Uns Energy (UNS) 8-K Unisource Energy Reports Third Quarter 2010 Earnings, Narrows 2010 Earnings Guidance Range

Exhibit 99.2

UniSource Energy Corporation
3^rdQuarter 2010 Supplemental Earnings Information
As of October 27, 2010

TABLE OF CONTENTS
Safe Harbor and Non-GAAP Measures	1
Variance Explanation — 3rd Quarter	2
Variance Explanation — Year-to-Date	3
Operations & Maintenance Components	4
TEP Operating Statistics	5
TEP Margin Revenues	6
UNS Electric Operating Statistics	7
UNS Gas Operating Statistics	8
Basic & Diluted Shares Outstanding	9

SAFE HARBOR AND NON-GAAP MEASURES

This document contains forward-looking information that involves risks and uncertainties, that include, but are not limited to: state and federal regulatory and legislative decisions and actions; regional economic and market conditions which could affect customer growth and energy usage; weather variations affecting energy usage; the cost of debt and equity capital and access to capital markets; the performance of the stock market and changing interest rate environment, which affect the value of the company’s pension and other postretirement benefit plan assets and the related contribution requirements and expense; unexpected increases in O&M expense; resolution of pending litigation matters; changes in accounting standards; changes in critical accounting estimates; the ongoing restructuring of the electric industry; changes to long-term contracts; the cost of fuel and power supplies; performance of TEP’s generating plants; and other factors listed in UniSource Energy’s Form 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from historical results or from outcomes currently expected by UniSource Energy. The forecast assumptions and estimates below are not intended to be a full list of factors which could cause UniSource Energy’s future results to differ from current expectations. Please refer to UniSource Energy’s SEC filings for more information regarding risks and other uncertainties that could cause current expectations to differ from future results.

The Company’s press releases and other communications may include certain non-Generally Accepted Accounting Principles (GAAP) financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the Company’s financial statements.

Non-GAAP financial measures utilized by the Company include presentations of revenues, operating expenses, operating income and earnings (loss) per share. The Company uses these non-GAAP measures to evaluate the operations of the Company. Certain non-GAAP financial measures utilized by the Company exclude: the impact of non-recurring items: the effect of accounting changes or adjustments; expenses that are reimbursed by third parties; and other items. The Company’s management believes that these non-GAAP financial measures provide useful information to investors by removing the effect of variances in GAAP reported results of operations that are not indicative of fundamental changes in the earnings or cash flow capacity of the Company’s operations. Management also believes that the presentation of the non-GAAP financial measures is largely consistent with its past practice, as well as industry practice in general, and will enable investors and analysts to compare current non-GAAP measures with non-GAAP measures with respect to prior periods.

UNISOURCE ENERGY 3RD QUARTER EARNINGS VARIANCE EXPLANATION

	3rd Quarter 2009 UniSource Energy Net Income												$	57.6
	3rd Quarter						Change
TEP	2010			2009			Pre-Tax			After Tax
	-millions of dollars-
Retail Margin Revenues	$	188.2		$	189.1		$	(0.9	)	$	(0.5	)
L-T Wholesale Margin Revenues		5.6			6.0			(0.4	)		(0.2	)
Transmission Revenues		4.4			4.1			0.3			0.2
TEP Utility Gross Margin (Non-GAAP)		198.1			199.2			(1.0	)		(0.6	)
Base O&M		52.6			52.6			0.0			0.0
Depreciation		25.2			28.1			(2.9	)		(1.7	)
Amortization		8.2			9.6			(1.5	)		(0.9	)
Operating synergies related to Springerville Units 3&4		5.6			2.9			2.7			1.6
Total Other Income		2.9			3.4			(0.4	)		(0.3	)
Total Interest Expense		20.2			21.5			(1.3	)		(0.8	)
Other Line Item Changes		(3.4	)		(3.7	)		0.3			0.2
Income Tax Expense (Benefit)		38.1			34.6			3.5			3.5
TEP Net Income (GAAP)	$	59.0		$	55.3		NM			$	3.7
	Change in TEP Net Income													3.7
Other Business Segments — After Tax Amounts
UNS Electric Net Income	$	3.3		$	3.6		NM			$	(0.3	)
UNS Gas Net Income		(1.0	)		(1.3	)	NM				0.3
After-Tax (Loss) Income from MEH, UED and Consolidating Adj.		(6.3	)		0.2		NM				(6.5	)
Total Income (Loss) from Other Business Segments and Consolidating Adjustments	$	(4.0	)	$	2.5		NM			$	(6.5	)
	Change in UNS Electric, UNS Gas and Other													(6.5	)
	3rd Quarter 2010 UniSource Energy Net Income												$	54.9

