TEXAS UTILITIES ELECTRIC CO, 424B2, 1995-10-19

TEXAS UTILITIES ELECTRIC CO
424B2, 1995-10-19
ELECTRIC SERVICES

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<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been declared
effective by the Securities and Exchange Commission pursuant to Rule 415
under the Securities Act of 1933. A final prospectus supplement and the
accompanying prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction.

<PAGE>

Filed Pursuant to Rule 424(b)(2)
Registration No. 33-61947

Subject to Completion, Dated October 18, 1995

PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 28, 1995)

$81,595,000

SECURED FACILITY BONDS, % SERIES DUE

Interest on the Offered Bonds is payable semiannually on January 1 and
July 1, beginning January 1, 1996. The Offered Bonds will be secured by a
lien on and security interest in the Permian Basin Facility and the
DeCordova Facility and rights under the Lease relating to the Permian Basin
Facility and the DeCordova Facility and will be payable from basic rentals
and certain other amounts to be paid under such Lease by

TEXAS UTILITIES ELECTRIC COMPANY

The Offered Bonds will be issued by Shawmut Bank Connecticut, National
Association, not individually but solely as owner trustee (Lessor) under a
Trust Agreement dated as of December 1, 1988, as supplemented (Trust
Agreement) in order to refinance the initial series of Secured Facility Bonds
issued by the Lessor on December 6, 1989. Texas Utilities Electric Company
(TU Electric) will be unconditionally obligated to make basic rental and
certain other payments in amounts which will be at least sufficient to pay in
full, when due, all scheduled payments of principal of, premium, if any, and
interest on the Offered Bonds, although the Offered Bonds will not be direct
obligations of or guaranteed by TU Electric.

The Offered Bonds will mature on , and will be in the
aggregate principal amount and will bear interest at the rate shown in the
table below. For principal installment payment and mandatory redemption
provisions and other terms, see SUMMARY INFORMATION RELATING TO THE OFFERED
BONDS in this Prospectus Supplement and DESCRIPTION OF THE BONDS in the
accompanying Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
_______________________________________________________________________________
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMMISSION(2) LESSOR(2)
<S> <C> <C> <C>
Per Offered Bond . . . . . . . 100% % 100%
Total. . . . . . . . . . . . . $81,595,000 $ $81,595,000
_______________________________________________________________________________
</TABLE>

(1) Plus accrued interest, if any, from the date of issuance.
(2) Expenses, estimated to be $475,000, and underwriting commissions will
be paid by TU Electric and not from the proceeds of the Offered Bonds.

The Offered Bonds are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Offered Bonds will be made at
the office of Salomon Brothers Inc, New York, New York, or through the
facilities of The Depository Trust Company, on or about October 25, 1995.

SALOMON BROTHERS INC MORGAN STANLEY & CO.
INCORPORATED

The date of this Prospectus Supplement is October , 1995.

<PAGE>

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED BONDS
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

SUMMARY INFORMATION RELATING TO THE OFFERED BONDS

THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.

Securities Offered . . . . . . . $81,595,000 principal amount of Secured
Facility Bonds, which bear interest at the
rate of % per annum and mature on ,
(Offered Bonds).

Interest Payment Dates . . . . . January 1 and July 1, commencing January 1,
1996.

Principal Installment
Payments. . . . . . . . . . . The Supplemental Indenture relating to the
Offered Bonds (Supplemental Indenture)
provides for the payment of principal
installments on the Offered bonds on each
of the Installment Payment Dates set forth
below, in an aggregate amount equal to the
Installment Payment Amounts set forth
below, together with interest accrued to
such Installment Payment Date. The
Outstanding Balance Factor set forth below
for each Installment Payment Date
represents a factor that when applied to
the original principal amount of each
Offered Bond will indicate the outstanding
principal amount of such Offered Bond
remaining unpaid after payment of the
principal installment due on such
Installment Payment Date.

INSTALLMENT INSTALLMENT OUTSTANDING
PAYMENT DATE PAYMENT AMOUNT BALANCE FACTOR
------------ -------------- --------------
January 1, 2006
January 1, 2007
January 1, 2008
January 1, 2009
January 1, 2010
January 1, 2011
January 1, 2012
January 1, 2013
January 1, 2014
January 1, 2015
January 1, 2016
January 1, 2017
July 1, 2017
January 1, 2018

See DESCRIPTION OF THE BONDS -- "Principal
Installment Payments" in the accompanying
Prospectus.

S-2

<PAGE>

Mandatory
Redemption . . . . The Offered Bonds shall be subject to mandatory
redemption, at 100% of the unpaid principal
amount thereof, together with interest accrued
to the Redemption Date (as specified in the
Indenture) upon the receipt by the Trustee from
TU Electric of payment of the applicable
Casualty Value under the Lease resulting from
an Event of Loss (as defined in the
accompanying Prospectus) under the Lease
(unless, in connection with an Event of Loss
described in clause (v) below, TU Electric
assumes the Offered Bonds then outstanding and
all of the obligations of the Lessor under the
Indenture and the Offered Bonds and the Lessor
shall transfer the Facilities (as defined in
the accompanying Prospectus) to TU Electric),
in the principal amount equal to the product of
(a) the aggregate unpaid principal amount of
the Offered Bonds then outstanding and (b) a
fraction the numerator of which is the purchase
price of the Facility to which such Event of
Loss pertains and the denominator of which is
the aggregate purchase price of the Facilities
then subject to the lien of the Indenture.
Events of Loss under the Lease consist of:

(i) the loss of either Facility, in its
entirety or substantially in its entirety, due
to theft, disappearance, destruction or, in the
good faith and reasonable opinion of TU
Electric, damage beyond economic repair and or
the loss of use of either Facility for a period
reasonably anticipated to extend for at least
30 months (or such longer period not exceeding
60 months as may be required to repair or
restore such Facility to use) for any such
reasons;

(ii) the receipt of insurance proceeds based
upon an actual or constructive total loss with
respect to either Facility;

(iii) certain events of condemnation,
confiscation or seizure or loss of title to
either Facility or the ground interest relating
thereto;

(iv) shutdown of either Facility as a result
of any laws, regulations or governmental orders
for a period exceeding the lesser of (a) the
remaining portion of the term of the Lease and
(b) 60 months;

(v) the Lessor or the Owner Participant,
solely by reason of its participation in the
sale and lease transactions, shall be deemed by
any governmental authority to be, or shall
become subject to regulation as, a Texas Public
Utility, an "electric utility", a "public
utility" or a "public utility holding company"
or an affiliate of any of the foregoing and
shall have sent written notice to TU Electric
and the parties to the Participation Agreement
(as defined in the accompanying Prospectus)
that such person deems such regulation to be
materially burdensome; or

(vi) the permanent shutdown of either Facility.

The Offered Bonds shall be subject to
redemption in whole but not in part, on or
after , at 100% of the unpaid principal
amount thereof, together with interest accrued to
the Redemption Date, upon the receipt by the Trustee
of the applicable purchase price or Termination
Value (either of which shall be in an amount
sufficient to

S-3

<PAGE>

pay the capital Offered Bonds) under the lease
as a result of an early termination of the
Lease upon a determination by TU Electric that
the Facilities are obsolete, surplus or
uneconomic for TU Electric's purposes and will
no longer be used by TU Electric. See
DESCRIPTION OF THE BONDS -- "Pro Rata Payment"
and -- "Notice of Redemption" in the
accompanying Prospectus.

Optional
Redemption . . . . The Offered Bonds are not subject to optional
redemption at any time prior to the stated
maturity date.

Security and
Source of
Payments . . . . . The Offered Bonds will be secured by a lien on
and security interest in the Facilities and an
interest in the land underlying the Facilities,
and rights under the Lease, including basic
rentals and certain other amounts payable by TU
Electric under the Lease. TU Electric will be
unconditionally obligated to pay basic rent and
certain other amounts under the Lease which are
at least sufficient to pay in full, when due,
scheduled payments of principal of, premium, if
any, and interest on, the Offered Bonds.
However, the Offered Bonds will not be direct
obligations of or guaranteed by TU Electric.
The Lease is a "net lease" with all such
payments being required to be made without
counterclaim, setoff, deduction or defense. The
holders of the Offered Bonds will have no
recourse against the general credit of the
Lessor or the Owner Participant (as defined in
the accompanying Prospectus). See OWNERSHIP AND
LEASE OF THE FACILITIES, DESCRIPTION OF THE
LEASE and SECURITY AND SOURCE OF PAYMENT FOR
THE BONDS in the accompanying Prospectus.

The Facilities . . The Permian Basin Facility is composed of two
gas-fired combustion turbine peaking units. It
was placed in service in October 1989, and has
a nominal rating of 130 megawatts (MW). The
DeCordova Facility is composed of four
gas-fired combustion turbine peaking units. It
was placed in service in November 1989, and has
a nominal rating of 260 MW.

The Refinancing. . TU Electric has determined, in light of
prevailing economic and financial
circumstances, to exercise its option pursuant
to the Participation Agreement to request the
Lessor to refinance the initial series of
Secured Facility Bonds which were issued on
December 6, 1989 and are currently outstanding.
The proceeds from the Offered Bonds will be
used to refund in their entirety such initial
series of Secured Facility Bonds.

S-4

<PAGE>

_______________________________________________________________________________

SUMMARY FINANCIAL INFORMATION FOR TU ELECTRIC
(Thousands of Dollars, Except Ratios and Percentages)

The following material, which is presented herein solely to furnish limited
introductory information, is qualified in its entirety by, and should be
considered in conjunction with, the other information appearing in this
Prospectus Supplement and the accompanying Prospectus, including the
Incorporated Documents. In the opinion of TU Electric, all adjustments
(constituting only normal recurring accruals) necessary for a fair statement
of the results of operations for the twelve months ended September 30, 1995,
have been made.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
- ---------------------------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- 1995
1990 1991 1992 1993 1994 (UNAUDITED)
---------- ---------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues . . . $4,540,915 $4,891,522 $4,906,695 $5,409,156 $5,613,175 $5,545,186
Net Income (Loss)(a). . . 964,276 (289,173) 821,123 476,526 658,192 408,083
Ratio of Earnings to
Fixed Charges(a)(b). . . 2.54 0.34 2.48 2.00 2.45 1.92

ADJUSTED(C)
OUTSTANDING AT ----------------
SEPTEMBER 30, 1995 AMOUNT PERCENT
------------------ ------ -------
CAPITALIZATION (UNAUDITED):
Long-term Debt. . . . . . . . . . . . $7,234,493 $ 7,234,493 50.9%
Preferred Stock
Not subject to mandatory redemption. 855,869 855,869
Subject to mandatory redemption. . . 275,645 275,645
----------- -----------
Total Preferred Stock . . . . . . . 1,131,514 1,131,514 8.0
Common Stock Equity . . . . . . . . . 5,849,891 5,849,891 41.1
----------- ----------- ------
Total Capitalization. . . . . . . . . $14,215,898 $14,215,898 100.0%
=========== =========== ======
</TABLE>

(a) The net loss for the twelve month period ended December 31, 1991 was due
primarily to the recognition of a charge against earnings, representing a
provision for regulatory disallowances and for fuel gas costs disallowed
in TU Electric's Docket 9300 rate case. Additionally, the twelve month
periods ended December 31, 1990, December 31, 1991 and December 31, 1992
were affected by the discontinuation of the accrual of allowance for
funds used during construction (AFUDC) and the commencement of
depreciation on approximately $1.3 billion of investment in Unit 1 of
the Comanche Peak nuclear generating station (Comanche Peak) and
facilities which are common to Comanche Peak Units 1 and 2 incurred
after the end of the June 30, 1989 test year and, therefore, not
included in TU Electric's Docket 9300 rate case. Effective January
1992, TU Electric began recording base rate revenue for energy sold but
not billed to achieve a better matching of revenues and expenses. The
effect of this change in accounting increased net income for the twelve
months ended December 31, 1992, by approximately $102 million, of which
approximately $80 million represents the cumulative effect of the change
in accounting at January 1, 1992. The twelve month period ended
December 31, 1993 was affected by the recording of regulatory
disallowances in TU Electric's Docket 11735 rate case. (See the 1994
10-K.) The twelve month period ended September 30, 1995 was affected by
the impairment of several nonperforming assets. (See TU Electric's
Current Report on Form 8-K dated October 17, 1995).

