UNITED STATES
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): November 25, 1998
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification Number
- ----------- ----------------------------- ---------------------
1-13739 UNISOURCE ENERGY CORPORATION 86-0786732
(An Arizona Corporation)
220 West Sixth Street
Tucson, AZ 85701
(520) 571-4000
1-5924 TUCSON ELECTRIC POWER COMPANY 86-0062700
(An Arizona Corporation)
220 West Sixth Street
Tucson, AZ 85701
(520) 571-4000
<PAGE>
Item 5. Other Events
------------
Status of TEP's Settlement Agreement with ACC Staff
- ---------------------------------------------------
The Company previously reported that on November 4, 1998,
TEP reached a settlement agreement, the Stranded Cost Recovery
Agreement (SCR Agreement), with the Staff of the Arizona
Corporation Commission (ACC), for approval of TEP's plan to
divest generation assets and for 100% recovery of stranded costs.
The SCR Agreement also incorporated a Memorandum of Understanding
between TEP and Arizona Public Service Company (APS) to exchange
TEP's interests in the Navajo and Four Corners Generating
Stations for certain high voltage transmission assets currently
owned by APS.
The ACC issued a Procedural Order on November 25, 1998,
setting December 3, 1998 as the commencement date for hearings to
review the SCR Agreement. On December 1, 1998, a justice of the
Arizona Supreme Court granted a motion by the Arizona Attorney
General for an immediate stay of the ACC Procedural Order. The
Court agreed with the Attorney General and other petitioners that
standards of due process were not met with the time frame
provided for the intervenors to review the SCR Agreement in
preparation for the December 3 hearing. The Court set oral
argument on the motion for January 14, 1999 for the full Supreme
Court to hear further issues; however, on December 11, 1998, TEP
filed a motion with the Supreme Court indicating that the issue
is moot given that the SCR Agreement expired by its terms.
While there can be no assurance that the specific form of
divestiture and stranded cost recovery plan set forth in the SCR
Agreement will be approved by the ACC, the June 22, 1998 ACC
order setting forth the policy of permitting recovery of 100% of
stranded costs upon divestiture of generating assets through
auction remains in effect. TEP intends to continue to seek 100%
recovery of stranded costs.
ACC Votes to Approve Competition Rules
- --------------------------------------
On December 10, 1998, the ACC approved an order to put into
effect the Retail Electric Competition Rules (Rules) on January
1, 1999. These Rules, as summarized in the Company's Report on
Form 10-Q for the period ended September 30, 1998, were initially
adopted on an emergency basis on August 5, 1998. Final approval
of the Rules was required within six months or the emergency
rules would have become invalid.
The Rules as approved on December 10 are substantially the
same as those adopted on August 5, 1998. However, the ACC
adopted a change to the number of residential customers who will
be eligible to choose alternative energy suppliers during the
first two years of the phase-in period for retail competition.
The percentage of residential customers eligible for direct
access on January 1, 1999 was increased from 1/2 of 1% to 1 1/4%,
with an additional 1 1/4% eligible each quarter until January 1,
2001. Therefore, approximately 3,750 residential customers of
TEP will be eligible for competition on January 1, 1999 and an
additional 3,750 customers each quarter thereafter.
Although the Rules are effective January 1, 1999, further
ACC action on several matters is required, which, until acted
upon, delays the implementation of retail electric competition in
Arizona. These matters include, among others:
-- determination of the quantification and recovery of stranded
costs,
-- approval of unbundled tariffs, which provide separate rates
for generation, transmission, distribution, metering, meter
reading, billing and collection, and ancillary services,
-- establishment of an independent system administrator, which
is intended to facilitate nondiscriminatory retail direct access
of the transmission system in Arizona, and
-- certification of competitive power suppliers-companies that
will market, supply or broker competitive energy services in
Arizona.
The Company cannot predict the outcome of these matters.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, each registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized. The
signature for each undersigned company shall be deemed to relate
only to matters having reference to such company or its
subsidiary.
UNISOURCE ENERGY CORPORATION
----------------------------
(Registrant)
Date: December 15, 1998 Ira R. Adler
----------------------------
Ira R. Adler
Executive Vice President and
Principal Financial Officer
TUCSON ELECTRIC POWER COMPANY
-----------------------------
(Registrant)
Date: December 15, 1998 Ira R. Adler
-----------------------------
Ira R. Adler
Executive Vice President and
Principal Financial Officer
