SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 9, 1997
TUCSON ELECTRIC POWER COMPANY
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(Exact name of registrant as specified in its charter)
Arizona 1-5924 86-0062700
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
220 West Sixth Street, Tucson, Arizona 85701
(Address of principal executive office) (Zip Code)
(602) 571-4000
(Registrant's telephone number, including area code)
Item 5. Other Events
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On July 9, 1997 the Company filed with the Arizona
Corporation Commission ("ACC") a request for an annual rate
reduction of $6.8 million (or 1.1%) for retail customers.
This filing is in the form of a Shared Savings Proposal
("SSP") which promotes a sharing of benefits with customers
of cost containment efforts and the mitigation of potential
stranded costs associated with the introduction of retail
electric competition in Arizona.
Pursuant to a March 1996 Rate Order by the ACC, the Company
implemented a 1.1% retail rate increase. At the same time,
the Company agreed to a rate moratorium period whereby the
Company committed not to file for a change in base rates
prior to January 1, 2000, except under certain circumstances
which include the sharing with customers of benefits of cost
containment efforts.
In the Shared Savings Proposal filed with the ACC, the
Company identified approximately $23 million in annual pre-
tax cost containment measures of which $20.8 million is
allocable to ACC jurisdictional operations. These cost
containment measures include: (i) savings of $11.6 million
resulting from renegotiated fuel contracts, (ii) savings of
$8.2 million realized from the Company's 1996 Voluntary
Severance Program that resulted in a 15% reduction of TEP's
workforce, (iii) savings of $1.4 million attributable to
improved work techniques, and (iv) other miscellaneous
savings of approximately $1.4 million.
In the SSP, the Company is proposing to share these cost
savings with its retail customers. The proposed 1.1% rate
decrease, representing a rollback of the 1996 rate increase,
would result in savings to customers of $6.8 million annually.
The Company proposed that additional savings be used by
the Company to mitigate potential stranded costs through
accelerated amortization of excess capacity deferrals.
Excess capacity deferrals represent those operating and
capital costs associated with Springerville Unit 2 capacity,
which were deemed by the ACC to not be recoverable in retail rates
prior to the 1994 and 1996 Rate Orders. Such excess
capacity deferrals totaled $93.6 million at December 31,
1996. The proposed $7.2 million increase in annual
amortization expense for such excess capacity deferrals
would decrease the amortization period from 20 years to 7.76
years. The proposed increase in amortization expense would
be reflected in the Company's regulatory accounting records
but would have no impact on the expenses included in the
Company's financial accounting statements.
The Company has proposed that the rate reduction be
implemented by the ACC as soon as possible.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
TUCSON ELECTRIC POWER COMPANY
(Registrant)
Date: July 9, 1997 Ira R. Adler
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Ira R. Adler
Senior Vice President and
Principal Financial Officer