2 — Q3 Variance Explanation

UNISOURCE ENERGY YEAR-TO-DATE EARNINGS VARIANCE EXPLANATION

	YTD September 30, 2009 UniSource Energy Net Income												$	93.8
	YTD September 30,						Change
TEP	2010			2009			Pre-Tax			After Tax
	-millions of dollars-
Retail Margin Revenues	$	433.2		$	438.6		$	(5.4	)	$	(3.3	)
L-T Wholesale Margin Revenues		20.2			19.0			1.2			0.7
Transmission Revenues		15.6			12.4			3.1			1.9
TEP Utility Gross Margin (Non-GAAP)		469.0			470.1			(1.1	)		(0.6	)
Loss related to the settlement of a dispute over tranactions with the California Power Exchange (CPX)		(3.0	)		0.0			(3.0	)		(1.8	)
Base O&M		163.3			173.6			(10.3	)		(6.2	)
Depreciation (1)		74.1			81.6			(7.5	)		(4.5	)
Amortization (1)		24.0			28.9			(5.0	)		(3.0	)
Operating synergies related to Springerville Units 3&4		18.1			8.8			9.2			5.5
Total Other Income (1)		7.0			14.2			(7.2	)		(4.3	)
Total Interest Expense (1)		63.7			65.7			(2.0	)		(1.2	)
Other Line Item Changes		(9.5	)		(11.6	)		2.1			1.3
Income Tax Expense (Benefit)		59.5			50.5			9.0			9.0
TEP Net Income (GAAP)	$	97.0		$	81.2		NM			$	15.8
	Change in TEP Net Income													15.8
Other Business Segments — After Tax Amounts
UNS Electric Net Income (2)	$	8.2		$	5.9		NM			$	2.3
UNS Gas Net Income		5.3			3.6		NM				1.7
After-Tax (Loss) Income from MEH, UED and Consolidating Adj.		(10.1	)		3.1		NM				(13.2	)
Total Other Income and Consolidating Adjustments	$	3.4		$	12.6		NM			$	(9.2	)
	Change in UNS Electric, UNS Gas and Other													(9.2	)
	YTD September 30, 2010 UniSource Energy Net Income												$	100.4

(1)

In June 2009, TEP adjusted its accounting for a 2006 investment in 14.14% of Springerville Unit 1 lease equity. As a result, TEP recorded a net increase to the income statement of $0.6 million, before tax. The adjustment recorded in June 2009 included additional depreciation expense of $7 million; a reduction of amortization expense of $3 million; a reduction of interest expense on capital leases of $2 million; and $3 million of equity in earnings which is included in Other Income on the income statement. For comparison purposes, these amounts have been excluded from 2nd quarter 2009 depreciation, amortization, interest expense and other income shown above.

(2)

UNS Electric’s results in the first six months of 2010 includes an after-tax gain of $1.8 million related to the settlement of a dispute over transactions with the CPX.