(b) TU Electric's earnings were inadequate to cover its fixed charges for
the twelve month period ended December 31, 1991. The deficiency was
$499,062,000. The computation of the ratio of earnings to fixed charges
does not include interest payments made by affiliated companies on
senior notes, which are recovered currently through the fuel component
of rates.

(c) Adjusted amounts do not reflect (1) any possible future sales from time to
time by TU Electric of up to $650,000,000 principal amount of First
Mortgage Bonds (including the anticipated establishment of a $300,000,000
Medium-Term Note program in October 1995) and $25,000,000 of Preferred
Stock, for which registration statements are effective pursuant to Rule 415
under the Securities Act of 1933 (1933 Act), or (2) any possible
cancellation of Preferred Stock or issuance of preferred securities by
affiliated trusts pursuant to exchange offers for which registration
statements have been filed pursuant to the 1933 Act.

_______________________________________________________________________________

S-5

<PAGE>

RATE PROCEEDINGS

In July 1994, TU Electric filed a petition in the 200th Judicial District
Court of Travis County, Texas to seek judicial review of the final order of
the Public Utility Commission of Texas (PUC) granting a $449 million, or 9.0%
rate increase in connection with TU Electric's January 1993 rate increase
request of $760 million, or 15.3% (Docket 11735). Other parties to the PUC
proceedings also filed appeals with respect to various portions of the order.
TU Electric is unable to predict the outcome of such appeals.

The PUC's final order (Order) in connection with TU Electric's January 1990
rate increase request (Docket 9300) was reviewed by the 250th Judicial
District Court of Travis County, Texas (District Court) and thereafter was
appealed to the Court of Appeals for the Third District of Texas (Court of
Appeals). In June 1994, the Court of Appeals affirmed a prudence
disallowance of $472 million provided for in the Order with respect to
Comanche Peak, reversed and remanded the portion of the District Court's
judgment that had affirmed a disallowance of $25 million relating to TU
Electric's reacquisitions of the minority owner interests in Comanche Peak
nuclear fuel, and affirmed the District Court's remand of the remainder of
the disallowance of $884 million relating to the reacquisitions of such
minority owner interests. Therefore, the Court of Appeals remanded an
aggregate of $909 million of disallowances with respect to TU Electric's
reacquisitions of minority owner interests in Comanche Peak to the PUC for
reconsideration and ordered that such reconsideration be on the basis of a
prudent investment standard.

In addition, the Court of Appeals reversed the District Court's finding
that the PUC erred in ordering a refund of $2.5 million with respect to
certain fuel gas costs. Also, the Court of Appeals specified that, on
remand, the PUC will be required to re-evaluate the appropriate level of TU
Electric's construction work in progress included in rate base in light of
its financial condition at the time of the initial hearing and to reconsider
whether the $442 million revenue increase provided for in the PUC's final
order remains the benchmark in light of this re-examination.

The Court of Appeals also ruled in the appeal of TU Electric's Docket 9300
rate case that prior court rulings required that the tax benefits generated
by costs, including capital costs, not allowed in rates, must be used to
reduce rates charged to customers, reversing the District Court's decision.
TU Electric believes that such ruling is erroneous and not consistent with
the Texas Public Utility Regulatory Act. TU Electric contended that,
according to a Private Letter Ruling issued to TU Electric by the Internal
Revenue Service (IRS) with respect to investment tax credits, such ratemaking
treatment, to the extent related to property classified for tax purposes as
public utility property, would result in a violation of the normalization
rules under the Internal Revenue Code of 1986, as amended. In September
1995, the IRS issued another Private Letter Ruling to TU Electric, which
ruled that such ratemaking treatment would also violate the normalization
rules applicable to depreciation. Violation of the normalization rules would
result in a significant adverse effect on TU Electric's results of operation
and liquidity. If there are normalization violations, TU Electric will
forfeit its investment tax credits that remain unamortized as of the date of
the violation, and will also forfeit the ability to take advantage of
accelerated tax depreciation in years to which the violative order relates.
This could result in payments to the IRS of up to $1.3 billion. TU Electric
disagrees with certain portions of the decision of the Court of Appeals,
including specifically its decision with respect to federal income taxes, and
has filed an appeal to the Supreme Court of Texas. Other parties have also
filed appeals of this decision to the Supreme Court of Texas. TU Electric
cannot predict whether such appeals will be accepted by the Supreme Court of
Texas and cannot predict the outcome of any such appeals or any resulting
reconsideration of these issues on remand by the PUC.

In April 1995, in an appeal of a rate case involving another utility, the
Supreme Court of Texas held that the PUC has considerable discretion in
determining the fair share of consolidated tax savings to be allocated to a
utility and, accordingly, is not required to include losses of unregulated

S-6

<PAGE>

affiliates in determining such fair share. The Supreme Court of Texas also
held that the PUC could not use the tax benefits generated by disallowed
expenses to reduce rates.

USE OF PROCEEDS

The proceeds from the issuance of the Offered Bonds will be used by the
Lessor to redeem, on October 25, 1995, the $81,595,000 principal amount of
10.35% Secured Facility Bonds, Initial Series, due January 1, 2018.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, dated October , 1995 (Underwriting Agreement), TU Electric has
agreed to cause the Lessor to sell to each of the Underwriters named below,
and the Underwriters have agreed to purchase, the principal amount of the
Offered Bonds set forth below.

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER OFFERED BONDS
----------- -------------
<S> <C>

Salomon Brothers Inc . . . . . . . . . . . . . . $
Morgan Stanley & Co. Incorporated. . . . . . . .
------------
Total . . . . . . . . . . . . . . . . . . . $
============
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Offered Bonds, if
any are taken.

The Underwriters initially propose to offer the Offered Bonds in part
directly to retail purchasers at the initial public offering price set forth
on the cover page of this Prospectus Supplement and in part to certain
securities dealers at such price less a concession of % of the
principal amount of the Offered Bonds. The Underwriters may allow, and such
dealers may reallow, a concession not to exceed % of the principal
amount of the Offered Bonds to certain brokers and dealers.

The Offered Bonds are new issues of securities with no established
trading market. TU Electric has been advised by the Underwriters that they
intend to make a market in the Offered Bonds but are not obligated to do so
and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Offered Bonds.

After the initial public offering of the Offered Bonds, the public
offering price and other selling terms may from time to time be varied by the
Underwriters.

TU Electric has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the 1933 Act.

S-7

<PAGE>

PROSPECTUS

$81,595,000

SECURED FACILITY BONDS

The Secured Facility Bonds (Bonds) will be secured, as described herein, by a
lien on and security interest in the Permian Basin Facility and the DeCordova
Facility (Facilities) and rights under the Lease described herein relating to
the Facilities and will be payable from basic rentals and certain other
amounts to be paid under such Lease by

TEXAS UTILITIES ELECTRIC COMPANY

The Bonds will be issued by Shawmut Bank Connecticut, National Association
(formerly known as Connecticut National Bank), not individually but solely as
owner trustee (Lessor) under a Trust Agreement dated as of December 1, 1988,
as supplemented (Trust Agreement), in order to refinance the initial series
of Secured Facility Bonds issued by the Lessor on December 6, 1989. Texas
Utilities Electric Company (TU Electric) will be unconditionally obligated to
make basic rental and certain other payments in amounts which will be at
least sufficient to pay in full, when due, all scheduled payments of
principal of, premium, if any, and interest on the Bonds, although the Bonds
will not be direct obligations of or guaranteed by TU Electric.

For Bonds for which this Prospectus is being delivered (Offered Bonds), the
aggregate principal amount of the issue, interest rates, maturities,
redemption terms and other special terms of the Offered Bonds will be set
forth in an accompanying Prospectus Supplement (Prospectus Supplement).

The Bonds will be secured by a lien on and security interest in the
Facilities, and subject to certain exceptions, the rights of the Lessor under
the Lease, including the right to receive basic rentals and certain other
amounts payable by TU Electric thereunder. (See SECURITY AND SOURCE OF
PAYMENT FOR THE BONDS, DESCRIPTION OF THE BONDS, DESCRIPTION OF THE INDENTURE
and DESCRIPTION OF THE LEASE.)

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The Offered Bonds will be offered subject to prior sale, when, as and if
accepted by the Underwriters named herein, and subject to approval of certain
legal matters by Winthrop, Stimson, Putnam & Roberts, counsel for the
Underwriters, and certain other conditions. The net proceeds from the sale of
the Offered Bonds, and any applicable commissions, will be set forth in the
Prospectus Supplement.

SALOMON BROTHERS INC MORGAN STANLEY & CO.
INCORPORATED

The date of this Prospectus is August 28, 1995.

<PAGE>

AVAILABLE INFORMATION

TU Electric is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (1934 Act), and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (Commission). Such reports and other information filed by TU
Electric can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Chicago Regional Office, 500 West Madison, 14th Floor, Chicago,
Illinois and New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York. Copies of such material can also be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Certain Depositary Shares
representing shares of cumulative preferred stock of TU Electric are listed
on the New York Stock Exchange, where reports and other information
concerning TU Electric may be inspected.

Securityholders of TU Electric may obtain, upon request, copies of an
Annual Report on Form 10-K containing financial statements as of the end of
the most recent fiscal year audited and reported upon (with an opinion
expressed) by independent auditors.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by TU Electric with the
Commission pursuant to the 1934 Act, are incorporated herein by reference:

1. Annual Report on Form 10-K for the year ended December 31, 1994
(1994 10-K).

2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and
June 30, 1995.

All documents subsequently filed by TU Electric pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act and prior to the termination of the
offering hereunder shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
The documents which are incorporated by reference or deemed to be
incorporated by reference in this Prospectus are sometimes hereinafter
referred to as the "Incorporated Documents."

Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

TU ELECTRIC HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, UPON WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE INCORPORATED DOCUMENTS REFERRED TO ABOVE, OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED
TO PETER B. TINKHAM, SECRETARY, TEXAS UTILITIES ELECTRIC COMPANY, ENERGY
PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201, TELEPHONE NUMBER (214)
812-4600.

