UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ [ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

UNISOURCE ENERGY CORPORATION
- -------------------------------------------------------------------------------
(Name of the Registrant as Specified in its Charter)

- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[ ] Fee paid previously with preliminary materials.

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previously. Identify the previous filing by registration statement
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2) Form, Schedule or Registration Statement No.
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4) Date filed:
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UNISOURCE ENERGY CORPORATION
220 West Sixth Street
P.O. Box 711
Tucson, Arizona 85702

Charles E. Bayless
Chairman of the Board (520) 571-4000

March 31, 1998
Dear Shareholder:

You are cordially invited to attend the Annual Meeting (the "Meeting")
of Shareholders of UniSource Energy Corporation (the "Company") to be held on
May 8, 1998. The Meeting will begin at 10:00 a.m., Tucson time, at the
Tucson East Hilton Hotel, 7600 East Broadway Boulevard, Tucson, Arizona.

Effective January 1, 1998 (the "Effective Date"), the Company became the
parent company of Tucson Electric Power Company ("TEP"). TEP's common stock
shareholders approved the new corporate structure on May 26, 1995. TEP
received approval of the new corporate structure from the Arizona Corporation
Commission on November 25, 1997, and from the Federal Energy Regulatory
Commission on September 25, 1997. On the Effective Date, any outstanding
shares of TEP common stock were automatically exchanged, on a share-for-share
basis, for shares of the Company's common stock under a statutory share
exchange pursuant to Arizona corporation law. As a result, the holders of
TEP's common stock became owners of the Company's common stock and TEP stock
certificates automatically represent shares of the Company.

At the Meeting you will be asked to elect a Board of Directors for the
Company for the ensuing year. During the Meeting, a report will be given on
the operations of TEP during fiscal year 1997. Directors and officers of the
Company will be present to respond to questions that shareholders may have.

Please fill out, sign, date, and return the enclosed Proxy Card
promptly. If you attend the Meeting and wish to vote your shares personally,
you may revoke your proxy at that time. Your interest is very much
appreciated.

Sincerely yours,
UNISOURCE ENERGY CORPORATION

Charles E. Bayless
Chairman of the Board, President and
Chief Executive Officer

UNISOURCE ENERGY CORPORATION
220 West Sixth Street
P.O. BOX 711
TUCSON, ARIZONA 85702 (520) 571-4000

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS MAY 8, 1998

To the Shareholders of
UNISOURCE ENERGY CORPORATION

Notice is hereby given that the Annual Meeting (the "Meeting") of
Shareholders of UniSource Energy Corporation (the "Company") will be held on
the 8th day of May, 1998, at the Tucson East Hilton Hotel, 7600 East Broadway
Boulevard, Tucson, Arizona, at 10:00 a.m., Tucson time, for the purposes of:

(1) electing a Board of Directors for the ensuing year; and

(2) transacting such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.

The holders of record of common stock at the close of business on March
18, 1998, will be entitled to vote at the Meeting and at any adjournments
thereof. Proxy soliciting material is first being sent or given to
shareholders on March 31, 1998.

By order of the Board of Directors,

Dennis R. Nelson
Corporate Secretary

Dated: March 31, 1998

IMPORTANT: Your presence at the Meeting is desired, but if you cannot be
present, please fill out, sign, date, and return the enclosed form of proxy
in the envelope provided. Due to the number of shareholders, your
cooperation in returning your proxy promptly is essential and will be very
much appreciated.

YOUR VOTE IS IMPORTANT, REGARDLESS OF HOW MANY SHARES YOU OWN.

-----------------------

TO VOTE YOUR SHARES, PLEASE MARK, SIGN, AND DATE THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.

PROXY STATEMENT
GENERAL

Effective January 1, 1998 (the "Effective Date"), UniSource Energy
Corporation (the "Company") became the parent company of Tucson Electric
Power Company ("TEP"). TEP's common stock shareholders approved the new
corporate structure on May 26, 1995. TEP received approval of the new
corporate structure from the Arizona Corporation Commission on November 25,
1997, and from the Federal Energy Regulatory Commission on September 25,
1997. On the Effective Date, any outstanding shares of TEP common stock were
automatically exchanged, on a share-for-share basis, for shares of the
Company's common stock under a statutory share exchange pursuant to Arizona
corporation law. As a result, the holders of TEP's common stock became
owners of the Company's common stock and TEP stock certificates automatically
represent shares of the Company.

This Proxy Statement is being mailed to shareholders in connection with
the solicitation, by and on behalf of the Board of Directors of the Company,
of proxies to be voted at the Annual Meeting (the "Meeting") of Shareholders
of the Company to be held on May 8, 1998, at the time and place and for the
purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders and at any and all adjournments of the Meeting.

An appropriate form of proxy for execution by shareholders is enclosed.
Any shareholder giving a proxy has the right to revoke the same by giving
notice to the Company in writing, directed to the Corporate Secretary, or in
person at the Meeting at any time before the proxy is exercised.

The entire cost of the solicitation of proxies will be borne by the
Company. Solicitations will be made by the Company primarily by use of the
mails. Additional solicitation of brokers, banks, nominees, and
institutional investors may be made pursuant to a special engagement of
BEACON HILL PARTNERS, INC. at a cost to the Company of approximately $5,000
plus reasonable out-of-pocket expenses. If necessary to obtain reasonable
representation of shareholders at the Meeting, solicitations may also be made
by telephone, facsimile, or personal interview. The Company will request
brokers or other persons holding stock in their names, or in the names of
their nominees, to forward proxy material to the beneficial owners of such
stock or request authority for the execution of the proxies, and will
reimburse such brokers or other persons for their expense in so doing.

In accordance with the Company's Bylaws, the Board of Directors has
fixed March 18, 1998 as the record date (the "Record Date") for the
determination of shareholders entitled to vote at the Meeting and at any and
all adjournments thereof. The stock transfer books will not be closed.

CHANGE IN ACCOUNTANTS

On November 7, 1997, based upon the recommendation of its audit
committee, the Board of Directors of the Company voted to appoint Price
Waterhouse LLP as the Company's independent accountants effective for the
year ending December 31, 1998. The Company chose not to renew the engagement
of Deloitte & Touche LLP, the Company's present independent accountants.
Deloitte & Touche LLP continued to serve for the 1997 fiscal year, including
rendering an opinion on the Company's financial statements for the year ended
December 31, 1997.