3 — YTD Variance Explanation

UNISOURCE ENERGY AND TEP O&M

UniSource Energy	3rd Quarter						YTD September 30,
O&M Components	2010			2009			2010			2009
	-millions of dollars-						-millions of dollars-
TEP Base O&M (Non-GAAP)	$	52.6		$	52.6		$	163.3		$	173.6
UNS Gas Base O&M		6.1			6.1			18.4			18.2
UNS Electric Base O&M		5.2			4.8			15.3			14.2
Consolidating Adjustments & Other		(2.2	)		(2.0	)		(6.6	)		(5.4	)
UniSource Energy Base O&M (Non-GAAP)	$	61.7		$	61.5		$	190.4		$	200.6
Reimbursed O&M Related to Springerville Units 3 and 4		14.0			11.8			40.5			29.6
O&M Related to Customer-funded Renewable Energy and DSM Programs		13.2			6.2			28.1			13.2
UniSource Energy O&M (GAAP)	$	88.9		$	79.5		$	259.0		$	243.4

TEP	3rd Quarter				YTD September 30,
O&M Components	2010		2009		2010		2009
	-millions of dollars-				-millions of dollars-
Wages, A&G, Other	$	37.8	$	35.3	$	109.9	$	109.0
Generating Plant Maintenance Expense		10.7		12.9		42.4		51.1
Pension and Postretirement Benefits Expense		4.1		4.4		11.0		13.5
TEP Base O&M (Non-GAAP)	$	52.6	$	52.6	$	163.3	$	173.6
Reimbursed O&M Related to Springerville Units 3 and 4		14.0		11.8		40.5		29.6
O&M Related to Customer-funded Renewable Energy and DSM Programs		9.7		4.8		20.6		9.9
TEP O&M (GAAP)	$	76.3	$	69.2	$	224.4	$	213.1

4 — O&M

TEP — OPERATING STATISTICS

	Three Months Ended September 30,												Nine Months Ended September 30,
	2010			2009			Incr (Decr)			% Change			2010			2009			Incr (Decr)			% Change
AVG. ELECTRIC CUSTOMERS
Residential		365,583			364,461			1,122			0.3	%		365,632			364,724			908			0.2	%
Commercial		35,880			35,747			133			0.4	%		35,852			35,631			221			0.6	%
Industrial		631			627			4			0.6	%		632			630			2			0.3	%
Mining		3			3			—			0.0	%		2			2			—			0.0	%
Other		62			61			1			1.6	%		62			61			1			1.6	%
Total		402,159			400,899			1,260			0.3	%		402,180			401,048			1,132			0.3	%
RETAIL SALES — MWH
Residential		1,444,461			1,453,143			(8,682	)		-0.6	%		3,109,007			3,129,160			(20,153	)		-0.6	%
Commercial		612,303			618,955			(6,652	)		-1.1	%		1,515,901			1,544,514			(28,613	)		-1.9	%
Industrial		629,849			627,940			1,909			0.3	%		1,639,500			1,666,778			(27,278	)		-1.6	%
Mining		274,420			269,172			5,248			1.9	%		806,571			792,791			13,780			1.7	%
Other		65,199			66,744			(1,545	)		-2.3	%		178,068			188,359			(10,291	)		-5.5	%
Total		3,026,232			3,035,954			(9,722	)		-0.3	%		7,249,047			7,321,602			(72,555	)		-1.0	%
RETAIL USAGE — KWH/CUSTOMER
Residential		3,951			3,987			(36	)		-0.9	%		8,503			8,580			(76	)		-0.9	%
Commercial		17,065			17,315			(250	)		-1.4	%		42,282			43,347			(1,065	)		-2.5	%
Industrial		998,176			1,001,499			(3,323	)		-0.3	%		2,594,146			2,645,679			(51,534	)		-1.9	%
Mining		91,473,333			89,724,000			1,749,333			1.9	%		403,285,500			396,395,500			6,890,000			1.7	%
Other		1,051,597			1,094,164			(42,567	)		-3.9	%		2,872,065			3,087,852			(215,788	)		-7.0	%
Total		7,525			7,573			(48	)		-0.6	%		18,024			18,256			(232	)		-1.3	%
WEATHER — COOLING DEGREE DAYS
Actual		1,096			1,155			(59	)		-5.1	%		1,491			1,571			(80	)		-5.1	%
10-Year Average		978			970									1,433			1,434
% Change Actual vs. 10-Year Avg.		12.1	%		19.1	%								4.0	%		9.6	%
ENERGY MARKET INDICATORS
Avg. Wholesale Power Prices Palo Verde Index — $/MWh
On Peak	$	38.65		$	35.22		$	3.43			9.7	%	$	38.88		$	33.14		$	5.74			17.3	%
Off Peak	$	26.67		$	21.95		$	4.72			21.5	%	$	28.36		$	22.30		$	6.06			27.2	%
Avg. Natural Gas Prices Permian Index — $/MMBtu	$	3.94		$	2.98		$	0.96			32.2	%	$	4.33		$	3.10		$	1.23			39.7	%

