AMERICAN ELECTRIC POWER CO INC
(B) OPERATING AGREEMENT
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<FILENAME>x10b.txt
<DESCRIPTION>(B) OPERATING AGREEMENT
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                                                                   EXHIBIT 10(b)





                              RESTATED AND AMENDED

                               OPERATING AGREEMENT

                                      Among

                         Central Power and Light Company

                       Public Service Company of Oklahoma

                       Southwestern Electric Power Company

                          West Texas Utilities Company

                      Central and South West Services, Inc.

                                 January 1, 1998


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                               OPERATING AGREEMENT
                                TABLE OF CONTENTS
                                                                           Page
ARTICLE I
                                TERM OF AGREEMENT...........................  2

ARTICLE II
                                   DEFINITIONS..............................  2
         2.1      Agent.....................................................  3
         2.2      Agreement.................................................  3
         2.3      Capacity Commitment.......................................  3
         2.4      Capacity Commitment Charge................................  3
         2.5      Central Control Center....................................  3
         2.6      Chief Executive Officer (CEO).............................  3
         2.7      Company...................................................  3
         2.8      Company Capability........................................  3
         2.9      Company Demand............................................  4
         2.10     Company Hourly Capability.................................  4
         2.11     Company Load Responsibility...............................  4
         2.12     Company Operating Capability..............................  5
         2.13     Company Operating Reserve.................................  5
         2.14     Company Peak Demand.......................................  5
         2.15     Day.......................................................  5
         2.16     Decremental Energy Value..................................  5
         2.17     Economic Dispatch.........................................  5
         2.18     Energy....................................................  5
         2.19     Generating Unit...........................................  5
         2.20     Hour......................................................  6
         2.21     Incremental Energy Cost...................................  6
         2.22     Internal Economy Energy...................................  6
         2.23     Joint Resource Plan.......................................  6
         2.24     Joint Unit................................................  6
         2.25     (a)      Margin on Sales..................................  6
         2.25     (b)      Margin on Purchases..............................  6
         2.25     (c)      Margin on Internal Economy Energy................  6
         2.25     (d)      Margin...........................................  7
         2.26     Month.....................................................  7
         2.27     Operating Committee.......................................  7
         2.28     Own Load..................................................  7
         2.29     Parent Company............................................  7
         2.30     Planning Reserve Level....................................  7
         2.31     Pool Energy...............................................  7
         2.32     Power.....................................................  8
         2.33     Prorated Reserve Level....................................  8
         2.34     Reserve Capacity (Company or System)......................  8
         2.35     System....................................................  8
         2.36     System Capability.........................................  8
         2.37     System Demand.............................................  8
         2.38     System Load Responsibility................................  8
         2.39     System Operating Capability...............................  9
         2.40     System Operating Reserve..................................  9
         2.41     System Peak Demand........................................  9
                                        i
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         2.42     Transaction Cost..........................................  9
         2.43     Variable Cost.............................................  9
         2.44     Year......................................................  9

ARTICLE III
                                    OBJECTIVES..............................  9
         3.1      Purpose...................................................  9

ARTICLE IV
                                      AGENT................................. 10
         4.1      Responsibility of the Agent............................... 10
         4.2      Delegation and Acceptance of Authority.................... 10
         4.3      Reporting................................................. 10

ARTICLE V
                                OPERATING COMMITTEE......................... 11
         5.1      Operating Committee....................................... 11

ARTICLE VI
                                    OPERATIONS.............................. 11
         6.1      Planning and Authorization of Production Facilities....... 11
         6.2      Planning Reserve Levels................................... 12
         6.3      Provision to Achieve Planning Reserve Levels.............. 12
         6.4      Capacity Sales and Purchases and Reserve Shortfalls....... 13
         6.5      Energy Exchanges Among the Companies...................... 13
         6.6      Energy Exchange Pricing................................... 13
         6.7      Energy Exchanges with Non-Associated Utilities............ 14
         6.8      Communications and other Facilities....................... 15

ARTICLE VII
                             CENTRAL CONTROL CENTER......................... 15
         7.1      Central Control Center.................................... 15
         7.2      Expenses.................................................. 15

ARTICLE VIII
                                     GENERAL................................ 16
         8.1      Regulatory Authorization.................................. 16
         8.2      Effect on Other Agreements................................ 16
         8.3      Schedules................................................. 16
         8.4      Billings.................................................. 16
         8.5      Waivers................................................... 17
         8.6      Successors and Assigns; No Third Party Beneficiary........ 17
         8.7      Amendment................................................. 18
         8.8      Independent Contractors................................... 18
         8.9      Responsibility and Liability.............................. 18



                                       ii

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SCHEDULES

A  JOINT UNIT
B  COMPANY UNITS THAT ARE NOT JOINT UNITS
C  CAPACITY COMMITMENT CHARGE
D  PAYMENTS AND RECEIPTS FOR POOL ENERGY EXCHANGES AMONG THE COMPANIES
E  PAYMENTS AND RECEIPTS FOR INTERNAL ECONOMY ENERGY EXCHANGES AMONG THE
     COMPANIES AND FOR OFF-SYSTEM ENERGY PURCHASES AND SALES
F  DISTRIBUTION OF MARGIN FOR INTERNAL ECONOMY ENERGY EXCHANGES AND FOR OFF-
     SYSTEM ENERGY PURCHASES AND SALES
G  DISTRIBUTION OF OPERATING EXPENSES OF THE CENTRAL CONTROL CENTER
H  CAPACITY COMMITMENT UNITS
I  PLANNING-RESERVE CRITERIA
J  STATEMENT OF PRACTICE REGARDING OFF-SYSTEM ENERGY SALES
K  DISTRIBUTION OF CERTAIN TRANSACTION COSTS








                                       iii


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                              RESTATED AND AMENDED

                               OPERATING AGREEMENT

                                      Among

                         Central Power and Light Company

                       Public Service Company of Oklahoma

                       Southwestern Electric Power Company

                          West Texas Utilities Company

                      Central and South West Services, Inc.



