Exhibit 99.1

Exhibit 99.1



FOR IMMEDIATE RELEASE		August 3, 2009
Media Contact: Art McDonald, (520) 884-3628		Page 1 of 9
Financial Analyst Contact: Jo Smith, (520) 884-3650

UNISOURCE ENERGY REPORTS SECOND QUARTER 2009 EARNINGS,
NARROWS 2009 EARNINGS GUIDANCE RANGE

•

UniSource Energy’s net income for the second quarter of 2009 was $31 million, or $0.80 per diluted share of common stock, compared with net income of $5 million, or $0.13 per diluted share, in the second quarter of 2008. Earnings for the second-quarter of 2009 also reflect an after-tax gain of $3.6 million, or $0.09 per diluted share on the sale of its equity interest in Carboelectrica Sabinas, S. de R.L. de C.V. (Sabinas), one of UniSource Energy’s unregulated energy investments.

•

UniSource Energy narrows its 2009 reported GAAP earnings guidance to $2.55 to $2.70 per diluted share from $2.55 to $2.90 per diluted share.

Tucson, Ariz. — UniSource Energy Corporation (NYSE: UNS) today reported second quarter 2009 net income of $31 million, or $0.80 per diluted share of common stock, compared with net income of $5 million, or $0.13 per diluted share, in the same period last year.

UniSource Energy’s financial results are driven primarily by Tucson Electric Power (TEP), UniSource Energy’s principal subsidiary, which reported net income of $27 million for the second quarter compared with net income of $6 million last year. The increase can be attributed to two key elements: first, a $12 million increase in TEP’s retail revenues (excluding renewable energy and demand side management charges) reflecting an average base rate increase of 6% that was effective December 1, 2008 and a Purchased Power and Fuel Adjustment Clause (PPFAC) that allows recovery of actual costs. The new rate structure contributed to a $16 million increase in TEP’s utility gross margin (retail and wholesale revenues net of costs and deferrals related to fuel, purchased power and transmission) over the second quarter of last year. The other key element is that during the second quarter of 2008 TEP incurred charges of $22 million, including amortization of a regulatory asset and deferred revenues to be refunded; those charges will not recur in 2009.

Retail revenues were higher even though TEP’s second-quarter retail kilowatt-hour (kWh) sales fell 1.9 percent compared with the same period last year due to the struggling economy. The reduction in TEP’s second quarter retail sales actually represented a significant improvement over the 4.8 percent year-over-year decrease in the utility’s first quarter sales.

“With half of the year behind us and TEP’s retail energy sales lagging 3.3 percent behind last year’s levels, we’re revising our expectations and narrowing our 2009 guidance range to $2.55 - $2.70 per diluted share,” said Paul Bonavia, Chairman, President and CEO of UniSource Energy. “Although we’re beginning to see signs that economic conditions may be stabilizing, the high end of our previous earnings guidance is likely to remain out of reach.

To mitigate the impact of lower sales, the company is taking steps to reduce O&M expenses, Bonavia said. “We’re finding ways to cut costs without compromising safety, reliable service for our customers or the long-term health of our company,” he said.

TEP’s cash flows remain strong and are expected to combine with those of sister utilities UNS Gas and UNS Electric to push UniSource Energy’s 2009 consolidated operating cash flows above $330 million. Cash flows from operations are expected to be more than adequate to cover the company’s estimated consolidated capital expenditures of approximately $290 million.

The growth of TEP’s customer base also has proven resilient, Bonavia said. “TEP’s customer base continues to expand at a nearly 1 percent annual rate, which is encouraging in today’s economy,” he said. “With a more constructive regulatory framework in place, we will be well prepared to meet the needs of our customers as the economy improves in the years ahead.”

UniSource Energy’s revised guidance range also reflects the reduction in TEP’s long-term wholesale revenues, which fell $3 million in the second quarter compared with the same period last year. The decrease is linked primarily to reduced sales to the Navajo Tribal Utility Authority, which has made greater use of other energy sources that became more available and cost-effective under current economic conditions.

Tucson Electric Power

Second Quarter 2009 Results of Operations

TEP reported net income of $27 million in the second quarter of 2009, compared with net income of $6 million during the same period in 2008.

•

Retail electric revenues increased 5.5 percent, or $12 million, excluding the pass-through components for renewable energy and demand-side management (DSM) surcharges. Gains due to higher base rates and implementation of the PPFAC were partly offset by lower energy sales.

