UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549


                                 FORM 10-Q

  (Mark One)
     [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

                For The Quarterly Period Ended June 30, 2000

                                    OR

     [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from __________ to __________



                    Registrant; State of
Commission          Incorporation; Address            IRS Employer
File Number         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


      Indicate by check mark whether each registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No __

      At August 4, 2000, 32,391,164 shares of UniSource Energy Corporation's
Common Stock, no par value (the only class of Common Stock) were outstanding.

      UniSource Energy Corporation is the sole holder of the 32,139,434
shares of the outstanding Common Stock of Tucson Electric Power Company.







This combined Form 10-Q is separately filed by UniSource Energy Corporation
and  Tucson Electric Power Company.  Information contained in this document
relating  to  Tucson  Electric Power Company is filed by  UniSource  Energy
Corporation  and  separately by Tucson Electric Power Company  on  its  own
behalf.   Tucson  Electric  Power Company makes  no  representation  as  to
information  relating to UniSource Energy Corporation or its  subsidiaries,
except as it may relate to Tucson Electric Power Company.



                      TABLE OF CONTENTS

                                                                Page
                                                                ----
Definitions......................................................iv
Review Report of Independent Accountants......................... 1

                  PART I - FINANCIAL INFORMATION

Item 1. -- Financial Statements
 UniSource Energy Corporation
  Comparative Condensed Consolidated Statements
   of Income (Loss).............................................. 2
  Comparative Condensed Consolidated Statements
   of Cash Flows................................................. 3
  Comparative Condensed Consolidated Balance Sheets.............. 4
 Tucson Electric Power Company
  Comparative Condensed Consolidated Statements of Income........ 5
  Comparative Condensed Consolidated Statements of
   Cash Flows.................................................... 6
  Comparative Condensed Consolidated Balance Sheets.............. 7
 Notes to Condensed Consolidated Financial Statements
 Note 1.  Regulatory Accounting.................................. 8
 Note 2.  Business Segments...................................... 8
 Note 3.  Millennium Energy Businesses........................... 9
 Note 4.  Debt Retirement and Issuance...........................10
 Note 5.  Contingencies..........................................11
 Note 6.  Income Taxes...........................................11
 Note 7.  New Accounting Standards...............................12
 Note 8.  Review by Independent Public Accountants...............12
 Note 9.  Other Reclassifications................................13

Item 2. -- Management's Discussion and Analysis of Financial
 Condition and Results of Operations
 Overview........................................................14
 Factors Affecting Results of Operations
   Competition
     Retail......................................................15
     TEP's Settlement Agreement and Retail Electric
      Competition Rules..........................................15
     Wholesale...................................................16
     Transmission Access.........................................16
   Regulatory Matters............................................17
   Market Risks..................................................18
 Results of Operations...........................................18
   Contribution by Business Segment..............................18
   Utility Sales and Revenues....................................19
   Operating Expenses............................................20
   Other Income (Deductions).....................................20
   Interest Expense..............................................21
 Results of Millennium Energy Businesses.........................21
   AET and Global Solar..........................................21
   MEH and NewEnergy.............................................21
   Nations Energy................................................22
 Dividends on Common Stock
   UniSource Energy..............................................22
   TEP...........................................................22
   Millennium....................................................22
 Liquidity and Capital Resources
   Cash Flows
     UniSource Energy............................................23
     TEP.........................................................23
   Investing and Financing Activities
     TEP
      Capital Expenditures.......................................24
      TEP Credit Agreement.......................................24
     Millennium -- Unregulated Energy Businesses
      Sale of NewEnergy, Inc.....................................24
      Capital Requirements.......................................24
 Safe Harbor for Forward-Looking Statements......................25

Item 3. -- Quantitative and Qualitative
  Disclosures About Market Risk..................................26


                 PART II - OTHER INFORMATION

Item 1. -- Legal Proceedings
 Tax Assessments.................................................27
 ACC Order on the Sierrita Contract..............................27
Item 4. -- Submission of Matters to a Vote of
 Security Holders................................................27
Item 5. -- Other Information
 Additional Financial Data.......................................28
Item 6. -- Exhibits and Reports on Form 8-K......................28
Signature Page...................................................29
Exhibit Index....................................................30


</PAGE>



                                DEFINITIONS


The abbreviations and acronyms used in the 2000 Second Quarter Form 10-Q
are defined below:


ACC................. Arizona Corporation Commission.
AET................. Advanced Energy Technologies, Inc., a wholly-owned
                       subsidiary of Millennium.
Affected Utilities.. Electric utilities regulated by the ACC, including
                       TEP, Arizona Public Service, Citizens Utilities
                       company, and several electric cooperatives.
Common Stock........ UniSource Energy's common stock, without par value.
Company............. UniSource Energy Corporation.
Cooling Degree Days. Calculated by subtracting 75 from the average of the
                       high and low daily temperatures.
Credit Agreement.... Credit Agreement between TEP and a syndicate of banks,
                       dated as of December 30, 1997.
ESP................. Energy Service Provider.
FAS 71.............. Statement of Financial Accounting Standards No. 71:
                       Accounting for the Effects of Certain Types of
                       Regulation.
FAS 101............. Statement of Financial Accounting Standards No. 101:
                       Regulated Enterprises-Accounting for the Discontinu-
                       ation of FASB Statement No. 71.
FERC................ Federal Energy Regulatory Commission.
First Mortgage Bonds First mortgage bonds issued under the General First
                       Mortgage.
GAAP................ Generally Accepted Accounting Principles.
General First
 Mortgage........... The Indenture, dated as of April 1, 1941, of Tucson Gas,
                       Electric Light and Power Company to The Chase National
                       Bank of the City of New York, as trustee, as
                       supplemented and amended.
Global Solar........ Global Solar Holdings, L.L.C., a corporation which is
                       67% owned by AET and 33% owned by ITN.
Heating Degree Days. Calculated by subtracting the average of the high and
                       low daily temperatures from 75.
ION................. ION International, Inc., a wholly-owned subsidiary of
                       Millennium.
IRS................. Internal Revenue Service.
ISO................. Independent System Operator.
ITC................. Investment tax credit.
ITN................. ITN Energy Systems, Inc., an unaffiliated company which
                       owns 33% of Global Solar.
kWh................. Kilowatt-hour(s).
MEH................. MEH Corporation, a wholly-owned subsidiary of Millennium.
Millennium.......... Millennium Energy Holdings, Inc., a wholly-owned
                       subsidiary of UniSource Energy.
Nations Energy...... Nations Energy Corporation, a wholly-owned subsidiary
                       of Millennium.
NewEnergy........... NewEnergy, Inc., formerly New Energy Ventures, Inc., a
                       company in which a 50% interest was owned by MEH.
NOL................. Net Operating Loss carryforward for income tax purposes.
Rate Settlement..... TEP's Rate Settlement agreement approved by the
                       ACC in August 1998, which provides retail base price
                       decreases over a two-year period.
Revolving Credit
 Facility........... $100 million revolving credit facility entered into under
                       the Credit Agreement between a syndicate of banks
                       and TEP.
RTO................. Regional Transmission Organization.
Rules............... Retail Electric Competition Rules.
Settlement
 Agreement.......... TEP's Settlement Agreement approved by the ACC in
                       November 1999 provided for electric retail competition
                       and transition asset recovery.
Springerville....... Springerville Generating Station.
Springerville Common
 Facilities......... Facilities at Springerville used in common with
                       Springerville Unit 1 and Springerville Unit 2
                       Generating Station.
Springerville Unit 1 Unit 1 of the Springerville Generating Station.
Springerville Unit 1
 Lease.............. Leveraged lease arrangement relating to
                       Springerville Unit 1 and an undivided one-half
                       interest in certain Springerville Common Facilities.
TEP................. Tucson Electric Power Company, the principal
                       subsidiary of UniSource Energy.
UniSource Energy.... UniSource Energy Corporation.


</PAGE>

                         REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of
UniSource Energy Corporation and
to the Board of Directors of
Tucson Electric Power Company



We  have reviewed the accompanying condensed consolidated balance sheets of
UniSource  Energy  Corporation and its subsidiaries (the  Company)  and  of
Tucson  Electric Power Company and its subsidiaries (TEP) as  of  June  30,
2000,  and  the related condensed consolidated statements of income  (loss)
for  each of the three-month and six-month periods ended June 30, 2000  and
1999  and the condensed consolidated statements of cash flows for the  six-
month periods ended June 30, 2000 and 1999.  These financial statements are
the responsibility of the Company's and TEP's management.

We  conducted our reviews in accordance with standards established  by  the
American  Institute of Certified Public Accountants.  A review  of  interim
financial   information   consists  principally  of   applying   analytical
procedures  to  financial data and making inquiries of persons  responsible
for  financial and accounting matters.  It is substantially less  in  scope
than  an  audit  conducted in accordance with generally  accepted  auditing
standards, the objective of which is the expression of an opinion regarding
the  financial statements taken as a whole.  Accordingly, we do not express
such an opinion.

Based  on our reviews, we are not aware of any material modifications  that
should be made to the accompanying condensed consolidated interim financial
statements  for them to be in conformity with generally accepted accounting
principles.

We  previously  audited  in  accordance with  generally  accepted  auditing
standards, the consolidated balance sheets and statements of capitalization
of the Company and of TEP as of December 31, 1999, and the related consoli-
dated  statements  of income, of  changes  in stockholders' equity, and  of
cash  flows for  the  year  then ended  (not presented  herein), and in our
report dated February 2, 2000  we expressed   an   unqualified  opinion  on
those consolidated  financial statements.   In our opinion, the information
set forth in the accompanying  condensed  consolidated balance sheets as of
December 31, 1999, is  fairly stated in  all  material respects in relation
to the consolidated  balance sheets from which it has been derived.



PricewaterhouseCoopers LLP
Los Angeles, California
August 10, 2000

</PAGE>


The weather causes seasonal fluctuations in UniSource Energy's sales. As a
result, quarterly results are not indicative of annual operating results.
The quarterly financial statements that follow are unaudited but reflect all
normal recurring accruals and other adjustments which we believe are
necessary for a fair presentation of the results for the interim periods
presented. Also see Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations.  This quarterly report should
be reviewed in conjunction with UniSource Energy's 1999 Form 10-K.




UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                                                       Three Months Ended
                                                             June 30,
                                                         2000        1999
                                                           (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Operating Revenues
 Retail Customers                                     $172,891    $158,194
 Sales for Resale                                       61,622      30,872
 Other                                                   2,563       4,506
                                                      ---------   ---------
    Total Operating Revenues                           237,076     193,572
                                                      ---------   ---------
Operating Expenses
 Fuel and Purchased Power                               98,258      60,868
 Maintenance and Repairs                                15,350      14,667
 Other Operations                                       30,769      31,548
 Depreciation and Amortization                          27,761      21,005
 Amortization of Transition Recovery Asset               4,679           -
 Taxes Other Than Income Taxes                          12,512      12,396
 Capital Lease Expense                                       -      25,918
 Amortization of Springerville Unit 1 Allowance              -      (8,730)
 Income Taxes                                           (3,237)      3,392
                                                      ---------   ---------
    Total Operating Expenses                           186,092     161,064
                                                      ---------   ---------
      Operating Income                                  50,984      32,508
                                                      ---------   ---------
Other Income (Deductions)
 Interest Income                                         3,252       1,801
 Equity in Earnings (Losses) of Unconsolidated Entities (1,297)     (2,656)
 Other Income                                            1,482         613
 Income Taxes                                           (1,442)       (332)
                                                      ---------   ---------
    Total Other Income (Deductions)                      1,995        (574)
                                                      ---------   ---------
Interest Expense
 Long-Term Debt                                         17,155      16,797
 Interest on Capital Leases                             23,286           -
 Interest Imputed on Losses Recorded at Present Value        -       8,748
 Other Interest Expense                                  1,879       2,681
                                                      ---------   ---------
    Total Interest Expense                              42,320      28,226
                                                      ---------   ---------
Net Income (Loss)                                     $ 10,659    $  3,708
                                                      =========   =========
Average Shares of Common Stock Outstanding (000)        32,389      32,309
                                                      =========   =========
Basic Earnings (Loss) per Share                       $   0.33    $   0.11
                                                      =========   =========
Diluted Earnings (Loss) per Share                     $   0.32    $   0.11
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.




UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                                                         Six Months Ended
                                                             June 30,
                                                         2000       1999
                                                           (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Operating Revenues
 Retail Customers                                     $304,181    $286,214
 Sales for Resale                                      106,383      62,731
 Other                                                   4,114       6,763
                                                      ---------   ---------
    Total Operating Revenues                           414,678     355,708
                                                      ---------   ---------
Operating Expenses
 Fuel and Purchased Power                              158,798     115,787
 Maintenance and Repairs                                23,694      24,304
 Other Operations                                       62,783      58,907
 Depreciation and Amortization                          55,218      44,118
 Amortization of Transition Recovery Asset               5,582           -
 Taxes Other Than Income Taxes                          24,874      24,690
 Capital Lease Expense                                       -      51,379
 Amortization of Springerville Unit 1 Allowance              -     (17,459)
 Income Taxes                                           (5,235)        (78)
                                                      ---------   ---------
    Total Operating Expenses                           325,714     301,648
                                                      ---------   ---------
      Operating Income                                  88,964      54,060
                                                      ---------   ---------
Other Income (Deductions)
 Interest Income                                         6,486       3,664
 Equity in Earnings (Losses) of Unconsolidated Entities (1,868)     (4,275)
 Other Income                                            3,828       1,323
 Income Taxes                                           (1,728)       (644)
                                                      ---------   ---------
    Total Other Income (Deductions)                      6,718          68
                                                      ---------   ---------
Interest Expense
 Long-Term Debt                                         34,029      33,122
 Interest on Capital Leases                             46,552           -
 Interest Imputed on Losses Recorded at Present Value        -      17,496
 Other Interest Expense                                  4,200       5,330
                                                      ---------   ---------
    Total Interest Expense                              84,781      55,948
                                                      ---------   ---------
Net Income (Loss)                                     $ 10,901    $ (1,820)
                                                      =========   =========
Average Shares of Common Stock Outstanding (000)        32,382      32,297
                                                      =========   =========
Basic Earnings (Loss) per Share                           0.34    $  (0.06)
                                                      =========   =========
Diluted Earnings (Loss) per Share                     $   0.33    $  (0.06)
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.

</PAGE>

UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         Six Months Ended
                                                             June 30,
                                                         2000       1999
                                                            (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Cash Flows from Operating Activities
  Cash Receipts from Retail Customers                 $315,796    $296,616
  Cash Receipts from Sales for Resale                   86,296      61,526
  Fuel and Purchased Power Costs Paid                 (139,137)   (113,721)
  Wages Paid, Net of Amounts Capitalized               (33,070)    (36,969)
  Payment of Other Operations and Maintenance Costs    (49,863)    (49,698)
  Capital Lease Interest Paid                          (47,551)    (46,693)
  Taxes Paid, Net of Amounts Capitalized               (48,329)    (48,410)
  Interest Paid, Net of Amounts Capitalized            (36,541)    (36,221)
  Income Taxes Paid                                         (3)     (5,920)
  Interest Received                                      6,676       3,253
  Other                                                  3,880       3,030
                                                      ---------   ---------
    Net Cash Flows - Operating Activities               58,154      26,793
                                                      ---------   ---------
Cash Flows from Investing Activities
  Capital Expenditures                                 (53,139)    (42,633)
  Investments in and Loans to Millennium
    Energy Businesses                                   (5,443)     (5,050)
  Sale of Interest in Millennium Energy Businesses      19,950       4,050
  Investment in Lease Debt                             (27,633)    (15,728)
  Other Investments - Net                                  381         306
                                                      ---------   ---------
    Net Cash Flows - Investing Activities              (65,884)    (59,055)
                                                      ---------   ---------
Cash Flows from Financing Activities
  Proceeds from Issuance of Long-Term Debt                   -       1,977
  Payments to Retire Long-Term Debt                    (48,103)     (1,225)
  Payments to Retire Capital Lease Obligations         (22,817)    (16,611)
  Common Stock Dividends Paid                           (5,176)          -
  Other                                                  1,479       1,629
                                                      ---------   ---------
    Net Cash Flows - Financing Activities              (74,617)    (14,230)
                                                      ---------   ---------
Net Decrease in Cash and Cash Equivalents              (82,347)    (46,492)
Cash and Cash Equivalents, Beginning of Year           145,288     145,167
                                                      ---------   ---------
Cash and Cash Equivalents, End of Period              $ 62,941    $ 98,675
                                                      =========   =========



UNISOURCE ENERGY CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION

                                                         Six Months Ended
                                                             June 30,
                                                         2000       1999
                                                           (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Net Income (Loss)                                     $ 10,901    $ (1,820)
Adjustments to Reconcile Net Income (Loss)
 to Net Operating Cash Flows
  Depreciation and Amortization Expense                 55,218      44,043
  Deferred Income Taxes and Investment Tax Credit        1,680        (842)
  Lease Payments Deferred                                    -       9,670
  Amortization of Regulatory Assets & Liabilities,
   Net of Interest Imputed on Losses Recorded at
   Present Value                                         6,920       1,959
  Unremitted Losses of Unconsolidated Subsidiaries       1,868       3,816
  Other                                                   (368)      2,634
  Changes in Assets and Liabilities which Provided
    (Used) Cash Exclusive of Changes Shown Separately
    Accounts Receivable                                (35,015)    (11,101)
    Materials and Fuel                                   1,012      (7,640)
    Accounts Payable                                    19,896      (2,505)
    Taxes Accrued                                          948      (2,706)
    Other Current Assets and Liabilities                (8,681)     (7,516)
    Other Deferred Assets and Liabilities                3,775      (1,199)
                                                      ---------   ---------
Net Cash Flows - Operating Activities                 $ 58,154    $ 26,793
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.

</PAGE>


UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     June 30,   December 31,
                                                       2000        1999
                                                   (Unaudited)
---------------------------------------------------------------------------
ASSETS                                            - Thousands of Dollars -
Utility Plant
  Plant in Service                                  $2,339,690  $2,301,645
  Utility Plant Under Capital Leases                   741,446     741,446
  Construction Work in Progress                        107,719      96,565
                                                    ----------- -----------
    Total Utility Plant                              3,188,855   3,139,656
  Less Accumulated Depreciation and Amortization    (1,148,377) (1,105,371)
  Less Accumulated Depreciation of Capital Lease
   Assets                                             (318,930)   (304,429)
                                                    ----------- -----------
    Total Utility Plant - Net                        1,721,548   1,729,856
                                                    ----------- -----------
Investments and Other Property                         128,991     114,483
                                                    ----------- -----------
Current Assets
  Cash and Cash Equivalents                             62,941     145,288
  Accounts Receivable                                  102,941      67,926
  Materials and Fuel                                    41,107      42,119
  Deferred Income Taxes - Current                       16,771      17,148
  Prepaid Pension Costs                                 16,066      15,818
  Tax Settlement Deposit                                 4,487      13,471
  Other                                                 39,525      31,368
                                                    ----------- -----------
    Total Current Assets                               283,838     333,138
                                                    ----------- -----------
Deferred Debits - Regulatory Assets
  Transition Recovery Asset                            364,709     370,291
  Income Taxes Recoverable Through Future Revenues      76,656      79,497
  Other Regulatory Assets                                7,301       8,639
Deferred Debits - Other                                 17,237      20,351
                                                    ----------- -----------
    Total Deferred Debits                              465,903     478,778
                                                    ----------- -----------
Total Assets                                        $2,600,280  $2,656,255
                                                    =========== ===========


See Notes to Condensed Consolidated Financial Statements.


UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS


                                                     June 30,   December 31,
                                                       2000       1999
                                                    (Unaudited)
---------------------------------------------------------------------------
                                                   - Thousands of Dollars -
CAPITALIZATION AND OTHER LIABILITIES
Capitalization
  Common Stock                                      $  642,226  $  641,723
  Accumulated Deficit                                 (309,172)   (317,475)
                                                    ----------- -----------
  Common Stock Equity                                  333,054     324,248
  Capital Lease Obligations                            864,698     880,427
  Long-Term Debt                                     1,134,595   1,135,820
                                                    ----------- -----------
    Total Capitalization                             2,332,347   2,340,495
                                                    ----------- -----------
Current Liabilities
  Current Obligations Under Capital Leases              29,416      36,335
  Current Maturities of Long-Term Debt                   1,725      48,603
  Accounts Payable                                      51,787      34,068
  Interest Accrued                                      62,850      66,311
  Taxes Accrued                                         26,008      31,374
  Other                                                 15,993      18,038
                                                    ----------- -----------
    Total Current Liabilities                          187,779     234,729
                                                    ----------- -----------
Deferred Credits and Other Liabilities
  Deferred Income Taxes - Noncurrent                    40,988      42,526
  Other                                                 39,166      38,505
                                                    ----------- -----------
    Total Deferred Credits and Other Liabilities        80,154      81,031
                                                    ----------- -----------
Total Capitalization and Other Liabilities          $2,600,280  $2,656,255
                                                    =========== ===========


See Notes to Condensed Consolidated Financial Statements.

</PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

The weather causes seasonal fluctuations in TEP's sales. As a result,
quarterly results are not indicative of annual operating results. The
quarterly financial statements that follow are unaudited but reflect all
normal recurring accruals and other adjustments which we believe are
necessary for a fair presentation of the results for the interim periods
presented. Also see Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations.  This quarterly report should
be reviewed in conjunction with TEP's 1999 Form 10-K.





TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                       Three Months Ended
                                                             June 30,
                                                         2000        1999
                                                           (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Operating Revenues
 Retail Customers                                     $172,891    $158,194
 Sales for Resale                                       61,622      30,872
 Other                                                   1,057         917
                                                      ---------   ---------
    Total Operating Revenues                           235,570     189,983
                                                      ---------   ---------
Operating Expenses
 Fuel and Purchased Power                               98,258      60,868
 Maintenance and Repairs                                15,350      14,667
 Other Operations                                       26,472      26,772
 Depreciation and Amortization                          27,662      20,962
 Amortization of Transition Recovery Asset               4,679           -
 Taxes Other Than Income Taxes                          12,360      12,192
 Capital Lease Expense                                       -      25,918
 Amortization of Springerville Unit 1 Allowance              -      (8,730)
 Income Taxes                                           (2,057)      3,958
                                                      ---------   ---------
    Total Operating Expenses                           182,724     156,607
                                                      ---------   ---------
      Operating Income                                  52,846      33,376
                                                      ---------   ---------
Other Income (Deductions)
 Interest Income                                         1,966       1,552
 Interest Income-Note Receivable from UniSource Energy   2,311       2,554
 Other Income                                              504         265
 Income Taxes                                           (1,933)     (1,166)
                                                      ---------   ---------
    Total Other Income (Deductions)                      2,848       3,205
                                                      ---------   ---------
Interest Expense
 Long-Term Debt                                         17,155      16,797
 Interest on Capital Leases                             23,273           -
 Interest Imputed on Losses Recorded at Present Value        -       8,748
 Other Interest Expense                                  1,879       2,681
                                                      ---------   ---------
    Total Interest Expense                              42,307      28,226
                                                      ---------   ---------

Net Income                                            $ 13,387    $  8,355
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                         Six Months Ended
                                                             June 30,
                                                         2000        1999
                                                           (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Operating Revenues
 Retail Customers                                     $304,181    $286,214
 Sales for Resale                                      106,383      62,731
 Other                                                   1,629       1,674
                                                      ---------   ---------
    Total Operating Revenues                           412,193     350,619
                                                      ---------   ---------
Operating Expenses
 Fuel and Purchased Power                              158,798     115,787
 Maintenance and Repairs                                23,694      24,304
 Other Operations                                       55,345      50,395
 Depreciation and Amortization                          55,049      44,043
 Amortization of Transition Recovery Asset               5,582           -
 Taxes Other Than Income Taxes                          24,554      24,346
 Capital Lease Expense                                       -      51,379
 Amortization of Springerville Unit 1 Allowance              -     (17,459)
 Income Taxes                                           (3,119)      1,399
                                                      ---------   ---------
    Total Operating Expenses                           319,903     294,194
                                                      ---------   ---------
      Operating Income                                  92,290      56,425
                                                      ---------   ---------
Other Income (Deductions)
 Interest Income                                         4,002       3,017
 Interest Income-Note Receivable from UniSource Energy   4,637       5,079
 Other Income                                            1,017         797
 Income Taxes                                           (3,889)     (2,335)
                                                      ---------   ---------
    Total Other Income (Deductions)                      5,767       6,558
                                                      ---------   ---------
Interest Expense
 Long-Term Debt                                         34,029      33,122
 Interest on Capital Leases                             46,527           -
 Interest Imputed on Losses Recorded at Present Value        -      17,496
 Other Interest Expense                                  4,200       5,330
                                                      ---------   ---------
    Total Interest Expense                              84,756      55,948
                                                      ---------   ---------
Net Income                                            $ 13,301    $  7,035
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.

</PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         Six Months Ended
                                                             June 30,
                                                         2000       1999
                                                           (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Cash Flows from Operating Activities
  Cash Receipts from Retail Customers                 $315,796    $296,616
  Cash Receipts from Sales for Resale                   86,296      61,526
  Fuel and Purchased Power Costs Paid                 (139,137)   (113,721)
  Wages Paid, Net of Amounts Capitalized               (29,157)    (33,499)
  Payment of Other Operations and Maintenance Costs    (43,664)    (46,200)
  Capital Lease Interest Paid                          (47,525)    (46,693)
  Taxes Paid, Net of Amounts Capitalized               (48,082)    (48,143)
  Interest Paid, Net of Amounts Capitalized            (36,541)    (36,221)
  Income Taxes Paid                                         (3)     (5,918)
  Interest Received                                      4,300       2,787
  Other                                                     47         224
                                                      ---------   ---------
    Net Cash Flows - Operating Activities               62,330      30,758
                                                      ---------   ---------
Cash Flows from Investing Activities
  Capital Expenditures                                 (50,091)    (41,295)
  Investment in Lease Debt                                 132     (15,728)
  Other Investments - Net                                 (473)       (295)
                                                      ---------   ---------
    Net Cash Flows - Investing Activities              (50,432)    (57,318)
                                                      ---------   ---------
Cash Flows from Financing Activities
  Proceeds from Issuance of Long-Term Debt                   -       1,977
  Payments to Retire Long-Term Debt                    (48,103)     (1,225)
  Payments to Retire Capital Lease Obligations         (22,737)    (16,611)
  Other                                                  1,122       1,450
                                                      ---------   ---------
    Net Cash Flows - Financing Activities              (69,718)    (14,409)
                                                      ---------   ---------
Net Decrease in Cash and Cash Equivalents              (57,820)    (40,969)
Cash and Cash Equivalents, Beginning of Year            88,402     118,236
                                                      ---------   ---------
Cash and Cash Equivalents, End of Period              $ 30,582    $ 77,267
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.


TUCSON ELECTRIC POWER COMPANY
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION

                                                         Six Months Ended
                                                             June 30,
                                                         2000        1999
                                                            (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Net Income                                            $ 13,301    $  7,035
Adjustments to Reconcile Net Income to Net
 Operating Cash Flows
  Depreciation and Amortization Expense                 55,049      44,043
  Deferred Income Taxes and
   Investment Tax Credit                                 2,333         293
  Lease Payments Deferred                                    -       9,670
  Amortization of Regulatory Assets & Liabilities, Net
   of Interest Imputed on Losses Recorded at
   Present Value                                         6,920       1,959
  Interest Accrued on Note Receivable from UniSource
   Energy                                               (4,638)     (5,079)
  Other                                                  4,658       2,379
  Changes in Assets and Liabilities which Provided(Used)
    Cash Exclusive of Changes Shown Separately
    Accounts Receivable                                (33,448)    (10,811)
    Materials and Fuel                                   1,014      (6,383)
    Accounts Payable                                    19,946      (1,781)
    Taxes Accrued                                          465      (2,758)
    Other Current Assets and Liabilities                (4,829)     (6,633)
    Other Deferred Assets and Liabilities                1,559      (1,176)
                                                      ---------   ---------
Net Cash Flows - Operating Activities                 $ 62,330    $ 30,758
                                                      =========   =========


See Notes to Condensed Consolidated Financial Statements.

</PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     June 30,  December 31,
                                                       2000       1999
                                                   (Unaudited)
---------------------------------------------------------------------------
ASSETS                                            - Thousands of Dollars -
Utility Plant
  Plant in Service                                  $2,339,690  $2,301,645
  Utility Plant Under Capital Leases                   741,446     741,446
  Construction Work in Progress                        107,719      96,565
                                                    ----------- -----------
    Total Utility Plant                              3,188,855   3,139,656
  Less Accumulated Depreciation and Amortization    (1,148,377) (1,105,371)
  Less Accumulated Depreciation of Capital Lease
   Assets                                             (318,930)   (304,429)
                                                    ----------- -----------
    Total Utility Plant - Net                        1,721,548   1,729,856
                                                    ----------- -----------
Investments and Other Property                          66,874      67,838
                                                   ----------- -----------
Note Receivable from UniSource Energy                   74,770      70,132
                                                    ---------- -----------
Current Assets
  Cash and Cash Equivalents                             30,582      88,402
  Accounts Receivable                                  104,187      70,739
  Materials and Fuel                                    41,021      42,035
  Deferred Income Taxes - Current                       16,488      17,190
  Prepaid Pension Costs                                 16,066      15,818
  Tax Settlement Deposit                                 4,487      13,471
  Other                                                  9,155       6,249
                                                    ----------- -----------
    Total Current Assets                               221,986     253,904
                                                    ----------- -----------
Deferred Debits - Regulatory Assets
  Transition Recovery Asset                            364,709     370,291
  Income Taxes Recoverable Through Future Revenues      76,656      79,497
  Other Regulatory Assets                                7,301       8,639
Deferred Debits - Other                                 17,237      20,351
                                                    ----------- -----------
    Total Deferred Debits                              465,903     478,778
                                                    ----------- -----------
Total Assets                                        $2,551,081  $2,600,508
                                                    =========== ===========


See Notes to Condensed Consolidated Financial Statements.



TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     June 30,  December 31,
                                                       2000       1999
                                                    (Unaudited)
---------------------------------------------------------------------------
                                                  - Thousands of Dollars -
CAPITALIZATION AND OTHER LIABILITIES
Capitalization
  Common Stock                                      $  647,738  $  647,366
  Capital Stock Expense                                 (6,357)     (6,357)
  Accumulated Deficit                                 (357,574)   (370,875)
                                                    ----------- -----------
  Common Stock Equity                                  283,807     270,134
  Capital Lease Obligations                            864,334     880,111
  Long-Term Debt                                     1,134,595   1,135,820
                                                    ----------- -----------
    Total Capitalization                             2,282,736   2,286,065
                                                    ----------- -----------
Current Liabilities
  Current Obligations Under Capital Leases              29,303      36,263
  Current Maturities of Long-Term Debt                   1,725      48,603
  Accounts Payable                                      60,633      42,864
  Interest Accrued                                      62,850      66,311
  Taxes Accrued                                         21,889      27,738
  Other                                                 15,139      15,289
                                                    ----------- -----------
    Total Current Liabilities                          191,539     237,068
                                                    ----------- -----------
Deferred Credits and Other Liabilities
  Deferred Income Taxes - Noncurrent                    37,703      38,913
  Other                                                 39,103      38,462
                                                    ----------- -----------
    Total Deferred Credits and Other Liabilities        76,806      77,375
                                                    ----------- -----------
Total Capitalization and Other Liabilities          $2,551,081  $2,600,508
                                                    =========== ===========


See Notes to Condensed Consolidated Financial Statements.


</PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------------------

NOTE 1.  REGULATORY ACCOUNTING
-------------------------------------------------

     TEP generally uses the same accounting policies and practices used
by unregulated companies for financial reporting under GAAP.  However,
sometimes these principles, such as FAS 71, require special accounting
treatment for regulated companies to show the effect of regulation.
For example, in setting TEP's retail rates, the ACC may not allow TEP
to currently charge its customers to recover certain expenses, but
instead requires that these expenses be charged to customers in the
future.  In this situation, FAS 71 requires that TEP defer these items
and show them as regulatory assets on the balance sheet until TEP is
allowed to charge its customers.  TEP then amortizes these items as
expense to the income statement as those charges are recovered from
customers.  Similarly, certain revenue items may be deferred as
regulatory liabilities, which are also eventually amortized to the
income statement.

     In November 1999, upon approval by the ACC of a Settlement
Agreement relating to recovery of TEP's transition costs and standard
retail rates, we discontinued application of FAS 71 to our generation
operations.  As a result, many costs in the UniSource Energy and TEP
income statements are reflected in different line items in 2000 than
they were in 1999.  The primary differences are:

 - In 2000, amortization of our capital lease assets and interest
related to Capital Leases are reflected in Depreciation and
Amortization and Interest on Capital Leases, respectively.  Through
October 1999, these expenses were included as Capital Lease Expense.

 - Amortization of Springerville Unit 1 Allowance and Interest Imputed
on Losses Recorded at Present Value are no longer presented in 2000.
In November 1999, the unamortized balance of the Springerville Unit 1
Allowance reduced the Springerville Unit 1 capital lease amount.

 - Amortization of Transition Recovery Asset appears as an expense
beginning in November 1999.

 - Amortization of Investment Tax Credit no longer contributes to
Income Taxes included in Other Income (Deductions) in 2000.  All ITC
was recognized in November 1999.

     We continue to apply FAS 71 to our regulated operations, the
distribution and transmission portions of TEP's business.  To apply the
accounting policies and practices of FAS 71, the following conditions
must exist:
 - an independent regulator sets rates;
 - the regulator sets the rates to cover specific costs of delivering
service; and
 - the service territory lacks competitive pressures to reduce rates
below the rates set by the regulator.

     We periodically assess whether we can continue to apply FAS 71 to
these operations.  If we stopped applying FAS 71 to TEP's remaining
regulated operations, we would write off the related balances of TEP's
regulatory assets as a charge in our income statement.  Based on the
balances of TEP's regulatory assets at June 30, 2000, if we had stopped
applying FAS 71 to TEP's remaining regulated operations, we would have
recorded a net after-tax extraordinary loss of approximately $270
million.  While regulatory orders and market conditions may affect our
cash flows, our cash flows would not be affected if we stopped applying
FAS 71.


NOTE 2.  BUSINESS SEGMENTS
----------------------------------------

     We determine our business segments based on the way we organize
our operations and evaluate performance.  We currently have two
reportable business segments that are managed separately based on
fundamental differences in their operations.  UniSource Energy's
principal business segment is TEP, an electric utility business.

     The other reportable business segment is comprised of the
unregulated energy businesses of Millennium:

 - Advanced Energy Technologies, Inc. (AET) which owns 67% of Global
Solar Holdings, L.L.C. (Global Solar), a developer and manufacturer of
photovoltaic materials.  In June 2000, our share of Global Solar
increased from 50% to 67%.  See Note 3;

 - Nations Energy Corporation (Nations Energy) which is an independent
power developer.  See Note 3 regarding the sale of Nations Energy
Holland Holding;

 - Southwest Energy Solutions, Inc. which provides energy support
services to electric consumers; and

 - ION International, Inc. which provides technology applications for
efficient use of energy.

We disclose selected financial data for our business segments in the
following table:


                                 Segments
                            ----------------------
                                                            UniSource
                                             Reconciling      Energy
                          TEP    Millennium  Adjustments  Consolidated
----------------------------------------------------------------------
                                     - Thousands of Dollars  -
Income Statement
----------------
Three months ended
 June 30, 2000:
  Operating Revenues   $235,570     $ 1,609      $ (103)     $237,076
----------------------------------------------------------------------
  Net Income (Loss)
  Before Income Taxes    13,263      (2,246)     (2,153)        8,864
----------------------------------------------------------------------
  Net Income (Loss)      13,387      (1,433)     (1,295)       10,659
----------------------------------------------------------------------


                                 Segments
                            ----------------------
                                                            UniSource
                                             Reconciling      Energy
                          TEP    Millennium  Adjustments  Consolidated
----------------------------------------------------------------------
                                     - Thousands of Dollars  -
Three months ended
 June 30, 1999:
  Operating Revenues    189,983       3,601         (12)      193,572
----------------------------------------------------------------------
  Net Income (Loss)
  Before Income Taxes    13,479      (3,607)     (2,440)        7,432
----------------------------------------------------------------------
  Net Income (Loss)       8,355      (3,180)     (1,467)        3,708
----------------------------------------------------------------------
Six months ended
 June 30, 2000:
  Operating Revenues   $412,193     $ 2,663      $ (178)     $414,678
----------------------------------------------------------------------
  Net Income (Loss)
  Before Income Taxes    14,071      (2,627)     (4,050)        7,394
----------------------------------------------------------------------
  Net Income (Loss)      13,301          36      (2,436)       10,901
----------------------------------------------------------------------
Six months ended
 June 30, 1999:
  Operating Revenues    350,619       5,228        (139)      355,708
----------------------------------------------------------------------
  Net Income (Loss)
  Before Income Taxes    10,769      (7,231)     (4,792)       (1,254)
----------------------------------------------------------------------
  Net Income (Loss)       7,035      (5,973)     (2,882)       (1,820)
----------------------------------------------------------------------
Balance Sheet
-------------
Total Assets,
June 30, 2000         2,551,081     140,125     (90,926)    2,600,280
Total Assets,
December 31, 1999     2,600,508     100,289     (44,542)    2,656,255
----------------------------------------------------------------------

Intersegment revenues are not material.  The reconciling adjustments
include the following:

 - Elimination of TEP's Note Receivable from UniSource Energy and
related interest; and
 - Elimination of intercompany activity and balances.


