Uns Energy (UNS) 8-K Unisource Energy Reports 2008 Earnings; Issues Earnings Guidance for 2009

Exhibit 99.1

FOR IMMEDIATE RELEASE	February 26, 2009
Media Contact: Joe Salkowski, (520) 884-3625	Page 1 of 7
Financial Analyst Contact: Jo Smith, (520) 884-3650

UNISOURCE ENERGY REPORTS 2008 EARNINGS; ISSUES EARNINGS GUIDANCE FOR 2009

• Net income for 2008 was $14 million, or $0.39 per diluted share of common stock, compared with $58 million, or $1.57 per diluted share in 2007.

• The decrease in earnings was due primarily to higher fuel and purchased power costs at TEP.

• UniSource Energy estimates 2009 earnings guidance of $2.55 — $2.90 per diluted share.

Tucson, Ariz. —UniSource Energy Corp. (NYSE: UNS) today reported 2008 net income of $14 million, or $0.39 per diluted share of common stock, compared with $58 million, or $1.57 per diluted share in 2007. The decline was due primarily to lower earnings at Tucson Electric Power (TEP), UniSource Energy’s principal subsidiary. TEP had net income of $4 million in 2008, compared with net income of $53 million in 2007.

TEP’s results were negatively impacted by higher fuel and purchased power expenses and other cost increases related to power plant maintenance and outage costs. Customer growth also slowed considerably at both TEP and UniSource Energy Services (UES) compared to prior years and is expected to remain depressed through 2009 due to economic conditions. Last year, TEP’s customer base grew on average about 1% compared with an average of 2% in 2007.

TEP’s average base retail rate increased 6% beginning in December 2008. TEP’s new rates also include a purchased power and fuel adjustment clause, effective January 1, 2009, that allows for recovery of fuel and purchased power costs incurred to serve TEP’s retail customers.

“The new rates and cost recovery structures will help us cope with the volatile costs that dragged down the company’s performance in 2008. They will put us on a more stable financial footing for the future. We aren’t immune from the economic slowdown though,” said Paul Bonavia, UniSource Energy’s Chairman, President and CEO.

“We have prudently scaled back our capital investments at all of our electric and gas utilities to match the reduced growth we’re now expecting, but we’ll still be making the investments we need to maintain safe, reliable service for our customers.”

UES, which provides gas and electric service in Northern and Southern Arizona through subsidiaries UNS Gas and UNS Electric, reported earnings of $12 million in 2008 and $9 million in 2007.

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Net Income and Earnings per Share Summary

	Year-End						4th Quarter
Net Income	2008			2007			2008		2007
	-Millions-						-Millions-
Tucson Electric Power	$	4.4		$	53.5		$	19.7	$	14.4
UNS Gas		8.5			4.0			3.0		2.8
UNS Electric		3.3			4.8			—		—
Other (1)		(2.2	)		(3.9	)		0.2		(1.0	)
Net Income	$	14.0		$	58.4		$	22.9	$	16.2
Avg. Basic Shares Outstanding (millions)		35.6			35.5			35.7		35.5
Avg. Diluted Shares Outstanding (millions)		36.2			40.1			40.2		40.1

	Year-End						4th Quarter
Earnings Per UniSource Energy Share	2008			2007			2008		2007
Tucson Electric Power	$	0.12		$	1.51		$	0.55	$	0.41
UNS Gas		0.24			0.11			0.08		0.08
UNS Electric		0.09			0.14			0.00		0.00
Other (1)		(0.06	)		(0.12	)		0.01		(0.03	)
Net Income per Basic Share	$	0.39		$	1.64		$	0.64	$	0.46
Net Income per Diluted Share (2)	$	0.39		$	1.57		$	0.63	$	0.43

(1)	Includes UniSource Energy on a stand-alone basis and results from Millennium Energy Holdings, Inc. and UniSource Energy Development, wholly-owned subsidiaries of UniSource Energy.
(2)	For 2008, 4 million of potentially dilutive shares and after-tax interest expense of $4.4 million were not included in the computation of diluted EPS because doing so would be anti-dilutive.

UniSource Energy believes that the presentation of TEP, UNS Gas, UNS Electric and Other segment net income or loss on a per basic UniSource Energy share basis, which are non-GAAP financial measures, provides useful information to investors by disclosing the results of operations of its business segments on a basis consistent with UniSource Energy’s reported earnings.

