100122--3/2/2009--TUCSON_ELECTRIC_POWER

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{operation, natural, condition}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{cost, operation, labor}

{competitive, industry, competition}

Economic conditions could adversely impact our ability to comply with financial covenants in the UniSource Energy and TEP Credit Agreements. TEP, UNS Gas and UNS Electric may be required to post margin under their power and fuel supply agreements which could negatively impact their liquidity. UniSource Energy s utility subsidiaries are subject to numerous environmental laws and regulations which may increase their cost of operations or expose them to environmentally-related litigation and liabilities. TEP could be subject to penalties as a result of mandatory reliability standards. The operation of electric generating stations involves risks that could result in unplanned outages or reduced generating capability that could adversely affect TEP s results of operations, net income and cash flows. UNS Electric may not be able to secure sufficient energy resources to serve its retail customers. TEP s, UNS Gas and UNS Electric s revenues, results of operations and cash flows are seasonal, and are subject to weather conditions, economic conditions and customer usage patterns, which are beyond the Company s control. Changes in federal energy regulation may affect TEP, UNS Gas and UNS Electric s results of operations, net income and cash flows. UniSource Energy and its subsidiaries have a substantial amount of indebtedness which could adversely affect its business and results of operations. The cost of renewing leases or purchasing TEP s leased assets, or the cost of procuring alternate sources of generation or purchased power, could adversely affect TEP s results of operations, net income and cash flows.

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100122--3/2/2009--TUCSON_ELECTRIC_POWER_CO