The reports of Deloitte & Touche LLP on the Company's financial
statements for each of the two most recent years ended December 31, 1997 did
not contain any adverse opinion or disclaimer of opinion, nor were the
reports qualified in any matter.

During 1996, 1997 and the period from December 31, 1997 to March 2, 1998
the date of the Company's Form 10-K, there were no disagreements with
Deloitte Touche LLP on any matter of accounting principle or practice, this
period, there were no "reportable events" as that term is defined in Item 304
(a) (1) (v) of Regulation S-K.

Deloitte and Touche LLP furnished a letter addressed to the Securities
and Exchange Commission stating that it agreed with the above statements for
the two most recent years ended December 31, 1997 to March 2, 1998 the date
of the Company's Form 10-K.

On November 14, 1997, the Company engaged Price Waterhouse LLP as its
principal accountants to audit the financial statements for the year ending
December 31, 1998. During 1996, 1997 and the period from December 31, 1997
to March 2, 1998 the date of the Company's Form 10-K, the Company has not
consulted Price Waterhouse LLP on items which concerned the application of
accounting principles generally, or to a specific transaction or group of
transactions, either completed or proposed, or the type of audit opinion that
might be rendered on the financial statements except as related to
transactions for the year ending December 31, 1998.

Representatives of Price Waterhouse, LLP, the Company's independent
auditors, are expected to be present at the Meeting with the opportunity to
make a statement if they desire to do so, and to be available to respond to
appropriate questions. Representatives of Deloitte & Touche LLP are not
expected to be present at the meeting.

VOTING OF SHARES

At the Record Date, the Company had outstanding 32,138,124 shares of
common stock, no par value shares ("Common Stock"). At the Record Date,
there were 27,514 shareholders of record of the Common Stock. Holders of
Common Stock will be entitled to one vote per share, subject to cumulative
voting rights in the election of Directors as described below.

Under the Arizona Business Corporation Act, a majority of the shares
entitled to vote on any single subject matter which may be brought before the
Meeting will constitute a quorum, and business may be conducted once a quorum
is represented at the Meeting. Except as otherwise specified by law, if a
quorum exists, action on a matter other than the election of Directors will
be deemed approved if the votes cast "For" such matter exceed votes cast
"Against" it.

In the election of Directors, each holder of shares of Common Stock has
the right to cumulate his votes by casting as many votes in the aggregate as
shall equal the number of his shares of Common Stock multiplied by the number
of Directors to be elected, and he may cast the whole number of such votes
for one nominee or distribute such votes among two or more nominees. If a
quorum is present, Directors are elected by a plurality of the votes cast by
the shares entitled to vote. Withheld votes will be counted as being
represented at the Meeting for quorum purposes but will not have an effect on
the vote.

The shares represented by an executed proxy will be voted for the
election of Directors, or withheld in accordance with the specifications made
in said proxy. If no specification is made in said proxy, the proxy will be
voted "FOR" the nominees listed herein.

Broker "non-votes," if any, with respect to a proposal will be counted
for purposes of determining the presence or absence of quorum, but will not
be counted as shares represented and voting with respect to that proposal.
In contrast, proxies voted "abstain" will have the same legal effect as votes
against a proposal.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of the Record Date, the following person was known by the Company to
be the beneficial owner of more than five percent of the outstanding shares
of Common Stock:
Amount and
Name and address Nature of Percent of
Title of Class of Beneficial Owner Beneficial Ownership Class
---------------------------------------------------------------------------
Common The Prudential Insurance 1,730,180 (1) 5.38%
Company of America
751 Broad Street
Newmark, NJ 07102-3777

- -----------------------
(1) In a statement dated February 10, 1998, filed with the Securities and
Exchange Commission on Schedule 13G under the Securities Exchange Act of
1934, The Prudential Insurance Company of America indicated it may have
direct or indirect voting and/or investment discretion over 1,730,180
shares of the outstanding Common Stock of the Company which are held for
the benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates.

In 1992 all but one of the owner participants in TEP's lease of Unit 1
of the Springerville Generating Station submitted a "no-action" request to
the staff of the Securities and Exchange Commission regarding their status
under the Public Utility Holding Company Act of 1935, as amended ("Holding
Company Act"). In connection with such "no-action" request, each such owner
participant entered into a separate voting agreement with TEP (each, a
"Voting Agreement") with respect to the shares of Common Stock of TEP and
warrants to purchase Common Stock of TEP ("Warrants") that such owner
participant received as part of a 1992 comprehensive restructuring of TEP's
obligations to certain of its creditors, major suppliers, and lease
participants, as well as the reclassification of all shares of TEP's
previously outstanding preferred stock into Common Stock (the "Financial
Restructuring"). Under the Financial Restructuring, such owner participants
received, in the aggregate, approximately 8.9% of the total number of shares
of Common Stock of TEP outstanding at the date of the closing of the
Financial Restructuring on December 15, 1992 (the "Closing") (but before
giving effect to the exercise of the Warrants) and Warrants in an aggregate
amount of approximately 6.75% of the total number of shares of Common Stock
of TEP at the date of the Closing. Each Voting Agreement constitutes an
irrevocable proxy of the owner participant directing TEP to vote those shares
issued to it under the Financial Restructuring (including shares issuable
upon the exercise of the Warrants) in the same proportion as the votes cast
for and against any particular matter by the other holders of Common Stock of
TEP voting on such matter. However, an owner participant has the right to
vote or direct the voting of the shares of Common Stock of TEP held by it
upon the occurrence of any of the following events: (i) a default under the
Springerville Unit 1 lease; (ii) a default by TEP in respect of obligations
with an aggregate amount in excess of $500,000; or (iii) the institution of
bankruptcy or similar proceedings by or against TEP or any of its affiliates.
In the event of any sale or disposition of the shares that are subject to a
Voting Agreement to a person who is not an owner participant or an affiliate
thereof, the shares sold would no longer be subject to that Voting Agreement.
The Warrants remain in effect with respect to the Common Stock of TEP.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth as of the Record Date, the number and
percentage of shares beneficially owned, along with the nature of such
beneficial ownership, by each of the Company's Directors and nominees, the
Company's Chief Executive Officer, the four other most highly compensated
executive officers of the Company during 1997, and all Directors and
executive officers as a group.