     THIS  RESTATED  AND  AMENDED  OPERATING   AGREEMENT,   hereinafter   called
Agreement,  is made and entered  into as of the 1st day of January,  1998 by and
among Central Power and Light Company,  hereinafter  called CPL;  Public Service
Company  of  Oklahoma,  hereinafter  called  PSO;  Southwestern  Electric  Power
Company,  hereinafter called SWEPCO;  West Texas Utilities Company,  hereinafter
called WTU; and Central and South West Services,  Inc., hereinafter called CSWS;
all of whose common stock is wholly owned by Central and South West Corporation,
and supersedes  the Restated and Amended  Operating  Agreement  dated October 1,
1993.

     WHEREAS,  CPL,  PSO,  SWEPCO,  and WTU  are the  owners  and  operators  of
interconnected  electric generation,  transmission,  and distribution facilities
with which they are engaged in the  business of  generating,  transmitting,  and
selling  electric  Power and Energy to the general  public and to other electric
utilities; and

     WHEREAS,  the  Companies  achieve  economic  benefits  for their  customers
through  operation  as a single  interconnected  system and through  coordinated
planning,  construction,  operation and  maintenance  of their  electric  supply
facilities; and

     WHEREAS, CSWS is qualified to act as Agent for the Companies;

     NOW, THEREFORE, the parties hereto mutually agree as follows:

                                    ARTICLE I

                                TERM OF AGREEMENT

     1.1 This Agreement shall become effective on such date as is established by
the Federal Energy Regulatory Commission. This Agreement shall continue in force
and effect for a period of ten (10) Years from the  effective  date  hereinabove
described,  and continue from Year to Year thereafter until terminated by one or
more of the parties upon three (3) Years written notice to the other parties.

     1.2 This Agreement is intended to cover only the acquisition,  disposition,
planning,  design,  construction,  operation and  maintenance  of the Generating
Units and is not to affect  those  matters that are the subject of orders of the
United  States  Securities  and  Exchange  Commission  authorizing  certain cost
allocation methods for CSWS billings.

                                   ARTICLE II

                                   DEFINITIONS

     For the purposes of this  Agreement  and of Schedules A through K which are
attached hereto and made a part hereof, the following definitions shall apply:

     2.1 Agent for the Companies shall be CSWS.

     2.2  Agreement  shall  be this  Agreement  including  all  attachments  and
schedules applying hereto and any amendments made hereafter.

     2.3 Capacity Commitment shall be generating capacity committed by a Company
to provide  capability  to enable  another  Company to attain  its  Planning  or
Prorated Reserve Level, whichever shall be lower.

     2.4  Capacity  Commitment  Charge  shall be the  charge  made by a  Company
supplying  a  Capacity   Commitment  to  the  Company   receiving  the  Capacity
Commitment.

     2.5 Central  Control Center shall be a center operated by the Agent for the
optimal utilization of System resources for the supply of Power and Energy.

     2.6 Chief Executive  Officer (CEO) shall be the Chief Executive  Officer of
Central and South West Corporation or the CEO's designee.

     2.7  Company  shall be any one of the  Central  and South West  Corporation
operating   companies  and  Companies  shall  be  the  Central  and  South  West
Corporation operating companies collectively.

     2.8 Company Capability shall be:

          (a)  The sum of the Company net plant capability in megawatts; plus

          (b)  The megawatt amount of purchases and exchanges  without reserves,
               under contract from other systems; less

          (c)  The  megawatt  amount of sales and  exchanges  without  reserves,
               under contract to other systems.

     2.9 Company Demand shall be:

          (a)  The  clock-hour   demand  in  megawatts  of  a  Company's  system
               represented by the  simultaneous  hourly input in  megawatt-hours
               from all sources into the system of a Company; less

          (b)  The sum of the simultaneous  hourly output in  megawatt-hours  to
               other   systems   (exclusive   of  any   wholesale   requirements
               obligations of the Company).

     2.10 Company Hourly Capability for a Company shall be:

          (a)  The megawatt  amount of  dependable  capability  of the Company's
               generating units on line, including its shares of Joint Units and
               its shares of units owned jointly with  non-associated  entities,
               during the Hour; plus

          (b)  The  megawatt  amount of  capability  committed to the Company by
               other Companies or non-associated suppliers during the Hour; less

          (c)  The  megawatt  amount of  capability  committed by the Company to
               other  Companies or  non-associated  purchasers  during the Hour;
               less

          (d)  Any capability required to provide operating reserves.

     2.11 Company Load Responsibility shall be as follows:

          (a)  Company Peak Demand; less

          (b)  the difference  between Company Peak Demand and Company Demand at
               the time of System Peak Demand; less

          (c)  The   megawatt-hour   output   of  the   Company   served  on  an
               interruptible basis during the hour of Company Peak Demand; plus

          (d)  The  contractual  amount of sales  and  exchanges  with  reserves
               during the period to other systems; less

          (e)  The  contractual  amount of purchases and exchanges with reserves
               during the period from other systems.

     2.12 Company Operating Capability shall be the dependable net capability in
megawatts of Generating Units of a Company carrying load or ready to take load.

     2.13 Company  Operating  Reserve  shall be the excess of Company  Operating
Capability over Company Demand expressed in megawatts.

