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 March 31, 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;                    IRS Employer
File Number         Address; and Telephone Number     Identification Number
-----------         -----------------------------     ---------------------

   1-13739          UNISOURCE ENERGY CORPORATION       86-0786732
                    (An Arizona Corporation)
                    220 West Sixth Street
                    Tucson, AZ  85701
                    (520) 571-4000

   1-5924           TUCSON ELECTRIC POWER COMPANY      86-0062700
                    (An Arizona Corporation)
                    220 West Sixth Street
                    Tucson, AZ  85701
                    (520) 571-4000


     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 May 4, 2000, 32,371,541 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.


<PAGE>


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 Loss...........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.  Contingencies...........................................9
 Note 5.  New Accounting Standards...............................10
 Note 6.  Review by Independent Public Accountants...............10
 Note 7.  Reclassifications......................................10

Item 2. -- Management's Discussion and Analysis of Financial
 Condition and Results of Operations
 Overview........................................................12
 Factors Affecting Results of Operations
   Competition
     Retail......................................................13
     TEP's Settlement Agreement and Retail Electric
     Competition Rules...........................................13
     Wholesale...................................................14
     Transmission Access.........................................14
   Regulatory Matters............................................15
   Market Risks..................................................15
 Results of Operations...........................................16
   Contribution by Business Segment..............................16
   Utility Sales and Revenues....................................17
   Operating Expenses............................................17
   Other Income (Deductions).....................................17
   Interest Expense..............................................18
 Results of Millennium Energy Businesses.........................18
   AET and Global Solar..........................................18
   MEH and NewEnergy.............................................18
   Nations Energy................................................19
 Dividends on Common Stock
   UniSource Energy..............................................19
   TEP...........................................................19
   Millennium....................................................19
 Liquidity and Capital Resources
   Cash Flows
     UniSource Energy............................................19
     TEP.........................................................20
   Investing and Financing Activities
     UniSource Energy
      Loans and Guarantees.......................................21
     TEP
      Capital Expenditures.......................................21
      TEP Credit Agreement.......................................21
     Millennium -- Unregulated Energy Businesses
      Sale of NewEnergy, Inc.....................................21
      Capital Requirements.......................................21
 Safe Harbor for Forward-Looking Statements......................22

Item  3. -- Quantitative And Qualitative
  Disclosures About Market Risk..... ............................22


                 PART II - OTHER INFORMATION

Item 1. -- Legal Proceedings
 Tax Assessments.................................................23
 ACC Order on the Sierrita Contract..............................23
Item 5. -- Other Information
 Additional Financial Data.......................................23
Item 6. -- Exhibits and Reports on Form 8-K......................23
Signature Page...................................................24
Exhibit Index....................................................25


<PAGE>


                                DEFINITIONS


The abbreviations and acronyms used in the 2000 First 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.
Credit Agreement.... Credit Agreement between TEP and the banks,
                       dated as of December 30, 1997.
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 Discontinuation
                       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.
Global Solar........ Global Solar Energy, L.L.C., a corporation which is
                       50% owned by AET and 50% 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., a company which owns
                       50% 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.
NEV Southwest....... New Energy Ventures Southwest, L.L.C., a wholly-
                       owned subsidiary of NewEnergy.
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
 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  March  31,
2000,  and  the related condensed consolidated statements of income  (loss)
for  each of the three-month periods ended March 31, 2000 and 1999 and  the
condensed consolidated statements of cash flows for the three-month periods
ended  March  31,  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
as of December 31, 1999, and the related consolidated statements of income,
of  cash flows, and changes in stockholders' equity 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
May 5, 2000




                        PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------------------------------------------------------

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
                                                            March 31,
                                                         2000       1999
                                                           (Unaudited)
----------------------------------------------------------------------------
                                                    -Thousands of Dollars-
Operating Revenues
 Retail Customers                                     $131,786    $128,654
 Sales for Resale                                       44,761      31,859
----------------------------------------------------------------------------
    Total Operating Revenues                           176,547     160,513
----------------------------------------------------------------------------
Operating Expenses
 Fuel and Purchased Power                               60,540      54,919
 Capital Lease Expense                                       -      25,461
 Amortization of Springerville Unit 1 Allowance              -      (8,729)
 Other Operations                                       28,873      23,623
 Maintenance and Repairs                                 8,344       9,637
 Depreciation and Amortization                          27,387      23,081
 Amortization of Transition Recovery Asset                 903           -
 Taxes Other Than Income Taxes                          12,194      12,154
 Income Taxes                                           (1,062)     (2,559)
----------------------------------------------------------------------------
    Total Operating Expenses                           137,179     137,587
----------------------------------------------------------------------------
      Operating Income                                  39,368      22,926
----------------------------------------------------------------------------

Other Income (Deductions)
 Income Taxes                                              649         599
 Interest Income                                         2,470       1,638
 Millennium Energy Businesses                             (380)     (3,624)
 Other Income                                              584         655
----------------------------------------------------------------------------
 Total Other Income Deductions                           3,323        (732)
----------------------------------------------------------------------------
Interest Expense
 Long-Term Debt                                         16,874      16,325
 Interest on Capital Leases                             23,254           -
 Interest Imputed on Losses Recorded at Present Value        -       8,748
 Other Interest Expenses                                 2,321       2,649
----------------------------------------------------------------------------
    Total Interest Expense                              42,449      27,722
----------------------------------------------------------------------------
Net Income (Loss)                                    $     242    $ (5,528)
============================================================================

Average Shares of Common Stock Outstanding (000)        32,374      32,286
============================================================================
Basic and Diluted Earnings (Loss) per Share           $   0.01    $  (0.17)
============================================================================


See Notes to Condensed Consolidated Financial Statements.