Amount and Allocable Amount of
Nature of Shares under Deferred
Name of Beneficial Percent of Compensation
Title of Class Beneficial Owner Ownership (1)(2) Class Stock Plan (3)
- -------------- ---------------- ---------------- ---------- ---------------------

Common Charles E. Bayless 40,370 (4) * 10,039
Chairman, President
and CEO

Common Larry W. Bickle 2,000 * ----
Director

Common Elizabeth T. Bilby 2,600 (5) * 1,893
Director

Common Harold W. Burlingame 1,000 * ----
Director

Common Jose L. Canchola 2,600 (5) * 404
Director

Common John L. Carter 7,800 (6) * 2,112
Director

Common John A. Jeter 3,400 (5) * 597
Director

Common R. B. O'Rielly 2,680 (5) * 2,617
Director

Common Martha R. Seger 4,188 (5) * 2,112
Director

Common Donald G. Shropshire 2,700 (5)(7) * ----
Director

Common H. Wilson Sundt 4,000 (5)(8) * 364
Director

Common James S. Pignatelli 18,115 (9) * ----
Executive Vice President and
Chief Operating Officer
Tucson Electric Power Company

Common Ira R. Adler 17,940 (10) * ----
Executive Vice President
and Chief Financial Officer
Tucson Electric Power Company

Common Romano Salvatori 6,991 (11) * 1,781
President
Nations Energy Corporation

Common George W. Miraben 11,327 (12) * 562
Senior Vice President -
Policy and Human Resources
Tucson Electric Power Company

Common All Directors and 190,512 (13) * 25,314
executive officers as
a group
- -----------
<FN>

* Represents less than l% of the outstanding Common Stock of the Company.
(1) Includes any shares held in the name of the spouse, minor children, or
other relatives sharing the home of the Director or executive officer.
Except as otherwise indicated below, the Directors, nominees for
Director, andrexecutive officersphave soleuvotingeandwinvestmentcpower
voting of the shares held, and investment power includes the power to
direct the disposition of the shares held.
(2) Based on information furnished by executive officers and Directors.
Includes shares subject to options exercisable within 60 days.
(3) Represents stock held in trust under the Deferred Compensation Plan.
With the cash compensation deferred, the trust invests in Common Stock
quarterly. Distributions under the Deferred Compensation Plan are made
in Common Stock. Until the Common Stock is distributed, executive officers
and Directors are not the beneficial owners of such shares. The number of
shares set forth includes shares purchased through the last quarterly
purchase on January 15, 1998.
(4) Includes 39,370 shares subject to options exercisable within 60 days.
(5) Includes 2,400 shares subject to options exercisable within 60 days.
(6) Includes 800 shares subject to options exercisable within 60 days.
(7) Pursuant to the policy of the Board of Directors, Mr. Shropshire has
retired from the Board effective May 8, 1998.
(8) Includes 1,000 shares held by a corporation with which Mr. Sundt is
associated.
(9) Includes 17,715 shares subject to options exercisable within 60 days.
(10)Includes 16,770 shares subject to options exercisable within 60 days.
(11)Includes 6,991 shares subject to options exercisable within 60 days.
(12)Includes 10,367 shares subject to options exercisable within 60 days.
(13)Includes 168,643 shares subject to options exercisable within 60 days.

PROPOSAL 1
ELECTION OF DIRECTORS

GENERAL

At the Meeting, the shareholders will elect ten Directors to serve on the
Board of Directors of the Company for the ensuing year and until their
successors shall have been elected and shall have qualified. The votes
applicable to the shares represented by executed proxies in the form
enclosed, unless withheld, will be cast for the eight nominees listed below,
or, in the discretion of the persons acting as proxies, will be voted
cumulatively for one or more of such nominees, all of whom are present
members of the Board of Directors. All of the nominees have consented to
serve if elected. If any nominee becomes unavailable for any reason or a
vacancy should occur before the election (which events are not anticipated),
it is the intention of the persons designated as proxies to vote, in their
discretion, for other nominees.

DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
------------------------------ --- -----

CHARLES E. BAYLESS, Chairman of the Board of 55 1990
Directors of the Company since January 1998;
President and Chief Executive Officer of the
Company since January 1998; Chairman of the Board
of Directors of TEP since January 1992; President
and Chief Executive Officer of TEP since July
1990; Senior Vice President and Chief Financial
Officer of TEP from December 1989 until July 1990;
Director of Trigen Energy Corporation from July
1994 to present.

LARRY W. BICKLE, Managing Director of Haddington 52 1998
Ventures, LLC, an investment company, since 1997;
Chairman, Market Hub Partners, a developer of
natural gas storage facilities from 1994 to 1997;
Chairman and CEO, TPC Corporation (formerly Tejas
Power Corporation) from 1984 to May 1997;
Director, St. Mary Land & Exploration Company.

(1)(2)(3) ELIZABETH T. BILBY, President and Treasurer of L & 58 1995
(4) C Gourmet Products, Inc., an agricultural product
marketing company, and Director of International
Marketing of Santa Cruz Valley Pecan Co. since
1982.

HAROLD W. BURLINGAME, Executive Vice President of 57 1998
Human Resources of AT&T since 1987. Chairman of
the AT&T Foundation.

(1)(2)(3) JOSE L. CANCHOLA, President and Chief Executive 66 1992
Officer of Canchola Group, Inc., holder of several
restaurant franchises in Tucson and Nogales,
Arizona, since 1972; Member of McDonald's
Corporation Operators Advisory Board from 1981 to
1993; National Franchise Director, U.S.
Department of Commerce, Office of Minority
Business Enterprise from 1974 to 1976.

(2)(4) JOHN L. CARTER, Executive Vice President and Chief 63 1996
Financial Officer of Burr-Brown Corporation from
1993 to 1996; President and Chief Executive
Officer of Qualtronics Manufacturing, Inc. from
1987 to 1996.

