ITEM 1. BUSINESS GENERAL
Central Louisiana Electric Company, Inc. (the Company) was incorporated in 1934 under the laws of the State of Louisiana and is engaged principally in the generation, transmission, distribution and sale of electric energy to approximately 225,000 customers in 63 communities and contiguous rural areas in a 14,000 square-mile region in the State of Louisiana. At December 31, 1996, the Company employed 1,215 persons. The Company's mailing address is P. O. Box 5000, Pineville, Louisiana 71361-5000, and its telephone number is (318) 484-7400.
ELECTRIC OPERATIONS
CERTAIN FACTORS AFFECTING THE COMPANY'S ELECTRIC OPERATIONS
As an electric utility, the Company has been affected, to varying degrees, by a number of factors affecting the electric utility industry in general. These factors include increasingly competitive business conditions, the cost of compliance with environmental regulations and changes in the federal regulation of the generation and transmission of electricity. For a discussion of various regulatory changes and competitive forces affecting the Company and other electric utilities, see "Regulatory and Environmental Matters -- Industry Developments/Customer Choice" below.
POWER GENERATION
The Company operates and either owns or has an ownership interest in four steam electric generating stations and a gas turbine. The Company is the sole owner of Coughlin Power Station, Teche Power Station and Rodemacher Power Station Unit 1. The Company owns a 50% interest in Dolet Hills Power Station Unit 1 (Dolet Hills Unit 1), and a 30% interest in Rodemacher Power Station Unit 2 (Rodemacher Unit 2). At December 31, 1996, the Company's aggregate electric generating capacity was 1,693,000 kilowatts (excluding the Company's 20,000 kilowatts of firm purchases from the Sabine River Authority). The following table sets forth certain information with respect to the Company's generating facilities.
(1) Where oil is used on a standby basis, capacity may be reduced. (2) Represents the Company's 30% interest in the capacity of Rodemacher Unit 2, a 523,000-kilowatt generating unit. (3) Represents the Company's 50% interest in the capacity of Dolet Hills Unit 1, a 650,000-kilowatt generating unit.
FUEL AND PURCHASED POWER
Change in fuel and purchased power expenses reflect fluctuations in generation fuel mix costs, availability of economy power and deferral of expenses for recovery from customers through fuel adjustment clauses in subsequent months.
The following table sets forth, for the periods indicated, the percentages of power generated from various fuels at the Company's electric generating plants, the cost of fuel used per kilowatt hour (kWh) attributable to each such fuel and the weighted average fuel cost per kWh.
POWER PURCHASES
The Company purchases electric energy from neighboring utilities when the price of the energy purchased is less than the cost to the Company of generating such energy from its own facilities. Additionally, the Company has a long-term contract under which it purchases a small percentage of its total energy requirements from a hydroelectric generating plant.
In 1996, the Company purchased substantially more power on the wholesale market, as a result of increased availability of low-cost, solid fuel generation. The cost of purchased power was less than the Company's generation cost due primarily to the substantial increases in natural gas prices. The following table sets forth the amount of power purchased by the Company on the wholesale market for the years indicated.
For information with respect to the Company's ability to currently pass through changes in costs of fuel to its customers, see "Regulatory and Environmental Matters -- Rates" below.
Natural Gas Supply
During 1996, the Company purchased a total of 23,277 billion British thermal units (MMMBtu) of natural gas for the generation of electricity. The annual and average per-day quantities of gas purchased by the Company from each supplier are shown in the table below.
- ------------------------- *Of the 1996 purchases from LIG, 160 MMMBtu were for deliveries in 1997.
The Company terminated several gas supply and transportation contracts in 1996 in order to take advantage of a more competitive natural gas market. The Company accessed this competitive gas supply and transportation market with the construction of Company-owned pipeline laterals into three of its power plants. A contract for base supply with NES, a subsidiary of NorAm Energy Corp. was terminated October 31, 1996 under price reopener provisions which were initiated by the Company in early 1996. During 1996, the Company also terminated a contract with LL&E for the purchase and transportation of 5 MMMBtu of gas per day. Effective November 1, 1996 the Company entered into a one-year contract with LIG which obligates the Company to a purchase commitment of 13.8 billion cubic feet of gas, about one-third of its total natural gas requirements.
The remaining two-thirds of the Company's natural gas requirements are purchased on the spot market through arrangements made month to month, week to week and day to day. Arrangements made throughout the month allow the Company to take advantage of opportunities in the energy market and in the gas market, as prices tend to vary considerably throughout the month.
The newly constructed Company-owned pipelines give the Company access to several markets not previously available when the Company was connected only to the LIG pipeline system. These direct sources include market supplies on the gas pipeline systems of Trunkline, Columbia Gas and ANR.