<PAGE>

TU ELECTRIC

TU Electric was incorporated under the laws of the State of Texas in 1982
and has perpetual existence under the provisions of the Texas Business
Corporation Act. TU Electric is an electric utility engaged in the
generation, purchase, transmission, distribution and sale of electric energy
wholly within the State of Texas. The principal executive offices of TU
Electric are located at Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201;
the telephone number is (214) 812-4600.

TU Electric is the principal subsidiary of Texas Utilities Company (Texas
Utilities). The other electric utility subsidiary of Texas Utilities is
Southwestern Electric Service Company, which is engaged in the purchase,
transmission, distribution and sale of electric energy in ten counties in the
eastern and central parts of Texas with a population estimated at 125,000.
Texas Utilities also has five other subsidiaries which perform specialized
functions within the Texas Utilities Company System: Texas Utilities Fuel
Company owns a natural gas pipeline system, acquires, stores and delivers
fuel gas and provides other fuel services at cost for the generation of
electric energy by TU Electric; Texas Utilities Mining Company owns, leases
and operates fuel production facilities for the surface mining and recovery
of lignite at cost for the generation of electric energy by TU Electric;
Texas Utilities Properties Inc. owns, leases and manages real and personal
properties; Texas Utilities Communications Inc. was organized to provide
access to advanced telecommunications technology, primarily for the System
Companies' expected expanding energy services business in the future; and
Texas Utilities Services Inc. provides financial, accounting, information
technology, personnel, procurement and other administrative services at cost.

TU Electric's service area covers the north central, eastern and western
parts of Texas, with a population estimated at 5,730,000 - about one-third of
the population of Texas. Electric service is provided in 91 counties and 372
incorporated municipalities, including Dallas, Fort Worth, Arlington, Irving,
Plano, Waco, Mesquite, Grand Prairie, Wichita Falls, Odessa, Midland,
Carrollton, Tyler, Richardson and Killeen. The area is a diversified
commercial and industrial center with substantial banking, insurance,
communications, electronics, aerospace, petrochemical and specialized steel
manufacturing, and automotive and aircraft assembly. The territory served
includes major portions of the oil and gas fields in the Permian Basin and
East Texas, as well as substantial farming and ranching sections of the
State. It also includes the Dallas-Fort Worth International Airport and the
Alliance Airport.

USE OF PROCEEDS

The proceeds from the issuance of the Bonds will be used by the Lessor to
refund, in one or more series, $81,595,000 principal amount of Secured
Facility Bonds, Initial Series, 10.35% due January 1, 2018 (Refunded Bonds).
The redemption premium payable upon redemption of the Refunded Bonds and the
expenses and underwriting commission with respect to the issuance of the
Bonds will be paid by TU Electric and not from the proceeds from the issuance
of the Bonds.

OWNERSHIP AND LEASE OF THE FACILITIES

The Lessor purchased and holds the Permian Basin Facility located in Ward
County near Monahans, Texas (Permian Basin Facility) and the DeCordova
Facility located in Hood County near Granbury, Texas (DeCordova Facility)
(together with the Permian Basin Facility, the "Facilities") in trust for the
benefit of the settlor and beneficiary under the Trust Agreement (Owner
Participant). TU Electric has leased the Facilities pursuant to a Lease
Agreement dated as of December 1, 1989, as amended and supplemented (Lease),
for a term expiring June 30, 2018 on a net lease basis. The Facilities and
interests in the land underlying the Facilities, which TU Electric has leased
to the Lessor pursuant to an Assignment, Amendment and Restatement of the
Permian Basin Ground Lease and an Assignment,

<PAGE>

Amendment and Restatement of the DeCordova Ground Lease, each dated as of
December 1, 1989 (Ground Leases), are sometimes referred to herein
collectively as the "Leased Assets." The Permian Basin Facility is composed
of two gas-fired combustion turbine peaking units. The Permian Basin
Facility relies on existing common facilities at the site. The DeCordova
Facility is composed of four gas-fired combustion turbine peaking units
together with certain common facilities. Both the Permian Basin Facility and
the DeCordova Facility are connected to TU Electric's transmission system.
The Permian Basin Facility was placed in service for tax purposes in October
1989 and has a nominal rating of 130 MW. The DeCordova Facility was placed in
service for tax purposes in November 1989 and has a nominal rating of 260 MW.

The Bonds will be issued pursuant to the Trust Indenture, Security
Agreement and Mortgage, dated as of December 1, 1989, as amended and
supplemented (Indenture), from the Lessor to American National Bank and Trust
Company of Chicago, as indenture trustee (Trustee). Pursuant to the
Indenture, the Trustee, for the benefit of the holders of all the bonds,
including the Bonds, issued under the Indenture, obtained a lien on and a
security interest in the Facilities and the Lessor's rights to receive basic
rentals and certain other amounts payable by TU Electric.

The basic documents underlying the sale and lease transactions are
sometimes referred to herein as the "Operative Documents." In addition to the
Trust Agreement, the Lease, the Ground Leases and the Indenture, the
Operative Documents consist of the Participation Agreement dated as of
December 1, 1988, as amended and restated pursuant to an Amended and Restated
Participation Agreement, dated as of November 28, 1989 (Participation
Agreement) (which sets forth the obligations of the parties to the sale and
lease transactions), the Deed and Bill of Sale relating to the Permian Basin
Facility and the Deed and Bill of Sale relating to the DeCordova Facility,
the Bonds, the Tax Indemnity Agreement dated as of December 1, 1989 (Tax
Indemnity Agreement) (whereby TU Electric indemnifies the Owner Participant
with respect to certain tax liabilities), the Facility Agreement dated as of
December 1, 1989 with respect to the Permian Basin Facility and the Facility
Agreement dated as of December 1, 1989 with respect to the DeCordova Facility
(Facility Agreements) (whereby TU Electric agrees to provide certain
facilities and services for the operation of the Facilities after the
termination of the Lease).

<PAGE>

FLOW OF FUNDS FOR DEBT SERVICE PAYMENTS ON THE BONDS

[Flowchart]

SECURITY AND SOURCE OF PAYMENT FOR THE BONDS

The Bonds, which will be without recourse to the general credit of the
Lessor or the Owner Participant and will not be direct obligations of, or
guaranteed by, TU Electric, will be payable from and secured by, among other
things, a lien on and security interest in the Leased Assets, and, subject to
certain exceptions, the rights of the Lessor under the Lease, including the
right to receive basic rentals and certain other amounts thereunder. The
Lease requires that payments of basic rent and certain other amounts be made
by TU Electric in such amounts as will be sufficient to provide for the
payment, when due, of the scheduled payments of principal of, premium, if
any, and interest on all of the Bonds. In addition, the Lease requires that
basic rent payments together with payments of Casualty Value (as specified in
the Lease), Termination Value (as specified in the Lease) and certain other
amounts be made in such amounts and at such times as will be sufficient for
the payment, when due, of the mandatory prepayments of principal of, premium,
if any, and interest on all of the Bonds as described under DESCRIPTION OF
THE INDENTURE. The Lease is a net lease pursuant to which TU Electric is
unconditionally obligated to make all payments thereunder without any right
of counterclaim, setoff, deduction or defense. See DESCRIPTION OF THE
INDENTURE - "Security and Source of Payment for the Bonds" and DESCRIPTION OF
THE LEASE - "Net Lease/Maintenance." If a Lease Default (as defined herein)
shall have occurred and be continuing, remedies may be exercised as described
under DESCRIPTION OF THE LEASE -- "Lease Default; Lessor's Remedies" and
DESCRIPTION OF THE INDENTURE.

<PAGE>

If an Indenture Default (as defined herein) shall have occurred and be
continuing at a time when there shall not have occurred and be continuing a
Lease Default, remedies may be exercised as described under DESCRIPTION OF
THE INDENTURE. In such a case, the exercise of such remedies will not
disturb TU Electric's quiet use and enjoyment of the Facilities or require
prepayment of basic rent, Casualty Value or Termination Value.

In certain instances, upon its purchase of the Facilities or other
termination of the Lease, TU Electric may elect to assume the Bonds, in which
event the Bonds will continue to be secured by the Facilities and will become
the unconditional obligations of TU Electric. See DESCRIPTION OF THE LEASE -
"Purchase Options and Termination Options" and -"Events of Loss."

Under certain conditions, additional bonds (Additional Bonds) may be
issued under the Indenture (i) for the purpose of redeeming any series of
bonds, including the Bonds, previously issued under the Indenture and (ii) to
provide funds for all or a portion of certain alterations, modifications,
additions or improvements to the Facilities, subject to certain limitations.
See DESCRIPTION OF THE INDENTURE - "Additional Bonds."

DESCRIPTION OF THE BONDS

The statements under this caption are summaries and do not purport to be
complete. The summaries are qualified in their entirety by reference to the
Indenture, a copy of which has been included as an exhibit to the
registration statement of which this Prospectus is a part (Registration
Statement).

GENERAL

The Bonds will be issued under the Indenture. Although the Bonds will
not be direct obligations of or guaranteed by TU Electric, TU Electric will
be the "issuer" of the Bonds for purposes of the 1933 Act and the 1934 Act.

The Bonds will be issued in registered form in original principal
denominations of $1,000 or any integral multiples thereof. Since the
principal of each Bond will be subject to payment from time to time without
surrender of, or notation on, the Bond, the unpaid principal amount of each
Bond as reflected on the bond register maintained by the Trustee shall be
controlling and binding on each holder with respect to the actual unpaid
principal amount of a Bond as of any date. Bonds may be surrendered for
registration of transfer or exchange for Bonds of the same series and
maturity in Chicago, Illinois at the office of The First National Bank of
Chicago, the initial bond registrar or in the City of New York, at the office
of The First Chicago Trust Company of New York, agent of the initial bond
registrar. No service charge will be required in respect of transfers or
exchanges, but payment may be required of taxes or other governmental charges
that may be imposed in connection therewith.

PRINCIPAL AMOUNTS, INTEREST RATES AND PAYMENT

The Offered Bonds will bear interest on the unpaid principal amount
thereof from the date of their initial authentication at the rate per annum
shown on the cover page of the Prospectus Supplement relating to such Offered
Bonds for each stated maturity, payable semiannually on January 1 and July 1
in each year. Interest and principal installments will be paid to the persons
in whose names such Offered Bonds are registered at the close of business on
the 15th day of the calendar month next preceding each Installment Payment
Date or interest payment date, as the case may be. If a scheduled Installment
Payment Date or interest payment date is not a Business Day (as defined in
the Indenture), payment will be made on the next Business Day with the same
effect as though made on the scheduled date. Interest on any overdue
principal, premium, if any, and (to the

<PAGE>

extent permitted by applicable law) any overdue interest will be payable, on
demand, from the due date thereof at the rate per annum equal to the stated
interest rate of such Offered Bonds of such stated maturity as shown on the
cover page of the Prospectus Supplement relating to such Offered Bonds of
such stated maturity for the actual period during which any such principal,
premium or interest shall be overdue. All interest will be computed on the
basis of a 360-day year consisting of twelve, 30-day months.