•

Sales to residential customers were up 0.5 percent compared with the second quarter of 2008. The pace of residential sales in the second quarter improved on the year-over-year decrease of 5.9 percent in the first quarter of 2009.

•

Second quarter sales to commercial and industrial customers — whose usage most closely reflects economic activity — were down 3.7 and 3.1 percent, respectively. The drop in second-quarter industrial sales improved on the 5.4 percent decrease in first quarter sales to those customers. The year-over-year reduction in second quarter sales to commercial customers increased from the 2.8 percent drop recorded in the first quarter.

•

Long-term wholesale sales decreased $3 million, or 24 percent, due to lower sales volumes.

•

PPFAC-related expenses, net of offsets, decreased by $8 million compared with the fuel and purchased power expenses net of short term wholesale revenues recorded during the second quarter of 2008. The decrease was due primarily to lower wholesale market prices for energy and natural gas and lower retail demand.

•

O&M expense increased $8 million, due in part to planned maintenance at TEP’s generating plants and a $3 million increase in pension-related costs.

•

Amortization of TEP’s Transition Recovery Asset (TRA) ended in May 2008, resulting in a $7 million decrease in amortization in the second quarter of 2009 compared with the second quarter of 2008.

•

Depreciation and amortization increased $11 million due primarily to plant additions, new depreciation rates for generating assets, amortization of regulatory assets resulting from the 2008 TEP rate order and a $4 million adjustment related to a change in accounting for TEP’s investment in Springerville Unit 1 lease equity.

•

Total other income increased $7 million due primarily to a $3 million adjustment related to a change in accounting for TEP’s investment in Springerville Unit 1 lease equity and interest on income tax refunds of $2 million.

•

Interest expense decreased $4 million due primarily to lower rates on variable rate debt, lower balances on capital lease obligations and a $1.6 million adjustment related to a change in accounting for TEP’s investment in Springerville Unit 1 lease equity.

During the second quarter of 2009, TEP adjusted its accounting for an investment in Springerville Unit 1 lease equity acquired in 2006, resulting in a $0.6 million increase in pre-tax income. Adjustments were made to depreciation and amortization, other income and expense, and interest on capital leases for the period from July 2006 through June 2009.

UNS Gas

UNS Gas reported no earnings in the second quarter of 2009, compared with net income of $0.3 million during the same period last year. UNS Gas’s operations are seasonal in nature with peak usage occurring in the winter months. The weak economy contributed to a lack of customer growth compared to the same period last year.

A request for higher UNS Gas rates is pending before the Arizona Corporation Commission (ACC). The company has requested an average base rate increase of 6 percent, or approximately $9.5 million, to cover increases in capital and operating costs. The ACC’s staff has recommended rates that would provide a $3.4 million revenue increase. Hearings before an administrative law judge are scheduled to begin Aug. 10, 2009.

UNS Electric

UNS Electric reported net income of $1.5 million for the second quarter of 2009, compared with net income of $0.7 million in the second quarter of 2008. Like TEP, UNS Electric’s operations are seasonal in nature, with peak energy demand occurring in the summer months.

Second-quarter retail kWh sales rose 6.8 percent compared with the same period last year due to the operations of a new copper mine in the company’s service area. Excluding mining sales, UNS Electric’s retail kWh sales fell 1.5 percent compared with the same period last year due to mild weather and the weak economy.

In April 2009, UNS Electric filed a general rate case with the ACC requesting an average base rate increase of $13.5 million, or 7.4 percent over 2008 retail revenues, to cover its rising service costs. Hearings before an administrative law judge are scheduled to begin Feb. 2, 2010

Millennium Energy Holdings, Inc.

In June, Millennium Energy Holdings (Millennium) recorded a pre-tax gain of $6 million from the sale of its equity interest in Sabinas, a Mexican coal supplier and owner of coal and associated gas reserves. The interest in Sabinas represented Millennium’s largest unregulated energy investment. Millennium received $5 million in cash and a $15 million three-year secured note bearing interest at 6 percent for the sale of its interest in Sabinas. At June 30, 2009, Millennium’s remaining total investments, including the $15 million note, were approximately $30 million.

