UNS Energy Reports Third Quarter 2012 Earnings, Narrows 2012 Earnings Guidance Range

UNS Energy Corporation (NYSE: UNS) today reported third quarter 2012 net income of $50.7 million, or $1.21 per diluted share of common stock, compared with net income of $59.7 million, or $1.46 per diluted share in the same period last year.

TEP reported net income of $44.6 million for the third quarter of 2012, 17 percent below net income of $53.9 million in the third quarter of 2011.

“Although earnings continue to be pressured by TEP’s retail rate freeze, our operating performance remains strong. We expect to hold full year operating and maintenance expenses at the same level as 2009 while maintaining a high level of reliability and safety,” said Paul Bonavia, UNS Energy’s Chairman and Chief Executive Officer. “Our power plants ran exceptionally well this summer and our safety record to date is outstanding.”

A 2008 settlement agreement approved by the Arizona Corporation Commission (ACC) will keep TEP’s non-fuel base retail rates unchanged until TEP’s pending rate request is finalized and approved in 2013. During this rate freeze period, TEP’s retail sales volumes have remained virtually unchanged due to general economic conditions and energy efficiency requirements passed by the ACC. In order to partially mitigate the effect of stagnant energy demand on UNS Energy’s financial performance, the company successfully aligned operating expenses with retail energy sales through the implementation of new operating efficiencies and cost containment measures.

However, TEP faces cost pressures associated with capital investments in order to maintain safe and reliable service that are not reflected in current retail rates. In July 2012, TEP submitted an application with the ACC seeking its first non-fuel base rate increase since 2008. The filing requests a non-fuel base rate increase of approximately $128 million, or 15 percent, to be effective no later than August 1, 2013.

Tucson Electric Power

Retail kWh Sales and Revenues

TEP’s retail kWh sales decreased by 3.6 percent in the third quarter, due in part to a 12.2 percent decline in cooling degree days compared with the third quarter of 2011. The decrease in retail sales volumes led to a 4.0 percent, or $7.3 million, decrease in TEP’s retail margin revenues compared with the third quarter of 2011.

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