The principal of the Bonds at stated maturity or upon mandatory
redemption will be payable, upon presentment of the Bonds, in Chicago,
Illinois at the office of The First National Bank of Chicago, the initial
paying agent or in the City of New York, at the office of The First Chicago
Trust Company of New York, agent of the initial paying agent. Interest and
installments of principal will be paid by checks mailed on each interest
payment date and Installment Payment Date, to the address of the person
entitled thereto as shown on the bond register.

PRINCIPAL INSTALLMENT PAYMENTS

With respect to each Installment Payment Date, the holder of an Offered
Bond of a stated maturity will receive a payment of principal equal to such
holder's pro rata share of the Installment Payment Amount for such
installment payment date as described in the Prospectus Supplement relating
to such Offered Bonds.

In the event that there shall have been any partial redemption of the
Bonds (other than pursuant to principal installment payments), the amount of
each Installment Payment Amount subsequent to such redemption shall be
reduced by an amount equal to the amount obtained by multiplying the amount
of such Installment Payment Amount as in effect prior to such redemption by a
fraction of which the numerator shall be the aggregate principal amount of
the Bonds of such stated maturity redeemed pursuant to such partial
redemption, and the denominator shall be the aggregate principal amount of
the Bonds of such stated maturity outstanding immediately prior to such
redemption.

The Outstanding Balance Factor as of any Installment Payment Date is the
quotient (rounded to the seventh decimal place) computed by dividing (i) the
aggregate principal amount of Offered Bonds of a stated maturity remaining
unpaid after the payment of the principal installment due on such Installment
Payment Date, by (ii) the aggregate original principal amount of Offered
Bonds of such stated maturity. The Outstanding Balance Factor for Offered
Bonds of each stated maturity will initially be 1.000000; thereafter, the
Outstanding Balance Factor for Offered Bonds of each stated maturity will
decline as described in the Prospectus Supplement relating to such Offered
Bonds to reflect installment payments, except in the event of any partial
redemption due to a partial casualty or a default. The unpaid principal
amount of a holder's Offered Bond can be determined by multiplying the
original principal amount of such Offered Bond by the Outstanding Balance
Factor for Offered Bonds of such stated maturity as of the applicable
Installment Payment Date.

MANDATORY REDEMPTION

The Bonds of each maturity shall be subject to mandatory redemption, at
100% of the unpaid principal amount thereof, together with interest accrued
to the Redemption Date (as specified in the Indenture) upon the receipt by
the Trustee from TU Electric of payment of the applicable Casualty Value
under the Lease resulting from an Event of Loss (as hereinafter defined)
under the Lease (unless, in connection with an Event of Loss described in
clause (v) below, TU Electric assumes the Bonds then outstanding and all of
the obligations of the Lessor under the Indenture and the Bonds and the
Lessor shall transfer the Facilities to TU Electric), in the principal amount
equal to the product of (a) the aggregate unpaid principal amount of the
Bonds of such stated maturity then outstanding and (b) a fraction the
numerator of which is the purchase price of the Facility to which such Event
of Loss

<PAGE>

pertains and the denominator of which is the aggregate purchase price
of the Facilities then subject to the lien of the Indenture. Events of Loss
under the Lease consist of:

(i) the loss of either Facility, in its entirety or substantially in
its entirety, due to theft, disappearance, destruction or, in the good faith
and reasonable opinion of TU Electric, damage beyond economic repair and or
the loss of use of either Facility for a period reasonably anticipated to
extend for at least 30 months (or such longer period not exceeding 60 months
as may be required to repair or restore such Facility to use) for any such
reasons;

(ii) the receipt of insurance proceeds based upon an actual or
constructive total loss with respect to either Facility;

(iii) certain events of condemnation, confiscation or seizure or
loss of title to either Facility or the ground interest relating thereto;

(iv) shutdown of either Facility as a result of any laws, regulations or
governmental orders for a period exceeding the lesser of (a) the remaining
portion of the term of the Lease and (b) 60 months;

(v) the Lessor or the Owner Participant, solely by reason of its
participation in the sale and lease transactions, shall be deemed by any
governmental authority to be, or shall become subject to regulation as, a
Texas Public Utility, an "electric utility", a "public utility" or a "public
utility holding company" or an affiliate of any of the foregoing and shall
have sent written notice to TU Electric and the parties to the Participation
Agreement that such person deems such regulation to be materially burdensome;
or

(vi) the permanent shutdown of either Facility.

The Offered Bonds shall be subject to redemption in whole but not in
part, on or after the date set forth in the Prospectus Supplement relating to
such Offered Bonds, at 100% of the unpaid principal amount thereof, together
with interest accrued to the Redemption Date, upon the receipt by the Trustee
of the applicable purchase price or Termination Value (either of which shall
be in an amount sufficient to pay the Bonds) under the Lease as a result of
an early termination of the Lease upon a determination by TU Electric that
the Facilities are obsolete, surplus or uneconomic for TU Electric's purposes
and will no longer be used by TU Electric, all as described in the Prospectus
Supplement relating to such Offered Bonds.

OPTIONAL REDEMPTION

The Offered Bonds are not subject to optional redemption at any time
prior to their respective stated maturity dates.

PRO RATA PAYMENT

If less than all of the unpaid principal amount of Bonds of a stated
maturity are to be redeemed, the principal amount of Bonds to be redeemed
shall be allocated among the holders thereof pro rata, in proportion, as
nearly as practicable, to the respective unpaid principal amounts of Bonds of
such stated maturity held by such holders. Each Installment Payment Amount
shall be applied pro rata to Bonds of a stated maturity, in proportion, as
nearly as practicable, to the respective unpaid principal amounts of Bonds of
such stated maturity held by such holders.

<PAGE>

NOTICE OF REDEMPTION

Notice of redemption of the Bonds shall be given by first-class mail,
mailed not less than 30 days prior to the Redemption Date, to each holder of
the Bonds to be redeemed, at the holder's address appearing on the bond
register.

DESCRIPTION OF THE INDENTURE

SECURITY AND SOURCE OF PAYMENT FOR THE BONDS

The Bonds will be issued without recourse to the general credit of the
Lessor or the Owner Participant and will be secured under the Indenture on a
parity with other bonds which may be issued thereunder in the future. Such
security will consist of, among other things, a lien on and security interest
in: (i) the Leased Assets, (ii) the Lessor's rights under the Lease,
including the right to receive basic rent and certain other amounts payable
thereunder other than certain amounts payable to the Lessor which are not
assigned as security, and (iii) with certain exclusions, the Lessor's rights
under the Operative Documents.

The Lease is a net lease under which TU Electric is unconditionally
obligated to pay basic rent and certain other amounts which are at least
sufficient to pay in full, when due, all scheduled payments of the principal
of, premium, if any, and interest on all Bonds outstanding under the
Indenture, without notice, demand, counterclaim, setoff, deduction or defense
on the part of TU Electric.

Under certain conditions, Additional Bonds are permitted to be issued by
the Lessor under the Indenture (i) for the purpose of redeeming any
previously issued series of bonds and (ii) to provide funds to finance a
portion of the cost of any nonseverable alterations, modifications, additions
and improvements to the Facilities. See DESCRIPTION OF THE INDENTURE -
"Additional Bonds."

EVENTS OF DEFAULT, NOTICE AND WAIVER

Events of default under the Indenture (Indenture Defaults) include: (i)
default in the payment of any principal of, premium, if any, or interest on,
any Bond when it becomes due and payable, and continuance of such default for
a period of ten days; (ii) default in the performance, or breach of any
covenant of TU Electric contained in the Indenture or of the Lessor or the
Owner Participant contained in any Operative Document and continuance of such
default or breach for a period of 30 days after notice thereof; provided,
however, that such failure to perform or observe any such other covenant,
condition or agreement shall not give rise to an Indenture Default if such
failure is other than in the payment of money, and shall not materially
adversely affect any material rights or interests of the holders of the Bonds
or the Trustee in, to or under the Indenture or the Bonds and curative action
shall have been instituted within such 30-day period and diligently pursued
to completion; (iii) the occurrence and continuation of an "event of default"
under the Lease (Lease Default), unless the Lease Default results from
nonpayment of certain payments not assigned to the Trustee and the Lessor has
not consented to the declaration of an Indenture Default in respect of such
nonpayment; and (iv) certain events of bankruptcy, insolvency and
reorganization relating to the Lessor.

The Trustee, within 90 days after it shall know of the occurrence of a
default under the Indenture, is required to mail to the holders of the Bonds
notice thereof, unless such default shall have been cured or waived before
the giving of such notice, provided that, except in the case of a default

<PAGE>

in the payment of principal of, premium, if any, or interest on, any Bond or
in the payment of any installment with respect to the Bonds, the Trustee
shall be protected in withholding such notice if, in good faith, it
determines that the withholding of such notice is in the interests of the
holders of the Bonds, and provided further, that in the case of a default
specified in clause (ii) above, no such notice to holders shall be given
until at least 30 days after the occurrence of such default. For all purposes
of the Indenture, in the absence of actual knowledge of a responsible officer
of the Trustee, the Trustee shall not be deemed to have knowledge of an
Indenture Default (except the failure of TU Electric to pay any installment
of basic rent when due) unless notified in writing by any holder of a Bond,
the Owner Participant, the Lessor or TU Electric.

During the continuance of any Indenture Default, either the Trustee or
the holders of not less than 25% in aggregate unpaid principal amount of the
Bonds outstanding, by written notice to the Lessor, the Owner Participant and
TU Electric (and to the Trustee if given by the holders), may declare the
unpaid principal amount of all of the Bonds outstanding and the interest
accrued thereon to be immediately due and payable, but no such declaration
will be made in the case of an Indenture Default which resulted directly from
a failure by TU Electric to make a payment or to perform or observe any
covenant under the Lease until such time as the Lessor has been given an
opportunity to exercise its rights to cure such default under the Lease. See
DESCRIPTION OF THE INDENTURE - "Rights of Lessor to Cure and Purchase Bonds."

No holder of any Bond will have any right to institute any suit, action
or proceeding at law or in equity or otherwise for the foreclosure of the
Indenture, for the appointment of a receiver or for the enforcement of any
remedy under the Indenture unless the Trustee has been given written notice
of a continuing Indenture Default, the holders of not less than 25% in
aggregate unpaid principal amount of the Bonds outstanding have made a
written request to the Trustee and have offered indemnity as provided in the
Indenture, the Trustee has failed to act for 60 days thereafter and no
inconsistent direction has been given to the Trustee by the holders of a
majority in aggregate unpaid principal amount of the Bonds outstanding during
such 60-day period. Nothing contained in the Indenture, however, impairs or
affects the rights of any holder of a Bond to enforce the payment of the
unpaid principal of, premium, if any, and interest on, any Bond on or after
the respective due dates thereof (or, in the case of redemption, on the
Redemption Date).

If an Indenture Default has occurred and is continuing, the holders of a
majority in aggregate unpaid principal amount of the Bonds outstanding may,
subject to certain conditions specified in the Indenture, direct the Trustee
to institute any proceeding relating to the Bonds, but the Trustee may
decline if it in good faith determines that the action directed would involve
the Trustee in personal liability or expense.

