 million, $9 million and $7
million of CSW's Deferred Income Tax Expense in 1999, 1998 and 1997,
respectively, was attributed to SEEBOARD U.S.A.
(2)ITC deferred in prior years are included in income over the lives of the
related properties.

2-68
<PAGE>

--------------------------------------------------
INCOME TAX RATE RECONCILIATION CSW CPL PSO SWEPCO WTU
-------------------------------------
1999 (millions) (thousands)
<S> <C> <C> <C> <C> <C>

Income before taxes attributable to:
Domestic operations $541
Foreign operations 128
--------
Income before taxes $669 $267,812 $94,573 $115,715 $38,964

Tax at U.S. statutory rate $234 $93,734 $33,101 $40,500 $13,637
Differences
Amortization of ITC (13) (5,207) (1,791) (4,565) (1,275)
Regulated flowthrough items 5 6,736 292 (2,011) (246)
Consolidated tax savings -- (6,243) (2,031) (2,617) (275)
Non-deductible goodwill amortization 12 -- -- -- --
Foreign tax benefits (28) -- -- -- --
State income taxes, net of Federal
income tax benefit 13 6,965 3,110 2,924 --
Adjustments (19) (5,460) (2,627) (621) 480
Other 11 5,113 1,915 (1,551) (129)
--------------------------------------------------
$215 $95,638 $31,969 $32,059 $12,192
--------------------------------------------------
Effective rate 32% 36% 34% 28% 31%

1998
Income before taxes attributable to:
Domestic operations $558
Foreign operations 112
--------
Income before taxes $670 $276,277 $125,849 $144,217 $58,004

Tax at U.S. statutory rate $235 $96,697 $44,047 $50,476 $20,301
Differences
Amortization of ITC (12) (3,858) (1,795) (4,631) (1,321)
Mirror CWIP 10 10,055 -- -- --
Other regulated flowthrough items 5 8,051 (1,437) (2,302) 208
Consolidated tax savings -- (2,120) 229 (1,994) (1,147)
Non-deductible goodwill amortization 12 -- -- -- --
Foreign tax benefits (41) -- -- -- --
State income taxes, net of Federal
income tax benefit 8 -- 4,473 3,308 --
Adjustments 14 5,493 3,977 (2,526) (779)
Other (10) 309 (488) 3,783 2,927
--------------------------------------------------
$221 $114,627 $49,006 $46,114 $20,189
--------------------------------------------------
Effective rate 33% 41% 39% 32% 35%

1997
Income before taxes attributable to:
Domestic operations $327
Foreign operations 147
--------
Income before taxes $474 $197,465 $64,689 $130,392 $30,480

Tax at U.S. statutory rate $166 $69,113 $22,641 $45,637 $10,668
Differences
Amortization of ITC (13) (4,819) (2,278) (4,662) (1,321)
Mirror CWIP 5 4,647 -- -- --
Other regulated flowthrough items 3 5,622 (1,740) (1,373) 421
Consolidated tax savings -- (4,868) (1,685) (2,703) (739)
Non-deductible goodwill amortization 12 -- -- -- --
Foreign tax benefits (19) -- -- -- --
State income taxes, net of Federal
income tax benefit 5 -- 1,596 2,993 --
Adjustments (4) (1,361) (1,324) (633) (177)
Other (10) 660 1,273 (1,769) 167
--------------------------------------------------
$145 $68,994 $18,483 $37,490 $9,019
--------------------------------------------------
Effective tax rate 31% 35% 29% 29% 30%
</TABLE>

2-69
<PAGE>

--------------------------------------------------
DEFERRED INCOME TAXES (1) CSW CPL PSO SWEPCO WTU
-------------------------------------
1999 (millions) (thousands)
<S> <C> <C> <C> <C> <C>

Deferred Income Tax Liabilities
Depreciable utility plant $1,944 $798,381 $308,497 $389,680 $153,027
Deferred plant costs 3 -- -- -- 2,923
Mirror CWIP asset 1 1,028 -- -- --
Income tax related regulatory
assets 156 113,436 9,085 27,698 5,580
Regulatory assets designated for
securitization 332 332,198 -- -- --
Other 280 89,321 32,852 38,799 14,697
--------------------------------------------------
2,716 1,334,364 350,434 456,177 176,227

Deferred Income Tax Assets
Income tax related regulatory
liability (95) (39,108) (21,782) (24,332) (10,149)
Unamortized ITC (91) (46,657) (14,533) (21,279) (8,863)
Alternative minimum tax carryforward (11) -- -- -- --
Other (106) (11,554 (30,537) (31,654) (6,816)
--------------------------------------------------
(303) (97,319) (66,852) (77,265) (25,828)
--------------------------------------------------
Net Accumulated Deferred Income Taxes $2,413 $1,237,045 $283,582 $378,912 $150,399
--------------------------------------------------

Net Accumulated Deferred Income
Taxes
Noncurrent $2,430 $1,234,942 $302,727 $380,495 $148,746
Current (17) 2,103 (19,145) (1,583) 1,653
--------------------------------------------------
$2,413 $1,237,045 $283,582 $378,912 $150,399
--------------------------------------------------

DEFERRED INCOME TAXES (1)

1998
Deferred Income Tax Liabilities
Depreciable utility plant $1,936 $812,335 $299,659 $409,779 $141,627
Deferred plant costs 174 168,856 -- -- 5,219
Mirror CWIP asset 90 89,846 -- -- --
Income tax related regulatory assets 224 165,263 10,086 37,738 11,072
Other 257 72,123 21,881 35,851 18,076
--------------------------------------------------
2,681 1,308,423 331,626 483,368 175,994
Deferred Income Tax Assets
Income tax related regulatory
liability (117) (39,095) (23,940) (38,251) (15,303)
Unamortized ITC (96) (48,480) (15,226) (22,964) (9,309)
Alternative minimum tax
carryforward (11) -- -- -- --
Other (75) -- (27,068) (28,357) (11,017)
--------------------------------------------------
(299) (87,575) (66,234) (89,572) (35,629)

--------------------------------------------------
Net Accumulated Deferred Income Taxes $2,382 $1,220,848 $265,392 $393,796 $140,365
--------------------------------------------------

Net Accumulated Deferred Income
Taxes
Noncurrent $2,410 $1,221,561 $277,181 $398,664 $140,731
Current (28) (713) (11,789) (4,868) (366)
--------------------------------------------------
$2,382 $1,220,848 $265,392 $393,796 $140,365
--------------------------------------------------
</TABLE>

(1)Other than excess foreign tax credits, CSW did not have other valuation
allowances recorded against other deferred tax assets at December 31, 1999
and 1998 due to a favorable earnings history. At December 31, 1999, CSW had
$117 million of foreign tax credits, for which a 100% valuation allowance
has been provided. At December 31, 1998, CSW had $145 million of foreign tax
credits, for which a 100% valuation allowance has been provided.

CSW has not provided for U.S. federal income and foreign withholding taxes on
$62 million of non-U.S. subsidiaries' undistributed earnings as of December
31, 1999, because such earnings are intended to be reinvested indefinitely.

2-70
<PAGE>

If these earnings were distributed, foreign tax credits should become
available under current law to reduce or eliminate the resulting U.S. income
tax liability.

5. BENEFIT PLANS

Cash Balance and Non-qualified Pension Plans

CSW maintains a tax qualified, non-contributory defined benefit cash
balance pension plan covering substantially all CSW employees in the United
States. Under the cash balance formula, each participant has an account, for
recordkeeping purposes only, to which credits are allocated annually based on a
percentage of the participant's pay. The applicable percentage is determined by
age and years of vested service the participant has with CSW as of December 31
of each year. The fair value of the plan assets are measured as of September 30
of each year. Pension plan assets consist primarily of stocks and short-term and
intermediate-term fixed income investments.

In addition, CSW has a non-qualified excess benefit pension plan. This
plan is available to all pension plan participants who are entitled to receive a
pension benefit from CSW which is in excess of the limitations imposed on
benefits by the Internal Revenue Code through the qualified plan.

As the plan sponsor, CSW will continue to reflect the cost of the pension
plans according to the provisions of SFAS No. 87 and allocate such costs to each
of the participating employers. SFAS No. 132, adopted by CSW in 1998, amended
the disclosure requirements of SFAS No. 87 and SFAS No. 88 and have been
incorporated in the following disclosures.

U.K. Pension Plans

The majority of SEEBOARD's employees joined a pension plan that is
administered for the United Kingdom's electricity industry. The assets of this
plan are held in a separate trustee-administered fund that is actuarially valued
every three years. SEEBOARD and its participating employees both contribute to
the plan. Subsequent to July 1, 1995, new employees were no longer able to
participate in that plan. Instead, two new pension plans were made available to
new employees, both of which are also separate trustee-administered plans.

CSW Retirement Savings Plan

The CSW System Retirement Savings Plan is a defined contribution plan
offered to all full time employees and certain part time employees who meet plan
eligibility requirements. Company contributions to this plan totaled $15 million
in 1999, $15 million in 1998 and $11 million in 1997.
<TABLE>
<CAPTION>

1999 1998
Pension Retirement Plans CSW U.S. U.K. CSW U.S. U.K.
TOTAL PLANS PLANS TOTAL PLANS PLANS
------------------------------ ------------------------
Change in Benefit Obligations (millions) (millions)
<S> <C> <C> <C> <C> <C> <C>

Benefit obligation at beginning of
year $2,111 $ 991 $ 1,120 $ 1,978 $ 955 $ 1,023
Service cost 35 21 14 36 22 14
Interest cost 123 65 58 137 69 68
Plan participants' contributions 3 - 3 3 - 3
Amendments 7 - 7 58 - 58
Foreign currency translation adjustment (26) - (26) 9 - 9
Acquisitions - - - 7 - 7
Actuarial (gain) loss (11) (47) 36 11 11 -
Benefits paid (129) (63) (66) (128) (66) (62)
------------------------------ ------------------------
Benefit obligation at end of year $ 2,113 $ 967 $ 1,146 $ 2,111 $ 991 $ 1,120
------------------------------ ------------------------
</TABLE>

2-71
<PAGE>
<TABLE>
<CAPTION>

1999 1998
Pension Retirement Plans CSW U.S. U.K. CSW U.S. U.K.
TOTAL PLANS PLANS TOTAL PLANS PLANS
------------------------------ ------------------------
Change in Plan Assets (millions) (millions)
<S> <C> <C> <C> <C> <C> <C>

Fair value of plan assets at
beginning of year $ 2,326 $ 1,014 $ 1,312 $ 2,290 $ 1,109 $ 1,181
Actual return on plan assets 274 122 152 143 (30) 173
Employer contributions 9 2 7 7 1 6
Plan participants' contributions 3 - 3 3 - 3
Foreign currency translation adjustment (33) - (33) 11 - 11
Benefits paid (129) (63) (66) (128) (66) (62)
------------------------------ ------------------------
Fair value of plan assets at end
of year $ 2,450 $ 1,075 $ 1,375 $ 2,326 $ 1,014 $ 1,312
------------------------------ ------------------------

Reconciliation of Funded Status
Funded status at end of year $ 337 $ 108 $ 229 $ 214 $ 23 $ 191
Unrecognized:
Transition obligation 8 8 - 10 10 -
Prior service cost (64) (75) 11 (77) (81) 4
Actuarial (gain) loss (88) 88 (176) 26 159 (133)
------------------------------ ------------------------
Prepaid benefit cost $ 193 $ 129 $ 64 $ 173 $ 111 $ 62
------------------------------ ------------------------

Amounts Recognized in Balance Sheet
Prepaid benefit cost $ 209 $ 145 $ 64 $ 188 $ 126 $ 62
Additional minimum liability (23) (23) - (25) (25) -
Intangible asset - - - 2 2 -
Accumulated other comprehensive expense 7 7 - 8 8 -
------------------------------ ------------------------
Net amount recognized on balance sheet $ 193 $ 129 $ 64 $ 173 $ 111 $ 62
------------------------------ ------------------------

Other comprehensive expense(income)
attributable to change in additional
minimum liability recognition $ (2) $ (2) $ - $ 1 $ 1 $ -

</TABLE>

Additional Information for Plans With
Unfunded Accumulated Benefit Obligations

Non Qualified Plan
------------------------------
(thousands)

1999 1998
---------- ----------
Projected benefit obligation $ 24,676 $ 27,379
Accumulated benefit obligation 22,875 25,137
Plan assets at fair value - -

2-72

<PAGE>
Pension Retirement Plans
CSW U.S. U.K.
Components of Net Periodic Benefit Costs TOTAL PLANS PLANS
-------------------------------------
1999 (millions)
Service cost $ 35 $ 21 $ 14
Interest cost 123 65 58
Expected return on plan assets (167) (98) (69)
Amortization of:
Unrecognized transition obligation 2 2 -
Prior service cost (6) (6) -
-------------------------------------
Net periodic benefit cost $ (13) $ (16) $ 3
-------------------------------------

Weighted-average assumptions as of year end
Discount rate 7.50% 6.00%
Expected return on plan assets 9.00% 6.50%
Rate of compensation increase 4.96% 4.00%

U.S. PLANS
----------------------------------------------
CPL PSO SWEPCO WTU
----------------------------------------------
(thousands)
Service cost $ 4,510 $ 3,304 $ 3,943 $ 2,346
Interest cost 14,108 10,336 12,334 7,338
Expected return on plan assets (21,885) (16,035) (19,135) (11,384)
Amortization of:
Unrecognized transition
obligation 338 248 296 176
Prior service cost (1,341) (982) (1,172) (697)
----------------------------------------------
Net periodic benefit cost $ (4,270) $ (3,129) $ (3,734) $ (2,221)
----------------------------------------------

CSW U.S. U.K.
TOTAL PLANS PLANS
-----------------------------------
1998 (millions)
Service cost $ 36 $ 22 $ 14
Interest cost 137 69 68
Expected return on plan assets (174) (97) (77)
Amortization of:
Unrecognized transition obligation 2 2 -
Prior service cost (6) (6) -
-----------------------------------
Net periodic benefit cost $ (5) $ (10) $ 5
-----------------------------------

Weighted-average assumptions as of year end
Discount rate 6.75% 5.50%
Expected return on plan assets 9.00% 6.25%
Rate of compensation increase 4.96% 3.50%

U.S. PLANS
---------------------------------------------
CPL PSO SWEPCO WTU
---------------------------------------------
(thousands)
Service cost $ 4,537 $ 3,485 $ 4,109 $ 2,352
Interest cost 14,693 11,283 13,302 7,614
Expected return on plan assets (21,107) (16,211) (19,111) (10,940)
Amortization of:
Unrecognized transition
obligation 328 252 297 170
Prior service cost (1,301) (999) (1,178) (674)
---------------------------------------------
Net periodic benefit cost $ (2,850) $ (2,190) $ (2,581) $ (1,478)
---------------------------------------------

2-73
<PAGE>
Pension Retirement Plans
CSW U.S. U.K.
Components of Net Periodic Benefit Costs TOTAL PLANS PLANS
-------------------------------------
1997 (millions)
Service cost $ 34 $ 20 $ 14
Interest cost 139 66 73
Expected return on plan assets (173) (92) (81)
Amortization of:
Unrecognized transition obligation 2 2 -
Prior service cost (6) (6) -
Net actuarial (gain) loss 1 1 -
-------------------------------------
Net periodic benefit cost $ (3) $ (9) $ 6
-------------------------------------

Weighted-average assumptions as of year end
Discount rate 7.50% 6.75%
Expected return on plan assets 9.00% 7.25%
Rate of compensation increase 5.46% 4.75%

U.S. PLANS
----------------------------------------------
CPL PSO SWEPCO WTU
----------------------------------------------
(thousands)
Service cost $ 4,602 $ 3,421 $ 4,260 $ 2,488
Interest cost 15,085 11,214 13,965 8,156
Expected return on plan assets (21,410) (15,892) (19,839) (11,597)
Amortization of:
Unrecognized transition
obligation 328 252 297 170
Prior service cost (1,301) (999) (1,178) (674)
----------------------------------------------
Net periodic benefit cost $ (2,696) $ (2,004) $ (2,495) $ (1,457)
----------------------------------------------

As permitted, the amortization of any prior service cost is
determined using a straight-line amortization of the cost over the average
remaining service period of employees expected to receive benefits under the
plan.

Post-retirement Benefits Other Than Pensions
CSW, including each of the U.S. Electric Operating Companies, adopted
SFAS No. 106 effective January 1, 1993. The transition obligation established at
adoption is being amortized over twenty years, with thirteen years remaining.
Prior to 1993, these benefits were accounted for on a pay-as-you-go basis.
Pursuant to an order by the Oklahoma Commission, PSO established a regulatory
asset of approximately $5 million in 1993 for the difference between the
pay-as-you-go basis and the costs determined under SFAS No. 106. PSO is
recovering the amortization of this regulatory asset over a ten year period.

2-74
<PAGE>
<TABLE>
<CAPTION>

Post- Retirement Benefits Other Than Pensions Total CSW CPL PSO SWEPCO WTU
------------- -----------------------------------------------
(millions) (thousands)
<S> <C> <C> <C> <C> <C>
Change in Benefit Obligation
1999
Benefit obligation at beginning of year $ 275 $ 81,339 $ 67,688 $ 62,347 $ 36,157
Service cost 11 2,670 1,934 2,215 1,318
Interest cost 18 5,323 4,423 4,089 2,367
Plan participants' contributions 2 459 347 341 242
Actuarial (gain) loss (19) (5,015) (4,091) (3,732) (2,729)
Benefits paid (21) (6,492) (5,625) (4,706) (2,848)
------------- -----------------------------------------------
Benefit obligation at end of year $ 266 $ 78,284 $ 64,676 $ 60,554 $ 34,507
------------- -----------------------------------------------

1998
Benefit obligation at beginning of year $ 241 $ 72,991 $ 61,434 $ 54,214 $ 32,516
Service cost 8 2,201 1,616 1,781 1,132
Interest cost 17 5,290 4,450 3,941 2,358
Plan participants' contributions 1 228 195 186 119
Amendments (5) (1,569) (1,322) (1,204) (717)
Actuarial (gain) loss 28 6,928 5,299 6,701 2,883
Benefits paid (15) (4,730) (3,984) (3,272) (2,134)
------------- -----------------------------------------------
Benefit obligation at end of year $ 275 $ 81,339 $ 67,688 $ 62,347 $ 36,157
------------- -----------------------------------------------

Change in Plan Assets
1999
Fair value of plan assets at beginning of year $ 164 $ 46,538 $ 42,728 $ 39,876 $ 21,475
Actual return on plan assets 23 7,447 5,828 4,899 3,342
Employer contributions 25 6,860 5,552 5,244 3,116
Plan participants' contributions 2 459 347 341 242
Benefits paid (21) (6,492) (5,625) (4,706) (2,848)
------------- -----------------------------------------------
Fair value of plan assets at end of year $ 193 $ 54,812 $ 48,830 $ 45,654 $ 25,327
------------- -----------------------------------------------

1998
Fair value of plan assets at beginning of year $ 158 $ 44,168 $ 43,366 $ 39,630 $ 20,411
Actual return on plan assets 3 201 2,190 487 202
Employer contributions 17 6,671 961 2,845 2,877
Plan participants' contributions 1 228 195 186 119
Benefits paid (15) (4,730) (3,984) (3,272) (2,134)
------------- -----------------------------------------------
Fair value of plan assets at end of year $ 164 $ 46,538 $ 42,728 $ 39,876 $ 21,475
------------- -----------------------------------------------

Reconciliation of Funded Status
1999
Funded status at end of year $ (73) $(23,472) $(15,846) $(14,900) $ (9,180)
Unrecognized:
Transition obligation 117 37,708 32,872 25,568 15,922
Actuarial (gain) loss (44) (14,236) (17,026) (10,668) (6,742)
------------- -----------------------------------------------
Prepaid (accrued) benefit cost $ - $ - $ - $ - $ -
------------- -----------------------------------------------

1998
Funded status at end of year $ (111) $(34,801) $(24,960) $(22,471) $(14,682)
Unrecognized:
Transition obligation 126 40,608 35,400 27,535 17,147
Actuarial (gain) loss (15) (5,807) (10,440) (5,064) (2,465)
------------- -----------------------------------------------
Prepaid (accrued) benefit cost $ - $ - $ - $ - $ -
------------- -----------------------------------------------

</TABLE>
2-75
<PAGE>
<TABLE>
<CAPTION>

Post- Retirement Benefits Other Than Pensions Total CSW CPL PSO SWEPCO WTU
------------- -----------------------------------------------
(millions) (thousands)
<S> <C> <C> <C> <C> <C>

Amounts Recognized in Balance Sheet
1999
Prepaid benefit costs $ 3 $ 113 $ 78 $ 206 $ 115
Accrued benefit (liability) (3) (113) (78) (206) (115)
------------- -----------------------------------------------
Net amount recognized $ - $ - $ - $ - $ -
------------- -----------------------------------------------

1998
Prepaid benefit costs $ 2 $ 19 $ 83 $ 121 $ 74
Accrued benefit (liability) (2) (19) (83) (121) (74)
------------- -----------------------------------------------
Net amount recognized $ - $ - $ - $ - $ -
------------- -----------------------------------------------

Components of Net Periodic Benefit Cost
1999
Service cost $ 11 $ 2,670 $ 1,934 $ 2,215 $ 1,318
Interest cost 18 5,323 4,423 4,089 2,367
Expected return on plan assets (13) (3,308) (3,369) (3,358) (1,533)
Amortization of:
Transition obligation 9 2,900 2,528 1,967 1,225
Net actuarial (gain) loss 10
------------- -----------------------------------------------
Net periodic benefit cost $ 25 $ 7,595 $ 5,516 $ 4,913 $ 3,377
------------- -----------------------------------------------
</TABLE>

Weighted-average assumptions as of year end
Discount rate 7.5%
Expected return on plan assets 9.0%
Health care cost trend rate 6.0% Ultimate rate of
5.0% in 2001
<TABLE>
<CAPTION>

Total CSW CPL PSO SWEPCO WTU
------------- -----------------------------------------------
(millions) (thousands)
<S> <C> <C> <C> <C> <C>

1998
Service cost $ 8 $ 2,201 $ 1,616 $ 1,781 $ 1,132
Interest cost 17 5,290 4,450 3,941 2,358
Expected return on plan assets (12) (3,237) (3,401) (3,387) (1,497)
Amortization of:
Transition obligation 9 2,900 2,528 1,967 1,225
Net actuarial (gain) loss (2) (555) (824) (629) (216)
------------- -----------------------------------------------
Net periodic benefit cost $ 20 $ 6,599 $ 4,369 $ 3,673 $ 3,002
------------- -----------------------------------------------

</TABLE>

Weighted-average assumptions as of year end
Discount rate 6.75%
Expected return on plan assets 9.00%
Health care cost trend rate 6.50% Ultimate rate of
5.0% in 2001

2-76
<PAGE>
<TABLE>
<CAPTION>

Post- Retirement Benefits Other Than Pensions Total CSW CPL PSO SWEPCO WTU
------------- -----------------------------------------------
Components of Net Periodic Benefit Cost (millions) (thousands)
<S> <C> <C> <C> <C> <C>

1997
Service cost $ 8 $ 2,076 $ 1,694 $ 1,771 $ 1,120
Interest cost 18 5,663 4,794 4,190 2,564
Expected return on plan assets (10) (2,739) (2,998) (2,787) (1,257)
Amortization of:
Transition obligation 9 2,900 2,528 1,967 1,225
Net actuarial (gain) loss (1) (162) (365) (181)
------------- -----------------------------------------------
Net periodic benefit cost $ 24 $ 7,738 $ 5,653 $ 4,960 $ 3,652
------------- -----------------------------------------------
</TABLE>

Weighted-average assumptions as of year end
Discount rate 7.50%
Expected return on plan assets 9.00%
Health care cost trend rate 7.00% Ultimate rate
of 5.0% in
2001

Effect of 1% Change in Assumed Health Total CSW CPL PSO SWEPCO WTU
------------- -----------------------------------------------
Care Cost Trend Rate (millions) (thousands)
<S> <C> <C> <C> <C> <C>

1% Increase
Service cost plus interest cost $ 4 $ 1,096 $ 801 $ 871 $ 524
APBO 28 8,162 6,404 6,404 3,693

1% Decrease
Service cost plus interest cost $ (3) $ (917) $ (678) $ (727) $ (437)
APBO (24) (7,070) (5,584) (5,538) (3,192)

</TABLE>

As permitted, the amortization of any prior service cost is determined
using a straight-line amortization of the cost over the average remaining
service period of employees expected to receive benefits under the plan.

2-77
<PAGE>

6. JOINTLY OWNED ELECTRIC UTILITY PLANT

The U.S. Electric Operating Companies are parties to various joint
ownership agreements with other non-affiliated entities. Such agreements provide
for the joint ownership and operation of generating stations and related
facilities, whereby each participant bears its share of the project costs. At
December 31, 1999, the U.S. Electric Operating Companies had undivided interests
in five such generating stations and related facilities as shown in the
following table.
<TABLE>
<CAPTION>

CPL SWEPCO SWEPCO SWEPCO CSW(1)
STP Flint Creek Pirkey Dolet Hills Oklaunion
Nuclear Plant Coal Plant Lignite Plant Lignite Plant Coal Plant
----------------------------------------------------------------
($ millions)
<S> <C> <C> <C> <C> <C>

Plant in service $2,352 $82 $435 $231 $400
Accumulated depreciation 746 52 204 99 143
Plant capacity-MW 2,501 528 675 650 690
Participation 25.2% 50.0% 85.9% 40.2% 78.1%
Share of capacity-MW 630 264 580 262 539
</TABLE>

(1) CPL, PSO and WTU have joint ownership agreements with each other and
other non-affiliated entities. Such agreements provide for the joint
ownership and operation of Oklaunion Power Station. Each participant provided
financing for its share of the project, which was placed in service in
December 1986. CPL's 7.8%, PSO's 15.6% and WTU's 54.7% ownership interest
represents CSW's 78.1% participation in the plant. The statements of income
reflect CPL's, PSO's and WTU's respective portions of the operating costs of
Oklaunion Power Station. The total investments, including AFUDC, in Oklaunion
Power Station for CPL, PSO and WTU were $37 million, $81 million and $282
million, respectively, at December 31, 1999. Accumulated depreciation was $13
million, $36 million and $94 million for CPL, PSO and WTU, respectively, at
December 31, 1999.

7. FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the following
fair values of each class of financial instruments for which it is practicable
to estimate fair value. The fair value does not affect any of the liabilities
unless the issues are redeemed prior to their maturity dates.

Cash, temporary cash investments, accounts receivable, other financial
instruments and short-term debt
The fair value equals the carrying amount as stated on the balance sheets
due to the short maturity of those instruments.

Securities available for sale
The fair values, which are based on quoted market prices, equal the
carrying amounts as stated on the balance sheet as prescribed by SFAS No. 115.
See ITEM 8. NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Long-term debt
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to CSW for
debt of the same remaining maturities.

2-78
<PAGE>

Trust Preferred Securities
The fair value of the Trust Preferred Securities are based on quoted
market prices on the New York Stock Exchange.

Long-term debt and preferred stock due within 12 months
The fair value of current maturities of long-term debt and preferred
stock due within 12 months are estimated based on quoted market prices for the
same or similar issues or on the current rates offered for long-term debt or
preferred stock with the same or similar remaining redemption provisions.
<TABLE>
<CAPTION>

CARRYING VALUE AND
ESTIMATED FAIR VALUE CSW CPL PSO SWEPCO WTU
---------- ----------------------------------------------
(millions) (thousands)
<S> <C> <C> <C> <C> <C>
Long-term debt
1999 carrying amount $3,821 $1,304,541 $364,516 $495,973 $263,686
fair value 3,828 1,285,083 358,437 491,759 258,220
1998 carrying amount 3,938 1,225,706 384,064 543,741 303,519
fair value 4,025 1,223,502 405,163 546,450 323,202

Trust Preferred
Securities
1999 carrying amount 335 150,000 75,000 110,000 --
fair value 290 129,360 63,390 97,372 --
1998 carrying amount 335 150,000 75,000 110,000 --
fair value 345 154,875 77,640 112,772 --

Long-term debt and
preferred stock due
within 12 months
1999 carrying amount 256 150,000 20,000 45,595 40,000
fair value 256 150,000 20,000 45,595 40,000
1998 carrying amount 169 125,000 -- 43,932 --
fair value 169 125,000 -- 43,932 --
</TABLE>

Commodity Contracts
CSW utilizes commodity forward contracts which contain pricing and/or
volume terms designed to stabilize market risk associated with fluctuations in
the price of natural gas used in generation and electric energy sold under firm
commitments with certain of our customers.

During 1999 and 1998, CSW did not utilize any contracts for commodities
that would be classified as a financial instrument under generally accepted
accounting principles, since physical delivery of natural gas and electricity
may, and most frequently does, occur pursuant to these contracts. These
contracts are, however, the major part of CSW's risk management program.

Cross-currency swaps and SEEBOARD's electricity contracts for differences
The fair value of cross currency swaps reflect third-party valuations
calculated using proprietary pricing models. Based on these valuations, CSW's
position in these cross currency swaps represented an unrealized loss of $41.8
million at December 31, 1999. This unrealized loss is offset by unrealized gains

2-79
<PAGE>

related to the underlying transactions being hedged. CSW expects to hold these
contracts to maturity. The fair value of SEEBOARD's contracts for differences is
not determinable due to the absence of a trading market.

Expected Expected Cash
Cash Inflows Outflows
Contract Maturity Date (Maturity Value) (Market Value)
- -----------------------------------------------------------------------------
(millions)
Cross currency swaps August 1, 2001 $200 $213
Cross currency swaps August 1, 2006 $200 $229

8. LONG-TERM DEBT

The CSW System's long-term debt outstanding as of the end of the last two
years is presented in the following table.

Maturities Interest Rates December 31,
From To From To 1999 1998
-----------------------------------------------------------------------------
(millions)
Secured bonds
2001 2025 5.25% 7.75% $1,452 $1,824

Unsecured bonds
2001 2030 3.33%(1) 8.88% 1,701 1,359

Notes and Lease
Obligations
2001 2021 5.91% 9.25% 672 765

Unamortized discount (4) (10)
-------------------------
$3,821 $3,938
-------------------------
(1) Variable rate.
--------------------------

The mortgage indentures, as amended and supplemented, securing FMBs issued
by the U.S. Electric Operating Companies, constitute a direct first mortgage
lien on substantially all electric utility plants. The U.S. Electric Operating
Companies may offer additional FMBs, medium-term notes and other securities
subject to market conditions and other factors.

CSW's year end weighted average cost of long-term debt was 7.0% for 1999,
7.3% for 1998 and 7.2% for 1997. For additional information about the U.S.
Electric Operating Companies' long-term debt, see their Statements of
Capitalization in the Financial Statements.

Annual Requirements
Certain series of outstanding FMBs have annual sinking fund requirements,
which are generally 1% of the amount of each such series issued. These
requirements may be, and generally have been, satisfied by the application of
net expenditures for bondable property in an amount equal to 166-2/3% of the
annual requirements. Certain series of pollution control revenue bonds also have
sinking fund requirements. At December 31, 1999, the annual sinking fund
requirements and annual maturities (including sinking fund requirements) for all
long-term debt for the next five years are presented in the following table.

2-80
<PAGE>

CSW CPL PSO SWEPCO WTU
--------------------------------------------------
(millions) (thousands)
-----------------------------------------
Sinking fund
Requirements

2000 $1 $-- $-- $595 $--
2001 1 -- -- 595 --
2002 1 -- -- 595 --
2003 1 -- -- 595 --
2004 1 -- -- 595 --

Annual Maturities

2000 $256 $150,000 $20,000 $45,595 $40,000
2001 421 -- 20,000 595 --
2002 151 115,000 -- 595 35,000
2003 388 50,000 100,000 55,595 --
2004 271 100,000 50,000 40,595 80,000

Dividends
At December 31, 1999, approximately $1.5 billion of CSW's subsidiary
companies' retained earnings were available for payment of cash dividends by
such subsidiaries to CSW. The amounts of retained earnings available for
dividends attributable to each of the U.S. Electric Operating Companies at
December 31, 1999.

CPL - $764 million PSO - $142 million SWEPCO - $288 million WTU - $116 million

Long-term Debt

CPL
On February 16, 2000, CPL sold $150 million of unsecured floating rate
notes. The notes will have a two-year final maturity of February 22, 2002, but
may be redeemed at par after one year. The interest rate will reset quarterly at
the then current three-month LIBOR plus 0.45%. The initial rate, which was set
February 18, 2000, was 6.56%. Net proceeds of $149.6 million will be used to
refund $100 million of FMBs maturing April 1, 2000 and repay a portion of
short-term debt. CPL is replacing FMBs with unsecured debt, which provides more
financial flexibility as CPL unbundles its electric operations.

On May 1, 1999, $100 million of CPL's 7.50% Series JJ FMBs matured and on
December 1, 1999, $25 million of CPL's 7.125% Series DD FMBs matured. In June
1999, CPL reacquired $25 million of its 7.50% Series II FMBs due April 1, 2023.

In November and December 1999, Matagorda sold, for the benefit of CPL,
$111.7 million of 4.90% Series 1999A and $50 million of 4.95% Series 1999B
unsecured tax exempt PCRBs. The bonds mature in 2030 but will be subject to
remarketing and an interest rate reset in two years. The proceeds were used to
refund $111.7 million aggregate principal amount of outstanding 7.50% Series T
due December 15, 2014 and will be used to refund $50 million aggregate principal
amount of outstanding 7.50% Series AA due March 21, 2020.

2-81
<PAGE>

In September 1998, CPL reacquired $36 million principal amount outstanding
of Series L FMBs, in its entirety, at a call price of 100.53.

PSO
In July 1999, the Oklahoma Development Finance Authority sold for the
benefit of PSO $33.7 million of 4.875% unsecured tax exempt pollution control
revenue refunding bonds. The bonds mature in fifteen years but will be subject
to remarketing and an interest rate reset in five years. In August 1999, the
proceeds were used to refund $33.7 million aggregate principal amount of
outstanding Oklahoma Environmental Finance Authority (PSO Project) 5.9% Series A
bonds due December 1, 2007.

In September 1998, PSO reacquired $25 million principal amount outstanding
of Series K and $30 million principal amount outstanding of Series L FMBs, in
their entirety, at call prices of 100 and 100.77, respectively.

SWEPCO
In the first quarter of 2000, SWEPCO sold $150 million of unsecured
floating rate notes. The bonds will have a two-year final maturity of March 1,
2002, but may be redeemed at par after one year. The interest rate will reset
quarterly at the then current three-month LIBOR plus 0.23%. The initial rate,
which was set March 1, 2000, was 6.34%. Net proceeds of $149.6 million will be
used to refund $45 million of FMBs maturing April 1, 2000 and to repay of a
portion of outstanding short-term indebtedness.

On September 1, 1999, $40 million of SWEPCO's 6.125% Series W FMBs
matured.

The reacquisitions and maturities were funded with short-term debt and
with proceeds from the issuance of the floating rate notes.

Reference is made to ITEM 7. MD&A, LIQUIDITY AND CAPITAL RESOURCES for
further information related to long-term debt, including new issues and
reacquisitions of long-term debt during 1999.

9. PREFERRED STOCK

The outstanding preferred stock of the U.S. Electric Operating Companies
as of the end of the last two years is presented in the following table.

Current
Dividend December 31, Redemption Price
Rate
From To 1999 1998 From - To
--------------------------------------------
(millions)
Not subject to mandatory
redemption
182,907 shares 4.00% - $18 $19 $103.19 - $107.00
5.00%
Auction -- 160
Issuance expenses/premiums -- (3)
-------------
$18 $176
-------------
Total authorized shares
6,405,000

2-82
<PAGE>

its money market preferred stock and $85 million of its Series A and Series B
preferred stock at par. During 1997, SWEPCO redeemed $1.2 million pursuant to
its annual sinking fund requirement. During 1997, each of the U.S. Electric
Operating Companies reacquired a significant portion of its outstanding
preferred stock. As a result of differences between the dividend rates on the
reacquired securities and prevailing market rates, CSW realized an overall gain
of approximately $10 million on the transactions. This gain is shown separately,
as Gain on Reacquired Preferred Stock, on the Consolidated Statements of Income.

CPL
The dividends on CPL's $160 million auction and money market preferred
stocks are adjusted every 49 days, based on current market rates. The dividend
rates averaged 4.3%, 4.4% and 4.3% during 1999, 1998 and 1997, respectively. In
November and December 1999, CPL called $75 million of its money market preferred
stock and $85 million of its Series A and Series B Auction Preferred Stock at
par.

SWEPCO
On April 1, 1998, SWEPCO called the remaining 274,010 shares of its $100
par value 6.95% preferred stock. SWEPCO used short-term debt to fund the
redemption.

For additional information about the U.S. Electric Operating Companies'
preferred stock, see their Statements of Capitalization in the Financial
Statements.

10. TRUST PREFERRED SECURITIES

The following Trust Preferred Securities issued by the wholly-owned
statutory business trusts of CPL, PSO and SWEPCO were outstanding at December
31, 1999. They are classified on the balance sheets as CPL, PSO or SWEPCO
Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
Holding Solely Junior Subordinated Debentures of CPL, PSO or SWEPCO,
respectively.
<TABLE>
<CAPTION>

Amount Description of Underlying
Business Trust Security Units (millions) Debentures of Registrant
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

CPL Capital I 8.00%, Series A 6,000,000 $150 CPL, $154.6 million, 8.00%, Series A
PSO Capital I 8.00%, Series A 3,000,000 75 PSO, $77.3 million, 8.00%, Series A
SWEPCO Capital I 7.875%, Series A 4,400,000 110 SWEPCO, $113.4 million,7.875%, Series A
---------------------
13,400,000 $335
---------------------
</TABLE>

Each of the business trusts will be treated as a subsidiary of its parent
company. The only assets of the business trusts are the subordinated debentures
issued by their parent company as specified above. In addition to the
obligations under their subordinated debentures, each of the parent companies
has also agreed to a security obligation which represents a full and
unconditional guarantee of its capital trust obligation.

11. SHORT-TERM FINANCING

The CSW System uses short-term debt, primarily commercial paper, to meet
fluctuations in working capital requirements and other interim capital needs.
CSW has established a money pool to coordinate short-term borrowings for certain
subsidiaries and also incurs borrowings outside the money pool for other
subsidiaries. As of December 31, 1999, CSW had revolving credit facilities
totaling $1.4 billion to backup its commercial paper program. At December 31,
1999, CSW had $1.3 billion outstanding in short-term borrowings. The maximum
amount of such short-term borrowings outstanding during the year, which had a

2-83
<PAGE>

weighted average interest yield for the year of 5.5%, was $1.4 billion during
December 1999.

CSW Credit, which does not participate in the money pool, issues
commercial paper on a stand-alone basis. At December 31, 1999, CSW Credit had a
$1.2 billion revolving credit agreement that is secured by the assignment of its
receivables to back up its commercial paper program which had $754 million
outstanding. The maximum amount of such commercial paper outstanding during the
year, which had a weighted average interest yield for the year of 5.3%, was $1.0
billion during August 1999.

12. COMMON STOCK

CSW's basic earnings per share of common stock are computed by dividing
net income for common stock by the average number of common shares outstanding
for the respective periods. Diluted earnings per share reflect the potential
dilution that could occur if all options outstanding under CSW's stock incentive
plan were converted to common stock and then shared in the income for common
stock. CSW's basic earnings per share equalled diluted earnings per share for
each of the years 1997-1999. CSW's dividends per common share reflect per share
amounts paid for each of the periods.

CSW can issue common stock, either through the purchase and reissuance of
shares from the open market or by issuing original shares, through the LTIP, a
stock option plan, PowerShare and Retirement Savings Plan. CSW began funding
these plans through open market purchases, effective April 1, 1997. Information
concerning common stock activity issued through the LTIP, the stock option plan,
PowerShare and the Retirement Savings Plan is presented in the following table.
<TABLE>
<CAPTION>

1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>

Number of new shares issued 41 372 765
(thousands)
Range of stock price for new $23 1/8 - $26 7/16 $25 5/8 - $30 1/16 $21 1/4 - $25 5/8
shares
New common stock equity $1 $10 $20
(millions)
</TABLE>

13. STOCK-BASED COMPENSATION PLANS

CSW has a key employee incentive plan. This plan is accounted for under
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been recognized. Had compensation cost for this plan been determined consistent
with SFAS No. 123, pro forma calculations of CSW's and each of the U.S. Electric
Operating Companies' net income for common stock and earnings per share as
required by SFAS No. 123 would not have changed significantly from amounts
reported.

Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.

CSW may grant options for up to 4.0 million shares of CSW common stock
under the stock option plan. Under the stock option plan, the option exercise
price equals the stock's market price on the date of grant. The grant vests over
three years, one-third on each of the three anniversary dates of the grant and
expires 10 years after the original grant date. CSW has granted 2.8 million
shares through December 31, 1999. A summary of the status of CSW's stock option
plan at December 31, 1999, 1998, and 1997 and the changes during the years then
ended is presented in the following table.

2-84
<PAGE>

1999 1998 1997
-------------------------------------------------------------------------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
(thousands) Exercise Price (thousands) Exercise Price (thousands) Exercise Price
<S> <C> <C> <C> <C> <C> <C>

Outstanding at
beginning of year 1,446 $24 1,902 $24 1,412 $26
Granted -- -- -- -- 694 21
Exercised (37) 23 (337) 24 -- --
Canceled (30) 26 (119) 24 (204) 28
---------- ---------- ---------
Outstanding at end
of year 1,379 24 1,446 24 1,902 24

Exercisable at end 1,178 not applicable 1,010 not applicable 1,162 not applicable
of year
</TABLE>

2-85

<PAGE>

14. BUSINESS SEGMENTS

CSW's business segments at December 31, 1999, included U.S. Electric and
U.K. Electric. Eight additional non-utility companies are included with CSW in
Other and Reconciling Items (CSW Energy, CSW International, C3 Communications,
EnerShop, CSW Energy Services, CSW Credit, CSW Leasing and CSW Services). CSW's
business segment information is presented in the following tables.

U.S. U.K. Other Reconciling CSW
Electric Electric Segments Items Consolidated
-------------------------------------------------
(millions)
1999
Operating revenues $3,524 $1,705 $342 $(34) $5,537
Depreciation and amortization 400 128 24 -- 552
Interest income 10 6 92 (54) 54
Interest expense 196 105 159 (54) 406
Operating income tax expense 191 6 7 -- 204
Net income from equity method
subsidiaries -- -- -- -- --
Income before extraordinary item 370 113 508 (522) 469
Extraordinary loss -
discontinuance of SFAS No. 71 (8) -- -- -- (8)
Extraordinary loss - loss on
reacquired debt (6) -- -- -- (6)
Total assets 9,391 3,024 7,217 (5,470) 14,162
Investments in equity method
subsidiaries 17 -- -- -- 17
Capital expenditures 474 153 138 -- 765

1998
Operating revenues $3,488 $1,769 $258 $(33) $5,482
Depreciation and amortization 399 95 27 -- 521
Interest income 6 6 73 (55) 30
Interest expense 197 116 160 (57) 416
Operating income tax expense 235 1 (33) -- 203
Net income from equity method
subsidiaries (1) -- -- -- (1)
Income before extraordinary item 374 117 441 (492) 440
Total assets 9,151 3,032 6,656 (4,942) 13,897
Investments in equity method
subsidiaries 15 -- -- -- 15
Capital expenditures 313 106 100 -- 519

1997
Operating revenues $3,321 $1,870 $112 $(35) $5,268
Depreciation and amortization 389 92 16 -- 497
Interest income 8 12 34 (34) 20
Interest expense 212 120 105 (23) 414
Operating income tax expense 144 31 (24) -- 151
Net income from equity method
subsidiaries (1) -- -- -- (1)
Income before extraordinary item 289 117 149 (226) 329
Extraordinary loss U.K.
windfall profits tax -- (176) -- -- (176)
Total assets 9,337 2,931 6,267 (4,919) 13,616
Investments in equity method
subsidiaries 15 -- -- -- 15
Capital expenditures 346 126 279 -- 751

Products and Services
The U.S. Electric Operating Companies' products and services primarily consist
of the generation, transmission and distribution of electricity. The U.K.
Electric segment's primary lines of business are the supply and distribution of
electricity. CSW is currently developing computer systems to provide information
by product and services rather than by legal entity.

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<PAGE>

Geographic Areas

Revenues
----------------------------------------------------
United United CSW
States Kingdom Other Foreign Consolidated
----------------------------------------------------
(millions)
1999 $3,828 $1,705 $4 $5,537
1998 3,705 1,769 8 5,482
1997 3,390 1,870 8 5,268

Long-Lived Assets
----------------------------------------------------
United United CSW
States Kingdom Other Foreign Consolidated
----------------------------------------------------
(millions)

1999 $7,850 $2,499 $257 $10,606
1998 7,831 2,530 201 10,562
1997 7,801 2,551 254 10,606

15. PROPOSED AEP MERGER

Under the AEP merger agreement, each common share of CSW will be converted
into 0.6 share of AEP common stock. CSW stockholders will own approximately 40%
of the combined company. CSW plans to continue to pay dividends on its common
stock until the closing of the AEP Merger at approximately the same times and
rates per share as in 1999, subject to continuing evaluation of CSW's earnings,
financial condition and other factors by the CSW board of directors.

Under the AEP merger agreement, there will be no changes required with
respect to the public debt issues, the outstanding preferred stock or the Trust
Preferred Securities of CSW's subsidiaries.

AEP and CSW anticipate net savings related to the merger of approximately
$2 billion over a 10-year period from the elimination of duplication in
corporate and administrative programs, greater efficiencies in operations and
business processes, increased purchasing efficiencies and the combination of the
two work forces. As a result of the approved settlement and agreement with the
state commissions in CSW and AEP's respective service territories, AEP and CSW
have agreed to guarantee that approximately 55% of those savings will be passed
through to their customers. AEP and CSW continue to seek opportunities for
additional saving and expect to realize significant additional savings based
upon the work of the merger transitions teams over the last two years. The

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<PAGE>

preceding discussion constitutes forward-looking information within the meaning
of Section 21E of the Exchange Act. Actual results may differ materially from
such projected information. See FORWARD-LOOKING INFORMATION.

The AEP merger agreement contains covenants and agreements that restrict
the manner in which the parties may operate their respective businesses until
the time of closing of the merger. In particular, without the prior written
consent of AEP, CSW may not engage in a number of activities that could affect
its sources and uses of funds. Pending closing of the merger, CSW's and its
subsidiaries' strategic investment activity, capital expenditures and non-fuel
operating and maintenance expenditures are limited to specific agreed upon
projects and in agreed upon amounts. In addition, prior to consummation of the
merger, CSW and its subsidiaries are restricted from:

- - Issuing shares of common stock other than pursuant to employee benefit
plans;

- - Issuing shares of preferred stock or similar securities other than to
refinance existing obligations or to fund permitted investment or capital
expenditures; and

Merger Regulatory Approvals
The merger is conditioned, among other things, upon the approval of
several state and federal regulatory agencies. Some of the merger conditions
cannot be waived by the parties.

State Regulatory Commissions
Arkansas
On June 12, 1998, AEP and CSW jointly filed a request with the Arkansas
Commission for approval of the proposed merger. The Arkansas Commission issued
an order approving the merger on August 13, 1998, subject to approval of the
associated regulatory plan. On December 17, 1998, the Arkansas Commission issued
a final order granting conditional approval of a stipulated agreement related to

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<PAGE>

a proposed merger regulatory plan. The stipulated agreement calls for SWEPCO to
reduce rates through a net merger savings rider for its Arkansas retail
customers by $6 million over the five-year period following completion of the
merger. The Arkansas Commission order notes the possibility of decisions in
other jurisdictions adversely affecting provisions of the stipulated agreement.
Consequently, the Arkansas Commission conditioned its final order on its
consideration of approval of the merger in other state and federal
jurisdictions.

Louisiana
On May 15, 1998, AEP and CSW jointly filed a request with the Louisiana
Commission for approval of the proposed merger and for a finding that the merger
is in the public interest.

On September 27, 1999, the Louisiana Commission issued a final order
granting conditional approval of the pending merger between AEP and CSW. In
granting approval, the Louisiana Commission also approved a stipulated
settlement with the Louisiana Commission staff. Under the stipulated settlement,
AEP and CSW have agreed to share with SWEPCO's Louisiana customers merger
savings created as a result of the merger over the eight years following its
completion. A savings mechanism will be implemented to calculate merger savings
annually. AEP and CSW estimate that the customer rate credits in Louisiana will
total more than $18 million during that eight-year period. During the second
year following completion of the merger, customers will begin receiving a
monthly rate credit for 50% of calculated merger savings. This credit will be
updated annually and continue for the remainder of the eight-year period
following the merger's completion.

Oklahoma
On August 14, 1998, AEP and CSW jointly filed a request with the Oklahoma
Commission for approval of their proposed merger.

An amended application was filed with the Oklahoma Commission on February
25, 1999. On May 11, 1999, the Oklahoma Commission approved the proposed merger
between AEP and CSW. The approval follows a partial settlement between the
Oklahoma Commission Utility Division Staff, the Oklahoma Commission Consumer
Services Division, the Office of the Attorney General for Oklahoma, PSO, AEP and
CSW. The Oklahoma Commission order was appealed by the Municipal Electric
Systems of Oklahoma, Inc. and the Oklahoma Association of Electric Cooperatives.
On October 13, 1999, the Oklahoma Supreme Court dismissed the appeal of the
Oklahoma Association of Electric Cooperatives. The Municipal Electric System of
Oklahoma, Inc. withdrew its appeal and the Oklahoma Association of Electric
Cooperatives filed a motion to dismiss its appeal of the Oklahoma Commission
order approving the merger.

Under the partial settlement agreement, AEP and CSW would:

- - Share merger savings with Oklahoma customers as well as AEP
shareholders, effective with the merger closing;

- - Not increase Oklahoma base rates prior to January 1, 2003;

- - File by December 31, 2001 with the FERC an application to join a
regional transmission organization; and

- - Establish additional quality of service standards for PSO's retail customers.
Oklahoma's share of the $50.2 million in guaranteed net merger savings over
the first five years after the merger is consummated would be split between
Oklahoma customers and AEP shareholders, with customers receiving
approximately 55% of the savings.

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<PAGE>

The Oklahoma Commission has withdrawn its opposition to the merger at the
FERC.

Texas
On April 30, 1998, AEP and CSW jointly filed a request with the Texas
Commission for a finding that the merger is in the public interest.

On May 4, 1999, AEP and CSW announced a proposed settlement with several
intervenor groups for the proposed merger between AEP and CSW. The settlement
would result in combined rate reductions totaling $221 million over a six-year
period for Texas customers of the three CSW Texas Electric Operating Companies
if the merger is completed as planned and issues are resolved associated with
the three CSW Texas Electric Operating Companies rate and fuel reconciliation
proceedings.

The settlement was reached with the General Counsel of the Texas
Commission, the State of Texas, the Texas Industrial Energy Consumers, the Low
Income Intervenors, the Office of Public Utility Counsel of Texas and the
steering committee of the Cities of McAllen, Corpus Christi, Victoria, Abilene,
Big Lake, Vernon and Paducah. The settlement expands upon a previous Texas
settlement announced on November 12, 1998, with the Office of Public Utility
Counsel of Texas and the cities' steering committee. That prior settlement
agreement provided for Texas retail rate reductions of $180 million over the six
years following completion of the merger. The new settlement agreement proposes
additional rate reductions totaling $41 million for a total of $221 million. The
settlement also calls for the divestiture of a total of 1,604 MW of existing and
proposed generating capacity within Texas.