NOTE 3. MILLENNIUM ENERGY BUSINESSES
-------------------------------------

  Sale of Interest in Nations Holland and COPESA Market Adjustment

     In January 2000, Nations Energy sold Nations Energy Holland
Holding, including its minority interest in a power project located in
the Czech Republic.  Nations Energy recorded a pre-tax gain of $2.5
million on the sale.  Nations Energy received $20 million in cash
proceeds from the sale which is reflected in the Cash Flows from
Investing Activities in the UniSource Energy cash flow statement for
the six months ended June 30, 2000.

     In March 2000, Nations International, a wholly owned subsidiary of
Nations Energy, recorded a $1.4 million decrease in the market value of
its minority interest investment in a project in Panama.  At June 30,
2000, Nations International's investment in this project was $3.2
million.  Nations International intends to sell its 40% equity interest
in this project.  We can not predict whether future market adjustments
will be necessary for this project.

  Additional Interest Acquired in Global Solar

     Effective June 1, 2000, AET increased its ownership percentage in
Global Solar from 50% to 67%.  The remaining 33% of Global Solar is
owned by ITN Energy Systems, Inc. (ITN).  Millennium and ITN finalized
the agreement in which ITN transferred its rights to certain assets and
proprietary and intellectual property, including thin-film battery
technology, to Global Solar.  Millennium has agreed to contribute to
Global Solar up to $14 million in additional equity.  As of June 30,
2000, Millennium funded $7.9 million under this agreement, including
$4.2 million in the second quarter of 2000.

     Because we own 67% of Global Solar as of June 1, 2000, it is
consolidated with UniSource Energy for financial reporting purposes.
Previously, AET reported Global Solar's earnings (losses) using the
equity method. By the end of 1999, all of ITN's equity contributions
had been written down to zero for financial reporting purposes.  As a
result, minority interest is not reflected in the financial statements
and AET records 100% of Global Solar's losses for accounting purposes.
When Global Solar generates net income, AET will recognize 100% of net
income to the extent AET's recognized losses are greater than AET's
ownership percentage of such losses.

  NewEnergy Note Receivable and Expiration of Guarantees

     In consideration for the July 1999 sale of Millennium's 50%
interest in NewEnergy to The AES Corporation (AES), Millennium received
shares of AES common stock, which were sold in the third quarter of
1999, and two $11.4 million promissory notes issued by NewEnergy.  The
maturity dates of the promissory notes are July 23, 2000 and July 23,
2001.  In July 2000, Millennium collected $11.4 million from NewEnergy
as scheduled.

     Subsequent to the sale of NewEnergy in July 1999, all guarantees
of performance bonds and contractual obligations that UniSource Energy
made on behalf of NewEnergy have been terminated.

  Reclassification of Millennium Energy Businesses Results

     The operating revenues and expenses from the Millennium Energy
Businesses are currently included as part of UniSource Energy's
Operating Revenues and Operating Expenses.  Previously, these revenues
and expenses were included in the Millennium Energy Businesses line
item in the Other Income and Deduction section of the income statement.
The income statements for the three- and six-months ended June 30, 1999
have been reclassified to conform to the new presentation.

NOTE 4.  DEBT RETIREMENT AND ISSUANCE
-------------------------------------

  Retirement of 12.22% First Mortgage Bonds

     In June 2000, TEP retired its remaining $46.9 million principal
amount of 12.22% First Mortgage Bonds as scheduled.

  Revolving Credit Facility

     As of June 30, 2000, TEP had no borrowings under its Revolving
Credit Facility.  However, TEP borrowed $25 million under its Revolving
Credit Facility in July 2000, which was repaid in August 2000.
Proceeds were used to fund on-going cash expenditures.


NOTE 5.  CONTINGENCIES
----------------------

  Income Tax Assessments

     In February 1998, the IRS issued an income tax assessment for the
1992 and 1993 tax years.  The IRS challenged our treatment of various
items relating to a 1992 financial restructuring, including the amount
of NOL and ITC generated before December 1991 that may be used to
reduce taxes in future periods.  In the second quarter of 2000, we
resolved the 1992 and 1993 audits.  In the second quarter we also
received an IRS assessment related to tax years 1994, 1995, and 1996.
After reviewing the impact of these items on our accrued tax
liabilities and the potential for assessments related to later tax
years, we reversed $7 million of the deferred tax valuation allowance.
See Note 6 regarding the $7 million reduction of the valuation
allowance.

     Due to the financial restructuring, a change in TEP's ownership
occurred for tax purposes in December 1991.  As a result, our use of
the NOL and ITC generated before 1992 is limited under the tax code.
At December 31, 1999, pre-1992 federal NOL and ITC carryforwards were
approximately $187 million and $20 million, respectively.  In addition
to the pre-1992 NOL and ITC which are subject to the limitation, $175
million of federal NOL at December 31, 1999, is not subject to the
limitation. Because of the valuation allowance amounts recorded, we do
not expect these annual limitations to have a material adverse impact
on the financial statements.

  ACC Order on the Sierrita Contract

     On May 14, 1999, TEP filed a complaint with the ACC against Cyprus
Sierrita Corporation (now known as Phelps Dodge Sierrita, Inc.)
(Sierrita) over energy costs that TEP charged to Sierrita under an ACC-
approved contract.  Sierrita has disputed these charges.  The dispute
concerns the proper method of calculating energy charges under the
contract.  TEP has not recorded revenue for these disputed energy
charges billed to Sierrita.  In March 2000, the ACC ruled in favor of
TEP and ordered Sierrita to pay the disputed charges from May 14, 1999
forward.  Sierrita has appealed the ACC's order, and we are unable to
predict the resolution of the appeal, but anticipate that the appeal
process will take between one and two years.  If TEP ultimately
prevails, TEP would recognize pre-tax income equal to the disputed
amounts billed after May 14, 1999.  At June 30, 2000, this amounted to
$2 million.


NOTE 6.  INCOME TAXES
---------------------

The differences between the income tax expense (benefit) and the amount
obtained by multiplying income before income taxes by the U.S.
statutory federal income tax rate are as follows:

                                            UniSource Energy
                                ---------------------------------------
                                Three Months Ended    Six Months Ended
                                    June 30,              June 30,
                                 2000       1999        2000       1999
                                ---------------------------------------
                                       - Thousands of Dollars -
Federal Income Tax (Benefit)
 Expense at Statutory Rate     $ 3,102   $  2,601  $  2,588    $  (439)
  State Income Tax (Benefit)
   Expense, Net of Federal
   Deduction                       435        361       363        (61)
  Depreciation Differences
   (Flow Through Basis)          1,574        356     2,135        682
  Reduction in Valuation
  Allowance - Benefit
  (see Note 5)                  (7,000)         -    (7,000)         -
  Investment Tax Credit
   Amortization                      -       (700)        -     (1,400)
  Foreign Operations of
   Millennium Energy Businesses     62      1,065    (1,674)     1,678
  Other                             32         41        81        106
                               --------  ---------  --------  ---------
Total (Benefit) Expense for
 Federal and State Income
 Taxes                         $(1,795)  $ (3,724)  $(3,507)   $   566
                               ========  =========  ========  =========



                                                   TEP
                                ---------------------------------------
                                Three Months Ended     Six Months Ended
                                    June 30,                June 30,
                                 2000       1999        2000       1999
                                ---------------------------------------
                                       - Thousands of Dollars -
Federal Income Tax Expense
 at Statutory Rate             $ 4,642   $  4,718   $ 4,925   $  3,769
 State Income Tax Expense,
  Net of Federal Deduction         650        654       689        523
 Depreciation Differences
  (Flow Through Basis)           1,574        356     2,135        682
 Reduction in Valuation
  Allowance - Benefit
  (see Note 5)                  (7,000)         -    (7,000)         -
 Investment Tax Credit
  Amortization                       -       (700)        -     (1,400)
 Other                              10         96        21        160
                               --------  ---------   -------  ---------
Total (Benefit) Expense for
Federal and State Income Taxes $  (124)   $ 5,124   $   770   $  3,734
                               ========  =========  ========  =========


     Income taxes are included in the income statements as follows:

                                            UniSource Energy
                               ---------------------------------------
                               Three Months Ended     Six Months Ended
                                    June 30,               June 30,
                                2000       1999        2000       1999
                               ---------------------------------------
                                       - Thousands of Dollars -
Operating Expenses             $(3,237)   $  3,392  $(5,235)   $   (78)
Other Income (Deductions)        1,442         332    1,728        644
                               --------   --------  --------   --------
Total Income Tax (Benefit)
 Expense                       $(1,795)   $  3,724  $(3,507)   $   566
                               ========  =========  ========  =========

                                                  TEP
                               ---------------------------------------
                               Three Months Ended     Six Months Ended
                                    June 30,               June 30,
                                2000       1999        2000       1999
                               ---------------------------------------
                                       - Thousands of Dollars -
Operating Expenses             $(2,057)   $ 3,958   $(3,119)   $ 1,399
Other Income (Deductions)        1,933      1,166     3,889      2,335
                               --------  ---------  --------  ---------
Total Income Tax (Benefit)
 Expense                       $  (124)   $ 5,124   $   770    $ 3,734
                               ========  =========  ========  =========



NOTE 7.  NEW ACCOUNTING STANDARDS
---------------------------------

    In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (FAS 133),
Accounting for Derivative Instruments and Hedging Activities.  A
derivative financial instrument or other contract derives its value
from another investment or designated benchmark.  This Statement
requires all derivative instruments to be recognized as either assets
or liabilities in the balance sheet.  Some derivative instruments
offset, or hedge, exposure to a specific risk.  If the derivative is
not a hedging instrument, measurement is at fair value and changes in
fair value (i.e., gains and losses) are recognized in earnings in the
period of change.  If a derivative qualifies as a hedge, the accounting
for changes in fair value will depend on the specific exposure being
hedged.  We are required to comply with FAS 133 effective January 1,
2001.  We are still in the process of quantifying the effect, if any,
that compliance with FAS 133 will have on our financial statements.


NOTE 8.  REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------------

      With  respect  to the unaudited condensed consolidated  financial
information  of UniSource Energy and TEP for the three-month  and  six-
month periods ended June 30, 2000 and 1999, PricewaterhouseCoopers  LLP
reported  that they have applied limited procedures in accordance  with
professional  standards  for  a review of such  information.   However,
their  separate report dated August 10, 2000, appearing herein,  states
that  they  did  not audit and they do not express an opinion  on  that
unaudited  condensed  consolidated financial information.  Accordingly,
the  degree of reliance on their report on such information  should  be
restricted  in  light  of the limited nature of the  review  procedures
applied.   PricewaterhouseCoopers LLP is not subject to  the  liability
provisions of section 11 of the Securities Act of 1933 for their report
on  the  unaudited condensed consolidated financial information because
that  report is not a "report" or a "part" of a registration  statement
prepared or certified by PricewaterhouseCoopers LLP within the  meaning
of sections 7 and 11 of the Act.


NOTE 9.  OTHER RECLASSIFICATIONS
--------------------------------

     In addition to the reclassifications discussed in Note 3, we have
made reclassifications to the prior year financial statements for
comparative purposes.  These reclassifications had no effect on net
income.