The holders of a majority in aggregate unpaid principal amount of the
Bonds outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, subject to certain
limitations specified in the Indenture.

The holders of a majority in aggregate unpaid principal amount of the
Bonds outstanding may waive any past default under the Indenture and its
consequences, except a default (i) in the payment of the principal of,
premium, if any, or interest on, any Bonds or (ii) in respect of a covenant
or provision of the Indenture which under the Indenture cannot be modified or
amended without the consent of the holder of each outstanding Bond affected.

TU Electric is required to deliver to the Trustee annually a written
statement that all of its obligations under the Indenture during such year
have been fulfilled, or in the event of any default in the fulfillment of
such obligations, specifying each such default and the nature and status
thereof.

<PAGE>

RESCISSION OF ACCELERATION

If, after the Bonds have become due and payable due to declaration of
acceleration by the Trustee or the holders of not less than 25% in aggregate
unpaid principal amount of the Bonds outstanding and before any sale of the
property subject to the lien of the Indenture, (i) there has been paid to or
deposited with the Trustee a sum sufficient to pay (a) all overdue
installments of interest on all of the Bonds, and, to the extent lawful,
interest thereon, (b) the principal of and premium, if any, on any Bonds
which have become due otherwise than by such acceleration and interest
thereon, and (c) all sums paid or advanced by the Trustee and the reasonable
compensation, expenses, disbursements and advancements of the Trustee, its
agents and counsel, the paying agent and the bond registrar, and (ii) all
other Indenture Defaults other than the nonpayment of the unpaid principal of
the Bonds which have become due solely by such acceleration, have been cured
or waived, the holders of a majority in aggregate unpaid principal amount of
the Bonds outstanding, by written notice to the Lessor, the Owner
Participant, TU Electric and the Trustee, may rescind and annul such
declaration and its consequences; but no such rescission will affect any
subsequent default or impair any right consequent thereon.

REMEDIES

If an Indenture Default has occurred and is continuing, the Trustee may,
and upon the written request of, and the proffering of satisfactory indemnity
by, the holders of a majority in aggregate unpaid principal amount of the
Bonds outstanding, shall, subject to the Lessor's rights of cure, exercise
the rights and remedies available to it under the Indenture and applicable
law, including (i) the institution of judicial proceedings, either at law or
in equity or otherwise, to protect its rights under the Indenture or for
foreclosure thereunder; and (ii) the sale in whole or in part of the property
subject to the lien of the Indenture. As a condition to exercising any of its
rights and remedies under the Indenture in connection with an Indenture
Default while an Indenture Default occasioned by a Lease Default has occurred
and is continuing, the Trustee is required, to the extent that it may do so
under the Indenture, the Lease and applicable law, to exercise one or more of
its rights and remedies under the Lease (at least one of which remedies must
involve the payment of Termination Value, an amount measured by Termination
Value or an amount in excess of Termination Value specified in the Lease). If
no Lease Default shall have occurred and be continuing, the Trustee's rights
and remedies shall be subject to TU Electric's rights under the Lease.

All payments received and amounts held or realized by the Trustee after
(i) an Indenture Default has occurred and is continuing and (ii) the Trustee
has declared (as assignee from the Lessor) the Lease to be in default or the
Bonds have become due and payable, will be distributed: first, to reimburse
the Trustee for its expenses and to pay the reasonable remuneration of the
Trustee; second, to pay the unpaid principal amount of all of the Bonds
outstanding, together with premium, if any, plus accrued but unpaid interest
(as well as interest on overdue principal and, to the extent permitted by
law, on overdue interest) to the date of distribution on the Bonds, or,
ratably, if the amount distributed shall be insufficient to pay all such
Bonds in full; third, to pay, in full, or ratably if necessary, to the
present or former holders of the Bonds, any amounts payable to them as
indemnitees in accordance with the provisions of the Indenture; and fourth,
to pay any other indebtedness at the time due and owing to the Trustee or the
holders of the Bonds which the Indenture secures. The balance, if any, will
be paid to the Lessor.

After the Trustee has knowledge of a default or an Indenture Default and
while such default or Indenture Default shall be continuing, all payments
which it receives and amounts which it realizes (except for payments which
are specifically excluded from the trust estate, which at all times will be
paid to the person entitled to receive such payment) which would otherwise be
payable to the Lessor will be held by the Trustee, provided that the Trustee
must distribute such amounts to the Lessor

<PAGE>

within 90 days of the Trustee's receipt thereof unless an Indenture Default
is declared and the Trustee is diligently pursuing any remedies available
under the Indenture.

POSSIBLE REJECTION OF LEASE BY A TRUSTEE IN BANKRUPTCY

If TU Electric were to enter into bankruptcy or reorganization
proceedings, TU Electric or its bankruptcy trustee could reject the Lease. In
such event, there could be no assurance that the amount of the claim for
damages for rejection of the Lease would be sufficient to repay the Bonds.
Under Section 502(b)(6) of the United States Bankruptcy Code, as amended, a
claim by a lessor for damages resulting from the rejection of a lease of real
property in connection with bankruptcy proceedings affecting the lessee may
be limited to an amount equal to the rent reserved under the lease, without
acceleration, for the greater of 1 year or 15 percent (but not more than 3
years) of the remaining term of the lease, plus rent already due but unpaid.
Although the Lease covers property considered to be personal property, there
can be no assurance that a bankruptcy court could not find such property to
be real estate, in whole or in part. If the property covered by the Lease
were held to constitute personal property, such limitation would not apply.
In any case, rejection of the Lease by TU Electric or its bankruptcy trustee
would not deprive the Trustee of its lien on and security interest in the
Facilities. It should be noted that rejection of the Lease would deprive TU
Electric of the use of the Facilities and any revenues which could be derived
from the sale of the output thereof.

In the event of a bankruptcy of the Owner Participant, it is possible
that, notwithstanding that the Facilities are owned by the Lessor in trust,
the Facilities, the Lease, the Lessor and the Bonds might become subject to
the bankruptcy proceedings. In such event, payments under the Lease or on the
Bonds might be interrupted and the ability of the Trustee to exercise its
remedies under the Indenture might be restricted, although the Trustee would
retain its status as a secured creditor in respect of the Lease and the
Facilities.

RIGHTS OF LESSOR TO CURE AND PURCHASE BONDS

An Indenture Default is deemed cured (i) if it results from a nonpayment
of basic or supplemental rent under the Lease, if the Lessor has paid all of
such defaulted rent to the extent required to enable the Trustee to make all
payments of principal and interest then due and unpaid on all outstanding
Bonds, within 30 days after receipt by the Lessor of notice of such
nonpayment or (ii) if such Indenture Default results from the failure of TU
Electric to perform or observe any of its covenants, conditions or agreements
under the Operative Documents (other than to pay basic rent), and the Lessor
has observed or performed any such covenant, condition or agreement on behalf
of TU Electric within 30 days after its receipt of notice of the occurrence
of such failure, unless in the case of clause (i) above, TU Electric fails to
make all payments of basic rent (a) on more than four consecutive basic rent
payment dates or (b) on more than eight basic rent payment dates during the
term of the Lease.

If an Indenture Default has occurred and (i) the Bonds have been
accelerated and such acceleration has not been rescinded, (ii) no Indenture
Default arising out of a failure by the Lessor or the Owner Participant to
perform or observe any of its covenants, conditions or agreements contained
in the Operative Documents has occurred and is continuing, and (iii) the
Lessor, within 45 days after receiving notice from the Trustee of such
acceleration, has given written notice to the Trustee and the holders of the
Bonds of its intention to purchase all such Bonds on a specified purchase
date, then, upon payment by the Lessor on or before such purchase date of an
amount equal to the aggregate unpaid principal amount of all outstanding
Bonds together with accrued but unpaid interest thereon to the date of such
payment (such interest to be accrued after notice of intention to purchase is
given at the rate provided for prior to the applicable default under the
Indenture) plus all other amounts which holders of the Bonds would be
entitled to be paid under the Indenture before any payments were to

<PAGE>

be made to the Lessor, each holder will be deemed to have sold its Bonds to
the Lessor; provided, that no such sale shall be deemed to have occurred
unless all outstanding Bonds are simultaneously to be so purchased and such
transfer or conveyance is not in violation of any applicable law or rule. If
a Bond is not tendered, it will be deemed to be purchased, and on the
purchase date, interest thereon will cease to accrue to the former holder
thereof, and the former holder will have no rights or interest in such Bond
except the right to receive payment of the principal of and accrued interest
on such Bond to the purchase date. Bonds tendered to the Trustee after the
date fixed for purchase will be purchased from moneys deposited for the
purchase thereof.

ADDITIONAL BONDS

Additional Bonds may be issued by the Lessor under and secured by the
Indenture, at any time or from time to time, for the purpose of refunding, in
whole or in part, any previously issued series of bonds, including the Bonds,
or to provide funds to finance a portion of the cost of any nonseverable
alterations, modifications, additions and improvements (Alterations) to
either Facility (excluding original, substitute or replacement components).
The terms, conditions and designations of Additional Bonds must be set forth
in a supplemental indenture executed by the Lessor, TU Electric and the
Trustee. In addition, rentals and other amounts payable by TU Electric under
the Lease will be adjusted to the extent necessary to provide debt service
for the Additional Bonds. Additional Bonds cannot be issued to finance the
cost of Alterations at any time that senior secured long-term debt securities
of TU Electric do not have an investment grade credit rating. All bonds
issued and outstanding under the Indenture, including the Bonds, will be
equally and ratably secured thereunder, without preference, priority or
distinction of any thereof over any other by reason of difference in time of
issuance, maturity or otherwise.

SUPPLEMENTAL INDENTURES

The Lessor, TU Electric and the Trustee may enter into indentures
supplemental to the Indenture, without the consent of the holders of any
outstanding Bonds, for any one or more of the following purposes: (i) to
evidence the succession of another corporation to TU Electric and the
assumption by any such successor of the covenants of TU Electric in the
Indenture or to evidence the succession of another corporation to the Lessor
and the assumption by any such successor of the covenants of the Lessor in
the Indenture and in the Bonds; (ii) to add to the covenants of TU Electric
or the Lessor, for the benefit of the holders of the Bonds, or to surrender
any right or power conferred in the Indenture upon TU Electric or the Lessor;
(iii) to convey, transfer and assign to the Trustee, and to subject to the
lien of the Indenture, additional properties, and to correct or amplify the
description of any property at any time subject to the lien of the Indenture
or to assure, convey and confirm to the Trustee any property subject or
required to be subject to the lien of the Indenture; (iv) to modify,
eliminate or add to the provisions of the Indenture to the extent necessary
to qualify or continue qualification of the Indenture and any supplemental
indentures under the Trust Indenture Act of 1939; (v) to cure any ambiguity
in, or to correct or supplement any defective or inconsistent provision of
the Indenture; (vi) to establish the form or terms of any additional series
of the Bonds; (vii) to effect an assumption by TU Electric of the obligations
on the Bonds; (viii) to change or amend any provision of the Indenture
provided that such change or amendment will not be applicable to any Bonds
outstanding prior to the date thereof; (ix) to evidence the succession of a
new Trustee under the Indenture or the addition of a co-trustee; or (x) to
make any other provisions with respect to matters or questions arising under
the Indenture, so long as such action does not adversely affect the interests
of the holders of the outstanding Bonds.