Natural gas has been relatively plentiful in recent years; however, future supplies to the Company are vulnerable to disruption due to weather conditions, transportation disruption, price changes and other events. Large boiler fuel users of natural gas, including electric utilities, generally have the lowest priority among gas users in the event pipeline suppliers are forced to curtail deliveries due to inadequate supplies. As a result, supplies of natural gas may become unavailable from time to time, or prices may increase rapidly in response to temporary supply disruptions. Such events may require the Company to shift its gas-fired generation to alternative fuel sources, such as fuel oil, to the extent it has the capability to burn those alternative fuels. Currently, the Company anticipates that its alternative fuel capability, combined with its solid-fuel generating resources, is adequate to meet fuel needs during any temporary interruption of gas supplies.
Coal and Lignite Supply
Substantially all of the coal for Rodemacher Unit 2 is purchased under a long-term contract expiring in 2007 with Kerr-McGee Coal Corporation from a mine in Wyoming. The contract may be terminated earlier under a price reopener provision which may be initiated by either party beginning in early 1997; and the Company has recently exercised its option to renegotiate the price. If the parties do not come to an agreement regarding price, the contract terminates effective mid-1999. The price of coal under the contract is a base price per ton plus a "total escalation charge" to reflect changes in certain indices specified in the contract. After purchasing a given annual quantity of base coal (516,000 tons in 1996), the Company has the right to purchase coal from third parties in the spot market, and Kerr-McGee has the right to meet the terms of the proposed purchase if it chooses to do so. The coal is transported to the Rodemacher Unit 2 site under terms of a long-term rail transportation contract in unit trains which are leased by the Company pursuant to various long-term leases.
Substantially all of the lignite used to fuel Dolet Hills Unit 1 is obtained under two long-term agreements. The Company and Southwestern Electric Power Company (SWEPCO), each a 50% owner of Dolet Hills Unit 1, have entered into agreements pursuant to which each acquired an undivided 50% interest in the other's leased and owned lignite reserves in northwestern Louisiana. The Company and SWEPCO have also entered into a long-term agreement expiring in 2011 with the Dolet Hills Mining Venture for the mining and delivery of such lignite reserves, which reserves are expected to provide a substantial portion of the fuel requirements for the projected operating life of Dolet Hills Unit 1. The Company's minimum annual purchase requirement is 1,187,500 tons. The price of lignite delivered pursuant to the agreement is a base price per ton, subject to escalation based on certain inflation indices, plus specified "pass-through" costs. Additional spot lignite may be obtained through competitive bidding.
Additionally, the Company and SWEPCO have entered into a long-term agreement expiring in 2011 with Red River Mining Co., a joint venture of the North American Coal Corporation and Phillips Coal Company, which provides for base contract purchases and spot purchases of lignite. The Company's minimum annual purchase requirement is 275,000 tons. The base lignite price under the contract is a base price per MMMBtu, subject to escalation, plus certain pass-through costs, while the spot lignite price is determined through competitive bidding.
The continuous supply of coal and lignite from the mining sources may be subject to interruption due to adverse weather conditions or other factors which may disrupt mining operations or transportation. At December 31, 1996, the Company's coal inventory at Rodemacher Unit 2 was approximately 106,000 tons (about a 49-day supply), and the Company's lignite inventory at Dolet Hills Unit 1 was approximately 204,000 tons (about a 36-day supply).
Oil Supply
The Company stores fuel oil as an alternative fuel source. Rodemacher Power Station has storage capacity for an approximate 75-day supply and other generating stations have storage capacity totaling about a 20-day supply. However, in accordance with the Company's current fuel oil inventory practices, at December 31, 1996, the Company had between 5 to 10 days supply of fuel oil stored at its generating stations. During 1996, 82,451 barrels of fuel oil were burned. The increase in 1996 was due to an unusually cold winter in early 1996 which resulted in a decrease in gas availability. The Company has been able to obtain fuel oil by spot purchases as needed.
SALES
The Company is a "public utility" engaged principally in the generation, transmission, distribution and sale of electricity within Louisiana. For further information regarding the Company's generating stations and its transmission and distribution facilities, see "Power Generation" above and "Properties" in Item 2

ITEM 2. PROPERTIES
All of the Company's electric generating stations and all other operating properties are located in the State of Louisiana. The Company considers all of its properties to be well maintained, in good operating condition and suitable for their intended purposes.
ELECTRIC GENERATING STATIONS
As of December 31, 1996, the Company either owned or had an ownership interest in four steam electric generating stations and a gas turbine with a combined electric generating capacity of 1,693,000 kilowatts. For additional information regarding the Company's generating facilities, see "Electric Operations -- Power Generation" in Item 1 of this report.
SUBSTATIONS
As of December 31, 1996, the Company owned 80 transmission substations and 320 distribution substations.
ELECTRIC LINES
As of December 31, 1996, the Company's transmission system consisted of approximately 67 circuit miles of 500 kilovolt (kV) lines; 454 circuit miles of 230 kV lines; 648 circuit miles of 138 kV lines; and 21 circuit miles of 69 kV lines. The Company's distribution system consisted of approximately 2,096 circuit miles of 34.5 kV lines and 10,745 circuit miles of other lines.