The first rate-reduction rider provides for $84.4 million in net-merger
savings. The amounts are to be credited to Texas customers' bills through a
net-merger-savings rate-reduction rider over six years following completion of
the merger.

Additional rate-reduction riders will be implemented to resolve issues
associated with the three CSW Texas Electric Operating Companies rate and fuel
reconciliation proceedings and court appeals in Texas. The settlement provides
for an additional reduction of $136.6 million, which will be implemented over
the six years following completion of the merger.

Hearings on the merger in Texas began August 9, 1999 and concluded on
August 10, 1999. As the hearings began, settlements were reached with all but
one of the parties in the case. The settling parties are all wholesale electric
customers of the three CSW Texas electric operating companies, and the
settlements call for the withdrawal of their opposition to the merger in all
regulatory approval proceedings. On October 1, 1999, an ALJ for the Texas State
Office of Administrative Hearings issued a proposal for decision recommending
that the Texas Commission approve the pending merger between AEP and CSW. In the
proposal for decision, the ALJ determined that, consistent with the terms of the
proposed settlement, the merger is in the public interest. On November 2, 1999,
the Texas Commission approved the proposed merger with AEP.

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<PAGE>

On March 15, 2000, the FERC conditionally approved the merger. Conditions
placed on the merger include:

- - AEP and CSW must complete divestiture of the ERCOT capacity by March
15, 2001 and divestiture of the SPP capacity by July 1, 2002.

Other Federal
On October 13, 1998, AEP and CSW jointly filed an application with the SEC
for approval of the proposed merger. The SEC merger filing requests approval of
the merger and related transactions and outlines the expected combined company
benefits of the merger to AEP and CSW customers and shareholders. Since then,
AEP and CSW have filed four amendments to the application. Several parties have
filed petitions opposing the proposed merger at the SEC which have not been
withdrawn.

On July 29, 1999, applications were made with the FCC to authorize the
transfer of control of licenses of several CSW entities to AEP. In February
2000, the FCC approved the transfer which will be effective upon completion of
the proposed merger.

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<PAGE>

On April 21, 1999, AEP and CSW announced that they had reached separate
settlements with six wholesale customers that address issues related to the
proposed merger.

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<PAGE>

and CSW continue the process of seeking regulatory approvals, but there can be
no assurance as to when, on what terms or whether the required approvals will be
received. After June 30, 2000, either CSW or AEP may terminate the merger
agreement if all of the conditions to its obligation to close have not been
satisfied. There can be no assurance that the AEP Merger will be consummated.

16. EXTRAORDINARY ITEMS

Texas Electric Operating Companies Discontinuance of SFAS No. 71
The discontinuance of SFAS No. 71 in 1999 for SWEPCO's Arkansas and Texas
generation business and WTU's Texas generation business created certain
write-offs for those companies, which are categorized as extraordinary losses on
their income statements. The extraordinary loss at SWEPCO was $3.0 million. The
extraordinary loss at WTU was $5.5 million. The extraordinary loss in 1999 at
CPL was $5.5 million as a result of the write-off of losses on the reacquisition
of long-term debt associated with generation-related assets. See ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation for additional discussion of discontinuing SFAS No. 71.

United Kingdom Windfall Profits Tax
In the general election held in the United Kingdom on May 1, 1997, the
United Kingdom's Labour Party won control of the government with a considerable
majority. Prior to the general election, the Labour Party had announced that if
elected, it would impose a windfall profits tax on certain industries in the
United Kingdom, including the privatized utilities, to fund a variety of social
improvement programs. On July 2, 1997, the one-time windfall profits tax was
introduced in the Labour Party's budget and the legislation enacting the tax
subsequently was passed during the third quarter of 1997. Accordingly, during
the third quarter of 1997, SEEBOARD U.S.A. accrued, as an extraordinary item,
(pound)109.5 million (or $176 million when converted at (pound)1.00 = $1.61) for
a one-time windfall profits tax enacted by the United Kingdom government.

The windfall profits tax was payable in two equal installments, due
December 1, 1997 and December 1, 1998. The tax was charged at a rate of 23% on
the difference between nine times the average profits after tax for the four
years following flotation in 1990, and SEEBOARD's market capitalization
calculated as the number of shares issued at flotation multiplied by the
flotation price per share.

17. NEW ACCOUNTING STANDARDS

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<PAGE>

18. SOUTH AMERICAN INVESTMENTS

Through November 1999, CSW International had purchased a 36% equity
interest in Vale for $80 million. CSW International also extended $100 million
of debt convertible to equity in Vale in 1998. In December of 1999, CSW
International converted $69 million of the $100 million into equity, thereby
raising the equity interest to 44%. CSW International anticipates converting the
remaining debt into equity over the next two years.

In January 1999, amid market instability, the Brazilian government
abandoned its policy of pegging the Brazilian Real in a range against the
dollar. This action resulted in a 49% devaluation of the Brazilian currency by
the end of December 1999. Vale is unfavorably affected by the devaluation due
primarily to the revaluation of foreign denominated debt.

CSW International has a put option, which, if exercised, requires Vale to
purchase CSW International shares at a minimum price equal to the U.S. dollar
equivalent of the purchase price for Vale. As a result of the put option
arrangement, management has concluded that CSW International's investment
carrying amount will not be reduced below the put option value unless there is
deemed to be a permanent impairment. Pursuant to the put option arrangement, CSW
International will not recognize its proportionate share of any future earnings
until its proportionate share of any losses of Vale is recognized. At December
31, 1999, CSW International had deferred losses, after tax, of approximately $21
million related to its Vale investment. CSW International views its investment
in Vale as a long-term investment, which has significant long-term value and is
recoverable. Management will continue to closely evaluate the changes in the
Brazilian economy and its impact on CSW International's investment in Vale.

As of December 31, 1999, CSW International had invested $110 million in
stock of a Chilean electric company. The investment is classified as securities
available for sale and accounted for by the cost method. Based on the current
market value of the shares and the year end foreign exchange rate, the value of
the investment at December 31, 1999 was $62 million. The reduction in the
carrying value of this investment has been reflected in Other Comprehensive
Income in CSW's Consolidated Statements of Stockholders' Equity. Management
views its investment in Chile as a long-term investment strategy and believes
this investment continues to have significant long-term value and that it is
recoverable. Management will continue to closely evaluate the changes in the
South American economy and its impact on CSW International's investment in the
Chilean electric company.

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<PAGE>

19. QUARTERLY INFORMATION (UNAUDITED)

The following unaudited quarterly information includes, in the opinion of
management all adjustments necessary for a fair presentation of such amounts.
Information for quarterly periods is affected by seasonal variations in sales,
rate changes, timing of fuel expense recovery and other factors.

QUARTER ENDED 1999 1998
-----------------------------------------------------------------
(millions, except EPS)
March 31
Operating Revenues $1,225 $1,257
Operating Income 147 163
Net Income for Common Stock 45 60
Basic and Diluted EPS $0.21 $0.28

June 30
Operating Revenues $1,319 $1,344
Operating Income 206 214
Net Income for Common Stock 103 107
Basic and Diluted EPS $0.49 $0.50

September 30
Operating Revenues $1,618 $1,581
Operating Income 335 344
Income before Extraordinary Item 230 233
Extraordinary Loss (8) --
Net Income for Common Stock 222 233
Basic and Diluted EPS before
Extraordinary Item $1.08 $1.10
Basic and Diluted EPS from
Extraordinary Loss ($0.04) $--
Basic and Diluted EPS $1.04 $1.10

December 31
Operating Revenues $1,375 $1,300
Operating Income 178 145
Income before Extraordinary Item 91 40
Extraordinary Loss (6) --
Net Income for Common Stock 85 40
Basic and Diluted EPS before
Extraordinary Item $0.43 $0.19
Basic and Diluted EPS from
Extraordinary Loss ($0.03) $--
Basic and Diluted EPS $0.40 $0.19

Total
Operating Revenues $5,537 $5,482
Operating Income 866 866
Income before Extraordinary Item 469 440
Extraordinary Loss (14) --
Net Income for Common Stock 455 440
Basic and Diluted EPS before
Extraordinary Item $2.21 $2.07
Basic and Diluted EPS from
Extraordinary Loss ($0.07) $--
Basic and Diluted EPS $2.14 $2.07

2-95
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Central and South West
Corporation:

We have audited the accompanying consolidated balance sheets of Central
and South West Corporation (a Delaware corporation) and subsidiary companies as
of December 31, 1999 and 1998, and the related consolidated statements of
income, stockholders' equity and cash flows, for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of CSW UK Holdings (1999) and CSW UK Finance Company
(1998 and 1997) which statements reflect total assets and total revenues of 20
percent and 31 percent in 1999, 22 percent and 32 percent in 1998 and 22 percent
and 35 percent in 1997, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for those
entities, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Central and South West Corporation and subsidiary
companies as of December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States.

Arthur Andersen LLP

Dallas, Texas
February 25, 2000

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<PAGE>

AUDITOR'S REPORT TO THE MEMBERS OF CSW UK HOLDINGS

We have audited the consolidated balance sheets of CSW UK Holdings and
subsidiaries as of 31 December 1999 and the related consolidated statement of
earnings and statements of cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes assessing, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CSW UK
Holdings and subsidiaries at 31 December 1999 and the result of their operations
and cash flows for the year then ended in conformity with generally accepted
accounting principles in the United Kingdom.

Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations and shareholders'
equity as of and for the year ended 31 December 1999 to the extent summarised in
Note 23 to the consolidated financial statements.

KPMG Audit Plc
Chartered Accountants London
Registered Auditor 17 January 2000

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<PAGE>

AUDITOR'S REPORT TO THE MEMBERS OF CSW UK FINANCE COMPANY

We have audited the consolidated balance sheets of CSW UK Finance Company
and subsidiaries as of 31 December 1998 and 1997 and the related consolidated
statement of earnings and statements of cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CSW UK
Finance Company and subsidiaries at 31 December 1998 and 1997 and the results of
their operations and cash flows for the years then ended in conformity with
generally accepted accounting principles in the United Kingdom.

Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations and shareholders'
equity as of and for the years ended 31 December 1998 and 1997 to the extent
summarised in Note 23 to the consolidated financial statements.

KPMG Audit Plc
Chartered Accountants London, England
Registered Auditor 18 January 1999

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<PAGE>

REPORT OF MANAGEMENT

Management is responsible for the preparation, integrity and objectivity
of the consolidated financial statements of Central and South West Corporation
and subsidiary companies as well as other information contained in this annual
report. The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis and,
in some cases, reflect amounts based on the best estimates and judgments of
management giving due consideration to materiality. Financial information
contained elsewhere in this annual report is consistent with that in the
consolidated financial statements.

The consolidated financial statements have been audited by CSW's
independent public accountants who were given unrestricted access to all
financial records and related data, including minutes of all meetings of
stockholders, the board of directors and committees of the board. CSW and its
subsidiaries believe that representations made to the independent public
accountants during their audit were valid and appropriate. The reports of
independent public accountants are presented elsewhere in this report.

CSW, together with its subsidiary companies, maintains a system of
internal controls to provide reasonable assurance that transactions are executed
in accordance with management's authorization, that the consolidated financial
statements are prepared in accordance with generally accepted accounting
principles and that the assets of CSW and its subsidiaries are properly
safeguarded against unauthorized acquisition, use or disposition. The system
includes a documented organizational structure and division of responsibility,
established policies and procedures including a policy on ethical standards
which provides that the companies will maintain the highest legal and ethical
standards, and the careful selection, training and development of our employees.

Internal auditors continuously monitor the effectiveness of the internal
control system following standards established by the Institute of Internal
Auditors. Actions are taken by management to respond to deficiencies as they are
identified. The board, operating through its audit committee, which is comprised
entirely of directors who are not officers or employees of CSW or its
subsidiaries, provides oversight to the financial reporting process.

Due to the inherent limitations in the effectiveness of internal controls,
no internal control system can provide absolute assurance that errors will not
occur. However, management strives to maintain a balance, recognizing that the
cost of such a system should not exceed the benefits derived.

CSW and its subsidiaries believe that, in all material respects, its
system of internal controls over financial reporting and over safeguarding of
assets against unauthorized acquisition, use or disposition functioned
effectively as of December 31, 1999.

E. R. Brooks Glenn D. Rosilier Lawrence B. Connors
Chairman and Executive Vice President and Controller
Chief Executive Officer Chief Financial Officer

2-99
<PAGE>

CENTRAL POWER AND LIGHT
COMPANY

2-100 CPL
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data for each of the five years ended
December 31 is provided to highlight significant trends in the financial
condition and results of operations for CPL. The extraordinary loss was a result
of a loss associated with the reacquisition of production-related long-term
debt. Certain financial statement items for prior years have been reclassified
to conform to the most recent period presented.
<TABLE>
<CAPTION>

1999 (1) 1998 (1) 1997 (1) 1996 1995
(thousands, except ratios)
<S> <C> <C> <C> <C> <C>

INCOME STATEMENT DATA
Revenues $1,482,475 $1,406,117 $1,376,282 $1,300,688 $1,073,469
Income before extraordinary item 188,405 161,650 128,471 147,051 206,447
Extraordinary loss on reacquired debt (5,517) -- -- -- --
Net Income for Common Stock 173,194 154,479 121,350 133,488 191,978

BALANCE SHEET DATA
Assets 4,847,850 4,736,189 4,897,380 4,919,014 4,976,494
Long-term obligations (2) 1,454,541 1,375,706 1,536,336 1,413,805 1,612,705
Capitalization ratios
Common stock equity 48% 46% 45% 46% 43%
Preferred stock -- 6 5 8 8
Trust Preferred Securities 5 5 5 -- --
Long-term debt 47 43 45 46 49
Ratio of earnings to fixed charges
(SEC Method) 3.41 3.21 2.48 2.86 2.63
</TABLE>

(1) See CENTRAL POWER AND LIGHT COMPANY - RESULTS OF OPERATIONS for major
factors affecting earnings.
(2) Long-term obligations include long-term debt and Trust Preferred Securities.

2-101 CPL
<PAGE>

CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS

Reference is made to CPL's Consolidated Financial Statements, related
Notes to Consolidated Financial Statements and Selected Financial Data.
Referenced information should be read in conjunction with, and is essential to
understanding, the following discussion and analysis.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND 1998

CPL's net income for common stock increased $18.5 million to $173.2
million during 1999 from $154.7 million in 1998. The increase was primarily the
result of higher non-fuel-related revenues partially offset by an increase in
other operating and maintenance expenses. Also, lower depreciation and
amortization expenses, lower income tax expenses and lower interest charges
contributed to the increase in net income for common stock.

Electric operating revenues increased $76.4 million, or 5% in 1999 as
compared to 1998. Fuel-related revenues increased $44.2 million due to higher
fuel and purchased power expenses as discussed in the following paragraph.
Non-fuel-related revenues increased $32.2 million due mainly to higher retail
MWH sales resulting from increased customer demand offset in part by lower sales
attributable to milder weather in 1999 and lower base rates resulting from the
CPL 1997 Final Order. Additionally, non-fuel-related revenues increased
resulting from changes to CSW's transmission coordination agreement offset in
part by the absence in 1999 of a transmission service agreement adjustment in
1998. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Transmission
Coordination Agreement and CPL and WTU Complaint versus Texas Utilities Electric
Company (Docket No. 17285) and CPL Rate Review - Docket No. 14965.

Fuel expense increased to $404.0 million, or $18.0 million higher in 1999
when compared to 1998 resulting primarily from a rise in the average unit fuel
cost. The average unit fuel cost increased from $1.59 per MMbtu in 1998 to $1.72
per MMbtu in 1999, resulting primarily from higher spot market natural gas
prices. Purchased power expense rose $28.1 million in 1999 to $68.2 million when
compared to 1998. The increase was due primarily to higher economy energy
purchases.

Other operating expenses were $290.1 million during 1999, an increase of
$29.2 million when compared to 1998. The increase was due primarily to higher
outside service expenses associated with the Texas Legislation and
securitization, as well as higher transmission expenses. The increase in
transmission expense was due primarily to the settlement of the complaint with
Texas Utilities Electric Company and the absence in 1999 of a transmission
service agreement adjustment made in 1998 related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). Maintenance expenses increased $6.4 million in 1999 to $70.2
million due primarily to scheduled power plant repairs and maintenance,
including the refueling and a 10-year inspection of STP Units 1 and 2.
Depreciation and amortization expenses decreased $7.1 million, or 4% in 1999 as
compared to last year due primarily to the absence of 1999 amortization
associated with regulatory assets designated for securitization as well as the
absence in 1999 of an accelerated capital recovery charge in 1998. Partially
offsetting this decrease is a charge to reflect the excess earnings provision of
the Texas Legislation and increases to depreciable plant. See ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation and ITEM 7. MD&A Securitization of Generation-related Regulatory
Assets and Stranded Costs.

Taxes, other than income increased $2.9 million to $73.8 million due
primarily to higher franchise tax expenses in 1999 when compared to 1998. Income
tax expense associated with utility operations decreased $12.9 million for the

2-102 CPL
<PAGE>

year compared to 1998 as a result of lower taxable income in 1999, the
reclassification of certain income tax related regulatory assets designated for
securitization consistent with the Texas Legislation, and prior year income tax
liability adjustments. The decrease in income tax expense was offset in part by
the income portion of the Texas state franchise taxes. See ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation. and ITEM 7. MD&A Securitization of Generation-related Regulatory
Assets and Stranded Costs.

Other income and deductions increased $7.4 million resulting from higher
interest income and lower non-operating income tax expense.

Interest charges decreased $7.7 million for 1999, when compared to 1998
due primarily to lower average interest rates associated with the maturity and
reacquisition of long-term debt during 1999 and 1998. See ITEM 8. NOTE 8.
LONG-TERM DEBT for additional information related to the reacquisition of
long-term debt. The extraordinary loss of $5.5 million was the result of the
write-off of unamortized expenses associated with the reacquisition of
production-related long-term debt. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - Electric Utility Restructuring Legislation, NOTE 8. LONG-TERM
DEBT, and NOTE 16. EXTRAORDINARY ITEMS. The redemption of $160 million of
preferred stock resulted in a reduction of net income of $2.8 million. See ITEM
8. NOTE 9. PREFERRED STOCK for further information.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Net income for common stock increased $33.4 million to $154.7 million
during 1998 from $121.4 million in 1997. This increase was due primarily to
increased non-fuel revenues related to weather-related demand and the absence in
1998 of the provision for the CPL 1997 Final Order. The increase in net income
for common stock was partially offset by a reduction in base rates associated
with the CPL 1997 Final Order. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS for more information related to the CPL 1997 Final Order.

Total electric operating revenues increased $29.8 million, or 2% in 1998
as compared to 1997. This increase was mainly attributed to increased non-fuel
revenue of $91.6 million, which was a result of a 3% increase in weather-related
MWH sales and the absence in 1998 of the $76.4 million provision for rate refund
in 1997. In addition, electric operating revenues increased due in part to a
transmission service agreement adjustment related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). The increase was partially offset by decreased fuel revenues
of $30.8 million and by lower base rates resulting from the CPL 1997 Final
Order.

Fuel and purchased power expenses decreased approximately $27.1 million in
1998 as compared to 1997. Fuel expense decreased $10.7 million as a result of
lower average unit cost of fuel declining from $1.83 per MMbtu in 1997 to $1.59
per MMbtu in 1998 due to lower spot market natural gas prices. Purchased power
expenses decreased approximately 29% from $56.4 million in 1997 to $40.1 million
in 1998 due to decreases in economy energy purchases.

Other operating expenses were $260.8 million during 1998, a decrease of
$22.8 million when compared to 1997. The decrease is primarily due to a
transmission service agreement adjustment related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). Also contributing to the decrease is the absence in 1998 of
a $15 million write-off of previously capitalized energy efficiency incentives,
and rate case-related expenses. Maintenance expenses increased $4.0 million due
primarily to flood damage, power plant repairs and storm-related tree

2-103 CPL
<PAGE>

maintenance. Depreciation and amortization expenses increased $13.5 million, or
8% in 1998 as compared to 1997 due primarily to the accelerated recovery of ECOM
property recorded in 1998 related to the CPL 1997 Final Order as well as
increases in depreciable and amortizable plant. Partially offsetting the
increase in depreciation and amortization expenses was lower depreciation rates
on non-ECOM property related to the CPL 1997 Final Order.

Taxes, other than income decreased $12.0 million for 1998 due to a
decrease in Texas ad valorem taxes. Operating income taxes increased $42.8
million for the year compared to 1997 as a result of higher pre-tax income.

Other income and deductions decreased approximately $7.5 million due to
reduced interest income associated with lower levels of short-term investments
in 1998 as well as reduced non-operating taxes.

Interest charges decreased $9.1 million during 1998 when compared to 1997
primarily as a result of the maturity of CPL's $200 million Series BB, 6% FMBs
in October 1997 and $28 million Series J, 6 5/8%, FMBs that matured January 1,
1998 and the reacquisition of $36 million Series L 7% FMBs in September 1998.
See ITEM 8. NOTE 8. LONG-TERM DEBT for additional information related to the
reacquisition of long-term debt. The decrease was offset in part by increased
distributions on Trust Preferred Securities, which were outstanding for a
portion of 1997.

2-104 CPL
<PAGE>
<TABLE>
<CAPTION>

CPL
Consolidated Statements of Income
Central Power and Light Company
- -------------------------------------------------------------------------------------------------------
For the Years Ended December 31,
-------------------------------------------
1999 1998 1997
----------- ----------- ------------
(thousands)
<S> <C> <C> <C>

Electric Operating Revenues
Residential $ 540,452 $ 527,081 $ 541,169
Commercial 393,595 377,492 400,412
Industrial 330,629 309,543 330,481
Sales for resale 75,836 66,680 70,461
Other 141,963 125,321 33,759
----------- ----------- ------------
1,482,475 1,406,117 1,376,282
----------- ----------- ------------
Operating Expenses and Taxes
Fuel 403,989 385,944 396,707
Purchased power 68,155 40,062 56,475
Other operating 290,074 260,843 283,640
Maintenance 70,165 63,779 59,791
Depreciation and amortization 177,702 184,805 171,349
Taxes, other than income 73,823 70,927 82,909
Income taxes 103,895 116,831 74,044
----------- ----------- ------------
1,187,803 1,123,191 1,124,915
----------- ----------- ------------

Operating Income 294,672 282,926 251,367
----------- ----------- ------------

Other Income and (Deductions)
Charges for investments and plant development costs -- -- (2,060)
Allowance for equity funds used during construction -- 51 1,724
Other 2,827 (1,495) 3,563
Non-operating income taxes 5,286 2,204 5,050
----------- ----------- ------------
8,113 760 8,277
----------- ----------- ------------

Income Before Interest Charges 302,785 283,686 259,644
----------- ----------- ------------

Interest Charges
Interest on long-term debt 87,413 93,301 105,081
Distributions on Trust Preferred Securities 12,000 12,000 7,533
Interest on short-term debt and other 19,498 19,506 20,613
Allowance for borrowed funds used during construction (4,531) (2,771) (2,054)
----------- ----------- ------------
114,380 122,036 131,173
----------- ----------- ------------

Income before Extraordinary Item 188,405 161,650 128,471
Extraordinary loss on reacquired debt
(net of tax of $2,971) (5,517) -- --
----------- ----------- ------------

Net Income 182,888 161,650 128,471
Less: Preferred stock dividends 6,931 6,901 9,523
Gain (Loss) on reacquired preferred stock (2,763) -- 2,402
----------- ----------- ------------
Net Income for Common Stock $ 173,194 $ 154,749 $ 121,350
=========== =========== ============

</TABLE>

The accompanying notes to consolidated financial statements as they relate to
CPL are an integral part of these statements.

2-105 CPL
<PAGE>
CPL
Consolidated Statements of Retained Earnings
Central Power and Light Company
- --------------------------------------------------------------------------------
For the Years Ended December 31,
----------------------------------------
1999 1998 1997
------------ ------------ ----------
(thousands)

Retained Earnings at Beginning of Year $ 739,031 $ 833,282 $ 868,932
Net income for common stock 173,194 154,749 121,350
Deduct: Common stock dividends 148,000 249,000 157,000
------------ ------------ ----------
Retained Earnings at End of Year $ 764,225 $ 739,031 $ 833,282
============ ============ ==========

The accompanying notes to consolidated financial statements as they relate
to CPL are an integral part of these statements.

2-106 CPL
<PAGE>
CPL
Consolidated Balance Sheets
Central Power and Light Company

As of December 31,
--------------------------
1999 1998
----------- ------------
(thousands)
ASSETS
Electric Utility Plant
Production $ 3,152,319 $ 3,146,269
Transmission 566,629 527,146
Distribution 1,157,091 1,090,175
General 307,378 298,352
Construction work in progress 101,550 67,300
Nuclear fuel 226,927 206,949
----------- ------------
5,511,894 5,336,191
Less - accumulated depreciation 2,263,925 2,072,686
----------- ------------
3,247,969 3,263,505
----------- ------------
Current Assets
Cash 5,830 5,195
Special deposits for reacquisition of long-term debt 50,000 --
Accounts receivable 64,482 51,056
Materials and supplies, at average cost 58,196 59,814
Fuel inventory at LIFO cost 26,434 20,340
Under-recovered fuel costs 30,911 --
Accumulated deferred income taxes -- 713
Prepayments and other 5,353 2,952
----------- ------------
241,206 140,070
----------- ------------
Deferred Charges and Other Assets
Regulatory assets 215,302 1,099,631
Regulatory assets designated for securitization 953,249 --
Nuclear decommissioning trust 86,122 65,972
Other 104,002 167,011
----------- ------------
1,358,675 1,332,614
----------- ------------
$ 4,847,850 $ 4,736,189
=========== ============

The accompanying notes to consolidated financial statements as they relate
to CPL are an integral part of these statements.

2-107 CPL
<PAGE>
CPL
Consolidated Balance Sheets
Central Power and Light Company
<TABLE>
<CAPTION>

As of December 31,
---------------------------
1999 1998
--------- ---------
CAPITALIZATION AND LIABILITIES (thousands)
<S> <C> <C> <C> <C>

Capitalization
Common stock: $25 par value
Authorized shares: 12,000,000
Issued and outstanding shares: 6,755,535 $ 168,888 $ 168,888
Paid-in capital 405,000 405,000
Retained earnings 764,225 739,031
--------- ---------
Total Common Stock Equity 1,338,113 48% 1,312,919 46%
--------- ---- --------- ----
Preferred stock 5,967 --% 163,204 6%

CPL-obligated, mandatorily redeemable preferred
securities of subsidiary trust holding solely
Junior Subordinated Debentures of CPL 150,000 5% 150,000 5%
Long-term debt 1,304,541 47% 1,225,706 43%
--------- ---- --------- ----
Total Capitalization 2,798,621 100% 2,851,829 100%
--------- ---- --------- ----
Current Liabilities
Long-term debt due within twelve months 150,000 125,000
Advances from affiliates 322,158 160,298
Payable to affiliates 33,162 38,331
Accounts payable 88,702 86,998
Accrued taxes 41,121 46,855
Accumulated deferred income taxes 2,103 --
Accrued interest 14,723 27,036
Over-recovered fuel costs -- 9,135
Other 19,330 18,819
--------- ---------
671,299 512,472
--------- ---------
Deferred Credits
Accumulated deferred income taxes 1,234,942 1,221,561
Investment tax credits 133,306 138,513
Other 9,682 11,814
--------- ---------
1,377,930 1,371,888
--------- ---------
$ 4,847,850 $ 4,736,189
========= =========
</TABLE>

The accompanying notes to consolidated financial statements as they relate
to CPL are an integral part of these statements.

2-108 CPL
<PAGE>

Consolidated Statements of Cash Flows
Central Power and Light Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

For the Years Ended December 31,
----------------------------------
1999 1998 1997
----------- --------- ---------
(thousands)
<S> <C> <C> <C>

OPERATING ACTIVITIES
Net Income $ 182,888 $161,650 $128,471
Non-cash Items Included in Net Income
Depreciation and amortization 196,147 206,515 192,775
Deferred income taxes and investment tax credits 15,101 (12,111) 29,666
Extraordinary loss on reacquired debt 5,517 -- --
Refund due customers -- (63,713) 20,447
Charges for investments and assets -- 18,669 2,061
Inventory reserve -- -- 3,834
Changes in Assets and Liabilities
Accounts receivable (13,426) 10,255 (8,273)
Fuel inventory (6,094) (5,524) 645
Material and supplies 1,618 5,476 10,442
Accrued interest (12,313) (1,343) (3,187)
Accounts payable 1,660 13,891 26,224
Payables to affiliates (5,169) 26,341 (12,005)
Accrued taxes (5,734) 33,297 (50,649)
Fuel recovery (40,046) 52,364 (16,931)
Other deferred credits (2,132) (2,575) 2,701
Other (14,833) (4,311) 13,419
----------- --------- ---------
303,184 438,881 339,640
----------- --------- ---------
INVESTING ACTIVITIES
Construction expenditures (210,823) (123,803) (126,693)
Other 15,063 (7,181) 1,185
----------- --------- ---------
(195,760) (130,984) (125,508)
----------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 358,887 -- --
Retirement of long-term debt (125,000) (28,000) --
Reacquisition of long-term debt (136,700) (36,000) (200,000)
Special deposit for reacquisition of long-term debt (50,000) -- --
Redemption of preferred stock (160,001) -- (84,745)
Proceeds from issuance of Trust Preferred Securities -- -- 144,706
Change in advances from affiliates 161,860 17,517 90,256
Payment of dividends (155,835) (256,219) (167,648)
----------- --------- ---------
(106,789) (302,702) (217,431)
----------- --------- ---------

Net Change in Cash and Cash Equivalents 635 5,195 (3,299)
Cash and Cash Equivalents at Beginning of Year 5,195 -- 3,299
----------- --------- ---------
Cash and Cash Equivalents at End of Year $ 5,830 $ 5,195 $ --
=========== ========= =========

SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized (includes
distributions on Trust Preferred Securities) $ 125,222 $ 99,239 $116,782
=========== ========= =========
Income taxes paid $ 78,393 $ 94,245 $ 61,509
=========== ========= =========
</TABLE>

The accompanying notes to consolidated financial statements as they relate
to CPL are an integral part of these statements.

2-109 CPL
<PAGE>
CPL
Consolidated Statements of Capitalization
Central Power and Light Company

As of December 31,
------------------------
1999 1998
----------- -----------
(thousands)
COMMON STOCK EQUITY $ 1,338,113 $ 1,312,919
----------- -----------
PREFERRED STOCK
Cumulative $100 Par Value, Authorized 3,035,000 shares

Number of Shares Current
Series Outstanding Redemption Price
- -------------------------------------------------------------
Not Subject to Mandatory
Redemption
4.00% 42,038 $105.75 4,204 4,205
4.20% 17,476 $103.75 1,748 1,748
Auction Money Market -- 75,000
Auction Series A -- 42,500
Auction Series B -- 42,500
Issuance Expense 15 (2,749)
----------- -----------
5,967 163,204
----------- -----------
TRUST PREFERRED SECURITIES
CPL-obligated, mandatorily redeemable preferred
securities of subsidiary trust holding solely
Junior Subordinated Debentures of CPL, 8.00%,
due April 30, 2037 150,000 150,000
----------- -----------
LONG-TERM DEBT
First Mortgage Bonds
Series T, 7 1/2%, due December 15, 2014 (Matagorda) * -- 111,700
Series AA, 7 1/2%, due March 1, 2020 (Matagorda) * 50,000 50,000
Series CC, 7 1/4%, due October 1, 2004 100,000 100,000
Series DD, 7 1/8%, due December 1, 1999 -- 25,000
Series EE, 7 1/2%, due December 1, 2002 115,000 115,000
Series FF, 6 7/8%, due February 1, 2003 50,000 50,000
Series GG, 7 1/8%, due February 1, 2008 75,000 75,000
Series HH, 6%, due April 1, 2000 100,000 100,000
Series II, 7 1/2%, due April 1, 2023 75,000 100,000
Series JJ, 7 1/2%, due May 1, 1999 -- 100,000
Series KK, 6 5/8%, due July 1, 2005 200,000 200,000
Installment Sales Agreements - PCRBs *
Series 1993, 6%, due July 1, 2028 (Matagorda) 120,265 120,265
Series 1995, 6.10%, due July 1, 2028 (Matagorda) 100,635 100,635
Series 1995, variable rate, due November 1, 2015
(Guadalupe) 40,890 40,890
Series 1996, 6%, due June 1, 2020 (Red River) 6,330 6,330
Series 1996, 6 1/8%, due May 1, 2030 (Matagorda) 60,000 60,000
Series 1999A, 4.90%, due May 1, 2030 (Matagorda) 111,700 --
Series 1999B, 4.95%, due May 1, 2030 (Matagorda) 50,000 --
Senior Unsecured Floating Rate Notes, 6.07125%, due
November 23, 2001 200,000 --
Unamortized Discount (279) (4,114)
Amount to be Redeemed Within One Year (150,000) (125,000)
----------- -----------
1,304,541 1,225,706
----------- -----------
TOTAL CAPITALIZATION $ 2,798,621 $ 2,851,829
=========== ===========

*Obligations incurred in connection with the sale by public authorities of
tax-exempt PCRBs.

The accompanying notes to consolidated financial statements as they relate
to CPL are an integral part of these statements.

2-110 CPL
<PAGE>

CENTRAL POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See CSW's NOTE 1.

2. LITIGATION AND REGULATORY PROCEEDINGS
See CSW's NOTE 2.

3. COMMITMENTS AND CONTINGENT LIABILITIES
See CSW's NOTE 3.

4. INCOME TAXES
See CSW's NOTE 4.

5. BENEFIT PLANS
See CSW's NOTE 5.

6. JOINTLY OWNED ELECTRIC UTILITY PLANT
See CSW's NOTE 6.

7. FINANCIAL INSTRUMENTS
See CSW's NOTE 7.

8. LONG-TERM DEBT
See CSW's NOTE 8.

9. PREFERRED STOCK
See CSW's NOTE 9.

10. TRUST PREFERRED SECURITIES
See CSW's NOTE 10.

11. SHORT-TERM FINANCING
See CSW's NOTE 11.

12. STOCK BASED COMPENSATION PLANS
See CSW's NOTE 13.

13. EXTRAORDINARY ITEMS
See CSW's NOTE 16.

14. NEW ACCOUNTING STANDARDS
See CSW's NOTE 17.

2-111 CPL
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Central Power and Light Company:

We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Central Power and Light Company (a
Texas corporation and a wholly-owned subsidiary of Central and South West
Corporation) and subsidiary company as of December 31, 1999 and 1998, and the
related consolidated statements of income, retained earnings and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of Central Power and Light Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Central
Power and Light Company and subsidiary company as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

Arthur Andersen LLP

Dallas, Texas
February 25, 2000

2-112 CPL
<PAGE>

REPORT OF MANAGEMENT

Management is responsible for the preparation, integrity and objectivity
of the consolidated financial statements of Central Power and Light Company and
subsidiary company as well as other information contained in this annual report.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis and, in
some cases, reflect amounts based on the best estimates and judgments of
management, giving due consideration to materiality. Financial information
contained elsewhere in this annual report is consistent with that in the
consolidated financial statements.

The consolidated financial statements have been audited by CPL's
independent public accountants who were given unrestricted access to all
financial records and related data, including minutes of all meetings of
shareholders, the board of directors and committees of the board. CPL and its
subsidiary company believe that representations made to the independent public
accountants during their audit were valid and appropriate. The report of
independent public accountants is presented elsewhere in this report.

CPL, together with its subsidiary company, maintains a system of internal
controls to provide reasonable assurance that transactions are executed in
accordance with management's authorization, that the consolidated financial
statements are prepared in accordance with generally accepted accounting
principles and that the assets of the companies are properly safeguarded against
unauthorized acquisition, use or disposition. The system includes a documented
organizational structure and division of responsibility, established policies
and procedures including a policy on ethical standards which provides that CPL
will maintain the highest legal and ethical standards, and the careful
selection, training and development of our employees.

Internal auditors continuously monitor the effectiveness of the internal
control system following standards established by the Institute of Internal
Auditors. Actions are taken by management to respond to deficiencies as they are
identified. The board, operating through its audit committee, which is comprised
entirely of directors who are not officers or employees of CPL or its subsidiary
company, provides oversight to the financial reporting process.

CPL and its subsidiary believe that, in all material respects, their
system of internal controls over financial reporting and over safeguarding of
assets against unauthorized acquisition, use or disposition functioned
effectively as of December 31, 1999.

J. Gonzalo Sandoval R. Russell Davis
General Manager/President - CPL Controller - CPL

2-113 CPL
<PAGE>

PUBLIC SERVICE COMPANY
OF OKLAHOMA

2-114 PSO
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data for each of the five years ended
December 31 is provided to highlight significant trends in the financial
condition and results of operations for PSO. Certain financial statement items
for prior years have been reclassified to conform to the most recent period
presented.
<TABLE>
<CAPTION>

1999(1) 1998(1) 1997(1) 1996 1995
(thousands, except ratios)
<S> <C> <C> <C> <C> <C>

INCOME STATEMENT DATA
Revenues $749,390 $780,159 $712,690 $735,265 $690,823
Net Income 62,605 76,843 46,206 31,478 81,828
Net Income for Common Stock 62,392 76,630 50,053 30,662 81,012

BALANCE SHEET DATA
Assets 1,543,871 1,482,728 1,464,563 1,449,665 1,499,511
Long-term obligations (2) 439,516 459,064 513,703 438,369 397,945
Capitalization ratios
Common stock equity 52% 51% 48% 51% 54%
Preferred stock -- -- -- 2 2
Trust Preferred Securities 8 8 8 -- --
Long-term debt 40 41 44 47 44
Ratio of earnings to fixed charges
(SEC Method) 3.39 4.21 2.68 2.45 4.32

</TABLE>

(1) See PUBLIC SERVICE COMPANY OF OKLAHOMA - RESULTS OF OPERATIONS for major
factors affecting earnings.
(2) Long-term obligations include long-term debt and Trust Preferred Securities.

2-115 PSO
<PAGE>

PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS

Reference is made to PSO's Consolidated Financial Statements, related
Notes to Consolidated Financial Statements and Selected Financial Data.
Referenced information should be read in conjunction with, and is essential to
understanding, the following discussion and analysis.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND 1998

PSO's net income for common stock decreased 19% during 1999 to $62.4
million from $76.6 million in 1998. The decrease resulted primarily from lower
non-fuel-related revenues and higher other operating and maintenance expenses
offset in part by lower income tax expense.

Electric operating revenues were $749.4 million during 1999, a $30.8
million or 4% decrease from $780.2 million in 1998. The decrease was due
primarily to lower fuel-related revenues of $24.6 million resulting from lower
combined fuel expense and purchased power expense as discussed in the following
paragraph. Non-fuel-related revenues decreased $16.5 million due primarily to an
8% decline in residential sales attributable to milder weather in 1999. The
decrease in operating revenues was partially offset by a $6.3 million increase
in sales for resale to other utilities as a result of increased demand and a
$4.0 million increase in transmission-related revenues resulting primarily from
changes to CSW's transmission coordination agreement. See ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Transmission Coordination Agreement.

Fuel expense decreased $40.7 million, or 13% to $269.3 million from $310.0
million in 1998. This decline resulted primarily from a $52.3 million decrease
in the recovery of deferred fuel costs due to a significant difference in fuel
factors used to recover fuel expense from customers. The decrease in recovery of
deferred fuel was partially offset by higher average unit fuel costs. The
average unit cost of fuel increased from $1.77 per MMbtu in 1998 to $1.96 per
MMbtu in 1999 due primarily to higher spot market natural gas prices. Purchased
power expenses increased 31% to $74.9 million in 1999 from $57.2 million in
1998. This increase is due primarily to an increase in economy energy and firm
contract purchases.

Other operating expenses increased $10.7 million in 1999 to $120.1 million
from $109.4 million in 1998. The increase was due primarily to higher
transmission expenses of $13.4 million partially offset by $4.0 million in
reduced administrative and general expenses. The higher transmission expenses
resulted primarily from a $6.1 million change in the CSW transmission
coordination agreement, and the absence in 1999 of a $4.0 million transmission
service agreement adjustment made in 1998 related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - Transmission Coordination Agreement and CPL and WTU Complaint
versus Texas Utilities Electric Company (Docket No. 17285).

Maintenance expense of $45.8 million in 1999 was $8.8 million or 24%
higher than 1998 due primarily to higher production and distribution maintenance
expenses. The production maintenance expense increase of $6.8 million related to
scheduled power plant maintenance as well as the restart of a power plant
generating unit and an unscheduled outage. Distribution maintenance expense
increased $1.4 million primarily from an increase in tree trimming maintenance
activities in 1999.

Income tax expense associated with utility operations of $34.2 million for
1999 was $14.9 million, or 30% lower than 1998 due primarily to lower taxable
income in 1999 and prior year income tax liability adjustments.

2-116 PSO
<PAGE>

Interest on long-term debt was $2.6 million or 9% lower in 1999 than 1998
due primarily to the reacquisition of $55 million of FMBs during the third
quarter of 1998. An increase of $3.0 million on short-term debt and other was
primarily a result of increased short-term borrowings and interest expense
related to the changes to CSW's transmission coordination agreement. See ITEM 8.
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Transmission Coordination
Agreement and NOTE 8. LONG-TERM DEBT.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Net income for common stock increased 53% during 1998 to $76.6 million
from $50.1 million in 1997. The increase resulted primarily from higher non-fuel
revenues, decreased transmission expenses and the absence in 1998 of the impact
of recording the effects associated with the outcome of the PSO 1997 Rate
Settlement Agreement. The increase was offset in part by the absence in 1998 of
the $4.2 million gain on the reacquisition of preferred stock recorded in 1997.
See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional
information related to the PSO 1997 Rate Settlement Agreement.

Electric operating revenues were $780.2 million during 1998, a 9% increase
from $712.7 million for the same period in 1997. This increase was due primarily
to higher non-fuel revenues of $39.2 million and fuel-related revenues of $28.3
million. The increase in non-fuel revenues was due primarily to a 9% increase in
retail MWH sales resulting from warmer weather as well as the absence in 1998 of
a $29.0 million provision for rate refund. The increase in revenues was offset
in part by lower base rates resulting from the PSO 1997 Rate Settlement
Agreement and a decrease in transmission-related revenues resulting from changes
to a transmission coordination agreement pending before the FERC. See ITEM 8.
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Transmission Coordination
Agreement. The increase in fuel revenues was due primarily to higher fuel
expense, as discussed below.

Fuel expense increased $31.0 million, or 11%, during 1998 when compared to
1997 due primarily to a $43.3 million increase in the recovery of deferred fuel
costs and a 7% increase in generation due primarily to higher weather-related
demand. The increase in fuel expense was offset in part by lower average unit
fuel costs. The average unit cost of fuel declined from $1.98 per MMbtu in 1997
to $1.77 per MMbtu in 1998 due primarily to lower spot market natural gas and
coal prices. Purchased power expenses increased 11% to $57.2 million in 1998
from $51.6 million in 1997. This increase was due primarily to higher off-system
and emergency energy purchases associated with higher weather-related demand in
1998 and a plant outage in the first quarter of 1998, partially offset by lower
cogeneration purchases.

Other operating expenses were $109.4 million in 1998, a decrease of $26.5
million from $135.9 million in 1997. The decrease was due primarily to the
absence in 1998 of a write-off of previously capitalized energy efficiency
incentives and the write-off of rate case-related expenses, both associated with
the previously mentioned rate settlement agreement. Also contributing to the
decline in other operating expenses were lower transmission expenses resulting
from a transmission service agreement adjustment related to the final order in
Texas Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). The decrease in other operating expenses was offset in part
by additional environmental expenses.

Maintenance expenses increased 10% to $37.0 million in 1998 from $33.6
million in 1997. The increase was due primarily to higher production and
distribution maintenance activities.

Depreciation and amortization expense decreased $8.6 million, or 11%
during 1998 when compared to the prior year. This decrease was due primarily to
lower depreciation rates and the absence in 1998 of a write-off of regulatory

2-117 PSO
<PAGE>

assets, both resulting from the PSO 1997 Rate Settlement Agreement. This
decrease was offset in part by higher depreciable plant.

Taxes, other than income, were $29.8 million in 1998, a 4% increase from
$28.8 million in 1997 as a result of higher ad valorem tax expenses.

Operating income taxes were $49.1 million in 1998 compared to $20.8
million in 1997 due primarily to higher pre-tax income in 1998.

Other income and deductions decreased $1.7 million in 1998 when compared
to 1997 primarily as a result of lower miscellaneous non-operating income.

Interest charges increased $0.9 million in 1998 when compared to the same
period in 1997 due primarily to a full year of distributions in 1998 on Trust
Preferred Securities offset in part by a decrease in long-term interest expenses
in 1998 as a result of a reduction of long-term debt outstanding during 1998.
See ITEM 8. NOTE 8. LONG-TERM DEBT.

2-118 PSO
<PAGE>
PSO
Consolidated Statements of Income
Public Service Company of Oklahoma

For the Years Ended December 31,
--------------------------------
1999 1998 1997
--------- ---------------------
(thousands)
Electric Operating Revenues
Residential $ 294,407 $ 329,058 $ 297,265
Commercial 226,687 236,258 226,525
Industrial 161,148 162,773 161,974
Sales for resale 39,187 27,413 30,896
Other 27,961 24,657 (3,970)
------- ------- -------
749,390 780,159 712,690
------- ------- -------
Operating Expenses and Taxes
Fuel 269,316 309,969 278,976
Purchased power 74,893 57,222 51,619
Other operating 120,123 109,393 135,943
Maintenance 45,809 36,981 33,608
Depreciation and amortization 74,736 72,671 81,227
Taxes, other than income 30,519 29,816 28,778
Income taxes 34,184 49,099 20,763
------- ------- -------
649,580 665,151 630,914
------- ------- -------
Operating Income 99,810 115,008 81,776
------- ------- -------
Other Income and (Deductions)
Allowance for equity funds used during
construction 201 860 995
Charges for investments and plant
development costs -- -- (123)
Other (1,470) (1,044) (1,503)
Non-operating income taxes 2,215 93 2,280
------- ------- -------
946 (91) 1,649
------- ------- -------
Income Before Interest Charges 100,756 114,917 83,425
------- ------- -------
Interest Charges
Interest on long-term debt 26,528 29,136 30,474
Distributions on Trust Preferred
Securities 6,000 6,000 3,967
Interest on short-term debt and other 7,058 4,107 4,100
Allowance for borrowed funds used
during construction (1,435) (1,169) (1,322)
------- ------- -------
38,151 38,074 37,219
------- ------- -------

Net Income 62,605 76,843 46,206
Less: Preferred stock dividends 213 213 364
Gain on reacquired preferred stock -- -- 4,211
------- ------- -------
Net Income for Common Stock $ 62,392 $ 76,630 $ 50,053
======= ======= =======

The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.

2-119 PSO
<PAGE>
PSO
Consolidated Statements of Retained Earnings
Public Service Company of Oklahoma
- --------------------------------------------------------------------------------
For the Years Ended December 31,
----------------------------------
1999 1998 1997
---------- ----------- --------
(thousands)

Retained Earnings at Beginning of Year $ 144,626 $ 136,996 $ 145,943
Net income for common stock 62,392 76,630 50,053
Deduct: Common stock dividends 65,000 69,000 59,000
---------- ----------- --------
Retained Earnings at End of Year $ 142,018 $ 144,626 $ 136,996
========== =========== ========

The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.

2-120 PSO
<PAGE>
PSO
Consolidated Balance Sheets
Public Service Company of Oklahoma
- -------------------------------------------------------------------------
As of December 31,
--------------------------
1999 1998
----------- ------------
(thousands)
ASSETS
Electric Utility Plant
Production $ 916,889 $ 913,083
Transmission 392,029 378,719
Distribution 897,516 855,277
General 217,368 211,124
Construction work in progress 35,903 33,519
----------- ------------
2,459,705 2,391,722
Less - Accumulated depreciation 1,114,255 1,082,081
----------- ------------
1,345,450 1,309,641
----------- ------------
Current Assets
Cash 3,077 4,670
Accounts receivable 34,584 32,916
Materials and supplies, at average cost 34,289 33,006
Fuel inventory, at LIFO cost 24,143 16,441
Under-recovered fuel costs 6,469 --
Accumulated deferred income taxes 19,145 11,789
Prepayments and other 1,668 2,881
----------- ------------
123,375 101,703
----------- ------------

Deferred Charges and Other Assets 75,046 71,384
----------- ------------
$ 1,543,871 $ 1,482,728
=========== ============

The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.

2-121 PSO
<PAGE>

Consolidated Balance Sheets
Public Service Company of Oklahoma
- ------------------------------------------------------------------------------
As of December 31,
------------------------------
1999 1998
----------- -----------
CAPITALIZATION AND LIABILITIES (thousands)
Capitalization
Common stock: $15 par value
Authorized shares: 11,000,000 shares
Issued 10,482,000 shares and outstanding
9,013,000 shares $157,230 $157,230
Paid-in capital 180,000 180,000
Retained earnings 142,018 144,626
----------- -----------
Total Common Stock Equity 479,248 52% 481,856 51%
----------- ------ ----------- -----

Preferred stock 5,286 -- % 5,287 -- %
PSO-obligated, mandatorily redeemable
preferred securities of subsidiary trust
holding solely Junior Subordinated
Debentures of PSO 75,000 8% 75,000 8%
Long-term debt 364,516 40% 384,064 41%
----------- ------ ----------- -----
Total Capitalization 924,050 100% 946,207 100%
----------- ------ ----------- ----

Current Liabilities
Long-term debt due within twelve months 20,000 --
Advances from affiliates 79,169 15,892
Payables to affiliates 34,043 33,489
Accounts payable 44,088 52,888
Customer deposits 17,752 17,368
Accrued taxes 18,480 23,095
Accrued interest 5,420 7,606
Over-recovered fuel costs -- 15,240
Other 5,085 6,599
----------- -----------
224,037 172,177
----------- -----------
Deferred Credits
Accumulated deferred income taxes 302,727 277,181
Investment tax credits 37,574 39,365
Income tax related regulatory
liabilities, net 32,826 35,818
Other 22,657 11,980
----------- -----------
395,784 364,344
----------- -----------
$1,543,871 $ 1,482,728
=========== ===========

The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.