Net Income and Earning Per Share Summary


	2nd Quarter					YTD June 30,
Net Income	2009		2008			2009		2008
	-Millions-					-Millions-

Tucson Electric Power	$	26.5	$	5.8		$	26.0		($3.1	)
UNS Gas		—		0.3			4.9		6.6
UNS Electric		1.5		0.7			2.3		1.2
Other (1)		3.3		(2.1	)		3.1		(2.6	)

Net Income	$	31.3	$	4.7		$	36.3	$	2.1


Avg. Basic Shares Outstanding (millions)		35.7		35.6			35.7		35.6
Avg. Diluted Shares Outstanding (millions)		40.2		36.2			40.2		36.1


	2nd Quarter					YTD June 30,
Earnings Per UniSource Energy Share	2009		2008			2009		2008

Tucson Electric Power	$	0.74	$	0.16		$	0.73		($0.09	)
UNS Gas		0.00		0.01			0.14		0.19
UNS Electric		0.04		0.02			0.06		0.03
Other (1)		0.09		(0.06	)		0.09		(0.07	)

Net Income per Basic Share	$	0.88	$	0.13		$	1.02	$	0.06

Net Income per Diluted Share (2)	$	0.80	$	0.13		$	0.95	$	0.06


(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 the second quarter and six months ending June 30, 2008, 4 million of potentially dilutive shares and after-tax interest expense of $1 million and $2 million, respectively, were not included in the computation of diluted EPS because doing so would be anti-dilutive.

UniSource Energy believes 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.

Seasonality of Earnings

The net income and results of operations of UniSource Energy’s utility businesses are seasonal in nature. TEP and UNS Electric are summer-peaking utilities and historically have recorded a majority of their net income during the second and third quarters, when hot weather drives increases in energy consumption.

Energy demand from UNS Gas customers typically peaks during the winter, and that company records the majority of its net income during the first and fourth quarters.

Conference Call and Webcast

UniSource Energy will host a conference call on Tuesday, August 4 at 2:00 p.m. EDT 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:		21943106

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


Replay Number:		(800) 642-1687

Reference Code:		21943106

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 more than 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’s Form 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.

UNISOURCE ENERGY 2009 RESULTS

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


	Three Months Ended
	June 30,						Increase / (Decrease)
	2009			2008			Amount			Percent
Operating Revenues
Electric Retail Sales	$	267,200		$	248,753		$	18,447			7.4
Provision for Rate Refunds — CTC Revenue		—			(14,898	)		14,898			N/M

Net Electric Retail Sales		267,200			233,855			33,345			14.3
Electric Wholesale Sales		27,950			77,456			(49,506	)		(63.9	)
Gas Revenue		24,661			29,740			(5,079	)		(17.1	)
Other Revenues		17,973			19,271			(1,298	)		(6.7	)

Total Operating Revenues		337,784			360,322			(22,538	)		(6.3	)


Operating Expenses
Fuel		69,047			75,982			(6,935	)		(9.1	)
Purchased Energy		64,219			123,478			(59,259	)		(48.0	)
Transmission		2,991			4,957			(1,966	)		(39.7	)
Increase (Decrease) to reflect PPFAC/PGA Recovery Treatment		3,618			(4,892	)		8,510			N/M

Total Fuel and Purchased Energy		139,875			199,525			(59,650	)		(29.9	)
Other Operations and Maintenance		78,929			70,670			8,259			11.7
Depreciation and Amortization		47,527			36,281			11,246			31.0
Amortization of Transition Recovery Asset		—			6,695			(6,695	)		N/M
Taxes Other Than Income Taxes		12,363			12,525			(162	)		(1.3	)

Total Operating Expenses		278,694			325,696			(47,002	)		(14.4	)

Operating Income		59,090			34,626			24,464			70.7


Other Income (Deductions)
Interest Income		4,823			3,039			1,784			58.7
Other Income		13,878			2,699			11,179			N/M
Other Expense		(695	)		(2,291	)		1,596			69.7

Total Other Income (Deductions)		18,006			3,447			14,559			N/M


Interest Expense
Long-Term Debt		14,719			18,175			(3,456	)		(19.0	)
Interest on Capital Leases		11,450			13,074			(1,624	)		(12.4	)
Other Interest Expense		961			582			379			65.1
Interest Capitalized		(619	)		(1,628	)		1,009			62.0

Total Interest Expense		26,511			30,203			(3,692	)		(12.2	)


Income Before Income Taxes		50,585			7,870			42,715			N/M
Income Tax Expense		19,310			3,123			16,187			N/M


Net Income	$	31,275		$	4,747		$	26,528			N/M


Weighted-average Shares of Common Stock Outstanding (000)		35,687			35,612			75			0.2