Earnings Guidance

UniSource Energy estimates 2009 diluted earnings per share of between $2.55 and $2.90. The earnings guidance assumes 2009 retail kWh sales at TEP to be equal to actual retail kWh sales in 2008.

In conjunction with this earnings announcement, UniSource Energy has posted on its web site detailed information on its 2008 performance, and factors that could impact the Company’s earnings outlook for 2009, 2010 and 2011. These materials are available atwww.uns.com

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Conference Call and Webcast

The Company will host a conference call on Friday, February 27 at 12 Noon EST to discuss the financial results and outlook. To participate in the call, please dial in five to 10 minutes prior to the start.

Dial in: (877) 582-0446

Reference code: 85648869

The conference call will also be broadcast on UniSource Energy’s website. The webcast can be accessed at www.uns.com and will be available for replay for seven days.

Replay Number: (800) 642-1687

Reference Code: 85648869

UniSource Energy is a Tucson, Arizona based company with consolidated assets of approximately $3.5 billion. UniSource Energy’s primary subsidiaries include Tucson Electric Power Company, which serves nearly 400,000 customers in southern Arizona and UniSource Energy Services, provider of natural gas and electric service for about 236,000 customers in northern and southern Arizona. For more information about UniSource Energy and its subsidiaries, visit uns.com.

This release contains forward-looking information that involves risks and uncertainties, including factors that could affect UniSource Energy’s ability to reach the 2009 earnings guidance. These risks and uncertainties 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’sForm 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from outcomes currently expected by UniSource Energy.

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UNISOURCE ENERGY 2008 RESULTS

UniSource Energy Corporation
Consolidated Statements of Income
(in thousands of dollars, except per share amounts)

	Years Ended
	December 31,						Increase / (Decrease)
(UNAUDITED)	2008			2007			Amount			Percent
Operating Revenues
Electric Retail Sales	$	983,970		$	976,795		$	7,175			0.7
CTC Revenue to be Refunded		(58,092	)		—			(58,092	)		N/M
Net Electric Retail Sales		925,878			976,795			(50,917	)		(5.2	)
Electric Wholesale Sales		236,300			196,233			40,067			20.4
Gas Revenue		163,590			148,597			14,993			10.1
Other Revenues		71,743			59,748			11,995			20.1
Total Operating Revenues		1,397,511			1,381,373			16,138			1.2
Operating Expenses
Fuel		292,557			291,238			1,319			0.5
Purchased Energy		436,869			352,898			83,971			23.8
Other Operations and Maintenance		311,907			258,176			53,731			20.8
Depreciation and Amortization		147,690			140,638			7,052			5.0
Amortization of 1999 Transition Recovery Asset		23,945			77,681			(53,736	)		(69.2	)
Taxes Other Than Income Taxes		39,339			47,837			(8,498	)		(17.8	)
Total Operating Expenses		1,252,307			1,168,468			83,839			7.2
Operating Income		145,204			212,905			(67,701	)		(31.8	)
Other Income (Deductions)
Interest Income		11,011			18,828			(7,817	)		(41.5	)
Other Income		7,838			7,622			216			2.8
Other Expense		(9,286	)		(4,380	)		(4,906	)		N/M
Total Other Income (Deductions)		9,563			22,070			(12,507	)		(56.7	)
Interest Expense
Long-Term Debt		70,227			73,095			(2,868	)		(3.9	)
Interest on Capital Leases		57,272			64,499			(7,227	)		(11.2	)
Other Interest Expense		1,837			5,480			(3,643	)		(66.5	)
Interest Capitalized		(5,566	)		(5,551	)		(15	)		(0.3	)
Total Interest Expense		123,770			137,523			(13,753	)		(10.0	)
Income Before Income Taxes		30,997			97,452			(66,455	)		(68.2	)
Income Tax Expense		16,976			39,079			(22,103	)		(56.6	)
Net Income	$	14,021		$	58,373		$	(44,352	)		(76.0	)
Weighted-average Shares of Common Stock Outstanding (000)		35,632			35,486			146			0.4
Basic Earnings per Share	$	0.39		$	1.64		$	(1.25	)		(76.2	)
Diluted Earnings per Share	$	0.39		$	1.57		$	(1.18	)		(75.2	)
Dividends Declared per Share	$	0.96		$	0.90		$	0.06			6.7

	Years Ended
Tucson Electric Power	December 31,				Increase / (Decrease)
Electric MWh Sales:	2008		2007		Amount			Percent
Retail Sales		9,502,645		9,634,405		(131,760	)		(1.4	)
Wholesale Sales		3,968,688		3,512,081		456,607			13.0
Total		13,471,333		13,146,486		324,847			2.5

N/M — Not Meaningful

Reclassifications have been made to prior periods to conform to the current period’s presentation.