2-122 PSO
<PAGE>
PSO
Consolidated Statements of Cash Flows
Public Service Company of Oklahoma
- -----------------------------------------------------------------------------
For the Years Ended December 31,
--------------------------------
1999 1998 1997
-------- ---------- ----------
(thousands)
OPERATING ACTIVITIES
Net Income $ 62,605 $ 76,843 $ 46,206
Non-cash Items Included in Net Income
Depreciation and amortization 77,472 75,693 85,459
Deferred income taxes and investment
tax credtis 13,407 (3,488) 6,169
Charges for investments and assets -- 4,159 12,803
Inventory reserve -- -- 838
Changes in Assets and Liabilities
Accounts receivable (1,668) (13,308) (11,190)
Fuel inventory (7,702) (5,014) 2,634
Accounts payable (9,604) 4,895 1,009
Payables to affiliates 554 (2,314) 7,916
Accrued taxes (4,615) 23,095 (12,306)
Other deferred credits 10,677 5,865 (585)
Fuel recovery (21,709) 30,605 (12,715)
Other (6,825) (3,938) (4,584)
-------- ---------- ----------
112,592 193,093 121,654
-------- ---------- ----------
INVESTING ACTIVITIES
Construction expenditures (103,122) (68,897) (79,568)
Other (8,659) (8,271) (6,008)
-------- ---------- ----------
(111,781) (77,168) (85,576)
-------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 33,232 -- --
Reacquisition of long-term debt (33,700) (55,231) --
Redemption of preferred stock (1) -- (10,329)
Proceeds from issuance of Trust Preferred
Securities -- -- 72,450
Change in advances from affiliates 63,277 11,018 (37,993)
Payment of dividends (65,212) (69,213) (59,514)
-------- ---------- ----------
(2,404) (113,426) (35,386)
-------- ---------- ----------

Net Change in Cash and Cash Equivalents (1,593) 2,499 692
Cash and Cash Equivalents at Beginning of
Year 4,670 2,171 1,479
-------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 3,077 $ 4,670 $ 2,171
======== ========== ==========

SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized
(includes distributions on Trust
Preferred Securities $ 37,081 $ 37,772 $ 35,557
======== ========== ==========
Income taxes paid $ 23,871 $ 33,712 $ 34,244
======== ========== ==========

The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.

2-123 PSO
<PAGE>
PSO
Consolidated Statements of Capitalization
Public Service Company of Oklahoma
- --------------------------------------------------------------------------------
As of December 31,
----------------------
1999 1998
---------- ----------
(thousands)
COMMON STOCK EQUITY $479,248 $481,856
---------- ----------

PREFERRED STOCK
(Cumulative $100 Par Value, Authorized 700,000
shares, redeemable at the option of PSO
upon 30 days notice)
Number Current
of Shares Redemption
Series Outstanding Price
- ----------------------------------------------------

4.00% 44,631 $105.75 4,463 4,464
4.24% 8,069 $103.19 807 807
Premium 16 16
---------- ----------
5,286 5,287
---------- ----------

TRUST PREFERRED SECURITIES
PSO-obligated, mandatorily redeemable preferred
securities of subsidiary trust holding solely
Junior Subordinated Debentures of PSO, 8.00%,
due April 30, 2037 75,000 75,000
---------- ----------

LONG-TERM DEBT
First Mortgage Bonds
Series S, 7 1/4%, due July 1, 2003 65,000 65,000
Series T, 7 3/8%, due December 1, 2004 50,000 50,000
Series U, 6 1/4%, due April 1, 2003 35,000 35,000
Series V, 7 3/8%, due April 1, 2023 100,000 100,000
Series W, 6 1/2%, due June 1, 2005 50,000 50,000
Medium-term Notes, 5.89%-6.43%, due December 15, 2000
March 1, 2001 40,000 40,000
Installment sales agreement - PCRBs *
Series A, 5.9%, due December 1, 2007 (OEFA) 34,700 34,700
Series 1996, 6.0%, due June 1, 2020 (Red River) 12,660 12,660
Unamortized discount (2,844) (3,296)
Amounts to be redeemed within one year (20,000) --
---------- ----------
364,516 384,064
---------- ----------
TOTAL CAPITALIZATION $924,050 $946,207
========== ==========

*Obligations incurred in connection with the sale by public authorities of
tax-exempt PCRBs.

The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.

2-124 PSO
<PAGE>

PUBLIC SERVICE COMPANY OF OKLAHOMA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See CSW's NOTE 1.

2. LITIGATION AND REGULATORY PROCEEDINGS
See CSW's NOTE 2.

3. COMMITMENTS AND CONTINGENT LIABILITIES
See CSW's NOTE 3.

4. INCOME TAXES
See CSW's NOTE 4.

5. BENEFIT PLANS
See CSW's NOTE 5.

6. JOINTLY OWNED ELECTRIC UTILITY PLANT
See CSW's NOTE 6.

7. FINANCIAL INSTRUMENTS
See CSW's NOTE 7.

8. LONG-TERM DEBT
See CSW's NOTE 8.

9. PREFERRED STOCK
See CSW's NOTE 9.

10. TRUST PREFERRED SECURITIES
See CSW's NOTE 10.

11. SHORT-TERM FINANCING
See CSW's NOTE 11.

12. STOCK BASED COMPENSATION PLANS
See CSW's NOTE 13.

13. NEW ACCOUNTING STANDARDS
See CSW's NOTE 17.

2-125 PSO
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Public Service Company of
Oklahoma:

We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Public Service Company of Oklahoma
(an Oklahoma corporation and a wholly-owned subsidiary of Central and South West
Corporation) and subsidiary companies as of December 31, 1999 and 1998, and the
related consolidated statements of income, retained earnings and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of Public Service Company of Oklahoma's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Public
Service Company of Oklahoma and subsidiary companies as of December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

Arthur Andersen LLP

Dallas, Texas
February 25, 2000

2-126 PSO
<PAGE>

REPORT OF MANAGEMENT

Management is responsible for the preparation, integrity and objectivity
of the consolidated financial statements of Public Service Company of Oklahoma
and its subsidiary companies as well as other information contained in this
annual report. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis and, in some cases, reflect amounts based on the best estimates and
judgments of management, giving due consideration to materiality. Financial
information contained elsewhere in this annual report is consistent with that in
the consolidated financial statements.

The consolidated financial statements have been audited by PSO's
independent public accountants who were given unrestricted access to all
financial records and related data, including minutes of all meetings of
shareholders, the board of directors and committees of the board. PSO and its
subsidiaries believe that representations made to the independent public
accountants during their audit were valid and appropriate. The report of
independent public accountants is presented elsewhere in this report.

PSO, together with its subsidiary companies, maintains a system of
internal controls to provide reasonable assurance that transactions are executed
in accordance with management's authorization, that the consolidated financial
statements are prepared in accordance with generally accepted accounting
principles and that the assets of the companies are properly safeguarded against
unauthorized acquisition, use or disposition. The system includes a documented
organizational structure and division of responsibility, established policies
and procedures including a policy on ethical standards which provides that PSO
will maintain the highest legal and ethical standards, and the careful
selection, training and development of our employees.

Internal auditors continuously monitor the effectiveness of the internal
control system following standards established by the Institute of Internal
Auditors. Actions are taken by management to respond to deficiencies as they are
identified. The board, operating through its audit committee, which is comprised
entirely of directors who are not officers or employees of PSO or its
subsidiaries, provides oversight to the financial reporting process.

PSO and its subsidiaries believe that, in all material respects, their
system of internal control over financial reporting and over safeguarding of
assets against unauthorized acquisition, use or disposition functioned
effectively as of December 31, 1999.

T. D. Churchwell R. Russell Davis
President - PSO Controller - PSO

2-127 PSO
<PAGE>

SOUTHWESTERN ELECTRIC
POWER COMPANY

2-128 SWEPCO
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data for each of the five years ended
December 31 is provided to highlight significant trends in the financial
condition and results of operations for SWEPCO. SWEPCO recorded an extraordinary
loss as a result of legislation passed in Texas and Arkansas where the
electricity generation portion of SWEPCO's business no longer meets the criteria
to apply SFAS No. 71. Certain financial statement items for prior years have
been reclassified to conform to the most recent period presented.
<TABLE>
<CAPTION>

1999 (1) 1998 (1) 1997 (1) 1996 1995
(thousands, except ratios)
<S> <C> <C> <C> <C> <C>

INCOME STATEMENT DATA
Revenues $965,027 $952,952 $939,869 $920,786 $836,705
Income Before Extraordinary Item 86,666 98,103 92,902 66,566 117,114
Extraordinary Loss (3,011) -- -- -- --
Net Income for Common Stock 83,426 96,542 92,254 63,503 113,870

BALANCE SHEET DATA
Assets 2,107,798 2,081,391 2,134,619 2,141,999 2,159,793
Long-term obligations (2) 605,973 653,741 723,554 672,458 675,653
Capitalization ratios
Common stock equity 52% 51% 49% 50% 49%
Preferred stock -- -- 2 4 4
Trust Preferred Securities 9 8 8 -- --
Long-term debt 39 41 41 46 47
Ratios of earnings to fixed charges
(SEC Method) 2.97 3.53 3.46 2.81 3.80
</TABLE>

(1) See SOUTHWESTERN ELECTRIC POWER COMPANY - RESULTS OF OPERATIONS for major
factors affecting earnings.
(2) Long-term obligations include long-term debt and Trust Preferred Securities.

2-129 SWEPCO
<PAGE>

SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS

Reference is made to SWEPCO's Consolidated Financial Statements, related
Notes to Consolidated Financial Statements and Selected Financial Data.
Referenced information should be read in conjunction with, and is essential in
understanding, the following discussion and analysis.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 AND 1998

SWEPCO's net income for common stock for 1999 was $83.4 million, which was
$13.1 million, or 14% lower than in 1998. The decrease resulted primarily from
increased other operating and maintenance expenses, the write-off of Cajun
acquisition expenses, increased interest charges and the effect of an
extraordinary loss offset in part by increased electric operating revenues.

Electric operating revenues for 1999 were $965.0 million, which is $12.1
million higher than in 1998. This increase resulted from increased fuel-related
revenues of $3.1 million due to higher fuel expense and purchased power as
discussed in the following paragraph and increased sales for resale to other
utilities of $14.2 million as a result of increased demand. The increase in
revenues was also affected by the absence in 1999 of a $3.9 million transmission
service agreement adjustment in 1998 related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL AND WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). Additionally, revenues were affected by the absence in 1999
of a 1998 provision for rate refund of $5.3 million primarily in connection with
the annual determination of cost of service formula rates for SWEPCO's wholesale
customers and a reversal in 1999 of a previous provision for rate refund of $1.7
million. Also affecting revenues was the absence in 1999 of a 1998 reduction in
fuel revenues of $3.2 million in accordance with a Texas Commission order in
SWEPCO's fuel reconciliation regarding transmission equalization expense
recovery. These increases were partially offset by decreased non-fuel-related
revenues of $5.3 million and a $7.5 million adjustment related to changes to
CSW's transmission coordination agreement. See ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS - Transmission Coordination Agreement. Non-fuel-related
retail revenues were affected by a 3% decrease in retail MWH sales due primarily
to decreased weather-related customer demand. Revenues in 1999 also decreased
due to a $6.5 million charge to reflect the excess earnings provision of the
Texas Legislation. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS -
Electric Utility Restructuring Legislation.

Fuel and purchased power expense increased in 1999 compared to 1998. Fuel
expense increased $8.2 million, or 2% due primarily to an increase in average
unit fuel costs and a 3% increase in generation. Average unit fuel costs
increased from $1.63 per MMbtu in 1998 to $1.66 per MMbtu in 1999 due primarily
to higher spot market natural gas prices. Fuel expense was affected by the
absence in 1999 of a transmission service agreement adjustment in 1998 related
to the final order in Texas Commission Docket No. 17285. See ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - CPL and WTU Complaint versus Texas
Utilities Electric Company (Docket No. 17285). Purchased power expenses for 1999
increased $1.9 million, or 5%, compared to 1998 due primarily to an increase in
economy energy purchases.

Other operating expenses for 1999 were $141.7 million, an increase of $1.2
million compared to 1998 as a result of increased transmission and
customer-related expenses. The increase was offset in part by a decrease in
administrative and general expenses. The increase in transmission expenses was
due to the absence in 1999 of a transmission service agreement adjustment in
1998 related to the final order in Texas Commission Docket No. 17285. See ITEM
8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - CPL and WTU Complaint versus

2-130 SWEPCO
<PAGE>

Texas Utilities Electric Company (Docket No. 17285). Transmission expenses were
also affected by expenses related to changes to CSW's transmission coordination
agreement. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS -
Transmission Coordination Agreement. The decrease in administrative and general
expenses was due primarily to establishment of certain regulatory assets in
connection with the settlement and approval of rate proceedings in Arkansas and
Louisiana. See ITEM 7. MD&A - RATES AND REGULATORY MATTERS and ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - SWEPCO Louisiana Rate Review and SWEPCO
Arkansas Rate Review. Administrative and general expenses were also affected by
lower employee-related expenses in 1999.

Maintenance expenses for 1999 were $64.2 million, which was $13 million,
or 25% higher than 1998. This increase was due to higher power station
maintenance, increased tree-trimming maintenance and higher overhead line
maintenance.

Depreciation and amortization expenses for 1999 were $102.3 million, an
increase of $3.9 million, or 4% when compared to 1998 due primarily to increased
depreciable plant.

Taxes, other than income for 1999 were $53.8 million, a decrease of $3.3
million, or 6% below 1998. This decrease was due primarily to lower ad valorem
taxes.

Income tax expenses associated with utility operations during 1999 were
$38.5 million, which decreased $9.5 million, or 20% compared to 1998 due to
lower taxable income and prior year income tax liability adjustments.

Other income and deductions decreased as a result of the write-off in the
third quarter of 1999 of Cajun acquisition expenses of $3.7 million, net of tax.
See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEDURES - Withdrawal of SWEPCO
Cajun Asset Proposal.

Interest charges for 1999 were $58.9 million an increase of $3.8 million,
or 7% when compared to 1998 due primarily to increased levels or short-term
borrowing and additional interest expense in connection with changes to CSW's
transmission coordination agreement. See ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS - Transmission Coordination Agreement.

The extraordinary loss of $3.0 million was the result of legislation
passed in Texas and Arkansas where the electricity generation portion of
SWEPCO's business no longer meets the criteria to apply SFAS No. 71. See ITEM 8.
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation and ITEM 8. NOTE. 16. EXTRAORDINARY ITEMS.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 AND 1997

Net income for common stock increased 5% during 1998 to $96.5 million from
$92.3 million in 1997. The increase resulted primarily from increased non-fuel
revenue and the absence in 1998 of certain operating expense charges in 1997.

Electric operating revenues increased $13.1 million, to $953.0 million in
1998 from $939.9 million in 1997. The increase was due primarily to higher
non-fuel revenues of $26.8 million resulting from a 5% increase in
weather-related MWH sales. The increase in electric operating revenues was
offset in part by a transmission service agreement adjustment related to the
final order in Texas Commission Docket No. 17285, a provision for rate refund of
$5.3 million primarily in connection with the annual determination of cost of
service formula rates for SWEPCO's wholesale customers and a $3.2 million
reduction in fuel revenues in accordance with a Texas Commission order in
SWEPCO's fuel reconciliation regarding transmission equalization expense
recovery. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - CPL and

2-131 SWEPCO
<PAGE>

WTU - Complaint versus Texas Utilities Electric Company (Docket No. 17285).
Electric operating revenues were also affected by a decrease in fuel revenues of
$1.3 million.

Fuel expense decreased $11.0 million for 1998 when compared to 1997 due
primarily to a decrease in average unit fuel costs for natural gas from $1.69
per MMbtu in 1997 to $1.63 per MMbtu in 1998 as a result of lower priced spot
market natural gas. The decrease in fuel expenses was offset in part as a result
of a transmission service agreement adjustment related to the final order in
Texas Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint Versus Texas Utilities Electric Company
(Docket No. 17285). Fuel expense was also affected by an increase in natural gas
generation associated with weather-related demand. Purchased power expense
increased $9.6 million for 1998 compared to 1997 due primarily to an increase in
economy energy purchases.

Other operating expenses decreased $16.7 million, or 11% to $140.5 million
during 1998 when compared to 1997. The decrease is due primarily to a
transmission service agreement adjustment related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). The decrease was also affected by the absence in 1998 of
costs in 1997 associated with a canceled transmission project of $10.2 million,
the write-off of previously capitalized energy efficiency incentives of $4.2
million and the write-off of obsolete inventory of $1.2 million. The decrease
was offset in part by increased expenses in 1998 related to a transmission
coordination agreement. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - Transmission Coordination Agreement.

Maintenance expenses increased $7.2 million, or 16% as a result of
increased power station maintenance, wind storm damage and additional
tree-trimming maintenance expenses.

Depreciation and amortization expense increased $3.3 million, or 3% during
1998 when compared to 1997 due primarily to increases in depreciable and
amortizable plant. Operating income taxes increased $8.3 million, or 21%, as a
result of increased pre-tax income.

Other income and deductions decreased $1.6 million for 1998 compared to
1997 due primarily to the absence in 1998 of a $ 1.1 million, net of tax, gain
on the sale of lignite properties recorded in 1997.

Interest charges increased $4.6 million due primarily to distributions on
Trust Preferred Securities, which were outstanding for a portion of 1997.

2-132 SWEPCO
<PAGE>

SWEPCO
Consolidated Statements of Income
Southwestern Electric Power Company
- --------------------------------------------------------------------------------
For the Years Ended December 31,
---------------------------
1999 1998 1997
-------- --------- ---------
(thousands)
Electric Operating Revenues
Residential $294,743 $314,600 $289,723
Commercial 198,222 197,737 192,115
Industrial 255,038 253,458 263,207
Sales for resale 172,076 139,869 146,916
Other 44,948 47,288 47,908
-------- --------- ---------
965,027 952,952 939,869
-------- --------- ---------
Operating Expenses and Taxes
Fuel 379,597 371,414 382,404
Purchased power 37,371 35,483 25,928
Other operating 141,674 140,460 157,188
Maintenance 64,241 51,219 44,038
Depreciation and amortization 102,331 98,479 95,228
Taxes, other than income 53,783 57,128 55,962
Income taxes 38,506 47,982 39,712
-------- --------- ---------
817,503 802,165 800,460
-------- --------- ---------

Operating Income 147,524 150,787 139,409
-------- --------- ---------

Other Income and (Deductions)
Charges for investments and plant development
costs -- -- (743)
Allowance for equity funds used during
construction 35 1,336 934
Other (6,826) (753) 1,616
Non-operating income taxes 4,826 1,868 2,222
-------- --------- ---------
(1,965) 2,451 4,029
-------- --------- ---------

Income Before Interest Charges 145,559 153,238 143,438
-------- --------- ---------

Interest Charges
Interest on long-term debt 38,380 39,233 40,440
Distributions on Trust Preferred Securities 8,662 8,662 5,582
Interest on short-term debt and other 13,800 8,591 5,736
Allowance for borrowed funds used during
construction (1,949) (1,351) (1,222)
-------- --------- ---------
58,893 55,135 50,536
-------- --------- ---------

Income Before Extraordinary Item 86,666 98,103 92,902

Extraordinary Loss (net of tax of $1,621) (3,011) -- --
-------- --------- ---------

Net Income 83,655 98,103 92,902
Less: Preferred stock dividends 229 705 2,467
Gain (Loss) on reacquired preferred stock -- (856) 1,819
-------- --------- ---------
Net Income for Common Stock $ 83,426 $ 96,542 $ 92,254
======== ========= =========

The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.

2-133 SWEPCO
<PAGE>
SWEPCO
Consolidated Statements of Retained Earnings
Southwestern Electric Power Company
- --------------------------------------------------------------------------------
For the Years Ended December 31,
--------------------------------
1999 1998 1997
--------- --------- ---------
(thousands)

Retained Earnings at Beginning of Year $300,592 $324,050 $321,801
Net income for common stock 83,426 96,542 92,254
Loss on reacquisition of preferred stock -- -- (5)
Deduct: Common stock dividends 96,000 120,000 90,000
--------- --------- ---------
Retained Earnings at End of Year $288,018 $300,592 $324,050
========= ========= =========

The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.

2-134 SWEPCO
<PAGE>
SWEPCO
Consolidated Balance Sheets
Southwestern Electric Power Company

As of December 31,
-------------------------
1999 1998
----------- -----------
(thousands)
ASSETS

Electric Utility Plant
Production $ 1,402,062 $ 1,397,924
Transmission 484,327 474,035
Distribution 958,318 916,293
General 333,949 321,136
Construction work in progress 52,775 48,523
----------- -----------
3,231,431 3,157,911
Less - Accumulated depreciation 1,384,242 1,317,057
----------- -----------
1,847,189 1,840,854

Current Assets
Cash and temporary cash investments 2,018 4,444
Accounts receivable 45,511 33,014
Receivables from affiliates 6,053 7,416
Materials and supplies, at average cost 26,420 25,135
Fuel inventory, at average cost 60,844 40,238
Accumulated deferred income taxes 1,583 4,869
Prepayments and other 16,978 16,651
----------- -----------
159,407 131,767
----------- -----------

Deferred Charges and Other Assets 101,202 108,770
----------- -----------
$ 2,107,798 $ 2,081,391
=========== ===========

The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.

2-135 SWEPCO
<PAGE>
SWEPCO
Consolidated Balance Sheets
Southwestern Electric Power Company
<TABLE>
<CAPTION>

As of December 31,
---------------------------
1999 1998
--------- ---------
CAPITALIZATION AND LIABILITIES (thousands)
<S> <C> <C> <C> <C>

Capitalization
Common stock: $18 par value
Authorized: 7,600,000 shares
Issued and outstanding: 7,536,640 shares $ 135,660 $ 135,660
Paid-in capital 245,000 245,000
Retained earnings 288,018 300,592
--------- ---------
Total Common Stock Equity 668,678 52% 681,252 51%
--------- ---- --------- ----
Preferred stock 4,706 --% 4,707 --%

SWEPCO-obligated, mandatorily redeemable
preferred securities of subsidiary trust
holding solely Junior Subordinated
Debentures of SWEPCO 110,000 9% 110,000 8%
Long-term debt 495,973 39% 543,741 41%
--------- ---- --------- ----
Total Capitalization 1,279,357 100% 1,339,700 100%
--------- ---- --------- ----
Current Liabilities
Long-term debt due within twelve months 45,595 43,932
Advances from affiliates 140,897 40,705
Accounts payable 60,689 73,507
Payables to affiliates 37,353 37,795
Customer deposits 14,236 13,316
Accrued taxes 24,374 23,189
Accrued interest 9,792 14,275
Over-recovered fuel costs 2,888 5,378
Other 13,874 12,538
--------- ---------
349,698 264,635
--------- ---------
Deferred Credits
Accumulated deferred income taxes 380,495 398,664
Investment tax credits 57,649 62,213
Other 40,599 16,179
--------- ---------
478,743 477,056
--------- ---------
$ 2,107,798 $ 2,081,391
========= =========

</TABLE>

The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.

2-136 SWEPCO
<PAGE>
SWEPCO
Consolidated Statements of Cash Flows
Southwestern Electric Power Company
For the Years Ended December 31,
--------------------------------
1999 1998 1997
--------- --------- ---------
(thousands)
OPERATING ACTIVITIES
Net Income $ 83,655 $ 98,103 $ 92,902
Non-cash Items Included in Net Income
Depreciation and amortization 107,863 104,047 100,015
Deferred income taxes and investment
tax credits (21,663) (16,481) (6,907)
Extraordinary Loss related to SFAS No.71 3,011 -- --
Charges for investments and assets -- 2,140 16,493
Inventory reserve -- -- 1,150
Changes in Assets and Liabilities
Accounts receivable (11,134) 41,077 (13,367)
Fuel inventory (20,606) (13,823) 29,360
Accounts payable (12,240) 260 24,374
Payables to affiliates (442) (25,788) (5,125)
Accrued taxes 1,185 10,305 (12,357)
Other current liabilities 1,336 2,987 (17,699)
Fuel recovery (2,490) 18,391 (3,893)
Other deferred credits 24,420 8,067 (1,851)
Other 2,047 (2,822) (2,607)
--------- --------- ---------
154,942 226,463 200,488
--------- --------- ---------
INVESTING ACTIVITIES
Construction expenditures (111,019) (83,120) (108,126)
Other (4,167) (5,202) (4,545)
--------- --------- ---------
(115,186) (88,322) (112,671)
--------- --------- ---------
FINANCING ACTIVITIES
Redemption of preferred stock (1) (27,988) (16,043)
Proceeds from issuance of Trust Preferred
Securities -- -- 106,231
Retirement of long-term debt (46,144) (2,354) (52,600)
Change in advances from affiliates 100,192 15,530 (32,320)
Payment of dividends (96,229) (121,183) (92,666)
--------- --------- ---------
(42,182) (135,995) (87,398)
--------- --------- ---------

Net Change in Cash and Cash Equivalents (2,426) 2,146 419
Cash and Cash Equivalents at Beginning of Year 4,444 2,298 1,879
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 2,018 $ 4,444 $ 2,298
========= ========= =========
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized
(includes distributions on Trust Preferred
Securities $ 55,254 $ 50,341 $ 49,847
========= ========= =========
Income taxes paid $ 55,677 $ 57,977 $ 57,715
========= ========= =========

The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.

2-137 SWEPCO
<PAGE>
SWEPCO
Consolidated Statements of Capitalization
Southwestern Electric Power Company
- ----------------------------------------------------------------------------
As of December 31,
---------------------
1999 1998
--------- ---------
(thousands)
COMMON STOCK EQUITY $ 668,678 $ 681,252
--------- ---------

PREFERRED STOCK
Cumulative $100 Par Value, Authorized 1,860,000 shares

Number of Shares Current
Series Outstanding Redemption Price
- ----------------------------------------------------------
Not Subject to Mandatory Redemption
5.00% 37,727 $109.00 3,772 3,773
4.65% 1,907 $102.75 191 191
4.28% 7,386 $103.90 739 739
Premium 4 4
--------- ---------
4,706 4,707
--------- ---------

TRUST PREFERRED SECURITIES
SWEPCO-obligated, mandatorily redeemable preferred
securities of subsidiary trust holding solely
Junior Subordinated Debentures of SWEPCO,
7.875%, due April 30, 2037 110,000 110,000
--------- ---------

LONG-TERM DEBT
First Mortgage Bonds
Series V, 7 3/4%, due June 1, 2004 40,000 40,000
Series W, 6 1/8%, due September 1, 1999 -- 40,000
Series X, 7%, due September 1, 2007 90,000 90,000
Series Y, 6 5/8%, due February 1, 2003 55,000 55,000
Series Z, 7 1/4%, due July 1, 2023 45,000 45,000
Series AA, 5 1/4%, due April 1, 2000 45,000 45,000
Series BB, 6 7/8%, due October 1, 2025 80,000 80,000
1976 Series A, 6.20%, due November 1, 2006 (Siloam
Springs)* 5,940 6,085
1976 Series B, 6.20%, due November 1, 2006 (Siloam
Springs)* 1,000 1,000
Installment Sales Agreements - PCRBs *
1978 Series A, 6%, due January 1, 2008 (Titus
County) 13,970 14,420
1991 Series A, 8.2%, due August 1, 2011 (Titus
County) 17,125 17,125
1991 Series B, 6.9%, due November 1, 2004 (Titus
County) 12,290 12,290
Series 1992, 7.6%, due January 1, 2019 (DeSoto) 53,500 53,500
Series 1996, 6.1%, due April 1, 2018 (Sabine) 81,700 81,700
Railcar lease obligations -- 5,549
Unamortized discount and premium 1,043 1,004
Amount to be redeemed within one year (45,595) (43,932)
--------- ---------
495,973 543,741
--------- ---------
TOTAL CAPITALIZATION $ 1,279,357 $ 1,339,700
========= =========

*Obligations incurred in connection with the sale by public authorities of
tax-exempt PCRBs.

The accompanying notes to consolidated financial statements as they relate
to SWEPCO are an integral part of these statements.

2-138 SWEPCO
<PAGE>

SOUTHWESTERN ELECTRIC POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See CSW's NOTE 1.

2. LITIGATION AND REGULATORY PROCEEDINGS
See CSW's NOTE 2.

3. COMMITMENTS AND CONTINGENT LIABILITIES
See CSW's NOTE 3.

4. INCOME TAXES
See CSW's NOTE 4.

5. BENEFIT PLANS
See CSW's NOTE 5.

6. JOINTLY OWNED ELECTRIC UTILITY PLANT
See CSW's NOTE 6.

7. FINANCIAL INSTRUMENTS
See CSW's NOTE 7.

8. LONG-TERM DEBT
See CSW's NOTE 8.

9. PREFERRED STOCK
See CSW's NOTE 9.

10. TRUST PREFERRED SECURITIES
See CSW's NOTE 10.

11. SHORT-TERM FINANCING
See CSW's NOTE 11.

12. STOCK BASED COMPENSATION PLANS
See CSW's NOTE 13.

13. EXTRAORDINARY ITEMS
See CSW's NOTE 16.

14. NEW ACCOUNTING STANDARDS
See CSW's NOTE 17.

2-139 SWEPCO
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Southwestern Electric Power
Company:

We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Southwestern Electric Power Company
(a Delaware corporation and a wholly-owned subsidiary of Central and South West
Corporation) and subsidiary company as of December 31, 1999 and 1998, and the
related consolidated statements of income, retained earnings and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of Southwestern Electric Power Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Southwestern
Electric Power Company and subsidiary company as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

Arthur Andersen LLP

Dallas, Texas
February 25, 2000

2-140 SWEPCO
<PAGE>

REPORT OF MANAGEMENT

Management is responsible for the preparation, integrity and objectivity
of the consolidated financial statements of Southwestern Electric Power Company
and its subsidiary company as well as other information contained in this annual
report. The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis and,
in some cases, reflect amounts based on the best estimates and judgments of
management, giving due consideration to materiality. Financial information
contained elsewhere in this annual report is consistent with that in the
financial statements.

The consolidated financial statements have been audited by SWEPCO's
independent public accountants who were given unrestricted access to all
financial records and related data, including minutes of all meetings of
shareholders, the board of directors and committees of the board. SWEPCO and its
subsidiary company believe that representations made to the independent public
accountants during their audit were valid and appropriate. The report of
independent public accountants is presented elsewhere in this report.

SWEPCO, together with its subsidiary company, maintains a system of
internal controls to provide reasonable assurance that transactions are executed
in accordance with management's authorization, that the consolidated financial
statements are prepared in accordance with generally accepted accounting
principles and that the assets of the companies are properly safeguarded against
unauthorized acquisition, use or disposition. The system includes a documented
organizational structure and division of responsibility, established policies
and procedures including a policy on ethical standards which provides that
SWEPCO will maintain the highest legal and ethical standards, and the careful
selection, training and development of our employees.

Internal auditors continuously monitor the effectiveness of the internal
control system following standards established by the Institute of Internal
Auditors. Actions are taken by management to respond to deficiencies as they are
identified. The board, operating through its audit committee, which is comprised
entirely of directors who are not officers or employees of SWEPCO or its
subsidiary, provides oversight to the financial reporting process.

SWEPCO and its subsidiary believe that, in all material respects, their
system of internal controls over financial reporting and over safeguarding of
assets against unauthorized acquisition, use or disposition functioned
effectively as of December 31, 1999.

Michael H. Madison R. Russell Davis
President - SWEPCO Controller - SWEPCO

2-141 SWEPCO
<PAGE>

WEST TEXAS UTILITIES COMPANY

2-141 WTU
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data for each of the five years ended
December 31 is provided to highlight significant trends in the financial
condition and results of operations for WTU. The extraordinary loss was a result
of legislation passed in Texas where the electricity generation portion of WTU's
business no longer meets the criteria to apply SFAS No. 71. Certain financial
statement items for prior years have been reclassified to conform to the most
recent period presented.
<TABLE>
<CAPTION>

1999 (1) 1998 (1) 1997 (1) 1996 1995
(thousands, except ratios)
<S> <C> <C> <C> <C> <C>

INCOME STATEMENT DATA
Revenues $439,709 $424,953 $397,778 $377,057 $319,835
Net Income Before Extraordinary Item 32,232 37,814 21,461 16,571 34,530
Extraordinary loss (5,461) -- -- -- --
Net Income for Common Stock 26,667 37,710 22,402 16,307 34,266

BALANCE SHEET DATA
Assets 861,205 819,812 826,858 838,491 845,072
Long-term obligations 263,686 303,519 303,350 303,182 302,702
Capitalization ratios
Common stock equity 49% 46% 46% 46% 46%
Preferred stock -- -- -- 1 1
Long-term debt 51 54 54 53 53
Ratio of earnings to fixed charges
(SEC Method) 2.89 3.33 2.21 2.05 2.63
</TABLE>

(1) See WEST TEXAS UTILITIES COMPANY - RESULTS OF OPERATIONS for major factors
affecting earnings.

2-143 WTU
<PAGE>

WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS

Reference is made to WTU's Financial Statements, related Notes to
Financial Statements and Selected Financial Data. Referenced information should
be read in conjunction with, and is essential to understanding, the following
discussion and analysis.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND 1998

WTU's net income for common stock for 1999 was $26.7 million, which was
$11.0 million, or 29% lower than 1998. The decrease was primarily the result of
an increase in other operating expense, maintenance expense and taxes, other
than income and the effect of an extraordinary loss. The decrease in earnings
was partially offset by a reduction in income tax expense as well as an increase
in electric operating revenues.

Electric operating revenues for 1999 were $439.7 million, which was $14.8
million or 3% higher than in 1998. Fuel-related revenues increased $13.5 million
due to higher net fuel and purchased power expense as discussed below.
Non-fuel-related revenues increased $1.3 million due to increases in wholesale
sales and transmission-related revenues related to CSW's transmission
coordination agreement. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric Company
(Docket No. 17285). This increase was nearly offset by a 5% decrease in
residential MWH and a 7% decrease in industrial MWH sales and electric service
rendered but not yet billed. Revenues were also lower due to a charge to reflect
the excess earnings provision of the Texas Legislation. See ITEM 8. NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation.

Fuel expense was nearly unchanged in 1999 when compared to 1998,
increasing to $123.3 million from $122.8 million. The average unit fuel cost
increased from $1.83 per MMbtu in 1998 to $1.98 MMbtu in 1999 primarily as a
result of an increase in the spot market price of natural gas. As as result of
an increase in average unit fuel costs, generation declined 5%. Purchased power
for 1999 increased to $61.5 million, which was $13.4 million, or 28% higher than
in 1998 due primarily to an unscheduled outage at a coal-fired generating plant.

Other operating expenses for 1999 were $93.7 million, which was $3.8
million, or 4% higher than in 1998 due to higher transmission expenses. The
increase in transmission expense was due to the absence in 1999 of a
transmission service agreement adjustment made in 1998 related to the final
order in Texas Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS - CPL and WTU Complaint versus Texas Utilities Electric
Company (Docket No. 17285).

Maintenance expense for 1999 was $19.6 million, which was $2.9 million or
18% higher than the comparable period in 1998 due primarily to increased power
plant maintenance and overhead line maintenance.

Taxes, other than income, for 1999 increased $3.6 million, or 15% when
compared to 1998 primarily due to higher state franchise tax expense.

Income taxes associated with utility operations for 1999 were $14.3
million, which was $6.4 million, or 31% lower than in 1998 as a result of lower
taxable income in 1999 as well as prior year income tax liability adjustments.

2-144 WTU
<PAGE>

The extraordinary loss of $5.5 million was a result of legislation passed
in Texas where the electricity generation portion of WTU's business no longer
meets the criteria to apply SFAS No. 71. See ITEM 8. NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS - Electric Utility Restructuring Legislation.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Net income for common stock for 1998 was $37.7 million compared to $22.4
million for 1997, an increase of $15.3 million, or 68%. The increase in net
income was due primarily to higher non-fuel revenue. This increase was partially
offset by higher maintenance expenses and income taxes. The increase in net
income was also offset in part by the absence in 1998 of the recognition of the
gain on reacquired preferred stock in 1997.

Electric operating revenues were $425.0 million for 1998, an increase of
$27.2 million, or 7% when compared to the year ended 1997. This increase was due
primarily to an increase in fuel and non-fuel related revenues of $4.5 million
and $22.7 million, respectively. The increase in non-fuel-related revenues was
due primarily to a 4% increase in retail MWH sales resulting from favorable
weather-related demand. Included in non-fuel-related revenues were additional
transmission-related revenues resulting from changes to open access tariff
transmission and a transmission coordination agreement. Conversely,
non-fuel-related revenues were decreased by a transmission service agreement
adjustment related to the final order in Texas Commission Docket No. 17285. See
ITEM 8. NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Transmission
Coordination Agreement and CPL and WTU Complaint versus Texas Utilities Electric
Company (Docket No. 17285). The increase in fuel-related revenues was
attributable to higher fuel costs as discussed below.

Fuel expense increased to $122.8 million for 1998 from $119.2 million
compared to 1997 due primarily to a 6% increase in generation. The increase in
generation was due largely to a 4% increase in MWH sales. Partially offsetting
the increase was lower average unit cost of fuel. The average unit cost of fuel
declined from $1.98 per MMbtu in 1997 to $1.83 per MMbtu in 1998. This decline
in the average unit costs of fuel was due primarily to lower spot market natural
gas and coal prices. Purchased power expense declined $2.4 million, or 5%, for
1998 compared to 1997 as a result of decreased economy energy purchases.

Other operating expenses declined $3.9 million in 1998 when compared to
1997 due primarily to a reduction in transmission expenses resulting from a
transmission service agreement adjustment related to the final order in Texas
Commission Docket No. 17285. See ITEM 8. NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - CPL and WTU Complaint Versus Texas Utilities Electric Company
(Docket No. 17285) for additional information on the transmission service
agreement. Additionally, other operating expenses also decreased due to lower
employee-related expenses. The decrease was offset in part by higher production
related expenses resulting from the increased utilization of generating stations
to meet increased weather-related customer demand. Maintenance expenses rose
$2.7 million from 1997 as a result of increased unplanned power plant
maintenance activity.

Operating income taxes were $20.6 million for 1998 compared to $9.4
million in 1997 for an increase of $11.2 million as a result of higher pre-tax
income.

Other income and deductions increased $1.2 million due to an increase in
interest income on temporary cash investments, merchandise sales and
under-recovered fuel cost.

2-145 WTU
<PAGE>
WTU
Statements of Income
West Texas Utilities Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

For the Years Ended December 31,
--------------------------------
1999 1998 1997
--------- -------- --------
(thousands)
<S> <C> <C> <C>

Electric Operating Revenues
Residential $ 132,486 $134,204 $124,578
Commercial 78,710 76,155 73,196
Industrial 52,195 51,715 56,928
Sales for resale 103,212 97,560 88,814
Other 73,106 65,319 54,262
--------- -------- --------
439,709 424,953 397,778
--------- -------- --------
Operating Expenses and Taxes
Fuel 123,348 122,836 119,158
Purchased power 61,532 48,131 50,493
Other operating 93,730 89,924 93,796
Maintenance 19,604 16,666 14,013
Depreciation and amortization 44,789 42,750 41,592
Taxes, other than income 28,267 24,638 24,669
Income taxes 14,275 20,643 9,490
--------- -------- --------
385,545 365,588 353,211
--------- -------- --------
Operating Income 54,164 59,365 44,567
--------- -------- --------

Other Income and (Deductions)
Allowance for equity funds used during
construction 362 678 227
Other 2,984 1,580 766
Non-operating income taxes (858) 454 471
--------- -------- --------
2,488 2,712 1,464
--------- -------- --------
Income Before Interest Charges 56,652 62,077 46,031
--------- -------- --------

Interest Charges
Interest on long-term debt 20,352 20,352 20,352
Interest on short-term debt and other 4,731 4,580 4,911
Allowance for borrowed funds used during
construction (663) (669) (693)
--------- -------- --------
24,420 24,263 24,570
--------- -------- --------

Income Before Extraordinary Item 32,232 37,814 21,461

Extraordinary Loss (net of tax of $2,941) (5,461) -- --
--------- -------- --------

Net Income 26,771 37,814 21,461

Less: Preferred stock dividends 104 104 144
Gain on reaquired preferred stock -- -- 1,085
--------- -------- --------
Net Income for Common Stock $ 26,667 $ 37,710 $ 22,402
========= ======== ========

</TABLE>

The accompanying notes to financial statements as they relate to WTU
are an integral part of these statements.

2-146 WTU
<PAGE>
WTU
Statements of Retained Earnings
West Texas Utilities Company
- --------------------------------------------------------------------------------
For the Years Ended December 31,
--------------------------------
1999 1998 1997
--------- --------- ---------
(thousands)

Retained Earnings at Beginning of Year $117,189 $119,479 $123,077
Net income for common stock 26,667 37,710 22,402
DeductCommon stock dividends 28,000 40,000 26,000
--------- --------- ---------
Retained Earnings at End of Year $115,856 $117,189 $119,479
========= ========= =========

The accompanying notes to financial statements as they relate to WTU
are an integral part of these statements.

2-147 WTU
<PAGE>
WTU
Balance Sheets
West Texas Utilities Company
- -------------------------------------------------------------------------------
As of December 31,
-------------------------
1999 1998
----------- -----------
(thousands)
ASSETS

Electric Utility Plant
Production $ 429,783 $ 429,896
Transmission 220,479 213,630
Distribution 403,206 382,373
General 113,945 108,878
Construction work in progress 15,131 11,805
----------- -----------
1,182,544 1,146,582
Less - Accumulated depreciation 495,847 473,503
----------- -----------
686,697 673,079
----------- -----------
Current Assets
Cash 3,810 2,093
Accounts receivable 50,579 31,689
Materials and supplies, at average cost 14,029 14,191
Fuel inventory, at LIFO cost 17,133 13,186
Accumulated deferred income taxes -- 366
Under-recovered fuel costs 14,652 3,980
Prepayments and other 2,883 5,988
----------- -----------
103,086 71,493
----------- -----------
Deferred Charges and Other Assets
Deferred Oklaunion costs 8,352 14,910
Other 63,070 60,330
----------- -----------
71,422 75,240
----------- -----------

$ 861,205 $ 819,812
=========== ===========

The accompanying notes to financial statements as they relate to WTU
are an integral part of these statements.

2-148 WTU
<PAGE>
WTU
Balance Sheets
West Texas Utilities Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

As of December 31,
----------------------------
1999 1998
---------- -----------
CAPITALIZATION AND LIABILITIES (thousands)
<S> <C> <C> <C> <C>

Capitalization
Common stock: $25 par value
Authorized: 7,800,000 shares
Issued and outstanding: 5,488,560 shares $ 137,214 $ 137,214
Paid-in capital 2,236 2,236
Retained earnings 115,856 117,189
---------- -----------
Total Common Stock Equity 255,306 49% 256,639 46%
---------- ----- ----------- ----

Preferred stock 2,482 --% 2,482 --%
Long-term debt 263,686 51% 303,519 54%
---------- ----- ----------- ----
Total Capitalization 521,474 100% 562,640 100%
---------- ----- ----------- ----

Current Liabilities
Long-term debt due within twelve months 40,000 --
Advances from affiliates 21,408 4,573
Payables to affiliates 18,856 19,917
Accounts payable 39,611 31,473
Accrued taxes 12,458 10,031
Accumulated deferred income taxes 1,653 --
Accrued interest 4,165 4,125
Refund due customers 6,000 --
Other 4,799 3,797
---------- -----------
148,950 73,916
---------- -----------
Deferred Credits
Accumulated deferred income taxes 148,746 140,731
Investment tax credits 25,323 26,597
Income tax related regulatory liabilities, net 13,057 12,088
Other 3,655 3,840
---------- -----------
190,781 183,256
---------- -----------

$ 861,205 $ 819,812
========== ===========

</TABLE>

The accompanying notes to financial statements as they relate to WTU
are an integral part of these statements.

2-149 WTU
<PAGE>
WTU
Statements of Cash Flows
West Texas Utilities Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

For the Years Ended December 31,
------------------------------
1999 1998 1997
-------- -------- --------
(thousands)
<S> <C> <C> <C>

OPERATING ACTIVITIES
Net Income $ 26,771 $ 37,814 $ 21,461
Non-cash Items Included in Net Income
Depreciation and amortization 44,789 43,826 43,138
Deferred income taxes and investment tax
credits 10,947 (7,899) (2,275)
Extraordinary loss related to SFAS No. 71 5,461 -- --
Charges for investments and assets -- 1,527 5,296
Inventory reserve -- -- 1,498
Changes in Assets and Liabilities
Accounts receivable (18,890) (21,119) 13,553
Fuel inventory (3,947) (715) 4,203
Fuel recovery (10,672) 7,988 (3,007)
Accounts payable 8,138 1,952 (4,182)
Payables to affiliates (1,061) (1,652) 7,991
Accrued taxes 2,427 (1,344) (2,088)
Other 2,299 (718) 9,658
-------- -------- --------
66,262 59,660 95,246
-------- -------- --------
INVESTING ACTIVITIES
Construction expenditures (49,443) (36,867) (31,817)
Other (3,832) (5,782) 261
-------- -------- --------
(53,275) (42,649) (31,556)
-------- -------- --------
FINANCING ACTIVITIES
Redemption of preferred stock -- -- (2,724)
Payment of dividends (28,105) (40,104) (26,184)
Change in advances from affiliates 16,835 4,573 (14,833)
-------- -------- --------
(11,270) (35,531) (43,741)
-------- -------- --------

Net Change in Cash and Cash Equivalents 1,717 (18,520) 19,949
Cash and Cash Equivalents at Beginning of Year 2,093 20,613 664
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 3,810 $ 2,093 $ 20,613
======== ======== ========

SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 17,577 $ 17,250 $ 19,659
========= ======== ========
Income taxes paid $ 3,309 $ 29,533 $ 15,710
========= ======== ========

</TABLE>

The accompanying notes to financial statements as they relate to WTU
are an integral part of these statements.

2-150 WTU
<PAGE>

Statements of Capitalization
West Texas Utilities Company
- --------------------------------------------------------------------------------
As of December 31,
---------------------
1999 1998
--------- ---------
(thousands)
COMMON STOCK EQUITY $255,306 $ 256,639
--------- ---------

PREFERRED STOCK
Cumulative $100 Par Value, Authorized 810,000 shares
Number Current
of Shares Redemption
Series Outstanding Price
- ----------------------------------------------------

4.40% 23,673 $107.00 2,367 2,367
Premium 115 115
--------- ---------
2,482 2,482
--------- ---------

LONG-TERM DEBT
First Mortgage Bonds
Series P, 7 3/4%, due June 1, 2007 25,000 25,000
Series Q, 6 7/8%, due October 1, 2002 35,000 35,000
Series R, 7%, due October 1, 2004 40,000 40,000
Series S, 6 1/8%, due February 1, 2004 40,000 40,000
Series T, 7 1/2%, due April 1, 2000 40,000 40,000
Series U, 6 3/8%, due October 1, 2005 80,000 80,000
Installment Sales Agreements - PCRBs *
Series 1996, 6%, due June 1, 2020 (Red River) 44,310 44,310
Unamortized discount (624) (791)
Amount to be redeemed within one year (40,000) --
--------- ---------
263,686 303,519
--------- ---------

TOTAL CAPITALIZATION $521,474 $ 562,640
========= =========

*Obligations incurred in connection with the sale by public authorities of
tax-exempt PCRBs.

The accompanying notes to financial statements as they relate to WTU
are an integral part of these statements.

2-151 WTU
<PAGE>

WEST TEXAS UTILITIES COMPANY
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See CSW's NOTE 1.

2. LITIGATION AND REGULATORY PROCEEDINGS
See CSW's NOTE 2.

3. COMMITMENTS AND CONTINGENT LIABILITIES
See CSW's NOTE 3.

4. INCOME TAXES
See CSW's NOTE 4.

5. BENEFIT PLANS
See CSW's NOTE 5.

6. JOINTLY OWNED ELECTRIC UTILITY PLANT
See CSW's NOTE 6.

7. FINANCIAL INSTRUMENTS
See CSW's NOTE 7.

8. LONG-TERM DEBT
See CSW's NOTE 8.

9. PREFERRED STOCK
See CSW's NOTE 9.

10. SHORT-TERM FINANCING
See CSW's NOTE 11.

11. STOCK BASED COMPENSATION PLANS
See CSW's NOTE 13.

12. EXTRAORDINARY ITEMS
See CSW's NOTE 16.

13. NEW ACCOUNTING STANDARDS
See CSW's NOTE 17.

2-152 WTU
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of West Texas Utilities Company:

We have audited the accompanying balance sheets and statements of
capitalization of West Texas Utilities Company (a Texas corporation and a
wholly-owned subsidiary of Central and South West Corporation) as of December
31, 1999 and 1998, and the related statements of income, retained earnings and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of West Texas Utilities
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of West Texas Utilities Company
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Dallas, Texas
February 25, 2000

2-153 WTU
<PAGE>

REPORT OF MANAGEMENT

Management is responsible for the preparation, integrity and objectivity
of the financial statements of West Texas Utilities Company as well as other
information contained in this annual report. The financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis and, in some cases, reflect amounts based on the best
estimates and judgments of management, giving due consideration to materiality.
Financial information contained elsewhere in this annual report is consistent
with that in the financial statements.

The financial statements have been audited by WTU's independent public
accountants who were given unrestricted access to all financial records and
related data, including minutes of all meetings of shareholders, the board of
directors and committees of the board. WTU believes that representations made to
the independent public accountants during their audit were valid and
appropriate. The report of independent public accountants is presented elsewhere
in this report.

WTU maintains a system of internal controls to provide reasonable
assurance that transactions are executed in accordance with management's
authorization, that the financial statements are prepared in accordance with
generally accepted accounting principles and that the assets of the companies
are properly safeguarded against unauthorized acquisition, use or disposition.
The system includes a documented organizational structure and division of
responsibility, established policies and procedures including a policy on
ethical standards which provides that WTU will maintain the highest legal and
ethical standards, and the careful selection, training and development of our
employees.

Internal auditors continuously monitor the effectiveness of the internal
control system following standards established by the Institute of Internal
Auditors. Actions are taken by management to respond to deficiencies as they are
identified. The board, operating through its audit committee, which is comprised
entirely of directors who are not officers or employees of WTU, provides
oversight to the financial reporting process.

WTU believes that, in all material respects, its system of internal
controls over financial reporting and over safeguarding of assets against
unauthorized acquisition, use or disposition functioned effectively as of
December 31, 1999.

Paul J. Brower R. Russell Davis
General Manager/President - WTU Controller - WTU

2-154 WTU
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

CSW None.
CPL None.
PSO None.
SWEPCO None.
WTU None.

2-155 WTU
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.

(a) (1) Directors of CSW, together with certain information with respect
to each of them, are listed below. Ages are as of March 1, 2000.

CSW or an affiliate of CSW has employed each of the executive officers listed in
the table below in an executive or managerial capacity for at least the last
five years, except as stated below.

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

MOLLY SHI BOREN AGE - 55 1991
Ms. Boren, of Norman, Oklahoma, has been an attorney since prior
to 1994 and is a former Special District Judge in Pontotoc
County, Oklahoma. She served as a Director of Liberty Bank
Corporation, Tulsa, Oklahoma, and of Pet Incorporated prior to
and during 1994. She is currently The University of Oklahoma
First Lady.

E. R. BROOKS AGE - 62 1988
Mr. Brooks has served as Chairman and CEO of CSW since February
1991. He served as CSW's President from February 1991 to July,
1997. He is also a member of the Board of Directors of each of
CSW's subsidiaries, as well as a Director of Hubbell, Inc,
Orange, Connecticut. Mr. Brooks is a Trustee of Baylor Health
Care Center, Dallas, Texas, and Hardin-Simmons University,
Abilene, Texas.

DONALD M. CARLTON AGE - 60 1994
In January 1996, Mr. Carlton was named President and CEO of
Radian International LLC, Austin, Texas, and retired as of
December 31, 1998. Mr. Carlton served as the President and
Chairman of Radian Corporation, an engineering and technology
firm, from 1969 through December 1995. He is a member of the
Board of Directors of Valero Energy, San Antonio, Texas; Concert
Investment Series Funds, New York, and National Instruments,
Austin, Texas.