<PAGE>


UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Three Months Ended
                                                            March 31,
                                                         2000       1999
                                                           (Unaudited)
----------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Cash Flows from Operating Activities
  Cash Receipts from Retail Customers                 $153,005    $147,388
  Cash Receipts from Sales for Resale                   41,107      31,511
  Fuel and Purchased Power Costs Paid                  (61,835)    (59,315)
  Wages Paid, Net of Amounts Capitalized               (18,500)    (15,857)
  Payment of Other Operations and Maintenance Costs    (25,536)    (24,460)
  Capital Lease Interest Paid                          (43,733)    (44,505)
  Taxes Paid, Net of Amounts Capitalized               (11,450)    (11,110)
  Interest Paid, Net of Amounts Capitalized            (23,564)    (24,004)
  Income Taxes Paid                                         (2)     (4,819)
  Interest Received                                      4,618       2,222
  Other                                                  2,146       1,294
----------------------------------------------------------------------------
Net Cash Flows - Operating Activities                   16,256      (1,655)
----------------------------------------------------------------------------
 Cash Flows from Investing Activities
  Capital Expenditures                                 (26,409)    (16,729)
  Investments in and Loans to
   Millennium Energy Businesses                         (2,118)     (5,050)
  Sale of Interest in Millennium Energy Businesses      19,950         500
  Investment in Lease Debt                             (27,633)          -
  Other                                                    (96)        227
----------------------------------------------------------------------------
    Net Cash Flows - Investing Activities              (36,306)    (21,052)
----------------------------------------------------------------------------
Cash Flows from Financing Activities
  Proceeds from Issuance of Long-Term Debt                   -         255
  Payments to Retire Long-Term Debt                     (1,225)     (1,225)
  Payments to Retire Capital Lease Obligations         (20,725)    (16,552)
  Common Stock Dividends Paid                           (2,583)          -
  Other                                                    795         837
----------------------------------------------------------------------------
   Net Cash Flows - Financing Activities               (23,738)    (16,685)
----------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents              (43,788)    (39,392)
Cash and Cash Equivalents, Beginning of Year           145,288     145,167
----------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period            $  101,500  $  105,775
============================================================================

See Notes to Condensed Consolidated Financial Statements.





UNISOURCE ENERGY CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION


                                                      Three Months Ended
                                                           March 31,
                                                         2000      1999
                                                           (Unaudited)
----------------------------------------------------------------------------
                                                     -Thousands of Dollars-

Net Income (Loss)                                    $    242     $ (5,528)
Adjustments to Reconcile Net Income (Loss) to
Net Operating Cash Flows
  Depreciation and Amortization Expense                27,387       23,081
  Amortization of Regulatory Assets & Liabilities,
   Net of Interest Imputed on Losses Recorded at
    Present Value                                         903           18
  Amortization of Deferred Debt Related Costs
   Included in Interest Expense                         1,192        1,257
  Deferred Income Taxes and Investment Tax Credit       5,587       (8,459)
  Lease Payments Deferred                                   -      (16,404)
  Deferred Contract Termination Fee                         -          962
  Unremitted Losses of Unconsolidated Subsidiaries        685        1,385
  Gain on Sale of Nations Holland Holding B.V.         (2,527)           -
  Market Value Adjustments Related to Nations Energy    1,499            -
  Other                                                 1,024        1,826
  Changes in Assets and Liabilities which Provided
   (Used) Cash Exclusive of Changes Shown Separately
    Accounts Receivable                                 6,264        6,379
    Materials and Fuel                                   (998)      (3,146)
    Accounts Payable                                   (2,985)      (7,947)
    Interest Accrued                                  (25,862)      (6,734)
    Taxes Accrued                                      10,671        8,311
    Other Current Assets and Liabilities               (7,206)       4,156
    Other Deferred Assets and Liabilities                 380         (812)
----------------------------------------------------------------------------
 Net Cash Flows - Operating Activities               $ 16,256     $ (1,655)
============================================================================