* Totals and percent changes calculated on un-rounded data; may not correspond to data shown in table

5 — TEP Operating Stats

TEP — RETAIL AND WHOLESALE MARGIN REVENUES

	Three Months Ended September 30,										Nine Months Ended September 30,
	2010		2009		Incr (Decr)			% Change			2010		2009		Incr (Decr)			% Change
RETAIL REVENUES — $ MILLIONS
Margin Revenues:
Residential	$	96.7	$	97.0	$	(0.3	)		-0.3	%	$	203.4	$	204.5	$	(1.1	)		-0.5	%
Commercial		51.2		51.6		(0.5	)		-0.9	%		123.4		124.6		(1.2	)		-0.9	%
Industrial		28.8		29.3		(0.5	)		-1.7	%		74.1		77.6		(3.4	)		-4.4	%
Mining		8.1		7.7		0.4			4.7	%		23.2		22.5		0.6			2.8	%
Other		3.4		3.5		(0.0	)		-1.2	%		9.1		9.4		(0.4	)		-3.7	%
Total	$	188.2	$	189.1	$	(0.9	)		-0.5	%	$	433.2	$	438.6	$	(5.4	)		-1.2	%
DSM / REST		11.8		4.8		7.1		NM				29.8		9.9		19.9		NM
Fuel Revenues:
Recovered from Customers		100.3		103.6		(3.3	)		-3.2	%		222.3		226.7		(4.3	)		-1.9	%
Total Retail Revenues	$	300.3	$	297.4	$	2.9			1.0	%	$	685.3	$	675.2	$	10.1			1.5	%
RETAIL REVENUES — CENTS / KWH
Margin Revenues:
Residential		6.69		6.67		0.02			0.3	%		6.54		6.54		0.01			0.1	%
Commercial		8.35		8.34		0.01			0.2	%		8.14		8.07		0.07			0.9	%
Industrial		4.57		4.67		(0.09	)		-2.0	%		4.52		4.65		(0.13	)		-2.8	%
Mining		2.95		2.87		0.08			2.7	%		2.88		2.84		0.03			1.1	%
Other		5.25		5.19		0.06			1.2	%		5.10		5.01		0.09			1.8	%
Total		6.22		6.23		(0.01	)		-0.2	%		5.98		5.99		(0.01	)		-0.2	%
DSM / REST		0.39		0.16		0.23		NM				0.41		0.14		0.28		NM
Fuel Revenues:
Recovered from Customers		3.31		3.41		(0.10	)		-2.9	%		3.07		3.10		(0.03	)		-0.9	%
Total Retail Revenues		9.92		9.80		0.13			1.3	%		9.45		9.22		0.23			2.5	%
LONG-TERM WHOLESALE MARGIN — $ MILLIONS
Long-term Wholesale Revenues	$	13.8	$	10.4	$	3.4			33.2	%	$	41.7	$	34.6	$	7.1			20.5	%
Fuel and Purchased Power Expense		8.2		4.4		3.8			87.0	%		21.5		15.6		5.9			37.8	%
Net	$	5.6	$	6.0	$	-0.4			-6.5	%	$	20.2	$	19.0	$	1.2			6.3	%