T. J. ELLIS AGE - 57 1996
Mr. Ellis served as the Commercial Director of SEEBOARD plc in
1985 and became the Chief Executive of SEEBOARD plc , Crawley,
West Sussex, after privatization of the United Kingdom's national
electric distribution system. In 1996, he was appointed Chairman
and Chief Executive of SEEBOARD plc following its acquisition by
CSW and is a director of British-Borneo Oil and Gas plc, a
Director of the Sussex Chamber of Commerce Training and
Enterprise and a Director of the Brighton West Pier Trust. In the
1998 Queen's Birthday Honours List, he was made a Commander of
the Order of the British Empire for his services to the United
Kingdom electricity industry.

3-1
<PAGE>

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

JOE H. FOY AGE - 72 1974
Mr. Foy, retired, is currently a member of the Board of Directors
of Enron Corporation, Houston, Texas.

WILLIAM HOWELL AGE - 63 1997
Mr. Howell served as Chairman of the Board of J.C. Penney
Company, Plano, Texas, from 1983 to January 1997 and also as its
CEO from 1983 to January 1996. He is currently Chairman Emeritus
of J.C. Penney Company. He has been Chairman of the Board of
Trustees of Southern Methodist University, Dallas, Texas, since
the summer of 1996 and serves on the Chairman's Advisory Council
of the National Minority Suppliers Development Council. He is a
member of the Board of Directors of Exxon Corporation, Irving,
Texas; Warner-Lambert Company, Morris Plains, New Jersey; Bankers
Trust, New York; Halliburton Company, Dallas, Texas and The
Williams Companies, Inc., Tulsa, Oklahoma.

ROBERT W. LAWLESS AGE - 62 1991
Dr. Lawless served as the President and CEO of Texas Tech
University and Texas Tech University Health Sciences Center in
Lubbock, Texas from July, 1989 through April 1996. He has served
as the president of the University of Tulsa since May 1996. He is
a member of the Board of Directors of Salomon Smith Barney Mutual
Funds, New York.

JAMES L. POWELL AGE - 69 1987
Mr. Powell has been involved in ranching and investments in Ft.
McKavett, Texas since prior to 1994. He is a Director of
Southwest Bancorp of Sanderson, Texas, a Director and member of
the Executive Committee of National Finance Credit Corporation,
and an Advisory Director of First National Bank, Mertzon, Texas.

RICHARD L. SANDOR AGE - 56 1997
Dr. Sandor has served as Chairman and CEO of Environmental
Financial Products Ltd., formerly Centre Financial Products
Limited, Chicago, Illinois, since prior to 1994 and also as
Chairman of the Board of Hedge Financial Products, Inc., Chicago,
Illinois, since May 1997. He is a member of the Board of
Directors of Sustainable Performance Group, Zurich, Switzerland,
an investment company, and is on the board of governors of The
School of the Art Institute of Chicago.

THOMAS V. SHOCKLEY, III AGE - 53 1991
Mr. Shockley was elected President and Chief Operating Officer of
CSW in July 1997. He joined CSW as Senior Vice President in
January, 1990, and became an Executive Vice President in
September of that same year. Mr. Shockley continues to serve as a
Director of each of CSW's non-electric subsidiaries.

The directors and executive officers of CSW are elected to hold office until the
first meeting of CSW's Board of Directors after the respective Annual Meeting of
Stockholders by class and year as follows: Class I Directors (Ms. Boren, Mr.
Carlton, Mr. Ellis and Mr. Shockley) in July 2000; Class II Directors (Mr.
Brooks, Dr. Lawless and Mr. Powell) in April 2001; and Class III Directors (Mr.
Files, Mr. Foy, Mr. Howell and Dr. Sandor) in April 2002. All outside directors
have engaged in their principal occupations listed above for a period of more
than five years, unless otherwise indicated.

3-2
<PAGE>

(a) (2) Directors of each of the U.S. Electric Operating Companies,
together with certain information with respect to each of them, are listed
below. Ages are as of March 1, 2000.

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

CPL

JOHN F. BRIMBERRY AGE - 67 1995
CEO of Professional Insurance Agents, Inc., Victoria, Texas.

E. R. BROOKS AGE - 62 1991
Chairman and CEO of CSW since 1991. Director of CSW and each of
its subsidiaries. President of CSW from 1991 to 1997. Director of
Hubbell, Inc., Orange, Connecticut. Trustee of Baylor Health Care
Center, Dallas, Texas and Hardin-Simmons University, Abilene,
Texas.

GLENN FILES AGE - 52 1996
Senior Vice President of CSW since 1996. President and CEO of WTU
from 1992 to 1996.

RUBEN M. GARCIA AGE - 68 1981
President and CEO of Modem Construction Inc. and Modem Machine
Shop, Inc., Laredo, Texas.

ALPHONSO R. JACKSON AGE - 54 1998
President of CSW-Texas since February 1998. Vice President of CSW
Energy, Inc., from 1996 to 1998. President and CEO of The Housing
Authority of the City of Dallas, Texas, from 1989 to 1996.
Director of Chase Bank of Texas N.A., Dallas, Texas. Director of
Chase Bank of Texas, N.A., Houston, Texas.

ROBERT A. McALLEN AGE - 65 1983
Owner of Robert A. McAllen Insurance Agency, Weslaco, Texas.

PETE MORALES, JR. AGE - 59 1990
President of Morales Feed Lots, Inc., Devine, Texas. Director of
The Bank of Texas, Devine, Texas.

H. LEE RICHARDS AGE - 66 1987
Chairman of the Board of Hygeia Dairy Company, Harlingen, Texas.

J. GONZALO SANDOVAL AGE - 51 1992
General Manager/President of CPL since February 1998. General
Manager of CPL from 1996 to 1998. Vice President, Operations and
Engineering of CPL from 1993 to 1996.

3-3
<PAGE>

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

GERALD E. VAUGHN AGE - 57 1993
Chairman for the STPNOC since its formation in September 1997.
Vice President, Nuclear of CSW Services since 1994.

Each of the directors and executive officers of CPL is elected to hold
office until the first meeting of CPL's Board of Directors after the 2000 Annual
Meeting of Stockholders. CPL's 2000 Annual Meeting of Stockholders is presently
scheduled to be held on April 13, 2000. All outside directors have engaged in
their principal occupations listed above for a period of more than five years,
unless otherwise indicated.

PSO

T. D. CHURCHWELL AGE - 55 1996
President of PSO since 1996. Executive Vice President of WTU from
1993 to 1996.

HARRY A. CLARKE AGE - 71 1972
General Partner and President of HAC Investments, Afton, Oklahoma.

GLENN FILES AGE - 52 1996
Senior Vice President of CSW since 1996. President and CEO of WTU
from 1992 to 1996.

PAUL K. LACKEY, JR. AGE - 56 1992
President of The University of Oklahoma - Tulsa, Tulsa, Oklahoma.
Chief of Staff for the Governor of the State of Oklahoma from
1997 to 1999. Secretary of Health and Human Services, Executive
Director of the Office of Juvenile Affairs, State of Oklahoma,
from 1995 to 1997. Consultant, Flint Industries, Inc., a
construction, electronics manufacturing, and environmental
services company, Tulsa, Oklahoma, during a portion of 1995.
President, Flint Industries, Inc. from 1986 to 1995. Director of
Bank South, Tulsa, Oklahoma.

PAULA MARSHALL-CHAPMAN AGE - 46 1991
President and CEO of Bama Companies, a
baked goods products company, Tulsa, Oklahoma.

3-4
<PAGE>

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

WILLIAM R. McKAMEY AGE - 53 1993
General Manager of PSO since 1996. Vice President, Marketing and
Business Development of PSO from 1993 to 1996.

DR. ROBERT B. TAYLOR, JR. AGE - 71 1975
Dentist, Okmulgee, Oklahoma.

Each of the directors and executive officers of PSO is elected to hold office
until the first meeting of PSO's Board of Directors after the 2000 Annual
Meeting of Stockholders. PSO's 2000 Annual Meeting of Stockholders is presently
scheduled to be held on April 18, 2000. All outside directors have engaged in
their principal occupations listed above for a period of more than five years,
unless otherwise indicated.

SWEPCO

KAREN C. ADAMS AGE - 39 1996
General Manager of SWEPCO since 1996. Director of Regulatory
Services at CSW from 1995 to 1996. Administrative Director of the
El Paso Transition Team at CSW from 1993 to 1995.

JAMES E. DAVISON AGE - 62 1993
President and CEO of Davison Terminal Services, Inc. President
and CEO of Davison Motor Company, Inc. President and CEO of
Davison Insurance Company, Inc. All of the above entities are
located in Ruston, Louisiana. Director of Bank One, Louisiana,
Baton Rouge, Louisiana.

GLENN FILES AGE - 52 1996
Senior Vice President of CSW since 1996. President and CEO of WTU
from 1992 to 1996.

DR. FREDERICK E. JOYCE AGE - 65 1990
President of Chappell-Joyce Pathology Association, P.A.,
Texarkana, Texas. President of Doctors Diagnostic Laboratory,
Inc., Texarkana, Texas. Director of New Boston Bank Shares, Inc.,
New Boston, Texas. Director of Century Bank, New Boston, Texas.

3-5
<PAGE>

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

JOHN M. LEWIS AGE - 60 1997
Chairman and CEO of The Bank of Fayetteville, Fayetteville, Arkansas.

MICHAEL H. MADISON AGE - 51 1998
President of SWEPCO since April 1998. Programme Director of
SEEBOARD from 1996 to 1998. Vice President, Operations and
Engineering of SWEPCO from 1993 to 1996.

WILLIAM C. PEATROSS AGE - 56 1990
President and CEO of United Title of Louisiana, Inc. Director of
Deposit Guaranty Bank. Both entities are located in Shreveport,
Louisiana.

MAXINE P. SARPY AGE - 60 1996
Vice President and Office Manager for Sarpy Medical Clinic,
Shreveport, Louisiana.

Each of the directors and executive officers of SWEPCO is elected to hold office
until the first meeting of SWEPCO's Board of Directors after the 2000 Annual
Meeting of Stockholders. SWEPCO's 2000 Annual Meeting of Stockholders is
presently scheduled to be held on April 12, 2000. All outside directors have
engaged in their principal occupations listed above for a period of more than
five years, unless otherwise indicated.

WTU

PAUL J. BROWER AGE - 51 1991
General Manager/President of WTU since February 1998. General
Manager of WTU from 1996 to 1998. Vice President, Marketing and
Business Development of WTU from 1991 to 1996.

GLENN FILES AGE - 52 1996
Senior Vice President of CSW since 1996. President and
CEO of WTU from 1992 to 1996.

3-6
<PAGE>

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

TOMMY MORRIS AGE - 65 1976
President of The Tommy Morris Agency, an independent insurance
and investment agency, Abilene, Texas.

DIAN G. OWEN AGE - 59 1994
Chairperson, Mansfeldt Investment Corporation, since 1997.
Chairperson, Dian Graves Owen Foundation, a general purpose
private foundation, since 1996. Consultant, Owen Healthcare,
Inc., a hospital pharmacy management services company from 1997
to present. Corporate Executive/Founder of Owen Healthcare, Inc.,
from 1976 to 1997.

JAMES M. PARKER AGE - 69 1987
President and CEO of J. M. Parker and Associates, Inc., an
investment company, Abilene, Texas. Director of First Financial
Bankshares, Inc. and First National Bank of Abilene, Abilene,
Texas.

F. L. STEPHENS AGE - 61 1980
Served as Chairman and CEO of Town & Country Food Stores, Inc.,
San Angelo, Texas until his retirement in June 1999.

Each of the directors and executive officers of WTU is elected to hold office
until the first meeting of WTU's Board of Directors after the 2000 Annual
Meeting of Stockholders. WTU's 2000 Annual Meeting of Stockholders is presently
scheduled to be held on March 28, 2000. All outside directors have engaged in
their principal occupations listed above for a period of more than five years,
unless otherwise indicated.

3-7
<PAGE>

(b) (1) The following is a list of officers, who are not directors, of CSW,
together with certain information with respect to each of them:

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------
CSW

FERD C. MEYER, JR. AGE - 60 1998
Executive Vice President and General Counsel since 1998.
Senior Vice President and General Counsel from 1990 to 1998.

GLENN D. ROSILIER AGE - 52 1998
Executive Vice President and Chief Financial Officer since 1998.
Senior Vice President and Chief Financial Officer from 1990 to 1998.

THOMAS M. HAGAN AGE - 55 1996
Senior Vice President, External Affairs since 1996. Vice
President, Governmental Relations and Regulatory Affairs from
1995 to 1996. Vice President, Governmental Relations from 1993 to
1995.

VENITA MCCELLON-ALLEN AGE - 40 1996
Senior Vice President, Customer Relations and Corporate
Development and Assistant Corporate Secretary since 1996. Vice
President, Corporate Services from 1995 to 1996. SWEPCO Division
Manager from 1994 to 1995. SWEPCO Director Corporate
Communications and Governmental Affairs from 1993 to 1994.

KENNETH C. RANEY, JR. AGE - 48 1996
Vice President, Associate General Counsel and Corporate Secretary
since 1996. Vice President, Assistant General Counsel from 1989
to 1996.

WENDY G. HARGUS AGE - 42 1996
Treasurer since 1996. CSW Controller from 1993 to 1996.

LAWRENCE B. CONNORS AGE - 48 1996
Controller since 1996. CSWS Vice President, Administration from
1993 to 1996.

STEPHEN J. MCDONNELL AGE - 49 1998
Vice President, AEP Merger since 1998. Vice President, Mergers
and Acquisitions from 1996 to 1998. CSWS Treasurer from 1989 to
1996.

MICHAEL D. SMITH AGE - 48 1998
Vice President, Business Opportunities since 1998. SWEPCO
President from 1996 to 1997. Vice President, Mergers and
Acquisitions from 1995 to 1996. Vice President, Corporate
Services from 1993 to 1995.

3-8
<PAGE>

(b) (2) The following is a list of officers, who are not directors, of the U.S.
Electric Operating Companies, together with certain information with respect to
each of them:

Name, Age, Principal Year
Occupation, Business Experience First Became
and Other Directorships Director
- --------------------------------------------------------------------------------

U.S. Electric Operating Companies
WENDY G. HARGUS AGE - 42 1996
Treasurer of CSW, CPL, PSO, SWEPCO, WTU and CSW Services since
1996. Controller of CSW from 1993 to 1996.

R. RUSSELL DAVIS AGE - 43 1994
Controller of CPL, PSO, WTU, SWEPCO and CSW Services since 1994.

CPL
BRENDA L. SNIDER AGE - 46 1996
Corporate Secretary of CPL since 1996. Manager of Planning and
Analysis at CPL since 1996. Senior Financial Consultant at CPL
from 1994 to 1996.

PSO
LINA P. HOLM AGE - 59 1997
Corporate Secretary and Executive Secretary to the President of
PSO since 1997. Executive Secretary to the President and
Assistant Corporate Secretary of PSO from 1992 to 1997.

SWEPCO
MARILYN S. KIRKLAND AGE - 52 1995
Corporate Secretary of SWEPCO since 1995. Executive Administrator
since 1997. Senior Executive Secretary to the President, from
1992 to 1997.

WTU
MARTHA MURRAY AGE - 54 1992
Corporate Secretary of WTU since 1992.

3-9
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

Cash and Other Forms of Compensation

CSW and the U.S. Electric Operating Companies

CSW's executive compensation program has as its foundation the following
objectives:

- - Maintaining a total compensation program consisting of base salary,
performance incentives and benefits designed to support the corporate goal of
providing superior value to our stockholders and customers;

- - Providing comprehensive programs which serve to facilitate the recruitment,
retention and motivation of qualified executives; and

- - Rewarding key executives for achieving financial, operating and individual
objectives that produce a return to CSW's stockholders in both the long-term
and the short-term.

The Executive Compensation Committee of the CSW Board of Directors, which
consists of four independent outside directors, has designed CSW's executive
compensation programs around a strong pay-for-performance philosophy. The
Executive Compensation Committee strives to maintain competitive levels, at
average, of total compensation as compared to peers in the utility industry. The
Executive Compensation Committee performs its functions for the U.S. Electric
Operating Companies as well. The U.S. Electric Operating Companies do not have
Executive Compensation Committees nor committees performing similar functions.

Each year, the Executive Compensation Committee conducts a comprehensive
review of CSW's executive compensation programs. The Executive Compensation
Committee is assisted in these efforts by an independent consultant and by CSW's
internal staff, who provide the Executive Compensation Committee with relevant
information and recommendations regarding the compensation policies, programs,
and specific compensation practices. This review is designed to ensure that the
programs are in place to enable CSW to achieve its strategic and operating
objectives and provide value to its stockholders, CSW's customers, and to
document CSW's relative competitive position.

The Executive Compensation Committee reviews a comparison of CSW's
compensation programs with those offered by comparable companies within the
utility industry. For each component of compensation as well as total
compensation, the Executive Compensation Committee seeks to ensure that CSW's
level of compensation for expected level of performance approximates the average
or mean for executive officers in similar positions at comparable companies. In
most years, this means that the level of total compensation for expected
performance will be near the average for comparable companies. Performance above
or below expected levels is reflected in a corresponding increase, reduction, or
no award in the incentive portion of our compensation program.

The amounts of each of the primary components of executive
compensation-salary, annual incentive plan awards and long-term incentive plan
awards will fluctuate according to individual, business unit, and/or corporate
performance, as described in detail in this report. Corporate performance for
these purposes is measured against a peer group of selected companies in the
utility industry. The utility peer group consists of the companies listed in the
Standard & Poor's Electric Utility Index as well as large regional competitors.
The Executive Compensation Committee believes that using the utility peer group
provides an objective measure to compare performance benchmarks appropriate for
compensation purposes.

3-10
<PAGE>

CSW's executive compensation program includes several components serving
long-term and short-term objectives. CSW also provides its senior executive
officers with benefits under the Special Executive Retirement Plan and all
executive officers with certain executive perquisites, as noted later in this
section.

In addition, CSW maintains for each of its executive officers a package of
benefits under its pension and welfare benefit plans that are generally provided
to all employees, including group health, life, disability and accident
insurance plans, tax-advantaged reimbursement accounts, a defined benefit
pension plan and the 401(k) savings plan. There is no relationship between this
package and corporate performance.

The following describes the relationship of compensation to performance
for the principal components of executive officer compensation.

Base Salary: Each executive officer's corporate position is matched to a
comparable position within the utility industry and is valued at the 50th
percentile market level. In some cases, these positions are common in both the
utility industry as well as general industry. In these cases, comparisons are
made to both markets, although pay decisions are influenced only by the utility
industry data. Once these market values are determined, the position is then
evaluated based on the position's overall contribution to corporate goals. This
internal weighting is combined with the value the market places on the
associated job responsibilities and a salary is assigned to that position. Each
year the assigned values are reviewed against market conditions, including
compensation practices in the utility peer group, inflation, and supply and
demand in the labor markets. If these conditions change significantly there may
be an adjustment to base salary. Finally, the results of the executive officer's
performance over the past year becomes part of the basis of the Executive
Compensation Committee's decision to approve, at its discretion, base salaries
of executive officers.

Incentive Programs - General: The executive incentive programs are designed to
strike an appropriate balance between short-term accomplishments and CSW's need
to effectively plan for and perform over the long-term.

Incentive Programs - Annual Incentive Plan: The AIP is a short-term bonus plan
rewarding annual performance. AIP awards are determined under a formula that
directly ties the amount of the award with levels of achievement for specific
corporate and individual performance. Business unit executives' awards are also
based on specific business unit performance. The amount of an executive
officer's AIP equals the corporate results plus business unit results, if
applicable, times their individual performance results times their target award.

Corporate performance is currently determined by two equally weighted
measures-earnings per share and cash flow. Threshold, target and exceptional
levels of performance are set by the Executive Compensation Committee in the
first quarter of each year. The Executive Compensation Committee considers both
historic performance and budgeted, or expected levels of performance in setting
these targets.

Performance for a given business unit represents the weighted average of
performance indices that measure the achievement of specific financial and/or
operational goals that are set and weighted at the beginning of the year for
that business unit.

The individual performance component represents the average of results
achieved on several individual goals and a subjective evaluation of overall job
performance. Although individual performance goals do not repeat corporate
performance measures, these goals are constructed to support corporate
performance goals or initiatives.

3-11
<PAGE>

If an individual fails to achieve a minimum threshold performance level on
individual performance goals, that individual does not earn an AIP award for
that year.

Target awards for executive officers have been fixed at 50 percent of
salary for the CEO, President and Executive and Senior Vice Presidents, 45
percent of salary for Business Unit Presidents and 35 percent of salary for
other officers. The award can vary from 0 to a maximum of 150 percent of target.
These targets are established by a review of competitive practice among the
utility peer group.

Performance under the AIP is measured or reviewed by each executive
officer's superior officer, or in the case of the CEO by the Executive
Compensation Committee, with the assistance of internal staff. The results are
reviewed and are subject to approval by the Executive Compensation Committee.
Under the terms of the AIP, the Executive Compensation Committee in the exercise
of its discretion, may vary corporate or company performance measures and the
form of payment for AIP awards from year-to-year prior to establishing the
awards, including payment in cash or restricted stock, as determined by the
Executive Compensation Committee.

In 1999, AIP awards were determined based on the corporate performance,
business unit performance, if applicable, and individual performance. The
Executive Compensation Committee reviewed the results of this calculation in
determining the size of awards.

Incentive Programs - Long-Term Incentive Plan: Amounts realized by CSW's
executive officers under awards made pursuant to the CSW 1992 LTIP depend
entirely upon corporate performance. The Executive Compensation Committee
selects the form and amount of LTIP awards based upon its evaluation of which
vehicles then are best positioned to serve as effective incentives for long-term
performance.

Since 1992, the Executive Compensation Committee has established LTIP
awards in the form of performance units. These awards provide incentives both
for exceptional corporate performance and to encourage retention. Each year, the
Executive Compensation Committee has set a target award of a specified number of
performance units based on a percentage of salary and the stock price on the
date the award is established.

The payout of such an LTIP award is based upon a comparison of CSW's total
stockholder return over a three-year period, or "cycle," against total
stockholder returns of utilities in the utility peer group over the same
three-year period. If CSW's total stockholder return for a cycle falls in one of
the top three quartiles of total stockholder returns achieved at companies in
the utility peer group, CSW will make a payout to participants for the
three-year cycle then ending. First, second and third quartile performance will
result in payouts of 150 percent, 100 percent and 50 percent of target,
respectively. Performance in the fourth quartile yields no payout under the
LTIP.

A new three-year performance cycle begins each year. In January 1999, the
Executive Compensation Committee reviewed total stockholder return results for
the period covering 1996-1998, and because performance was in the fourth
quartile, no restricted stock awards were granted.

CSW from time to time has also granted stock options and restricted stock
under the LTIP. Stock options and restricted stock are granted at the discretion
of the Executive Compensation Committee. Stock options, once vested, allow
grantees to buy specified numbers of shares of CSW Common Stock at a specified
stock price, which to date has been the market price on the date of grant. In
determining grants to date, the Executive Compensation Committee has considered
both the number and value of options granted by companies in the utility peer
group with respect to both the number and value of options awarded by CSW, and
the relative amounts of other long-term incentive awards at CSW and such peers.
The executive officers' realization of any value on the options depends upon

3-12
<PAGE>

stock appreciation. No executive officer owns in excess of one percent of CSW's
Common Stock. Further, the amounts of LTIP awards are measured against similar
practices at other companies in the utility peer group.

Tax Considerations: Section 162(m) of the Internal Revenue Code, as amended,
generally limits CSW's federal income tax deduction for compensation paid in any
taxable year to any one of the five highest paid executive officers named in
Part III of this Form 10-K to $1 million. The limit does not apply to specified
types of payments, including, most significantly, payments that are not
includible in the employee's gross income, payments made to or from a
tax-qualified plan, and compensation that meets the Internal Revenue Code
definition of performance-based compensation. Under the tax law, the amount of a
performance-based incentive award must be based entirely on an objective
formula, without any subjective consideration of individual performance, to be
considered performance-based.

The Executive Compensation Committee has carefully considered the impact
of this law. At this time, the Executive Compensation Committee believes it is
in CSW's and its stockholder's best interest to retain the subjective
determination of individual performance under the AIP. Consequently, payments
under the AIP, if any, to the named executive officers may be subject to the
limitation imposed by the Internal Revenue Code section 162(m). In 1997,
stockholders approved the restated LTIP and re-qualified the plan for Internal
Revenue Code section 162(m) purposes.

Rationale for CEO Compensation

In 1999, Mr. Brooks' compensation was determined as described above for
all of CSW's executive officers.

Mr. Brooks' annual salary increased in 1999 to $806,000 from $775,000. The
Executive Compensation Committee reviewed Mr. Brooks' salary as a part of its
overall annual review of executive compensation. His salary is based on market
information for similar positions, as well as changes in the salaries of chief
executive officers at comparable regional utilities (not limited to the utility
peer group).

For 1999, CSW achieved earnings per share of $2.14. Based on corporate and
individual results Mr. Brooks' AIP for 1999, which was paid in 2000, was 150% of
target.

In 1999, the Executive Compensation Committee established Mr. Brooks'
target performance units for LTIP for the 1999-2001 cycle of 19,572 units to be
paid in shares of restricted stock in 2001 if performance measures are met. Mr.
Brooks' target amount was derived by reference to the number and value of grants
to chief executive officers at comparable companies.

CSW EXECUTIVE COMPENSATION COMMITTEE

Joe H. Foy, Chairman
Molly Shi Boren
William R. Howell
Richard L. Sandor

3-13
<PAGE>

Comparison of Five Year Cumulative Total Return
Among Central and South West Corporation,
the Standard & Poors 500 Index
and the Standard & Poors Electric Companies Index

GRAPH OMITTED

CSW, S&P Electric & S&P 500

Year CSW S&P Electric S&P 500
- ---- --- ------------ -------
1994 100 100 100
1995 131 131 138
1996 128 131 169
1997 144 166 226
1998 156 193 290
1999 123 162 351

The total return performance shown on the graph above is not necessarily
indicative of future performance.

3-14
<PAGE>

CSW
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

Annual Compensation Long-Term Compensation
---------------------------------- --------------------------------------------
Awards Payouts

Other
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and Salary Bonus sation Award(s) Options/ Payouts sation
Principal Position Year ($) ($)(1) ($)(2) ($)(1)(3) SARs(#) ($)(4) ($)(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

E. R. Brooks 1999 780,961 536,558 18,346 -- -- -- 23,557
Chairman, 1998 741,345 450,000 119,057 -- -- 220,748 23,263
and CEO 1997 699,999 375,200 14,723 -- 65,000 -- 23,757

T. V. Shockley,III 1999 544,230 375,205 7,098 -- -- -- 23,557
President and 1998 518,462 300,000 20,921 -- -- 130,928 23,263
Chief Operating 1997 490,000 215,662 4,325 -- 41,000 -- 23,757
Officer

Glenn Files 1999 393,077 283,562 5,893 -- -- -- 23,557
Senior Vice Pres. 1998 392,307 125,000 10,753 -- -- 75,992 23,263
Electric Operations 1997 374,999 143,099 8,534 -- 31,000 -- 23,757

Ferd. C. Meyer,Jr. 1999 350,961 259,550 5,617 -- -- -- 23,557
Executive Vice 1998 359,272 185,000 8,893 -- -- 102,810 23,263
President and 1997 345,051 157,157 3,950 -- 29,000 -- 21,307
General Counsel

Glenn D. Rosilier 1999 340,962 251,872 4,738 -- -- -- 23,557
Executive Vice 1998 348,636 185,000 6,042 -- -- 102,810 23,263
President and 1997 334,751 161,055 3,594 -- 28,000 -- 23,757
Chief Financial
Officer
</TABLE>

(1)Amounts in these columns are paid or awarded in a calendar year for
performance in a preceding year.
(2)The following are the 1999 perquisites and other personal benefits required
to be identified in respect of the following Named Executive Officer: none.
(3)Grants of restricted stock are administered by the Executive Compensation
Committee of the CSW Board of Directors, which has the authority to determine
the individuals to whom and the terms upon which restricted stock grants,
including the number of underlying shares, shall be made.

As of the end of 1999, the aggregate restricted stock holdings of each of the
Named Executive Officers were:

Restricted Stock Held Market Value at
At December 31, 1999 December 31, 1999
--------------------------------------------- ---------------------
E. R. Brooks 8,153 $163,060
T. V. Shockley, III 4,844 96,880
Ferd. C. Meyer, Jr. 3,799 75,980
Glenn D. Rosilier 3,799 75,980
Glenn Files 2,904 58,080

(4)The awards reflected in this column are the value of restricted shares paid
out under the LTIP in 1998. The awards have a two-year vesting period with 50
percent of the stock vesting on each anniversary date. Upon vesting, shares
of CSW Common Stock are re-issued without restrictions. The individual
receives dividends and may vote shares of restricted stock, even before they
are vested. The amount reported in the Summary Compensation Table represents
the market value of the shares at the date of grant.
(5)Amounts shown in this column consist of (i) the annual employer matching
payments to CSW's Retirement Savings Plan, (ii) premiums paid per participant
for personal liability insurance and (iii) average amounts of premiums paid
per participant in those years under CSW's memorial gift program. In 1999,

3-15
<PAGE>

1998 and 1997, Messrs. Brooks, Shockley ,Files, Meyers and Rosilier
participated in the memorial gift program. See Meetings and Compensation for
a description of CSW's memorial gift program.

U.S. ELECTRIC OPERATING COMPANIES

The following table sets forth the aggregate cash and other compensation
for services rendered for the fiscal years of 1999, 1998 and 1997 paid or
awarded to the President of each of the U.S. Electric Operating Companies and
the Named Executive Officers as defined below.

Because of the functional restructuring undertaken by CSW during 1996,
certain of the Executive Officers of the U.S. Electric Operating Companies,
Messrs. Files, Zemanek and Verret, are not actually employed by any of the U.S.
Electric Operating Companies. Instead, they are employed by CSW Services and
manage CSW business units and perform policy-making functions that are integral
to the U.S. Electric Operating Companies. Therefore, these individuals are
included in the Summary Compensation Table as Named Executive Officers due to
the functional perspective regarding the management of the companies.

Summary Compensation Table
<TABLE>
<CAPTION>

Annual Compensation Long-Term Compensation
---------------------------------- --------------------------------------------
Awards Payouts

Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying LTIP Compen-
Principal Position Salary Bonus sation Award(s) Options/ Payouts sation
at Registrant Year ($) ($)(1) ($)(2) ($)(1)(3) SARs(#) ($)(4) ($)(5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Glenn Files, Senior 1999 393,077 283,562 5,893 -- -- -- 23,557
President of CSW 1998 392,307 125,000 10,753 -- -- 75,992 23,263
Electric Operations 1997 374,999 143,099 8,534 -- 31,000 -- 23,757
(4,5)
Richard H. Bremer, 1999 181,092 213,300 2,132 -- -- -- 2,523,557
Former Pres. of CSW 1998 328,154 48,642 2,499 -- -- 87,818 23,263
Energy Serv business 1997 307,462 99,993 4,648 -- 26,000 -- 21,357
unit (4,5,6)
Robert L. Zemanek, 1999 283,250 184,985 3,510 -- -- -- 23,557
President of CSW 1998 294,144 9,560 49,818 -- -- 81,702 23,263
Energy Delivery 1997 283,250 89,279 10,272 -- 24,000 -- 23,757
business unit (4,5)
Richard P. Verret, 1999 271,116 175,676 2,009 -- -- -- 8,103
President of CSW 1998 270,038 50,953 1,833 -- -- 47,576 7,900
Production (4,5) 1997 251,230 83,390 2,083 -- 21,000 -- 7,953

J. Gonzalo Sandoval 1999 138,863 29,955 -- -- -- -- 7,200
General Manager/ 1998 138,115 8,110 -- -- -- 18,944 6,580
President of CPL (4)

T. D. Churchwell, 1999 192,500 101,063 2,209 -- -- -- 8,103
President of PSO 1998 199,904 6,738 2,359 -- -- 37,942 7,900
(4,5) 1997 192,500 53,672 2,167 -- 13,000 -- 6,398

Michael H. Madison, 1999 186,944 87,380 5,544 -- -- -- 8,103
President of SWEPCO 1998 178,593 53,150 28,914 -- -- 18,944 7,900
(4,5)

Paul J. Brower, 1999 141,677 29,955 5,564 -- -- -- 7,200
General Manager/ 1998 138,115 2,874 15,136 -- -- 18,944 6,344
President of WTU (4)
</TABLE>

(1) Amounts in these columns are paid or awarded in a calendar year for
performance in a preceding year.

(2) The following are the perquisites and other personal benefits required to be
identified in respect of each Named Executive Officer: None.

3-16
<PAGE>

(3) Grants of restricted stock are administered by the Executive Compensation
Committee of the CSW Board of Directors, which has the authority to
determine the individuals to whom and the terms upon which restricted stock
grants, including the number of underlying shares, shall be made.

As of December 31, 1999, the aggregate restricted stock holdings of each of the
Named Executive Officers are presented in the following table.

Restricted Stock Market Value at
Name at December 31, 1999 December 31, 1999
---------------------------------------------------------------
Glenn Files 2,904 $58,080
Richard H. Bremer -- --
Robert L. Zemanek 3,009 60,180
Richard P. Verret 1,754 35,080
J. Gonzalo Sandoval 725 14,500
T. D. Churchwell 1,076 21,520
Michael H. Madison 725 14,500
Paul J. Brower 725 14,500

(5)Amounts shown in this column consist of: (i) the annual employer matching
payments to CSW's Retirement Savings Plan; (ii) premiums paid per participant
for personal liability insurance; and (iii) average amounts of premiums paid
per participant in those years under CSW's memorial gift program. In 1999,
1998 and 1997, Messrs. Bremer, Files and Zemanek participated in the memorial
gift program. See Meetings and Compensation for a description of CSW's
memorial gift program. In 1999, $2,500,000 was paid to Mr. Bremer upon his
resignation.

(6)Mr. Bremer was President of the CSW Energy Services business unit until he
resigned in 1999.

Option/SAR Grants

No stock options or appreciation rights were granted to any officer or director
of CSW or the U.S. Electric Operating Companies in 1999.

CSW
Option/SAR Exercises and Year-End Value Table

Shown below is information regarding option/SAR exercises during 1999 and
unexercised options/SARs as of December 31, 1999, for the Named Executive
Officers.

3-17

<PAGE>

Aggregated Option/SAR Exercises in 1999
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>

Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money
Shares Acquired Realized Options/SARs at Year End Options/SARs at Year End
Name On Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ----------------- --------------- --------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>

E. R. Brooks -- -- 86,842/21,667 --/--
T. V. Shockley, III -- -- 69,564/13,667 --/--
Glenn Files -- -- 44,319/10,334 --/--
Ferd. C. Meyer, Jr. -- -- 42,556/9,667 --/--
Glenn D. Rosilier -- -- 51,555/9,334 --/--
</TABLE>

(1) Calculated based upon the difference between the closing price of CSW's
Shares on the New York Stock Exchange on December 31, 1999 ($20.00 per
share) and the exercise price per share of the outstanding unexercisable
and exercisable options ($20.750, $24.813 and $29.625, as applicable).

U.S. ELECTRIC OPERATING COMPANIES
Option/SAR Exercises and Year-End Value Table

Shown below is information regarding option/SAR exercises during 1999 and
unexercised options/SARs at December 31, 1999 for the Named Executive Officers
for the U.S. Electric Operating Companies.

Aggregated Option/SAR Exercises in 1999
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>

Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money
Shares Acquired Realized Options/SARs at Year End Options/SARs at Year End
Name On Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- --------------- --------------- --------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>

Glenn Files -- -- 44,319/10,334 --/--
Richard H. Bremer 33,233 $107,880 --/-- --/--
Robert L. Zemanek -- -- 41,430/8,000 --/--
Richard P. Verret -- -- 10,135/7,000 --/--
J. Gonzalo Sandoval -- -- 2,916/-- --/--
T. D. Churchwell -- -- 13,601/4,334 --/--
Michael H. Madison -- -- 6,802/3,667 --/--
Paul J. Brower -- -- 7,145/-- --/--
</TABLE>

(1)Calculated based upon the difference between the closing price of CSW's
Shares on the New York Stock Exchange on December 31, 1999 ($20.00 per share)
and the exercise price per share of the outstanding unexercisable and
exercisable options ($20.750, $24.813 and $29.625, as applicable).

3-18
<PAGE>

CSW
Long-Term Incentive Plan Awards in 1999

The following table shows information concerning awards made to the Named
Executive Officers for CSW during 1999 under the LTIP:
<TABLE>
<CAPTION>

Estimated Future Payouts under
Non-Stock Price Based Plans

Performance or
Number of Other Period
Shares, Units or Until Maturation Threshold Target Maximum
Name Other Rights Or Payout ($) ($) ($)
---- ---------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
E. R. Brooks 19,572 2 years -- 391,440 587,160
T. V. Shockley, III 11,689 2 years -- 233,780 350,670
Glenn Files 8,442 2 years -- 168,840 253,260
Ferd. C. Meyer, Jr. 7,576 2 years -- 151,520 227,280
Glenn D. Rosilier 7,360 2 years -- 147,200 220,800
</TABLE>

(1) Vesting period for awards paid at end of three-year cycle.

Payouts of the awards are contingent upon CSW achieving a specified level
of total stockholder return, relative to a peer group of utility companies, for
a three-year period or cycle and exceeding a certain defined minimum threshold.
If the Named Executive Officer's employment is terminated during the performance
period for any reason other than death, total and permanent disability or
retirement, then the award is canceled. The LTIP contains provision-accelerating
awards upon a change in control of CSW. If a change in control of CSW occurs,
all options and SARs become fully exercisable and all restrictions, terms and
conditions applicable to all restricted stock are deemed lapsed and satisfied
and all performance units are deemed to have been fully earned, as of the date
of the change in control. The LTIP also contains provisions designed to prevent
circumvention of the above acceleration provisions through coerced termination
of an employee prior to a change in control. See Cash and Other Forms of
Compensation - CSW for additional discussion of the terms of the LTIP.

U.S. Electric Operating Companies
Long-term Incentive Plan Awards in 1999

The following table shows information concerning awards made to the Named
Executive Officers during 1999 under the CSW LTIP.

Estimated Future Payouts under
Non-Stock Price Based Plans

Performance or
Number of Other Period
Shares, Units or Until Maturation Threshold Target Maximum
Name Other Rights Or Payout ($) ($) ($)
---- ---------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Glenn Files 8,442 2 years -- 168,840 253,260
Robert L. Zemanek 6,131 2 years -- 122,620 183,930
Richard P. Verret 5,823 2 years -- 116,460 174,690
J. Gonzalo Sandoval -- 2 years -- -- --
Richard H. Bremer -- 2 years -- -- --
T. D. Churchwell 2,778 2 years -- 55,560 83,340
Michael H. Madison 2,482 2 years -- 49,640 74,460
Paul J. Brower -- 2 years -- -- --
</TABLE>

(1) Vesting period for awards paid at end of three year cycle.

3-19
<PAGE>

Payouts of these awards are contingent upon CSW achieving a specified
level of total stockholder return, relative to a peer group of utility
companies, for a three-year period, or cycle, and exceeding a certain defined
minimum threshold. If the Named Executive Officer's employment is terminated
during the performance period for any reason other than death, total and
permanent disability or retirement, then the award is canceled. The CSW LTIP
contains a provision accelerating awards upon a change in control of CSW. If a
change in control of CSW occurs, all options and SARs become fully exercisable
and all restrictions, terms and conditions applicable to all restricted stock
are deemed lapsed and satisfied and all performance-based units are deemed to
have been fully earned, as of the date of the change in control. The CSW LTIP
also contains provisions designed to prevent circumvention of the above
acceleration provisions through coerced termination of an employee prior to a
change in control.

Cash Balance Retirement Plan

The CSW System maintains the Cash Balance Plan for eligible employees. In
addition, the CSW System maintains the SERP, a non-qualified ERISA excess plan,
that primarily provides benefits that cannot be payable under the Cash Balance
Plan because of maximum limitations imposed on such plans by the Internal
Revenue Code. Under the cash balance formula, each participant has an account
for recordkeeping purposes only, to which dollar amount credits are allocated
annually based on a percentage of the participant's pay. Pay for the Cash
Balance Plan includes base pay, bonuses, overtime, and commissions. The
applicable percentage is determined by the age and years of vesting service the
participant has with CSW and its affiliates as of December 31 of each year (or
as of the participant's termination date, if earlier). The following table shows
the applicable percentage used to determine dollar amount credits at the age and
years of service indicated.

Sum of Age plus
Years of Service Applicable Percentage
------------------------------------------------
<30 3.0%
30-39 3.5%
40-49 4.5%
50-59 5.5%
60-69 7.0%
70 or more 8.5%

As of December 31, 1999, the sum of age plus years of service of the Named
Executive Officers for CSW for the cash balance formula is as follows: Mr.
Brooks, 100; Mr. Shockley, 77; Mr. Files, 80; Mr. Meyer, 78; and Mr. Rosilier,
75.
As of December 31, 1999, the sum of age plus years of service of the Named
Executive Officers for the U.S. Electric Operating Companies for the cash
balance formula are as follows: Mr. Zemanek, 77; Mr. Verret, 80; Mr. Sandoval,
76, Mr. Churchwell, 76; Mr. Madison, 79; Mr. Brower, 73.

All dollar amount balances in the accounts of participants earn a fixed
rate of interest, which is also credited annually. The interest rate for a
particular year is the average rate of return of the 30-year Treasury Rate for
November of the prior year. For 1999, the interest rate was 5.25%. For 2000, the
interest rate is 6.15%. Interest continues to be credited as long as the
participant's balance remains in the plan.

At retirement or other termination of employment, an amount equal to the
vested balance (including qualified and SERP benefit) then credited to the
account is payable to the participant in the form of an immediate or deferred
lump sum or annuity. Benefits, (both from the Cash Balance Plan and the SERP)

3-20
<PAGE>

under the cash balance formula, are not subject to reduction for Social Security
benefits or other offset amounts. The estimated annual benefit payable to each
of the Named Officers as a single life annuity at age 65 under the Cash Balance
Plan and the SERP is:

CSW
E.R. Brooks $467,246
T.V. Shockley, III 244,999
Ferd. C. Meyer, Jr. 146,311
Glenn D. Rosilier 255,520
Glenn Files 279,398

U.S. Electric Operating Companies
Robert L. Zemanek $241,035
Richard P. Verret 177,290
Richard H. Bremer --
J. Gonzalo Sandoval 98,903
T.D. Churchwell 108,313
Michael H. Madison 124,924
Paul J. Brower 81,665

These projections are based on the following assumptions: (1) participant
remains employed until age 65; (2) salary used is base pay paid for calendar
year 1999 assuming no future increases plus bonus at 1999 target level; (3)
interest credit at 6.15% for 2000 and future years; and (4) the conversion of
the lump-sum cash balance to a single life annuity at normal retirement age is
based on an interest rate of 6.15% and the 1983 Group Annuity Mortality Table,
which sets forth generally accepted life expectancies.

In addition, certain employees who were 50 or over and had completed at
least 10 years of service as of July 1, 1997, also continue to earn a benefit
using the prior pension formula. For CSW, at commencement of benefits, Mr.
Brooks, Mr. Shockley and Mr. Meyer have a choice of their accrued benefit using
the cash balance formula or their accrued benefit using the prior pension
formula. For the U.S. Electric Operating Companies, at commencement of benefits,
Mr. Verret and Mr. Churchwell have a choice of their accrued benefit using the
cash balance formula or their accrued benefit using the prior pension formula.
Once the participant selects either the earned benefit under the cash balance
formula or the earned benefit under the prior pension formula, the other earned
benefit is no longer available.

3-21
<PAGE>

The table below shows the estimated combined benefits payable from both
the prior pension formula and the SERP based on retirement age of 65, the
average compensation shown, the years of credited service shown, continued
existence of the prior pension formula without substantial change and payment in
the form of a single life annuity.

Annual Benefits After
Specified Years of Credited Service
Average
Compensation 15 20 25 30 or more
----------------------------------------------------------------

$100,000 $25,050 $33,333 $41,667 $50,000
150,000 37,575 50,000 62,500 75,000
200,000 50,100 66,667 83,333 100,000
250,000 62,625 83,333 104,167 125,000
300,000 75,150 100,000 125,000 150,000
350,000 87,675 116,667 145,833 175,000
450,000 112,725 150,000 187,500 225,000
550,000 137,775 183,333 229,167 275,000
650,000 162,825 216,667 270,833 325,000
750,000 187,875 250,000 312,500 375,000
850,000 212,500 283,333 357,000 425,000
950,000 237,975 316,667 395,833 475,000

Benefits payable under the prior pension formula are based upon the
participant's years of credited service (up to a maximum of 30 years), age at
retirement, and covered compensation earned by the participant. The annual
normal retirement benefit payable under the prior pension formula and the SERP
are based on 1.67 percent of "Average Compensation" times the number of years of
credited service (reduced by no more than 50 percent of a participant's age 62
or later Social Security benefit). "Average Compensation" is covered
compensation for the prior pension formula and equals the average annual
compensation, reported as salary in the Summary Compensation Table, during the
36 consecutive months' highest pay during the 120 months prior to retirement.

Respective years of credited service and ages, as of December 31, 1999,
for the following officers of CSW, who continue to earn a benefit under the
prior pension formula are: Mr. Brooks, 38 and 62, Mr. Shockley, 23 and 54 and
Mr. Meyer, 30 and 60. Respective years of credited service and ages, as of
December 31, 1999, for the following officers of the U.S. Electric Operating
Companies, who continue to earn a benefit under the prior pension formula are:
Mr. Verret, 27 and 53, Mr. Churchwell, 21 and 55.

Change in Control Agreements

Pursuant to approval by the CSW Board of Directors in October 1996, CSW
also has Change in Control Agreements with the Named Executive Officers of CSW
and certain other CSW System officers. The purpose of the Change in Control
Agreements is to assure the objective judgment and to retain the loyalty of
these individuals in the event of a Change in Control of CSW. A Change in
Control includes, among other things, any person gaining ownership or control of
25% or more of the outstanding shares of CSW's voting stock or the closing of
any merger, acquisition or consolidation following which the former stockholders
of CSW own less than 75% of the surviving entity.

The Change in Control Agreements entitle the Named Executive Officers, in
certain circumstances, including but not limited to, a termination by CSW within
three years after a Change in Control (prior to the expiration of the Change in
Control Agreements), to receive: (i) a lump sum payment equal to two to four
times their base salary plus target bonus; (ii) enhanced non-qualified
retirement benefits; (iii) continued health and other welfare benefits for up to
three years and (iv) various other non-qualified benefits. The participating CSW

3-22
<PAGE>

System officers are also eligible for an additional payment, if required, to
make them whole for any excise tax imposed by Section 4999 of the Internal
Revenue Code.

CSW's LTIP provides for awards of stock options, stock appreciation
rights, restricted stock, phantom stock and performance unit awards to employees
selected by the CSW Executive Compensation Committee, including those
individuals named in the CSW Summary Compensation Table. Upon a Change in
Control (as defined in the LTIP), the awards previously granted to those
employees will become fully exercisable, fully vested, or fully earned.

Meetings and Compensation

CSW

The CSW Board of Directors held six regular meetings and four special
meetings during 1999. Directors who are not officers or employees of CSW receive
annual cash directors' fees of $12,000 for serving on the CSW Board and a fee of
$1,250 per day plus expenses for each meeting of the CSW Board or committee
meeting attended. CSW also has the Directors' Compensation Plan which awards
non-employee directors an annual award of 600 phantom stock shares. Pursuant to
the Directors' Compensation Plan, all phantom stock was vested and immediately
converted, on a share-for-share basis, to Common Stock after stockholder
approval of the proposed merger with AEP, on May 28, 1998. For 1999, and any
future awards of phantom stock, all awards were and will be immediately vested,
converted to common stock and issued. The CSW Board has standing Policy, Audit,
Executive Compensation and Nominating Committees. Chairmen of the Audit,
Executive Compensation, and Nominating Committees receive annual fees of $6,000,
$3,500 and $3,500, respectively, to be paid in cash in addition to regular
director and meeting fees. Any committee chairman who is also an officer of CSW
receives no annual fees.

CSW maintains a memorial gift program for all of its current directors,
directors who have retired since 1992 and certain executive officers. There are
17 current directors and executive officers and 15 retired or resigned directors
and officers eligible for the memorial gift program. Under this program, CSW
will make donations in a director's or executive officer's name for up to three
charitable organizations in an aggregate of $500,000, payable by CSW upon such
person's death. CSW maintains corporate-owned life insurance policies to fund
the program. The annual premiums paid by CSW are based on pooled risks and
averaged $15,454 per participant in 1999, $15,363 per participant for 1998 and
$15,803 per participant for 1997.

Non-employee directors are provided the opportunity to defer some or all
of their directors' fees by participating in either the Central and South West
Deferred Compensation Plan for Directors or the Directors' Deferred Savings
Plan. The Compensation Plan allows participants to defer up to $20,000 of board
and committee fees. Participants receive a ten-year annuity, based on the amount
deferred, beginning at the participant's normal retirement date from the CSW
Board. The Savings Plan is unlimited as to the amount of participating fees
which are returned, with accrued interest, as a lump sum or over a period not to
exceed 15 years following retirement.

Non-employee directors are provided the opportunity to enroll in a medical
and dental program offered by CSW. This program is identical to the employee
plan, and directors who elect coverage pay the same premium as active employee
participants in the plan. If a non-employee director terminates his service on
the CSW Board with ten or more years of service and is over 70 years of age,
that director is eligible to receive retiree medical and dental benefits
coverage from CSW.

All current directors attended more than 75% of the total number of
meetings held by the CSW Board and each committee on which such directors served
in 1999.

3-23
<PAGE>

U.S. Electric Operating Companies

Meetings and Directors Fees

Those directors who are not also officers of CPL, PSO, SWEPCO and WTU
receive annual directors' fees and a fee of $300 plus expenses for each board or
committee meeting attended, as described below. They are also eligible to
participate in a deferred compensation plan. Under this plan such directors may
elect to defer payment of annual directors' and meeting fees until they retire
from the board or as they otherwise direct. The number of board meetings and
annual directors' fees are presented in the following table.

CPL PSO SWEPCO WTU
---------------------------------------------

Number of regular board meetings 4 4 4 4
Number of special board meetings 1 -- 2 1
Annual directors' fees $6,000 $6,000 $6,600 $6,000

All of CPL's directors attended 75% or more of the scheduled and special
board meetings. PSO and SWEPCO each had one director who attended only 50% of
the meetings. WTU had one director who attended only 25% of the meetings.

Board Committees

CSW

Policy Committee. The Policy Committee, currently consisting of Messrs.
Brooks (Chairman), Foy, Lawless and Powell, held two meetings in 1999. The
Policy Committee reviews and makes recommendations to the CSW Board concerning
major policy issues, considers the composition, structure and functions of the
CSW Board and its committees and reviews existing corporate policies and
recommends changes when appropriate. The Policy Committee has authority to act
on behalf of the CSW Board when the full CSW Board is not in session, except as
otherwise provided under Delaware law.

