UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): May 31, 2005
IRS Employer
Commission Registrant; State of Incorporation; Identification
File Number Address; and Telephone Number Number
- ------------ ------------------------------------------ ----------------
1-13739 UNISOURCE ENERGY CORPORATION 86-0786732
(An Arizona Corporation)
One South Church Avenue, Suite 100
Tucson, AZ 85701
(520) 571-4000
1-5924 TUCSON ELECTRIC POWER COMPANY 86-0062700
(An Arizona Corporation)
One South Church Avenue, Suite 100
Tucson, AZ 85701
(520) 571-4000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 - OTHER EVENTS
- ----------------------------------------------
Rates - TEP's 1999 Settlement Agreement and Retail Electric Competition Rules
As previously reported, on May 4, 2005, in an effort to resolve the uncertainty
surrounding the methodology that will be applied to determine Tucson Electric
Power Company's (TEP) rates for generation service after the current competition
transition charges (CTC) expire, TEP filed a motion with the Arizona Corporation
Commission (ACC) requesting that the ACC issue an order declaring its position
regarding the rate treatment that will be afforded to TEP's generation assets
after 2008.
In May 2005, a number of participants in TEP's rate proceedings, including the
staff of the ACC, filed responses to TEP's motion. Those responses reflect
differing interpretations of the 1999 Settlement Agreement which established
TEP's existing rate structure and generation service rates, and the effect of
the 2002 Track A order which eliminated the requirement that TEP transfer its
generation assets to a subsidiary and the future of electric competition in
Arizona. A number of these responses dispute TEP's assertion that the existing
rate structure contemplates market-based rates for generation services after
December 31, 2008.
On June 1, 2005, TEP filed a reply in support of its motion. The reply states
that the differences of opinion expressed in the various responses filed
underscore the need for the ACC to clarify how it will determine TEP's rates for
generation services after December 31, 2008. TEP's reply also states that,
although it would prefer that the ACC continue to authorize TEP to charge
market-based rates for generation services after December 31, 2008, it is
concerned that its customers will be subject to a significant rate increase in
2009.
TEP believes that any actions by the ACC should not deny TEP the economic
benefits of the 1999 Settlement Agreement, and accordingly analyzed how the 1999
Settlement Agreement can be modified so as to: (i) preserve the intent of the
parties; (ii) avoid a significant rate increase in 2009; (iii) mitigate a
negative financial impact on TEP; and (iv) provide all interested parties with
certainty in the near future about TEP's post-2008 rate structure.
TEP's reply suggests that these goals can be accomplished through a modification
to the 1999 Settlement Agreement which includes the following concepts: (i) an
extension of the existing rate freeze at current rates; (ii) retention of the
current CTC amortization schedule; (iii) a commitment not to seek rate treatment
for certain TEP generation assets; and (iv) implementation of a mechanism to
protect TEP from extreme fuel market volatility after December 31, 2008. TEP
intends to discuss its proposal with the parties to the 1999 Settlement
Agreement and ACC staff and, thereafter, enter into formal negotiations to seek
to modify the 1999 Settlement Agreement.
On May 31, 2005, TEP and the parties to TEP's 2004 general rate case information
proceeding filed a request with the ACC for the administrative law judge to
suspend the current deadlines for filing testimony, pending the outcome of a
procedural conference
2
to discuss the appropriate procedural schedule for the TEP motion, and any
rulings that may result therefrom. The administrative law judge has scheduled a
procedural conference for June 7, 2005 to discuss TEP's motion and the request
to suspend the current procedural schedule in TEP's rate review proceeding.
TEP cannot predict when, or if, the ACC will respond to its motion or whether
the 1999 Settlement Agreement will be modified in the manner proposed by TEP.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: June 6, 2005 UNISOURCE ENERGY CORPORATION
------------------------------------
(Registrant)
/s/ Kevin P. Larson
------------------------------------
Vice President and Principal
Financial Officer
Date: June 6, 2005 TUCSON ELECTRIC POWER COMPANY
------------------------------------
(Registrant)
/s/ Kevin P. Larson
------------------------------------
Vice President and Principal
Financial Officer
4