6 — TEP Margin Revenues

UNS ELECTRIC — OPERATING STATISTICS

	Three Months Ended September 30,												Nine Months Ended September 30,
	2010			2009			Incr (Decr)			% Change			2010			2009			Incr (Decr)			% Change
AVG. ELECTRIC CUSTOMERS
Residential		80,215			79,476			739			0.9	%		80,149			79,460			689			0.9	%
Commercial		10,349			10,308			41			0.4	%		10,346			10,331			15			0.1	%
Industrial		23			23			—			0.0	%		24			21			3			14.3	%
Mining		2			1			1			100.0	%		1			1			—			0.0	%
Other		266			265			1			0.4	%		266			263			3			1.1	%
Total		90,855			90,073			782			0.9	%		90,786			90,076			710			0.8	%
RETAIL SALES — MWH
Residential		301,191			300,881			310			0.1	%		652,457			651,577			880			0.1	%
Commercial		181,275			185,393			(4,118	)		-2.2	%		469,860			478,628			(8,768	)		-1.8	%
Industrial		62,090			56,438			5,652			10.0	%		165,471			144,273			21,198			14.7	%
Mining		51,115			43,036			8,079			18.8	%		149,254			116,643			32,611			28.0	%
Other		480			499			(19	)		-3.8	%		1,520			1,586			(66	)		-4.2	%
Total		596,151			586,247			9,904			1.7	%		1,438,562			1,392,707			45,855			3.3	%
RETAIL USAGE — KWH/CUSTOMER
Residential		3,755			3,786			(31	)		-0.8	%		8,141			8,200			(60	)		-0.7	%
Commercial		17,516			17,985			(469	)		-2.6	%		45,415			46,329			(915	)		-2.0	%
Industrial		2,699,565			2,453,826			245,739			10.0	%		6,894,625			6,870,143			24,482			0.4	%
Mining		25,557,500			43,036,000			(17,478,500	)		-40.6	%		149,254,000			116,643,000			32,611,000			28.0	%
Other		1,805			1,883			(79	)		-4.2	%		5,714			6,030			(316	)		-5.2	%
Total		6,562			6,509			53			0.8	%		15,846			15,461			384			2.5	%
RETAIL REVENUES — MILLIONS
Margin Revenues:
Residential	$	7.2		$	7.2		$	0.1			1.0	%	$	16.4		$	16.2		$	0.2			0.9	%
Commercial		6.2			6.4			(0.2	)		-2.5	%		17.0			17.2			(0.2	)		-1.3	%
Industrial		1.9			1.7			0.2			9.4	%		5.5			4.7			0.8			17.7	%
Mining		1.1			0.8			0.3			33.7	%		3.2			2.5			0.7			28.0	%
Other		0.0			0.1			(0.0	)		-4.7	%		0.1			0.2			(0.1	)		-43.5	%
Total Margin Revenues	$	16.5		$	16.1		$	0.4			2.2	%	$	42.2		$	40.7		$	1.5			3.6	%
DSM / REST		3.2			1.2			2.0			164.8	%		6.8			2.9			3.9			134.2	%
Fuel Revenues:
Recovered from Customers		40.0			34.2			5.8			17.0	%		90.5			98.7			(8.2	)		-8.4	%
Total Retail Revenues	$	59.7		$	51.5		$	8.1			15.8	%	$	139.4		$	142.3		$	(2.9	)		-2.0	%
WEATHER — COOLING DEGREE DAYS
Actual		5,758			5,666			92			1.6	%		8,235			8,710			(475	)		-5.5	%
10-Year Average		5,433			5,367									8,462			8,501
% Change Actual vs. 10-Year Avg.		6.0	%		5.6	%								-2.7	%		2.5	%

* Totals and percent changes calculated on un-rounded data; may not correspond to data shown in table