Audit Committee. The Audit Committee, currently consisting of Ms. Boren
and Messrs. Carlton, Lawless (Chairman), and Sandor, held seven meetings in
1999. The Audit Committee recommends to the CSW Board the independent public
accountants to be selected; discusses with the internal auditors and independent
public accountants the overall scope, plans and results of their audits, and
their evaluations of internal controls and the overall quality of CSW's
accounting and financial reporting practices; facilitates any private
communication with the Audit Committee desired by the internal auditors or
independent public accountants; discusses with management, internal auditors and
the independent public accountants CSW's accounting and financial reporting
principles and policies; monitors the program to ensure compliance with CSW's
business ethics policy; and may direct and supervise an investigation into any
significant matter brought to its attention within the scope of its duties.

Executive Compensation Committee. The Executive Compensation Committee,
currently consisting of Ms. Boren and Messrs. Foy (Chairman), Howell, and
Sandor, held three meetings in 1999. The Executive Compensation Committee
determines the executive compensation philosophy of CSW and the U.S. Electric
Operating Companies, reviews benefit programs and management succession
programs, sets the salaries for the executive officers of CSW and the U.S.
Electric Operating Companies and reviews and recommends salaries for the chief
executive officers of CSW principal subsidiaries.

3-24
<PAGE>

Nominating Committee. The Nominating Committee, currently consisting of
Messrs. Carlton, Howell and Powell (Chairman), held two meetings in 1999. The
Nominating Committee reviews and recommends qualified candidates for election to
the Board of Directors. The Nominating Committee welcomes stockholder
suggestions for Board nominations. Such suggestions should be directed to Mr.
Brooks, Chairman and CEO, who will forward them to the Nominating Committee.

U.S. Electric Operating Companies

Committees

Each of the four U.S. Electric Operating Companies has an audit committee.
Except for CPL, each of the other companies also has an executive committee
which addresses policy matters that arise between scheduled board meetings.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 and Section 17(a) of
the Public Utility Holding Company Act of 1935 require CSW's and the U.S.
Electric Operating Companies' officers and directors, and persons who
beneficially own more than ten percent of CSW's Common Stock, or any class of
equity security (other than an exempted security) which is registered pursuant
to Section 12 of the Exchange Act, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Officers, directors and
greater-than-ten-percent stockholders are required by SEC regulation to furnish
CSW with copies of all Section 16(a) reports they file. Based solely on CSW's
review of the copies of such forms received and written representations from
certain reporting persons, CSW and the U.S. Electric Operating Companies believe
that during 1999 all such filing requirements applicable to its officers,
directors and greater-than-ten-percent stockholders were complied with.

Compensation Committee Interlocks and Insider Participation

No person serving during 1999 as a member of the Executive Compensation
Committee of the Board of Directors of CSW served as an officer or employee of
any Registrant during or prior to 1999. No person serving during 1999 as an
executive officer of the U.S. Electric Operating Companies serves or has served
on the compensation committee or as a director of another company whose
executive officers serve or have served as a member of the Executive
Compensation Committee of CSW or as a director of one of the U.S. Electric
Operating Companies. The U.S. Electric Operating Companies have no Executive
Compensation Committees or committee performing similar functions.

3-25
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Security Ownership of Certain Beneficial Owners

Set forth below are the only persons or groups known to CSW as of December
31, 1999, which have beneficial ownership of five percent or more of CSW's
Common Stock.

--------------------------------------------------------------------------
(3)
Amount and
(2) Nature of (4)
(1) Name and Address of Beneficial Percent of
Title of Class Beneficial Owners Ownership Class
--------------------------------------------------------------------------
Common Stock Sanford C. Berstein & Co. 18,290,965 8.6%
767 Fifth Avenue
New York, NY 10153-0185

Common Stock Barrow, Hanley, Mewhinney & 16,090,800 7.6%
Strauss, Inc.
1 McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, TX 75204-2429 (A)

Common Stock Capital Research & Management 15,715,800 7.4%
Company
333 South Hope Street
Los Angeles, CA 90071-1447

(A) Vanguard Windsor Funds, Inc., P.O. Box 2600, Valley Forge, PA 19482,
reported beneficial ownership of 12,443,000 shares of Common Stock, or
5.9%. The 7.6% block of shares reported by Barrow, Hanley, Mewhinney &
Strauss, Inc. includes the Vanguard shares, based upon the information
contained in the Vanguard Windsor II Fund Annual Report dated October 31,
1999.

U.S. Electric Operating Companies
All of the outstanding shares of common stock of each of the U.S. Electric
Operating Companies, presented in the following table, is owned beneficially and
of record by CSW.

Company Shares Par Value
-------------------------------------------------
CPL 6,755,535 $25
PSO 9,013,000 15
SWEPCO 7,536,640 18
WTU 5,488,560 25

3-26
<PAGE>

CSW

Security Ownership of Management

The following table shows securities beneficially owned as of December 31,
1999 by each director and nominee, certain executive officers and all directors
and executive officers as a group. Share amounts shown in this table include
options exercisable within 60 days after December 31, 1999, restricted stock,
shares of Common Stock credited to Retirement Savings Plan accounts and all
other shares of Common Stock beneficially owned by the listed persons.

Beneficial Ownership as of December 31, 1999

CSW Common
Underlying
CSW Restricted Immediately
Name Common Stock Exercisable
(1) (2) (3) Options (3)
---------------------------------------------------------------
CSW
Molly Shi Boren 5,663
E.R. Brooks 161,237 8,153 86,842
Donald M. Carlton 10,120
T.J. Ellis 41,395 542 37,733
Glenn Files 65,636 2,904 44,319
Joe H. Foy 2,834
Thomas M. Hagan 27,984 779 21,818
William Howell 1,220
Robert W. Lawless 5,433
Venita McCellon-Allen 21,747 751 15,267
Ferd. C. Meyer, Jr. 60,229 3,799 42,556
James L. Powell 6,101
Glenn D. Rosilier 93,004 3,799 51,555
Richard L. Sandor 620
T. V. Shockley, III 101,692 4,844 69,564
Lawrence B. Connors 28,700 779 15,597
Wendy G. Hargus 16,944 725 12,650
Stephen J. McDonnell 40,169 725 15,145
Kenneth C. Raney, Jr. 16,881 725 9,476
Michael D.Smith 19,892 751 16,445

----------------------------------
TOTAL 727,501 29,276 438,967

(1)Beneficial ownership percentages are all less than one percent and therefore
are omitted.
(2)These individuals currently have voting power, but not investment power,
with respect to these shares.
(3)These shares are included in the CSW Common column.

The following tables show securities beneficially owned as of December 31,
1999, by each director, the President, Executive Officers and all directors and
Executive Officers as a group for each of the U.S. Electric Operating Companies.
Share amounts shown in this table include options exercisable within 60 days
after December 31, 1999, restricted stock, CSW Common Stock credited to CSW
Retirement Savings Plan accounts and all other CSW Common Stock beneficially
owned by the listed persons.

3-27
<PAGE>

Each of the U.S. Electric Operating Companies has one or more series of
preferred stock outstanding. As of December 31, 1999, none of the individuals
listed in the following tables owned any shares of preferred stock of any of the
U.S. Electric Operating Companies.

Beneficial Ownership as of December 31, 1999
CSW Common
Underlying
CSW Restricted Immediately
Name Common Stock Exercisable
(1) (2) (3) Options (3)
----------------------------------------------------------------
CPL
John F. Brimberry 1,542 - --
E. R. Brooks 161,237 8,153 86,842
Glenn Files 65,636 2,904 44,319
Ruben M. Garcia -- -- --
Robert A. McAllen 250 -- --
Pete Morales, Jr. -- -- --
H. Lee Richards 1,400 -- --
J. Gonzalo Sandoval 12,758 725 2,916
Gerald E. Vaughn 21,699 725 15,010
Wendy Hargus 16,944 725 12,650
Alphonso R. Jackson 7,151 221 6,666
R. Russell Davis 1,406 -- 1,406
Brenda L. Snider 834 -- --
-----------------------------------
TOTAL 290,857 13,453 169,809
-----------------------------------

PSO
E. R. Brooks 161,237 8,153 86,842
T. D. Churchwell 17,137 1,076 13,601
Harry A. Clarke -- -- --
Glenn Files 65,636 2,904 44,319
Paul K. Lackey, Jr. -- -- --
Paula Marshall-Chapman -- -- --
William R. McKamey 15,655 725 3,323
Dr. Robert B. Taylor, Jr. -- -- --
Wendy Hargus 16,944 725 12,650
R. Russell Davis 1,406 -- 1,406
Lina P. Holm 789 -- --
------------------------------------
TOTAL 278,804 13,583 162,141
------------------------------------

SWEPCO
Karen C. Adams 2,601 -- 880
E. R. Brooks 161,237 8,153 86,842
James E. Davison 34,175 -- --
Glenn Files 65,636 2,904 44,319
Dr. Frederick E. Joyce -- -- --
John M. Lewis -- -- --
William C. Peatross -- -- --
Maxine P. Sarpy 100 -- --
Michael H. Madison 14,100 725 6,802
Wendy Hargus 16,944 725 12,650
R. Russell Davis 1,406 -- 1,406
Marilyn S. Kirkland 289 -- --
------------------------------------
TOTAL 296,488 12,507 152,899
------------------------------------

WTU
E. R. Brooks 161,237 8,153 86,842
Paul J. Brower 10,338 725 7,145
Glenn Files 65,636 2,904 44,319
Tommy Morris 2,000 -- --
Dian G. Owen -- -- --
James M. Parker -- -- --
F. L. Stephens 15,215 600 --
Alphonso R. Jackson 7,151 221 6,666
Wendy Hargus 16,944 725 12,650
R. Russell Davis 1,406 -- 1,406
Martha Murray 3,583 -- --
------------------------------------
TOTAL 283,510 13,328 159,028
------------------------------------
(1)Beneficial ownership percentages are all less than one percent and therefore
are omitted.
(2)These individuals currently have voting power, but not investment power,
with respect to these shares.
(3)These shares are included in the CSW Common column.

3-28
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

CSW
None.

U.S. Electric Operating Companies
None.

3-29
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as a part of this report on this Form
10-K.

(1) Financial Statements.
Reports of Independent Public Accountants on the financial statements for
CSW and subsidiary companies, CPL, PSO, SWEPCO and WTU are listed under
ITEM 8 herein.

The financial statements filed as a part of this report for CSW and
subsidiary companies, CPL, PSO, SWEPCO and WTU are listed under ITEM 8
herein.

(2) Exhibits.
Exhibits for CSW, CPL, PSO, SWEPCO and WTU are listed in (c) Index to
Exhibits below.

(b) Reports on Form 8-K.

CSW
Date of earliest event reported: October 8, 1999
Date of report: October 18, 1999
Item 5. Other Events and Item 7. Financial Statements and Exhibits, news release
related to the sale of 50% equity interest in the Sweeny electric generating
plant.

CSW CPL, PSO, SWEPCO and WTU
Date of earliest event reported: November 17, 1999
Date of report: December 7, 1999
Item 5. Other Events and Item 7. Financial Statements and Exhibits, news release
reporting a FERC ALJ finding that the AEP Merger is in the public interest and a
news release reporting the Louisiana Commission's approval of an agreement and
stipulation covering rates to retail customers.

CSW CPL, PSO, SWEPCO and WTU
Date of earliest event reported: December 16, 1999
Date of report: December 17, 1999
Item 5. Other Events and Item 7. Financial Statements and Exhibits, news release
reporting amendment of the AEP Merger agreement extending the term for closing
until June 30, 2000.

CSW CPL, SWEPCO and WTU
Date of earliest event reported: January 10, 2000
Date of report: January 25, 2000
Item 5. Other Events and Item 7. Financial Statements and Exhibits, copies of
news release and Texas Commission filing by CSW and its three electric utilities

4-1
<PAGE>

serving Texas jurisdictional customers announcing a business separation plan for
"unbundling" Texas electrical utilities into three entities: a retail electric
provider, a power generation company and an energy delivery company.

SWEPCO
Date of earliest event reported: February 4, 2000
Date of report: February 4, 2000
Item 5. Other Events and Item 7. Financial Statements and Exhibits, reporting
SWEPCO's 1999 earnings in anticipation of filing a Form S-3 registration
statement with the SEC for a new debt offering. Exhibits include a ratio of
earnings to fixed charges and a financial data schedule.

CSW CPL, PSO, SWEPCO and WTU
Date of earliest event reported: January 25, 2000
Date of report: February 14, 2000
Item 5. Other Events and Item 7. Financial Statements and Exhibits, news
releases reporting regulatory approvals of AEP Merger from United Kingdom's
Department of Trade and Industry and United States Department of Justice; news
release reporting a settlement between CPL and the Texas Commission relating to
the initial securitization of stranded costs; and the reporting of CPL's 1999
earnings in anticipation of a new debt offering. Exhibits include a ratio of
earnings to fixed charges and a financial data schedule.

4-2
<PAGE>

CSW
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
21, 2000. The signature of the undersigned registrant shall be deemed to relate
only to matters having reference to such registrant and any subsidiaries
thereof.

CENTRAL AND SOUTH WEST CORPORATION

By: Lawrence B. Connors
Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 21, 2000. The signature
of each of the undersigned shall be deemed to relate only to matters having
reference to the above named registrant and any subsidiaries thereof.

Signature Title
- --------- -----
E. R. Brooks Chairman, CEO and Director
(Principal Executive Officer)

Glenn D. Rosilier Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)

Lawrence B. Connors Controller
(Principal Accounting Officer)

*Molly Shi Boren Director
*Dr. Donald M. Carlton Director
*T. J. Ellis Director
*Joe H. Foy Director
*William R. Howell Director
*Dr. Robert W. Lawless Director
*James L. Powell Director
*Dr. Richard L. Sandor Director
*T. V. Shockley, III President, Chief Operating Officer and
Director

*Lawrence B. Connors, by signing his name hereto, does sign this document on
behalf of the persons indicated above pursuant to a power of attorney duly
executed by each such person.

*By: Lawrence B. Connors
Attorney-in-Fact

4-3
<PAGE>

CPL
SIGNATURES

CENTRAL POWER AND LIGHT COMPANY

By: R. Russell Davis
Controller

Signature Title
- --------- ------
J. Gonzalo Sandoval General Manager/President and
Director
(Principal Executive Officer)

R. Russell Davis Controller
(Principal Accounting and Financial
Officer)

*John F. Brimberry Director
*E. R. Brooks Director
*Glenn Files Director
*Ruben M. Garcia Director
*Alphonso R. Jackson Director
*Robert A. McAllen Director
*Pete Morales, Jr. Director
*H. Lee Richards Director
*Gerald E. Vaughn Director

*R. Russell Davis, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to a power of attorney duly executed by
each such person.

*By: R. Russell Davis
Attorney-in-Fact

4-4
<PAGE>

PSO
SIGNATURES

PUBLIC SERVICE COMPANY OF OKLAHOMA

By: R. Russell Davis
Controller

Signature Title
- --------- -----
T. D. Churchwell President and Director
(Principal Executive Officer)

R. Russell Davis Controller
(Principal Accounting and Financial
Officer)

*E. R. Brooks Director
*Harry A. Clarke Director
*Glenn Files Director
*Paul K. Lackey, Jr. Director
*Paula Marshall-Chapman Director
*William R. McKamey General Manager and Director
*Dr. Robert B. Taylor, Jr. Director

*R. Russell Davis, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to a power of attorney duly executed by
each such person.

*By: R. Russell Davis
Attorney-in-Fact

4-5
<PAGE>

SWEPCO
SIGNATURES

SOUTHWESTERN ELECTRIC POWER COMPANY

By: R. Russell Davis
Controller

Signature Title
- --------- -----
Michael H. Madison President and Director
(Principal Executive Officer)

R. Russell Davis Controller
(Principal Accounting and Financial
Officer)

*Karen C. Adams General Manager and Director
*E. R. Brooks Director
*James E. Davison Director
*Glenn Files Director
*Dr. Frederick E. Joyce Director
*John M. Lewis Director
*William C. Peatross Director
*Maxine P. Sarpy Director

*R. Russell Davis, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to a power of attorney duly executed by
each such person.

*By: R. Russell Davis
Attorney-in-Fact

4-6
<PAGE>

WTU
SIGNATURES

WEST TEXAS UTILITIES COMPANY

By: R. Russell Davis
Controller

Signature Title
- --------- -----
Paul J. Brower General Manager/President and
Director
(Principal Executive Officer)

R. Russell Davis Controller
(Principal Accounting and Financial
Officer)

*E. R. Brooks Director
*Glenn Files Director
*Alphonso R. Jackson Director
*Tommy Morris Director
*Dian G. Owen Director
*James M. Parker Director
*F. L. Stephens Director

*R. Russell Davis, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to a power of attorney duly executed by
each such person.

*By: R. Russell Davis
Attorney-in-Fact

4-7
<PAGE>

The following exhibits indicated by an asterisk (*) preceding the exhibit
number are filed herewith. The balance of the exhibits have heretofore been
filed with the SEC, respectively, as the exhibits and in the file numbers
indicated and are incorporated herein by reference. The exhibits marked with a
plus (+) are management contracts or compensatory plans or arrangements required
to be filed herewith and required to be identified as such by ITEM 14 of Form
10-K. Reference is made to a duplicate list of exhibits being filed as a part of
this Form 10-K, which list, prepared in accordance with Item 102 of Regulation
S-T of the SEC, immediately precedes the exhibits being filed with this Form
10-K.

(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.

CSW, CPL, SWEPCO and WTU
1 Business separation plan for "unbundling" Texas electrical utilities
into three separate entities: a retail electric provider, a power
generation company and an energy delivery company filed with the
Texas Commission on January 10, 2000, (incorporated herein by
reference to CSW's, CPL's, SWEPCO's and WTU's Form 8-K dated January
10, 2000).

(3) Articles of Incorporation and Bylaws.

CSW
1 Certificate of Amendment to Second Restated Certificate of
Incorporation of CSW (incorporated herein by reference to Item 10,
Exhibit B-1.2 to the 1993 CSW annual report on Form U5S, File No.
1-1443).
2 Bylaws of CSW, as amended January 20, 1999 (incorporated herein by
reference to Exhibit 3.2 to CSW's Form 10-K dated December 31, 1998,
File No. 1-1443).

CPL
3 Restated Articles of Incorporation Without Amendment, Articles of
Correction to Restated Articles of Incorporation Without Amendment,
Articles of Amendment to Restated Articles of Incorporation,
Statements of Registered Office and/or Agent, and Articles of
Amendment to the Articles of Incorporation (incorporated herein by
reference to Exhibit 3.1 to CPL's Form 10-Q dated March 31, 1997).
4 Bylaws of CPL, as amended (incorporated herein by reference to
Exhibit 3.1 to CPL's Form 10-Q dated September 30, 1996, File No.
0-346).

PSO
5 Restated Certificate of Incorporation of PSO (incorporated herein by
reference to Exhibit B-3.1 of CSW's 1996 Form U5S, File No. 1-1443).
6 Bylaws of PSO, as amended (incorporated herein by reference to
Exhibit 3.1 of PSO's Form 10-Q, dated March 31,1998, File No. 0-343).

4-8
<PAGE>

SWEPCO
7 Restated Certificate of Incorporation, as amended through May 6, 1997,
including Certificate of Amendment of Restated Certificate of
Incorporation (both incorporated herein by reference to Exhibit 3.4 to
SWEPCO's Form 10-Q dated March 31, 1997, File No. 1-3146).
8 Bylaws of SWEPCO, as amended (incorporate herein by reference to
Exhibit 3.3 to SWEPCO's Form 10-Q dated September 30, 1996, File No.
1-3146).

WTU
9 Restated Articles of Incorporation, as amended, and Articles of
Amendment to the Articles of Incorporation (both incorporated herein by
reference to Exhibit 3.5 to WTU's Form 10-K dated March 31, 1997, File
No. 0-340).
10 Bylaws of WTU, as amended (incorporated herein by reference to Exhibit
3.4 to WTU's Form 10-Q dated September 30, 1996, File No. 0-340).

(4) Instruments defining the rights of security holder, including indentures.

CSW
(a) Rights Agreement dated as of December 22, 1997 between CSW and CSW
Services, Inc., as Rights Agent (incorporated herein by reference to
Exhibit 1 to CSW Form 8-A/A dated March 19, 1998, File No. 1-1443).

CPL
(a) Indenture of mortgage or deed of trust dated November 1,1943, executed
by CPL to the First National Bank of Chicago and Robert L. Grinnell as
trustee, as amended through October 1, 1977 (incorporated herein by
reference to Exhibit 5.01 in File No. 2-60712).

Supplemental Indentures to the First Mortgage Indenture:

Dated File Reference Exhibit
September 1, 1978 2-62271 2.02
December 15, 1984 Form U-1, No. 70-7003 17
July 1, 1985 2-98944 4 (b)
May 1, 1986 Form U-1, No. 70-7236 4
November 1, 1987 Form U-1, No. 70-7249 4
June 1, 1988 Form U-1, No. 70-7520 2
December 1, 1989 Form U-1, No. 70-7721 3
March 1, 1990 Form U-1, No. 70-7725 10
October 1, 1992 Form U-1, No. 70-8053 10 (a)
December 1, 1992 Form U-1, No. 70-8053 10 (b)
February 1, 1993 Form U-1, No. 70-8053 10 (c)
April 1, 1993 Form U-1, No. 70-8053 10 (d)
May 1, 1994 Form U-1, No. 70-8053 10 (e)
July 1, 1995 Form U-1, No. 70-8053 10 (f)

(b) CPL-obligated, mandatorily redeemable preferred securities of
subsidiary trust holding solely Junior Subordinated Debentures of CPL.

(1) Indenture, dated as of May 1, 1997, between CPL and the Bank
of New York, as Trustee (incorporated herein by reference to
Exhibit 4.1 of CPL's Form 10-Q dated March 31, 1997, File No.
0-346).

4-9
<PAGE>

(2) First Supplemental Indenture, dated as of May 1, 1997, between
CPL and the Bank of New York, as Trustee (incorporated herein
by reference to Exhibit 4.2 of CPL's Form 10-Q dated March 31,
1997, File No. 0-346).
(3) Amended and Restated Trust Agreement of CPL Capital I, dated
as of May 1, 1997, among CPL, as Depositor; the Bank of New
York, as Property Trustee; the Bank of New York (Delaware), as
Delaware Trustee; and the Administrative Trustee (incorporated
herein by reference to Exhibit 4.3 of CPL's Form 10-Q dated
March 31, 1997, File No. 0-346).
(4) Guarantee Agreement, dated as of May 1, 1997, delivered by CPL
for the benefit of the holders of CPL Capital I's Preferred
Securities (incorporated herein by reference to Exhibit 4.4 of
CPL's Form 10-Q dated March 31, 1997, File No. 0-346).

(c) Agreement as to Expenses and Liabilities dated as of May 1, 1997,
between CPL and Capital I (incorporated herein by reference to
Exhibit 4.5 of CPL's Form 10-Q dated March 31, 1997, File No.
0-346).

(d) Senior Notes Indenture dated November 15, 1998 between CPL and The
Bank of New York as Trustee (incorporated herein by reference to
Exhibit 4 of CPL's Form S-3 dated November 18, 1998, File No.
333-67525).
(1) First Supplemental Indenture dated November 15, 1999, between
CPL and The Bank of New York, as Trustee, for $200 million
Floating Rate Notes due November 23, 2001 (incorporated herein
by reference to Exhibit 4 of CPL's Form S-3 dated November 18,
1998, File No. 333-67525).
(2) Second Supplemental Indenture dated February 16, 2000, between
CPL and the Bank of New York, as Trustee, for $150 million
Floating Rate Notes due February 22, 2002, (incorporated
herein by reference to Exhibit 4 of CPL's Form S-3 dated
November 18, 1998, File No. 333-67525).

PSO
(a) Indenture dated July 1, 1945, as amended, of PSO (incorporated herein
by reference to Exhibit 5.03 in Registration No. 2-60712).

Supplemental Indentures to the First Mortgage Indenture:

Dated File Reference Exhibit
June 1, 1979 2-64432 2.02
December 1, 1979 2-65871 2.02
March 1, 1983 Form U-1, No. 70-6822 2
May 1, 1986 Form U-1, No. 70-7234 3
July 1, 1992 Form S-3, No. 33-48650 4 (b)
December 1, 1992 Form S-3, No. 33-49143 4 (c)
April 1, 1993 Form S-3, No. 33-49575 4 (b)
June 1, 1993 Form 10-K, No. 0-343 4 (b)
February 1, 1996 Form 8-K, March 4, 1996, No.0-343 4.01
February 1, 1996 Form 8-K, March 4, 1996, No.0-343 4.02
February 1, 1996 Form 8-K, March 4, 1996, No.0-343 4.03

(b) PSO-obligated, mandatorily redeemable preferred securities of
subsidiary trust holding solely Junior Subordinated Debentures
of PSO.

4-10
<PAGE>

(1) Indenture, dated as of May 1, 1997, between PSO and The Bank
of New York, as Trustee (incorporated herein by reference to
Exhibit 4.6 of PSO's Form 10-Q dated March 31, 1997, File No.
0-343).
(2) First Supplemental Indenture, dated as of May 1, 1997, between
PSO and The Bank of New York, as Trustee (incorporated herein
by reference to Exhibit 4.7 of PSO's Form 10-Q dated March 31,
1997 File No. 0-343).
(3) Amended and Restated Trust Agreement of PSO Capital I, dated
as of May 1, 1997, among PSO, as Depositor; The Bank of New
York, as Property Trustee; The Bank of New York (Delaware), as
Delaware Trustee; and the Administrative Trustee (incorporated
herein by reference to Exhibit 4.8 of PSO's Form 10-Q dated
March 31, 1997, File No. 0-343).
(4) Guarantee Agreement, dated as of May 1, 1997, delivered by PSO
for the benefit of the holders of PSO Capital I's Preferred
Securities (incorporated herein by reference to Exhibit 4.9 of
PSO's Form 10-Q dated March 31, 1997, File No. 0-343).
(5) Agreement as to Expenses and Liabilities, dated as of May 1,
1997, between PSO and PSO Capital I (incorporated herein by
reference to Exhibit 4.10 of PSO's Form 10-Q dated March 31,
1997, File No. 0-343).

SWEPCO
(a) Indenture dated February 1, 1940, as amended through November 1, 1976
(incorporated herein by reference to Exhibit 5.04 in Registration No.
2-60712).

Supplemental Indentures to the First Mortgage Indenture:

Dated File Reference Exhibit
August 1, 1978 2-61943 2.02
January 1, 1980 2-66033 2.02
April 1, 1981 2-71126 2.02
May 1, 1982 2-77165 2.02
August 1, 1985 Form U-1, No. 70-7121 4
May 1, 1986 Form U-1, No. 70-7233 3
November 1, 1989 Form U-1, No. 70-7676 3
June 1, 1992 Form U-1, No. 70-7934 10
September 1, 1992 Form U-1, No. 72-8041 10 (b)
July 1, 1993 Form U-1, No. 70-8041 10 (c)
October 1, 1993 Form U-1, No. 70-8239 10 (a)

(b) SWEPCO-obligated, mandatorily redeemable preferred securities of
subsidiary trust holding solely Junior Subordinated Debentures of
SWEPCO.
(1) Indenture, dated as of May 1, 1997, between SWEPCO and the Bank
of New York, as Trustee (incorporated herein by reference to
Exhibit 4.11 of SWEPCO's Form 10-Q dated March 31, 1997,
File No. 1-3146).
(2) First Supplemental Indenture, dated as of May 1, 1997, between
SWEPCO and the Bank of New York, as Trustee (incorporated
herein by reference to Exhibit 4.12 of SWEPCO's Form 10-Q
dated March 31, 1997, File No. 1-3146).
(3) Amended and Restated Trust Agreement of SWEPCO Capital I,
dated as of May 1, 1997, among SWEPCO, as Depositor; the Bank
of New York, as Property Trustee; the Bank of New York
(Delaware), as Delaware Trustee; and the Administrative
Trustee (incorporated herein by reference to Exhibit 4.13 of
SWEPCO's Form 10-Q dated March 31, 1997, File No. 1-3146).

4-11
<PAGE>

(4) Guarantee Agreement, dated as of May 1, 1997, delivered by
SWEPCO for the benefit of the holders of SWEPCO Capital I's
Preferred Securities (incorporated herein by reference to
Exhibit 4.14 of SWEPCO's Form 10-Q dated March 31, 1997, File
No. 1-3146).
(5) Agreement as to Expenses and Liabilities, dated as of May 1,
1997 between SWEPCO and SWEPCO Capital I (incorporated herein
by reference to Exhibit 4.15 of SWEPCO's Form 10-Q dated March
31, 1997, File No. 1-3146).
(6) Senior Note Indenture dated February 4, 2000, between SWEPCO
and The Bank of New York as Senior Note Trustee, (incorporated
herein by reference to Exhibit 4 of SWEPCO Form S-3 dated
February 4, 2000, File No. 333-96213).
(a) First Supplemental Indenture, dated February 25, 2000,
between SWEPCO and The Bank of New York, as Senior Note
Trustee, for $150 million Floating Rate Notes due March
1, 2001 (incorporated herein by reference to Exhibit 4
of SWEPCO's Form S-3 dated February 4, 2000, File No.
333-96213).

WTU
(a) Indenture dated August 1, 1943, as amended through July 1, 1973, of
WTU, incorporated herein by reference to Exhibit 5.05 in File No.
2-60712.

Supplemental Indentures to the First Mortgage Indenture:

Dated File Reference Exhibit
May 1, 1979 2-63931 2.02
November 15, 1981 2-74408 4.02
November 1, 1983 Form U-1, No. 70-6820 12
April 15, 1985 Form U-1, No. 70-6925 13
August 1, 1985 2-98843 4 (b)
May 1, 1986 Form U-1, No. 70-7237 4
December 1, 1989 Form U-1, No. 70-7719 3
June 1, 1992 Form U-1, No. 70-7936 10
October 1, 1992 Form U-1, No. 72-8057 10
February 1, 1994 Form U-1, No. 70-8265 10
March 1, 1995 Form U-1, No. 70-8057 10 (b)
October 1, 1995 Form U-1, No. 70-8057 10 (c)

(10) Material contracts.

CSW
+1 Change in Control Agreement between CSW and E. R. Brooks.
+2 Change in Control Agreement between CSW and Thomas V. Shockley, III.
+3 Change in Control Agreement between CSW and Ferd. C. Meyer, Jr.
+4 Change in Control Agreement between CSW and Glenn D. Rosilier.
+5 Change in Control Agreement between CSW and Venita. McCellon-Allen.
+6 Change in Control Agreement between CSW and Thomas M. Hagan.
+7 Change in Control Agreement between CSW and Glenn Files.
+8 Change in Control Agreement between CSW and Robert L. Zemanek.
+9 Change in Control Agreement between CSW and Richard H. Bremer.
+10 Change in Control Agreement between CSW and Richard P. Verret.

4-12
<PAGE>

+11 Change in Control Agreement between CSW and T. J. Ellis.
+12 Change in Control Agreement between CSW and Terry D. Dennis.
+13 Change in Control Agreement between CSW and Bruce Evans.
+14 Change in Control Agreement between CSW and T.D. Churchwell.
+15 Change in Control Agreement between CSW and Michael D. Smith.
+16 Change in Control Agreement between CSW and Floyd Nickerson.
+17 Restricted Stock Plan for Central and South West Corporation
(incorporated herein by reference to Exhibit 10 (a) to CSW's 1990 Form
10-K, File No. 1-1443).
+18 Central and South West System Special Executive Retirement Plan as
amended and restated effective July 1, 1997 (incorporated herein by
reference to Exhibit 10 (18) to CSW's 1998 Form 10-K, File No. 1-1443).
+19 Executive Incentive Compensation Plan for Central and South West System
(incorporated herein by reference to Exhibit 10 (c) to CSW's 1990 Form
10-K, File No. 1-1443).
20 Central and South West Corporation Stock Option Plan (incorporated
herein by reference to Exhibit 10 (d) to CSW's 1990 Form 10-K, File No.
1-1443).
21 Central and South West Corporation Deferred Compensation Plan for
Directors (incorporated herein by reference to Exhibit 10 (e) to CSW's
1990 Form 10-K, File No. 1-1443).

+22 Central and South West Corporation 1992 Long-Term Incentive Plan
(incorporated herein by reference to Appendix A to the Central and
South West Corporation Notice of 1992 Annual Meeting of Shareholders
and Proxy Statement).
23 Agreement and Plan of Merger, dated as of December 21, 1997, by and
among American Electric Power Company, Inc.; a New York Corporation,
Augusta Acquisition Corporation, a Delaware Corporation and a
wholly-owned subsidiary of AEP; and Central and South West Corporation,
a Delaware Corporation (incorporated herein by reference to the 1998
Joint Proxy Statement, File No. 1-1443).
24 Amendment to the AEP Merger agreement extending the term for closing
until June 30, 2000. (incorporated herein by reference to CSW, CPL,
PSO, SWEPCO and WTU Form 8-K dated December 17, 1999).
+25 Central and South West Corporation Executive Deferred Savings Plan as
amended and restated effective as of January 1, 1997 (incorporated
herein by reference to Exhibit 10 (24) to CSW's 1998 Form 10-K, File
No. 1-1443).

(12) Statements re computation of ratios.

CPL, PSO, SWEPCO and WTU
* 1 CPL's Statement re computation of Ratio of Earnings to Fixed Charges
for the five years ended December 31, 1999.
* 2 PSO's Statement re computation of Ratio of Earnings to Fixed Charges
for the five years ended December 31, 1999.
* 3 SWEPCO's Statement re computation of Ratio of Earnings to Fixed
Charges for the five years ended December 31, 1999.
* 4 WTU's Statement re computation of Ratio of Earnings to Fixed Charges
for the five years ended December 31, 1999.

* (13) Annual report to security holders.
* 1 CSW's 1999 Financial Report.
* 2 CSW's 1999 Summary Annual Report.

* (21) Subsidiaries of the registrant (CSW).

4-13
<PAGE>

(23) Consent of experts and counsel.

CSW, CPL, PSO
* 1 CSW's Consent of Independent Public Accountants.
* 2 CSW UK Holdings Consent of Independent Public Accountants.
* 3 CSW UK Finance Company Consent of Independent Public Accountants
* 4 CPL's Consent of Independent Public Accountants.
* 5 PSO's Consent of Independent Public Accountants.
* 6 SWEPCO's Consent of Independent Public Accountants.

(24) Power of attorney.

CSW
* 1 Power of Attorney.
* 2 Power of Attorney.
* 3 Power of Attorney.
* 4 Power of Attorney.
* 5 Board Resolution Authorizing Power of Attorney.

CPL
* 6 Power of Attorney.
* 7 Power of Attorney.
* 8 Power of Attorney.
* 9 Board Resolution Authorizing Power of Attorney.

PSO
* 10 Power of Attorney.
* 11 Power of Attorney.
* 12 Power of Attorney
* 13 Board Resolution Authorizing Power of Attorney.

SWEPCO
* 14 Power of Attorney.
* 15 Power of Attorney.
* 16 Power of Attorney.
* 17 Board Resolution Authorizing Power of Attorney

WTU
* 18 Power of Attorney.
* 19 Power of Attorney.
* 20 Power of Attorney.
* 21 Board Resolution Authorizing Power of Attorney.

4-14
<PAGE>

(27) Financial Data Schedules.

CSW, CPL, PSO, SWEPCO and WTU
* 1 CSW's Financial Data Schedules.
* 2 CPL's Financial Data Schedules.
* 3 PSO's Financial Data Schedules.
* 4 SWEPCO's Financial Data Schedules.
* 5 WTU's Financial Data Schedules.

(d) Index to Financial Statement Schedules.

Other Schedules.

All other exhibits and schedules are omitted because of the absence of the
conditions under which they are required or because the required information is
included in the financial statements or related notes to financial statements.

4-15

Exhibit 12.1

Central Power and Light Company
Consolidated Ratio of Earnings to Fixed Charges
For Years Ended December 31,

1999 1998 1997 1996 1995
---------------------------------------------------
(thousands, except ratios)

Operating income $294,672 $282,926 $251,367 $285,647 $282,184
Adjustments
Income taxes 83,508 126,738 39,329 47,227 51,755
Provision for deferred
income taxes 20,308 (8,253) 34,484 51,476 (30,025)
Deferred investment tax
credits (5,207) (3,858) (4,819) (5,553) (5,789)
Charges for investments
and plant development
costs, net of tax -- -- (1,281) (15,569) --
Other income and deductions 8,113 709 7,834 3,997 14,880
Allowance for borrowed
and equity funds used
during construction 4,532 2,822 3,778 1,845 4,514
Mirror CWIP amortization -- -- -- -- 41,000
---------------------------------------------------
Earnings $405,926 $401,084 $330,692 $369,070 $358,519
===================================================

Fixed charges:
Interest on long-term debt $87,413 $93,301 $105,081 $110,375 $116,205
Interest on short-term
debt 19,498 19,506 20,613 18,494 19,926
Distributions on Trust
Preferred Securities 12,000 12,000 7,533 -- --
---------------------------------------------------
Fixed Charges $118,911 $124,807 $133,227 $128,869 $136,131
===================================================

Ratio of earnings to
fixed charges 3.41 3.21 2.48 2.86 2.63

4-16

Exhibit 12.2

Public Service Company of Oklahoma
Consolidated Ratio of Earnings to Fixed Charges
For Years Ended December 31,

1999 1998 1997 1996 1995
---------------------------------------------------
(thousands, except ratios)

Operating income $99,810 $115,008 $81,776 $101,737 $111,769
Adjustments
Income taxes 18,562 52,494 12,313 25,257 37,490
Provision for deferred
income taxes 15,198 (1,693) 8,448 (1,328) 2,704
Deferred investment tax
credits (1,791) (1,795) (2,278) (2,784) (2,789)
Charges for investments
and plant development
costs, net of tax -- -- (75) (35,708) --
Other income and
deductions 745 (951) 729 (95) 2,274
Allowance for borrowed
and equity funds used
during construction 1,636 2,029 2,317 1,722 3,734
---------------------------------------------------
Earnings $134,160 $165,092 $103,230 $88,801 $155,182
===================================================

Fixed charges:
Interest on long-term
debt $26,528 $29,136 $30,474 $30,555 $29,594
Interest on short-term
debt 7,058 4,107 4,100 5,623 6,355
Distributions on Trust
Preferred Securities 6,000 6,000 3,967 -- --
---------------------------------------------------
Fixed Charges $39,586 $39,243 $38,541 $36,178 $35,949
===================================================

Ratio of earnings to
fixed charges 3.39 4.21 2.68 2.45 4.32

4-17

Exhibit 12.3

Southwestern Electric Power Company
Consolidated Ratio of Earnings to Fixed Charges
For Years Ended December 31,

1999 1998 1997 1996 1995
---------------------------------------------------
(thousands, except ratios)

Operating income $147,524 $150,787 $139,409 $138,083 $162,776
Adjustments
Income taxes 55,343 62,595 44,396 32,931 41,131
Provision for deferred
income taxes (17,098) (11,850) (2,244) 2,849 6,287
Deferred investment tax
credits (4,565) (4,631) (4,662) (4,730) (4,786)
Charges for investments
and plant development
costs, net of tax -- -- (483) (21,815) --
Other income and deductions (2,000) 1,115 3,578 312 178
Allowance for borrowed and
equity funds used
during construction 1,984 2,687 2,156 2,423 9,334
Interest portion of
financing leases 335 598 1,194 1,514 1,896
---------------------------------------------------
Earnings $181,523 $201,301 $183,344 $151,567 $216,816
===================================================

Fixed charges:
Interest on long-term
debt $38,380 $39,233 $40,440 $44,066 $44,468
Distributions on Trust
Preferred Securities 8,662 8,662 5,582 -- --
Interest on short-term
debt & other 13,800 8,591 5,736 8,381 10,706
Interest portion of
financing leases 335 598 1,194 1,514 1,896
---------------------------------------------------
Fixed Charges $61,177 $57,084 $52,952 $53,961 $57,070
===================================================

Ratio of earnings to fixed
charges 2.97 3.53 3.46 2.81 3.80

4-18

Exhibit 12.4

West Texas Utilities Company
Ratio of Earnings to Fixed Charges
For Years Ended December 31,

1999 1998 1997 1996 1995
---------------------------------------------------
(thousands, except ratios)

Operating income $54,164 $59,365 $44,567 $51,734 $59,486
Adjustments
Income taxes 4,186 28,088 11,294 6,547 6,456
Provision for deferred
income taxes 12,222 (6,578) (954) 5,718 1,971
Deferred investment tax
credits (1,275) (1,321) (1,321) (1,321) (1,321)
Charges for investments
and plant development costs,
net of tax -- -- -- (10,946) --
Other income and deductions 2,126 2,034 1,237 601 (463)
Allowance for borrowed and
equity funds used during
construction 1,025 1,347 920 1,276 1,031
---------------------------------------------------
Earnings $72,448 $82,935 $55,743 $53,609 $67,160
===================================================

Fixed charges:
Interest on long-term debt 20,352 $20,352 $20,352 $21,169 $21,413
Interest on short-term
debt & other 4,731 4,580 4,911 4,925 4,111
---------------------------------------------------
Fixed Charges $25,083 $24,932 $25,263 $26,094 $25,524
===================================================

Ratio of earnings to fixed
charges 2.89 3.33 2.21 2.05 2.63

4-19

Exhibit 21
Central And South West Corporation
Subsidiaries of the Registrant
As of December 31, 1999

Company Name State or Jurisdiction of
Business Conducted Under Same Name Incorporation/Formation
- ---------------------------------- ------------------------
Central Power and Light Company Texas
539 North Carancahua Street
Corpus Christi, Texas 78401-2802

CPL Capital I Delaware
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

Public Service Company of Oklahoma Oklahoma
212 East 6th Street
Tulsa, Oklahoma 74119-1212

PSO Capital I Delaware
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

Southwestern Electric Power Company Delaware
428 Travis Street
Shreveport Louisiana 71156-0001

SWEPCO Capital I Delaware
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

West Texas Utilities Company Texas
301 Cypress Street
Abilene, Texas 79601-5820

SEEBOARD, plc United Kingdom
Registered Office
Forest Gate, Brighton Road
Crawley, West Sussex RH11 9BH

Central and South West Services, Inc. Texas
2 West Second Street
Tulsa, Oklahoma 74103-3102
and
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

C3 Communications, Inc. Delaware
1705 South Capital of Texas Highway - Suite 400
Austin, Texas 78746

CSW Credit, Inc. Delaware
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

CSW Energy, Inc. Texas
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

4-20
<PAGE>

Company Name State or Jurisdiction of
Business Conducted Under Same Name Incorporation/Formation
- ---------------------------------- ------------------------
CSW Energy Services, Inc. Texas
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

CSW International, Inc. Delaware
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

CSW Leasing, Inc. Delaware
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234

EnerShop Inc. Delaware
2777 Stemmons Freeway - Suite 700
Dallas, Texas 75207-2214

4-21

Exhibit 23.1

Consent of Independent Public Accountants

To the Stockholders and Board of Directors of Central and South West
Corporation:

As independent public accountants, we hereby consent to the incorporation
of our report dated February 25, 2000, included in this Form 10-K, into Central
and South West Corporation's previously filed registration statements on Form
S-8 (File Nos. 33-49301, 33-63027 and 33-64233) and on Form S-3 (File No.
333-00911).

Arthur Andersen LLP

Dallas, Texas
March 21, 2000

4-22

Exhibit 23.2

Consent of Independent Public Accountants

The Board of Directors
CSW UK Holdings:

We consent to the incorporation by reference in the registration statements on
Form S-8 and on Form S-3 of Central and South West Corporation of our report
dated 17 January 2000, with respect to the consolidated balance sheet of CSW UK
Holdings as of 31 December 1999, and the related consolidated statements of
earnings and cash flows for the year then ended, which report appears in the 31
December 1999, annual report on Form 10-K of Central and South West Corporation.

KPMG Audit Plc London, England
Chartered Accountants 3 February 2000
Registered Auditors

4-23

Exhibit 23.3

Consent of Independent Public Accountants

The Board of Directors
CSW UK Finance Company:

We consent to the incorporation by reference in the registration
statements on Form S-8 and on Form S-3 of Central and South West Corporation of
our report dated 18 January 2000, with respect to the consolidated balance
sheets of CSW UK Finance Company as of 31 December 1998 and 1997, and the
related consolidated statements of earnings and cash flows for the years then
ended, which report appears in the 31 December 1999, annual report on Form 10-K
of Central and South West Corporation.

KPMG Audit Plc London, England
Chartered Accountants 3 February 2000
Registered Auditors

4-24

Exhibit 23.4

Consent of Independent Public Accountants

To the Stockholders and Board of Directors of Central Power and Light Company:

As independent public accountants, we hereby consent to the incorporation
of our report with respect to the Consolidated Financial Statements of Central
Power and Light Company dated February 25, 2000, included in this Form 10-K,
into Central Power and Light Company's previously filed registration statement
on Form S-3 (File Nos. 33-49577 and 33-52759).

Arthur Andersen LLP

Dallas, Texas
March 21, 2000

4-25

Exhibit 23.5

Consent of Independent Public Accountants

To the Stockholders and Board of Directors of Public Service Company of
Oklahoma:

As independent public accountants, we hereby consent to the incorporation
of our report with respect to the Consolidated Financial Statements of Public
Service Company of Oklahoma dated February 25, 2000, included in this Form 10-K,
into Public Service Company of Oklahoma's previously filed registration
statement on Form S-3 (File No. 333-00973).

Arthur Andersen LLP

Dallas, Texas
March 21, 2000

4-26

Exhibit 23.6

Consent of Independent Public Accountants

To the Stockholders and Board of Directors of Southwestern Electric Power
Company:

As independent public accountants, we hereby consent to the incorporation
of our report with respect to the Consolidated Financial Statements of
Southwestern Electric Power Company dated February 25, 2000, included in this
Form 10-K, into Southwestern Electric Power Company's previously filed
registration statement on Form S-3 (File No. 333-96213).

Arthur Andersen LLP

Dallas, Texas
March 21, 2000

4-27

CSW

================================================================================

Central and South West Corporation

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

1999 CSW FINANCIAL REPORT

<PAGE>

TABLE OF CONTENTS

Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................1

Consolidated Statements of Income.............................................35

Consolidated Statements of Stockholders' Equity...............................36

Consolidated Balance Sheets...................................................37

Consolidated Statements of Cash Flows.........................................39

Notes to Consolidated Financial Statements....................................40

Reports of Independent Public Accountants.....................................88

Report of Management..........................................................91

Glossary of Terms.............................................................92

<PAGE>

FORWARD-LOOKING INFORMATION

This report made by CSW contains forward-looking statements within the meaning
of Section 21E of the Exchange Act. Although CSW believes that its expectations
are based on reasonable assumptions, any such statements may be influenced by
factors that could cause actual outcomes and results to be materially different
from those projected. Important factors that could cause actual results to
differ materially from those in the forward-looking statements include, but are
not limited to:

- - increased competition and electric utility industry restructuring in the
United States,
- - the impact of the proposed AEP Merger, including any regulatory conditions
imposed on the merger or the inability to consummate the AEP Merger, or other
merger and acquisition activity,
- - federal and state regulatory developments and changes in law which may have a
substantial adverse impact on the value of CSW System assets,
- - the impact of general economic changes in the United States and in countries
in which CSW either currently has made or in the future may make investments,
- - timing and adequacy of rate relief,
- - adverse changes in electric load and customer growth,
- - climatic changes or unexpected changes in weather patterns,
- - changing fuel prices, generating plant and distribution facility performance,
- - decommissioning costs associated with nuclear generating facilities,
- - costs associated with any year 2000 computer-related failure(s) either within
the CSW System or supplier failures that adversely affect the CSW System,
- - uncertainties in foreign operations and foreign laws affecting CSW's
investments in those countries,
- - the effects of retail competition in the natural gas and electricity
distribution and supply businesses in the United Kingdom, and
- - the timing and success of efforts to develop domestic and international power
projects.

In the non-utility area, the previously mentioned factors apply and also
include, but are not limited to:

- - the ability to compete effectively in new areas, including telecommunications
and other energy-related services, and
- - evolving federal and state regulatory legislation and policies that may
adversely affect those industries generally or the CSW System's
business in areas in which it operates.

<PAGE>

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

Reference is made to CSW's Consolidated Financial Statements and related
Notes to Consolidated Financial Statements. The information contained therein
should be read in conjunction with, and is essential in understanding, the
following discussion and analysis. The RESULTS OF OPERATIONS of CSW precede its
financial statements.

OVERVIEW

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The non-cash impacts of exchange rate differences on the translation of
foreign currency denominated assets and liabilities were recorded on a separate
line on the cash flow statement.

Internally Generated Funds
Internally generated funds, which consist of cash flows from operating
activities less common and preferred stock dividends, should meet most of the
capital requirements of the CSW System. However, CSW's strategic initiatives,
including expanding CSW's core electric utility and non-utility businesses
through acquisitions or otherwise, may require additional capital from external
sources. For a description of certain restrictions on CSW's ability to raise
capital from external sources, see MD&A, PROPOSED AEP MERGER and NOTE 15.
PROPOSED AEP MERGER. Productive investment of net funds from operations in
excess of capital expenditures and dividend payments is necessary to enhance the
long-term value of CSW for its investors. CSW is continually evaluating the best
use of internally generated funds, which totaled $426 million, $564 million and
$343 million for 1999, 1998 and 1997, respectively.

2
<PAGE>

year 2000 by approximately $40 million, dependent upon the level of further cost
reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A., its United Kingdom business segment, was $113
million for the twelve months ended December 31, 1999.

OFGEM's price proposals for SEEBOARD will have a material adverse effect
on the future results of operations of CSW, but are not be expected to adversely
affect the financial condition of CSW.

CSW regularly evaluates its capital spending policies and generally seeks
to fund only those projects and investments that management believes will offer
satisfactory returns in the current environment. Consistent with this strategy,
the CSW System is likely to continue to make additional investments in
energy-related and non-utility businesses and will continue to search for other
electric utility properties to acquire. Primary sources of capital for these
expenditures are long-term debt, trust preferred securities and preferred stock
issued by the U.S. Electric Operating Companies, long-term and short-term debt
issued by CSW, as well as internally generated funds. Historically, the issuance
of common stock by CSW has also been a source of capital. CSW Energy and CSW
International typically use various forms of non-recourse project financing to
provide a portion of the capital required for their respective projects as well
as utilizing long-term debt for other investments. Although CSW and each of the
U.S. Electric Operating Companies expect to fund the majority of their
respective capital expenditures for their existing utility systems through
internally generated funds, for any significant investment or acquisition,
additional funds from the capital markets may be required. For a description of
certain restrictions on CSW's ability to make investments and raise capital from
external sources, including through the issuance of common stock, see MD&A
PROPOSED AEP MERGER and NOTE 15. PROPOSED AEP MERGER.

3
<PAGE>

CAPITAL EXPENDITURES
Estimated Expenditures
1997 1998 1999 2000 2001 2002
------------------------------ --------------------------------
(millions including AFUDC)

CSW $901 $669 $774 $1,071 $817 $643

Estimated capital expenditures for 2000 - 2002 do not include expenditures
for acquisition-type investments.