(1)(2)(3) JOHN A. JETER, independent business consultant 67 1994
since 1991; partner in the accounting firm of
Arthur Andersen & Co. from 1967 to 1991.

(1)(4) R. B. O'RIELLY, President of O'Rielly Motor 68 1989
Company, an automobile dealership management
company, since 1955; Director of Banc One Arizona
Corporation and Bank One Arizona, N.A.

(2)(4) MARTHA R. SEGER, Distinguished Visiting Professor 66 1992
of Finance, American Graduate School of
International Management from 1993 to present;
John M. Olin Distinguished Fellow at the Karl
Eller Center for the Study of Private Market
Economy at the University of Arizona from 1991 to
1993; Financial Economist and Governor of the
Federal Reserve System from 1984 until 1991;
Director of Amoco Corporation, Xerox Corporation,
Kroger Company, Fluor Corporation, Amerisure,
Johnson Controls Inc., and Providian Corporation.

(2)(3) H. WILSON SUNDT, Chairman of the Board and Chief 65 1976
Executive Officer of Sundt Corp, a general
construction contracting firm, since 1979, having
served as President from 1979 until July 1983.
- ----------------
(1) Member of Nominating Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Member of Finance Committee.

As noted above, Dr. Seger is a member of the Board of Directors of
Providian Corporation. Providian is a debt participant in TEP leases of
Springerville Unit 1. Dr. Seger has advised the Company that she does not
intend to participate in any deliberations or actions of either the Board of
Directors of the Company, of TEP, or of Providian, with respect to any matter
involving the other companies.

COMMITTEE FUNCTIONS

The Audit Committee selects and recommends to the Board of Directors a
firm of independent certified public accountants to audit annually the
financial statements of the Company; reviews and discusses the scope of such
audit; receives and reviews the audit reports and recommendations; transmits
recommendations, if any, of the Audit Committee to the Board of Directors;
reviews with the internal audit department of the Company, from time to time,
the accounting and internal control procedures of the Company, and makes
recommendations to the Board of Directors for any changes deemed necessary in
such procedures; and performs such other functions as the Board of Directors,
from time to time, shall delegate to the Audit Committee. The Audit
Committee of TEP held 6 meetings in 1997.

The Compensation Committee reviews the performance of the Company's
officers and Directors and makes recommendations to the Board of Directors
with respect to officers' and Directors' compensation. The Compensation
Committee of TEP held 5 meetings in 1997.

The Nominating Committee interviews potential Directors of the Company
and nominates and recommends to the shareholders and Directors, as the case
may be, qualified persons to serve as Directors. The Nominating Committee of
TEP did not hold any meetings in 1997. At such times as Director vacancies
occur, the Nominating Committee will consider written recommendations for the
Board of Directors which have been received from shareholders.
Recommendations must include detailed biographical material indicating the
candidate's qualifications and also a written statement from the candidate
of willingness and availability to serve. Recommendations should be directed
to the Corporate Secretary, UniSource Energy Corporation, P.O. Box 711, Tucson,
Arizona 85702.

The Finance Committee reviews and recommends to the Board of Directors
long-range financial policies and objectives, and actions required to achieve
those objectives. Specifically, the Finance Committee reviews capital and
operating budgets, current and projected financial results of operations,
short-term and long-range financing plans, dividend policy, risk management
activities, and major commercial banking, investment banking, financial
consulting, and other financial relations of the Company. The Finance
Committee of TEP held 2 meetings in 1997.

The Board of Directors of TEP held a total of 11 regular meetings in
1997.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The following tables set forth certain information concerning
compensation of, stock option grants to, and stock options/SARs held by the
Company's Chief Executive Officer and the four other most highly compensated
executive officers at December 31, 1997.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION
----------------------
AWARDS
----------------------

ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSATION STOCK UNDERLYING COMPENSATION
Name and principal ------------ AWARDS($)(1) Options/SARs(#) ($)(2)
position Year Salary($) Bonus($)
- ----------------------------- ---- -------- -------- ------------ -------------- -------------

Charles E. Bayless 1997 439,309 352,001 451,793 41,890 7,200
President 1996 423,881 242,250 36,196 47,863
and Chief Executive Officer 1995 394,905 157,964 17,430 6,750
Tucson Electric Power Company

James S. Pignatelli 1997 307,924 186,001 67,524 16,800 7,200
Executive Vice President and 1996 256,462 113,288 13,109 8,561
Chief Operating Officer 1995 234,808 80,507 8,883 6,750
Tucson Electric Power Company

Ira R. Adler 1997 244,558 147,001 83,853 13,300 7,200
Executive Vice President 1996 235,400 100,633 9,652 61,073
and Chief Financial Officer 1995 234,808 80,507 8,883 6,750
Tucson Electric Power Company

Romano Salvatori 1997 228,385 145,049 - 7,200
President 1996 199,231 71,250 9,652 24,058
Nations Energy Corporation 1995 180,001 51,300 5,661 6,750

George W. Miraben 1997 208,616 126,001 71,870 11,400 7,200
Senior Vice President - 1996 174,376 76,950 9,652 19,096
Policy and Human Resources 1995 160,097 45,743 5,047 6,750
Tucson Electric Power Company

<FN>
(1) Represents the fair market value of the restricted stock award on June 27, 1997, the grant date.
The restrictions lapse over a three-year period in one-third increments on each anniversary date of
the grant. Recipients are entitled to receive shares of stock after the restrictions have lapsed,
but may elect to defer receipt of such stock to a future period. The restricted stock is entitled
to dividends at the same rate as the Company's Common Stock. As of December 31, 1997, based on the
closing market price of the Company's stock on that date of $18.125, Charles E. Bayless held 31,293
shares of restricted stock valued at $567,186; James S. Pignatelli held 4,677 shares of restricted
stock valued at $84,771; Ira R. Adler held 5,808 shares of restricted stock valued at $105,270; and
George W. Miraben held 4,978 shares of restricted stock valued at $90,226

(2) All other compensation is comprised of the Company's contributions to the Company's Triple
Investment Plan for Salaried Employees 401(k) Plan ($7,200 for each named executive officer in 1997
and $6,750 for each executive officer in 1995 and 1996, with the balance in 1996 attributable to
a one-time payment for vacation accrued and unused for all years of service with the Company).

OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants

Number of Percent of Potential Realizable
Securities Total Value at Assumed
Underlying Options/SARs Annual Rates of
Options/SARs Granted to Exercise Stock Price Appreciaton
Granted Employees in Price Expiration for Option Term
Name (#) Fiscal year ($/Sh) Date 5%($) 10%($)
---- ------------ ------------ ------- ---------- ----- ------

Charles E. Bayless 41,890 31.1% 14.4375 6/26/07 380,347 963,875
James S. Pignatelli 16,800 12.5% 14.4375 6/26/07 152,538 386,562
Ira R. Adler 13,300 9.9% 14.4375 6/26/07 120,760 306,029
Romano Salvatori - - - - -
George W. Miraben 11,400 8.5% 14.4375 6/26/07 103,509 262,311

During 1997, the Compensation Committee of the Board of Directors of TEP
granted stock options intended to qualify as incentive stock options under
the Internal Revenue Code of 1986, as amended (the "Code"), to the executive
officers of the Company with exercise prices equal to the market price of the
Common Stock at the date of grant. The options vest ratably over a three-
year period. The aggregate number of shares attributable to the 1997 grants
is 134,590.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Fiscal Year-End Fiscal Year End
Acquired (#) ($)
on Exercise Value Exercisable/ Exercisable/
Name (#) Realized ($) Unexercisable Unexercisable
---- --- ------------ ------------- ---------------

Charles E. Bayless -- -- 39,370/71,833 109,338/282,311
James S. Pignatelli -- -- 17,715/28,501 36,475/109,624
Ira R. Adler -- -- 16,770/22,697 40,324/85,453
Romano Salvatori -- -- 6,991/8,322 22,908/35,738
George W. Miraben -- -- 10,367/19,518 28,922/76,344

LONG-TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR

Number of Performance Or
Shares, Other Period Estimated Future Payouts
Name Units Or Until Under Non-Stock Price-Based
---- Other Maturation or Plans
Rights (#) Payout
---------- ------ ----------------------------
Threshold Target Maximum
(#) (#) (#)
-- --- --

Charles E. Bayless 105,550 12/31/01 52,775 105,550 158,325
James S. Pignatelli 24,790 12/31/01 12,395 24,790 37,185
Ira R. Adler 19,600 12/31/01 9,800 19,600 29,400
Romano Salvatori -- -- -- -- --
George W. Miraben 16,800 12/31/01 8,400 16,800 25,200

On June 26, 1997, at the recommendation of the Compensation Committee,
the Board of Directors unanimously approved a Performance Share Program under
the Omnibus Plan. The Performance Share Program is intended to align the
interests of the Company's executive officers directly with the interest of
its shareholders. On October 10, 1997, the Compensation Committee approved a
total of 254,540 Performance Shares to be awarded (the "Target Number of
Shares") to all executive officers, including Mr. Bayless and the other Named
Executives. The Performance Share Program provides for the delivery of
shares of the Company's Common Stock equal to 0 to 150% of the Target Number
of Shares, depending upon the Company's total shareholder return (stock price
increase plus dividends, divided by the initial stock price) over the
performance period ending December 31, 2001, compared to corporations in a
peer group. For this purpose, "peer group" means those corporations that as
of the vesting date are included in the S&P Electric Utility Index. At the
end of the performance period, the Compensation Committee will determine the
number of Performance Shares that vest (the "Vested Performance Shares")
based on the Company's performance against the peer group. Performance Share
recipients will receive one share of Common Stock for each Vested Performance
Share. The shares of Common Stock underlying the performance shares are
subject to limitations on their sale, transfer, or pledge prior to the time
they become vested. Recipients of Performance Shares will have no rights as
stockholders of the Company, including dividend rights and voting rights,
with respect to the Performance Shares and any shares of Common Stock
underlying or issuable in respect of such Performance Shares until such
shares are actually issued and held of record by the recipient.

PENSION PLAN TABLE

Remuneration ($) Years of Service
----------------- --------------------------------------------------------
15 20 25 30 35
--------------------------------------------------------
125,000 32,910 43,880 54,850 54,850 54,850
150,000 39,492 52,656 65,820 65,820 65,820
175,000 46,074 61,432 76,790 76,790 76,790
200,000 52,656 70,208 87,760 87,760 87,760
225,000 59,238 78,984 98,730 98,730 98,730
250,000 65,820 87,760 109,700 109,700 109,700
300,000 78,984 105,312 131,640 131,640 131,640
400,000 105,312 140,416 175,520 175,520 175,520
450,000 118,476 157,968 197,460 197,460 197,460
500,000 131,640 175,520 219,400 219,400 219,400
550,000 144,804 193,072 241,340 241,340 241,340

Remuneration is comprised of the officers' average annual compensation during
the five consecutive years of employment with the highest compensation within
the last 15 years preceding retirement. Compensation is comprised of salary
only, shown on the Summary Compensation Table.

The estimated credited years of service for the Company's most highly
compensated executive officers follows:
Credited
Years of
Name Service
------------------------------------------------------------
Charles E. Bayless ........................... 8
James S. Pignatelli .......................... 3
Ira R. Adler ................................. 12
Romano Salvatori ............................. 3
George W. Miraben ............................ 8

The amount of the pension benefit is equal to a base of 40% of the
compensation for 25 years of service, plus 9.7% of such calculated amount. The
estimated benefits shown in the Pension Plan Table are straight life annuities
not subject to a reduction for any Social Security benefits. The table also
reflects amounts payable under the Excess Benefits Plan which will pay from the
general funds of the Company the difference, if any, between the benefits shown
in the table above and any benefit payments which may be limited by federal
income tax regulations.