See Notes to Condensed Consolidated Financial Statements


<PAGE>


UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                    March 31,  December 31,
                                                      2000        1999
                                                   (Unaudited)
---------------------------------------------------------------------------
                                                   - Thousands of Dollars -
ASSETS
Utility Plant
  Plant in Service                                  $2,312,951  $2,301,645
  Utility Plant Under Capital Leases                   741,446     741,446
  Construction Work in Progress                        107,435      96,565
---------------------------------------------------------------------------
    Total Utility Plant                              3,161,832   3,139,656
  Less Accumulated Depreciation and Amortization    (1,126,554) (1,105,371)
  Less Accumulated Depreciation of Capital Lease
   Assets                                             (311,649)   (304,429)
---------------------------------------------------------------------------
   Total Utility Plant - Net                         1,723,629   1,729,856
---------------------------------------------------------------------------

Investments and Other Property                         128,025     114,483
---------------------------------------------------------------------------

Current Assets
  Cash and Cash Equivalents                            101,500     145,288
  Accounts Receivable                                   61,662      67,926
  Materials and Fuel                                    43,139      42,119
  Deferred Income Taxes - Current                        5,007      17,148
  Prepaid Pension Costs                                 15,942      15,818
  Tax Settlement Deposit                                 8,791      13,471
  Other                                                 36,750      31,368
---------------------------------------------------------------------------
   Total Current Assets                                272,791     333,138
---------------------------------------------------------------------------

Deferred Debits - Regulatory Assets
  Transition Recovery Asset                            369,388     370,291
  Income Taxes Recoverable Through Future Revenues      78,564      79,497
  Other Regulatory Assets                                7,866       8,639
Deferred Debits - Other                                 18,411      20,351
---------------------------------------------------------------------------
   Total Deferred Debits                               474,229     478,778
---------------------------------------------------------------------------

Total Assets                                        $2,598,674  $2,656,255
===========================================================================

See Notes to Condensed Consolidated Financial Statements.


<PAGE>


UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     March 31,  December 31,
                                                       2000         1999
                                                    (Unaudited)
----------------------------------------------------------------------------
                                                   - Thousands of Dollars -
CAPITALIZATION AND OTHER LIABILITIES
Capitalization
  Common Stock                                      $  641,975  $  641,723
  Accumulated Deficit                                 (317,237)   (317,475)
----------------------------------------------------------------------------
  Common Stock Equity                                  324,738     324,248
  Capital Lease Obligations                            866,986     880,427
  Long-Term Debt                                     1,134,595   1,135,820
----------------------------------------------------------------------------
    Total Capitalization                             2,326,319   2,340,495
----------------------------------------------------------------------------

Current Liabilities
  Current Obligations Under Capital Leases              29,085      36,335
  Current Maturities of Long-Term Debt                  48,603      48,603
  Accounts Payable                                      28,715      32,390
  Interest Accrued                                      39,125      66,311
  Taxes Accrued                                         38,888      31,374
  Accrued Employee Expenses                              9,286      10,782
  Other                                                  4,995       8,934
----------------------------------------------------------------------------
    Total Current Liabilities                          198,697     234,729
----------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Deferred Income Taxes - Noncurrent                    35,039      42,526
  Other                                                 38,619      38,505
----------------------------------------------------------------------------
    Total Deferred Credits and Other Liabilities        73,658      81,031
----------------------------------------------------------------------------
Total Capitalization and Other Liabilities          $2,598,674  $2,656,255
============================================================================
See Notes to Condensed Consolidated Financial Statements.


<PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF LOSS

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 LOSS

                                                       Three Months Ended
                                                            March 31,
                                                         2000       1999
                                                           (Unaudited)
----------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Operating Revenues
 Retail Customers                                     $131,862    $128,780
 Sales for Resale                                       44,761      31,859
----------------------------------------------------------------------------
    Total Operating Revenues                           176,623     160,639
----------------------------------------------------------------------------
Operating Expenses
 Fuel and Purchased Power                               60,540      54,919
 Capital Lease Expense                                       -      25,461
 Amortization of Springerville Unit 1 Allowance              -      (8,729)
 Other Operations                                       28,873      23,623
 Maintenance and Repairs                                 8,344       9,637
 Depreciation and Amortization                          27,387      23,081
 Amortization of Transition Recovery Asset                 903           -
 Taxes Other Than Income Taxes                          12,194      12,154
 Income Taxes                                           (1,062)     (2,559)
----------------------------------------------------------------------------
    Total Operating Expenses                           137,179     137,587
----------------------------------------------------------------------------
      Operating Income                                  39,444      23,052
----------------------------------------------------------------------------
Other Income (Deductions)
 Income Taxes                                           (1,956)     (1,169)
 Interest Income                                         2,036       1,465
 Interest Income-Note Receivable from UniSource Energy   2,326       2,525
 Other Income                                              513         529
----------------------------------------------------------------------------
    Total Other Income (Deductions)                      2,919       3,350
----------------------------------------------------------------------------
Interest Expense
 Long-Term Debt                                         16,874      16,325
 Interest on Capital Leases                             23,254           -
 Interest Imputed on Losses Recorded at Present Value        -       8,748
 Other Interest Expenses                                 2,321       2,649
----------------------------------------------------------------------------
    Total Interest Expense                              42,449      27,722
----------------------------------------------------------------------------
Net Loss                                              $    (86)   $ (1,320)
============================================================================

See Notes to Condensed Consolidated Financial Statements.


<PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Three Months Ended
                                                            March 31,
                                                         2000       1999
                                                           (Unaudited)
----------------------------------------------------------------------------
                                                     -Thousands of Dollars-
Cash Flows from Operating Activities
  Cash Receipts from Retail Customers                 $153,005    $147,388
  Cash Receipts from Sales for Resale                   41,107      31,511
  Fuel and Purchased Power Costs Paid                  (61,835)    (59,315)
  Wages Paid, Net of Amounts Capitalized               (16,489)    (14,406)
  Payment of Other Operations and Maintenance Costs    (22,953)    (22,475)
  Capital Lease Interest Paid                          (43,721)    (44,505)
  Taxes Paid, Net of Amounts Capitalized               (11,344)    (11,000)
  Interest Paid, Net of Amounts Capitalized            (23,564)    (24,004)
  Income Taxes Paid                                         (2)     (4,818)
  Interest Received                                      3,333       1,962
  Other                                                      -          86
----------------------------------------------------------------------------
    Net Cash Flows - Operating Activities               17,537         424
----------------------------------------------------------------------------
 Cash Flows from Investing Activities
  Capital Expenditures                                 (23,718)    (15,493)
  Other Investments - Net                                  159        (269)
----------------------------------------------------------------------------
    Net Cash Flows - Investing Activities              (23,559)    (15,762)
----------------------------------------------------------------------------
 Cash Flows from Financing Activities
  Proceeds from Issuance of Long-Term Debt                   -         255
  Payments to Retire Long-Term Debt                     (1,225)     (1,225)
  Payments to Retire Capital Lease Obligations         (20,705)    (16,552)
  Other                                                    630         703
----------------------------------------------------------------------------
    Net Cash Flows - Financing Activities              (21,300)    (16,819)
----------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents              (27,322)    (32,157)
Cash and Cash Equivalents, Beginning of Year            88,402     118,236
----------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period               $61,080     $86,079
============================================================================

See Notes to Condensed Consolidated Financial Statements.




TUCSON ELECTRIC POWER COMPANY
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION



                                                       Three Months Ended
                                                            March 31,
                                                         2000       1999
                                                            (Unaudited)
---------------------------------------------------------------------------
                                                     -Thousands of Dollars-

Net Loss                                              $    (86)   $ (1,320)
Adjustments to Reconcile Net Loss
   to Net Operating Cash Flows
  Depreciation and Amortization Expense                 27,387      23,081
  Amortization of Regulatory Assets & Liabilities,
   Net of Interest Imputed on Losses Recorded at
   Present Value                                           903          18
  Amortization of Deferred Debt Related Costs Included
   in Interest Expense                                   1,192       1,257
  Deferred Income Taxes and Investment Tax Credit        5,767      (7,117)
  Lease Payments Deferred                                    -     (16,404)
  Deferred Contract Termination Fee                          -         962
  Unremitted (Earnings) Losses of Unconsolidated
   Subsidiaries                                            114        (234)
  Interest on Note Receivable from UniSource Energy     (2,326)     (2,525)
  Other                                                    830         194
  Changes in Assets and Liabilities which Provided
   (Used) Cash Exclusive of Changes Shown Separately
    Accounts Receivable                                  8,070      10,306
    Materials and Fuel                                  (1,000)     (2,792)
    Accounts Payable                                    (3,185)     (7,488)
    Interest Accrued                                   (25,862)     (6,734)
    Taxes Accrued                                       10,788       8,390
    Other Current Assets and Liabilities                (5,429)      1,637
    Other Deferred Assets and Liabilities                  374        (807)
---------------------------------------------------------------------------
Net Cash Flows - Operating Activities                 $ 17,537    $    424
===========================================================================

See Notes to Condensed Consolidated Financial Statements.


<PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                   March 31,  December 31,
                                                      2000        1999
                                                   (Unaudited)
---------------------------------------------------------------------------
ASSETS
Utility Plant
  Plant in Service                                  $2,312,951  $2,301,645
  Utility Plant Under Capital Leases                   741,446     741,446
  Construction Work in Progress                        107,435      96,565
---------------------------------------------------------------------------
    Total Utility Plant                              3,161,832   3,139,656
  Less Accumulated Depreciation and Amortization    (1,126,554) (1,105,371)
  Less Accumulated Depreciation of Capital Lease
   Assets                                             (311,649)   (304,429)
---------------------------------------------------------------------------
    Total Utility Plant - Net                        1,723,629   1,729,856

Investments and Other Property                          67,595      67,838
---------------------------------------------------------------------------
Note Receivable from UniSource Energy                   72,459      70,132
---------------------------------------------------------------------------

Current Assets
  Cash and Cash Equivalents                             61,080      88,402
  Accounts Receivable                                   62,754      70,739
  Materials and Fuel                                    43,057      42,035
  Deferred Income Taxes - Current                        5,048      17,190
  Prepaid Pension Costs                                 15,942      15,818
  Tax Settlement Deposit                                 8,791      13,471
  Other                                                  9,676       6,249
---------------------------------------------------------------------------
    Total Current Assets                               206,348     253,904
---------------------------------------------------------------------------
Deferred Debits - Regulatory Assets
  Transition Recovery Asset                            369,388     370,291
  Income Taxes Recoverable Through Future Revenues      78,564      79,497
  Other Regulatory Assets                                7,866       8,639
Deferred Debits - Other                                 18,411      20,351
---------------------------------------------------------------------------
    Total Deferred Debits                              474,229     478,778
---------------------------------------------------------------------------
Total Assets                                        $2,544,260  $2,600,508
===========================================================================

See Notes to Condensed Consolidated Financial Statements.


