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TUCSON, Ariz., Dec. 31, 2002 -- UniSource Energy Corp. has reduced a pair of previously requested rate increases as part of its plan to acquire Arizona gas and electric systems from Citizens Communications.
Citizens' electric customers would save a combined $25 million a year as compared to the original request if the Arizona Corporation Commission (ACC) accepts a proposal filed today by UniSource Energy. Citizens gas customers, meanwhile, would save about $4 million a year under UniSource's rate proposal.
"Although some rate relief is required, we're glad we could roll back the requests previously filed with the commission," said James S. Pignatelli, chairman, president and CEO of UniSource Energy. "We're looking forward to providing our new customers with quality services at a fair price."
UniSource Energy has asked for a 22 percent increase in electric rates, less than half of the 45 percent increase requested by Citizens.
Citizens sought to fully recover the cost of electricity purchased from Arizona Public Service and its parent company, Pinnacle West Capital Corp. UniSource Energy has asked only to recover expenses incurred after the acquisition is final, foregoing collection of power costs that are expected to exceed $135 million on the acquisition date.
Citizens also asked the ACC to approve a 29 percent increase in its gas rates to recover the cost of its substantial investment in new facilities. UniSource Energy has reduced that requested increase to 23 percent.
In October 2002, UniSource Energy agreed to pay $230 million for Citizens' gas and electric transmission and distribution assets in northern and southern Arizona. Citizens' electric systems serve about 76,500 customers in Santa Cruz and Mohave counties. Its natural gas systems serve about 122,000 customers in Santa Cruz, Mohave, Yavapai, Coconino, Navajo and Apache counties.
The agreement is subject to state regulatory approval by the ACC and federal approval by both the Securities and Exchange Commission and the Federal Energy Regulatory Commission. UniSource Energy expects the agreement will be finalized by mid-year 2003.
If the purchase is approved, the acquired assets will become part of a new UniSource Energy subsidiary, UniSource Energy Services Inc., which will operate as a sister company to Tucson Electric Power Co. (TEP), UniSource Energy's principal subsidiary.
UniSource Energy plans to retain most of the Citizens employees who currently operate its gas and electric systems in Arizona. UniSource Energy also plans to invest in system improvements whileexpanding access to programs that assist low-income customers.
UniSource Energy's ability to reduce the previously filed rate requests stems from its expertise in utility system operations as well as the discounted price it will pay for the Citizens' assets.
UniSource Energy's primary subsidiaries include TEP, Arizona's second-largest investor-owned electric utility, and Millennium Energy Holdings, parent company of UniSource Energy's unregulated energy businesses. For more information about UniSource Energy and its subsidiaries, visit www.UniSourceEnergy.com.
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