7 — UNS Electric Op. Stats

UNS GAS — OPERATING STATISTICS

	Three Months Ended September 30,												Nine Months Ended September 30,
	2010			2009			Incr (Decr)			% Change			2010			2009			Incr (Decr)			% Change
AVG. GAS CUSTOMERS
Residential		132,768			132,192			576			0.4	%		133,206			132,606			600			0.5	%
Commercial		11,080			11,225			(145	)		-1.3	%		11,248			11,374			(126	)		-1.1	%
Industrial		22			23			(1	)		-4.3	%		23			24			(1	)		-4.2	%
All Other		1,095			1,086			9			0.8	%		1,092			1,085			7			0.6	%
Total		144,965			144,526			439			0.3	%		145,569			145,089			480			0.3	%
RETAIL SALES — THOUSANDS OF THERMS
Residential		5,096			5,186			(90	)		-1.7	%		49,649			44,553			5,096			11.4	%
Commercial		3,915			3,888			27			0.7	%		20,936			19,604			1,332			6.8	%
Industrial		305			344			(39	)		-11.3	%		1,357			1,447			(90	)		-6.2	%
All Other		352			356			(4	)		-1.1	%		4,465			4,056			409			10.1	%
Total		9,668			9,774			(106	)		-1.1	%		76,407			69,660			6,747			9.7	%
RETAIL USAGE — THERMS/CUSTOMER
Residential		38			39			(1	)		-2.2	%		373			336			37			10.9	%
Commercial		353			346			7			2.0	%		1,861			1,724			138			8.0	%
Industrial		13,864			14,957			(1,093	)		-7.3	%		59,000			60,292			(1,292	)		-2.1	%
All Other		321			328			(6	)		-1.9	%		4,089			3,738			351			9.4	%
Total		67			68			(1	)		-1.4	%		525			480			45			9.3	%
RETAIL REVENUES — MILLIONS
Margin Revenues:
Residential	$	5.6		$	5.0		$	0.5			10.4	%	$	27.3		$	24.5		$	2.8			11.5	%
Commercial		1.6			1.5			0.1			9.0	%		7.1			6.5			0.7			10.1	%
All Other		0.2			0.2			0.0			5.1	%		1.4			1.3			0.1			5.4	%
Total Margin Revenues	$	7.4		$	6.7		$	0.7			10.0	%	$	35.8		$	32.3		$	3.5			11.0	%
DSM Revenues		0.3			0.2			0.1			84.8	%		0.7			0.4			0.3			70.1	%
Transport/NSP Revenues		4.8			3.7			1.1			31.0	%		13.2			12.4			0.8			6.2	%
Fuel Revenues:
Recovered from Customers		6.3			7.5			(1.2	)		-16.4	%		51.1			58.2			(7.1	)		-12.2	%
Total Gas Revenues	$	18.7		$	18.1		$	0.6			3.4	%	$	100.8		$	103.3		$	(2.5	)		-2.4	%
WEATHER — HEATING DEGREE DAYS
Actual		224			301			(77	)		-25.6	%		13,621			11,879			1,742			14.7	%
10-Year Average		333			346									12,741			12,527
% Change Actual vs. 10-Year Avg.		-32.7	%		-13.0	%								6.9	%		-5.2	%

* Totals and percent changes calculated on un-rounded data; may not correspond to data shown in table

8 — UNS Gas Op. Stats

BASIC AND DILUTED SHARES OUTSTANDING

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2010		2009		2010		2009
	-Thousands of Dollars-				-Thousands of Dollars-
Numerator:
Net Income	$	54,883	$	57,646	$	100,395	$	93,839
Income from Assumed Conversion of Convertible Senior Notes		1,097		1,097		3,292		3,292
Adjusted Numerator	$	55,980	$	58,743	$	103,687	$	97,131
	-Thousands of Shares-				-Thousands of Shares-
Denominator:
Weighted-average Shares of Common Stock Outstanding:
Common Shares Issued		36,308		35,722		36,107		35,623
Fully Vested Deferred Stock Units		132		100		120		102
Participating Securities		93		106		94		104
Total Weighted-average Shares of Common Stock Outstanding — Basic		36,533		35,928		36,321		35,829
Effect of Dilutive Securities:
Convertible Senior Notes		4,192		4,101		4,166		4,086
Options and Stock Issuable Under Employee Benefit Plans and the Directors’ Plans		416		507		436		491
Total Shares — Diluted		41,141		40,536		40,923		40,406

Stock options to purchase 227,000 and 395,000 shares of Common Stock were outstanding during the nine months ended September 30, 2010 and 2009, respectively, but were not included in the computation of diluted EPS because the stock options’ exercise prices were greater than the average market price of the Common Stock.

9 — Diluted Share Count