Basic Earnings per Share	$	0.88		$	0.13		$	0.75			N/M


Diluted Earnings per Share	$	0.80		$	0.13		$	0.67			N/M


Dividends Declared per Share	$	0.290		$	0.240		$	0.050			20.8


	Three Months Ended
Tucson Electric Power	June 30,				Increase / (Decrease)
Electric MWh Sales:	2009		2008		Amount			Percent
Retail Sales		2,356,390		2,403,032		(46,642	)		(1.9	)
Wholesale Sales		614,046		1,160,805		(546,759	)		(47.1	)

Total		2,970,436		3,563,837		(593,401	)		(16.7	)

N/M — Not Meaningful

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

UNISOURCE ENERGY 2009 RESULTS

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


	Six Months Ended
	June 30,						Increase / (Decrease)
	2009			2008			Amount			Percent
Operating Revenues
Electric Retail Sales	$	468,552		$	447,293		$	21,259			4.8
Provision for Rate Refunds — CTC Revenue		—			(14,898	)		14,898			N/M

Net Electric Retail Sales		468,552			432,395			36,157			8.4
Electric Wholesale Sales		63,246			129,825			(66,579	)		(51.3	)
Gas Revenue		82,963			95,170			(12,207	)		(12.8	)
Other Revenues		34,880			33,066			1,814			5.5

Total Operating Revenues		649,641			690,456			(40,815	)		(5.9	)


Operating Expenses
Fuel		123,864			145,205			(21,341	)		(14.7	)
Purchased Energy		140,914			231,558			(90,644	)		(39.1	)
Transmission		5,251			8,621			(3,370	)		(39.1	)
Increase (Decrease) to reflect PPFAC/PGA Recovery Treatment		10,320			(11,231	)		21,551			N/M

Total Fuel and Purchased Energy		280,349			374,153			(93,804	)		(25.1	)
Other Operations and Maintenance		163,882			138,160			25,722			18.6
Depreciation and Amortization		88,202			72,434			15,768			21.8
Amortization of Transition Recovery Asset		—			23,945			(23,945	)		N/M
Taxes Other Than Income Taxes		24,818			25,120			(302	)		(1.2	)

Total Operating Expenses		557,251			633,812			(76,561	)		(12.1	)

Operating Income		92,390			56,644			35,746			63.1


Other Income (Deductions)
Interest Income		6,921			6,204			717			11.6
Other Income		14,385			5,198			9,187			N/M
Other Expense		(1,228	)		(2,882	)		1,654			57.4

Total Other Income (Deductions)		20,078			8,520			11,558			N/M


Interest Expense
Long-Term Debt		29,363			35,420			(6,057	)		(17.1	)
Interest on Capital Leases		24,258			26,151			(1,893	)		(7.2	)
Other Interest Expense		1,431			1,723			(292	)		(16.9	)
Interest Capitalized		(1,344	)		(3,175	)		1,831			57.7

Total Interest Expense		53,708			60,119			(6,411	)		(10.7	)


Income Before Income Taxes		58,760			5,045			53,715			N/M
Income Tax Expense		22,566			2,913			19,653			N/M


Net Income	$	36,194		$	2,132		$	34,062			N/M


Weighted-average Shares of Common Stock Outstanding (000)		35,676			35,585			91			0.3


Basic Earnings per Share	$	1.01		$	0.06		$	0.95			N/M


Diluted Earnings per Share	$	0.95		$	0.06		$	0.89			N/M


Dividends Declared per Share	$	0.580		$	0.480		$	0.100			20.8


	Six Months Ended
Tucson Electric Power	June 30,				Increase / (Decrease)
Electric MWh Sales:	2009		2008		Amount			Percent
Retail Sales		4,285,649		4,430,115		(144,466	)		(3.3	)
Wholesale Sales		1,444,028		2,104,014		(659,986	)		(31.4	)

Total		5,729,677		6,534,129		(804,452	)		(12.3	)

N/M — Not Meaningful

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

TUCSON ELECTRIC POWER COMPANY 2009 RESULTS

TUCSON ELECTRIC POWER COMPANY
Comparative Condensed Consolidated Statements of Income
(in thousands of dollars)
(UNAUDITED)


	Three Months Ended
	June 30,						Increase / (Decrease)
	2009			2008			Amount			Percent
Operating Revenues
Electric Retail Sales	$	220,007		$	205,486		$	14,521			7.1
Provision for Rate Refunds — CTC Revenue		—			(14,898	)		14,898			N/M

Net Electric Retail Sales		220,007			190,588			29,419			15.4
Electric Wholesale Sales		31,985			82,582			(50,597	)		(61.3	)
Other Revenues		19,552			20,971			(1,419	)		(6.8	)

Total Operating Revenues		271,544			294,141			(22,597	)		(7.7	)