</PAGE>


ITEM 2. -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

     UniSource Energy is a holding company that owns all of the outstanding
common  stock  of TEP and Millennium.  TEP is an operating  public  utility
engaged in the generation, purchase, transmission, distribution and sale of
electricity  for  customers  in the greater Tucson,  Arizona  area  and  to
wholesale  customers.  Millennium owns all of the outstanding common  stock
of  four subsidiaries established for the purpose of operating or investing
in various unregulated energy-related businesses.

     Management's Discussion and Analysis  centers on the general financial
condition  and the results of operations for UniSource Energy and  its  two
primary  business segments, the electric utility business of  TEP  and  the
unregulated energy businesses of Millennium, and includes the following:

     * operating results during the second quarter and the first six months
       of 2000 compared with the same periods in the prior year,
     * changes in liquidity and capital resources during the second quarter
       and first six months of 2000, and
     * expectations of identifiable material trends which may affect our
       business in the future.

      TEP  is  the principal operating subsidiary of UniSource  Energy  and
accounts  for substantially all of its assets and revenues.  The  financial
condition  and  results  of operations of TEP are currently  the  principal
factors  affecting  the financial condition and results  of  operations  of
UniSource  Energy on an annual basis.  The seasonal nature of the  electric
utility  business  causes  operating results  to  vary  significantly  from
quarter  to  quarter.   The results from the energy related  businesses  of
Millennium and certain of its subsidiaries and interests have also  had  an
impact  on earnings reported by UniSource Energy for the quarters  and  the
sixth month periods ended June 30, 2000 and 1999.

     Management's  Discussion and Analysis should be  read  in  conjunction
with the Condensed Consolidated Financial Statements, beginning on page  2,
which  present the results of operations for the quarters and  sixth  month
periods ended June 30, 2000 and 1999.  Management's Discussion and Analysis
explains  the  differences between periods for specific line items  of  the
Condensed Consolidated Financial Statements.

OVERVIEW
--------

     UniSource  Energy recorded net income of $10.7 million for the  second
quarter  of 2000, and net income of $10.9 million for the first six  months
of  2000.   This compares with a net income of $3.7 million in  the  second
quarter of 1999 and a net loss of $1.8 million for the first six months  of
1999.   Second  quarter net income for 2000 was higher than second  quarter
net  income  for 1999 due primarily to stronger kWh sales by  TEP  and  the
recognition  of  tax  benefits  from  the resolution  of  various tax audit
issues.  The net income for the first six months of 2000 increased over the
prior  year  period  due  primarily to  stronger  kWh  sales  by  TEP,  the
recognition  of tax benefits mentioned above and a gain on the  sale  of  a
minority  interest  in  a  power project of one of our  unregulated  energy
businesses in the first quarter 2000.  See Results of Operations below  for
further detail.

      Our  financial  prospects  are subject  to  significant  competitive,
regulatory,  economic  and  other uncertainties.   The  approval  of  TEP's
Settlement  Agreement  in November 1999 resolved a  significant  amount  of
regulatory  uncertainty and provides TEP with a reasonable  opportunity  to
recover 100 percent of its transition recovery assets.  However, we  cannot
predict  with  certainty  the full impact of retail  competition  on  TEP's
future operating results or financial condition.  Some of the factors which
may  affect  our future financial results include weather variations  which
may affect customer usage, load growth and demand levels in the current TEP
service territory, and market prices for wholesale and retail energy.   See
Competition, Retail below.

      Other  uncertainties  include the extent to  which,  in  response  to
industry  changes  or  unanticipated  economic  downturns,  TEP  can  alter
operations and reduce costs, which may be limited due to high financial and
operating  leverage.   Future results will depend, in part, on our  ability
to  contain  and/or  reduce the costs of serving retail customers  and  the
level of sales to such customers.

     We are addressing the uncertainties discussed above by positioning our
subsidiaries  to  benefit from the changing regulatory  and  energy  market
environment.   In  November  1998,  TEP  organized  its  utility   business
activities  into  two  separate  business units:  (1)  generation  and  (2)
transmission  and  distribution, and in January 1999, TEP  formed  a  third
business  unit  which  provides  administrative  services  to  the  utility
business   units.   We  are  improving  cost  measurement  and   management
techniques at TEP.  We have also extended contracts, where appropriate, for
large  wholesale and retail customers.  We are investing in our unregulated
affiliates  to provide energy products and services to markets both  within
and  beyond  TEP's  retail  service territory.   See  Competition,  Retail;
Results of Operation and Results of Millennium Energy Businesses below.

      Our financial prospects are also subject to uncertainties relating to
the   start-up  and  developmental  activities  of  the  Millennium  Energy
Businesses  segment.   At June 30, 2000, Millennium's  unregulated  energy-
related affiliates comprised approximately 5% of total assets, but at times
have  had  a  significant impact on our consolidated net  income  and  cash
flows.   We  continue  to evaluate these affiliates  for  opportunities  to
realize value from our investments.  In the third quarter of 1999, we  sold
our  ownership interest in affiliate NewEnergy and recorded a pre-tax  gain
of  $35  million on the transaction.  In January 2000, we sold our interest
in  a  power project in which Nations Energy had invested, recording a pre-
tax  gain  of  $2.5 million on the transaction.  See Results of  Millennium
Energy Businesses below.

     Our  consolidated  capital structure remains highly leveraged.   Since
April  1997,  however, we have made significant progress in  our  financial
strategy  to reduce TEP refinancing risk by extending maturities  of  long-
term  debt  and  letters  of credit and by reducing  exposure  to  variable
interest rates by refinancing over $475 million in variable rate debt  with
fixed  interest rate securities.  With a more stabilized regulatory outlook
and  with  ongoing improvements in our capital structure, UniSource  Energy
paid  its first dividend to common shareholders in March 2000.  We had  not
paid a common dividend to public shareholders since 1989.  See Dividends on
Common Stock and Investing and Financing Activities, below.

       TEP's  capital  requirements include construction  expenditures  and
scheduled  maturities  of debt and capital lease obligations.   During  the
next twelve months, TEP expects to be able to fund operating activities and
construction expenditures with internal cash flows, existing cash balances,
and,  when  necessary,  borrowings under  the  Revolving  Credit  Facility.
Millennium's  unregulated  energy  businesses  will  continue  to   require
additional  funding to meet their capital and credit needs.  We  expect  to
use  existing cash balances to fulfill these needs, or if necessary, we may
seek  investments  by  unaffiliated parties to  meet  the  ongoing  capital
requirements  of  some  of  these businesses.  See  Liquidity  and  Capital
Resources, Investing and Financing Activities, below.


FACTORS AFFECTING RESULTS OF OPERATIONS
---------------------------------------

     COMPETITION
     -----------

     RETAIL

     The  electric  utility industry  is undergoing significant  regulatory
change  designed  to encourage competition in the sale of  electricity  and
related services. Approximately 20% of TEP's retail customers are currently
eligible  to  choose an alternate energy supplier.  However, no competitors
are currently providing electric service to customers in our retail service
area nor has TEP lost any significant customers to self-generation.  It  is
likely  that,  with  open  access  in our retail  service  territory,  some
customers  will  elect  to  purchase their energy requirements  from  other
energy  suppliers  when available.  TEP also competes against  gas  service
suppliers and others who provide energy services.

     TEP'S SETTLEMENT AGREEMENT AND RETAIL ELECTRIC COMPETITION RULES

     In  November 1999, the ACC approved the Settlement Agreement that  was
entered  into between TEP and certain customer groups relating to  recovery
of  TEP's  transition recovery assets and unbundling of tariffs.  For  TEP,
the  Retail Electric Competition Rules (Rules) provide a framework for  the
introduction of retail electric competition in Arizona.  Direct  access  to
competitive electricity by customers became effective in January  2000,  60
days  after  the  effective  date  of the Settlement  Agreement.   However,
certain conditions must be met before competitive electricity will be  sold
in  TEP's  service  territory,  such as  certification  of  Energy  Service
Providers  (ESPs)  by the ACC and execution of and compliance  with  direct
access  service  agreements by ESPs and other service providers  with  TEP.
Currently,  no  ESPs  have  met  all  the  necessary  conditions  to   sell
electricity in TEP's service territory.

      As  required by the Rules consumer choice for energy supply beginning
in  2000 will be phased in until January 1, 2001 when consumer choice  will
be available to all customers.

      In  accordance with the Rate Settlement Agreement approved by the ACC
in  1998, TEP decreased rates to retail customers by 1.1% on July 1,  1998,
1%  on July 1, 1999 and 1% on July 1, 2000.  These reductions apply to  all
retail  customers  except for certain customers that have  negotiated  non-
standard  rates.  In accordance with the Settlement Agreement  approved  in
November  1999,  now that these three rate reductions have  occurred  TEP's
retail  rates will be frozen until December 31, 2008, except under  certain
circumstances.  TEP will recover the costs of transmission and distribution
under  regulated  unbundled rates.  TEP's frozen  rates  will  include  two
Competition Transition Charge (CTC) components, a Fixed CTC and a  Floating
CTC,  which  are  designated for the recovery of  its  transition  recovery
assets.

      Other  major provisions of the Settlement Agreement were reported  in
the  1999  Form  10-K.  See TEP's Settlement Agreement and Retail  Electric
Competition Rules in the 1999 Form 10-K.

     Approval  of  the  Settlement  Agreement  caused  TEP  to  discontinue
regulatory  accounting  for  its generation  operations  using  FAS  71  in
November  1999.   See  Note 1 of Notes to Condensed Consolidated  Financial
Statements, Regulatory Accounting.

     Lawsuits have been filed in Maricopa County Superior Court challenging
the ACC's Retail Electric Competition Rules order  and in the Arizona Court
of Appeals challenging the ACC's order approving TEP's Settlement Agreement.
It has been contended  that allowing  marketplace competition  to determine
rates  violates the ACC's  constitutional duty  to set rates.   On July 12,
2000 a Maricopa County Superior Court judge issued a preliminary ruling  on
the consolidated cases that generally upheld the Retail Electric Competition
Rules but concluded that some of  the  Rules  were  invalid.  Specifically,
the  court  held  that  several  non-ratemaking  Rules  were required to be
submitted to the Arizona Attorney General for certification.  Additionally,
the judge determined that, in determining rates, the  Arizona  Constitution
requires the ACC to consider the fair value of the property of an  ESP upon
its certification.  Based on the  judge's decision,  the ACC can decide  to
permit marketplace competition to determine rates,  as  it has already done
in  the  Rules.   However, since  the Rules  do  not  require a  fair value
determination, the judge ruled them unconstitutional regarding this matter.
The action in the Arizona Court of Appeals is still pending.

      The  Retail  Electric Competition Rules are still in  effect  pending
submission  of  proposed  forms of judgment for the court's  consideration.
The  parties  to the consolidated case will submit forms of judgment  which
will  establish  the  specific impact of the  court's  ruling.   We  cannot
predict the outcome of these actions.

     WHOLESALE

     TEP  competes  with other utilities, power marketers  and  independent
power producers in the sale of electric capacity and energy at market-based
rates in the wholesale market.  We expect competition to sell capacity  and
energy to remain vigorous.  Competition for the sale of capacity and energy
is influenced by the following factors:

     *  availability of capacity in the southwestern United States;
     *  restructuring of the electric utility industry in Arizona,
        California and other western states;
     *  the availability and prices of natural gas, oil and coal;
     *  spot energy prices;
     *  effect of precipitation on temperature; and
     *  transmission access.

    TRANSMISSION ACCESS

     In  December 1999, the FERC issued FERC Order No. 2000 which  requires
all public utilities that are transmission owners to file a proposal for  a
Regional Transmission Organization (RTO) by October 15, 2000.  An RTO is an
organization or institution which is envisioned by the FERC to  operate  an
electric  transmission  system  on a regional  basis,  enhance  operational
transmission  efficiencies  and reliability.  The  FERC  has  not  dictated
specific  RTO  structures but has instead adopted a  flexible  approach  to
considering  proposed organizational structures, including the  possibility
of  a  transmission  company  which  would  own  and  operate  all  of  the
transmission assets in a particular region.  As an alternative  to  an  RTO
proposal,  transmission-owning public utilities must file a description  of
any  efforts made by the utility to participate in an RTO, the reasons  for
not  participating and any obstacles to participation, and  any  plans  for
further  work  toward participation.  This order is a  culmination  of  the
FERC's  efforts to promote the regional development of transmission  system
operation  and contemplates that RTOs will be operational by  December  15,
2001.  While FERC Order 2000 takes a voluntary approach to participation in
RTOs,  the  FERC  has indicated that it will take any action  it  considers
necessary,  including requiring RTO formation, to address any undue  market
power that may exist on the part of transmission owners.