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UNISOURCE ENERGY 2008 RESULTS

UniSource Energy Corporation
Consolidated Statements of Income
(in thousands of dollars, except per share amounts)

	Three Months Ended
	December 31,						Increase / (Decrease)
(UNAUDITED)	2008			2007			Amount			Percent
Operating Revenues
Electric Retail Sales	$	215,537		$	211,345		$	4,192			2.0
CTC Revenue to be Refunded		(13,677	)		—			(13,677	)		N/M
Net Electric Retail Sales		201,860			211,345			(9,485	)		(4.5	)
Electric Wholesale Sales		49,196			56,718			(7,522	)		(13.3	)
Gas Revenue		48,804			47,670			1,134			2.4
Other Revenues		19,343			19,823			(480	)		(2.4	)
Total Operating Revenues		319,203			335,556			(16,353	)		(4.9	)
Operating Expenses
Fuel		39,490			67,815			(28,325	)		(41.8	)
Purchased Energy		80,166			81,434			(1,268	)		(1.6	)
Other Operations and Maintenance		85,891			63,830			22,061			34.6
Depreciation and Amortization		38,494			37,144			1,350			3.6
Amortization of 1999 Transition Recovery Asset		—			17,737			(17,737	)		N/M
Taxes Other Than Income Taxes		4,141			11,629			(7,488	)		(64.4	)
Total Operating Expenses		248,182			279,589			(31,407	)		(11.2	)
Operating Income		71,021			55,967			15,054			26.9
Other Income (Deductions)
Interest Income		2,287			6,172			(3,885	)		(62.9	)
Other Income		1,571			167			1,404			N/M
Other Expense		(3,567	)		163			(3,730	)		N/M
Total Other Income (Deductions)		291			6,502			(6,211	)		(95.5	)
Interest Expense
Long-Term Debt		16,624			18,362			(1,738	)		(9.5	)
Interest on Capital Leases		14,303			16,109			(1,806	)		(11.2	)
Other Interest Expense		462			713			(251	)		(35.2	)
Interest Capitalized		(1,086	)		(323	)		(763	)		N/M
Total Interest Expense		30,303			34,861			(4,558	)		(13.1	)
Income Before Income Taxes		41,009			27,608			13,401			48.5
Income Tax Expense		18,082			11,401			6,681			58.6
Net Income	$	22,927		$	16,207		$	6,720			41.5
Weighted-average Shares of Common Stock Outstanding (000)		35,681			35,534			147			0.4
Basic Earnings per Share	$	0.64		$	0.46		$	0.18			39.1
Diluted Earnings per Share	$	0.63		$	0.43		$	0.20			46.5
Dividends Declared per Share	$	0.240		$	0.225		$	0.015			6.7

	Three Months Ended
Tucson Electric Power	December 31,				Increase / (Decrease)
Electric MWh Sales:	2008		2007		Amount			Percent
Retail Sales		2,106,483		2,137,385		(30,902	)		(1.4	)
Wholesale Sales		959,536		1,101,998		(142,462	)		(12.9	)
Total		3,066,019		3,239,383		(173,364	)		(5.4	)

N/M — Not Meaningful

Reclassifications have been made to prior periods to conform to the current period’s presentation.