Notwithstanding the foregoing, no supplemental indenture shall become
effective except with the consent of the holders of all Bonds then
outstanding if as a result thereof the amounts payable to the Lessor under
the Lease (other than payments which are specifically excluded from the trust
estate)

<PAGE>

and assigned to the Trustee under the Indenture shall not be
sufficient to pay when due the principal of, premium, if any, and interest
on, the Bonds.

The holders of not less than a majority in aggregate unpaid principal
amount of the Bonds outstanding must consent to and approve the substance of
any supplemental indenture which adds to or changes the rights and
obligations of the holders of the Bonds and of TU Electric and the Lessor
under the Indenture. However, without the consent of the holder of each
outstanding Bond affected thereby, no such supplemental indenture may effect
(i) a change in the stated maturity or any interest payment date or
Installment Payment Date of any Bond, or a reduction in the principal amount
thereof or the interest thereon or any amount payable at maturity, on any
Installment Payment Date or upon the redemption thereof, or a change in the
circumstances for redemption or in the place of payment where, or the coin or
currency in which, any Bond or the interest thereon is payable, or an
impairment of the right to institute suit for the enforcement of any such
payment of principal of or interest on or after the maturity thereof (or, in
the case of redemption, on or after the Redemption Date) or a change in the
dates or the amounts of any installment payments to be made in respect of a
Bond of any series, (ii) the creation of any lien prior to or on a parity
with the lien of the Indenture or the termination of the lien of the
Indenture or the deprivation of the holder of any Bond of the security
afforded by the lien of the Indenture, (iii) the termination of the Lease, a
reduction of the amounts payable under the Lease assigned to the Trustee or a
change in the time for the payment thereof so that such payments are less
than the amounts necessary to pay when due the scheduled payments of
principal of and interest on the Bonds, (iv) a reduction in the percentage in
principal amount of outstanding Bonds required for consent to such
supplemental indenture or the consent of whose holders is required for any
waiver provided for in the Indenture, or (v) a modification of the above
provisions or the provisions of the Indenture dealing with waivers of past
defaults, except to increase any such percentage or provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the holder of each Bond affected thereby.

LIMITATIONS ON AMENDMENT OF DOCUMENTS

Without the consent of the holders of any Bonds outstanding, the parties
to the Operative Documents may modify, amend or supplement any of such
documents (other than the Indenture and its supplements), or may give any
consent, waiver or authorization thereunder, or may in good faith determine
compliance with any provision thereof provided that substantial compliance
therewith would exist regardless of such determination; provided, however,
that no such modification, amendment, supplement, consent, waiver,
authorization or determination shall:

(i) without the consent of the holder of each Bond affected thereby,
modify, amend or supplement, or waive any provision of, the Lease in such way
(a) as to terminate the Lease, reduce the amounts payable by TU Electric
under the Lease assigned to the Trustee or change the time for the payment
thereof such that such payments are less than the amounts necessary to pay
the principal of, premium, if any, and interest on, the outstanding Bonds
when due, (b) as to consent to any assignment of the Lease or give any
consent, waiver, authorization or determination which would release TU
Electric from its obligation in respect of payment of basic rent, Casualty
Value specified in the Lease, or any other amounts payable upon the
occurrence of an Event of Loss (as specified in the Lease) or any other
amount payable under the Lease and intended to be used to pay the principal
of or interest on the Bonds, in any way inconsistent with clause (a) above
except as provided in the Lease, or (c) as to change the Lease Defaults
(except to add Lease Defaults, to delete the requirement for notice or to
reduce any grace period); or

(ii) without the consent of the holders of a majority in aggregate
unpaid principal amount of the Bonds outstanding modify, amend or supplement
or waive any provision of (a) certain portions of the Operative Documents
pertaining, among other things, to the restrictions on TU Electric's
consolidation,

<PAGE>

merger or transfer of substantially all of its assets, operation and
maintenance of the Leased Assets, treatment of the Facilities as personal
property, insurance coverage on the Facilities and any sublease, assignment
or other transfer of the Lessor's interests in the Leased Assets, or (b) the
Facility Agreements or the Ground Leases in a manner which would materially
impair the lien and security interest created by the Indenture.

CERTAIN RIGHTS OF THE LESSOR AND THE OWNER PARTICIPANT

The Lessor has the right at all times, together with the Trustee, to
receive from TU Electric all notices, certificates, reports, filings,
opinions of counsel and other documents pursuant to any Operative Document
and to exercise its consent rights to any amendment to any Operative
Document.

In addition, so long as no Indenture Default shall have occurred and be
continuing, the Lessor shall have the right (i) to the exclusion of the
Trustee, (a) to exercise the rights, elections and options of the Lessor to
make any decision or determination and to adjust basic rent, Casualty Value
and Termination Value, and enter into amendments to the Lease effecting such
adjustments, and (b) to exercise all rights of the Lessor with respect to
certain solicitations of bids and (ii) but not to the exclusion of the
Trustee (which shall also have the right), (a) to grant such consents as may
be requested under the Lease, (b) to exercise certain inspection rights under
the Lease, (c) to consent to and approve any sublessees under the Lease, (d)
to approve any other accountants, engineers or counsel to render certain
services pursuant to the Operative Documents, (e) to give notice to TU
Electric of any misrepresentation and (f) to amend any Operative Document to
which the Lessor is a party; PROVIDED that in the event an Indenture Default
shall have occurred and be continuing, the Trustee shall have all rights of
the Lessor under the Lease to modify, amend or supplement the Lease or give
any consent, waiver, authorization or approval thereunder; PROVIDED, FURTHER,
that without the prior written consent of the Lessor and the Owner
Participant, and whether or not an Indenture Default shall have occurred and
be continuing, no such exercise of rights, elections or options and no such
amendment or supplement shall directly or indirectly (1) modify any
indemnities in favor of the Lessor or the Owner Participant, (2) extend the
term of the Lease or alter the amount or extend the time of payment of basic
rent, Casualty Value or Termination Value or alter or amend certain purchase
option, maintenance and insurance sections of the Lease, (3) modify the Lease
releasing TU Electric from its obligations in respect of the payment of basic
rent, Casualty Value or Termination Value or (4) modify the meaning of any
defined term in any Operative Document if the result thereof is contrary to
(1), (2) or (3) above.

The Lessor also has the right to seek specific performance of certain
insurance and maintenance covenants of TU Electric under the Lease and each
of the Lessor and the Owner Participant (to the exclusion of the Trustee) has
the right to enforce the payment of Excepted Payments (as defined in the
Indenture) due and payable to it.

RELEASES

The Trustee shall release from the lien of the Indenture (i) property
taken by eminent domain by, or by right of purchase of, any governmental
subdivision, body, or agency, which taking does not constitute an Event of
Loss, upon receipt of the consideration therefor, or (ii) components in
respect of the Leased Assets the removal of which will not materially impair
or reduce the operating capacity, cost efficiency, utility or value of the
Leased Assets. In addition, components in respect of the Facilities which
have become worn out, destroyed, obsolete or damaged beyond repair may be
removed by the Lessor without the release of the Trustee. All replacement
components shall become subject to the lien of the Indenture.

<PAGE>

DISCHARGE OF LIEN

The Indenture will cease to be in effect with respect to the Bonds of a
particular stated maturity, if at any time (i) the principal of and interest
on, all Bonds of such stated maturity have been paid, (ii) all Bonds of such
stated maturity theretofore authenticated and delivered have been delivered
to the Trustee for cancellation or (iii) there has been irrevocably deposited
with the Trustee as trust funds the entire amount in cash necessary to pay,
or direct obligations of the United States of America maturing in such
amounts and at such times as will ensure the availability of cash sufficient
to pay, at stated maturity, and including all payment dates or upon
redemption, the principal of and interest on, all such Bonds and, in any such
case, all other sums payable with respect to the Bonds of such stated
maturity have been paid. In such event, the holders of the Bonds of such
stated maturity will no longer be entitled to the benefits of the Indenture.

THE TRUSTEE

The Indenture provides that upon the occurrence of an Indenture Default,
the Trustee will exercise such of the rights and powers vested in it by the
Indenture, and will use the same degree of care and skill, as a prudent
person would exercise under the circumstances in the conduct of his or her
own affairs. The Trustee will not be liable for any error of judgment made in
good faith, unless the Trustee was negligent in ascertaining the pertinent
facts, or for any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of a majority in aggregate
principal amount of the Bonds outstanding. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights and powers
under the Indenture at the request of any holder of Bonds then outstanding
unless such holder has offered to the Trustee reasonable security or
indemnity. The Indenture provides that the Trustee may acquire and hold the
Bonds and, subject to certain conditions, may otherwise deal with the Lessor
and TU Electric with the same rights it would have if it were not the Trustee.

In the absence of actual knowledge of an officer of the Trustee, the
Trustee shall not be deemed to have knowledge of an Indenture Default (except
the failure of TU Electric to pay any installment of basic rent when the same
shall become due) unless notified in writing by any holder of a Bond, the
Owner Participant, the Lessor or TU Electric.

The First National Bank of Chicago (First Chicago), which is an
affiliate of the Trustee, has a commitment to lend up to $70,000,000 to Texas
Utilities and TU Electric under a credit agreement. Texas Utilities and TU
Electric also maintain various banking and investment management
relationships with First Chicago and the Trustee.

DESCRIPTION OF THE LEASE

The statements under this caption are summaries and do not purport to be
complete. The summaries are qualified in their entirety by reference to the
Lease, a copy of which has been included as an exhibit to the Registration
Statement.

TERMS AND RENTALS

The Lessor acquired the Leased Assets on December 6, 1989 and leased
them to TU Electric for a term expiring on June 30, 2018, unless earlier
terminated or extended as described below. Basic rent, the payment of which
commenced January 1, 1991, is required to be paid by TU Electric under the
Lease in immediately available funds on each January 1 and July 1. If the
scheduled due date is not a Business Day, such rent is required to be paid in
immediately available funds on the next succeeding Business Day. The basic
rent payable on each scheduled payment date is required to be

<PAGE>

in an amount that is at least equal to the aggregate amount of principal and
accrued interest due and payable on the outstanding Bonds on such date.
During such time as the Indenture is in effect, each payment of basic rent
and all other payments (except those that are not subject to the lien of the
Indenture) to be made by TU Electric under the Lease must be made to the
Trustee and applied, first, to the payment of interest (as well as interest
on overdue principal and interest to the extent permitted by law) then due
and unpaid on the outstanding Bonds, and, second, to the payment of principal
then due and unpaid on the Bonds. The balance of any such payments will be
paid by the Trustee to the Lessor or as the Lessor may direct. (See FLOW OF
FUNDS FOR DEBT SERVICE PAYMENTS ON THE BONDS). For a description of the
application of payments upon the occurrence of an Indenture Default, see
DESCRIPTION OF THE INDENTURE - "Remedies."