     TEP,  along  with other transmission owners and users located  in  the
southwestern United States, is continuing to investigate the feasibility of
forming an Independent System Operator (ISO) for the region.  An ISO, which
could  potentially satisfy the requirements of an RTO, would be responsible
for  ensuring transmission reliability and nondiscriminatory access to  the
regional  transmission grid.  The formation of an ISO would be  subject  to
approval  by the FERC and state regulatory authorities in the region.   The
financial  aspects  of forming an ISO, including the potential  effects  on
TEP's  future  results  of  operations, will be examined  as  part  of  the
developmental work.

      The  ACC Retail Electric Competition Rules require the formation  and
implementation   of   an   Arizona  Independent  Scheduling   Administrator
Association (AISA).  The AISA is anticipated to be a temporary organization
until  the  formation  of  an ISO or RTO.  TEP,  as  an  Affected  Utility,
participated  in the creation of the AISA.  This includes its incorporation
as  a  not-for-profit entity, the filing (when complete) at  the  FERC  for
approval  of its proposed structure, rates and procedures, and drafting  of
its protocols for operation.  Recently, the board of AISA approved a set of
operating  protocols that are in the process of being prepared  for  filing
with  the  FERC.   TEP  continues to participate with  the  other  Affected
Utilities  in developing the AISA's structure and protocols in response  to
retail competition.


   REGULATORY MATTERS
   ------------------

      TEP generally uses the same accounting policies and practices used by
unregulated  companies  for  financial  reporting  under  GAAP.    However,
sometimes  these  principles, such as FAS 71,  require  special  accounting
treatment  for  regulated companies to show the effect of regulation.   For
example,  in  setting  TEP's retail rates, the ACC may  not  allow  TEP  to
currently  charge  its customers to recover certain expenses,  but  instead
requires that these expenses be charged to customers in the future. In this
situation,  FAS  71 requires that TEP defer these items and  show  them  as
regulatory  assets on the balance sheet until TEP is allowed to charge  its
customers.  TEP  then  amortizes  these items  as  expense  to  the  income
statement as those charges are recovered from customers. Similarly, certain
revenue  items  may be deferred as regulatory liabilities, which  are  also
eventually amortized to the income statement.

     The   conditions  a  regulated  company  must  satisfy  to  apply  the
accounting policies and practices of FAS 71 include:

     *  an independent regulator sets rates;
     *  the regulator sets the rates to cover specific costs of delivering
        service; and
     *  the service territory lacks competitive pressures to reduce rates
        below the rates set by the regulator.

     Under  GAAP,  FAS  71 must be discontinued once sufficiently  detailed
deregulation  guidance  is issued for a separable portion  of  a  business.
However,  a  company may continue to recognize regulatory  assets  formerly
associated with the deregulated portion of the business, to the extent  the
transition   plan  provides  for  their  recovery  through  the   regulated
transmission and distribution portion of the business.

     Effective  November  1,  1999, TEP stopped  applying  FAS  71  to  its
generation  operations because the Settlement Agreement provided sufficient
details  regarding the deregulation of TEP's generation operations.   As  a
result,  we  changed  certain accounts in our  financial  statements.   See
Regulatory  Matters  in  the  1999 Form 10-K  for  a  discussion  of  these
accounting changes.

     We  continue to apply  FAS 71 in accounting  for the  distribution and
transmission  portions  of  TEP's business, our regulated  operations.   We
periodically assess whether we can continue to apply FAS 71.  If we stopped
applying FAS 71 to TEP's remaining regulated operations, we would write off
the  related balances of TEP's regulatory assets as a charge in our  income
statement.   Based on the balances of TEP's regulatory assets at  June  30,
2000,  if  we  had  stopped  applying FAS 71 to TEP's  remaining  regulated
operations,  we would have recorded a net after-tax extraordinary  loss  of
approximately $270 million.  While regulatory orders and market  conditions
may  affect  our  cash flows, our cash flows would not be  affected  if  we
stopped applying FAS 71.

See  Note  1  of  Notes  to  Condensed Consolidated  Financial  Statements,
Regulatory Accounting.


     MARKET RISKS
     ------------

      We  are potentially exposed to various forms of market risk.  Changes
in  interest  rates, returns on marketable securities, changes  in  foreign
currency  exchange rates, and changes in commodity prices  may  affect  our
future   financial  results.   TEP  currently  uses  derivative   commodity
instruments such as forward contracts to buy or sell energy, but  does  not
use  derivative  commodity or derivative financial instruments  for  either
trading  or speculative purposes.  In the future TEP will evaluate to  what
extent,  if  any, it may use derivative financial and commodity instruments
in the normal course of its business. The market risks described above have
not changed materially from the market risks reported in the 1999 Form 10-K.


RESULTS OF OPERATIONS
---------------------

     UniSource  Energy recorded net income of $10.7 million  or  $0.33  per
average share of Common Stock in the second quarter of 2000, and net income
of  $10.9 million or $0.34 per share in the first six months of 2000.  This
compares  with  net income of $3.7 million or $0.11 per  average  share  of
Common  Stock in the second quarter of 1999, and a net loss of $1.8 million
or $0.06 per share in the first six months of 1999.

     The  primary factors affecting the results of operations in the second
quarter  of  2000  relative to the same period in 1999 were  increased  kWh
sales by TEP and a benefit due to the successful resolution of various  tax
issues  and  continued evaluation of reserves for future  tax  liabilities.
Energy  sales  increased  due to an increase in retail  customers  and  the
effects  of warmer weather.  Net tax benefits in the second quarter totaled
$6 million.  The primary factors  affecting the  results of operations  for
the  first six  months of 2000 relative  to the  same period  in 1999  were
increased kWh  sales  by TEP, a $2.5 million pre-tax gain on the sale of  a
minority interest in a power project by Nations Energy in the first quarter
of  2000 and the recognition of tax benefits described above.

  CONTRIBUTION BY BUSINESS SEGMENT

      The table below shows the contributions to our consolidated after-tax
earnings  by our two business segments, as well as parent company  expenses
and inter-company eliminations, for the second quarter and first six months
of 2000 and 1999, respectively:



                      Three Months Ended June 30,    Six Months Ended June 30,
                      ----------------------------   --------------------------
                              (Millions)                    (Millions)
-------------------------------------------------------------------------------
  Business Segment                 2000     1999                 2000     1999
-------------------------------------------------------------------------------
                       -Thousands of Dollars-         -Thousands of Dollars-
  Electric Utility                $13.4    $ 8.4                $13.3    $ 7.0
  Millennium Energy Businesses     (1.4)    (3.2)                 0.0     (6.0)
  Parent Company and Inter-
  Company Eliminations             (1.3)    (1.5)                (2.4)    (2.8)
-------------------------------------------------------------------------------
   Consolidated Net Income (Loss) $10.7    $(3.7)               $10.9    $(1.8)
===============================================================================



      Parent company results include the after-tax interest expense accrued
on  a note payable from UniSource Energy to TEP.  This note was provided to
TEP  in  exchange  for the stock of Millennium in January  1998.   Electric
utility results include interest income from this note.

     TEP's  electric  utility business accounts for  substantially  all  of
UniSource Energy's assets and revenues. The financial condition and results
of  operations  of  TEP are currently the principal factors  affecting  the
financial  condition and results of operations of UniSource  Energy  on  an
annual  basis.   The  following  discussion is  related  to  TEP's  utility
operations,   unless   otherwise  noted.   The  results   of   Millennium's
unregulated energy businesses are discussed in Results of Millennium Energy
Businesses below.

     Results for the second quarter include the reclassification of some of
the  results of our Millennium Energy Businesses in revenues and  expenses.
Previously,  these results were reported in Other Income (Deductions).  See
Note  3 of Notes to Condensed Consolidated Financial Statements, Millennium
Energy Businesses.

     During  the fourth quarter of 1999, the ACC  approved TEP's Settlement
Agreement  which  resulted in the discontinuation of regulatory  accounting
for its generation operations under FAS 71.  The effects of this change  in
accounting for generation operations were recorded in accordance  with  FAS
101.   The  changes  resulted  in  the  reclassification  and  changes   in
presentation of certain financial statement line items.

     TEP  will experience downward pressure on  earnings due to the changes
in  expense  recognition as a result of ceasing to  apply  FAS  71  to  our
generation  operations.  However, TEP expects that the changes  in  expense
recognition may be offset, and earnings provided by, the following factors:

     *  customer growth in TEP's service territory is expected to  continue
        at approximately 2% annually over the next five years;
     *  margins on wholesale sales are expected to increase as market prices
        in the region increase over time; and
     *  a portion of free cash flow may be used to reduce TEP's debt, thereby
        lowering interest expense.


  UTILITY SALES AND REVENUES

      Comparisons  of TEP's kilowatt-hour sales and electric  revenues are
shown below:

                                                           Increase
                                                     -------------------
Three Months Ended June 30,       2000       1999      Amount  Percent
-------------------------------   ----       ----      ------  -------
Electric kWh Sales (000):
   Retail Customers             2,127,117  1,945,855  181,262    9.3%
   Sales for Resale             1,226,142    997,556  228,586   22.9%
                                ---------  ---------  -------
       Total                    3,353,259  2,943,411  409,848   13.9%
                                =========  =========  =======

Electric Revenues (000):
   Retail Customers              $172,891  $158,191   $14,700    9.3%
   Sales for Resale                61,622    30,872    30,750   99.6%
                                 --------  --------   ------
       Total                     $234,513  $189,063   $45,450   24.0%
                                 ========  ========   =======



                                                           Increase
                                                     -------------------
Six Months Ended June 30,         2000       1999      Amount  Percent
-------------------------------   ----       ----      ------  -------
Electric kWh Sales (000):
   Retail Customers             3,848,714  3,608,398  240,316    6.7%
   Sales for Resale             2,717,803  2,176,842  540,961   24.9%
                                ---------  ---------  -------
       Total                    6,566,517  5,785,240  781,277   13.5%
                                =========  =========  =======

Electric Revenues (000):
   Retail Customers              $304,181  $286,214   $17,967    6.3%
   Sales for Resale               106,383    62,731    43,652   69.6%
                                 --------  --------   -------
       Total                     $410,564  $348,945   $61,619   17.7%
                                 ========  ========   =======


      TEP's  kWh sales to retail customers increased by 9.3% in the  second
quarter  of  2000 compared with the same period in 1999.   The  retail  kWh
sales increase was due to a 2.9% increase in the number of retail customers
and  warmer  spring  temperatures as measured by a 40% increase in  Cooling
Degree  Days  compared  with the second quarter of 1999.   Retail  revenues
increased  by  9.3% in the second quarter of 2000 compared  with  the  same
period  in  1999, reflecting the higher kWh sales offset, in part,  by  the
impact of the 1.0% rate decrease effective July 1, 1999.  For the first six
months  of  2000, retail kWh sales increased 6.7% compared  with  the  same
period  in  1999  as  a result of an increase in retail  customers  and  an
increase  in  Heating  and Cooling Degree Days for  the  first  and  second
quarters,  respectively.  Retail revenues increased 6.3% due  to  increased
retail kWh sales.

      Kilowatt-hour  sales  for  resale increased  22.9%  and  the  related
revenues  doubled  in  the second quarter of 2000 compared  with  the  same
period  in  1999.   Wholesale  sales volume  increased  primarily  from  an
increase   in   short-term  buy/resale  activity.    Market   prices   were
significantly higher in the three months ended June 30, 2000  than  in  the
same  prior year quarterly period, causing the revenue increase  to  exceed
the  volume increase  on a percentage  basis.  Higher  natural gas  prices,
reduced  hydro  supplies  in  the  Northwestern  United States and  various
planned and unplanned plant  outages in the region during periods of warmer
temperatures  in May and June  2000  contributed  to higher  market prices.
For  the first six months of 2000, wholesale sales increased 24.9% compared
with  the  same  period in 1999 due primarily to an increase in  buy/resale
activity.   Revenues from wholesale sales increased 69.6% as  a  result  of
increased sales volume and higher market prices as described above.