Financial Structure, Shelf Registrations and Credit Ratings As of December
31, 1999, the capitalization ratios of CSW were 47% common stock
equity, 4% Trust Preferred Securities and 49% long-term debt. CSW is committed
to maintaining financial flexibility through a strong capital structure and
favorable securities ratings in order to access capital markets
opportunistically or when required. CSW continually monitors the capital markets
for opportunities to lower its cost of capital through refinancing activities.
The estimated embedded cost of long-term debt for CSW at December 31, 1999 is
7.0%.

4
<PAGE>

Moody's Duff & Phelps Standard & Poor's
---------------------------------------
CPL
First mortgage bonds A3 A A
Senior unsecured Baa1 A- A-
Preferred stock Baa1 BBB+ BBB+
Trust preferred (CPL
Capital I) Baa1 BBB+ BBB+
Junior subordinated
deferrable Interest
debentures Baa2 -- --

PSO
First mortgage bonds A1 AA- AA-
Senior unsecured A2 A+ A
Preferred stock a3 A+ A-
Trust preferred (PSO
Capital I) a2 A+ A-
Junior subordinated
deferrable Interest
debentures A3 -- --

SWEPCO
First mortgage bonds Aa3 AA AA-
Senior unsecured A1 AA- A
Preferred stock a1 AA- A-
Trust preferred (SWEPCO
Capital I) aa3 AA- A-
Junior subordinated
deferrable Interest
debentures A2 -- --
WTU
First mortgage bonds A2 A+ A
Senior unsecured A3 -- A-
Preferred stock a3 A BBB+
CSW
Commercial paper P-2 D-2 A-2

These securities ratings may be revised or withdrawn at any time, and each
rating should be evaluated independently of any other rating.

The reacquisition, redemptions and maturities were funded with short-term
debt and with proceeds from the issuance of the floating rate notes.

5
<PAGE>

outstanding 7.50% Series T due December 15, 2014 and will be used to refund $50
million aggregate principal amount of outstanding 7.50% Series AA due March 21,
2020.

On September 1, 1999, $40 million of SWEPCO's 6.125% Series W FMBs
matured.

Short-Term Financing and Accounts Receivable Factoring
The CSW System uses short-term debt, primarily commercial paper, to meet
fluctuations in working capital requirements and other interim capital needs.
CSW has established a system money pool to coordinate short-term borrowings for
certain of its subsidiaries, primarily the U.S. Electric Operating Companies. In
addition, CSW also incurs borrowings for other subsidiaries that are not
included in the money pool. As of December 31, 1999, CSW had revolving credit
facilities totaling $1.4 billion to back up its commercial paper program. At
December 31, 1999, CSW had $1.3 billion outstanding in short-term borrowings.
The maximum amount of short-term borrowings outstanding during the year, which
had a weighted average interest yield for the year of 5.5%, was $1.4 billion
during December 1999.

6
<PAGE>

agreement. See NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES, for a discussion
of CSW's investments and commitments in CSW Energy projects at December 31,
1999.

RECENT DEVELOPMENTS AND TRENDS

PROPOSED AEP MERGER

Under the AEP merger agreement, there will be no changes required with
respect to the public debt issues, the outstanding preferred stock or the Trust
Preferred Securities of CSW's subsidiaries.

7
<PAGE>

- - Issuing shares of common stock other than pursuant to employee benefit plans;

- - Issuing shares of preferred stock or similar securities other than to
refinance existing obligations or to fund permitted investment or capital
expenditures; and

Merger Regulatory Approvals
The merger is conditioned, among other things, upon the approval of
several state and federal regulatory agencies. Some of the merger conditions
cannot be waived.

State Regulatory Commissions
The U.S. Electric Operating Companies have received approval for the
merger from their respective state regulatory commissions in Arkansas,
Louisiana, Oklahoma and Texas.

8
<PAGE>

exchange pricing issues. The settlements were submitted to the FERC for
approval. Hearings at the FERC concluded on July 19, 1999. On November 23, 1999,
the ALJ who presided over the FERC merger hearing issued a recommendation to the
FERC that the merger be approved and found that the proposed merger is in the
public interest.

On March 15, 2000, the FERC conditionally approved the merger. Conditions
placed on the merger include:

- - Divestiture of 550 MW of generating capacity comprised of 300 MW of
capacity in SPP and 250 MW of capacity in ERCOT. The FERC will require
AEP and CSW to divest their entire ownership interest in the generating
facilities that are to be divested. Alternatively, AEP and CSW may
choose to divest the same or greater amount of capacity from different
generating plants in their entirety. However, such generating plants
must be of similar cost, operation and location characteristics of
generating plants AEP and CSW originally proposed.

- - AEP and CSW must complete divestiture of the ERCOT capacity by March
15, 2001 and divestiture of the SPP capacity by July 1, 2002.

9
<PAGE>

AEP and CSW have filed several amendments to the application. Several parties
have filed petitions opposing the proposed merger at the SEC which have not been
withdrawn.

On April 21, 1999, AEP and CSW announced that they had reached separate
settlements with six wholesale customers that address issues related to the
proposed merger.

10
<PAGE>

Completion of the Merger
AEP and CSW have targeted consummation of the AEP Merger in the second
quarter of 2000. The merger is conditioned, among other things, upon the
approval of several state and federal regulatory agencies. All of such
approvals, except from the SEC, have been obtained. The transaction must satisfy
many conditions, including the condition that it must be accounted for as a
pooling of interests. The parties may not waive some of these conditions. AEP
and CSW continue the process of seeking regulatory approvals, but there can be
no assurance as to when, on what terms or whether the required approvals will be
received. After June 30, 2000, either CSW or AEP may terminate the merger
agreement if all of the conditions to its obligation to close have not been
satisfied. There can be no assurance that the AEP Merger will be consummated.

See NOTE 15. PROPOSED AEP MERGER.

COMPETITION AND INDUSTRY CHALLENGES

Electric industry restructuring and the development of competition in the
generation and sale of electric power requires resolution of several important
issues, including, but not limited to:

- - Whether all customers have access to the benefits of competition;

- - How, and by whom, the rules of competition will be established;

11
<PAGE>

- - What the impact of deregulation will be on conservation, environmental
protection and other regulator-imposed programs; and

- - How transmission system reliability will be ensured.

The degree of risk to CSW and the U.S. Electric Operating Companies
associated with various federal and state restructuring proposals aimed at
resolving any or all of these issues will vary depending on many factors,
including the proposals' competitive position and treatment of stranded utility
investment, primarily at CPL, resulting from such proposals. In CSW's service
territory, the states of Arkansas and Texas have passed legislation addressing
most of these issues while work continues on the remaining issues. The U.S.
Electric Operating Companies believe they are in a position to compete
effectively in a deregulated, more competitive marketplace. However, if events
and circumstances arise in the future that would indicate all costs previously
incurred are not recoverable from customers, then the U.S. Electric Operating
Companies may be required by existing accounting standards to recognize
potentially significant losses from unrecovered costs. (The foregoing statement
constitutes a forward-looking statement within the meaning of Section 21E of the
Exchange Act. Actual results may differ materially from such projected
information due to changes in the underlying assumptions. See FORWARD-LOOKING
INFORMATION). See Regulatory Accounting for additional information. See NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation for information on electric utility restructuring.

12
<PAGE>

customers by requiring utilities to take transmission service under their open
access tariffs for wholesale sales and purchases and by requiring utilities to
rely on the same transmission information that their transmission customers rely
on to make wholesale purchases and sales.

- - A proposal to participate in an RTO;

- - A petition asking whether a proposed transmission entity would qualify as an
RTO, or

- - An alternative filing describing the utility's efforts to participate in an
RTO and the reasons those efforts were unsuccessful.

13
<PAGE>

Arkansas
In April 1999, legislation was enacted for electric utility restructuring
in Arkansas. Some major provisions of that legislation include:

- - Retail competition begins January 1, 2002. The Arkansas Commission can
delay implementation, but not beyond June 30, 2003.

- - Companies with transmission lines must operate those facilities through
a transmission organization approved by FERC.

- - The Arkansas Commission has authority to address market power issues.

14
<PAGE>

time because it is not in the public interest. However, the Louisiana
Commission staff proposed a restructuring plan as an alternative, in the event
the Louisiana Commission decides to move forward with electric industry
restructuring and competition. The Louisiana Commission voted to begin
additional study and analysis of the issues associated with restructuring and
has adopted a procedural schedule that will result in a final restructuring
plan by January 1, 2001.

Texas
On June 18, 1999, legislation was signed into law in Texas that will
restructure the electric utility industry in that state. The new law gives Texas
customers of investor-owned utilities the opportunity to choose their electric
provider beginning January 1, 2002. The legislation also provides a rate freeze
until that date followed by a 6% rate reduction for residential and small
commercial customers, additional rate reductions for low income customers and a
number of customer protections. Rural electric cooperatives and municipal
electric systems can choose whether to participate in retail competition.

Some of the key provisions of the legislation include:

- - Each utility must unbundle its business activities into a retail electric
provider, a power generation company and a transmission and distribution
utility. Beginning January 1, 2002, retail customers of investor-owned
electric companies will be able to choose their retail electric provider.
The affiliated retail electric provider of the utility that serves the
customer on December 31, 2001 will serve the customer unless the customer
chooses another retail electric provider. Delivery of the electricity
will continue to be the responsibility of the transmission and
distribution utility company at regulated prices.

- - Retail electric cooperatives and municipal electric systems can choose
whether to participate in retail competition.

15
<PAGE>

- - A legislative oversight committee will monitor the implementation and
effectiveness of electric utility restructuring and make
recommendations for any necessary further legislative action.

As a result of rulings by the Texas Commission on March 16, 2000, CSW's
unbundling will include full structural separations for CPL and WTU by January
1, 2002. This includes the structural separation of the management and control
of the EDCs from the PGCs as well as the creation of a separate REP. For CPL and
WTU, unbundling will require that legal ownership of generation, transmission
and distribution assets will be separated and transferred to or vested in new
entities, the CPL and WTU PCGs and EDCs, respectively. The CPL and WTU EDCs
would be regulated utilities under Texas law. Office systems, computer systems,
accounting systems and similar equipment would be segregated and an employee
code of conduct would restrict information exchanges between employees of the
regulated entities and the other business units. Because SWEPCO also is
regulated in Arkansas and Louisiana, the Texas Commission deferred its decision
on the appropriate separation for SWEPCO until interested parties have an
opportunity to discuss issues that could result in a separation plan acceptable
in each state. CSW believes that its total cost to restructure the CSW System,
which includes costs for the EDC, PGC and REP in implementing retail competition
in its service territory is approximately $200 million, including refinancing
costs of approximately $70 million. Recognition in rates of the Texas

16
<PAGE>

jurisdictional EDC portion of these costs will be sought in the Texas Electric
Operating Companies' cost unbundling filings to establish new EDC regulated
rates during the year 2000.

Code of Conduct Under Customer Choice
Legislation was enacted in Arkansas and Texas in 1999 to restructure the
electric utility industry in those states. These two new laws require that the
CSW System begin to operate its utilities as separate power generation entities,
retail electric providers and transmission and distribution entities. Power
generation entities and retail electric providers will be non-regulated;
transmission and distribution entities will continue to be regulated. On or
before September 1, 2000, the Texas operations portion of each of the U.S.
Electric Operating Companies will functionally separate their regulated and
non-regulated utility activities.

Holding Company Act and Electric Industry Restructuring Legislation
In 1995, the SEC issued a report to the U.S. Congress advocating repeal of
the Holding Company Act, which restricts certain activities of CSW and other
registered holding companies, finding the Holding Company Act anachronistic and
duplicative of other federal and state regulatory regimes.

17
<PAGE>

101, as interpreted by EITF 97-4, have been applied. Management believes that
CPL, SWEPCO and WTU currently meet the criteria for following SFAS No. 71 for
the remainder of their electric utility business.

Additional non-cash write-offs of regulatory assets and liabilities would
be required if additional portions of the electric utility business of the U.S.
Electric Operating Companies no longer meet the criteria for applying SFAS No.
71, absent a means of recovering such assets or settling such liabilities. For
additional information regarding regulatory accounting, reference is made to
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

18
<PAGE>

In October 1998, PSO received an adverse ruling from a NLRB ALJ on the
union's unfair labor practice charge against PSO. The ALJ ruled that PSO did
negotiate in good faith but that PSO's position on some issues was too harsh,
and therefore the December 1996 implementation of PSO's then final proposal
should be rolled back and employees made whole from that date. The ALJ upheld
PSO's right to cease collecting union dues through payroll deductions.
Additionally, the ALJ ruled that PSO improperly solicited employees to withdraw
from the union. In December 1998, PSO appealed the ALJ's ruling to the NLRB. In
June 1999, PSO made a settlement offer to the union to resolve the pending
charges against PSO. The union rejected this offer and indicated it would wait
for a ruling from the NLRB before deciding on further action. Should PSO receive
an adverse ruling from the NLRB, PSO will have the option of appealing that
decision to a circuit court. At this time, management cannot predict the
ultimate outcome of the NLRB matter. However, management believes that it will
not have a material adverse effect on CSW's results of operations or financial
condition. The preceding discussion constitutes forward-looking information

19
<PAGE>

within the meaning of Section 21E of the Exchange Act. Actual results may differ
materially from such projected information. See FORWARD-LOOKING INFORMATION.

WTU estimates that 65 employees will be affected by the changes in
operations, including 49 merchandise employees. Although WTU has not completed
its analysis, the cost of these changes is not expected to have a material
adverse effect on CSW's results of operations or financial condition.

20
<PAGE>

RATES AND REGULATORY MATTERS

U.S. ELECTRIC

On May 4, 1999, AEP and CSW announced that they had reached a stipulated
agreement with the General Counsel of the Texas Commission and other intervenors
in the state of Texas related to the AEP/CSW merger case. The Texas Commission
approved the AEP Merger in early November 1999. If the AEP Merger is ultimately
consummated, CSW will withdraw its appeal with respect to the "glide path" rate
reduction methodology as discussed above as issue "(ii)" but will continue
seeking the appeal of issues "(i) and (iii)" as discussed above. See NOTE 15.
PROPOSED AEP MERGER for a discussion of the stipulated agreement.

See NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for information on the
CPL 1997 Final Order.

- - SWEPCO's Louisiana retail jurisdictional revenues were reduced by $11
million, effective with the December 1999 billing cycle;

- - SWEPCO is allowed to earn an 11.1% return on common equity;

- - SWEPCO is allowed to recover certain regulatory assets totaling $7.1
million;

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<PAGE>

- - SWEPCO will be subject to a two-year base rate freeze, which includes
force majeure provisions; and

- - SWEPCO will be allowed to increase depreciation rates for transmission,
distribution and generation plant.

The Louisiana Commission approved the Agreement and Stipulation in
November 1999 which was implemented in December 1999.

Other
Reference is made to NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for
information regarding fuel proceedings at CPL, SWEPCO and WTU.

U.K. ELECTRIC

22
<PAGE>

reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A., its United Kingdom business segment, was $113
million for the twelve months ended December 31, 1999.

OFGEM's price proposals for SEEBOARD will have a material adverse effect
on the future results of operations of CSW, but are not be expected to adversely
affect the financial condition of CSW.

In the fourth quarter of 1999, a rating agency downgraded SEEBOARD's
credit rating to BBB+ due to recent U.K. regulatory action.

OTHER INITIATIVES

DIVERSIFIED ELECTRIC

CSW Energy began construction in August 1998 of a 500 MW power plant,
known as Frontera, in the Rio Grande Valley, near the city of Mission, Texas.
The natural gas-fired facility began simple cycle operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in early 2000.
Pursuant to AEP's and CSW's stipulated agreement with several intervenors in the
state of Texas related to the AEP Merger, CSW Energy may sell 250 MW of Frontera
upon completion of the merger. See PROPOSED AEP MERGER and NOTE 15. PROPOSED AEP
MERGER for additional information.

23
<PAGE>

CSW Energy also has entered into an agreement with Eastman Chemical
Company to construct and operate a 440 MW cogeneration facility in Longview,
Texas. This facility will be known as the Eastex Cogeneration Project.
Construction of the facility began in the fourth quarter of 1999, with expected
operation in early 2001. Excess electricity generated by the plant will be sold
by CSW Energy in the wholesale electricity market.

In October 1999, GE Capital Structured Finance Group purchased 50% of the
equity ownership of Sweeny Cogeneration Limited Partnership. CSW Energy's
after-tax earnings from the proceeds of the transaction were approximately $33
million and were recorded in the fourth quarter of 1999. The agreement between
CSW Energy and GE Capital Structured Finance Group also provides for additional
payments to CSW Energy, subject to completion of a planned expansion of the
Sweeny cogeneration facility, which may be operational in the fourth quarter of
2000.

CSW International
CSW International was organized to pursue investment opportunities in EWGs
and FUCOs and currently holds investments in the United Kingdom, Mexico and
South America.

24
<PAGE>

investment, which has significant long-term value. Management will continue to
closely evaluate the changes in the Brazilian economy and its impact on CSW
International's investment in Vale.

As of December 31, 1999, CSW International had invested $110 million in
common stock of a Chilean electric company. The investment is classified as
securities available for sale and accounted for by the cost method. Based on the
current market value of the shares and the year-end foreign exchange rate, the
value of the investment at December 31, 1999 was $62 million. The reduction in
the carrying value of this investment has been reflected in Other Comprehensive
Income in CSW's Consolidated Statements of Stockholders' Equity. Management
views its investment in Chile as a long-term investment strategy and believes
this investment continues to have significant long-term value and that it is
recoverable. Management will continue to closely evaluate the changes in the
South American economy and its impact on CSW International's investment in the
Chilean electric company.

ENERGY SERVICES

25
<PAGE>

In late 1997, CSW Energy Services was launched to explore the electric
utility industry's emerging retail supply markets as they were deregulated on a
state-by-state basis. In January 1999, CSW Energy Services announced that it was
ceasing its business as a retail electric supplier and that it would assign its
existing electricity supply contracts to other suppliers or terminate them. In
the fourth quarter of 1999, the CSW Business Ventures group's investment in an
energy-related company that provides staffing services for nuclear power plants
was transferred from PSO to CSW Energy Services.

SOUTH TEXAS PROJECT

For additional information regarding STP and the accounting for the
decommissioning of STP, see NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
and NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS.

ENVIRONMENTAL MATTERS

26
<PAGE>

one PRP can be held responsible for the entire cost of a cleanup. Usually,
however, cleanup costs are allocated among PRPs.

The U.S. Electric Operating Companies are subject to various pending
claims alleging that they are PRPs under federal or state remedial laws for
investigating and cleaning up contaminated property. CSW believes that
resolution of these claims, individually or in the aggregate, will not have a
material adverse effect on CSW's or any U.S. Electric Operating Company's
results of operations or financial condition. Although the reasons for this
expectation differ from site to site, factors that are the basis for the
expectation for specific sites include the volume and/or type of waste allegedly
contributed by the U.S. Electric Operating Company, the estimated amount of
costs allocated to the U.S. Electric Operating Company and the participation of
other parties. (The foregoing statements constitute forward-looking statements
within the meaning of Section 21E of the Exchange Act. Actual results may differ
materially from such projected information due to changes in the underlying
assumptions. See FORWARD-LOOKING INFORMATION). See NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS and NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES for
additional discussion regarding environmental matters.

At the Kyoto, Japan Conference on Global Warming held in December 1997,
U.S. representatives agreed to a treaty which could require new limitations on
"greenhouse gases" from power plants. CSW and the U.S. Electric Operating
Companies could be affected if this treaty, in its present form, is approved by
the United States Congress. The impact, if any, on CSW or the U.S. Electric
Operating Companies cannot be determined because most of the greenhouse gas
emission reduction would come from coal generation that would have to be
switched to natural gas or retired. During 1999, 50% of the U.S. Electric
Operating Companies' MWH generation of which, at December 31, 1999, 33% of its
installed generating capacity was coal and lignite.

RISK MANAGEMENT

27
<PAGE>

Companies manage their price exposure for the benefit of customers by balancing
their commodity purchases through a combination of long-term and short-term or
spot market agreements.

For information related to currency risk in South America see OTHER
INITIATIVES, DIVERSIFIED ELECTRIC, CSW International and NOTE 18. SOUTH AMERICAN
INVESTMENTS. For information on commodity contracts see NOTE 7. FINANCIAL
INSTRUMENTS.

28
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OTHER MATTERS

29
<PAGE>

NEW ACCOUNTING STANDARDS

SFAS No. 133 as amended by SFAS No. 137
SFAS No. 133 as amended by SFAS No. 137 is effective for fiscal years
beginning after June 15, 2000 or January 1, 2001, for calendar year entities.
SFAS No. 133 replaces existing pronouncements and practices with a single
integrated accounting framework for derivatives and hedging activities and
eliminates previous inconsistencies in generally accepted accounting principles.
SFAS No. 133 expands the accounting definition of derivatives, which had focused
on freestanding contracts (futures, forwards, options and swaps) to include
embedded derivatives and many commodity contracts. All derivatives will be
reported on the balance sheet either as an asset or liability measured at fair
value. Changes in a derivative's fair value will be recognized currently in
earnings unless specific hedge accounting criteria are met. CSW has established
a project team to implement SFAS No. 133. CSW has not yet quantified the effects
of adopting SFAS No. 133 on its financial statements, although application of
SFAS No. 133 could increase volatility in earnings and other comprehensive
income. See NOTE 17. NEW ACCOUNTING STANDARDS.

30
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CENTRAL AND SOUTH WEST CORPORATION
RESULTS OF OPERATIONS

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND 1998

Partially offsetting the higher earnings was higher operations and
maintenance expense at SEEBOARD, CSW Energy and the U.S. Electric Operating
Companies. Also partially offsetting the higher earnings was a charge to
earnings at CPL, SWEPCO and WTU that was made to reflect the excess earnings
provision of the Texas Legislation enacted in 1999. Another factor partially
offsetting higher 1999 earnings was the extraordinary loss resulting from
legislation enacted in Texas and Arkansas under which the electricity generation
portion of CPL's, SWEPCO's and WTU's business in those states no longer meets
the criteria to apply SFAS No. 71. See MD&A - Securitization of
Generation-related Regulatory Assets and Stranded Cost, NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS - Electric Utility Restructuring Legislation and NOTE 16.
EXTRAORDINARY ITEMS for additional information.

Operating revenues increased $55 million in 1999 compared to 1998. The revenue
variances are shown in the following table.

1999 REVENUE VARIANCES
Increase (decrease) from prior year, millions

U.S. Electric
KWH Sales, Weather-Related $(64)
KWH Sales, Growth and Usage 65
Fuel Revenue 37
Sales for Resale 22
Other Electric (24)
-------
36
United Kingdom (64)
Other Diversified 83
-------
$55
-------
31
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32
<PAGE>

which had a cumulative effect of decreasing net income by $8.0 million. These
legislative changes also resulted in an extraordinary loss at CPL of $6 million
associated with a loss on reacquired debt and the discontinuance of SFAS No. 71.
See MD&A - Securitization of Generation-related Regulatory Assets and Stranded
Costs.and NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility
Restructuring Legislation, and NOTE 16. EXTRAORDINARY ITEMS for additional
information.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997

CSW's earnings increased to $440 million in 1998 from $153 million in
1997. CSW's return on average common stock equity was 12.4% in 1998 compared to
4.2% in 1997. The primary reason for the higher earnings and higher return on
average common stock equity was the absence in 1998 of the accrual of $176
million for the one-time United Kingdom windfall profits tax. Hotter than normal
summer weather and increased customer growth and usage at the U.S. Electric
Operating Companies were also factors in the increase in earnings over 1997.
Additionally, the sale of a telecommunications partnership interest in 1998 and
a decrease in the United Kingdom corporate tax rate contributed to the earnings
increase. The absence of the impact of CSW's final settlement of litigation with
El Paso in 1997 contributed to the increase in earnings in 1998 as well. Also
contributing to the increase in earnings was the absence in 1998 of the effect
of both the PSO 1997 Rate Settlement Agreement and the CPL 1997 Final Order. See
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information on the
CPL 1997 Final Order and the PSO 1997 Rate Settlement Agreement. See NOTE 16.
EXTRAORDINARY ITEMS for additional information on the windfall profits tax.
Partially offsetting the higher earnings was a charge for accelerated capital
recovery of STP and asset write-offs at several of CSW's business segments.

Operating revenues increased $214 million in 1998 compared to 1997. The revenue
variances are shown in the following table.

1998 REVENUE VARIANCES
Increase (decrease) from prior year, millions

33
<PAGE>

Other operating expense increased $48 million in 1998 compared to 1997 due
in part to a CSW Energy power plant that went into service in February 1998. The
increase in other operating expense was offset in part by the absence in 1998 of
the settlement of litigation with El Paso which increased other operating
expense $35 million in 1997. Further offsetting the increase in other operating
expense in 1998 was the absence of the $12 million impact of the CPL 1997 Final
Order and the $4 million impact of the PSO 1997 Rate Settlement Agreement. See
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information on the
CPL 1997 Final Order and the PSO 1997 Rate Settlement Agreement. Also partially
offsetting the increase in other operating expense was reduced pension expense
in 1997 resulting from changes made to the pension plan for CSW's domestic
employees. See NOTE 5. BENEFIT PLANS for additional information related to the
changes in the pension plan.

Other income and deductions increased to $42 million in 1998 from $32
million in 1997 due primarily to the sale of a telecommunications partnership
interest. Long-term interest expense decreased $22 million in 1998 due primarily
to the prepayment of a $60 million variable rate bank loan due December 1, 2001;
the maturity of $200 million of CPL FMBs on October 1, 1997 and $28 million of
CPL FMBs on January 1, 1998; and the redemption of $91 million of FMBs of
certain of the U.S. Electric Operating Companies on September 1, 1998. See NOTE
8. LONG-TERM DEBT for additional information on the redemption of these
securities. Short-term debt was used to prepay the variable rate bank loan in
two $30 million installments on January 28, 1998 and April 27, 1998. Short-term
borrowings and internal cash generation were used to fund the maturities and
redemption of the previously mentioned FMBs. Short-term and other interest
expense increased $35 million in 1998 when compared to 1997 due primarily to
higher levels of short-term borrowings. Distributions on Trust Preferred
Securities increased interest and other charges by $10 million in 1998. The
Trust Preferred Securities were outstanding for all of 1998, while they were
outstanding for only part of 1997. See NOTE 10. TRUST PREFERRED SECURITIES for
additional information on these securities.

34
<PAGE>
CSW
Consolidated Statements of Income
Central and South West Corporation
- --------------------------------------------------------------------------------
For the Years Ended December 31,
---------------------------------
1999 1998 1997
-------- ------- --------
($ in millions, except share amounts)
Operating Revenues
U.S. Electric $ 3,524 $ 3,488 $ 3,321
United Kingdom 1,705 1,769 1,870
Other diversified 308 225 77
-------- ------- --------
5,537 5,482 5,268
-------- ------- --------
Operating Expenses and Taxes
U.S. Electric fuel 1,176 1,190 1,177
U.S. Electric purchased power 157 111 89
United Kingdom cost of sales 1,133 1,204 1,291
Other operating 1,056 1,029 981
Maintenance 200 169 152
Depreciation and amortization 552 521 497
Taxes, other than income 193 189 195
Income taxes 204 203 151
-------- ------- --------
4,671 4,616 4,533
-------- ------- --------
Operating Income 866 866 735
-------- ------- --------

Income before Extraordinary Items 469 440 329
-------- ------- --------

Net Income for Common Stock $ 455 $ 440 $ 153
======== ======= ========

Average Common Shares Outstanding 212.6 212.4 212.1

Dividends Paid per Share of Common Stock $1.74 $1.74 $1.74
======== ======= ========

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

35
<PAGE>
CSW
Consolidated Statements of Stockholders' Equity
Central and South West Corporation
(millions)
<TABLE>
<CAPTION>

Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income(Loss) Total
-------------------------------------------- -------
<S> <C> <C> <C> <C> <C>

Beginning Balance -- January 1, 1998 $743 $1,039 $1,751 $23 $3,556
Sale of common stock 1 10 -- -- 11
Common stock dividends -- -- (370) -- (370)
Other -- -- 2 -- 2
-------
3,199

------------------------------------------ -------
Ending Balance -- December 31, 1998 $744 $1,049 $1,823 $8 $3,624
========================================== =======

------------------------------------------ -------
Ending Balance -- December 31, 1999 $744 $1,051 $1,906 ($18) $3,683
========================================== =======
</TABLE>

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

36
<PAGE>
CSW
Consolidated Balance Sheets
Central and South West Corporation
- --------------------------------------------------------------------------------
As of December 31,
--------------------
1999 1998
--------- ---------
(millions)
ASSETS
Fixed Assets
Electric
Production $ 5,901 $ 5,887
Transmission 1,663 1,594
Distribution 4,896 4,681
General 1,437 1,380
Construction work in progress 205 166
Nuclear fuel 227 207
------- -------
14,329 13,915
Other diversified 353 333
------- -------
14,682 14,248
Less - Accumulated depreciation and amortization 6,008 5,652
------- -------
8,674 8,596
------- -------
Current Assets
Cash and temporary cash investments 270 157
Special deposits for reacquisition of long-term debt 50 --
Accounts receivable 1,140 1,110
Materials and supplies, at average cost 149 191
Electric utility fuel inventory 129 90
Under-recovered fuel costs 52 4
Notes receivable 53 109
Prepayments and other 84 90
------- -------
1,927 1,751
------- -------
Deferred Charges and Other Assets
Regulatory assets 219 1,113
Regulatory assets designated for securitization 953 --
Other non-utility investments 454 432
Securities available for sale 62 66
Benefit costs 202 185
Goodwill 1,330 1,402
Other 341 352
------- -------
3,561 3,550
------- -------
$14,162 $13,897
======= =======

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

37
<PAGE>

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

38
<PAGE>

Effect of exchange rate changes on cash and cash
equivalents (3) -- (5)
----- ----- -----

SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 466 $ 446 $ 413
===== ===== =====
Income taxes paid $ 175 $ 258 $ 412
===== ===== =====

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

39
<PAGE>

CENTRAL AND SOUTH WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal business of SEEBOARD is the distribution and supply of
electricity and gas in South East England. SEEBOARD is subject to rate
regulation by the DGEGS.

The more significant accounting policies of the CSW System are summarized
below.

40
<PAGE>

market value which existed on the date of acquisition plus the original cost of
property acquired or constructed since the acquisition, less disposals.

CSW CPL PSO SWEPCO WTU
--------------------------------------------------
1999 3.3% 3.1% 3.1% 3.3% 3.3%
1998 3.4% 3.0% 3.1% 3.3% 3.2%
1997 3.4% 3.0% 3.3% 3.2% 3.3%

CPL, SWEPCO and WTU recover retail fuel costs in Texas as a fixed
component of rates whereby over-recoveries of fuel are payable to customers and
under-recoveries may be billed to customers after Texas Commission approval. The
cost of fuel is charged to expense as incurred, with resulting fuel
over-recoveries and under-recoveries recorded as regulatory liabilities and
assets. PSO recovers fuel costs in Oklahoma through service level fuel cost
adjustment factors, and SWEPCO recovers fuel costs in Arkansas and Louisiana
through automatic fuel recovery mechanisms. The application of these mechanisms
varies by jurisdiction. See NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS, for
further information about fuel recovery.

41
<PAGE>

Accounts Receivable
CSW Credit purchases, without recourse, the billed and unbilled accounts
receivable of the U.S. Electric Operating Companies and certain non-affiliated
public utility companies.

Regulatory Assets and Liabilities
For their regulated activities, the U.S. Electric Operating Companies
follow SFAS No. 71, which defines the criteria for establishing regulatory
assets and regulatory liabilities. See NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS - Electric Utility Restructuring Legislation for a discussion of the
continued application of SFAS No. 71 to the Texas Electric Operating Companies.
Regulatory assets represent probable future revenue to the company associated
with certain costs, which will be recovered from customers through the
ratemaking process. Regulatory liabilities represent probable future refunds to
customers. The regulatory assets are currently being recovered in rates or are
probable of being recovered in rates. The unamortized balances are included in
the table below.

1999 1998
-------- --------
(millions)
As of December 31
Regulatory Assets
Deferred plant costs (1) $491 $497
Mirror CWIP asset 257 257
Income tax related regulatory assets, net 318 308
Deferred restructuring and rate case costs (2) 22 26
OPEBs 2 2
Under-recovered fuel costs (3) 52 4
Loss on reacquired debt 133 153
Fuel settlement (4) 7 14
Other 11 10
-------- --------
$1,293 $1,271
======== ========
Regulatory Liabilities
Refunds due customers (5) $15 $22

Income tax related regulatory
liabilities, net -- --
-------- --------
$15 $22
======== ========

(1) $8 million and $15 million earning no return in 1999 and 1998, amortized
through 2001.
(2) $8 million and $16 million earning no return in 1999 and 1998, amortized
by the end of 2000; $7 million and $10 million earning no return in 1999
and 1998, amortized through 2001.
(3) $6 million earning no return in 1999, amortized over twelve month period,
recalculated twice each year.
(4) $7 million and $14 million earning no return in 1999 and 1998, amortized
by the end of 2006.
(5) $15 million earning no return in 1998, amortized over twelve month period,
recalculated twice each year.

42
<PAGE>

1999 will either be recovered through: (1) regulated rates; (2) stranded cost
recovery; or (3) FERC jurisdictional rates. The legislation provides for
securitization of 100% of regulatory assets and 75% of ECOM. Regulatory assets
in the amount of $763.7 million have been approved for securitization by the
Texas Commission, and a draft order has been prepared in this case. The Texas
Commission has indicated that it expects to issue a final order in late March
2000. The settlement also calls for $290 million of the amount originally
requested to be included in the calculation of stranded costs in CPL's March
2000 transmission and distribution cost filing. The securitization amount was
reduced by $186 million from the amount originally requested to reflect customer
benefits associated with accumulated deferred income taxes. CPL previously had
proposed to flow these benefits back to customers over the 14-year bond term.
See MD&A Securitization of Generation-related Regulatory Assets and Stranded
Costs and NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility
Restructuring Legislation for a discussion of CPL's securitization application
and the Texas Legislation.

Discontinuance of SFAS No. 71
Application of SFAS No. 71 was discontinued in 1999 for CPL's and WTU's
generation business in Texas and SWEPCO's generation business in Arkansas and
Texas resulting from legislation passed in those states. See MD&A -
Securitization of Generation-related Regulatory Assets and Stranded Costs and
NOTE 2. LITIGATION AND REGULATORY PROCEDURES - Electric Utility Restructuring
Legislation for additional information. The following table summarizes the net
assets included in Electric Utility Plant related to each company's generation
plant for which the application of SFAS No. 71 was discontinued, compared to
total assets at December 31, 1999.

Generation Net Assets
Which For
SFAS No. 71 Was
Company Discontinued Total Assets
------------------------------------------------------------
(millions)
CPL $1,872 $4,848
SWEPCO 226 2,108
WTU 168 861

Goodwill Resulting from SEEBOARD Acquisition
The acquisition of SEEBOARD was accounted for as a purchase combination.
The purchase price has been allocated and is reflected in the consolidated
financial statements. The goodwill, resulting from the SEEBOARD acquisition, is
being amortized on a straight-line basis over 40 years. The unamortized balance
of the SEEBOARD goodwill at December 31, 1999 was $1.3 billion. CSW continually
evaluates whether circumstances have occurred that indicates the remaining
useful life of goodwill warrants revision.

43
<PAGE>

average, historical and current exchange rates. The non-cash impact of the
changes in exchange rates on cash and cash equivalents, resulting from the
translation of items at the different exchange rates, is shown on CSW's
Consolidated Statements of Cash Flows in "Effect of exchange rate changes on
cash and cash equivalents."

One British pound equals the following U.S. dollar amounts:

1999 1998 1997
--------- ---------- -----------
At December 31 $1.62 $1.66 $1.65

Weighted average for
the 12 months ended
December 31 $1.62 $1.66 $1.58

See NOTE 18. SOUTH AMERICAN INVESTMENTS for information regarding CSW's
investments in Brazil and Chile.

CSW accounts for these transactions as hedge transactions and any gains or
losses associated with the risk management tools are recognized in the financial
statements at the time the hedge transactions are settled. CSW believes its
credit risk in these contracts is negligible. See MD&A, RISK MANAGEMENT, NOTE 7.
FINANCIAL INSTRUMENTS; NOTE 17. NEW ACCOUNTING STANDARDS and NOTE 18. SOUTH
AMERICAN INVESTMENTS for additional information.

Original Unrealized Holding
Cost Gains / (Losses) Fair Value
---------------------------------------------------------------
(millions)

Securities available
for sale $110 $(48) $62

44
<PAGE>

Components of Other Comprehensive Income
The following table provides the components that comprise the balance
sheet amount in Accumulated other comprehensive income.

Components 1999 1998 1997
----------------------------------------------------------------
(millions)

Foreign Currency Adjustments $6 $34 $27
Unrealized Losses on Securities (20) (20) 1
Minimum Pension Liability (4) (6) (5)
---------------------------
$(18) $8 $23
---------------------------

Reclassification
Certain financial statement items for prior years have been reclassified
to conform to the 1999 presentation.

45
<PAGE>

2. LITIGATION AND REGULATORY PROCEEDINGS

- - gives Texas customers of investor-owned utilities the opportunity to choose
their electric provider beginning January 1, 2002;

- - provides for the recovery of stranded costs, which are defined as the excess
of net book value of generation assets over the defined market value of
those assets;

- - requires reductions in nitrogen oxide and sulfur dioxide emissions;

- - sets certain limits on capacity owned and controlled by power generation
companies.

46
<PAGE>

Under the provisions of EITF 97-4, CPL's generation-related net regulatory
assets were transferred to the transmission and distribution portion of the
business and will be amortized as they are recovered through charges to
customers. Management currently believes all generation-related regulatory
assets for CPL will be recovered as provided under Texas Legislation. If future
events were to occur that made the recovery of these assets no longer probable,

47
<PAGE>

CPL would write-off any non-recoverable portion of such assets as a non-cash
charge to earnings.

48
<PAGE>

Commission on January 10, 2000, and will file excess earnings reports and cost
unbundling plans in March 2000 and CPL will file its ECOM report in March 2000.

Also see MD&A - RECENT DEVELOPMENTS AND TRENDS, Electric Utility
Restructuring Legislation for a discussion on restructuring legislation.

CPL filed an appeal of the CPL 1997 Final Order to the State District
Court of Travis County to raise several issues related to the rate case. The
primary issues include: (i) the classification of $800 million of invested
capital in STP as ECOM which was also assigned a lower return on equity than
non-ECOM property; (ii) the Texas Commission's use of the "glide path" rate
reduction methodology applied on May 1, 1998 and 1999; and (iii) the $18 million
of disallowed affiliate expenses from CSW Services. As part of the appeal, CPL
sought a temporary injunction to prohibit the Texas Commission from implementing
the "glide path" rate reduction methodology. The court denied the temporary
injunction and the "glide path" rate reduction was implemented in May 1998 and
May 1999. Hearings on the appeal were held during the third quarter of 1998, and
a judgment was issued in February 1999 affirming the Texas Commission order,
except for a consolidated tax issue in the amount of $6 million, which was
remanded to the Texas Commission.

CPL filed an appeal of this most recent order to the Third District of
Texas Court of Appeals and management is unable to predict how the final
resolution of these issues will ultimately affect CSW's and CPL's results of
operations and financial condition. On May 4, 1999, AEP and CSW announced that
they had reached a stipulated agreement with the General Counsel of the Texas
Commission and other intervenors in the state of Texas related to the AEP/CSW
merger case. The Texas Commission approved the AEP Merger in early November
1999. If the AEP Merger is ultimately consummated, CSW will withdraw its appeal
with respect to the "glide path" rate reduction methodology as discussed above
as issue "(ii)" but will continue seeking the appeal of issues "(i) and (iii)"
as discussed above. See NOTE 15. PROPOSED AEP MERGER and MD&A - PROPOSED AEP
MERGER for a discussion on the stipulated agreement.

See MD&A - RATES AND REGULATORY MATTERS, CPL Rate Review - Docket No.
14965 for a discussion of the CPL 1997 Final Order.

49
<PAGE>

By orders issued in October 1990 and December 1990, the Texas Commission
quantified the STP Unit 1 and Unit 2 deferred accounting costs and authorized
the inclusion of the amortization of the costs and associated return in CPL's
retail rates. These Texas Commission orders were appealed to the Travis County
District Court where the appeals are still pending. Language in the Supreme
Court of Texas' opinion in the appeal of the deferred accounting authorization
case suggests that the appropriateness of including deferred accounting costs in
rates charged to customers is dependent on a finding in the first case in which
the deferred STP costs are recovered through rates that the deferral was
actually necessary to preserve the utility's financial integrity. If in the
appeals of the October 1990 and December 1990 rate orders, the courts decide
that subsequent review under the financial integrity standard is required and
was not made in those orders, such rate orders would be remanded to the Texas
Commission for the purpose of entering findings applying the financial integrity
standard. Pending the ultimate resolution of CPL's deferred accounting issues,
management is unable to predict how its deferred accounting orders will
ultimately be resolved by the Texas Commission.

If CPL's deferred accounting matters are not favorably resolved, CSW could
experience a material adverse effect on its results of operations and financial
condition. While management is unable to predict the ultimate outcome of these
matters, management believes either that CPL will receive approval of its
deferred accounting amounts or that CPL will be successful in renegotiation of
its rate orders, so that there will be no material adverse effect on CSW's
results of operation or financial condition.

The deferred accounting amounts are included in the amounts to be
securitized as part of the settlement amount approved by the Texas Commission in
its October 18, 1999 securitization filing. See MD&A - Securitization of
Generation-related Regulatory Assets and Stranded Costs.

50
<PAGE>

Although CPL believes that it has substantial defenses to the cities'
claims and intends to defend itself against the cities' claims and pursue its
counterclaims vigorously, management cannot predict the outcome of the municipal
franchise fee litigation or its impact on CSW's results of operations or
financial position.

51
<PAGE>

CPL Sinton Landfill Litigation
CPL, along with over 30 others, was named as a defendant in the district
court in San Patricio County, Texas. The plaintiffs are approximately 500
current and former landowners in the vicinity of a landfill site near Sinton,
Texas. Each plaintiff alleges $10 million property damage and personal injury as
a result of alleged contamination from the site. Plaintiffs made a collective
settlement demand upon CPL for $1.1 million. In January 1999, in exchange for a
de minimus sum, CPL reached an agreement with Browning Ferris Industries, Inc.,
the operator of the site, to indemnify CPL for any judgment or settlement amount
that CPL may owe to the plaintiffs in this case, as well as CPL's attorney's
fees incurred after the agreement. In August 1999, the trial court granted
summary judgment for CPL. The plaintiffs appealed the summary judgment ruling.
Management believes that the ultimate resolution of this matter will not have a
material adverse impact on CSW's consolidated results of operations or financial
condition.

CPL Valero Litigation
In April 1998, Valero filed suit against CPL in Nueces County, Texas
District Court, alleging claims for breach of contract and negligence. Valero's
suit seeks in excess of $11 million as damages for property loss and lost
profits allegedly incurred after an interruption of electricity to its facility
in Corpus Christi, Texas in April 1996. The parties held a settlement conference
in August 1999, but no progress was made toward settlement of the case. The case
is currently in discovery. Management cannot predict the outcome of this
litigation. However, management believes that CPL has valid defenses to Valero's
claims and intends to defend the matter vigorously. Management also believes
that the claims are covered by insurance and that the ultimate resolution of
this matter will not have a material adverse impact on CSW's consolidated
results of operations or financial condition.

CPL and WTU Complaint versus Texas Utilities Electric Company (Docket No.
17285)
A joint complaint filed by CPL and WTU with the Texas Commission asserted
that since January 1, 1997, Texas Utilities Electric Company had been
effectively double charging for transmission service within ERCOT. A proposal
for decision received in February 1998 recommended approval of a proposal by CPL
and WTU to reduce by $15.5 million annually their payments to Texas Utilities
Electric Company. The Texas Commission approved the proposal in September 1998.
Although Texas Utilities Electric Company appealed the Texas Commission final
order, it refunded $26.6 million to CPL and WTU in November 1998. Prior to the
Texas Commission's September 1998 decision, the $15.5 million annual payment to
Texas Utilities Electric Company was allocated to the U.S. Electric Operating
Companies. As a result of this order, the payment continues to be recorded on
CPL's and WTU's books as a reduction to ERCOT transmission expense and there
will be no future expenses recorded on the books of PSO and SWEPCO.

52
<PAGE>

million and WTU accrued $5.6 million. In addition, the two new Transmission
Service Agreements require CPL and WTU to pay for export transmission service
along with the ERCOT transmission charges approved by the Texas Commission.

PSO Rate Review
In July 1996, the Oklahoma Commission staff filed an application seeking a
review of PSO's earnings and in July 1997 recommended a rate reduction of $76.8
million for PSO.

53
<PAGE>

$31.5 million and a reduction in expenses of $4.1 million which included the
write-off of the previously mentioned deferred assets.

The PSO 1997 Rate Settlement Agreement resulted in a material adverse
effect on PSO's, but not CSW's, results of operations for 1997 that will have a
continuing impact because of the rate decrease. However, it reduced significant
risks for PSO related to this regulatory proceeding and should allow PSO's rates
to remain competitive for the foreseeable future.

SWEPCO Louisiana Rate Review
In December 1997, the Louisiana Commission announced it would review
SWEPCO's rates and service. In October 1999, SWEPCO and the staff of the
Louisiana Commission reached an agreement and stipulation, which was filed on
October 14, 1999. The significant provisions of the agreement and stipulation
follow:

- - SWEPCO's Louisiana retail jurisdictional revenues were reduced by $11
million, effective with the December 1999 billing cycle;

- - SWEPCO is allowed to earn an 11.1% return on common equity;

- - SWEPCO is allowed to recover certain regulatory assets totaling $7.1
million;

- - SWEPCO will be subject to a two-year base rate freeze, which includes force
majeure provisions; and

- - SWEPCO will be allowed to increase depreciation rates for transmission,
distribution and general plant.

The Louisiana Commission approved the agreement and stipulation in
November 1999, which was implemented in December 1999.

SWEPCO Arkansas Rate Review
In July 1998, the Arkansas Commission began a review of SWEPCO's earnings.
On July 30, 1999, SWEPCO entered into a settlement agreement with the general
staff of the Arkansas Commission and the Arkansas Attorney General's Office. The
settlement agreement reduces SWEPCO's Arkansas annual revenues by $5.4 million,
or 3%. Additionally, the stipulation and settlement agreement provides for a
10.75% return on common equity, an increase in depreciation rates, and an
agreement by SWEPCO not to seek recovery of generation-related stranded costs.

54
<PAGE>

On December 8, 1997, SWEPCO and the other parties to the proceedings
before the Texas Commission filed a settlement on all issues except as to
whether transmission equalization payments should be included in fuel or base
revenues. The settlement resulted in a decrease of the under-recovered fuel
costs, and the resulting surcharge recovery, by $6.0 million, which was recorded
in 1997. The settlement also provides that SWEPCO's fuel and fuel-related
expenses during the reconciliation period were reasonable and necessary and
recoverable as fuel expense. Also, the settlement provides that SWEPCO's actions
in litigating and renegotiating certain fuel contracts, together with the
prices, terms and conditions of the renegotiated contracts, were prudent.

On April 8, 1998, the ALJ issued a proposal for decision regarding the
only outstanding issue, recommending that SWEPCO be allowed to include
transmission equalization expense in eligible fuel expense. On May 19, 1998, the
Texas Commission reversed the ALJ and ordered an earnings reduction of
approximately $1.8 million, recorded in the second quarter of 1998. On June 8,
1998, SWEPCO filed a motion for rehearing on the transmission equalization
issue, which was denied through operation of law. After the Texas Commission's
order on May 19, 1998, SWEPCO had still under-recovered its fuel and fuel
related expenses. On July 1, 1998, the Texas Commission issued an order allowing
SWEPCO to surcharge its Texas retail customers $6.9 million of under-recovered
fuel and fuel-related expenses and associated interest. The surcharge began in
July 1998 and ended in June 1999. SWEPCO has filed an appeal regarding this
matter in the State District Court of Travis County, Texas. Management is unable
to predict the ultimate outcome of this litigation. However, SWEPCO has agreed
to withdraw the appeal if the AEP Merger is consummated. See NOTE 15. PROPOSED
AEP MERGER for additional information.

55
<PAGE>

Although management cannot predict the ultimate outcome of this matter,
management believes that the resolution of this matter will not have a material
effect on CSW's results of operations or financial condition.

56
<PAGE>

Regulatory Price Proposal for SEEBOARD
On December 2, 1999, OFGEM published its final price proposals from its
United Kingdom electricity distribution review. OFGEM has proposed revenue
reductions in SEEBOARD's distribution business of 21%. In addition, OFGEM has
proposed the reallocation of a further 12% of costs out of SEEBOARD's
distribution business into its supply business. These proposals were accepted on
December 20, 1999 and will take effect from April 1, 2000, and remain in effect
for five years. OFGEM's proposals will reduce net income for SEEBOARD in the
year 2000 by approximately $40 million, dependent upon the level of further cost
reductions that can be achieved, and by approximately $60 million in 2001. CSW's
net income from SEEBOARD U.S.A., its United Kingdom business segment, was $113
million for the twelve months ended December 31, 1999.

CSW Energy, Texas-New Mexico Power Company Phillips Litigation
In May 1997, equipment operated by an unrelated third party allegedly came
in contact with a Texas-New Mexico Power Company transmission line rendering
Texas-New Mexico Power Company's Old Ocean switching station inoperable. As a
result, Phillips' refinery, located in Sweeny, Texas, lost power.

In October 1997, Phillips filed suit against Texas-New Mexico Power
Company in the District Court of Brazoria County, Texas, seeking damages in
excess of $36 million associated with the loss of power to its refinery in
Sweeny, Texas. Texas-New Mexico Power Company denies any liability to Phillips.

In June 1999, Sweeny Cogeneration Limited Partnership was notified that
Texas-New Mexico Power Company had joined Sweeny Cogeneration Limited
Partnership as a third party defendant to the pending litigation. Texas-New
Mexico Power Company is claiming that during the construction of Sweeny
Cogeneration Limited Partnership's cogeneration facility adjacent to Phillips'
refinery, Sweeny Cogeneration Limited Partnership modified Texas-New Mexico
Power Company's equipment which was supplying power to the Phillips refinery. In
this connection, Texas-New Mexico Power Company alleges that Sweeny Cogeneration
Limited Partnership was negligent in the construction of the cogeneraiton
facility.

57
<PAGE>

3. COMMITMENTS AND CONTINGENT LIABILITIES

Construction and Capital Expenditures

It is estimated that CSW, including the U.S. Electric Operating Companies,
SEEBOARD and other operations, will spend approximately $1,071 million in
capital expenditures (but excluding capital that may be required for
acquisitions) during 2000. Substantial commitments have been made in connection
with these programs. See MD&A - LIQUIDITY AND CAPITAL RESOURCES for expected use
of these expenditures.

CPL - $229 million PSO - $174 million SWEPCO - $159 million WTU - $55 million

Fuel and Related Commitments

To supply a portion of their fuel requirements, the U.S. Electric
Operating Companies have entered into various commitments for the procurement of
fuel.

SWEPCO South Hallsville Lignite Mine
As part of the process to receive a renewal of a Texas Railroad Commission
permit for lignite mining at the South Hallsville lignite mine and expansion
into the Marshall South Lignite Project area, SWEPCO has agreed to provide
guarantees of mine reclamation in the amount of $85 million. Since SWEPCO uses
self-bonding, the guarantee provides for SWEPCO to commit to use its resources
to complete the reclamation in the event the work is not completed by the third
party miner. At December 31, 1999 the cost to reclaim the mine is estimated to
be approximately $36 million.