Operating Expenses
Fuel		65,038			74,006			(8,968	)		(12.1	)
Purchased Energy		36,375			78,554			(42,179	)		(53.7	)
Transmission		1,259			2,430			(1,171	)		(48.2	)
Increase (Decrease) to reflect PPFAC Recovery Treatment		(3,634	)		—			(3,634	)		N/M

Total Fuel and Purchased Energy		99,038			154,990			(55,952	)		(36.1	)
Other Operations and Maintenance		69,103			61,481			7,622			12.4
Depreciation and Amortization		41,769			30,707			11,062			36.0
Amortization of Transition Recovery Asset		—			6,695			(6,695	)		N/M
Taxes Other Than Income Taxes		10,040			10,516			(476	)		(4.5	)

Total Operating Expenses		219,950			264,389			(44,439	)		(16.8	)

Operating Income		51,594			29,752			21,842			73.4


Other Income (Deductions)
Interest Income		4,740			2,678			2,062			77.0
Other Income		7,389			2,260			5,129			N/M
Other Expense		(521	)		(258	)		(263	)		N/M

Total Other Income (Deductions)		11,608			4,680			6,928			N/M


Interest Expense
Long-Term Debt		9,213			12,624			(3,411	)		(27.0	)
Interest on Capital Leases		11,446			13,070			(1,624	)		(12.4	)
Other Interest Expense		335			464			(129	)		(27.8	)
Interest Capitalized		(498	)		(1,297	)		799			61.6

Total Interest Expense		20,496			24,861			(4,365	)		(17.6	)


Income Before Income Taxes		42,706			9,571			33,135			N/M
Income Tax Expense		16,199			3,806			12,393			N/M


Net Income	$	26,507		$	5,765		$	20,742			N/M


N/M — Not Meaningful

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

TUCSON ELECTRIC POWER COMPANY 2009 RESULTS

TUCSON ELECTRIC POWER COMPANY
Comparative Condensed Consolidated Statements of Income (Loss)
(in thousands of dollars)
(UNAUDITED)


	Six Months Ended
	June 30,						Increase / (Decrease)
	2009			2008			Amount			Percent
Operating Revenues
Electric Retail Sales	$	377,771		$	367,408		$	10,363			2.8
Provision for Rate Refunds — CTC Revenue		—			(14,898	)		14,898			N/M

Net Electric Retail Sales		377,771			352,510			25,261			7.2
Electric Wholesale Sales		69,743			134,895			(65,152	)		(48.3	)
Other Revenues		37,303			35,338			1,965			5.6

Total Operating Revenues		484,817			522,743			(12,665	)		(2.4	)


Operating Expenses
Fuel		116,478			143,215			(26,737	)		(18.7	)
Purchased Energy		59,417			110,776			(51,359	)		(46.4	)
Transmission		1,807			4,469			(2,662	)		(59.6	)
Increase (Decrease) to reflect PPFAC Recovery Treatment		(4,003	)		—			(4,003	)		N/M

Total Fuel and Purchased Energy		173,699			258,460			(84,761	)		(32.8	)
Other Operations and Maintenance		143,837			120,065			23,772			19.8
Depreciation and Amortization		76,820			61,997			14,823			23.9
Amortization of Transition Recovery Asset		—			23,945			(23,945	)		N/M
Taxes Other Than Income Taxes		20,295			21,064			(769	)		(3.7	)

Total Operating Expenses		414,651			485,531			(70,880	)		(14.6	)

Operating Income		70,166			37,212			58,215			N/M


Other Income (Deductions)
Interest Income		6,809			5,466			1,343			24.6
Other Income		7,977			4,018			3,959			98.5
Other Expense		(906	)		(731	)		(175	)		(23.9	)

Total Other Income (Deductions)		13,880			8,753			5,127			58.6


Interest Expense
Long-Term Debt		18,404			24,337			(5,933	)		(24.4	)
Interest on Capital Leases		24,251			26,139			(1,888	)		(7.2	)
Other Interest Expense		683			1,469			(786	)		(53.5	)
Interest Capitalized		(1,132	)		(2,352	)		1,220			51.9

Total Interest Expense		42,206			49,593			(7,387	)		(14.9	)


Income (Loss) Before Income Taxes		41,840			(3,628	)		45,468			N/M
Income Tax Expense (Benefit)		15,887			(530	)		16,417			N/M


Net Income (Loss)	$	25,953		$	(3,098	)	$	29,051			N/M


N/M — Not Meaningful

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