     2.14 Company Peak Demand for a period shall be the highest  Company  Demand
for any Hour during the period.

     2.15 Day shall be a calendar day.

     2.16  Decremental  Energy  Value  shall be the cost  that a buying  Company
avoids  by  reducing  the  generation  of  Energy  from  its  Company  Operating
Capability or by reducing its purchase of Energy from others.

     2.17  Economic  Dispatch  shall be the  distribution  of  total  generation
requirements among alternative sources for System economy with due consideration
of incremental  generating costs,  incremental  transmission  losses, and System
security.

     2.18 Energy shall be work and shall be expressed in megawatt-hours (MWH).

     2.19  Generating  Unit shall be an electric  generator,  together  with its
prime mover and all auxiliary and appurtenant  devices and equipment designed to
be operated as a unit for the production of electric Power and Energy. The above
is to include equipment necessary for connection to the transmission system.

     2.20 Hour shall be a clock-hour.

     2.21  Incremental  Energy Cost shall be the  variable  cost which a selling
Company incurs in order to supply Energy for resale.

     2.22  Internal  Economy  Energy  shall be Energy  supplied  and sold by one
Company to another Company,  under Economic  Dispatch,  to meet a portion of the
purchasing Company's Own Load that could otherwise be supplied internally by the
purchasing Company.

     2.23 Joint Resource Plan shall be the formal documented plan developed from
time to time for all future  Generating  Units and other power supply and demand
management resources.

     2.24 Joint Unit shall be any  Generating  Unit jointly owned by two or more
of the Companies.

     2.25 (a) Margin on Sales shall be the difference  between:  (1) the revenue
from  off-System  Energy sales made  pursuant to Section 6.7 and (2) the selling
Companies' Incremental Energy Cost incurred in making such sales.

     2.25 (b) Margin on Purchases shall be the difference between (1) the buying
Companies'  Decremental  Energy Value avoided as a result of  off-System  Energy
purchases  made pursuant to Section 6.7 and (2) payments for  off-System  Energy
purchases made pursuant to Section 6.7.

     2.25 (c) Margin on Internal Economy Energy shall be the difference  between
(1) the buying  Companies'  Decremental  Energy  Value  avoided as the result of
receiving  Internal  Economy  Energy  and (2) the  selling  Companies'  Internal
Economy Energy Cost incurred in supplying Internal Economy Energy.

     2.25  (d)  Margin  for a  given  period  shall  be the  sum of the  amounts
developed in accordance with Sections 2.25 (a), 2.25 (b) and 2.25 (c).

     2.26 Month shall be a calendar Month.

     2.27 Operating Committee shall be the organization  established pursuant to
Section 5.1 and whose duties are more fully set forth therein.

     2.28 Own Load shall be Energy  required to meet Company  Demand plus Energy
associated  with sales or exchanges  with reserves less Energy  associated  with
purchases or exchanges with reserves.

     2.29 Parent Company shall be Central and South West Corporation.

     2.30  Planning  Reserve  Level  shall be the  megawatt  amount of  required
Reserve  Capacity for a Company,  expressed as a  percentage  of its  forecasted
Company Load Responsibility.

     2.31 Pool Energy  shall be the Energy  supplied  and sold by one Company to
another  Company to enable the  purchasing  Company to meet a portion of its Own
Load that such  other  Company  cannot or does not plan to serve  with its other
resources.  There shall be two categories of Pool Energy.  Emergency Pool Energy
shall be the Energy required by a Company that becomes  deficient  because of an
unplanned  occurrence (such as a generator unit trip or a missed load forecast).
Planned Pool Energy shall be the Energy  required by a Company to meet  portions
of its Own Load when it  determines  that (a) it will be short of capacity  when
planning  for future  operations  or (b) such  Energy  can be taken to  economic
advantage.

     2.32  Power  shall be the rate of doing  work  and  shall be  expressed  in
megawatts (MW).

     2.33 Prorated  Reserve  Level shall be a percentage  reserve level for each
Company that when divided by that  Company's  Planning  Reserve  Level gives the
same quotient as that for all other Companies.

     2.34 Reserve Capacity (Company or System) shall be that amount in megawatts
by  which  Company  or  System   Capability   exceeds  Company  or  System  Load
Responsibility.

     2.35 System shall be the coordinated Generating Units of the Companies.

     2.36 System  Capability  shall be the  arithmetical sum in megawatts of the
individual Company Capabilities.

     2.37  System  Demand  shall  be the  arithmetical  sum  of  the  Companies'
clock-hour demand in megawatts represented by:

          (a)  The simultaneous  hourly input in megawatt-hours from all sources
               into the System; less

          (b)  The sum of the simultaneous  hourly outputs in  megawatt-hours to
               other   systems   (exclusive   of  any   wholesale   requirements
               obligations of the Companies).

     2.38 System Load Responsibility shall be as follows:

          (a)  System Peak Demand; less

          (b)  The   megawatt-hour   output  of  the  Companies   served  on  an
               interruptible basis during the Hour of System Peak Demand; plus

          (c)  The  arithmetic  sum  in  megawatts  of  all  of  the  Companies'
               contractual  amount of sales and exchanges  with reserves  during
               the period to other systems; less

          (d)  The arithmetic sum in megawatts of all the Companies' contractual
               amount of purchases and exchanges with reserves during the period
               from other systems.

     2.39 System Operating Capability shall be the arithmetical sum in megawatts
of the individual Company Operating Capabilities.

     2.40  System  Operating  Reserve  shall  be  the  arithmetical  sum  of the
individual Company Operating Reserves, expressed in megawatts.