<PAGE>


TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS

                                                    March 31,  December 31,
                                                      2000        1999
                                                   (Unaudited)
---------------------------------------------------------------------------
                                                   - Thousands of Dollars -
CAPITALIZATION AND OTHER LIABILITIES
Capitalization
  Common Stock                                      $  647,618  $  647,366
  Capital Stock Expense                                 (6,357)     (6,357)
  Accumulated Deficit                                 (370,961)   (370,875)
---------------------------------------------------------------------------
  Common Stock Equity                                  270,300     270,134
  Capital Lease Obligations                            866,664     880,111
  Long-Term Debt                                     1,134,595   1,135,820
---------------------------------------------------------------------------
    Total Capitalization                             2,271,559   2,286,065
---------------------------------------------------------------------------
Current Liabilities
  Current Obligations Under Capital Leases              29,005      36,263
  Current Maturities of Long-Term Debt                  48,603      48,603
  Accounts Payable                                      36,578      41,277
  Interest Accrued                                      39,125      66,311
  Taxes Accrued                                         35,369      27,738
  Accrued Employee Expenses                              8,947      10,591
  Other                                                  4,899       6,285
---------------------------------------------------------------------------
    Total Current Liabilities                          202,526     237,068
---------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Deferred Income Taxes - Noncurrent                    31,605      38,913
  Other                                                 38,570      38,462
---------------------------------------------------------------------------
    Total Deferred Credits and Other Liabilities        70,175      77,375
---------------------------------------------------------------------------
Total Capitalization and Other Liabilities          $2,544,260  $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 the first
quarter of 2000 than they were in the first quarter of 1999.  The
primary differences are:

 - Amortization associated with Utility Plant Under Capital Leases is
included in Depreciation and Amortization and the new line Interest on
Capital Leases in 2000 while it appeared as Capital Lease Expense in
1999.

 - Amortization of Springerville Unit 1 Allowance and Interest Imputed
on Losses Recorded at Present Value are no longer presented in 2000.

 - Amortization of Transition Recovery Asset appears as an expense
beginning in 2000.

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

  We continue to apply FAS 71 to the distribution and transmission
portions of TEP's business, our regulated operations.  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.

      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 March 31,  2000,  if  we  had
stopped  applying  FAS 71 to TEP's remaining regulated  operations,  we
would  have  recorded  an  extraordinary  loss  of  approximately  $274
million,  after the related income tax benefit of $182 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 currently owns 50% of
Global Solar Energy, L.L.C., a developer and manufacturer of
photovoltaic materials.  In November 1999, Millennium entered into an
agreement whereby Millennium's share of Global Solar will increase to
67%.  See Note 3 regarding this agreement;

 - 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 intends to provide technology
applications to commerce, health care and industry organizations to
help them more efficiently manage their energy needs.

     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
 March 31, 2000:
  Operating Revenues $  176,623  $  1,095    $ (1,171)       $176,547
-----------------------------------------------------------------------
  Net Income (Loss)
  Before Income Taxes       808      (380)     (1,897)         (1,469)
-----------------------------------------------------------------------
Net Income (Loss)           (86)    1,469      (1,141)            242
-----------------------------------------------------------------------
Three months ended
 March 31, 1999:
  Operating Revenues    160,639     1,627      (1,753)        160,513
-----------------------------------------------------------------------
  Net Loss Before
  Income Taxes           (2,710)   (3,624)     (2,352)         (8,686)
-----------------------------------------------------------------------
  Net Loss               (1,320)   (2,793)     (1,415)         (5,528)
-----------------------------------------------------------------------

Balance Sheet
-------------
  Total Assets,
  March 31, 2000      2,544,260   140,003     (85,589)      2,598,674
  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 the revenues and expenses of Millennium Energy
Businesses to show this activity in the Other Income (Deductions)
section of UniSource Energy's income statements;

- 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 International, a wholly owned subsidiary of Nations
Energy, recorded a $1.4 million decrease in the market value of its
minority interest investment in the COPESA project.  At March 31, 2000,
Nations International's investment in COPESA was $3.2 million.  Nations
International intends to sell its 40% equity interest in COPESA.  We
can not predict whether future market adjustments will be necessary for
the COPESA project.

