Portland, Maine (Platts)--24Apr2008

Tucson Electric Power and Arizona Corporation Commission staff have
reached a tentative settlement on a pending rate case, the utility's parent,
UniSource Energy, told the US Securities and Exchange Commission Thursday.

The settlement calls for a cost-of-service rate methodology for TEP's
generation assets; a 6% base rate increase for the utility; a base rate
moratorium through January 1, 2013; a waiver of any claims under a 1999
settlement; and a fuel rate included in base rates would be 2.9 cents/kWh,
with a power purchase and fuel adjustment clause effective January 1.

Since 2005, TEP has been asking the ACC for clarity on what would happen
to its rates after a previous settlement expires at the end of 2008. In July
2007, TEP proposed three rate options that would lead to a rate hike of $117
million, or 14.9%, to $181 million, or 23%, depending on the approach
selected.

"TEP and the ACC staff will commence the process of preparing a
definitive settlement agreement, which is expected to be filed with the ACC,"
UniSource told the SEC. "There can be no assurance that a definitive
settlement agreement will be reached or whether other participants in the rate
proceeding will support the proposed settlement."

The proposed rates will be more fully developed in the final agreement
and may vary from those in the tentative settlement, UniSource said. TEP's
current rates will remain in effect until the ACC sets new rates for
the utility.