     2.41 System Peak Demand for a period shall be the highest System Demand for
any hour during the period.

     2.42  Transaction Cost shall be the sum of the charges assessed against any
one or more of the  Companies  for  transmission  services  related to  Internal
Economy Energy exchanges and off-System  Energy purchases and sales,  other than
such charges  allocated  among the  Companies  pursuant to the  Distribution  of
Certain Transaction Costs procedure set forth in Schedule K.

     2.43  Variable  Cost shall be a Company's  incremental  generation  cost or
purchased energy cost.

     2.44 Year shall be a calendar Year.

                                   ARTICLE III

                                   OBJECTIVES

     3.1 Purpose

     The purpose of this Agreement is to provide the  contractual  basis for the
coordinated planning,  construction,  operation and maintenance of the System to
achieve optimal economies, consistent with reliable electric service, reasonable
utilization of natural resources, and environmental requirements.

                                   ARTICLE IV

                                      AGENT

     4.1 Responsibility of the Agent

     The Companies hereby designate CSWS as their Agent for the purpose of:

          (a)  coordinating  the  acquisition,  disposition,  planning,  design,
               construction,  operation and maintenance of the Generating  Units
               of the Companies, including any Joint Units; and

          (b)  supervising the design,  construction,  operation and maintenance
               of the Central Control Center.

     4.2 Delegation and Acceptance of Authority

     The  Companies  hereby  delegate to the Agent and the Agent hereby  accepts
responsibility  and authority for the duties listed in Section 4.1 and elsewhere
in this Agreement.  Except as herein expressly established otherwise,  the Agent
shall perform each of those duties in consultation with the Operating Committee.
The  Agent  shall  also  perform  each of those  duties in  accordance  with the
standards of conduct described in 18 C.F.R. Section 37.4.

     4.3 Reporting

     The Agent shall provide  periodic  summary reports of its activities  under
this  Agreement to the  Companies and shall keep the Companies and the Operating
Committee  currently  informed of  situations  or problems  that may  materially
affect the outcome of these activities.  Furthermore, the Agent agrees to report
to the Companies or to the Operating  Committee in such additional  detail as is
requested regarding specific issues or projects under its supervision as Agent.

                                    ARTICLE V

                               OPERATING COMMITTEE

     5.1 Operating Committee

     The  Operating  Committee  is the  organization  established  to ensure the
coordinated  operation  of the  System  by  making  recommendations  to the  CEO
regarding operations under this Agreement.  The Operating Committee members will
be designated by the CEO and shall include a chairperson and at least one member
from the Agent and from each Company.  Operating Committee decisions shall be by
a majority vote of those present and shall be in the form of  recommendations to
the CEO. However, any member not present may vote by proxy. In any non-unanimous
decision  the  principles  of the  difference  shall be reported to the CEO. The
chairperson shall vote only in case of a tie.

                                   ARTICLE VI

                                   OPERATIONS

     6.1 Planning and Authorization of Production Facilities

          (a)  Each Company shall  forecast the amount of generating  capability
               required to meet its Company Load Responsibility and its Planning
               Reserve Level in future Years.

          (b)  A current Joint Resource Plan will be maintained  that will state
               the current forecasted System Load  Responsibility  including the
               Planning Reserve Level and the required resources.

          (c)  All  Generating  Units  placed in service  after the date of this
               Agreement  shall be in  accordance  with the then  current  Joint
               Resource  Plan.  Joint Units shall be  authorized by the Board of
               Directors  of the Parent  Company  prior to the  commencement  of
               detailed engineering of the units.

          (d)  For the purpose of this Agreement, the Generating Units listed in
               Schedule B are not Joint Units.

          (e)  The  organization  designated by the CEO shall be responsible for
               the staffing, operation and maintenance of each Generating Unit.

     6.2 Planning Reserve Levels

     The Operating  Committee  shall  periodically  review the Planning  Reserve
Level for each Company and recommend any modifications of such to the CEO.

     6.3 Provision to Achieve Planning Reserve Levels

          (a)  Each Company  shall own or have  available  to it under  contract
               such generating  capability and other facilities as are necessary
               to supply  its  Company  Load  Responsibility  plus its  Planning
               Reserve Level.

          (b)  The  Joint  Resource  Plan  shall be  periodically  reviewed  and
               adjusted to provide the Companies their required Planning Reserve
               Levels.  Any  Company  with  Reserve  Capacity  in  excess of its
               Planning Reserve Level for a future Year shall commit such excess
               capacity to Companies with insufficient  Reserve Capacity to meet
               their  Planning  Reserve  Level  during  that Year or any portion
               thereof.  The deficit Companies shall make payments to the excess
               Companies  in  respect  of each  Month of the  Year to which  the
               commitment  applies  in the  amount  of the  Capacity  Commitment
               Charge in  accordance  with  Schedule  C. In the  event  that the
               System  Capability,  including  outside  capacity  purchases,  is
               insufficient  to meet such Planning  Reserve  Levels,  the System
               Capability  shall  be  allocated  to  provide  each  Company  its
               Prorated Reserve Level.

          (c)  The ownership  percentages in future Joint Units are  established
               in  accordance  with  Schedule A, but may be  reallocated  in the
               Joint Resource Plan by recommendation of the Operating  Committee
               and authorization by the CEO.

     6.4 Capacity Sales and Purchases and Reserve Shortfalls

          (a)  The Agent shall  coordinate  and assist the  Companies  in making
               off-System capacity sales and purchases.

          (b)  The  System  Reserve  Capacity  shall be at the  disposal  of any
               Company  requiring such  capacity.  Should the System be short of
               capacity  as a result of an  emergency  and be unable to purchase
               the  deficit,  each  Company  shall  take  such  actions  as  are
               necessary to bring System load and generation into balance.