NET LEASE/MAINTENANCE

The Lease is a net lease. Payments of basic rent and certain other
amounts under the Lease by TU Electric must be made without notice, demand,
counterclaim, setoff, deduction or defense and without abatement, suspension,
deferment, diminution or reduction, except that TU Electric may offset
certain amounts so long as no such offset would reduce basic rent to an
amount insufficient to pay in full, when due, the scheduled payments of
principal, premium, if any, and interest on the outstanding Bonds. TU
Electric is required to use its best efforts, without cost or expense to the
Lessor, to (i) maintain the Facilities in accordance with prudent utility
practice, (ii) operate, service, maintain and repair all necessary or useful
components of the Facilities in accordance with prudent utility practice and
the terms of any insurance policy in effect with respect thereto so as not to
violate the conditions of any material contractor's or manufacturer's
warranties, (iii) comply with laws, regulations and governmental orders
affecting the Facilities, and (iv) keep and maintain proper books and records
relating to the operation, maintenance, repairs and replacement of the
Facilities.

ALTERATIONS AND IMPROVEMENTS

TU Electric is required to make any alterations to the Facilities
specified in the Lease required by applicable laws, regulations and
governmental orders or by applicable insurance. The costs of all severable
alterations will be paid by TU Electric. The costs of nonseverable
alterations may be financed through additional non-recourse borrowings by the
Lessor. The Owner Participant, however, may elect to make an additional
equity investment with respect to the cost of any nonseverable alteration in
such amount as, in its sole discretion, it shall determine. In the event of
the issuance of such additional non-recourse debt or such investment by the
Owner Participant, the basic rent under the Lease will be adjusted to cover
the additional debt service. TU Electric will retain title to all severable
alterations. At the end of the term of the Lease, the Lessor will have the
option to purchase or lease any such severable alteration from TU Electric
provided that TU Electric has not exercised its option to purchase the
Facility to which it relates. Title to all nonseverable alterations shall
vest in the Lessor.

SUBLEASE AND ASSIGNMENT

TU Electric is not permitted to assign, transfer or encumber its rights
under the Lease without the prior written consent of the Lessor, the Owner
Participant and the Trustee. However, TU Electric has the right, provided
there is no Lease Default, to sublease or assign the Leased Assets, in whole
or in part, without such consents if: (i) the assignment or sublease does not
extend beyond the basic term of the Lease; (ii) a copy of the sublease or
assignment is delivered to the Lessor, the Owner Participant and the Trustee
within 30 days of its execution; (iii) the sublease or assignment does not
impair or diminish the obligations or liabilities of TU Electric under the
Lease or the other Operative Documents, or result, in the reasonable opinion
of the Owner Participant, in adverse tax consequences to the Owner
Participant; (iv) the sublease or assignment is expressly subject and
subordinate to the provisions of the Lease and the other Operative Documents;
(v) the sublessee or assignee has all necessary legal and

<PAGE>

regulatory authority to discharge TU Electric's obligations and liabilities
with respect to the Facilities under the Lease and the other Operative
Documents; (vi) any assignee, other than an affiliate of TU Electric, shall
have established its creditworthiness to the reasonable satisfaction of the
Owner Participant; (vii) such sublease or assignment shall not render the
Owner Participant's investment in the Facilities illegal or subject it to
burdensome regulation; and (viii) for any sublease or assignment within two
years of the end of the term of the Lease, TU Electric shall be the operator
of the Facilities unless otherwise consented to by the Owner Participant.

INSURANCE

TU Electric is required, at its own cost and expense, to carry and
maintain or cause to be carried and maintained with insurers of recognized
responsibility (provided that such insurance is commercially available at a
reasonable cost), insurance covering physical loss or damage to the
Facilities against such risks and perils and in such form and in such amounts
as is consistent with prudent utility practice for similar companies
operating like properties. The Lessor, the Owner Participant and the Trustee
are to be included as insureds. Any insurance proceeds during a Lease Default
and, at other times, proceeds in excess of $3,000,000 are to be paid to the
Trustee to be used to pay for repairs and restoration.

TU Electric also is required, at its own cost and expense, to carry and
maintain with insurers of recognized responsibility public liability
insurance covering personal injury and bodily injury and property damage
liability covering claims arising out of the ownership, operation,
maintenance, condition or use of the Facilities (provided such insurance is
commercially available at a reasonable cost) in an amount not less than
$25,000,000 per occurrence and annual aggregate occurrences, subject to a
deductible of up to $5,000,000 or such other amount as may be approved from
time to time by the Lessor. The Lessor, the Owner Participant and the Trustee
are to be included as insureds.

RENEWAL OPTIONS

If no Lease Default has occurred and is continuing, TU Electric has
several options, upon prior written notice to the Lessor, the Owner
Participant and the Trustee, to renew the Lease with respect to either
Facility or both Facilities upon its expiration on June 30, 2018, and upon
the expiration of any renewal term.

PURCHASE OPTIONS AND TERMINATION OPTIONS

TU Electric has the option to purchase either Facility or both
Facilities from the Lessor (except in the case of clause (iii) below, TU
Electric only has the option to purchase both Facilities) (i) at the
expiration of the basic term of the Lease for a purchase price equal to the
lesser of (a) the fair market sale value on such date of the Facility or
Facilities to be purchased as determined by the Owner Participant and the
Lessee or as set forth in an appraisal relating to such Facility or
Facilities and (b) the sum of the estimated fair market value of the Facility
or Facilities to be purchased as of such date and the estimated fair market
value as of such date of any nonseverable alterations to such Facility or
Facilities which are to be purchased or completed after the date of the
appraisal and financed by additional investments by the Owner Participant,
(ii) at the expiration of a renewal term for a purchase price equal to the
fair market sale value of the Facility or Facilities which were leased for
such term, and (iii)(a) in the event of certain consolidations, mergers or
asset sales of TU Electric or (b) upon an increase in TU Electric's tax
indemnity obligations with respect to certain Texas state income taxes in any
year in an amount that exceeds $42,000 and exceeds 5% of basic rent payable
under the Lease for such year; in each case for a purchase price equal to the
greater of (1) the sum of the Termination Value on such date, the premium, if
any, then payable upon the redemption of the outstanding bonds issued under
the Indenture, and the basic rent due on such date, and (2) the sum of the
fair market sale

<PAGE>

value of the Facilities on such date, the premium, if any,
then payable upon the redemption of the outstanding bonds issued under the
Indenture, and the basic rent due on such date; provided, that in the case of
clause (iii), if TU Electric should elect to assume the Bonds and all of the
obligations of the Lessor under the Indenture and the Bonds, TU Electric may
credit against such purchase price the principal of and accrued and unpaid
interest to the date of purchase on the outstanding Bonds. The foregoing
notwithstanding, the Bonds are not subject to optional redemption and, if TU
Electric exercises its option to purchase the Facilities in the case of
clause (3) above, it must, subject to the satisfaction of certain conditions,
assume the Bonds and all of the obligations of Lessor under the Indenture and
the Bonds.

TU Electric has the option to terminate the Lease on or after July 1,
1997, if TU Electric's Board of Directors determines that the Facilities are
obsolete, surplus or uneconomic for TU Electric's purposes and will no longer
be used by TU Electric. Following notice of such termination given to the
Lessor and the Trustee, TU Electric shall act as agent for the Lessor in
arranging for the sale of the Facilities to a non-affiliate of TU Electric.
If no acceptable purchaser can be found or if TU Electric intends to purchase
the Facilities itself, the Lease will terminate and TU Electric shall pay to
the Lessor the greater of (a) the fair market sale value of the Facilities
and (b) the Termination Value in effect on the termination date, provided,
that TU Electric shall not directly or indirectly use or operate the
Facilities for its own account for a period of five years from such
termination date, except upon the prior payment of $25,000,000 to the Owner
Participant. If TU Electric does not elect to purchase the Facilities itself,
the Lessor may elect to retain the Facilities. As a condition to the Lessor's
right to retain the Facilities, the Lessor shall pay to the Trustee an amount
equal to the principal of, premium, if any, and unpaid interest on the Bonds
outstanding or deposit with the Trustee sufficient funds and securities to
discharge the lien of the Indenture (see DESCRIPTION OF THE INDENTURE -
"Discharge of Lien"). If the Lessor elects to retain the Facilities, (i) TU
Electric shall pay to the Lessor on the termination date any rent due on such
date and any premium payable on any outstanding Bond but shall not be
required to pay the Casualty Value, and (ii) the Lease shall terminate.

EVENTS OF LOSS

If an Event of Loss shall occur with respect to a Facility, TU Electric
shall pay to the Trustee the Casualty Value for such Facility. From the date
of the Event of Loss to and including the date of payment of such Casualty
Value, all rent shall continue to be paid when due. TU Electric is also
required to pay, simultaneously with the payment of such Casualty Value, all
other sums due and owing from TU Electric to the Lessor under the Operative
Documents. Upon such payment, the Lease shall terminate with respect to the
Facility suffering such Event of Loss, the obligations of TU Electric under
the Lease with respect to the Facility suffering such Event of Loss, subject
to certain exceptions set forth in the Lease, shall terminate and the Lessor
shall transfer the Facility with respect to which the Event of Loss has
occurred to TU Electric or as TU Electric shall direct, free and clear of the
lien created by the Indenture.

Notwithstanding the foregoing, in the case of an Event of Loss resulting
from a determination by any governmental authority that the Lessor, the
Trustee or the Owner Participant, solely by reason of its participation in
the sale and lease transactions, is deemed to be, or is subject to regulation
as, a Texas Public Utility (as defined in the Lease), an "electric utility"
or a "public utility" or a "public utility holding company" or an affiliate
of any of the foregoing and such person shall have sent written notice to TU
Electric and the parties to the Participation Agreement that such person
deems such regulation to be materially burdensome, if TU Electric has duly
executed and delivered an assumption agreement in accordance with the
Indenture, the obligation of TU Electric to pay the Casualty Value shall be
reduced by the principal amount of the outstanding Bonds so assumed and not
otherwise due on the date of such payment.

<PAGE>

LEASE DEFAULT; LESSOR'S REMEDIES

Lease Defaults include: (i) failure by TU Electric to pay basic rent or
Casualty Value within ten days after it becomes due, or supplemental rent or
other amounts payable under the Lease within 15 days after notice; (ii)
failure by TU Electric to maintain insurance as required by the Lease; (iii)
failure by TU Electric to perform or observe any other covenant or agreement
to be performed or observed by it under the Lease or any Operative Document
and such failure shall continue for a period of 30 days after notice;
provided, however, that the continuance of such failure for 30 days after
such notice shall not constitute a default if (a) it is curable but cannot be
cured within 30 days, (b) TU Electric is diligently pursuing such cure and
(c) such default does not materially impair the rights of the Owner
Participant or the Lessor in the Leased Assets or under the Operative
Documents or the security interest of the Trustee under the Indenture; (iv)
any representation or warranty made by TU Electric in any Operative Document
(other than the Tax Indemnity Agreement) proves to be incorrect in any
material respect when made and remains material and uncured for a period of
30 days after notice; provided, however, that the continuation of such
misrepresentation shall not constitute a default if the conditions of the
proviso to clause (iii) above are met; and (v) certain insolvency and
bankruptcy events with respect to TU Electric.