  Agreement to Acquire Additional Interest in Global Solar

     AET currently owns 50% of Global Solar Energy, L.L.C., which
develops and manufactures photovoltaic materials.  The other 50% is
owned by ITN Energy Systems, Inc. (ITN).  In November 1999, Millennium
and ITN entered into an agreement in which Millennium's share of Global
Solar will increase to 67%.  Under this agreement, ITN has transferred
its rights to certain assets and proprietary and intellectual property,
including thin-film battery technology, to Global Solar.  In addition,
Millennium will contribute to Global Solar up to $14 million in
additional equity upon the occurrence of certain agreed-upon production
and business milestones.  We expect Global Solar to reach these
milestones in the next 2 years.  The principal documents relating to
the increase in Millennium's share in Global Solar have been executed
and Millennium and ITN are currently finalizing the transaction.  As of
March 31, 2000, Millennium funded $3.7 million under this agreement,
including $2 million in the first quarter of 2000.

  Expiration of NewEnergy Guarantees

     In July 1999, UniSource Energy sold its interest in NewEnergy and
issued termination notices on all guarantees of performance bonds and
contractual obligations that were made on behalf of NewEnergy.  All
obligations incurred prior to the termination notices were extinguished
in 1999 with the exception of one in the amount of up to $1 million
which terminated in March 2000.


NOTE 4.  CONTINGENCIES
------------------------

  Income Tax Assessments

     In February 1998, the IRS issued an income tax assessment for the
1992 and 1993 tax years.  The IRS is challenging 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.

     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 may be limited under the tax
code.  The IRS is challenging our calculation of this limitation.  At
March 31, 2000, pre-1992 federal NOL and ITC carryforwards were
approximately $168 million and $20 million, respectively.  In addition
to the pre-1992 NOL and ITC which are subject to the limitation, $239
million of federal NOL at March 31, 2000, is not subject to the
limitation.

   We do not expect the resolution of these issues 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, which charges Sierrita disputes.  The dispute
concerns the proper method of calculating energy charges under the
contract.  TEP does not record 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 amounts
billed after May 14, 1999.  At March 31, 2000, this amounted to $1.4
million.


NOTE 5.  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 6.  REVIEW BY INDEPENDENT ACCOUNTANTS
------------------------------------------

     With respect to the unaudited consolidated financial information
of UniSource Energy and TEP for the three-month periods ended March 31,
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
May 5, 2000, appearing herein, states that they did not audit and they
do not express an opinion on that unaudited 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 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 7.  RECLASSIFICATIONS
--------------------------

     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 first quarter compared with the same
        period in the prior year,
     *  changes in liquidity and capital resources during the first quarter
        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  energy  related  businesses  of
Millennium  and certain of its subsidiaries and interests have also  had  a
significant  impact  on  earnings reported  by  UniSource  Energy  for  the
quarters ended March 31, 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 ended  March  31,
2000  and 1999.  Management's Discussion and Analysis analyzes and explains
the  differences between periods for specific line items of  the  Condensed
Consolidated Financial Statements.


OVERVIEW
--------

     UniSource Energy recorded net income of $242,000 for the first quarter
of  2000, compared with a net loss of $5.5 million in the first quarter  of
1999.  The improvement in first quarter performance over the prior year  is
due  primarily  to stronger kWh sales by TEP and a gain on the  sale  of  a
minority  interest  in  a  power project of one of our  unregulated  energy
businesses.    See  Results of Operations and Results of Millennium  Energy
Businesses 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 March 31, 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 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,  if necessary, borrowings under the Revolving Credit Facility.   While
some   of   Millennium's  unregulated  energy  businesses   have   required
significant amounts of capital and credit, management currently expects  to
make  limited  investments in these businesses.  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  competes  against  gas  service
suppliers and others who provide energy services.

     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.  The Rules  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  the  necessary
conditions to sell electricity in TEP's service territory.

     TEP'S Settlement Agreement and Retail Electric Competition Rules

     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 will decrease rates an additional 1% on  July  1,
2000.   These  reductions apply to all retail customers except for  certain
customers   that  have  negotiated  non-standard  rates.   The   Settlement
Agreement  approved in November 1999 provides that, after these reductions,
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 challenging the ACC's competition  rules
order  and  the  ACC's order approving TEP's Settlement Agreement.   It  is
contended that allowing marketplace competition to determine rates violates
the  ACC's constitutional duty to set rates.  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.  In the current market, wholesale prices are
typically  substantially below TEP's total cost of  service.   However,  we
make  wholesale  sales only at prices which exceed fuel and other  variable
costs.   We  expect  competition  to  sell  capacity  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;
     *  precipitation; 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 by October  15,
2000 a proposal for a Regional Transmission Organization (RTO).  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   and   remove    remaining
discriminatory transmission practices.  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 should 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,  we  stopped  applying FAS  71  to  our
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  iscussion  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  March  31,
2000,  if  we  had  stopped  applying FAS 71 to TEP's  remaining  regulated
operations,  we would have recorded an extraordinary loss of  approximately
$274  million, after the related income tax benefit of $182 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.  TEP continues to evaluate to what extent,
if  any, it may use derivative financial and commodity instruments  in  the
normal course of its future business. The market risks described above have
not  changed materially from the market risks reported in the 1999 Form 10-
K, except as noted below.