Other Commitments and Contingencies

58
<PAGE>

respective ownership interests in STP. For purposes of these assessments, STP
has two licensed reactors. CPL owns 25.2% of each reactor.

59
<PAGE>

negotiating with the City of Shreveport to determine under what terms the city
may acquire the Marshall Street site and who would pay for any potential
clean-up costs related to the site. In the fourth quarter of 1999, SWEPCO
accrued $4.0 million for SWEPCO's portion of any potential clean-up costs
related to the Marshall Street site.

60
<PAGE>

The U.K. Court of Appeal did not order the National Grid or National Power
PLC to make payment into the ESPS, and the court indicated that any requirement
to make such payments would be extreme since the relevant sections of the ESPS
are already in surplus. In the event that the court finally decides a payment by
SEEBOARD into the ESPS is necessary, such a payment is likely to create
additional pension fund surplus, which the company should then be able to
utilize over the next several years to reduce pension expense.

CSW Energy began construction in August 1998 of a 500 MW power plant,
known as Frontera, in the Rio Grande Valley, near the city of Mission, Texas.
The natural gas-fired facility began simple cycle operation of 330 MW in July
1999 and is scheduled to commence combined cycle operation in early 2000.
Pursuant to AEP's and CSW's stipulated agreement with several intervenors in the
state of Texas related to the AEP Merger, CSW Energy may sell 250 MW of
Frontera. See NOTE 15. PROPOSED AEP MERGER and MD&A, PROPOSED AEP MERGER for a
discussion including timing of sale.

61
<PAGE>

4. INCOME TAXES

--------------------------
INCOME TAX EXPENSE 1999 1998 1997
--------------------------
(millions)
Current (1) $177 $253 $47
Deferred (1) 40 (38) 117
Deferred ITC (2) (13) (12) (13)
--------------------------
204 203 151
Included in Other Income and Deductions
Current 18 18 --
Deferred 1 -- (6)
--------------------------
19 18 (6)

Included in Extraordinary Item (8) -- --

--------------------------
$215 $221 $145
--------------------------

62
<PAGE>

-------------------------
INCOME TAX RATE RECONCILIATION 1999 1998 1997
-------------------------
(millions)
Income before taxes attributable to:
Domestic operations $541 $558 $327
Foreign operations 128 112 147
-------------------------
Income before taxes $669 $670 $474

Tax at U.S. statutory rate $234 $235 $166
Differences
Amortization of ITC (13) (12) (13)
Mirror CWIP -- 10 5
Other regulated flowthrough items 5 5 3
Non-deductible goodwill amortization 12 12 12

Foreign tax benefits (28) (41) (19)
State income taxes, net of
Federal income tax benefit 13 8 5
Adjustments (19) 14 (4)
Other 11 (10) (10)
-------------------------
$215 $221 $145
-------------------------
Effective rate 32% 33% 31%

-----------------
DEFERRED INCOME TAXES (1) 1999 1998
-----------------
(millions)

Deferred Income Tax Liabilities
Depreciable utility plant $1,944 $1,936
Deferred plant costs 3 174
Mirror CWIP asset 1 90
Income tax related regulatory assets 156 224
Regulatory assets designated for
securitization 332 --
Other 280 257
-----------------
2,716 2,681

Deferred Income Tax Assets
Income tax related regulatory
liability (95) (117)
Unamortized ITC (91) (96)
Alternative minimum tax
carryforward (11) (11)
Other (106) (75)
-----------------
(303) (299)

-----------------
Net Accumulated Deferred Income Taxes $2,413 $2,382
-----------------

Net Accumulated Deferred Income
Taxes
Noncurrent $2,430 $2,410
Current (17) (28)
-----------------
$2,413 $2,382
-----------------

(1)Other than excess foreign tax credits, CSW did not have other valuation
allowances recorded against other deferred tax assets at December 31, 1999
and 1998 due to a favorable earnings history. At December 31, 1999, CSW had
$117 million of foreign tax credits, for which a 100% valuation allowance has
been provided. At December 31, 1998, CSW had $145 million of foreign tax
credits, for which a 100% valuation allowance has been provided.

63
<PAGE>

If these earnings were distributed, foreign tax credits should become
available under current law to reduce or eliminate the resulting U.S. income
tax liability.

5. BENEFIT PLANS

Cash Balance and Non-qualified Pension Plans

U.K. Pension Plans

CSW Retirement Savings Plan

1999 1998
Pension Retirement Plans CSW U.S. U.K. CSW U.S. U.K.
TOTAL PLANS PLANS TOTAL PLANS PLANS
------------------------------- -------------------------
Change in Benefit Obligations (millions) (millions)
<S> <C> <C> <C> <C> <C> <C>

Benefit obligation at beginning of year $ 2,111 $ 991 $ 1,120 $ 1,978 $ 955 $ 1,023
Service cost 35 21 14 36 22 14
Interest cost 123 65 58 137 69 68
Plan participants' contributions 3 - 3 3 - 3
Amendments 7 - 7 58 - 58
Foreign currency translation adjustment (26) - (26) 9 - 9
Acquistions - - - 7 - 7
Actuarial (gain) loss (11) (47) 36 11 11 -
Benefits paid (129) (63) (66) (128) (66) (62)
------------------------------- -------------------------
Benefit obligation at end of year $ 2,113 $ 967 $ 1,146 $ 2,111 $ 991 $ 1,120
------------------------------- -------------------------
</TABLE>

64
<PAGE>
<TABLE>
<CAPTION>

1999 1998
Pension Retirement Plans CSW U.S. U.K. CSW U.S. U.K.
TOTAL PLANS PLANS TOTAL PLANS PLANS
------------------------------- -------------------------
Change in Plan Assets (millions) (millions)
<S> <C> <C> <C> <C> <C> <C>

Fair value of plan assets at beginning
of year $ 2,326 $ 1,014 $ 1,312 $ 2,290 $ 1,109 $ 1,181
Actual return on plan assets 274 122 152 143 (30) 173
Employer contributions 9 2 7 7 1 6
Plan participants' contributions 3 - 3 3 - 3
Foreign currency translation adjustment (33) - (33) 11 - 11
Benefits paid (129) (63) (66) (128) (66) (62)
------------------------------- -------------------------
Fair value of plan assets at end
of year $ 2,450 $ 1,075 $ 1,375 $ 2,326 $ 1,014 $ 1,312
------------------------------- -------------------------

Reconciliation of Funded Status
Funded status at end of year $ 337 $ 108 $ 229 $ 214 $ 23 $ 191
Unrecognized:
Transition obligation 8 8 - 10 10 -
Prior service cost (64) (75) 11 (77) (81) 4
Actuarial (gain) loss (88) 88 (176) 26 159 (133)
------------------------------- -------------------------
Prepaid benefit cost $ 193 $ 129 $ 64 $ 173 $ 111 $ 62
------------------------------- -------------------------

Amounts Recognized in Balance Sheet
Prepaid benefit cost $ 209 $ 145 $ 64 $ 188 $ 126 $ 62
Additional minimum liability (23) (23) - (25) (25) -
Intangible asset - - - 2 2 -
Accumulated other comprehensive expense 7 7 - 8 8 -
------------------------------- -------------------------
Net amount recognized on balance sheet $ 193 $ 129 $ 64 $ 173 $ 111 $ 62
------------------------------- -------------------------

Other comprehensive expense(income)
attributable to change in additional
minimum liability recognition $ (2) $ (2) $ -- $ 1 $ 1 $ --
------------------------------- -------------------------
</TABLE>

Additional Information for Plans With Non Qualified Plan
Unfunded Accumulated Benefit Obligations ------------------
(thousands)

1999 1998
---------- -----------
Projected benefit obligation $ 24,676 $ 27,379
Accumulated benefit obligation 22,875 25,137
Plan assets at fair value - -

<PAGE>
Pension Retirement Plans
CSW U.S. U.K.
Components of Net Periodic Benefit Costs TOTAL PLANS PLANS
-------------------------------
1999 (millions)
Service cost $ 35 $ 21 $ 14
Interest cost 123 65 58
Expected return on plan assets (167) (98) (69)
Amortization of:
Unrecognized transition obligation 2 2 -
Prior service cost (6) (6) -
-------------------------------
Net periodic benefit cost $ (13) $ (16) $ 3
-------------------------------

Weighted-average assumptions as of year end
Discount rate 7.50% 6.00%
Expected return on plan assets 9.00% 6.50%
Rate of compensation increase 4.96% 4.00%

CSW U.S. U.K.
TOTAL PLANS PLANS
-------------------------------
1998 (millions)
Service cost $ 36 $ 22 $ 14
Interest cost 137 69 68
Expected return on plan assets (174) (97) (77)
Amortization of:
Unrecognized transition obligation 2 2 -
Prior service cost (6) (6) -
-------------------------------
Net periodic benefit cost $ (5) $ (10) $ 5
-------------------------------

Weighted-average assumptions as of year end
Discount rate 6.75% 5.50%
Expected return on plan assets 9.00% 6.25%
Rate of compensation increase 4.96% 3.50%

<PAGE>
Pension Retirement Plans
CSW U.S. U.K.
Components of Net Periodic Benefit Costs TOTAL PLANS PLANS
-------------------------------
1997 (millions)
Service cost $ 34 $ 20 $ 14
Interest cost 139 66 73
Expected return on plan assets (173) (92) (81)
Amortization of:
Unrecognized transition obligation 2 2 -
Prior service cost (6) (6) -
Net actuarial (gain) loss 1 1 -
-------------------------------
Net periodic benefit cost $ (3) $ (9) $ 6
-------------------------------

Weighted-average assumptions as of year end
Discount rate 7.50% 6.75%
Expected return on plan assets 9.00% 7.25%
Rate of compensation increase 5.46% 4.75%

As permitted, the amortization of any prior service cost is determined
using a straight-line amortization of the cost over the average remaining period
of employees expected to receive benefits under the plan.

Post-retirement Benefits Other Than Pensions
CSW, including each of the U.S. Electric Operating Companies, adopted SFAS
No. 106 effective January 1, 1993. The transition obligation established at
adoption is being amortized over twenty years, with thirteen years remaining.
Prior to 1993, these benefits were accounted for on a pay-as-you-go basis.
Pursuant to an order by the Oklahoma Commission, PSO established a regulatory
asset of approximately $5 million in 1993 for the difference between the
pay-as-you-go basis and the costs determined under SFAS No. 106. PSO is
recovering the amortization of this regulatory asset over a ten year period.

<PAGE>

Post- Retirement Benefits Other Than Pensions 1999 1998
--------------------
(millions)
Change in Benefit Obligation

Benefit obligation at beginning of year $ 275 $ 241
Service cost 11 8
Interest cost 18 17
Plan participants' contributions 2 1
Amendments - (5)
Actuarial (gain) loss (19) 28
Benefits paid (21) (15)
--------------------
Benefit obligation at end of year $ 266 $ 275
--------------------

Change in Plan Assets

Fair value of plan assets at beginning of year $ 164 $ 158
Actual return on plan assets 23 3
Employer contributions 25 17
Plan participants' contributions 2 1
Benefits paid (21) (15)
--------------------
Fair value of plan assets at end of year $ 193 $ 164
--------------------

Reconciliation of Funded Status

Funded status at end of year $ (73) $ (111)
Unrecognized:
Transition obligation 117 126
Actuarial (gain) loss (44) (15)
--------------------
Prepaid (accrued) benefit cost $ - $ -
--------------------

68
<PAGE>
Post- Retirement Benefits Other Than Pensions 1999 1998
--------------------
(millions)
Amounts Recognized in Balance Sheet

Prepaid benefit costs $ 3 $ 2
Accrued benefit (liability) (3) (2)
--------------------
Net amount recognized $ - $ -
--------------------

Components of Net Periodic Benefit Cost 1999 1998 1997
---------------------------
(millions)
Service cost $ 11 $ 8 $ 8
Interest cost 18 17 18
Expected return on plan assets (13) (12) (10)
Amortization of:
Transition obligation 9 9 9
Net actuarial (gain) loss (2) (1)
---------------------------

Net periodic benefit cost $ 25 $ 20 $ 24
---------------------------

Weighted-average assumptions as of year end
Discount rate 7.5% 6.75% 7.50%
Expected return on plan assets 9.0% 9.00% 9.00%
Health care cost trend rate 6.0% 6.50% 7.00%
(Ultimate rate of 5.0% in 2001)

Effect of 1% Change in Assumed Health Total CSW
-----------
Care Cost Trend Rate (millions)
1% Increase
Service cost plus interest cost $ 4
APBO 28

1% Decrease
Service cost plus interest cost $ (3)
APBO (24)

As permitted, the amortization of any prior service cost is determined
using a straight-line amortization of the cost over the average remaining
service period of employees expected to receive benefits under the plan.

<PAGE>

6. JOINTLY OWNED ELECTRIC UTILITY PLANT

</TABLE>

7. FINANCIAL INSTRUMENTS

Securities available for sale
The fair values, which are based on quoted market prices, equal the
carrying amounts as stated on the balance sheet as prescribed by SFAS No. 115.
See NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Trust Preferred Securities
The fair value of the Trust Preferred Securities are based on quoted
market prices on the New York Stock Exchange.

70
<PAGE>

Long-term debt and preferred stock due within 12 months
The fair value of current maturities of long-term debt and preferred stock
due within 12 months are estimated based on quoted market prices for the same or
similar issues or on the current rates offered for long-term debt or preferred
stock with the same or similar remaining redemption provisions.

CARRYING VALUE AND
ESTIMATED FAIR VALUE 1999 1998
---------- ----------
(millions)
Long-term debt
carrying amount $3,821 $3,938
fair value 3,828 4,025

Trust Preferred Securities
carrying amount 335 335
fair value 290 345

Long-term debt and preferred
stock duewithin 12 months
carrying amount 256 169
fair value 256 169

71
<PAGE>

contracts to maturity. The fair value of SEEBOARD's contracts for differences is
not determinable due to the absence of a trading market.

Expected Expected Cash
Cash Inflows Outflows
Contract Maturity Date (Maturity Value) (Market Value)
- -----------------------------------------------------------------------------
(millions)
Cross currency swaps August 1, 2001 $200 $213
Cross currency swaps August 1, 2006 $200 $229

8. LONG-TERM DEBT

The CSW System's long-term debt outstanding as of the end of the last two
years is presented in the following table.

Maturities Interest Rates December 31,
From To From To 1999 1998
-----------------------------------------------------------------------------
(millions)

Secured bonds
2001 2025 5.25% 7.75% $1,452 $1,824

Unsecured bonds
2001 2030 3.33% (1) 8.88% 1,701 1,359

Notes and Lease
Obligations
2001 2021 5.91% 9.25% 672 765

Unamortized discount (4) (10)
-------------------------
$3,821 $3,938
-------------------------
(1) Variable rate.

72
<PAGE>

Sinking fund Annual
Requirements Maturities
------------------------
(millions)
2000 $1 $256
2001 1 421
2002 1 151
2003 1 388
2004 1 271

Dividends
At December 31, 1999, approximately $1.5 billion of CSW's subsidiary
companies' retained earnings were available for payment of cash dividends by
such subsidiaries to CSW.

Long-term Debt

In September 1998, CPL reacquired $36 million principal amount outstanding
of Series L FMBs, in its entirety, at a call price of 100.53.

73
<PAGE>

On September 1, 1999, $40 million of SWEPCO's 6.125% Series W FMBs
matured.

The reacquisitions and maturities were funded with short-term debt and
with proceeds from the issuance of the floating rate notes.

Reference is made to MD&A, LIQUIDITY AND CAPITAL RESOURCES for further
information related to long-term debt, including new issues and reacquisitions
of long-term debt during 1999.

9. PREFERRED STOCK

The outstanding preferred stock of the U.S. Electric Operating Companies
as of the end of the last two years is presented in the following table.

Current
Dividend Rate December 31, Redemption Price
From To 1999 1998 From - To
--------------------------------------------
(millions)
Not subject to mandatory
redemption
182,907 shares 4.00% - 5.00% $18 $19 $103.19 - $107.00
Auction -- 160
Issuance expenses/premiums -- (3)
-------------
$18 $176
-------------
Total authorized shares
6,405,000

All of the outstanding preferred stock is redeemable at the option of the
U.S. Electric Operating Companies upon 30 days' notice at the current redemption
price per share. During November and December 1999, CPL called $75 million of
its money market preferred stock and $85 million of its Series A and Series B
preferred stock at par. During 1997, SWEPCO redeemed $1.2 million pursuant to
its annual sinking fund requirement. During 1997, each of the U.S. Electric
Operating Companies reacquired a significant portion of its outstanding
preferred stock. As a result of differences between the dividend rates on the
reacquired securities and prevailing market rates, CSW realized an overall gain
of approximately $10 million on the transactions. This gain is shown separately,
as Gain on Reacquired Preferred Stock, on the Consolidated Statements of Income.

74
<PAGE>

SWEPCO
On April 1, 1998, SWEPCO called the remaining 274,010 shares of its $100
par value 6.95% preferred stock. SWEPCO used short-term debt to fund the
redemption.

10. TRUST PREFERRED SECURITIES

CPL Capital I 8.00%, Series A 6,000,000 $150 CPL, $154.6 million, 8.00%, Series A
PSO Capital I 8.00%, Series A 3,000,000 75 PSO, $77.3 million, 8.00%, Series A
SWEPCO Capital I 7.875%, Series A 4,400,000 110 SWEPCO, $113.4 million, 7.875%, Series A
---------------------
13,400,000 $335
---------------------
</TABLE>

11. SHORT-TERM FINANCING

75
<PAGE>

12. COMMON STOCK

1999 1998 1997
----------------------------------------------------------
<S> <C> <C> <C>

Number of new shares issued
(thousands) 41 372 765
Range of stock price for new
shares $23 1/8 - $26 7/16 $25 5/8 - $30 1/16 $21 1/4 - $25 5/8
New common stock equity (millions) $1 $10 $20

</TABLE>

13. STOCK-BASED COMPENSATION PLANS

76
<PAGE>

<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------------------------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
(thousands) Exercise Price (thousands) Exercise Price (thousands) Exercise Price
<S> <C> <C> <C> <C> <C> <C>

Exercisable at end
of year 1,178 not applicable 1,010 not applicable 1,162 not applicable

</TABLE>

77
<PAGE>

14. BUSINESS SEGMENTS

U.S. U.K. Other Reconciling CSW
Electric Electric Segments Items Consolidated
--------------------------------------------------------
(millions)
<S> <C> <C> <C> <C> <C>

1999
Operating revenues $3,524 $1,705 $342 $(34) $5,537
Depreciation and amortization 400 128 24 -- 552
Interest income 10 6 92 (54) 54
Interest expense 196 105 159 (54) 406
Operating income tax expense 191 6 7 -- 204
Net income from equity method
subsidiaries -- -- -- -- --
Income before extraordinary item 370 113 508 (522) 469
Extraordinary loss -
discontinuance of SFAS No. 71 (8) -- -- -- (8)
Extraordinary loss - loss on
reacquired debt (6) -- -- -- (6)
Total assets 9,391 3,024 7,217 (5,470) 14,162
Investments in equity method
subsidiaries 17 -- -- -- 17
Capital expenditures 474 153 138 -- 765

78
<PAGE>

Geographic Areas

Revenues
---------------------------------------------------
United CSW
United States Kingdom Other Foreign Consolidated
---------------------------------------------------
(millions)
1999 $3,828 $1,705 $4 $5,537
1998 3,705 1,769 8 5,482
1997 3,390 1,870 8 5,268

Long-Lived Assets
---------------------------------------------------
United CSW
United States Kingdom Other Foreign Consolidated
---------------------------------------------------
(millions)
1999 $7,850 $2,499 $257 $10,606
1998 7,831 2,530 201 10,562
1997 7,801 2,551 254 10,606

15. PROPOSED AEP MERGER

Under the AEP merger agreement, each common share of CSW will be converted
into 0.6 share of AEP common stock. CSW stockholders will own approximately 40%
of the combined company. CSW plans to continue to pay dividends on its common
stock until the closing of the AEP Merger at approximately the same times and
rates per share as in 1999, subject to continuing evaluation of CSW's earnings,
financial condition and other factors by the CSW board of directors.

Under the AEP merger agreement, there will be no changes required with
respect to the public debt issues, the outstanding preferred stock or the Trust
Preferred Securities of CSW's subsidiaries.

AEP and CSW anticipate net savings related to the merger of approximately
$2 billion over a 10-year period from the elimination of duplication in
corporate and administrative programs, greater efficiencies in operations and
business processes, increased purchasing efficiencies and the combination of the
two work forces. As a result of the approved settlement and agreement with the
state commissions in CSW and AEP's respective service territories, AEP and CSW
have agreed to guarantee that approximately 55% of those savings will be passed
through to their customers. AEP and CSW continue to seek opportunities for
additional saving and expect to realize significant additional savings based
upon the work of the merger transitions teams over the last two years. The
preceding discussion constitutes forward-looking information within the meaning

79
<PAGE>

of Section 21E of the Exchange Act. Actual results may differ materially from
such projected information. See FORWARD-LOOKING INFORMATION.

- - Issuing shares of common stock other than pursuant to employee benefit plans;

- - Issuing shares of preferred stock or similar securities other than to
refinance existing obligations or to fund permitted investment or capital
expenditures; and

80
<PAGE>

Louisiana
On May 15, 1998, AEP and CSW jointly filed a request with the Louisiana
Commission for approval of the proposed merger and for a finding that the merger
is in the public interest.

Oklahoma
On August 14, 1998, AEP and CSW jointly filed a request with the Oklahoma
Commission for approval of their proposed merger.

Under the partial settlement agreement, AEP and CSW would:

- - Share merger savings with Oklahoma customers as well as AEP shareholders,
effective with the merger closing;

- - Not increase Oklahoma base rates prior to January 1, 2003;

- - File by December 31, 2001 with the FERC an application to join a regional
transmission organization; and

81
<PAGE>

The Oklahoma Commission has withdrawn its opposition to the merger at the
FERC.

Texas
On April 30, 1998, AEP and CSW jointly filed a request with the Texas
Commission for a finding that the merger is in the public interest.

82
<PAGE>

On March 15, 2000, the FERC conditionally approved the merger. Conditions
placed on the merger include:

- - Divestiture of 550 MW of generating capacity comprised of 300 MW of
capacity in SPP and 250 MW of capacity in ERCOT. The FERC will require
AEP and CSW to divest their entire ownership interest in the generating
facilities that are to be divested. Alternatively, AEP and CSW may
choose to divest the same or greater amount of capacity from different
generating plants in their entirety. However, such generating plants
must be of similar cost, operation and location characteristics of
generating plants AEP and CSW originally proposed.

- - AEP and CSW must complete divestiture of the ERCOT capacity by March
15, 2001 and divestiture of the SPP capacity by July 1, 2002.

Other Federal
On October 13, 1998, AEP and CSW jointly filed an application with the SEC
for approval of the proposed merger. The SEC merger filing requests approval of
the merger and related transactions and outlines the expected combined company
benefits of the merger to AEP and CSW customers and shareholders. Since then,
AEP and CSW have filed four amendments to the application. Several parties have
filed petitions opposing the proposed merger at the SEC which have not been
withdrawn.

83
<PAGE>

On April 21, 1999, AEP and CSW announced that they had reached separate
settlements with six wholesale customers that address issues related to the
proposed merger.

84
<PAGE>

approvals, except from the SEC, have been obtained. The transaction must satisfy
many conditions, including the condition that it must be accounted for as a
pooling of interests. The parties may not waive some of these conditions. AEP
and CSW continue the process of seeking regulatory approvals, but there can be
no assurance as to when, on what terms or whether the required approvals will be
received. After June 30, 2000, either CSW or AEP may terminate the merger
agreement if all of the conditions to its obligation to close have not been
satisfied. There can be no assurance that the AEP Merger will be consummated.

16. EXTRAORDINARY ITEMS

Texas Electric Operating Companies Discontinuance of SFAS No. 71
The discontuance of SFAS No. 71 in 1999 for SWEPCO's Arkansas and Texas
generation business and WTU's Texas generation business created certain
write-offs for those companies, which are categorized as extraordinary losses on
their income statements. The extraordinary loss at SWEPCO was $3.0 million. The
extraordinary loss at WTU was $5.5 million. The extraordinary loss in 1999 at
CPL was $5.5 million as a result of the write-off of losses on the reacquisition
of long-term debt associated with generation-related assets. See NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS - Electric Utility Restructuring
Legislation for additional discussion of discontinuing SFAS No. 71.

17. NEW ACCOUNTING STANDARDS

85
<PAGE>

integrated accounting framework for derivatives and hedging activities and
eliminates previous inconsistencies in generally accepted accounting principles.
SFAS No. 133 expands the accounting definition of derivatives, which had focused
on freestanding contracts (futures, forwards, options and swaps) to include
embedded derivatives and many commodity contracts. All derivatives will be
reported on the balance sheet either as an asset or liability measured at fair
value. Changes in a derivative's fair value will be recognized currently in
earnings unless specific hedge accounting criteria are met. CSW has established
a project team to implement SFAS No. 133. CSW has not yet quantified the effects
of adopting SFAS No. 133 on its financial statements, although application of
SFAS No. 133 could increase volatility in earnings and other comprehensive
income. See MD&A - NEW ACCOUNTING STANDARDS.

18. SOUTH AMERICAN INVESTMENTS

CSW International has a put option, which, if exercised, requires Vale to
purchase CSW International shares at a minimum price equal to the U.S. dollar
equivalent of the purchase price for Vale. As a result of the put option
arrangement, management has concluded that CSW International's investment
carrying amount will not be reduced below the put option value unless there is
deemed to be a permanent impairment. Pursuant to the put option arrangement, CSW
International will not recognize its proportionate share of any future earnings
until its proportionate share of any losses of Vale is recognized. At December
31, 1999, CSW International had deferred losses, after tax, of approximately $21
million related to its Vale investment. CSW International views its investment
in Vale as a long-term investment, which has significant long-term value and is
recoverable. Management will continue to closely evaluate the changes in the
Brazilian economy and its impact on CSW International's investment in Vale.

86
<PAGE>

19. QUARTERLY INFORMATION (UNAUDITED)

June 30
Operating Revenues $1,319 $1,344
Operating Income 206 214
Net Income for Common Stock 103 107
Basic and Diluted EPS $0.49 $0.50

87
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Central and South West
Corporation:

Arthur Andersen LLP

Dallas, Texas
February 25, 2000

88
<PAGE>

AUDITOR'S REPORT TO THE MEMBERS OF CSW UK HOLDINGS

KPMG Audit Plc
Chartered Accountants London
Registered Auditor 17 January 2000

89
<PAGE>

AUDITOR'S REPORT TO THE MEMBERS OF CSW UK FINANCE COMPANY

We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations and shareholders'
equity as of and for the years ended 31 December 1998 and 1997 to the extent
summarised in Note 23 to the consolidated financial statements.

KPMG Audit Plc
Chartered Accountants London, England
Registered Auditor 18 January 1999

90
<PAGE>

REPORT OF MANAGEMENT

E. R. Brooks Glenn D. Rosilier Lawrence B. Connors
Chairman and Executive Vice President and Controller
Chief Executive Officer Chief Financial Officer

91
<PAGE>

GLOSSARY OF TERMS
The following abbreviations or acronyms used in this Financial Report are
defined below:

Abbreviation or Acronym Definition
AEP.....................American Electric Power Company, Inc.
AEP Merger .............Proposed Merger between AEP and CSW where CSW would
become a wholly owned subsidiary of AEP
AFUDC ..................Allowance for funds used during construction
AIP.....................Annual Incentive Plan
ALJ ....................Administrative Law Judge
Alpek ..................Alpek S.A. de C.V.
Altamira................CSW International cogeneration project in Altamira,
Tamaulipas, Mexico
Anglo Iron..............Anglo Iron and Metal, Inc.
APBO....................Accumulated Postretirement Benefit Obligation
Arkansas Commission ....Arkansas Public Service Commission
Bankruptcy Code.........Title 11 Of The United States Bankruptcy Code, as
amended
BP Amoco................BP Amoco plc
Btu ....................British thermal unit
Burlington Northern ....Burlington Northern Railroad Company
C3 Communications ......C3 Communications, Inc., Austin, Texas (formerly CSW
Communications, Inc.)
CAAA ...................Clean Air Act/Clean Air Act Amendments
Cajun ..................Cajun Electric Power Cooperative, Inc.
Cash Balance Plan ......CSW's tax-qualified Cash Balance Retirement Plan
CEO ....................Chief Executive Officer
CERCLA .................Comprehensive Environmental Response, Compensation and
Liability Act of 1980
ChoiceCom ..............CSW/ICG ChoiceCom, L.P., a terminated joint venture
between C3 Communications and ICG Communications, Inc.
CLECO ..................Central Louisiana Electric Company, Inc.
CPL ....................Central Power and Light Company, Corpus Christi, Texas
CPL 1997 Final Order ...Final orders received from the Texas Commission in CPL's
rate case Docket No. 14965, including both the order
received on September 10, 1997 and the revised order
received on October 16, 1997
CSW ....................Central and South West Corporation, Dallas, Texas
CSW Credit .............CSW Credit, Inc., Dallas, Texas
CSW Energy .............CSW Energy, Inc., Dallas, Texas
CSW Energy Services ....CSW Energy Services, Inc., Dallas, Texas
CSW International ......CSW International, Inc., Dallas, Texas
CSW Investments ........CSW Investments, an unlimited company organized in the
United Kingdom through which CSW International owns
SEEBOARD
CSW Leasing ............CSW Leasing, Inc., Dallas, Texas
CSW Services ...........Central and South West Services, Inc., Dallas, Texas and
Tulsa, Oklahoma
CSW System .............CSW and its subsidiaries
CSW UK Finance Company..An unlimited company organized in the United Kingdom
through which CSW International owns CSW Investments
CSW UK Holdings.........An unlimited company organized in the United Kingdom
through which CSW International owns CSW UK Finance
Company
CSW U.S. Electric
System.................CSW and the U.S. Electric Operating Companies
DeSoto..................Parish of DeSoto, State of Louisiana pollution control
revenue bond issuing authority
DGEGS ..................Director General of Electricity and Gas Supply
DHMV ...................Dolet Hills Mining Venture
Diversified Electric ...CSW Energy and CSW International
DOE ....................United States Department of Energy
ECOM ...................Excess cost over market
EDC.....................Energy Delivery Company
EITF....................Emerging Issues Task Force
EITF 97-4...............Deregulation of the Pricing of Electricity - Issues
Related to the Application of SFAS Nos. 71 and 101
El Paso ................El Paso Electric Company
EMF ....................Electric and magnetic fields
EnerACT.................EnerACT(TM), Energy Aggregation and Control Technology
Energy Policy Act ......National Energy Policy Act of 1992
EnerShop ...............EnerShopsm Inc., Dallas, Texas
EPA ....................United States Environmental Protection Agency
EPS ....................Earnings per share of common stock
ERCOT ..................Electric Reliability Council of Texas
ERISA ..................Employee Retirement Income Security Act of 1974, as
amended
ESPS....................Electric Supply Pension Scheme
Exchange Act ...........Securities Exchange Act of 1934, as amended

92
<PAGE>

GLOSSARY OF TERMS (continued)
The following abbreviations or acronyms used in this Financial Report are
defined below:

Abbreviation or Acronym Definition
FCC.....................Federal Communications Commission
FERC ...................Federal Energy Regulatory Commission
FMB ....................First mortgage bond
FUCO ...................Foreign utility company as defined by the Holding
Company Act
Guadalupe...............Guadalupe-Blanco River Authority pollution control
revenue bond issuing authority
HL&P ...................Houston Lighting & Power Company
Holding Company Act ....Public Utility Holding Company Act of 1935, as amended
HVdc ...................High-voltage direct-current
IPP ....................Independent power producer
IBEW ...................International Brotherhood of Electrical Workers
ISO ....................Independent system operator
ITC ....................Investment tax credit
Joint Proxy Statement...The Notice of Annual Meeting and Joint Proxy Statement
of American Electric Power Company, Inc. and Central and
South West Corporation
July 1999 SWEPCO Plan ..The amended plan of reorganization for Cajun filed by
the Members Committee and SWEPCO on July 28, 1999 with
the U.S. Bankruptcy Court for the Middle District of
Louisiana
KWH ....................Kilowatt-hour
LIBOR...................London Inter-Bank Overnight Rate
LIFO ...................Last-in first-out (inventory accounting method)
Louisiana Commission ...Louisiana Public Service Commission
LTIP ...................Amended and Restated 1992 Long-Term Incentive Plan
Matagorda ..............Matagorda County Navigation District Number One (Texas)
pollution control revenue bond issuing authority
MD&A ...................Management's Discussion and Analysis of Financial
Condition and Results of Operations
MDEQ ...................Mississippi Department of Environmental Quality
MGP ....................Manufactured gas plant or coal gasification plant
Mirror CWIP ............Mirror construction work in progress
Mississippi Power ......Mississippi Power Company
MMbtu ..................Million Btu
MW .....................Megawatt
MWH ....................Megawatt-hour
Named Executive
Officers..............The CEO and the four most highly compensated Executive
Officers, as defined by regulation
National Grid ..........National Grid Group plc
NEIL ...................Nuclear Electric Insurance Limited
NLRB ...................National Labor Relations Board
NRC ....................Nuclear Regulatory Commission
OASIS ..................Open access same time information system
OEFA....................Oklahoma Environmental Finance Authority pollution
control revenue bond issuing authority
OFGEM...................Office of Gas and Electricity Markets
Oklahoma Commission ....Corporation Commission of the State of Oklahoma
Oklaunion ..............Oklaunion Power Station Unit No. 1
OPEB ...................Other postretirement benefits (other than pension)
PCB ....................Polychlorinated biphenyl
PCRB....................Pollution control revenue bond
PGC.....................Power Generation Company
Phillips................Phillips Petroleum Company
PowerShare .............CSW's PowerShareSM Dividend Reinvestment and Stock
Purchase Plan
PRP ....................Potentially responsible party
PSO ....................Public Service Company of Oklahoma, Tulsa, Oklahoma
PSO 1997 Rate Settlement
Agreement..............Joint stipulation agreement reached by PSO and other
parties to settle PSO's rate inquiry
PURPA...................Public Utility Regulatory Policies Act of 1978
QF......................Qualifying Facility as defined in PURPA
RCRA....................Federal Resource Conservation and Recovery Act of 1976
Red River...............Red River Authority of Texas pollution control revenue
bond issuing authority
Registrant(s) ..........CSW, CPL, PSO, SWEPCO and WTU
RESCTA .................Retail Electric Supplier Certified Territory Act
REP.....................Retail Electric Provider
Retirement Savings Plan.CSW's employee retirement savings plan
Rights Plan ............Stockholders Rights Agreement between CSW and CSW
Services, as Rights Agent
RTO.....................Region Transmission Organization
Sabine..................Sabine River Authority of Texas pollution control
revenue bond issuing authority

93
<PAGE>

GLOSSARY OF TERMS (continued)
The following abbreviations or acronyms used in this Financial Report are
defined below:

Abbreviation or Acronym Definition
SEC ....................United States Securities and Exchange Commission
SEEBOARD ...............SEEBOARD Group plc, Crawley, West Sussex, United Kingdom
SEEBOARD U.S.A..........CSW's investment in SEEBOARD consolidated and converted
to U.S. Generally Accepted Accounting Principles
SERP....................Special Executive Retirement Plan
SFAS....................Statement of Financial Accounting Standards
SFAS No. 34.............Capitalization of Interest Cost
SFAS No. 52 ............Foreign Currency Translation
SFAS No. 71 ............Accounting for the Effects of Certain Types of
Regulation
SFAS No. 87.............Employers' Accounting for Pensions
SFAS No. 88.............Employers' Accounting for Settlements and Curtailments
of Defined Pension Plans and for Termination Benefits
SFAS No. 101............Regulated Enterprises - Accounting for the
Discontinuation of Application of SFAS No. 71
SFAS No. 106 ...........Employers' Accounting for Postretirement Benefits Other
than Pensions
SFAS No. 115 ...........Accounting for Certain Investments in Debt and Equity
Securities
SFAS No. 121............Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of
SFAS No. 123 ...........Accounting for Stock-Based Compensation
SFAS No. 130 ...........Reporting Comprehensive Income
SFAS No. 131 ...........Disclosure about Segments of an Enterprise and Related
Information
SFAS No. 132 ...........Employers' Disclosures about Pensions and Other
Postretirement Benefits
SFAS No. 133 ...........Accounting for Derivative Instruments and Hedging
Activities
SFAS No. 137............Deferral of the Effective Date of Statement No. 133
SPP ....................Southwest Power Pool
Siloam Springs..........City of Siloam Springs, Arkansas pollution control
revenue bond issuing authority
STP ....................South Texas Project nuclear electric generating station
STPNOC .................STP Nuclear Operating Company, a non-profit Texas
corporation, jointly owned by CPL, HL&P, City of Austin,
and City of San Antonio
SWEPCO .................Southwestern Electric Power Company, Shreveport,
Louisiana
Texas Commission .......Public Utility Commission of Texas
Texas Electric Operating
Companies..............CPL, SWEPCO and WTU
Texas Legislation.......Texas Senate Bill 7 relating to deregulation of electric
utility industry
Titus County............Titus County Fresh Water Supply District No. 1 pollution
control revenue bond issuing authority
TNRCC...................Texas Natural Resource Conservation Commission
Transok.................Transok, Inc. and subsidiaries
Trust Preferred
Securities.............Collective term for securities issued by business trusts
of CPL, PSO and SWEPCO classified on the balance sheet
as "Certain Subsidiary (or CPL/PSO/SWEPCO)-obligated,
mandatorily redeemable preferred securities of
subsidiary trusts holding solely Junior Subordinated
Debentures of such Subsidiaries (or CPL/PSO/SWEPCO)"
U.K. Electric...........SEEBOARD U.S.A.
Union Pacific ..........Union Pacific Railroad Company
U.S. Electric Operating Companies or
U.S. Electric .....CPL, PSO, SWEPCO and WTU
UWUA....................Utility Workers Union of America
Vale ...................Empresa De Electricidade Vale Paranapanema SA, a
Brazilian Electric Distribution Company
Valero..................Valero Refining Company-Texas, Valero Refining Company
and Valero Energy Company
WTU ....................West Texas Utilities Company, Abilene, Texas
Yorkshire ..............Yorkshire plc, a regional electricity company in the
United Kingdom
94

[Front Cover]
[Close-up image of electric light bulb filament]

CENTRAL AND SOUTH WEST CORPORATION
SUMMARY ANNUAL REPORT 1999

staying
power

<PAGE>
[Front inside Cover]

Central and South West Corporation
Incorporated in Delaware in 1925

Central and South West Corporation is an investor-owned electric utility holding
company based in Dallas, Texas. CSW owns four electric utilities in the United
States: Central Power and Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company and West Texas Utilities Company. These
companies serve 1.8 million customers in an area covering 152,000 square miles
of Texas, Oklahoma, Louisiana and Arkansas. CSW also owns a regional energy
company in the United Kingdom, SEEBOARD plc, which serves 2 million customers in
South East England. CSW engages in international energy, telecommunications and
energy services businesses through its nonutility subsidiaries, primarily CSW
International, Inc., C3 Communications, Inc., and CSW Energy, Inc. On December
22, 1997, Central and South West Corporation and American Electric Power
Company, Inc., announced a definitive merger agreement for a tax-free
stock-for-stock transaction. On December 16, 1999, CSW and AEP mutually agreed
to amend the merger agreement to extend its term until June 30, 2000.

<PAGE>

Highlights

FINANCIAL DATA IN MILLIONS
For the years ended December 31, 1999 1998
- ----------------------------------------------------------------
Operating Revenues $5,537 $5,482
U.S. Electric Fuel and Purchased Power 1,333 1,301
United Kingdom Cost of Sales 1,133 1,204
Other Operating Expenses 1,808 1,719
Taxes 397 392
- ----------------------------------------------------------------
Operating Income 866 866
Other Income 59 42
Interest and Other Charges (456) (468)
Extraordinary Item (14) -
- ----------------------------------------------------------------
Net Income for Common Stock $ 455 $ 440
================================================================

COMMON STOCK DATA AND DIVIDENDS
At December 31, 1999 1998
- ----------------------------------------------------------------
Basic and Diluted Earnings per Share $2.14 $2.07
Dividends per Share $1.74 $1.74
Book Value per Share $17.32 $17.04
Average Common Shares Outstanding (millions) 212.6 212.4
Return on Average Common Equity 12.8% 12.4%
Dividend Yield 8.7% 6.3%
Dividend Payout Ratio 81% 84%
Year-End Market Price $20 $27 7/16
================================================================

QUARTERLY RESULTS
Closing Market Dividends
Price
High Low Paid
- ----------------------------------------------------------------
1999
First Quarter $28 $23 7/16 $0.435
Second Quarter 26 3/16 23 5/16 0.435
Third Quarter 23 1/2 20 7/8 0.435
Fourth Quarter 22 1/2 19 9/16 0.435
- ----------------------------------------------------------------
$1.74
=========

1998
First Quarter $27 13/16 $26 1/4 $0.435
Second Quarter 27 5/8 25 5/8 0.435
Third Quarter 28 3/4 25 1/4 0.435
Fourth Quarter 30 1/16 27 3/8 0.435
- ----------------------------------------------------------------
$1.74
=========
Copies of Central and South West Corporation's 1999 consolidated financial
statements may be obtained by calling our Investor Services Department at
1-800-527-5797.

1
<PAGE>

Letter to Our Shareholders

I am pleased to report that 1999 was a very successful year for Central and
South West Corporation. It was marked by major developments in three strategic
areas.

|X|Legislation to open the electric industry to greater competition was enacted
by the states of Texas and Arkansas, which joined Oklahoma and 20 other
states that have taken similar actions. As a result, we project that 70
percent of CSW's United States electric revenues will face competition by
2002.

|X|Our merger with American Electric Power Company reached many important
milestones. It received approvals from all four states served by CSW,
conditional approval from the Federal Energy Regulatory Commission and
antitrust clearance from the Department of Justice. We now anticipate
receiving all remaining regulatory approvals needed to close the merger in
the second quarter of 2000.

|X|CSW's earnings per share increased 3.4 percent in 1999 to $2.14. CSW Energy
was a major contributor to this improvement in earnings as a result of the
sale of a 50 percent interest in one of its cogeneration projects. The
after-tax effect of this transaction contributed 16 cents a share to
consolidated net income.

These developments and others--such as successfully handling the many
technological challenges for Year 2000--give us confidence in the staying power
of your investment. I believe the combination of CSW and American Electric Power
Company will increase the value of your investment.

2
<PAGE>

DECADE OF CHANGE
A decade ago, we began streamlining Central and South West to make it more
competitive. We flattened our organization, lowered our operating costs, updated
our technological systems and focused our employees on meeting our customers'
needs. We also worked to expand the corporation through major mergers and
acquisitions and to improve its total return through asset portfolio management.

During this period, we have achieved many impressive results in our U.S Electric
operations. Our prices in all customer categories compare favorably to our
competitors', with our residential prices down about 7.5 percent; our fuel costs
per Btu are improved; our recurring U.S. Electric capital spending and our
operations and maintenance expense are well under control; and our electric
expense per customer is about 20 percent below the regional average. All of
these improvements have been achieved while we reduced our U.S. employment by 18
percent.

These critical measures show how CSW has prepared for the changes now under way.
In particular, we anticipated a future of rapid change and structured the
company to operate not only as a single integrated electric system, but also as
a group of competitive lines of business. The confirmation of our vision came in
1999, when both the Texas Legislature and the Arkansas General Assembly passed
laws to restructure the electric utility industry in their states by 2002.

3
<PAGE>

HOW THE NEW ELECTRIC BUSINESS WILL OPERATE
The new laws require vertically integrated electric utilities to be unbundled.

Electricity is to be provided by three entities: unregulated generating
companies to produce the electricity and to trade power and boiler fuels on the
wholesale market, regulated transmission and distribution companies to deliver
power from various generators to customers' homes and businesses, and
competitive retail marketing companies to sell the electricity to consumers and
act as their point of contact for service arrangements.

CSW functionally is organized into these activities already; therefore, the
changes should not be dramatic for us. Nevertheless, a great deal of work is
involved in preparing filings with the state and federal regulatory commissions,
in deciding out how best to divide the business and in planning competitive
strategies for each of these three lines of business. We also must explain the
changes to our customers and help them adapt to new ways of doing business with
us and other electric service providers.

It is likely, too, that we will have to continue cutting costs to achieve higher
productivity in our organization. We also will have to continually improve our
work methods and to act faster in handling opportunities and risks. These are
the same challenges faced by virtually all companies in deregulated industries,
including natural gas, telecommunications, railroads and airlines.

For electricity customers, many choices will result. First, consumers will be
able to select their retail electric provider, whether based on price, type of
energy source or the availability of other bundled consumer services, such as
telecommunications, Internet service, cable TV, natural gas supply or home
security. Second, costs will come down because of legislative mandate or
competition. Third, innovative business models will evolve to benefit consumers,
in the same way that Internet retailers now are changing the way we buy books,
cars, clothes, stocks and just about everything else.

4
<PAGE>

[Close-up photo of turbine blades on a generator with the cutline: generation]

<PAGE>

[Bar charts: Return on Average Common Equity for 1995-99
Percent

1995 13.1%
1996 12.1%
1997 4.2%
1998 12.4%
1999 12.8%

and Earning and
Dividends per Share for 1995-99]

Reported
Dividends Earnings
1995 1.72 2.10
1996 1.74 2.07
1997 1.74 0.72
1998 1.74 2.07
1999 1.74 2.14

CSW also must make critical choices. We must choose where to compete in the
future, what energy services and products to sell and whether to form marketing
affiliations with other companies. These are major decisions that go to the
heart of the company's long-term strategy.

MERGER EXPECTED TO PROVIDE SIZABLE BENEFITS
For a company like CSW, which has been in this business for a long time,
opportunities abound. Our company has low-cost power supplies, a large number of
customers and strong relationships in hundreds of communities. Whether competing
on cost, reliability of energy supply or the capability to satisfy future market
demands, CSW can meet the challenge and succeed.

Why, then, did CSW's board of directors seek to merge with AEP? The answer is
staying power. The primary reason is to achieve the size necessary to
successfully compete on price, service and innovation. During the past 10 years,
CSW has pursued numerous opportunities to increase its size and strength. This
combination of CSW with AEP will create the largest generating company in North
America. The merged company will have more customers than any other U.S.
electric utility. It also will combine our vast transmission and distribution
operations--stretching from Canada to Mexico--to serve 11 states, including
Texas, the country's largest energy market. Just as important, the new AEP will
have some of the most experienced managers in the electric industry.

A merger with AEP will yield the efficiency and earnings necessary to compete in
the future. The new company will have a formidable regional, national and
international presence, an expanded growth potential and new strategic
strengths, such as greater fuel diversity and more power-trading capacity. The

6
<PAGE>

[Pie chart: 1999 Revenues, with percentages for U.S. Electric, U.K.
Electric and Other]

U.S. Electric 64%
U.K. Electric 31%
Other 5%

greater size also will add to the financial strength of the merged company; its
stronger balance sheet will offer the capability to undertake larger
investments, to attract global partners and to invest in ventures that offer
higher potential returns. Greater size, in short, will contribute to higher
long-term returns.

At the start of the merger, the two companies initially estimated $2 billion in
merger savings through the elimination of duplicative costs. During the past two
years, CSW and AEP employees have devoted thousands of hours to finding the best
ways to operate the combined company in the most efficient manner. As a result
of these efforts, we now project that AEP will be able to achieve significant
additional savings. In CSW's four states, merger settlement agreements and rate
plans provide major price reductions for our retail electric customers. With the
closing of the merger, I believe these merger benefits should be more fully
recognized and valued by the financial markets.

We have made great strides toward satisfying the conditions to complete the
merger. AEP and CSW have received many of the required regulatory approvals
needed and are expecting a ruling soon from the Securities and Exchange
Commission.

To provide sufficient time to satisfy all the closing conditions, the boards of
CSW and AEP have extended the term of the merger agreement until June 30, 2000.
After that date, either party may terminate the merger agreement if the merger
has not closed. The agreement continues to provide that CSW shareholders will
receive 0.6 a share of AEP common stock for each CSW common share at closing. We
also expect that CSW will continue paying its current quarterly dividend rate of
43.5 cents a share until the merger closes, based upon the corporation's
financial results and the decisions of CSW's board of directors.

7
<PAGE>

[Close-up photo of electrical socket plate with the cutline: transmission &
distribution]

<PAGE>

RESULTS IN 1999
CSW's net income for common stock was $455 million in 1999, compared to $440
million in 1998. Earnings per share increased 7 cents to $2.14.

The increase was primarily due to a one-time gain from the sale of half of CSW's
equity ownership interest in Sweeny Cogeneration Limited Partnership. CSW's
after-tax earnings from the proceeds of the sale were $33 million, or 16 cents a
share.

Earnings for 1999 adjusted for nonrecurring factors decreased to $1.98 a share
from $2.15 a share in 1998. Earnings from our U.S. Electric operations were
lower, mainly due to higher operations and maintenance expenses, which decreased
earnings 19 cents a share. Adding to O&M expenses was a settlement with a
transmission service provider, higher tree-trimming costs, an adjustment to FERC
transmission rates and additional power plant costs. Earnings from our U.K.
Electric operations improved 2 cents a share above those for 1998. The increase
was primarily due to lower energy purchase costs. Earnings from Diversified
Electric operations were 4 cents above those of 1998, primarily due to
contributions from several CSW Energy plants.

ELECTRIC OPERATIONS DURING 1999
Our total U.S. electric sales for 1999 were 66.8 billion kilowatt-hours, a
decline of less than 1 percent below 1998 sales. Summer weather in the Southwest
during 1999 returned to normal compared with the summer of 1998, which was one
of the hottest on record. Our total domestic retail electric sales declined by
1.5 percent, from 58.7 billion kilowatt-hours to 57.8 billion kilowatt-hours.
Sales for resale increased by 8.4 percent to 9.0 billion kilowatt-hours.

Our electric operations encountered no problems related to the Year 2000
computer programming issue. CSW began an extensive program in early 1996 to test
all major systems and to correct any date-related problems. We conducted
extensive internal tests, checked services from our suppliers and participated
in a number of national industry-readiness drills. This extensive effort to
assure reliable operations cost approximately $33 million during the past four
years, including $21 million in 1999.

9
<PAGE>

In the fourth quarter of 1999, the gas and electricity regulator in the United
Kingdom cut the allowed prices of U.K. electricity distributors, including CSW's
SEEBOARD plc unit. Although the new prices did not affect 1999 earnings, they
are expected to lower our U.K. Electric earnings by $40 million in 2000 and by
$60 million in 2001. As part of our merger with AEP, we have sought government
approval for the common ownership of SEEBOARD and Yorkshire Electricity Group,
in which AEP owns a 50 percent interest. The U.K. Department of Trade and
Industry has approved this change, subject to certain conditions that restrict
joint operation of the U.K. interests.