If a Lease Default has occurred and is continuing and the Lessor has
declared the Lease to be in default, the Lessor may exercise one or more of
the remedies provided in the Lease, which include the right to terminate the
Lease, to take possession of the Leased Assets, and to hold, lease or sell
the Leased Assets free and clear of the rights of TU Electric. The Lessor may
require TU Electric to pay as liquidated damages any unpaid rent due under
the Lease through the payment date specified in such notice, plus one of the
following amounts as selected by the Lessor (together with interest on such
amount from the date specified in the notice to the date of actual payment):

(1) an amount equal to the excess, if any, of (i) the Termination Value
over (ii) the fair market rental value of the Facilities during the remaining
term of the Lease after discounting such rental value semiannually to present
value;

(2) an amount equal to the excess, if any, of the Termination Value
over the fair market sale value of the Facilities as of such payment date;

(3) an amount equal to the highest of (i) such Termination Value, (ii)
such discounted fair market rental value and (iii) such fair market sale
value and, in this event, upon full payment by TU Electric of all sums due
under the Lease, the Lessor shall exercise its best efforts to promptly sell
the Facilities and pay over to TU Electric the net proceeds of such sale up
to the amount set forth in clause (i), (ii) or (iii) above paid by TU
Electric; or

(4) an amount equal to the excess of (i) the present value of all
installments of basic rent from the date of such notice to the end of the
basic term of the Lease, over (ii) the present value as of such payment date
of the fair market rental value of the Facilities for the remainder of such
basic term of the Lease.

If the Lessor shall have sold the Facilities, the Lessor, in lieu of
exercising its right to require the payment as liquidated damages of the
amounts specified above, may require TU Electric to pay as liquidated
damages, on the date of such sale, any unpaid rent due and attributable to
the use of the Facilities by TU Electric through such payment date, plus the
amount of any deficiency between the Termination Value and the net proceeds
of such sale, together with interest from the date of such sale until the
date of actual payment. For so long as any Bonds shall be outstanding, the
rights of the Lessor described in this section have been assigned to the
Trustee.

<PAGE>

CERTAIN TERMS OF THE PARTICIPATION AGREEMENT

The statements under this caption summarize certain provisions of the
Participation Agreement and do not purport to be complete. The summaries are
qualified in their entirety by reference to the Participation Agreement, a
copy of which has been included as an exhibit to the Registration Statement.

MERGER; CONSOLIDATION; MAINTENANCE OF CORPORATE EXISTENCE

Pursuant to the Participation Agreement, TU Electric has agreed that it
will at all times maintain its existence as a corporation under Texas law and
use its best efforts to maintain its status as an electric public utility and
will not consolidate with or merge with or into any other corporation or
convey, transfer or lease all or substantially all of its assets to any
person unless: (i) such successor corporation (if other than TU Electric)
assumes the due and punctual performance of each covenant and condition of
the Operative Documents to be performed or complied with by TU Electric; (ii)
such successor is a corporation organized under the laws of a state of the
United States of America or under Federal laws; (iii) such consolidation,
merger or transfer will not violate any provision of, or create a
relationship which would be a material violation of any law, regulation or
governmental order; (iv) if such successor corporation is other than TU
Electric, TU Electric shall have delivered (a) an opinion of counsel
confirming the validity and enforceability of the agreement referred to in
(i) above, and as to compliance with clauses (ii) and (iii) above, and (b) an
officer's certificate stating that such consolidation, merger, conveyance,
transfer or lease and the agreement referred to in clause (i) above complies
with the Participation Agreement and all conditions precedent contained
therein; and (v) Owner Participant shall not have determined in good faith
that upon such consolidation, merger, transfer or lease such person would not
have any outstanding senior secured long-term debt securities rated
investment grade and (unless the Owner Participant consents thereto) there
shall not have been a public announcement that such rating is under review
for a possible reduction.

Upon the consummation of any such transaction, the successor corporation
shall succeed to, and be substituted for, and may exercise every right and
power of, TU Electric under the Operative Documents with the same effect as
if such successor had been named therein. No such conveyance, transfer or
lease of all or substantially all of the assets of TU Electric shall have the
effect of releasing TU Electric or any successor corporation from its
liability under the Operative Documents without the prior written consent of
the Lessor, the Owner Participant and the Trustee.

TRANSFER OF OWNER PARTICIPANT'S INTEREST

The Owner Participant may at any time assign, convey or otherwise
transfer all or a part of its right, title and interest in and to the trust
estate (whether or not the same shall then have been pledged or mortgaged
under the Indenture, but subject to the lien of the Indenture) and in and to
the Operative Documents, but, only if: (i) the transferee is a permitted
transferee of the Owner Participant's interest under the Trust Agreement and
TU Electric and the Trustee shall have received advance notice of the
transfer; (ii) the transferee has entered into an agreement whereby the
transferee confirms that it has the requisite power and authority to enter
into and to carry out the transactions contemplated by each Operative
Document to which the Owner Participant is or will be a party, and that it
will be deemed a party to each of such Operative Documents and will agree to
be bound by all of the terms of, and to undertake all the obligations of the
transferor contained in, each Operative Document with respect to the interest
being conveyed; (iii) the transfer will not violate any provision of, or
create a relationship which in any material respect would be in violation of,
any law, regulation or governmental order and shall not involve, either
directly or indirectly, the assets of any pension plan; (iv) an opinion of
counsel has been delivered as to the due authorization, execution, delivery,
validity and enforceability of the agreement referred to in (ii) above and as
to compliance with (iii) above; (v) the transferee will be (a) an

<PAGE>

affiliate of the Owner Participant, (b) a person with a net worth at the time
of such conveyance of not less than $50,000,000 and, unless TU Electric shall
have consented thereto, which is not an electric utility company or an
affiliate thereof or (c) such other person or persons as to which TU Electric
shall have consented; and (vi) after giving effect to such transfer, there
will not be more than three Owner Participants. Upon any such transfer by the
Owner Participant, the transferee shall be deemed an "Owner Participant" for
all purposes of the Operative Documents.

PLAN OF DISTRIBUTION

TU Electric will cause the Lessor to sell the Offered Bonds to each of
the Underwriters named on the front cover of this Prospectus, in the
principal amounts to be set forth in the Prospectus Supplement relating to
such Offered Bonds.

The Prospectus Supplement with respect to the Offered Bonds will set
forth the terms of the offering of such Offered Bonds and the proceeds to
Lessor from such sale, any underwriting discounts and other items
constituting Underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.

The Offered Bonds will be acquired by the Underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. TU Electric will agree to
indemnify the several Underwriters against certain liabilities, including
liabilities under the 1933 Act. Any underwriting agreement will provide that
the obligations of the Underwriters are subject to certain conditions
precedent and that the Underwriters will be obligated to purchase all the
Offered Bonds if any are purchased.

EXPERTS AND LEGALITY

The financial statements and financial statement schedule included in
the 1994 10-K have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report included in the 1994 10-K, which is
incorporated herein by reference.

With respect to the unaudited interim financial information included in
TU Electric's Quarterly Reports on Form 10-Q incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for reviews of such information.
However, as stated in any of their reports that are included in TU Electric's
Quarterly Reports on Form 10-Q, incorporated herein by reference, they did
not audit and they do not express an opinion on that interim financial
information. Deloitte & Touche LLP is not subject to the liability provisions
of Section 11 of the 1933 Act for any of its reports on such unaudited
interim financial information because those reports are not "reports" or a
"part" of the Registration Statement filed under the 1933 Act with respect to
the Bonds prepared or certified by an accountant within the meaning of
Sections 7 and 11 of the 1933 Act.

The statements made as to matters of law and legal conclusions in any
accompanying Prospectus Supplement under the heading "Rate Proceedings" and
in the 1994 10-K under Part I, Item 1 - Business-Regulation and Rates and
Environmental Matters, incorporated herein by reference, have been reviewed
by Worsham, Forsythe & Wooldridge, L.L.P., Dallas, Texas, General Counsel for
TU Electric. All of such statements are set forth or incorporated by
reference herein in reliance upon the opinion of that firm given upon their
authority as experts. At June 30, 1995, members of the firm

<PAGE>

of Worsham, Forsythe & Wooldridge, L.L.P. owned approximately 47,000 shares
of the common stock of Texas Utilities.

The legality of the Offered Bonds will be passed upon for TU Electric by
Worsham, Forsythe & Wooldridge, L.L.P., and by Reid & Priest LLP, New York,
New York, of counsel to TU Electric, and for the Underwriters by Winthrop,
Stimson, Putnam & Roberts, New York, New York. However, all matters
pertaining to incorporation, titles to properties, franchises, licenses and
permits, the lien of the Indenture on property located in Texas and all other
matters of Texas law will be passed upon only by Worsham, Forsythe &
Wooldridge, L.L.P.

<PAGE>

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or
the Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized. This Prospectus Supplement
and the Prospectus do not constitute an offer to sell or the solicitation of
an offer to buy any securities other than the securities described in this
Prospectus Supplement or an offer to sell or the solicitation of any offer to
buy such securities in any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus Supplement or the
Prospectus nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that the information contained herein
or therein is correct as of any time subsequent to the date of such
information.

_________________

Table of Contents

Page
----

Prospectus Supplement

Summary Information Relating to the Offered Bonds. . . . . . . . . . . S-2
Summary Financial Information for TU Electric. . . . . . . . . . . . . S-5
Rate Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7

Prospectus

Available Information. . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference. . . . . . . . . . . . 2
TU Electric. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Ownership and Lease of the Facilities. . . . . . . . . . . . . . . . . 3
Flow of Funds for Debt Service Payments on the Bonds . . . . . . . . . 5
Security and Source of Payment for the Bonds . . . . . . . . . . . . . 5
Description of the Bonds . . . . . . . . . . . . . . . . . . . . . . . 6
Description of the Indenture . . . . . . . . . . . . . . . . . . . . . 9
Description of the Lease . . . . . . . . . . . . . . . . . . . . . . . 16
Certain Terms of the Participation Agreement . . . . . . . . . . . . . 21
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 22
Experts and Legality . . . . . . . . . . . . . . . . . . . . . . . . . 22

$81,595,000

TEXAS UTILITIES
ELECTRIC COMPANY

SECURED FACILITY BONDS, % SERIES DUE

[LOGO]

SALOMON BROTHERS INC

MORGAN STANLEY & CO.
INCORPORATED

Prospectus Supplement

Dated , 1995

<PAGE>

Appendix A

Flowchart description:

Boxes and arrows show the different payments made between the parties, as
follows:

Paying Party Payment Type Receiving Party
------------ ------------ ----------------
Texas Utilities Electric Rental Payments due Trustee for the Bonds
Company (Lessee) under the Lease (shown
as solid arrow)

Trustee for the Bonds Debt Service for the Bonds Paying Agent
(shown as solid arrow)

Paying Agent Debt Service for the Bonds Bondholders
(shown as solid arrow)

Trustee for the Bonds Rental Payments in Excess Lessor
of Debt Service (shown
as broken arrow)

Lessor Rental Payments in Excess Owner Participant
of Debt Service (shown
as solid arrow)