     6.5 Energy Exchanges Among the Companies

     The Agent shall  schedule the Energy output of System  Capability to obtain
the  lowest  cost of Energy  for  serving  System  Demand  consistent  with each
Company's  operating  and  security  constraints,   including  voltage  control,
stability  loading  of  facilities,  operating  guides  as  recommended  by  the
Operating  Committee  and approved by the CEO, fuel  commitments,  environmental
requirements, and continuity of service to customers.

     6.6 Energy Exchange Pricing

     For the purpose of pricing  Energy  exchange  among the  Companies,  System
resources shall be utilized to serve System requirements in the following order:

          a)   Those Generating Units which are designated not to be operated in
               the order of  lowest  to  highest  Variable  Cost due to  Company
               operating constraints shall be allocated to the Company requiring
               the Generating Unit.

          (b)  The lowest  Variable  Cost  generation of each  Company's  Hourly
               Capability shall first be allocated to serve its Own Load.

          c)   The next lowest Variable Cost portion of each Company's remaining
               Hourly  Capability  shall  be  allocated  to  serve  Pool  Energy
               requirements of Companies under System  Economic  Dispatch.  Pool
               Energy shall be priced in accordance with Schedule D.

          (d)  The next lowest Variable Cost portion of each Company's remaining
               Hourly Capability shall be used to supply Internal Economy Energy
               to Companies under System  Economic  Dispatch.  Internal  Economy
               Energy shall be priced in accordance with Schedule E.

     6.7 Energy Exchanges with Non-Associated Entities

     The Agent  shall  coordinate  and  direct  off-System  purchases  of Energy
necessary to meet System requirements or improve System economy,  after Internal
Economy Energy  transactions have been effected.  The Agent shall coordinate and
direct   off-System   sales  of  Energy  available  after  meeting  all  of  the
requirements  of the System  including the Energy  associated  with  contractual
requirements for off-System  capacity sales. Such off-System Energy purchases or
sales  shall be  implemented  by  decremental  or  incremental  System  Economic
Dispatch as appropriate. Any Margin on off-System Energy sales or purchases made
to improve  System  economy shall be  distributed to the Companies in accordance
with Schedule F. Price  quotations  for such Energy sales shall be determined in
accordance with Schedule J.

     6.8 Communications and other Facilities

     The Companies shall provide  communications and other facilities  necessary
for:

          (a)  The  metering  and  control of the  generating  and  transmission
               facilities;

          (b)  The dispatch of electric Power and Energy; and

          (c)  For such other purposes as may be necessary for optimum operation
               of the System.

                                   ARTICLE VII

                             CENTRAL CONTROL CENTER

     7.1 Central Control Center

     The Agent shall  provide and operate a Central  Control  Center  adequately
equipped and staffed to meet the  requirements  of the Companies for  efficient,
economical and reliable operation as contemplated by this Agreement.

     7.2 Expenses

     All expenses for operation of the Central  Control  Center shall be paid by
the Agent and billed monthly to each Company in accordance with Schedule G.



                                  ARTICLE VIII

                                     GENERAL

     8.1 Regulatory Authorization

     This Agreement is subject to certain regulatory  approvals and each Company
and the Agent shall diligently seek all necessary  regulatory  authorization for
this Agreement.

     8.2 Effect on Other Agreements

     This  Agreement  shall not modify the  obligations of any Company under any
agreement  between  that  Company  and others not parties to this  Agreement  in
effect at the date of this Agreement,  nor shall it modify any agreement between
or among the Companies  under any  transmission  tariff or other agreement filed
with the Federal Energy Regulatory Commission.

     8.3 Schedules

     The basis of  compensation  for the use of facilities and for the Power and
Energy  provided or supplied by a Company to another  Company or Companies under
this Agreement shall be in accordance with arrangements agreed upon from time to
time among the Companies.  Such arrangements  shall be in the form of Schedules,
each of which,  when signed by the parties  thereto and  approved or accepted by
appropriate regulatory authority, shall become a part of this Agreement.

     8.4 Billings

     Bills for services  rendered  hereunder  shall be  calculated in accordance
with  applicable  Schedules,  and shall be issued on or before the tenth working
Day of the Month  following that in which such service was rendered and shall be
payable on or before the twentieth Day of such Month.  After the thirtieth  Day,
interest  shall accrue on any balance due until paid at the latest rate approved
by the  United  States  Securities  and  Exchange  Commission  for  loans  among
Companies in the Central and South West System.  Billings in good faith disputed
and paid shall be deemed to have been paid under protest.


     8.5 Waivers

     Any waiver at any time by a Company of its rights with respect to a default
by any other  Company  under this  Agreement  shall not be deemed a waiver  with
respect to any subsequent  default of similar or different nature,  nor shall it
prejudice its right to deny waiver of similar default to a different Company.

     8.6 Successors and Assigns; No Third Party Beneficiary

     This  Agreement  shall  inure to and be  binding  upon the  successors  and
assigns of the  respective  parties  hereto,  but shall not be assignable by any
party without the written consent of the other parties,  except upon foreclosure
of a mortgage  or deed of trust.  Nothing  expressed  or  mentioned  or to which
reference  is made in this  Agreement  is intended or shall be construed to give
any person or  corporation  other than the parties hereto any legal or equitable
right,  remedy or claim under or in respect of this  Agreement or any  provision
herein  contained,  expressly  or by  reference,  or any Schedule  hereto,  this
Agreement,  any such Schedule and any and all conditions  and provisions  hereof
and thereof being intended to be and being for the sole and exclusive benefit of
the parties hereto, and for the benefit of no other person or corporation.