  OPERATING EXPENSES

     Fuel  and  Purchased  Power expense increased by  61%  in  the  second
quarter  of  2000  compared with the same period  the  year  before.   Fuel
expense at TEP's generating plants increased primarily due to higher energy
requirements,  including  gas  purchases,  to  meet  increased  kWh  sales.
Purchased  Power  expense  also increased primarily  because  of  increased
purchases in response to the large increase in wholesale energy sales  made
by  TEP  during the quarter.  For the six months ended June 30, 2000,  Fuel
and  Purchased  Power  expense increased primarily  for  the  same  reasons
discussed above.

     The  discontinuation  of regulatory  accounting for  TEP's  generation
operations  under FAS 71 and the resulting adoption of FAS 101 resulted  in
reclassification and changes in presentation of certain financial statement
line  items  which  has  impacted  several operating  expense  line  items.
Accordingly, beginning in November 1999, Capital Lease expense is now being
reflected  in  Depreciation and Amortization and  in  Interest  on  Capital
Leases.   The  increase  in Depreciation and Amortization  for  the  second
quarter and first six months of 2000 compared to the same periods the  year
before  is  primarily  due to this reclassification.   Because  we  stopped
applying FAS 71, we discontinued Amortization of the Springerville  Unit  1
Allowance  contra-asset and the recognition of Interest Imputed  on  Losses
Recorded at Present Value.

     The Transition Recovery Asset and its related amortization is a result
of  the  Settlement  Agreement reached with the ACC in 1999  regarding  the
recovery  of  costs stranded by the deregulation of power generation.   The
amount  of  Amortization of Transition Recovery Asset totaled $4.7  million
and  $5.6  million  for  the quarter and six months ended  June  30,  2000,
respectively.   Quarterly amortization amounts are a  function  of  various
factors including kWh sales.

     The change in Income Taxes for the second  quarter of 2000 compared to
the  same  quarter the year before is  primarily due to the recognition  of
tax benefits from the resolution of various IRS audit issues. See Note 5 of
Notes to Condensed Consolidated Financial Statements, Contingencies.

     For  the first six months of 2000 compared with the same period in the
prior  year, Depreciation and Amortization expense increased for  the  same
reasons  discussed  above.  Other Operations expense increased  to  support
customer  growth  and higher kWh sales for the first  six  months  of  2000
compared to the same prior year period.

  OTHER INCOME (DEDUCTIONS)

     INTEREST INCOME

     TEP's income statements  for the quarters ended June 30, 2000 and 1999
include $2.3 million and $2.6 million, respectively, of interest income  on
the  promissory note TEP received from UniSource Energy in exchange for the
transfer  of  its stock in Millennium.  On UniSource Energy's  consolidated
income   statement,   this  income  is  eliminated  as   an   inter-company
transaction.  For the six months ended June 30, 2000 and 1999, the interest
income   on  the  promissory  note  was  $4.6  million  and  5.0   million,
respectively.

     Higher  interest income  for the quarter ended June 30, 2000  and  the
first six months of 2000 was due primarily to interest earned on lease debt
investments.  See Liquidity and Capital Resources below.

     EQUITY IN EARNINGS (LOSSES) OF UNCONSOLIDATED ENTITIES

     Results from unconsolidated entities include various operations of the
unregulated  energy businesses of Millennium.  Because  of  the  change  in
ownership  of Global Solar, the results of operations from the consolidated
unregulated energy subsidiaries of Millennium are now included in Operating
Revenues  and Operating Expenses.  Previously, these revenues and  expenses
were  included  in  Other Income (Deductions).  See  Note  3  of  Notes  to
Condensed  Consolidated Financial Statements, Millennium Energy Businesses.
The  decrease in Equity in Losses of Unconsolidated Entities  for  the  six
months  ended  June 30, 2000, compared to the same prior  year  period,  is
primarily  due to the $2.5 million pre-tax gain on the sale of  a  minority
interest  in  a  power project in the Czech Republic in the  first  quarter
2000.

  INTEREST EXPENSE

     Because  we stopped applying FAS 71 to generation operations,  we  had
the  following  changes  which had the net effect  of  increasing  interest
expense:

     *  We reclassified Capital Lease Interest Expense from Operating
        Expenses to Interest Expense; and
     *  We no longer record the Interest Imputed on Losses Recorded at
        Present Value due to the elimination of the Springerville Unit 1
        Allowance.

Absent  these  accounting  changes, there would have  been  no  significant
change  in Interest Expense for the second quarter and first six months  of
2000 compared to the same periods of the prior year.


RESULTS OF MILLENNIUM ENERGY BUSINESSES
---------------------------------------

     The unregulated energy businesses of Millennium reported a net loss of
$1.4 million for the second quarter of 2000, and net income of $36,000  for
the  first  six  months of 2000.  This compares with a  net  loss  of  $3.2
million in the second quarter and a net loss of $6.0 million for the  first
six  months  of 1999.  The table below provides a breakdown by  Millennium-
owned  subsidiaries of the after tax net income/(losses) recorded  for  the
three months and six months ended June 30, 2000 and 1999.


----------------------------------------------------------------------
                       Three Months Ended         Six Months Ended
                           June 30,                   June 30,
      Subsidiary         2000       1999           2000       1999
----------------------------------------------------------------------
                     -Thousands of Dollars-     -Thousands of Dollars-
      AET              $(1,270)    $  (237)     $ (1,808)   $  (611)
      MEH                  363         (73)          677       (650)
      Nations Energy      (703)     (3,028)          931     (4,970)
      Other                177         158           236        258
----------------------------------------------------------------------
      Total Millennium $(1,433)    $(3,180)     $     36    $(5,973)
======================================================================


     AET AND GLOBAL SOLAR

     Advanced Energy Technologies, Inc. (AET) owns a 67% interest in Global
Solar  Holdings,  L.L.C. (Global Solar),  which owns Global  Solar  Energy,
Inc.,  a  manufacturer of thin-film photovoltaic cells.  In November  1999,
Millennium  and  ITN,  the other owner of Global  Solar,  entered  into  an
agreement  in which Millennium's share of Global Solar would increase  from
50%  to 67%.  This agreement became effective in June 2000.  See Note 3  of
Notes  to  Condensed Consolidated Financial Statements,  Millennium  Energy
Businesses.  AET's net losses in the second quarter and first six months of
1999  and  2000  were due to startup-related and small scale  manufacturing
expenses.   Commercial  production of solar-powered  photovoltaic  electric
generating systems is scheduled in 2000.


     MEH AND NEWENERGY

     Prior  to  the  third quarter  of 1999, MEH held  a  50%  interest  in
NewEnergy,  a  provider  of  electricity,  energy  products,  services  and
technology  based  energy  solutions to customers  in  deregulating  energy
markets.  NewEnergy was sold to The AES Corporation in the third quarter of
1999.   See  discussion of NewEnergy and the terms of  the  sale  below  at
Investing  and  Financing  Activities,  Millennium  -  Unregulated   Energy
Businesses.

     MEH's  net income for the second quarter and first six months of  2000
was  derived primarily from interest income from a note receivable as  part
of the sale of NewEnergy to AES Corporation.

     NATIONS ENERGY

     Nations Energy Corporation (Nations Energy) develops independent power
projects  worldwide.   For  the  second quarter  of  2000,  Nations  Energy
recorded  a  net  loss  of $0.7 million.  In the second  quarter  of  1999,
Nations  Energy  recorded a net loss of $3.0 million resulting  principally
from development costs and expenses related to the exercise of an option to
invest in a power project.  The minority investment interest in this  plant
was sold in the first quarter 2000.  Management is considering the sale  of
Nation's remaining assets.

DIVIDENDS ON COMMON STOCK
-------------------------

     UNISOURCE ENERGY

     On  May  12, 2000, UniSource  Energy declared a cash dividend  in  the
amount of $0.08 per share on its Common Stock.  This dividend was paid June
9,  2000  to shareholders of record at the close of business May 22,  2000.
On  August 4, 2000, UniSource Energy declared a cash dividend in the amount
of  $0.08  per  share  on its Common Stock, payable September  8,  2000  to
shareholders of record at the close of business August 15, 2000.

     UniSource Energy's Board of Directors  will review our dividend policy
on  a  continuing  basis, taking into consideration  a  number  of  factors
including  our  results  of  operations and  financial  condition,  general
economic  and competitive conditions and the cash flow from our  subsidiary
companies, TEP and Millennium.

     TEP

     In December 1999, TEP declared and paid  a dividend of $34 million  to
UniSource Energy, its sole shareholder.

     TEP  can  pay dividends if it maintains compliance with the TEP Credit
Agreement  and  certain  financial covenants,  including  a  covenant  that
requires  TEP  to maintain a minimum level of net worth.  As  of  June  30,
2000,  the  required minimum net worth was $218 million.  TEP's actual  net
worth  at  June  30,  2000 was $284 million.  See Investing  and  Financing
Activities, TEP Credit Agreement, below.  As of June 30, 2000, TEP  was  in
compliance with the terms of the Credit Agreement.

     The ACC Holding Company Order states that TEP may not pay dividends to
UniSource Energy in excess of 75% of its earnings until TEP's equity  ratio
equals 37.5% of total capital (excluding capital lease obligations).  As of
June 30, 2000, TEP's equity ratio on that basis was 20%.

     In  addition to these  limitations, the Federal Power Act states  that
dividends  shall not be paid out of funds properly included in the  capital
account.   Although  the terms of the Federal Power  Act  are  unclear,  we
believe that there is a reasonable basis to pay dividends from current year
earnings.   Therefore, TEP declared its December 1999  dividend  from  1999
earnings  since  TEP  had  an  accumulated deficit,  rather  than  positive
retained earnings.

     MILLENNIUM

     In  the  third  quarter of 1999, Millennium  paid a $10  million  cash
dividend  to  UniSource Energy. We cannot predict the amount or  timing  of
future dividends from Millennium.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

 CASH FLOWS
 ----------

     UNISOURCE ENERGY

     Consolidated cash  and cash equivalents decreased from  the  June  30,
1999  ending  balance of $98.7 million to $62.9 million at June  30,  2000.
For  the  twelve-month  period ended June 30, 2000, consolidated  net  cash
outflows for investing and financing activities exceeded the cash generated
from operating activities.

     Net cash flows from operating activities increased by $31.4 million in
the  first  six months of 2000 compared with the same period in 1999.   The
net increase primarily resulted from the following factors:

     *  $24.8 million increase in cash receipts from wholesale sales;
     *  $19.2 million increase in cash receipts from retail customers;
     *  $5.9 million reduction in income taxes paid; offset by
     *  $25.4 million increase in Fuel and Purchased Power Costs paid.

     Net  cash used for investing activities  totaled $65.9 million  during
the  first six months of 2000 compared with $59.1 million during  the  same
period  in 1999.  Capital expenditures were $10.5 million higher  in  2000.
Other  significant  investing activities in 2000 included:  (i)  the  $27.6
million purchase of Springerville Unit 1 Lease debt by Millennium and  (ii)
Nations Energy's $19.9 million in proceeds from the sale of its interest in
the  Czech Republic power project.  In 1999, $15.7 million of Springerville
Unit 1 Lease debt was purchased by TEP.

     Net  cash used for financing activities  totaled $74.6 million in  the
first six months of 2000 compared with $14.2 million during the same period
in 1999.  In 2000, the major use of cash for financing activities was $46.9
million to retire TEP's maturing 12.22% Series First Mortgage Bonds on June
1,  2000 and $22.8 million of scheduled payments that retired capital lease
obligations.   In  1999,  $16.6 million of capital lease  obligations  were
retired.   In the  first six  months  of 2000, UniSource Energy  paid  $5.2
million in dividends on Common Stock.

      UniSource   Energy's  consolidated  cash  balance,  including    cash
equivalents,  at August 4, 2000 was approximately $67 million.   We  invest
cash  balances  in high-grade money market securities with an  emphasis  on
preserving the principal amounts invested.

      During  the next 12 months, UniSource Energy expects to use  cash  to
fund  investments in Millennium's unregulated energy businesses and to  pay
dividends  to shareholders.  We expect our sources of cash to be  dividends
from  our subsidiaries, primarily TEP.  Although no specific offerings  are
currently contemplated, UniSource Energy may also issue debt and/or  equity
securities  from  time  to  time.   If  available  cash  falls   short   of
expectations,   we   would  reevaluate  the  investment   requirements   of
Millennium's unregulated energy businesses and/or seek additional financing
for, or investments in, those businesses by unrelated parties.