DIRECTOR COMPENSATION FOR LAST FISCAL YEAR

Cash Compensation Security Grants
-------------------------------------------------------
Number/of
Annual Securities
Name and Principal Retainer Fee Meeting Number of Underlying
Position (1) ($) (2) Fees ($)(2) Shares (#) Options/SARs(#)
- ------------ ------------ ---------- ---------- ----------------
Elizabeth T. Bilby 15,000 16,000 --- 1,200
Jose L. Canchola 15,000 22,000 --- 1,200
John L. Carter 15,000 20,000 --- 1,200
John A. Jeter 15,000 23,000 --- 1,200
R.B. O'Rielly 15,000 17,000 --- 1,200
Martha R. Seger 15,000 20,000 --- 1,200
Donald G. Shropshire 15,000 23,000 --- 1,200
H. Wilson Sundt 15,000 20,000 --- 1,200

(1) Mr. Bayless is not listed in the above table. He does not receive
compensation as a Director. Refer to the Summary Compensation Table for
information concerning his compensation.

(2) Amounts shown include cash compensation earned and received as well as
amounts earned but deferred at the election of Directors.

Each Director of TEP, other than Mr. Bayless, received an annual cash
retainer of $15,000, $1,000 for each Board meeting, and $1,000 for each
committee meeting attended in 1997. In addition, under the 1994 Outside
Director Stock Option Plan (the "Plan"), each Director, other than Mr.
Bayless, received a grant of 1,200 Common Stock Options on January 3, 1997
with an exercise price of $16.6875 per share, which represents the fair
market value of the underlying stock on the date of grant. Such options vest
in 1/3 increments on the 3rd day of January 1998, 1999 and 2000. As a
salaried employee of TEP, Mr. Bayless does not receive compensation in his
capacity as a member of the Board of Directors of TEP or the Company.

EXECUTIVE EMPLOYMENT CONTRACTS

TEP has employment agreements with 12 officers (including the Chief
Executive Officer and the four other most highly compensated officers) which
become effective in the event of a change in control of TEP or the Company
(which includes the acquisition of beneficial ownership of 30% of the Common
Stock, certain changes in the Board of Directors, or approval by the
shareholders of certain mergers or consolidations or upon certain transfers
of assets of TEP or the Company). The agreements provide that each officer
shall be employed by TEP or one of its subsidiaries or affiliates in a
position comparable to his current position, with compensation and benefits
which, as set forth in each agreement, are at least equal to such officer's
then current compensation and benefits, for an employment period of five
years after a change in control occurs (subject to earlier termination due to
such officer's acceptance of a position with another company, or termination
for cause).

Following a change in control of the Company or TEP, in the event that
the officer's employment is terminated by the Company (with the exception of
termination due to the officer's acceptance of another position or for cause)
or if the officer terminates his employment because of a reduction in
position, responsibility, salary or for certain other stated reasons, the
officer is entitled to severance benefits in the form of (i) a lump sum
payment equal to the present value of his salary and short-term incentive
compensation for the next two years under the agreement, (ii) the present
value of the additional amount he would have received under the Retirement
Plan if he had continued to be employed for the five-year period after a
change in control occurs, (iii) the present value of contributions that would
have been made by TEP under the 401(k) Plan if he had continued to be
employed for such five-year period, and (iv) the spread on any Company stock
options which would have been granted to the officer if he had continued to
be employed for two years following such termination. Such officer is also
entitled to continue to participate for such five-year period in the
Company's health plans, death benefit plans and disability benefit plans.
Notwithstanding the above, any payment which is determined to be a parachute
payment under the Code shall be limited to the maximum amount permitted to be
paid without the imposition of an excess parachute payment excise tax, minus
one dollar (and if it shall be determined that the Company has made a payment
in excess of this limitation, such excess would become a loan and the officer
would be required to repay such amount). Assuming a change in control
occurred on December 31, 1997 which resulted in the immediate termination of
the Chief Executive Officer and all four of the Company's other most highly
compensated officers, the total payments made by TEP pursuant to the said
contracts would not be expected to exceed $5,000,000.

Pursuant to an employment agreement, Mr. Salvatori is employed as
President of Nations Energy Corporation ("Nations"). The current term of his
agreement expires December 31, 1998. Mr. Salvatori's salary was determined
in the manner indicated in the Report of the Compensation Committee set forth
below. In addition to the salary reflected in the Summary Compensation
Table, Mr. Salvatori is entitled to an annual bonus based upon the
achievement of certain business objectives, and to participate in a bonus
pool paid as a percentage of the development fee received by Nations upon the
financial closing of new independent projects. The share of such bonus pool
received by Mr. Salvatori is determined by the Board of Directors of Nations.
Mr. Salvatori is also entitled to receive additional cash compensation based
upon pre-tax cash flow distributed to Nations associated with projects in
which Nations invests during the term of his agreement or for which Nations
obtains an option to invest which has been approved by Nations' Board of
Directors. The agreement also provides for a performance payment to Mr.
Salvatori in the event of a sale of a specified portion of Nations to a third
party. Any such payment would serve to reduce the amount received by Mr.
Salvatori under the change of control agreement described above.

REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the
"Compensation Committee") is responsible for developing and administering the
Company's executive compensation policies and programs and making
recommendations to the Board with respect thereto. In 1997, the Compensation
Committee was comprised of five of Tucson Electric Power Company's
independent outside Directors. The Compensation Committee determines the
compensation of the Company's executive officers, including Mr. Bayless and
the other senior executives named in the Summary Compensation Table (the
"Named Executives"), and sets policies for and reviews the compensation
award do to other key members of management. The Company applies a consistent
philosophy to compensation for all executive employees, including the Named
Executives.

COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS

The Company's executive compensation policies and programs
generally are intended to (i) relate the compensation of employees to the
success of the Company and the creation of shareholder value; and (ii)
attract, motivate and retain highly qualified executives. The Company's
compensation program was developed with the assistance of an external
consultant, and is intended to provide competitive pay levels which are
linked to the achievement of the Company's strategic objectives.

The Company's 1997 compensation program consisted of three components:
(i) base salary, (ii) short-term incentive compensation and (iii) long-term
incentive compensation.