     8.7 Amendment

     It is contemplated  by the parties that it may be appropriate  from time to
time to change,  amend,  modify or  supplement  this  Agreement or the Schedules
which are attached to this Agreement to reflect  changes in operating  practices
or costs of  operations  or for other  reasons.  This  Agreement may be changed,
amended, modified or supplemented by an instrument in writing executed by all of
the parties.

     8.8 Independent Contractors

     It is agreed among the Companies  that by entering into this  Agreement the
Companies shall not become partners,  but as to each other and to third persons,
the Companies shall remain  independent  contractors in all matters  relating to
this Agreement.

     8.9 Responsibility and Liability

     The  liability of the parties  shall be several,  not joint or  collective.
Each party shall be responsible  only for its  obligations,  and shall be liable
only for its  proportionate  share of the costs and expenses as provided in this
Agreement,  and any liability resulting herefrom. Each party hereto will defend,
indemnify,  and save harmless the other parties  hereto from and against any and
all  liability,  loss,  costs,  damages,  and  expenses,   including  reasonable
attorney's  fees,  caused by or  growing  out of the gross  negligence,  willful
misconduct, or breach of this Agreement by such indemnifying party.



     IN WITNESS WHEREOF, each of the Companies has caused this Agreement and the
attached  Schedules to be signed in its name and on its behalf by its  President
attested by its Secretary, both being duly authorized,  and CSWS has caused this
Agreement and the attached  Schedules to be signed in its name and on its behalf
by its Chief  Executive  Officer  attested  by its  Secretary,  both  being duly
authorized. This Agreement and attached Schedules shall become effective on such
date as is established by the Federal Energy Regulatory Commission.


                                       CENTRAL POWER AND LIGHT COMPANY
Attest


                                       By   /s/
Secretary                                       President



                                       PUBLIC SERVICE COMPANY OF OKLAHOMA
Attest


                                       By  /s/
Secretary                                       President



                                       SOUTHWESTERN ELECTRIC POWER COMPANY
Attest


                                       By   /s/
Secretary                                       President



                                       WEST TEXAS UTILITIES COMPANY
Attest


                                       By   /s/
Secretary                                       President



                                       CENTRAL AND SOUTH WEST SERVICES, INC.
Attest


                                       By   /s/
Secretary                                       Chief Executive Officer




<PAGE>
                                   SCHEDULE A

                                   JOINT UNIT

     9.1 Purpose

     The purpose of this  Schedule  is to provide  the basis for the  Companies'
participation in Joint Units.

     9.2 Ownership

     (a) Every Joint Unit shall be owned by the Companies  participating  in the
Joint Unit as tenants  in common.  Ownership  shares in each Joint Unit shall be
allocated  insofar as  practical  to achieve a  Prorated  Reserve  Level for all
Companies  participating in the unit. The allocation shall be recommended by the
Operating  Committee  and  authorized  by the CEO  prior to the time the unit is
authorized  by the Board of  Directors  of the  Parent  Company.  However,  each
Company  shall own at least  fifty (50)  megawatts  of each  Joint  Unit  unless
otherwise  agreed  to  by  the  Operating  Committee.   Each  Company  shall  be
responsible  for its pro rata share of the costs of construction of the unit and
shall contribute such funds to the Agent as billed.

     (b) When a new Joint Unit is installed at a site already occupied by one or
more existing  Generating  Units the Agent, in  consultation  with the Operating
Committee, shall identify any existing facilities that will be common to the new
Joint Unit and the portion of the common  facilities  to be allocated to the new
Joint Unit. The owners of the new Joint Unit shall  compensate the owners of the
existing common facilities for the use of those common facilities.

     9.3 Contracts

     The  Companies  shall  execute a joint  ownership  agreement for each Joint
Unit, such agreement to set out all of the rights and obligations of the parties
relating to the specific Joint Unit, including the allocation of fuel costs, the
allocation of other  operation  costs and the  allocation of  maintenance  costs
among the owners.


<PAGE>
                                   SCHEDULE B

                     COMPANY UNITS THAT ARE NOT JOINT UNITS

     10.1 Purpose

     The purpose of this Schedule is to list the Generating  Units, to be placed
in service after the date of the original  Operating  Agreement  dated September
28, 1983, which are not Joint Units.

     10.2 Company Units That Are Not Joint Units

     The Company units that are not Joint Units are as follows:

                  South Texas Project Unit Number 1 - CPL

                  South Texas Project Unit Number 2 - CPL

                  Dolet Hills Unit Number 1 - SWEPCO

                  Pirkey Unit Number 1 - SWEPCO




<PAGE>

                                   SCHEDULE C

                           CAPACITY COMMITMENT CHARGE

     11.1 Purpose

     The  purpose  of this  Schedule  is to  establish  the basis  for  Capacity
Commitments  between the  Companies  and the rates for the  Capacity  Commitment
Charge and associated Energy.

     11.2 Basis for Capacity Commitment

     A  committing  Company  shall make  available  to a receiving  Company unit
capacity  consisting  of a  portion  of  the  output  of one  or  more  specific
Generating Units. The receiving Company shall be entitled to receive Energy from
the specified  Generating Unit(s) up to an amount equal to an annual load factor
of sixty (60) percent or such other amount as is mutually agreeable.

     11.3 Provisions for Capacity Commitment Charge

     The monthly Capacity Commitment Charge for each specific Generating Unit(s)
from which capacity is committed  shall be an amount not to exceed the result of
the following formula:

     A = (1/12) (B) (C/D) (E)

     Where:

          A = Monthly  Capacity  Commitment  Charge for the specified unit to be
          due each month regardless of the availability of the specific unit.