     Foreign Currency Exchange Risk

     We  are subject to foreign currency exchange risk arising from equity
investments  by  our unregulated businesses in foreign countries.   Nations
Energy's  investment  in a power project in the Czech Republic,  which  was
sold  in  January 2000, was subject to foreign currency exchange risk.  The
impact  of  recording the exchange rate fluctuations on UniSource  Energy's
income  statement for 1999 and the first quarter of 2000 was not  material.
Foreign currency risk related to current investments made by Nations Energy
and other Millennium businesses is not material due to the small amount  of
such investments.


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

     UniSource Energy recorded net income of $242,000 or $0.01 per  average
share  of Common Stock in the first quarter of 2000.  This compares with  a
net  loss of $5.5 million or $0.17 per average share of Common Stock in the
first  quarter  of  1999.   The primary factors affecting  the  results  of
operations in the first quarter of 2000 were improved kWh sales by TEP  and
a  gain  on  the sale of a minority interest in a power project by  Nations
Energy.

   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 first quarter of 2000 and 1999:




                                      Three Months Ended March 31,
                                      -----------------------------
                                                       (Millions)
-------------------------------------------------------------------
Business Segment                                     2000     1999
-------------------------------------------------------------------

  Electric Utility                                  $(0.1)   $(1.3)
  Millennium Energy Businesses                        1.5     (2.8)
  Parent Company and Inter-Company Eliminations      (1.2)    (1.4)

-------------------------------------------------------------------
   Consolidated Net Income (Loss)                   $ 0.2    $(5.5)
===================================================================



     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 our unregulated  energy
businesses are discussed in Results of Millennium Energy Businesses below.

     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;
     *  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/(Decrease)
                                                           -------------------
Three Months Ended March 31,          2000        1999      Amount     Percent
-------------------------------       ----        ----      ------     -------
Electric kWh Sales (000):
   Retail Customers                1,721,597   1,662,543    59,054       3.6%
   Sales for Resale                1,491,661   1,179,286   312,375      26.5%
                                   ---------   ---------   -------
       Total                       3,213,258   2,841,829   371,429      13.1%
                                   =========   =========   =======

Electric Revenues (000):
   Retail Customers                 $131,862    $128,780   $ 3,082       2.4%
   Sales for Resale                   44,761      31,859    12,902      40.5%
                                     -------     -------    ------
       Total                        $176,623    $160,639   $15,984      10.0%
                                    ========    ========   =======



     TEP's  kWh sales to retail customers increased by 3.6% in  the  first
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  cooler  winter  temperatures as measured by a 19% increase in  Heating
Degree  Days  compared  with the first quarter of  1999.   Retail  revenues
increased  by  2.4%  in the first quarter of 2000 compared  with  the  same
period in 1999, reflecting the higher kWh sales and the impact of the  1.0%
rate decrease effective July 1, 1999.

     Kilowatt-hour  sales  for  resale increased  26.5%  and  the  related
revenues grew by 40.5% in the first quarter of 2000 compared with the  same
period  in  1999.  Wholesale sales volume increased due to  both  increased
buy/resale  activity  as  well as an increase in generation  available  for
resale.  Market prices were significantly higher in the three months  ended
March  31, 2000 than in the prior year period, causing the revenue increase
to exceed the volume increase.  Generation availability increased due to  a
reduction  in scheduled maintenance in the first quarter 2000  compared  to
the same prior year period. Higher natural gas prices contributed to higher
market prices.

    Operating Expenses

     Fuel and Purchased Power expense increased by 10% in the first 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  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.   Other
Operations and Maintenance expense increased to support customer growth and
higher kWh sales for the first quarter 2000 compared to the same prior year
period.

     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  first
quarter  of 2000 compared to the same quarter 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.

    Other Income (Deductions)

     Interest Income

     TEP's income statements for the quarters ended March 31, 2000 and 1999
include $2.3 million and $2.5 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.

     Higher  interest income for the quarter ended March 31, 2000 was  due
primarily  to lease debt investments.  See Liquidity and Capital  Resources
below.

     Income (Losses) from Millennium Energy Businesses

     The unregulated energy businesses of Millennium contributed net income
of $1.5 million for the first quarter ended March 31, 2000, compared with a
net loss of $2.8 million in the first quarter of 1999.  See Note 3 of Notes
to Condensed Consolidated Financial Statements, Millennium Energy Businesses
and  Results of Millennium Energy Businesses below for more information  on
the results of this business segment.

     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 first quarter of 2000 compared  to  the
same quarter of the prior year.


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

     The  table below provides a breakdown by Millennium-owned subsidiaries
of  the  after tax net income/(losses) recorded for the three months  ended
March 31, 2000 and 1999.