BASE SALARIES

The base salary component of compensation is intended to be competitive
with that paid by comparable companies in the electric industry. As noted
previously, in developing the compensation program, the Compensation
Committee retained an external consultant to conduct a competitive analysis
of pay for the Company's officer group. In conducting its analysis for 1997,
the consultant used a comparative group of 15 electric utilities, chosen
based on their business and size, with revenues from $.5 billion to $1.7
billion. The Compensation Committee believes the companies in the
comparative group are a more appropriate comparison for the Company than the
Edison Electric 100 companies used in the Performance Graph set forth
following this Report, because the type of business and annual revenues of
the companies included in the survey are more closely related to those of the
Company and the companies in the comparative group represent primary
competitors to the Company for top-level management personnel. The external
data from companies in the comparative group was used to develop a market
compensation for each executive position. "Market compensation" refers to the
median total salary for utility executives in the comparative group. Base
salaries for the Company's executive officers (including Mr. Bayless and the
other Named Executives) were set at market compensation levels in January
1997, in recognition of the increasingly competitive environment in the
electric industry and the need to continue to attract and retain highly
qualified executives, as well as the fact that a substantial portion of each
executive's total compensation package is "at-risk," based on the
achievement of certain corporate goals. See Short-Term Incentive Compensation
and Long-Term Incentive Compensation below. In the case of certain of the
Named Executives other than Mr. Bayless, a 15% premium was added to base
salary to reflect additional responsibilities of the executive. Mr. Bayless
received a 3.4% increase in base salary for 1997. The other Named Executives
received increases ranging from 2.5% to 17%.

SHORT-TERM INCENTIVE COMPENSATION

The Board adopted the Short-Term Incentive Plan to provide compensation
for meeting or exceeding specified corporate objectives designed to
contribute to the attainment of the Company's long-term strategic plan. Under
the Short-Term Incentive Plan, target award levels are set as a percentage of
each participant's base salary. In 1997, the percentage for Mr. Bayless was
40% and for the other executive officers ranged from 25-30%. Actual awards
can vary from 0 to 200% of the target award level, depending upon the
Company's performance in relation to pre-established goals. For 1997, pre-
established goals for officers (including Mr. Bayless and the other Named
Executives) consisted of two corporate objectives and a customer service
multiplier. The corporate objectives consisted of: 1) increasing the Company's
intrinsic value, measured by cash flow return on investment; and 2) improving
profitability and cost management, measured by operations & maintenance
expenses per kilowatt hour sold. The customer service multiplier consisted of
eight component goals, relating to: 1) reducing the number of outages;
2) decreasing average outage duration; 3) improving customer service
satisfaction; 4) increasing customer use of special programs and services;
5) increasing services provided to customers; 6) increasing customer service
options; 7) sustaining air quality compliance; and 8) sustaining Company
visibility through participation in community activities.

In calculating the percentage of target awards payable, the Compensation
Committee established target performance levels for each of the corporate
objectives. Minimum performance levels (50% of target awards payable) and
exceptional performance levels (150% of target awards payable) were
established as well. No credit was given for performance below minimum
levels. The customer service multiplier was established at levels ranging
from .8 to 1.2, depending upon the number of component goals met. In order
for any incentive compensation to be paid, the Company was required to meet
at least the minimum performance levels on each of the corporate objectives.
The Company met the criteria for exceptional performance levels for each of
the corporate objectives in 1997. Because the Company also met each of the
customer service multiplier component goals, the customer service multiplier
was set at 1.2. In addition, because the performance level for corporate
goals (150%) multiplied by the customer service multiplier (1.2) equaled 180%
of target performance, the Compensation Committee approved a Short-Term
Incentive Plan enhancement, resulting in incentive compensation to each of
the executive officers (including Mr. Bayless and the other Named Executives)
in the amount of 200% of his or her target award level. Incentive
compensation earned in 1997 by Mr. Bayless and the other Named Executives is
set forth in the preceding Summary Compensation Table. Mr. Salvatori does
not participate in the Short-Term Incentive Plan.

LONG-TERM INCENTIVE COMPENSATION

The Company's long-term incentive compensation is intended to attract
and retain quality employees over the long term in a manner that directly
aligns them with shareholder interests.

At the recommendation of the Compensation Committee, the Board of
Directors unanimously adopted, and, at the 1994 Annual Meeting of
Shareholders, the shareholders approved the Tucson Electric Power Company
1994 Omnibus Stock and Incentive Plan (the "Omnibus Plan"). On June 26, 1997,
the Compensation Committee issued Incentive Stock Options ("ISOs") and Non-
Qualified Stock Options ("NQSOs") to all executive officers of the Company
including Mr. Bayless and the other Named Executives. In calculating the
level of awards to Mr. Bayless and the other executive officers, the
Compensation Committee considered the aforementioned analysis of executive
compensation for comparative companies. Based on such analysis, as well as
Mr. Bayless' continuing contribution to the Company's financial recovery and
achievement of its long-term strategic goals, the Compensation Committee
awarded Mr. Bayless ISOs and NQSOs with a total value equal to 60% of his
base salary (based on a Black-Scholes pricing model which assigned a value of
$6.44 per share for ISOs and $6.17 per share for NQSOs). The total value of
stock options issued to other Named Executives ranged from 30% to 33% of base
salary. The number of shares covered by the stock option grant to Mr.
Bayless was 41,890. The Compensation Committee did not consider the number
of options previously granted or outstanding.

On June 26, 1997, the Compensation Committee issued awards of restricted
stock under the Omnibus Plan to all executive officers of the Company,
including Mr. Bayless and the other Named Executives. The restrictions on
such stock lapse over a three-year period in one-third increments on each
anniversary date of the grant. Based on the factors set forth above, the
Compensation Committee awarded Mr. Bayless restricted stock with a total
value equal to 99% of his base salary (based on an assumed economic value of
$13.92 per share of restricted stock). The total number of shares of
restricted stock issued to other Named Executives ranged from 21 to 33% of
base salary. The total number of shares of restricted stock issued to Mr.
Bayless was 31,293.

The Compensation Committee does not presently have a policy
regarding qualifying compensation paid to executive officers for
deductibility under Section 162(m) of the Code.

