Washington (Platts)--8Oct2008

Heating bills for UniSource Energy Services' Arizona natural gas
customers could rise between 8% and 16% this winter compared with last year
because of rising fuel prices, the utility said Wednesday.

"UES cannot control the price of natural gas and the company does not
benefit from higher costs," it said in a statement. "Instead, UES purchases
gas for customers on the wholesale market and passes its cost along to
customers without any markup. The cost of natural gas accounts for more than
60% of the amount UES customers will pay for gas service this winter.

Customers could pay as much as $1.31/therm of natural gas by April, up
from a winter low of $1.23/t in November, UES said. In the winter of 2007, the
cost fluctuated between $1.09/t and $1.16/t.

Bills could reach $142/t in December for customers who use an average of
107 therms.

To cover UES' rising cost, the company plans to file a request with the
Arizona Corporation Commission later this year for higher distribution rates
to take effect in the second half of 2009.

UES rates last went up in November, increasing bills by about 4%.

UES has more than 146,000 gas customers in Mohave, Yavapai, Coconino,
Navajo and Santa Cruz counties in Arizona. It also has about 90,000
electricity customers in the state.