          B = 0.1712 (fixed charge rate for the committing Company).

          C = Committing Company's total dollar investment, at original cost, in
          the  specific  Generating  Unit as of December 31 of the year prior to
          the year of the Capacity Commitment.

          D = Rated net dependable capability of the specific Generating Unit in
          megawatts.

          E = Megawatts of capacity committed from the specified unit.

     11.4 Provision for Energy Charge

     The rate for Energy received by a receiving  Company from specified unit(s)
shall be the Variable Cost of Energy  produced from each specified  unit(s) plus
ten (10) percent of such costs or three (3) mills per  kilowatt-hour,  whichever
is less.


<PAGE>

                                   SCHEDULE D

                 PAYMENTS AND RECEIPTS FOR POOL ENERGY EXCHANGES

                               AMONG THE COMPANIES

     12.1 Purpose

     The  purpose  of this  Schedule  is to  provide  the basis for  determining
payments and receipts among the Companies for Pool Energy exchanges.

     12.2 Hourly Calculations

     The payments and receipts of Section 12.3 are  calculated  Hourly,  but are
accumulated and billed Monthly among the Companies

     12.3 Receipts and Payments

     A selling  Company shall receive from a purchasing  Company one hundred and
ten percent  (110%) of the selling  Company's  Incremental  Energy Cost for Pool
Energy sold. A purchasing Company shall pay for Pool Energy received one hundred
and ten percent (110%) of its portion of the aggregate of the selling Companies'
Incremental Cost for Pool Energy. Where Pool Energy is purchased  simultaneously
by more than one Company,  these charges shall be pro rated in proportion to the
megawatt-hours of Pool Energy purchased by each buyer.





<PAGE>

                                   SCHEDULE E

                       PAYMENTS AND RECEIPTS FOR INTERNAL

                ECONOMY ENERGY EXCHANGES AMONG THE COMPANIES AND

                    FOR OFF-SYSTEM ENERGY PURCHASES AND SALES

     13.1 Purpose

     The  purpose  of this  Schedule  is to  provide  the basis for  determining
payments and receipts among the Companies for Internal  Economy Energy exchanges
and for off-System Energy purchases and sales made to improve System economy.

     13.2 Hourly Calculations

     The  payments  of  Section  13.3 and  receipts  of  Section  13.4  shall be
calculated Hourly, but are accumulated and billed Monthly among the Companies.

     13.3 Payments

     A purchasing  Company shall pay its  Decremental  Energy Value for Internal
Economy  Energy  purchased and  off-System  Energy  purchased to improve  System
economy.

     13.4 Receipts

     A selling  Company shall receive its  Incremental  Energy Cost for Internal
Economy Energy sold and off-System Energy sold to improve System economy.




<PAGE>

                                   SCHEDULE F

                       DISTRIBUTION OF MARGIN FOR INTERNAL

                   ECONOMY ENERGY EXCHANGES AND FOR OFF-SYSTEM

                           ENERGY PURCHASES AND SALES

     14.1 Purpose

     The purpose of this  Schedule is to  establish  the basis for  distributing
among the Companies the Margin  resulting from Internal Economy Energy exchanges
and for off-System Energy purchases and sales made to improve System economy.

     14.2 Distribution of Margin

     Any Margin  remaining from Internal Economy Energy exchanges and off-System
Energy  purchases and sales made to improve System  economy after  deducting any
Transaction  Cost  incurred in the period to which the Margin  relates  shall be
distributed to the Companies in proportion to the relative magnitude of the sums
for each  Company of the Energy  generated  or not  generated by such Company in
order to participate in Internal  Economy  Energy  exchanges or such  off-System
purchases or sales.


<PAGE>

                                   SCHEDULE G

                       DISTRIBUTION OF OPERATING EXPENSES

                          OF THE CENTRAL CONTROL CENTER

     15.1 Purpose

     The  purpose of this  Schedule  is to provide a basis for the  distribution
among the Companies of the costs  incurred by the Agent in operating the Central
Control Center.

     15.2 Costs

     Costs for the purpose of this Schedule  shall include all costs incurred in
maintaining  and operating the Central Control Center  including,  among others,
such items as salaries,  wages,  rentals,  the cost of materials  and  supplies,
interest, taxes, depreciation,  transportation, travel expenses, consulting, and
other professional services.

     15.3 Distribution of Costs

     All costs shall be billed by Agent to the  Companies in  proportion  to the
average  of the  maximum  Company  Peak  Demands  experienced  during  the three
previous calendar Years with the following  exception.  In the event the Central
Control  Center  makes a study or  performs  a  special  service  in  which  all
Companies are not thus proportionately  interested,  any resulting cost shall be
distributed to the interested parties in accordance with the standard procedures
of Agent authorized by the United States Securities and Exchange Commission.





<PAGE>

                                   SCHEDULE H

                            CAPACITY COMMITMENT UNITS

     16.1 Purpose

     The purpose of this  Schedule is to identify  the  Generating  Units of the
Companies from which Capacity  Commitments shall be made pursuant to Section 6.3
in accordance with Schedule C.

     16.2 Commitment Units

     Listed  below are the  Generating  Units from  which each of the  Companies
shall  commit  Capacity to other  Companies  pursuant to Section  6.3.  Capacity
Commitments  shall be made from the first listed unit of the committing  Company
unless or to the extent that such unit is not  expected to be  available  during
the commitment  period. In such event,  Capacity  Commitments shall be made from
the second listed unit of the committing Company.