Respectfully submitted,

THE COMPENSATION COMMITTEE

H. Wilson Sundt
Elizabeth T. Bilby
Jose L. Canchola
John A. Jeter
Donald G. Shropshire

TUCSON ELECTRIC POWER COMPANY
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
TUCSON ELECTRIC POWER COMPANY, S&P 500 INDEX, AND EEI INDEX
OF 100 INVESTOR-OWNED UTILITIES

The graph showing on the hard copy represents the comparison of five year
cumulative total return between Tucson Electric Power Company, the S&P
500 Index, and EEI index of 100 investor-owned utilities. The graph's
X-axis shows the years 1992 to 1997, and the Y-axis shows dollar values from
50 to 300. The data points are connected by lines with the following markers:
TEP - triangles; S&P 500 Index - diamonds; EEI index of 100 investor-
owned utilities - squares. The datapoints are as follows:

1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----

Tucson Electric
Power Company $100 $145 $120 $130 $132 $145

S&P 500 Index $100 $110 $112 $153 $189 $252

EEI Index of 100
Investor-owned
Utilities $100 $111 $ 98 $129 $130 $166

Assumes $100 invested on December 31, 1991 in Tucson Electric Power
Company Common Stock, S&P Index and EEI Index. It is assumed that all
dividends are reinvested in stock at the frequency paid and the returns of
each component peer group issuer are weighted according to the issuer's stock
market capitalization at the beginning of the period.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities and Exchange Act of 1934, as amended,
and Securities and Exchange Commission ("SEC") regulations, require
directors, certain officers, and persons who own greater than 10 percent of
the equity securities of a reporting company to file reports of ownership and
changes in ownership of such equity securities with the SEC and the principal
national securities exchange on which such equity securities are registered.

Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that
during 1997 all filing requirements applicable to its directors, officers,
and 10 percent shareholders were satisfied.

TRANSACTION OF OTHER BUSINESS

So far as the Company is aware, no matters other than those described in
this Proxy Statement will be acted upon at the Meeting. If, however, any
other matters shall properly come before the Meeting, it is the intention of
the persons name in the enclosed proxy to vote the proxy in accordance with
their judgemen on such matters.

SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING

Shareholder proposals intended to be presented at the 1999 Annual Meeting
of the Company must be received by the Company no later than December 2, 1998
in order to be eligible for inclusion in the Company's Proxy Statement and
the form of proxy relating to that meeting.

By order of the Board of Directors

DENNIS R. NELSON, Corporate Secretary
Dated: March 31, 1998

SHAREHOLDERS ARE REQUESTED TO FILL OUT, DATE, SIGN, AND PROMPTLY RETURN THE
ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.

APPENDIX

(FORM OF PROXY CARD)

UniSource Energy Corporation
220 West Sixth Street, Post Office Box 711
Tucson, Arizona 85702

You are cordially invited to join us at the Annual Meeting of
Shareholders of UniSource Energy Corporation. This year's meeting
will be held at the Tucson East Hilton Hotel, 7600 E. Broadway
Boulevard, Tucson, Arizona on Friday, May 8, 1998.

At the meeting you will be asked to elect a Board of Directors. It
is important that your shares be voted whether or not you plan to
be present at the meeting. You should specify your choices by
marking the appropriate boxes on the proxy form below, and date,
sign and return your proxy form in the enclosed, postpaid return
envelope as promptly as possible. If you date, sign and return
your proxy form without specifying your choice, your shares will
be voted in accordance with the recommendations of your directors.

We will discuss the business of UniSource Energy during the
meeting. I welcome your comments and suggestions, and we will
provide time during the meeting for questions from shareholders.

I am looking forward to having you with us on the 8th of May. In
the meantime, if you have questions regarding the Meeting, please
phone our Investor Relations Department at 520-884-3661.

Sincerely,

Detach Proxy Card Here
- ------------------------------------------------------------------

(FORM OF PROXY CARD-FRONT)

The Board of Directors Recommends a vote FOR the following
proposal:

1. Election of Directors

FOR all nominees WITHHOLD AUTHORITY to vote * EXCEPTIONS [ ]
listed below for all nominees listed
[ ] below [ ]

Nominees: Elizabeth T. Bilby, Charles E. Bayless, Jose L.
Canchola, John L. Carter, John A. Jeter, R.B. O'Rielly, Martha R.
Seger, Harold W. Burlingame, Larry W. Bickle, H. Wilson Sundt

(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the "Exceptions" box and write that nominee's name
in the space provided below).

*Exceptions ------------------------------------------------------

Change of Address and
or Comments Mark Here [ ]

PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. When shares are held
by joint tenants in common or as community property, both should
sign. When signing as attorney, executor, administrator, trustee,
guardian or custodian, please give full title as such. If a
corporation, please sign in corporate name by President or other
authorized officer. If a partnership, please sign in partnership
name by authorized person. Receipt is hereby acknowledged of
Notice of Annual Meeting, Proxy Statement and the 1997 Annual
Report.

Dated: , 1998

------------------------

Signature

------------------------

Signature

Votes MUST be indicated
(x) in Black or Blue ink.

Please Sign, Date and Return the Proxy Promptly Using the Enclosed
Envelope.

(FORM OF PROXY CARD - BACK)

UniSource Energy Corporation

This Proxy is Solicited on Behalf of the Board of Directors of the
Company for the Annual Meeting to be held May 8, 1998

PROXY

The undersigned hereby appoints Charles E. Bayless and Ira R.
Adler, and each of them, with the power of substitution, to
represent and to vote on behalf of the shareholder all shares of
Common Stock which the shareholder is entitled to vote at the
Annual Meeting of Shareholders scheduled to be held at the Tucson
East Hilton, 7600 E. Broadway Boulevard, Tucson, Arizona, on May
8, 1998, and at any adjournments thereof, with all powers the
shareholder would possess if personally present and particularly
with respect to Item 1 and in their discretion, upon such other
business as may properly come before the meeting. This proxy, when
properly executed, will be voted in the manner directed herein by
the shareholder. If no direction is made, this proxy will be voted
"FOR" Item. 1.
(Continued, and to be dated and signed on reverse side.)

UNISOURCE ENERGY CORPORATION
C/O THE BANK OF NEW YORK
P.O. BOX 11030
NEW YORK, N.Y. 10203-0030