GENERAL PROPERTIES
The Company owns various properties, which include a seven-story headquarters office building, regional offices, a central warehouse, service centers, telecommunications equipment and other facilities owned for general purposes.
TITLE
The Company's electric generating plants and certain other principal properties are owned in fee. Electric transmission and distribution lines are located either on private rights-of-way or along streets or highways by public consent.
Substantially all of the Company's property, plant and equipment is subject to a lien securing obligations of the Company under an Indenture of Mortgage, which does not impair the use of such properties in the operation of its business.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any legal proceeding to which it is a party which would have a material adverse effect on its financial condition, results of operations, cash flows or competitive position. For a discussion of certain legal proceedings and regulatory matters involving the Company, see (i) "Business -- Regulatory and Environmental Matters -- Industry Developments/Customer Choice" and "--Environmental Quality" in Item 1 of this report and (ii) "Results of Operations --Nonfuel Operating Expenses and Income Taxes" in "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 7 and 8 of the 1996 Annual Report to Shareholders, which information is filed as Exhibit 13 to this report, which sections are herein incorporated by reference.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the Company during the fourth quarter of 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names of the executive officers of the Company, their positions held, five-year employment history, ages and years of service as of December 31, 1996 are presented below. Executive officers are appointed annually to serve for the ensuing year or until their successors have been appointed.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed for trading on the New York Stock Exchange (NYSE) and the Pacific Stock Exchange. The following table sets forth high and low sales prices for the Company's common stock as reported on the NYSE Composite Tape and dividends paid per share during each calendar quarter of 1996 and 1995.
Subject to the prior rights of the holders of the respective series of the Company's preferred stock, such dividends as determined by the Board of Directors of the Company may be declared and paid on the common stock from time to time out of funds legally available therefor. The provisions of the Company's charter applicable to preferred stock and certain provisions contained in the debt instruments of the Company under certain circumstances restrict the amount of retained earnings available for the payment of dividends by the Company. The most restrictive covenant requires that common shareholders' equity be not less than 30% of total capitalization, including short-term debt. At December 31, 1996, approximately $144,300,000 of retained earnings was not restricted. On January 24, 1997, the Board of Directors of the Company declared a quarterly dividend of $0.385 per share, which dividend was paid on February 15, 1997, to common shareholders of record on February 3, 1997.
As of March 14, 1997, there were 11,599 holders of record of the Company's common stock, and the closing price of the Company's common stock as reported on the NYSE Composite Tape was $27.125 per share.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information set forth in "Selected Financial Data" on page 3 of the 1996 Annual Report to Shareholders is incorporated herein by reference; such information is filed as Exhibit 13 to this report. This information should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto set forth on pages 12 through 29 of the 1996 Annual Report to Shareholders, which is filed as Exhibit 13 to this report and incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth in "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 4 through 11 of the 1996 Annual Report to Shareholders is incorporated herein by reference; such information is filed as Exhibit 13 to this report.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth on pages 12 through 29 of the 1996 Annual Report to Shareholders is incorporated herein by reference; such information is filed as Exhibit 13 to this report.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth (i) under the subcaption "Directors" under the caption "Election of Directors" on pages 2 and 3 of, and (ii) under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 6 of the Company's definitive Proxy Statement dated March 12, 1997, filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 (1997 Proxy Statement), is incorporated herein by reference. See also "Executive Officers of the Registrant" on pages 17 and 18 of this report.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the subcaption "Organization and Compensation of the Board of Directors" under the caption "Election of Directors" on pages 3 and 4 of, and under the caption "Executive Compensation" on pages 6 through 15 of the 1997 Proxy Statement (excluding the information required by paragraphs (k) and (l) of Item 402 of Regulation S-K) is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Directors and Management" on page 5 and under the caption "Security Ownership of Certain Beneficial Owners" on pages 16 and 17 of the 1997 Proxy Statement is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
The Exhibits designated by an asterisk are filed herewith. The Exhibits not so designated have been previously filed with the Securities and Exchange Commission and are incorporated herein by reference. The Exhibits designated by two asterisks are management contracts and compensatory plans and arrangements required to be filed as Exhibits to this report.
14(b) Reports on Form 8-K
During the three-month period ended December 31, 1996, the Company filed no Current Reports on Form 8-K.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Central Louisiana Electric Company, Inc.:
Our report on the consolidated financial statements of Central Louisiana Electric Company, Inc. has been incorporated by reference in this Form 10-K from page 30 of the 1996 Annual Report to Shareholders of Central Louisiana Electric Company, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(a)(2) on page 22 of this Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audit.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana January 29, 1997
CENTRAL LOUISIANA ELECTRIC COMPANY, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1996, 1995 and 1994 (In thousands)
- ----------------------- (1) Deducted in the balance sheet.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTRAL LOUISIANA ELECTRIC COMPANY, INC. (REGISTRANT)
BY: GREGORY L. NESBITT (Gregory L. Nesbitt, President and Chief Executive Officer)
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
INDEX TO EXHBITS ----------------