     TEP

     Cash  and  cash  equivalents decreased from the June 30,  1999  ending
balance of $77.3 million to $30.6 million at June 30, 2000.  For the twelve-
month  period  ended  June 30, 2000, net cash outflows from  investing  and
financing activities exceeded net cash inflows for operating activities.

     Net cash flows from operating activities increased by $31.6 million in
the  first  six  months  of 2000 compared with the  same  period  in  1999,
principally  due to cash receipts from wholesale sales and  from  sales  to
retail customers.  See Cash Flows, UniSource Energy, above for a discussion
of other factors affecting net cash flows from operating activities.

      Net  cash used for investing activities totaled $50.4 million  during
the  first six months of 2000 compared with $57.3 million during  the  same
period of 1999.  Capital expenditures were $8.8 million higher in 2000.  In
1999,  $15.7  million of Springerville Unit 1 Lease debt was  purchased  by
TEP.

     Net  cash  used for financing activities totaled $69.7 million  during
the  first six months of 2000 compared with $14.4 million during  the  same
period  in  1999.   The  retirement of maturing First  Mortgage  Bonds  and
scheduled  Payments to Retire Capital Lease Obligations were the  principal
reasons  for the increase in financing activities.  On June 1,  2000  TEP's
maturing $46.9 million 12.22% Series First Mortgage Bonds were retired.

     TEP's consolidated cash balance, including cash equivalents, at August
4,  2000  was  approximately  $15 million.  As  of that date  TEP  had  $10
million  in  borrowings  outstanding under its Revolving  Credit  Facility.
This borrowing was repaid as of August 11, 2000.  See TEP Credit Agreement,
below.

     TEP expects to generate  enough cash flow during the next 12 months to
fund  continuing operating activities, capital expenditures, required  debt
maturities, and to pay dividends to UniSource Energy.  However, TEP's  cash
flows  may  vary due to changes in wholesale market conditions, changes  in
short-term  interest rates and other factors.  If cash flows were  to  fall
short  of  our  expectations, or if monthly cash  requirements  temporarily
exceed  available cash balances, TEP would borrow from the Revolving Credit
Facility.  See TEP Credit Agreement, below.

INVESTING AND FINANCING ACTIVITIES
----------------------------------

   TEP
   ---

     CAPITAL EXPENDITURES

      TEP's capital expenditures for the three months and six months  ended
June  30,  2000 were $23.7 million and $50.1 million, respectively.   TEP's
capital  budget for the year ending December 31, 2000 is approximately  $95
million.   These authorized expenditures include costs for  TEP  to  comply
with  current  federal and state environmental regulations.  All  of  these
estimates  are  subject  to  continuing  review  and  adjustment.    Actual
construction expenditures may differ from budgeted amounts due  to  changes
in  business conditions, construction schedules, environmental requirements
and changes to our business arising from retail competition.  TEP plans  to
fund these expenditures through internally generated cash flow.

     TEP CREDIT AGREEMENT

     As  of  June  30, 2000, TEP had no borrowings  under its $100  million
Revolving  Credit  Facility.  However, TEP borrowed $25 million  under  its
Revolving  Credit  Facility in July.  In early August  this  borrowing  was
reduced  to  $10  million.   Proceeds  were  used  to  fund  on-going  cash
expenditures.  As of August 11, 2000, this borrowing has been  repaid  from
internally  generated cash, resulting in no amounts outstanding  under  the
Credit Facility.

     TEP is required by its Credit  Agreement to maintain certain financial
covenants including (a) a minimum Consolidated Tangible Net Worth equal  to
the  sum  of  $133 million plus 40% of cumulative Consolidated  Net  Income
since January 1, 1997, (b) a minimum Cash Coverage Ratio ranging from  1.40
in  2000  and  gradually  increasing to 1.55 in 2002,  and  (c)  a  maximum
Leverage Ratio ranging from 6.60 in 2000 and gradually decreasing  to  6.20
in 2002.  TEP is in compliance with each of these covenants.

     MILLENNIUM -- UNREGULATED ENERGY BUSINESSES
     -------------------------------------------

     SALE OF NEWENERGY, INC.

     On  July 23, 1999, MEH sold its 50% ownership in NewEnergy to The  AES
Corporation (AES) for approximately $50 million in consideration.  As  part
of  the transaction, two promissory notes were issued by NewEnergy totaling
$22.8  million.   One  of the promissory notes in the principal  amount  of
$11.4  million was paid on July 24, 2000 and the remaining promissory  note
for  an  additional $11.4 million is due on July 23, 2001.   This  note  is
secured by AES stock and bears interest at 9.5%.

     CAPITAL REQUIREMENTS

    The unregulated energy businesses owned by Millennium have historically
required significant amounts of capital.  During 1999 and in 2000, we  have
taken  the  opportunity to  realize the value  from certain of  these  more
capital  intensive investments  and focus  on  emerging  energy  production
and storage technologies.

     In  January  2000, Nations Energy sold  its interest  in  the  project
located in the Czech Republic for a $2.5 million pre-tax gain.

     Plans   for  2000  and  beyond   include  lower  anticipated   funding
requirements  for Nations Energy and increased support of  AET  and  Global
Solar.  In particular, in November 1999 Millennium agreed to contribute  to
Global Solar up to $14 million in additional equity.  As of June 30,  2000,
Millennium  had  funded $7.9 million under this agreement,  including  $4.2
million in the second quarter of 2000.

     In  July  2000, Millennium made a $15 million capital commitment to  a
limited partnership which will fund energy related investments.  Initially,
$3  million  is  expected to be invested during the next six  months.   The
remaining amount is expected to be invested within three to five years.   A
member of the  UniSource Energy Board of Directors  will also have a  minor
investment in the project.  An affiliate of such board member will serve as
the general partner.

     Our  ability  to fund additional  future capital requirements  of  our
unregulated  business segment will depend to a great extent on  the  amount
and  availability of dividends UniSource Energy receives from  our  primary
operating subsidiary, TEP.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
------------------------------------------

     This Quarterly Report on Form 10-Q contains forward-looking statements
as  defined  by  the  Private Securities Litigation  Reform  Act  of  1995.
UniSource  Energy and TEP are including the following cautionary statements
to  make applicable and take advantage of the safe harbor provisions of the
Private  Securities  Litigation Reform Act of 1995 for any  forward-looking
statements made by or for UniSource Energy or TEP in this Quarterly  Report
on  Form  10-Q.   Forward-looking statements include statements  concerning
plans,  objectives,  goals, strategies, future events  or  performance  and
underlying  assumptions and other statements that  are  not  statements  of
historical facts.  Forward-looking statements may be identified by the  use
of words such as "anticipates," "estimates," "expects," "intends," "plans,"
"predicts," "projects," and similar expressions.  From time to time, we may
publish  or  otherwise make available forward-looking  statements  of  this
nature.  All such forward-looking statements, whether written or oral,  and
whether  made  by  or on behalf of UniSource Energy or TEP,  are  expressly
qualified   by  these  cautionary  statements  and  any  other   cautionary
statements   which  may  accompany  the  forward-looking  statements.    In
addition,  UniSource Energy and TEP disclaim any obligation to  update  any
forward-looking  statements to reflect events or  circumstances  after  the
date of this report.

      Forward-looking statements involve risks and uncertainties that could
cause  actual results or outcomes to differ materially from those expressed
in  the  forward-looking statements.  We express our expectations,  beliefs
and  projections in good faith and believe them to have a reasonable basis.
However,  we make no assurances that management's expectations, beliefs  or
projections  will  be  achieved or accomplished.  We  have  identified  the
following  important  factors that could cause  actual  results  to  differ
materially  from those discussed in our forward-looking statements.   These
may be in addition to other factors and matters discussed in other parts of
this report:

     1. Effects of restructuring initiatives in the electric industry and
        other energy-related industries.

     2. Effects of competition in retail and wholesale energy markets.

     3. Changes in economic conditions, demographic patterns and weather
        conditions in TEP's retail service area.

     4. Supply and demand conditions in wholesale energy markets, including
        volatility in market prices and illiquidity in markets, which are
        affected by a variety of factors including availability of
        generating capacity, weather, natural gas prices and the impact of
        utility restructuring and generation divestitures in various states.

     5. Changes affecting TEP's cost of providing electrical service in-
        cluding changes in fuel costs, generating unit operating performance,
        interest rates, tax laws, environmental laws, and the general rate of
        inflation.

     6. Changes in governmental policies and regulatory actions with respect
        to financings and rate structures.

     7. Changes affecting the cost of competing energy alternatives, including
        changes in available generating technologies and changes in the cost
        of natural gas.

     8. Changes in accounting principles or the application of such principles
        to UniSource Energy or TEP.

     9. Marketing conditions and technological changes affecting UniSource
        Energy's unregulated businesses.


ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information contained in this Item updates, and should be read  in
conjunction  with, information included in Part II, Item  7A  in  UniSource
Energy's  and TEP's Annual Report on Form 10-K for the year ended  December
31,  1999,  in  addition  to the interim condensed  consolidated  financial
statements and accompanying notes presented in Items 1 and 2 of  this  Form
10-Q.

     See   Item  2-  Management's  Discussion  and  Analysis  of  Financial
Condition   and  Results  of  Operations,  Factors  Affecting  Results   of
Operations, Market Risks.


                        PART II - OTHER INFORMATION

ITEM 1. -  LEGAL PROCEEDINGS

TAX ASSESSMENTS

      See  Note  5 of Notes to Condensed Consolidated Financial Statements,
Contingencies.

ACC ORDER ON THE SIERRITA CONTRACT

      See  Note  5 of Notes to Condensed Consolidated Financial Statements,
Contingencies.


ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     UniSource Energy conducted its annual meeting of shareholders on May
12, 2000.  At that meeting, the shareholders of UniSource Energy elected
members of the Board of Directors.

     The total votes were as follows:


Election of Directors
                                      Against                    Broker
                          For       or Withheld    Abstain     Non-Votes
                          ---       -----------    -------     ---------

Ira R. Adler          29,991,585      447,294       15,243         --
Lawrence J. Aldrich   29,989,608      449,271       17,220         --
Larry W. Bickle       29,990,496      448,383       16,332         --
Elizabeth T. Bilby    29,984,981      453,898       21,847         --
Harold W. Burlingame  29,998,496      440,383        8,332         --
Jose L. Canchola      29,973,750      465,129       33,078         --
John L. Carter        29,991,926      446,953       14,902         --
Daniel W. L. Fessler  29,499,857      939,022      506,971         --
John A. Jeter         29,985,988      452,891       20,840         --
James S. Pignatelli   29,998,344      440,535        8,484         --
Martha R. Seger       29,976,396      462,483       30,432         --
H. Wilson Sundt       29,980,416      458,463       26,412         --


     At UniSource Energy's annual meeting of shareholders on May 12, 2000
an amendment to UniSource Energy's 1994 Omnibus Stock and Incentive Plan
was voted on and approved.

    The total votes were as follows:

1994 Omnibus Stock and Incentive
Plan Amendment
                                      Against                    Broker
                          For      or Withheld     Abstain     Non-Votes
                          ---      -----------     -------     ---------

                      12,739,752    8,391,310      293,416     9,014,401




ITEM 5. - OTHER INFORMATION

ADDITIONAL FINANCIAL DATA

The following table reflects the ratio of earnings to fixed charges for
TEP:

                                              12 Months Ended
                                              ---------------
                                         June 30,      December 31,
                                           2000            1999
                                           ----            ----
  Ratio of Earnings to Fixed Charges       1.47            1.45


ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.

     -- See Exhibit Index.

(b)  Reports on Form 8-K.

     UniSource Energy and TEP filed the following current reports on Form
8-K during the quarter ended June 30, 2000:

     *  None.


<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:  August 14, 2000              /s/  Ira R. Adler
                                    ----------------------------
                                    Ira R. Adler
                                    Executive Vice President and
                                     Principal Financial Officer



                                    TUCSON ELECTRIC POWER COMPANY
                                    -----------------------------
                                           (Registrant)


Date:  August 14, 2000              /s/  Ira R. Adler
                                    -----------------------------
                                    Ira R. Adler
                                    Executive Vice President and
                                     Principal Financial Officer


</PAGE>



                               EXHIBIT INDEX

     11 -  Statement  re computation of per share earnings  -  UniSource
           Energy.
     12 -  Computation of Ratio of Earnings to Fixed Charges - TEP.
     15 -  Letter regarding unaudited interim financial information.
     27a - Financial Data Schedule - TEP.
     27b - Financial Data Schedule - UniSource Energy.