COMPANY       UNIT NAME            RATING(MW)       YEAR INSTALLED

CPL           B. M. Davis #2          341               1976
              Laredo #3               101               1975

PSO           Riverside #2            465               1976
              Riverside #1            457               1974

SWEPCO        Knox Lee #5             344               1974
              Wilkes #3               351               1971

WTU           Fort Phantom #2         204               1977
              Fort Phantom #1         158               1974





<PAGE>

                                   SCHEDULE I

                            PLANNING-RESERVE CRITERIA

     17.1 Purpose

     The purpose of this  Schedule is to identify  the  criteria  which shall be
used by the Companies in determining  their  respective  Planning Reserve Levels
for purposes of determining their respective Capacity Commitment obligations

     17.2 Planning Reserve Criteria

     The Planning  Reserve Level for each of the Companies shall be equal to 15%
of Company Load Responsibility.



<PAGE>

                                   SCHEDULE J

                              STATEMENT OF PRACTICE

                              REGARDING OFF-SYSTEM

                                  ENERGY SALES

     18.1 Purpose

     The  purpose of this  Schedule  is to  identify  the basis upon which price
quotations  for energy sales to a  non-associated  entity made to improve System
economy will be determined when any such  non-associated  entity makes a request
of a Company or the Agent to purchase  System Energy.  The prices for sales made
shall be set by  negotiation  or in accordance  with filed rate schedules of the
Companies and may include standard industry adders.

     18.2 Determination of Energy Price Quotations

     The CSW Central Control Center will predispatch System Energy  requirements
based upon an  estimate of on-line  System  generation  and such  System  Energy
requirements.  Any  request for the  purchase of System  Energy will result in a
price   quotation   based   upon   the   incremental   running   cost   of   the
next-least-costly-to-operate  System  Generating Unit (that will be available to
make the sale  requested  during  the time  period  that is the  subject  of the
request by the  non-associated  entity)  after  System  needs have been met.  In
determining  whether a  Generating  Unit will be  available  to make a requested
sale,  the  matters  listed in  Section  6.5 and the  availability  of  adequate
transmission  capacity on the System and on the systems of other utilities shall
be considered.




<PAGE>

                                   SCHEDULE K

                    DISTRIBUTION OF CERTAIN TRANSACTION COSTS

     19.1 Purpose

     The  purpose of this  Schedule  is to provide a basis for the  distribution
among the  Companies  of certain  charges  assessed by  non-associated  entities
against  one or  more of the  Companies  for  transmission  service  related  to
transactions contemplated by the Agreement.

     19.2 Fixed Transaction Costs

     For purposes of this  Schedule,  Fixed  Transaction  Costs shall consist of
transmission  service charges that are not computed based on specific  schedules
that vary on an  hour-by-hour  basis or that are not computed for specific  firm
transmission  service  reservations  between Companies dependent on the level of
reservation.

     19.3 Distribution of Fixed Transaction Costs

     All Fixed  Transaction Costs shall be billed to the Companies in proportion
to their maximum Company Peak Demands  experienced  during the previous calendar
Year less interruptible loads served during the peak hour.

     19.4 Directly Assigned Transaction Costs

     For purposes of this Schedule,  Directly  Assigned  Transaction Costs shall
consist of transmission service charges due to non-associated  entities that are
not  Fixed  Transaction  Costs and that are  associated  with the  receipt  by a
Company of Pool Energy,  Energy  produced from a Joint Unit,  Energy  associated
with a Capacity Commitment and off-System Energy purchased with reserves to meet
the requirements of the receiving Company.

     19.5 Distribution of Directly Assigned Transaction Costs

     All Directly Assigned Transaction Costs shall be billed to the Companies in
accordance with the following implementation steps:

          1)   Directly   Assigned   Transaction  Costs  due  to  non-associated
               entities shall be paid by the Company  receiving the bill.  Where
               two or more Companies are jointly receiving such Energy for which
               a  consolidated   transmission  service  bill  is  rendered,  the
               involved  Companies  will  be  responsible  for  the  charges  in
               proportion to their megawatt-hour (MWH) share of such Energy.

          2)   Should  a  non-associated  entity  render  a  bill  for  Directly
               Assigned  Transaction  Costs that does not  separately  attribute
               such  costs to  particular  Pool  Energy,  Joint  Unit,  Capacity
               Commitment  or   off-System   Energy   purchased   with  reserves
               transactions,  the terms and conditions of the contracts, tariffs
               or ERCOT practices on which the charges are based will be used to
               determine  which  Companies will be  responsible  for such Energy
               transaction charges.

          3)   When losses are required to be paid in kind, and the  responsible
               Company provides Energy (to the scheduling Company) sufficient to
               cover  the  losses to be  returned,  such  payments  shall not be
               considered  as  Directly  Assigned  Transaction  Costs.  When the
               responsible  Company  chooses to pay the cost associated with the
               scheduling  Company's  returning  the  losses  on  behalf  of the
               System,  such  Directly  Assigned   Transaction  Costs  shall  be
               determined  as the  product of the losses  paid back (in MWH) and
               the scheduling  Company's average monthly fuel cost for the Month
               in which the losses are returned.

          4)   On a calendar  Month basis,  according to  transaction  date, the
               total Directly Assigned Transmission Costs for which each Company
               is responsible and the total Directly Assigned Transmission Costs
               paid by each Company  shall be tabulated.  For a given Month,  an
               adjustment shall be made in an appropriate CSW Money Pool account
               for each Company by an amount equal to the difference between the
               total Directly Assigned Transaction Costs paid by the Company and
               the Directly Assigned  Transaction Costs for which the Company is
               responsible.

</TEXT>
</DOCUMENT>