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TUCSON ELECTRIC POWER COMPANY 2008 RESULTS

TUCSON ELECTRIC POWER COMPANY
Consolidated Statements of Income
(in thousands of dollars, except per share amounts)

	Years Ended					��
	December 31,						Increase / (Decrease)
(UNAUDITED)	2008			2007			Amount			Percent
Operating Revenues
Electric Retail Sales	$	802,331		$	811,649		$	(9,318	)		(1.1	)
CTC Revenue to be Refunded		(58,092	)		—			(58,092	)		N/M
Net Electric Retail Sales		744,239			811,649			(67,410	)		(8.3	)
Electric Wholesale Sales		259,855			195,999			63,856			32.6
Other Revenues		75,159			62,855			12,304			19.6
Total Operating Revenues		1,079,253			1,070,503			8,750			0.8
Operating Expenses
Fuel		285,224			291,238			(6,014	)		(2.1	)
Purchased Energy		238,024			140,498			97,526			69.4
Other Operations and Maintenance		267,100			211,851			55,249			26.1
Depreciation and Amortization		126,040			119,811			6,229			5.2
Amortization of 1999 Transition Recovery Asset		23,945			77,681			(53,736	)		(69.2	)
Taxes Other Than Income Taxes		31,649			40,366			(8,717	)		(21.6	)
Total Operating Expenses		971,982			881,445			90,537			10.3
Operating Income		107,271			189,058			(81,787	)		(43.3	)
Other Income (Deductions)
Interest Income		9,900			16,072			(6,172	)		(38.4	)
Other Income		5,708			3,665			2,043			55.7
Other Expense		(6,249	)		(3,296	)		(2,953	)		(89.6	)
Total Other Income (Deductions)		9,359			16,441			(7,082	)		(43.1	)
Interest Expense
Long-Term Debt		47,456			50,230			(2,774	)		(5.5	)
Capital Leases		57,252			64,477			(7,225	)		(11.2	)
Other Interest Expense		1,367			4,538			(3,171	)		(69.9	)
Interest Capitalized		(4,675	)		(2,744	)		(1,931	)		(70.4	)
Total Interest Expense		101,400			116,501			(15,101	)		(13.0	)
Income Before Income Taxes		15,230			88,998			(73,768	)		(82.9	)
Income Tax Expense		10,867			35,542			(24,675	)		(69.4	)
Net Income	$	4,363		$	53,456		$	(49,093	)		(91.8	)

N/M — Not Meaningful

Reclassifications have been made to prior periods to conform to the current period’s presentation.

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TUCSON ELECTRIC POWER COMPANY 2008 RESULTS

TUCSON ELECTRIC POWER COMPANY
Consolidated Statements of Income
(in thousands of dollars, except per share amounts)

	Three Months Ended
	December 31,						Increase / (Decrease)
(UNAUDITED)	2008			2007			Amount			Percent
Operating Revenues
Electric Retail Sales	$	175,196		$	175,831		$	(635	)		(0.4	)
CTC Revenue to be Refunded		(13,677	)		—			(13,677	)		N/M
Net Electric Retail Sales		161,519			175,831			(14,312	)		(8.1	)
Electric Wholesale Sales		52,065			56,662			(4,597	)		(8.1	)
Other Revenues		19,614			21,168			(1,554	)		(7.3	)
Total Operating Revenues		233,198			253,661			(20,463	)		(8.1	)
Operating Expenses
Fuel		37,297			67,815			(30,518	)		(45.0	)
Purchased Energy		26,829			25,388			1,441			5.7
Other Operations and Maintenance		73,631			52,282			21,349			40.8
Depreciation and Amortization		32,842			31,778			1,064			3.3
Amortization of 1999 Transition Recovery Asset		—			17,737			(17,737	)		N/M
Taxes Other Than Income Taxes		2,507			10,144			(7,637	)		(75.3	)
Total Operating Expenses		173,106			205,144			(32,038	)		(15.6	)
Operating Income		60,092			48,517			11,575			23.9
Other Income (Deductions)
Interest Income		2,196			5,247			(3,051	)		(58.1	)
Other Income		732			827			(95	)		(11.5	)
Other Expense		(2,961	)		(316	)		(2,645	)		N/M
Total Other Income (Deductions)		(33	)		5,758			(5,791	)		N/M
Interest Expense
Long-Term Debt		10,803			12,464			(1,661	)		(13.3	)
Capital Leases		14,298			16,106			(1,808	)		(11.2	)
Other Interest Expense		355			518			(163	)		(31.5	)
Interest Capitalized		(1,043	)		519			(1,562	)		N/M
Total Interest Expense		24,413			29,607			(5,194	)		(17.5	)
Income Before Income Taxes		35,646			24,668			10,978			44.5
Income Tax Expense		15,950			10,264			5,686			55.4
Net Income	$	19,696		$	14,404		$	5,292			36.7

N/M — Not Meaningful

Reclassifications have been made to prior periods to conform to the current period’s presentation.

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