CHANGING FROM REGULATION TO COMPETITION
In evolving from a regulated to a competitive industry in the U.S., many larger
utilities face the issue of recovering "stranded costs." These are investments
that were made prudently to serve customers but no longer will be economically
competitive in a restructured marketplace. The Texas Legislature included in the
state's restructuring law provisions for utilities to recover reasonable amounts
for their stranded investments.

Securitization is a financial mechanism for charging customers for these costs.
Essentially, new bonds are sold to refinance a portion of the debt and equity of
facilities built under a regulated market structure. Securitization allows the
costs that customers are currently paying for these assets to be paid off
sooner, resulting in lower customer prices in the future than otherwise would be
possible.

In October, CSW's Central Power and Light Company subsidiary filed with the
Public Utility Commission of Texas for permission to securitize $1.27 billion of
stranded investment related to regulatory assets. In February 2000, the Texas
PUC approved a settlement allowing CPL to securitize $764 million of regulatory
assets and to recover much of the remaining cost in the future. CPL expects to
issue bonds before the end of 2000, depending on the timing of receiving a final
nonappealable financing order from the commission and on market conditions. A
second phase of the securitization process will occur in 2001. CPL's stranded
costs are subject to a final review by the Texas PUC in 2004. The other CSW
operating companies do not have any stranded investments.

10
<PAGE>

[Close-up photo of electric range Calrod heating coil with cutline:
retail marketing]

<PAGE>

[Head-and-shoulders photo with cutline: E.R. Brooks, Chairman and Chief
Executive Officer]

In January 2000, CSW filed with the Texas PUC a plan to unbundle the company's
electric utility services into three entities, as required under the state's new
electric utility restructuring law. CSW's plan proposes a separation to ensure a
smooth transition for our customers while providing a cost-effective way to
divide the energy delivery, power generation and retail business functions.
Based on the experience of utilities in other states, we estimate that the total
cost to restructure the entire CSW system to implement retail competition will
range from $100 million to $200 million.

STAYING POWER FOR THE FUTURE
For 75 years, Central and South West has demonstrated enormous staying power.
Its operating companies were among the fastest-growing businesses during the
early part of this century as they electrified the expanding economy of the
Southwest. Later, CSW was one of the few holding companies with the managerial
strength to weather the terrible financial collapse of the Great Depression and
to remain intact after Congress passed the Public Utility Holding Company Act of
1935--which was a virtual death sentence for most utility holding companies of
that era.

During the years of war and peace that followed, our employees worked
tirelessly. They contributed in many ways to the growth and welfare of the 735
communities we now serve while they earned attractive returns for the investors
who placed their confidence in CSW. As the Southwest grew during the second half
of the 20th century, CSW's electric companies were there to generate the power
needed for a new industrial economy and the energy to make life in the Southwest
more comfortable. The company's continuing record of financial, operational and
civic achievements has made it an industry leader in developing new
opportunities in the U.S. and other countries.

Now, we look forward to the future and to continuing the staying power of our
business. To succeed in the electricity business of the future, we believe a

12
<PAGE>

company must possess the size and strength to compete and to innovate. As an
integral part of the new American Electric Power Company, the CSW system will
contribute to that necessary size and strength by helping AEP to grow in new
markets such as power trading, wholesale generation and international
investments.

To help lead the new AEP after the merger closes, Thomas V. Shockley, III,
president and chief operating officer of CSW, will be joining AEP as vice
chairman and as a member of its board of directors. In addition, four outside
CSW directors--Dr. Donald M. Carlton, William R. Howell, James L. Powell and Dr.
Richard L. Sandor--will be nominated for election to the AEP board.

I will be retiring as a company officer with the completion of the merger but
will remain active as a new director of AEP. I look forward to continuing my
role as a steward of your investment and to safeguarding the trust placed in the
new company by its customers. The coming years will bring dramatic changes to
this industry, and I am confident that our company's shareholders and customers
alike will benefit from them.

E. R. Brooks
Chairman and Chief Executive Officer

March 15, 2000

13
<PAGE>
Board of Directors and Corporate Officers

BOARD OF DIRECTORS

Molly Shi Boren
Attorney
Norman, Oklahoma

E. R. Brooks
Chairman and Chief Executive Officer
Central and South West Corporation
Dallas, Texas

Donald M. Carlton, Ph.D.
Retired President and
Chief Executive Officer
Radian International LLC
Austin, Texas

T. J. Ellis, CBE
Chairman and Chief Executive
SEEBOARD plc
Crawley, West Sussex, United Kingdom

Joe H. Foy
Retired Partner
Bracewell and Patterson
Kerrville, Texas

William R. Howell
Chairman Emeritus
J. C. Penney Company, Inc.
Dallas, Texas

Robert W. Lawless, Ph.D.
President
The University of Tulsa
Tulsa, Oklahoma

James L. Powell
Ranching and Investments
Fort McKavett, Texas

Richard L. Sandor, Ph.D.
Chairman and Chief Executive Officer
Environmental Financial Products Limited
Chicago, Illinois

Thomas V. Shockley, III
President and Chief Operating Officer
Central and South West Corporation
Dallas, Texas

OFFICERS

E. R. Brooks
Chairman and Chief Executive Officer

Thomas V. Shockley, III
President and Chief Operating Officer

Ferd. C. Meyer, Jr.
Executive Vice President and General Counsel

Glenn D. Rosilier
Executive Vice President and Chief Financial Officer

Glenn Files
Senior Vice President, Electric Operations

Thomas M. Hagan
Senior Vice President, External Affairs

Venita McCellon-Allen
Senior Vice President, Customer Relations
and Corporate Development,
and Assistant Corporate Secretary

Stephen J. McDonnell
Vice President, AEP Merger

Kenneth C. Raney, Jr.
Vice President, Associate General Counsel
and Corporate Secretary

Michael D. Smith
Vice President, Business Opportunities

Lawrence B. Connors
Controller

Wendy G. Hargus
Treasurer

COMMITTEES OF THE BOARD OF DIRECTORS
1. The Audit Committee recommends to the board of directors the independent
public accountants to be appointed, subject to shareholder approval. The Audit
Committee reviews with the independent public accountants and the corporation's
internal auditors the scope of external and internal audits and the adequacy of,
and the compliance with, the corporation's system of internal accounting
controls.

2. The Executive Compensation Committee reviews benefit programs and
management-succession programs and determines the compensation of executive
officers.

3. The Nominating Committee reviews and recommends candidates for election to
the board of directors.

4. The Policy Committee reviews and makes recommendations to the board of
directors concerning major policy issues; considers on a continuing basis the
composition, structure and functions of the board of directors and its
committees; and reviews existing corporate policies and recommends changes when
appropriate. The Policy Committee has authority to act in place of the board of
directors when the board is not in session, to the extent permitted by law.

The membership of these committees is as follows: Molly Shi Boren (1) (2); E. R.
Brooks, chairman of the Policy Committee (4); Donald M. Carlton (1) (3); Joe H.
Foy, chairman of the Executive Compensation Committee (2) (4); William R. Howell
(2) (3); Robert W. Lawless, chairman of the Audit Committee (1) (4); James L.
Powell, chairman of the Nominating Committee (3) (4); and Richard L. Sandor (1)
(2).

14
<PAGE>

Shareholder Information

COMMON STOCK LISTING
Central and South West Corporation's common stock is traded under the ticker
symbol CSR and is listed on the New York and the Chicago stock exchanges. You
can find stock quotations from the New York Stock Exchange in most daily
newspapers.

COMMON STOCK DIVIDENDS
Dividends of 43.5 cents a share were paid in each quarter of 1999. All dividends
paid by the corporation represent taxable income to shareholders for federal
income tax purposes. In January 2000, the corporation's board of directors
maintained the quarterly dividend rate of 43.5 cents a share. CSW anticipates
continuing its current dividend policy until the close of its merger with
American Electric Power Company and paying a second-quarter dividend in 2000 to
shareholders of record on or about May 5, 2000, unless the merger closes before
that date. Future cash dividends will be determined by the board of directors
and based upon the corporation's earnings, financial condition and other
factors.

LOST DIVIDEND CHECK OR STOCK CERTIFICATE
If you do not receive your dividend check or stock certificate, or if either is
lost, destroyed or stolen, please contact our Investor Services Department
immediately.

STOCK TRANSFER
Central and South West Services, Inc., is the transfer agent and registrar for
Central and South West Corporation's common stock and for the preferred stocks
of the corporation's subsidiaries. To transfer your stock to another name, write
the new name, address and tax identification number on the back of the
certificate and sign your name exactly as it appears on the front. Then have
your signature Medallion-guaranteed by a commercial bank or stockbroker.
Signatures cannot be Medallion-guaranteed by a notary public. Your stock
certificates should be sent to our Investor Services Department by registered or
certified mail. If you have questions about transferring your shares, please
contact our Investor Services Department.

TAXPAYER ID NUMBER
Federal law requires each shareholder to provide a taxpayer identification
number for all shareholder accounts. For individual shareholders, your ID number
is your Social Security number. You must provide your ID number when opening a
new account in our stock, even if you already own stock in existing accounts in
your name. If you do not provide the ID number, the corporation is required to
withhold 31 percent from your dividends payable to the Internal Revenue Service.
If your stock is registered in a joint account, it is important to tell us the
taxpayer ID number of the primary owner you designate. If you are custodian for
a minor or act as a trustee on an account, please provide the beneficial owner's
tax identification number. This will ensure that your dividends are reported
under the correct name, address and taxpayer ID number. If you have not yet
given us your taxpayer ID number, please contact our Investor Services
Department to request a W-9 form. Complete, sign and return the form as soon as
possible.

DIRECT DEPOSIT OF DIVIDENDS
We are pleased to offer direct deposit of dividend payments to your checking,
savings or credit union account at any financial institution that accepts direct
electronic deposits. Direct deposit eliminates the possibility of your check
being lost or stolen, and the funds are credited to your account on the dividend
payment date. If you would like an enrollment card, please contact our Investor
Services Department.

PROXY AND DIVIDEND MAILINGS
Duplicate mailings of proxies and dividend checks cannot be eliminated unless
the registration is the same name for all of your accounts. If your account
registrations are identical, notify our Investor Services Department that you
want to combine your accounts. If your account registrations are different and
you want to combine your accounts, all certificates must be issued in the one
registration you prefer. To have your certificates reissued, please follow the
instructions under Stock Transfer.

ADDITIONAL INFORMATION
We will be pleased to send you additional copies of this Summary Annual Report.
Also available are the 1999 Financial Report that accompanies this Summary
Annual Report, CSW's 1999 Annual Report on Form 10-K, a preliminary quarterly
financial report, a Five-Year Financial and Statistical Review of the Central
and South West System and our latest Environmental Report of the Central and
South West System.

Central and South West Corporation is subject to the informational and reporting
requirements of the Securities Exchange Act of 1934 and files reports and other
information statements with the Securities and Exchange Commission. These
reports may be inspected at the SEC's offices and on its Internet site as well
as at the New York and Chicago stock exchanges. We will provide copies of these
reports without charge to any Central and South West shareholder. If you would
like to receive a report, please contact our Investor Services Department.

INSTRUCTIONS FOR EXCHANGING CSW SHARES FOR AEP SHARES
Central and South West Corporation expects that all approvals for closing its
merger with American Electric Power Company, Inc., will be obtained in the
second quarter of 2000. Near the close of the merger, we will mail instructions
and forms for exchanging your CSW shares for AEP shares.

15
<PAGE>

INVESTOR SERVICES
Our Investor Services staff is available Monday through Friday from 9 a.m. to
4 p.m. central time to answer your questions. Our address and telephone numbers
are:

Central and South West Corporation
Investor Services Department
P. O. Box 660164
Dallas, Texas 75266-0164
1-800-527-5797
E-mail: [email protected]

INVESTOR RELATIONS
Security analysts should contact:
Becky Hall
Director of Investor Relations
Central and South West Corporation
214-777-1277

If you would like to be added to our mailing list to receive our news releases
and other information, please contact our Investor Services Department.

Certain matters discussed in this summary annual report are forward-looking
statements intended to qualify for the safe harbor from liability established by
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as CSW "believes," "anticipates" or "expects,"
or words of similar import. Similarly, statements that describe CSW's future
plans, objectives and goals also are forward-looking statements. Such statements
address future events and conditions concerning capital expenditures, earnings,
litigation, rate and other regulatory matters, liquidity and capital resources,
and accounting matters. Actual results in each case may differ materially from
those currently anticipated in such statements, by reason of factors such as
effects of state and federal regulatory approvals or proceedings and other
conditions precedent to the proposed merger with AEP, which may or may not be
satisfied; electric utility industry restructuring, including ongoing state and
federal legislative and regulatory activities; future economic conditions;
developments in the domestic and international markets in which CSW and its
subsidiaries operate; and other circumstances affecting anticipated business
activities, revenues and costs.

Design: Walsh Associates Photography: Jim Reisch; Stuart Simons/Photonica
Printed on recycled paper

16
<PAGE>
[inside back cover]

The CSW System

[Map of the states of Texas, Oklahoma, Louisiana and Arkansas with colored
overlays of the four CSW U.S. Electric operating companies' service areas, the
corporate and operating companies' headquarters cities, major cities in the
service areas, CSW system power plants and major transmission lines; an outline
map of the United Kingdom with an overlay showing the trade territory of
SEEBOARD plc and its headquarters city]

<PAGE>

[Back cover]
CENTRAL AND SOUTH WEST CORPORATION
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75266-0164
www.csw.com

[Picture of cover of Central and South West System 1999 Environmental Report]

To receive the latest Environmental Report of the Central and South West System,
please call our Investor Services Department at 1-800-527-5797 or send an e-mail
to [email protected].

Printed in U.S.A.
CSWAR99 160

EXHIBIT 24.1
POWER OF ATTORNEY

The undersigned, as Chairman and Chief Executive Officer of Central and South
West Corporation (the "Corporation"), hereby makes, constitutes and appoints
Glenn D. Rosilier and Lawrence B. Connors and each of them severally, his true
and lawful attorneys-in-fact and agents, each with full power and authority
(acting alone and without the others) to execute in the name and on behalf of
the undersigned, in any and all capacities, the Corporation's Annual Report on
Form 10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ E. R. Brooks
E. R. Brooks
Chairman, Chief Executive Officer
and Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

EXHIBIT 24.2
POWER OF ATTORNEY

The undersigned, as Executive Vice President and Chief Financial Officer of
Central and South West Corporation (the "Corporation"), hereby makes,
constitutes and appoints E. R. Brooks and Lawrence B. Connors, and each of them
severally, his true and lawful attorneys-in-fact and agents, each with full
power and authority (acting alone and without the others) to execute in the name
and on behalf of the undersigned, in any and all capacities, the Corporation's
Annual Report on Form 10-K for 1999 and any and all amendments thereto, to be
filed under the Securities Exchange Act of 1934, as amended, and any other
documents and instruments incidental thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting to such attorneys-in-fact, and agents,
and each of them, full power and authority of substitution and revocation in the
premises and full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully for
all intents and purposes as the undersigned might or could do in person and
hereby ratifying and confirming all that such attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Glenn D. Rosilier
Glenn D. Rosilier
Executive Vice President and
Chief Financial Officer

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

EXHIBIT 24.3
POWER OF ATTORNEY

The undersigned, as Controller of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks and Glenn D.
Rosilier, and each of them severally, his true and lawful attorney-in-fact and
agents, each with full power and authority (acting alone and without the other)
to execute in the name and on behalf of the undersigned, in any and all
capacities, the Corporation's Annual Report on Form 10-K for 1999 and any and
all amendments thereto, to be filed under the Securities Exchange Act of 1934,
as amended, and any other documents and instruments incidental thereto, and to
file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, hereby granting to such
attorney-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorney-in-fact and agent, or any of them, may do or cause to be done by virtue
of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Lawrence B. Connors
Lawrence B. Connors
Controller

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, her true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Molly Shi Boren
Molly Shi Boren
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Donald M. Carlton
Dr. Donald M. Carlton
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ T. J. Ellis
T. J. Ellis
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Joe H. Foy
Joe H. Foy
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ William R. Howell
William R. Howell
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Robert W. Lawless
Dr. Robert W. Lawless
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ James L. Powell
James L. Powell
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ Richard L. Sandor
Dr. Richard L. Sandor
Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.4
POWER OF ATTORNEY

The undersigned, as a director of Central and South West Corporation (the
"Corporation"), hereby makes, constitutes and appoints E. R. Brooks, Glenn D.
Rosilier and Lawrence B. Connors, and each of them severally, his true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned, in any and all capacities, the Corporation's Annual Report on Form
10-K for 1999 and any and all amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended, and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting to such attorneys-in-fact, and agents, and each of
them, full power and authority of substitution and revocation in the premises
and full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as the undersigned might or could do in person and hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 19th
day of January, 2000.

/s/ T. V. Shockley, III
T. V. Shockley III
President, Chief Operating Officer
and Director

Subscribed and sworn to before me this 19th day of January, 2000.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

EXHIBIT 24.5
CERTIFICATE

I, Kenneth C. Raney, Jr., Secretary of Central and South West Corporation,
a Delaware corporation (the "Corporation"), hereby certify that set forth below
is a complete and accurate copy of a certain resolution adopted by the Board of
Directors of the Corporation on this 19th day of January, 2000, and that such
resolution is in full force and effect as of the date of this certificate.

Central and South West Corporation
Board of Directors Resolution
January 19, 2000

RESOLVED, that each officer of Central and South West Corporation listed
at the end of this sentence is hereby authorized to make, constitute and
appoint, in his respective capacity, a power of attorney in favor of the
person(s) listed directly after his name at the end of this sentence, as his
true and lawful attorney(s)-in-fact and agent(s), with full power and authority
(and in the case of more than one attorney-in-fact, each attorney-in-fact acting
alone and without the other) to execute in the name and on behalf of the
officer, in any and all capacities, the Corporation's Annual Report on Form 10-K
for 1999 and any and all amendments thereto, to be filed under the Securities
Exchange Act of 1934, as amended, and any other documents and instruments
incidental thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
and grant to such attorney(s)-in-fact, and agent(s) (and in the case of more
than one attorney-in-fact, each of them), full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and all intents and purposes as the officer
might or could do in person.

1. E.R. Brooks is authorized to make, constitute and appoint Glenn D.
Rosilier and Lawrence B. Connors to be his attorney(s)-in-fact.
2. Glenn D. Rosilier is authorized to make, constitute and appoint E.R.
Brooks and Lawrence B. Connors to be his attorney(s)-in-fact.
3. Lawrence B. Connors is authorized to make, constitute and appoint E.R.
Brooks and Glenn D. Rosilier to be his attorney(s)-in-fact.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Central and South West Corporation this day, the 19th of January, 2000.

/s/ Kenneth C. Raney, Jr.
Kenneth C. Raney, Jr.

CORPORATE SEAL

EXHIBIT 24.6
POWER OF ATTORNEY

The undersigned, as President of Central Power and Light Company (the
"Company"), hereby makes, constitutes and appoints R. Russell Davis his true and
lawful attorney-in-fact and agent, with full power and authority to execute in
the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorney-in-fact, and agent, full power and authority of substitution and
revocation in the premises and full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as the undersigned might or
could do in person and hereby ratifying and confirming all that such
attorney-in-fact and agent, may do or cause to be done by virtue of this Power
of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ J. Gonazlo Sandoval
J. Gonzalo Sandoval
General Manager/President and
Director

Subscribed and sworn to before me this 27th day of January 2000 by J. Gonzalo
Sandoval.

/s/ Alice G. Crisp
Notary Public
State of Texas

My Commission Expires: August 3, 2002

EXHIBIT 24.7
POWER OF ATTORNEY

The undersigned, as Controller of Central Power and Light Company (the
"Company"), hereby makes, constitutes and appoints J. Gonzalo Sandoval his true
and lawful attorney-in-fact and agent, with full power and authority to execute
in the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to such attorney-in-fact,
and agent, full power and authority of substitution and revocation in the
premises and full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully for
all intents and purposes as the undersigned might or could do in person and
hereby ratifying and confirming all that such attorney-in-fact and agent, may do
or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ R. Russell Davis
R. Russell Davis
Controller

Subscribed and sworn to before me this 27th day of January, 2000 by R.
Russell Davis.

/s/ Kit Hill
Notary Public
State of Oklahoma

My Commission Expires: June 14, 2001

EXHIBIT 24.8
POWER OF ATTORNEY

The undersigned, as a director of Central Power and Light Company (the
"Company"), hereby makes, constitutes and appoints J. Gonzalo Sandoval and R.
Russell Davis, and each of them severally, his true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ John F. Brimberry
John F. Brimberry
Director

Subscribed and sworn to before me this 27th day of January, 2000 by John F.
Brimberry.

Lynell Scherer
Notary Public
State of Texas

My Commission Expires: March 11, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ Ruben M. Garcia
Ruben M. Garcia
Director

Subscribed and sworn to before me this 27th day of January, 2000 by Ruben M.
Garcia.

/s/ Alice G. Crisp
Notary Public
State of Texas

My Commission Expires: August 3, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ Robert A. McAllen
Robert A. McAllen
Director

Subscribed and sworn to before me this 27th day of January, 2000 by Robert A.
McAllen.

/s/ Alice G. Crisp
Notary Public
State of Texas
My Commission Expires: August 3, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ Pete J. Morales, Jr.
Pete J. Morales, Jr.
Director

Subscribed and sworn to before me this 27th day of January, 2000 by Pete J.
Morales, Jr.

/s/ Alice G. Crisp
Notary Public
State of Texas

My Commission Expires: August 3, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ H. Lee Richards
H. Lee Richards
Director

Subscribed and sworn to before me this 27th day of January, 2000 by H. Lee
Richards.

/s/ Alice G. Crisp
Notary Public
State of Texas

My Commission Expires: August 3, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ Gerald E. Vaughn
Gerald E. Vaughn
Director

Subscribed and sworn to before me this 27th day of January, 2000 by Gerald E.
Vaughn.

/s/ Alice G. Crisp
Notary Public
State of Texas

My Commission Expires: August 3, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ E. R. Brooks
E. R. Brooks
Director

Subscribed and sworn to before me this 27th day of January, 2000 by E. R.
Brooks.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ Glenn Files
Glenn Files
Director

Subscribed and sworn to before me this 27th day of January, 2000 by Glenn Files.

/s/ Alice G. Crisp
Notary Public
State of Texas
My Commission Expires: August 3, 2002

<PAGE>

EXHIBIT 24.8
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney as of the
27th day of January, 2000.

/s/ Alphonso R. Jackson
Alphonso R. Jackson
Director

Subscribed and sworn to before me this 27th day of January, 2000 by Alphonso
R. Jackson.

Alice G. Crisp
Notary Public
State of Texas
My Commission Expires: August 3, 2002

EXHIBIT 24.9
CERTIFICATE

I, Brenda L. Snider, Secretary of Central Power and Light Company, a Texas
corporation (the "Corporation"), hereby certify that set forth below is a
complete and accurate copy of a certain resolution adopted by the Board of
Directors of the Corporation on this 27th day of January, 2000, and that such
resolution is in full force and effect as of the date of this certificate.

Central Power and Light Company
Board of Directors Resolution
January 27, 2000

RESOLVED, that each officer of Central Power and Light Company listed at
the end of this sentence is hereby authorized to make, constitute and appoint,
in his respective capacity, a power of attorney in favor of the person(s) listed
directly after his name at the end of this sentence, as his true and lawful
attorney(s)-in-fact and agent(s), with full power and authority (and in the case
of more than one attorney-in-fact, each attorney-in-fact acting alone and
without the other) to execute in the name and on behalf of the officer, in any
and all capacities, the Corporation's Annual Report on Form 10-K for 1999 and
any and all amendments thereto, to be filed under the Securities Exchange Act of
1934, as amended, and any other documents and instruments incidental thereto,
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, and grant to such
attorney(s)-in-fact, and agent(s) (and in the case of more than one
attorney-in-fact, each of them), full power and authority of substitution and
revocation in the premises and full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully and all intents and purposes as the officer might or could do
in person.

1. J. Gonzalo Sandoval is authorized to make, constitute and appoint R.
Russell Davis to be his attorney(s)-in-fact.
2. R. Russell Davis is authorized to make, constitute and appoint J.
Gonzalo Sandavol to be his attorney(s)-in-fact.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Central Power and Light Company this day, the 27th of January, 2000.

/s/ Brenda L. Snider
Brenda L. Snider

CORPORATE SEAL

EXHIBIT 24.10
POWER OF ATTORNEY

The undersigned, as President of Public Service Company of Oklahoma (the
"Company"), hereby makes, constitutes and appoints R. Russell Davis his true and
lawful attorney-in-fact and agent, with full power and authority to execute in
the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to such attorney-in-fact,
and agents, full power and authority of substitution and revocation in the
premises and full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully for
all intents and purposes as the undersigned might or could do in person and
hereby ratifying and confirming all that such attorney-in-fact and agents, may
do or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ T. D. Churchwell
T. D. Churchwell
President and Director

Subscribed and sworn to before me this 18th day of January, 2000 by T. D.
Churchwell.

/s/ Lina P. Holm
Notary Public
State of Oklahoma

My Commission Expires: January 28, 2003

EXHIBIT 24.11
POWER OF ATTORNEY

The undersigned, as Controller of Public Service Company of Oklahoma (the
"Company"), hereby makes, constitutes and appoints T. D. Churchwell his true and
lawful attorney-in-fact and agent, with full power and authority to execute in
the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the
same,with all exhibits thereto and all documents in connection therewith, with
the Securities and Exchange Commission, hereby granting to such
attorney-in-fact, and agent, full power and authority of substitution and
revocation in the premises and full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as the undersigned might or
could do in person and hereby ratifying and confirming all that such
attorney-in-fact and agent, may do or cause to be done by virtue of this Power
of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ R. Russell Davis
R. Russell Davis
Controller

Subscribed and sworn to before me this 18th day of January, 2000 by R.
Russell Davis.

/s/ Kit Hill
Notary Public
State of Oklahoma

My Commission Expires: June 14, 2001

EXHIBIT 24.12
POWER OF ATTORNEY

The undersigned, as a director of Public Service Company of Oklahoma (the
"Company"), hereby makes, constitutes and appoints T. D. Churchwell and R.
Russell Davis, and each of them severally, his true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done
by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ E. R. Brooks
E. R. Brooks
Director

Subscribed and sworn to before me this 18th day of January, 2000 by E. R.
Brooks.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.12
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ Harry A. Clarke
Harry A. Clarke
Director

Subscribed and sworn to before me this 18th day of January, 2000 by Harry A.
Clarke.

/s/ Lina P. Holm
Notary Public
State of Oklahoma
My Commission Expires: January 28, 2003

<PAGE>

EXHIBIT 24.12
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ Glenn Files
Glenn Files
Director

Subscribed and sworn to before me this 18th day of January, 2000 by Glenn Files.

Lina P. Holm
Notary Public
State of Oklahoma

My Commission Expires: January 28, 2003

<PAGE>

EXHIBIT 24.12
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ Paul K. Lackey, Jr.
Paul K. Lackey, Jr.
Director

Subscribed and sworn to before me this 18th day of January, 2000 by Paul K.
Lackey, Jr.

/s/ Lina P. Holm
Notary Public
State of Oklahoma

My Commission Expires: January 28, 2003

<PAGE>

EXHIBIT 24.12
POWER OF ATTORNEY

The undersigned, as a director of Public Service Company of Oklahoma (the
"Company"), hereby makes, constitutes and appoints T. D. Churchwell and R.
Russell Davis, and each of them severally, her true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ Paula Marshall-Chapman
Paula Marshall-Chapman
Director

Subscribed and sworn to before me this 18th day of January, 2000 by Paula
Marshall-Chapman.

/s/ Barbara Masterson
Notary Public
State of Oklahoma

My Commission Expires: March 4, 2002

<PAGE>

EXHIBIT 24.12
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ William R. McKamey
William R. McKamey
General Manager and Director

Subscribed and sworn to before me this 18th day of January, 2000 by William R.
McKamey.

/s/ Lina P. Holm
Notary Public
State of Oklahoma

My Commission Expires: January 28, 2003

<PAGE>

EXHIBIT 24.12
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 18th
day of January, 2000.

/s/ Robert B. Taylor, Jr.
Dr. Robert B. Taylor, Jr.
Director

Subscribed and sworn to before me this 18th day of January, 2000 by Dr.
Robert B. Taylor, Jr.

/s/ Lina P. Holm
Notary Public
State of Oklahoma

My Commission Expires: January 28, 2003

EXHIBIT 24.13
CERTIFICATE

I, Lina P. Holm, Secretary of Public Service Company of Oklahoma, an
Oklahoma corporation (the "Corporation"), hereby certify that set forth below is
a complete and accurate copy of a certain resolution adopted by the Board of
Directors of the Corporation on this 18th day of January, 2000, and that such
resolution is in full force and effect as of the date of this certificate.

Public Service Company of Oklahoma
Board of Directors Resolution
January 18, 2000

RESOLVED, that each officer of Public Service Company of Oklahoma listed
at the end of this sentence is hereby authorized to make, constitute and
appoint, in his respective capacity, a power of attorney in favor of the
person(s) listed directly after his name at the end of this sentence, as his
true and lawful attorney(s)-in-fact and agent(s), with full power and authority
(and in the case of more than one attorney-in-fact, each attorney-in-fact acting
alone and without the other) to execute in the name and on behalf of the
officer, in any and all capacities, the Corporation's Annual Report on Form 10-K
for 1999 and any and all amendments thereto, to be filed under the Securities
Exchange Act of 1934, as amended, and any other documents and instruments
incidental thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
and grant to such attorney(s)-in-fact, and agent(s) (and in the case of more
than one attorney-in-fact, each of them), full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and all intents and purposes as the officer
might or could do in person.

1. T. D. Churchwell is authorized to make, constitute and appoint R.
Russell Davis to be his attorney(s)-in-fact.
2. R. Russell Davis is authorized to make, constitute and appoint T. D.
Churchwell to be his attorney(s)-in-fact.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Public Service Company of Oklahoma this day, the 18th of January, 2000.

/s/ Lina P. Holm
Lina P. Holm

CORPORATE SEAL

EXHIBIT 24.14
POWER OF ATTORNEY

The undersigned, as President of Southwestern Electric Power Company (the
"Company"), hereby makes, constitutes and appoints R. Russell Davis his true and
lawful attorney-in-fact and agent, with full power and authority to execute in
the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to such attorney-in-fact,
and agent, full power and authority of substitution and revocation in the
premises and full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully for
all intents and purposes as the undersigned might or could do in person and
hereby ratifying and confirming all that such attorney-in-fact and agent, may do
or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ Michael H. Madison
Michael H. Madison
President and Director

Subscribed and sworn to before me this 26th day of January, 2000 by Michael H.
Madison.

/s/ Judith w. Culver
Notary Public
Caddo & Bossier Parish, Louisiana

My Commission is for Life

EXHIBIT 24.15
POWER OF ATTORNEY

The undersigned, as Controller of Southwestern Electric Power Company (the
"Company"), hereby makes, constitutes and appoints Michael H. Madison his true
and lawful attorney-in-fact and agent, with full power and authority to execute
in the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to such attorney-in-fact,
and agent, full power and authority of substitution and revocation in the
premises and full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully for
all intents and purposes as the undersigned might or could do in person and
hereby ratifying and confirming all that such attorney-in-fact and agent, may do
or cause to be done by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ R. Russell Davis
R. Russell Davis
Controller

Subscribed and sworn to before me this 26th day of January, 2000 by R. Russell
Davis.

/s/ Kit Hill
Notary Public
State of Oklahoma

My Commission Expires: June 14, 2001

EXHIBIT 24.16
POWER OF ATTORNEY

The undersigned, as a director of Southwestern Electric Power Company (the
"Company"), hereby makes, constitutes and appoints Michael H. Madison and R.
Russell Davis, and each of them severally, his true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ E. R. Brooks
E. R. Brooks
Director

Subscribed and sworn to before me this 26th day of January, 2000 by E.R. Brooks.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ James E. Davison
James E. Davison
Director

Subscribed and sworn to before me this 26th day of January, 2000 by James E.
Davison.

/s/ Judith W. Culver
Notary Public
Caddo & Bossier Parish, Louisiana

My Commission is for Life

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

The undersigned, as a director of Southwestern Electric Power Company (the
"Company"), hereby makes, constitutes and appoints Michael H. Madison and R.
Russell Davis, and each of them severally, his true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that
such attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ Glenn Files
Glenn Files
Director

Subscribed and sworn to before me this 26th day of January, 2000 by Glenn Files.

/s/ Judith W. Culver
Notary Public
Caddo & Bossier Parish, Louisiana

My Commission is for Life

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ Dr. Frederick E. Joyce
Dr. Frederick E. Joyce
Director

Subscribed and sworn to before me this 26th day of January, 2000 by Dr.
Frederick E. Joyce.

/s/ Sandra Pate
Notary Public
State of Texas

My Commission Expires: May 15, 2001

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ John M. Lewis
John M. Lewis
Director

Subscribed and sworn to before me this 26th day of January, 2000 by James M.
Lewis.

/s/ Linda Carmack Catron
Notary Public
Washington County, Arkansas

My Commission Expires: May 1, 2001

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

The undersigned, as a director of Southwestern Electric Power Company (the
"Company"), hereby makes, constitutes and appoints Michael H. Madison and R.
Russell Davis, and each of them severally, her true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ Karen C. Adams
Karen C. Adams
General Manager and Director

Subscribed and sworn to before me this 26th day of January, 2000 by Karen C.
Adams.

Judith W. Culver
Notary Public
Caddo & Bossier Parish, Louisiana

My Commission is for Life

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ William C. Peatross
William C. Peatross
Director

Subscribed and sworn to before me this 26th day of January, 2000 by William C.
Peatross.

/s/ Judith W. Culver
Notary Public
Caddo & Bossier Parish, Louisiana

My Commission is for Life

<PAGE>

EXHIBIT 24.16
POWER OF ATTORNEY

The undersigned, as a director of Southwestern Electric Power Company (the
"Company"), hereby makes, constitutes and appoints Michael H. Madison and R.
Russell Davis, and each of them severally, her true and lawful attorneys-in-fact
and agents, each with full power and authority (acting alone and without the
others) to execute in the name and on behalf of the undersigned, in any and all
capacities, the Company's Annual Report on Form 10-K for 1999 and any and all
amendments thereto, to be filed under the Securities Exchange Act of 1934, as
amended, and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting to such
attorneys-in-fact, and agents, and each of them, full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as the undersigned
might or could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 26th
day of January, 2000.

/s/ Maxine P. Sarpy
Maxine P. Sarpy
Director

Subscribed and sworn to before me this 26th day of January, 2000 by Maxine P.
Sarpy.

/s/ Judith W. Culver
Notary Public
Caddo & Bossier Parish, Louisiana

My Commission is for Life

EXHIBIT 24.17
CERTIFICATE

I, Marilyn S. Kirkland, Secretary of Southwestern Electric Power Company,
a Delaware corporation (the "Corporation"), hereby certify that set forth below
is a complete and accurate copy of a certain resolution adopted by the Board of
Directors of the Corporation on this 26th day of January, 2000, and that such
resolution is in full force and effect as of the date of this certificate.

Southwestern Electric Power Company
Board of Directors Resolution
January 26, 2000

RESOLVED, that each officer of Southwestern Electric Power Company listed
at the end of this sentence is hereby authorized to make, constitute and
appoint, in his respective capacity, a power of attorney in favor of the
person(s) listed directly after his name at the end of this sentence, as his
true and lawful attorney(s)-in-fact and agent(s), with full power and authority
(and in the case of more than one attorney-in-fact, each attorney-in-fact acting
alone and without the other) to execute in the name and on behalf of the
officer, in any and all capacities, the Corporation's Annual Report on Form 10-K
for 1999 and any and all amendments thereto, to be filed under the Securities
Exchange Act of 1934, as amended, and any other documents and instruments
incidental thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
and grant to such attorney(s)-in-fact, and agent(s) (and in the case of more
than one attorney-in-fact, each of them), full power and authority of
substitution and revocation in the premises and full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and all intents and purposes as the officer
might or could do in person.

1. Michael H. Madison is authorized to make, constitute and appoint R.
Russell Davis to be his attorney(s)-in-fact.
2. R. Russell Davis is authorized to make, constitute and appoint Michael
H. Madison to be his attorney(s)-in-fact.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Southwestern Electric Power Company this day, the 26th of January, 2000.

/s/ Marilyn S. Kirkland
Marilyn S. Kirkland

CORPORATE SEAL

EXHIBIT 24.18
POWER OF ATTORNEY

The undersigned, as President of West Texas Utilities Company (the "Company"),
hereby makes, constitutes and appoints R. Russell Davis his true and lawful
attorney-in-fact and agent, with full power and authority to execute in the name
and on behalf of the undersigned, in any and all capacities, the Company's
Annual Report on Form 10-K for 1999 and any and all amendments thereto, to be
filed under the Securities Exchange Act of 1934, as amended, and any other
documents and instruments incidental thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting to such attorney-in-fact, and agent,
full power and authority of substitution and revocation in the premises and full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as the undersigned might or could do in person and hereby ratifying and
confirming all that such attorney-in-fact and agent, may do or cause to be done
by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ Paul J. Brower
Paul J. Brower
General Manager/President and
Director

Subscribed and sworn to before me this 25th day of January, 2000 by Paul J.
Brower.

/s/ Martha Murray
Notary Public
State of Texas
My Commission Expires: November 19, 2000

EXHIBIT 24.19
POWER OF ATTORNEY

The undersigned, as Controller of West Texas Utilities Company (the "Company"),
hereby makes, constitutes and appoints Paul J. Brower his true and lawful
attorney-in-fact and agent, with full power and authority to execute in the name
and on behalf of the undersigned, in any and all capacities, the Company's
Annual Report on Form 10-K for 1999 and any and all amendments thereto, to be
filed under the Securities Exchange Act of 1934, as amended, and any other
documents and instruments incidental thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting to such attorney-in-fact, and agent,
full power and authority of substitution and revocation in the premises and full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as the undersigned might or could do in person and hereby ratifying and
confirming all that such attorney-in-fact and agent, may do or cause to be done
by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ R. Russell Davis
R. Russell Davis
Controller

Subscribed and sworn to before me this 25th day of January, 2000 by R.
Russell Davis.

/s/ Kit Hill
Notary Public
State of Oklahoma

My Commission Expires: June 14, 2001

EXHIBIT 24.20
POWER OF ATTORNEY

The undersigned, as a director of West Texas Utilities Company (the "Company"),
hereby makes, constitutes and appoints Paul J. Brower and R. Russell Davis, and
each of them severally, his true and lawful attorneys-in-fact and agents, each
with full power and authority (acting alone and without the others) to execute
in the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to such attorneys-in-fact,
and agents, and each of them, full power and authority of substitution and
revocation in the premises and full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as the undersigned might or
could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ E. R. Brooks
E. R. Brooks
Director

Subscribed and sworn to before me this 25th day of January, 2000 by E. R.
Brooks.

/s/ Judy A. Hall
Notary Public
State of Texas

My Commission Expires: July 20, 2003

<PAGE>

EXHIBIT 24.20
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ Glenn Files
Glenn Files
Director

Subscribed and sworn to before me this 25th day of January, 2000 by Glenn Files.

/s/ Martha Murray
Notary Public
State of Texas

My Commission Expires: November 19, 2000

<PAGE>

EXHIBIT 24.20
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ Alphonso Jackson
Alphonso R. Jackson
Director

Subscribed and sworn to before me this 25th day of January, 2000 by Alphonso
R. Jackson.

/s/ Martha Murray
Notary Public
State of Texas

My Commission Expires: November 19, 2000

<PAGE>

EXHIBIT 24.20
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ Tommy Morris
Tommy Morris
Director

Subscribed and sworn to before me this 25th day of January, 2000 by Tommy
Morris.

/s/ Martha Murray
Notary Public
State of Texas

My Commission Expires: November 19. 2000

<PAGE>

EXHIBIT 24.20
POWER OF ATTORNEY

The undersigned, as a director of West Texas Utilities Company (the "Company"),
hereby makes, constitutes and appoints Paul J. Brower and R. Russell Davis, and
each of them severally, her true and lawful attorneys-in-fact and agents, each
with full power and authority (acting alone and without the others) to execute
in the name and on behalf of the undersigned, in any and all capacities, the
Company's Annual Report on Form 10-K for 1999 and any and all amendments
thereto, to be filed under the Securities Exchange Act of 1934, as amended, and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to such attorneys-in-fact,
and agents, and each of them, full power and authority of substitution and
revocation in the premises and full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as the undersigned might or
could do in person and hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may do or cause to be done by
virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ Dian G. Owen
Dian G. Owen
Director

Subscribed and sworn to before me this 25th day of January, 2000 by Dian G.
Owen.

/s/ Diane K. Nichols
Notary Public
State of Texas

My Commission Expires: February 14, 2003

<PAGE>

EXHIBIT 24.20
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ James M. Parker
James M. Parker
Director

Subscribed and sworn to before me this 25th day of January, 2000 by James M.
Parker.

/s/ Martha Murray
Notary Public
State of Texas

My Commission Expires: November 19, 2000

<PAGE>

EXHIBIT 24.20
POWER OF ATTORNEY

IN WITNESS WHEREOF, I have hereunto executed this Power of Attorney this 25th
day of January, 2000.

/s/ F. L. Stephens
F. L. Stephens
Director

Subscribed and sworn to before me this 25th day of January, 2000 by F. L.
Stephens.

/s/ Martha Murray
Notary Public
State of Texas

My Commission Expires: November 19, 2000

EXHIBIT 24.21
CERTIFICATE

I, Martha Murray, Secretary of West Texas Utilities Company, a Texas
corporation (the "Corporation"), hereby certify that set forth below is a
complete and accurate copy of a certain resolution adopted by the Board of
Directors of the Corporation on this 25th day of January, 2000, and that such
resolution is in full force and effect as of the date of this certificate.

West Texas Utilities Company
Board of Directors Resolution
January 25, 2000

RESOLVED, that each officer of West Texas Utilities Company listed at the
end of this sentence is hereby authorized to make, constitute and appoint, in
his respective capacity, a power of attorney in favor of the person(s) listed
directly after his name at the end of this sentence, as his true and lawful
attorney(s)-in-fact and agent(s), with full power and authority (and in the case
of more than one attorney-in-fact, each attorney-in-fact acting alone and
without the other) to execute in the name and on behalf of the officer, in any
and all capacities, the Corporation's Annual Report on Form 10-K for 1999 and
any and all amendments thereto, to be filed under the Securities Exchange Act of
1934, as amended, and any other documents and instruments incidental thereto,
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, and grant to such
attorney(s)-in-fact, and agent(s) (and in the case of more than one
attorney-in-fact, each of them), full power and authority of substitution and
revocation in the premises and full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully and all intents and purposes as the officer might or could do
in person.

1. Paul J. Brower is authorized to make, constitute and appoint R. Russell
Davis to be his attorney(s)-in-fact.
2. R. Russell Davis is authorized to make, constitute and appoint Paul J.
Brower to be his attorney(s)-in-fact.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
West Texas Utilities Company this day, the 25th of January, 2000.

/s/ Martha Murray
Martha Murray

CORPORATE SEAL

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<CIK> 0000018540
<NAME> CENTRAL AND SOUTH WEST CORPORTION
<SUBSIDIARY>
<NUMBER> 001
<NAME> CENTRAL AND SOUTH WEST CORPORATION
<MULTIPLIER> 1,000,000

<S> <C>
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<TOTAL-CURRENT-ASSETS> 1,927
<TOTAL-DEFERRED-CHARGES> 8
<OTHER-ASSETS> 3,553
<TOTAL-ASSETS> 14,162
<COMMON> 744
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18
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<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 40
<COMMERCIAL-PAPER-OBLIGATIONS> 2,100
<LONG-TERM-DEBT-CURRENT-PORT> 256
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,949
<TOT-CAPITALIZATION-AND-LIAB> 14,162
<GROSS-OPERATING-REVENUE> 5,537
<INCOME-TAX-EXPENSE> 204
<OTHER-OPERATING-EXPENSES> 4,467
<TOTAL-OPERATING-EXPENSES> 4,671
<OPERATING-INCOME-LOSS> 866
<OTHER-INCOME-NET> 59
<INCOME-BEFORE-INTEREST-EXPEN> 925
<TOTAL-INTEREST-EXPENSE> 456
<NET-INCOME> 455
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<EARNINGS-AVAILABLE-FOR-COMM> 455
<COMMON-STOCK-DIVIDENDS> 370
<TOTAL-INTEREST-ON-BONDS> 199
<CASH-FLOW-OPERATIONS> 803
<EPS-BASIC> 2.14
<EPS-DILUTED> 2.14

</TABLE>

<ARTICLE> UT
<CIK> 0000018734
<NAME> CENTRAL POWER AND LIGHT COMPANY
<SUBSIDIARY>
<NUMBER> 003
<NAME> CENTRAL POWER AND LIGHT COMPANY
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,247,969
<OTHER-PROPERTY-AND-INVEST> 2,552
<TOTAL-CURRENT-ASSETS> 241,206
<TOTAL-DEFERRED-CHARGES> 50,551
<OTHER-ASSETS> 1,305,572
<TOTAL-ASSETS> 4,847,850
<COMMON> 168,888
<CAPITAL-SURPLUS-PAID-IN> 405,000
<RETAINED-EARNINGS> 764,225
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,338,113
0
5,967
<LONG-TERM-DEBT-NET> 1,454,541
<SHORT-TERM-NOTES> 322,158
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 150,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,577,071
<TOT-CAPITALIZATION-AND-LIAB> 4,847,850
<GROSS-OPERATING-REVENUE> 1,482,475
<INCOME-TAX-EXPENSE> 103,895
<OTHER-OPERATING-EXPENSES> 1,083,908
<TOTAL-OPERATING-EXPENSES> 1,187,803
<OPERATING-INCOME-LOSS> 294,672
<OTHER-INCOME-NET> 8,113
<INCOME-BEFORE-INTEREST-EXPEN> 302,785
<TOTAL-INTEREST-EXPENSE> 114,380
<NET-INCOME> 182,888
6,931
<EARNINGS-AVAILABLE-FOR-COMM> 173,194
<COMMON-STOCK-DIVIDENDS> 148,000
<TOTAL-INTEREST-ON-BONDS> 87,413
<CASH-FLOW-OPERATIONS> 303,184
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>

<ARTICLE> UT
<CIK> 0000081027
<NAME> PUBLIC SERVICE COMPANY OF OKLAHOMA
<SUBSIDIARY>
<NUMBER> 004
<NAME> PUBLIC SERVICE COMPANY OF OKLAHOMA
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,345,450
<OTHER-PROPERTY-AND-INVEST> 18,644
<TOTAL-CURRENT-ASSETS> 123,375
<TOTAL-DEFERRED-CHARGES> 4,520
<OTHER-ASSETS> 51,882
<TOTAL-ASSETS> 1,543,871
<COMMON> 157,230
<CAPITAL-SURPLUS-PAID-IN> 180,000
<RETAINED-EARNINGS> 142,018
<TOTAL-COMMON-STOCKHOLDERS-EQ> 479,248
0
5,286
<LONG-TERM-DEBT-NET> 419,516
<SHORT-TERM-NOTES> 79,169
<LONG-TERM-NOTES-PAYABLE> 20,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 20,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 520,652
<TOT-CAPITALIZATION-AND-LIAB> 1,543,871
<GROSS-OPERATING-REVENUE> 749,390
<INCOME-TAX-EXPENSE> 34,184
<OTHER-OPERATING-EXPENSES> 615,396
<TOTAL-OPERATING-EXPENSES> 649,580
<OPERATING-INCOME-LOSS> 99,810
<OTHER-INCOME-NET> 946
<INCOME-BEFORE-INTEREST-EXPEN> 100,756
<TOTAL-INTEREST-EXPENSE> 38,151
<NET-INCOME> 62,605
213
<EARNINGS-AVAILABLE-FOR-COMM> 62,392
<COMMON-STOCK-DIVIDENDS> 65,000
<TOTAL-INTEREST-ON-BONDS> 24,098
<CASH-FLOW-OPERATIONS> 112,592
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>

<ARTICLE> UT
<CIK> 0000092487
<NAME> SOUTHWESTERN ELECTRIC POWER COMPANY
<SUBSIDIARY>
<NUMBER> 005
<NAME> SOUTHWESTERN ELECTRIC POWER COMPANY
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,847,189
<OTHER-PROPERTY-AND-INVEST> 5,782
<TOTAL-CURRENT-ASSETS> 159,407
<TOTAL-DEFERRED-CHARGES> 4,974
<OTHER-ASSETS> 90,446
<TOTAL-ASSETS> 2,107,798
<COMMON> 135,660
<CAPITAL-SURPLUS-PAID-IN> 245,000
<RETAINED-EARNINGS> 288,018
<TOTAL-COMMON-STOCKHOLDERS-EQ> 668,678
0
4,706
<LONG-TERM-DEBT-NET> 605,973
<SHORT-TERM-NOTES> 140,897
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 45,595
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 641,949
<TOT-CAPITALIZATION-AND-LIAB> 2,107,798
<GROSS-OPERATING-REVENUE> 965,027
<INCOME-TAX-EXPENSE> 38,506
<OTHER-OPERATING-EXPENSES> 778,997
<TOTAL-OPERATING-EXPENSES> 817,503
<OPERATING-INCOME-LOSS> 147,524
<OTHER-INCOME-NET> (1,965)
<INCOME-BEFORE-INTEREST-EXPEN> 145,559
<TOTAL-INTEREST-EXPENSE> 58,893
<NET-INCOME> 83,655
229
<EARNINGS-AVAILABLE-FOR-COMM> 83,426
<COMMON-STOCK-DIVIDENDS> 96,000
<TOTAL-INTEREST-ON-BONDS> 38,380
<CASH-FLOW-OPERATIONS> 154,942
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>

<ARTICLE> UT
<CIK> 0000105860
<NAME> WEST TEXAS UTILITIES COMPANY
<SUBSIDIARY>
<NUMBER> 006
<NAME> WEST TEXAS UTILITIES COMPANY
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 686,697
<OTHER-PROPERTY-AND-INVEST> 869
<TOTAL-CURRENT-ASSETS> 103,086
<TOTAL-DEFERRED-CHARGES> 31,215
<OTHER-ASSETS> 39,338
<TOTAL-ASSETS> 861,205
<COMMON> 137,214
<CAPITAL-SURPLUS-PAID-IN> 2,236
<RETAINED-EARNINGS> 115,856
<TOTAL-COMMON-STOCKHOLDERS-EQ> 255,306
0
2,482
<LONG-TERM-DEBT-NET> 263,686
<SHORT-TERM-NOTES> 21,408
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 40,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 278,323
<TOT-CAPITALIZATION-AND-LIAB> 861,205
<GROSS-OPERATING-REVENUE> 439,709
<INCOME-TAX-EXPENSE> 14,275
<OTHER-OPERATING-EXPENSES> 371,270
<TOTAL-OPERATING-EXPENSES> 385,545
<OPERATING-INCOME-LOSS> 54,164
<OTHER-INCOME-NET> 2,488
<INCOME-BEFORE-INTEREST-EXPEN> 56,652
<TOTAL-INTEREST-EXPENSE> 24,420
<NET-INCOME> 26,771
104
<EARNINGS-AVAILABLE-FOR-COMM> 26,667
<COMMON-STOCK-DIVIDENDS> 28,000
<TOTAL-INTEREST-ON-BONDS> 20,352
<CASH-FLOW-OPERATIONS> 66,262
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>