     ------------------------------------------------
                                 Three Months Ended
                                      March 31,
     ------------------------------------------------
           Subsidiary             2000        1999
     ------------------------------------------------
                               -Thousands of Dollars-
           AET                   $(538)      $(374)
           MEH                     314        (577)
           Nations Energy        1,634      (1,942)
           Other                    59         100
     ------------------------------------------------
            Total Millennium    $1,469     $(2,793)
     ================================================



     AET and Global Solar

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

     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.   The net loss of $577,000 for the first quarter  of  1999  was
related to NEV Southwest operating expenses.

     MEH's net  income for the first quarter 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 first quarter of 2000, Nations Energy recorded
net  income of $1.6 million. These earnings included a $2.5 million pre-tax
gain  on  the sale of a minority interest in a power project in  the  Czech
Republic.   Nations  Energy also recorded a $1.4 million  decrease  in  the
market value of its minority investment in the COPESA project in the  first
quarter  of  2000.  Nations Energy recorded a net loss of $1.9 million  for
the  first  quarter of 1999, resulting principally from losses  on  foreign
currency transactions related to the Czech Republic project.  Management is
considering the sale of Nation's remaining assets.


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

     UniSource Energy

     On  December 3, 1999 UniSource Energy declared a cash dividend in the
amount  of  $0.08  per share on its common stock.  This dividend  was  paid
March  10, 2000 to shareholders of record at the close of business February
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  March  31,
2000,  the  required minimum net worth was $212 million.  TEP's actual  net
worth  at  March  31, 2000 was $270 million.  See Investing  and  Financing
Activities, TEP Credit Agreement, below.  As of March 31, 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
March 31, 2000, TEP's equity ratio on that basis was 19.2%.

     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, however, 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  March  31,
1999  ending balance of $105.8 million to $101.5 million at March 31, 2000.
For  the  twelve-month period ended March 31, 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 $17.9 million in
the  first quarter of 2000 compared with the same period in 1999.  The  net
increase resulted from the following principal factors:

     *  $9.6 million increase in cash receipts from wholesale sales;
     *  $5.6 million increase in cash receipts from retail customers; and
     *  $4.8 million reduction in income taxes paid.

     Net  cash used for investing activities totaled $36.3 million  during
the  first  quarter  of 2000 compared with $21.0 million  during  the  same
period  in  1999.  Capital expenditures were $9.7 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.

     Net  cash used for financing activities totaled $23.7 million in  the
first quarter of 2000 compared with $16.7 million during the same period in
1999.   In  2000, the major use of cash for financing activities was  $20.7
million  of scheduled payments that retired capital lease obligations.   In
1999,  $16.5  million of capital lease obligations were  retired.   In  the
first quarter of 2000, $2.6 million in common stock dividends were paid.

     UniSource   Energy's  consolidated  cash  balance,  including   cash
equivalents, at May 4, 2000 was approximately $94 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 March 31,  1999  ending
balance  of  $86.1  million to $61.1 million at March 31,  2000.   For  the
twelve-month period ended March 31, 2000, net cash outflows from  investing
and   financing   activities  exceeded  net  cash  inflows  for   operating
activities.

     Net cash flows from operating activities increased by $17.1 million in
the  first  quarter  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 $23.6 million  during
the  first  quarter  of 2000 compared with $15.8 million  during  the  same
period of 1999.  Capital expenditures were $8.2 million higher in 2000.

     Net  cash  used for financing activities totaled $21.3 million  during
the  first  quarter  of 2000 compared with $16.8 million  during  the  same
period  in  1999.  Scheduled Payments to Retire Capital Lease  Obligations,
the  principal reason  for the increase, were  $4.2 million higher in 2000.
TEP's 12.22% Series First Mortgage Bonds will mature  on June 1, 2000.  The
payment of  principal and  interest upon maturity will total  approximately
$50 million.

     TEP's consolidated cash balance, including cash equivalents, at May 4,
2000 was approximately $49 million.

     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.


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

     UniSource Energy
     ----------------

     Loans and Guarantees

     As described below, UniSource Energy sold its interest in NewEnergy on
July  23, 1999.  Pursuant to the sale, UniSource Energy provided guarantees
on  certain of NewEnergy's transactions.  All of these guarantees have been
terminated.

     TEP
     ---

     Capital Expenditures

     TEP's capital expenditures for the quarter ended March 31, 2000  were
$23.7 million.  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  March  31, 2000 and as of May 4, 2000, TEP had no  borrowings
outstanding under its $100 million Revolving 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.   The notes are secured by AES stock and bear  interest  at
9.5%.  Principal of $11.4 million is due July 23, 2000 and July  23,  2001,
respectively.

     Capital Requirements

     The   unregulated  energy  businesses  owned  by   Millennium   have
historically required significant amounts of capital.  During 1999  and  in
the  first  quarter of 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, Millennium has agreed to contribute to Global  Solar
up  to  $14 million in additional equity.  As of March 31, 2000, Millennium
had funded $3.7 million of the $14 million commitment.

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

    5.  Changes in governmental policies and regulatory actions with respect
        to allowed rates of return, financings, and rate structures.

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

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

    8.  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, Foreign Currency Exchange Risk.


                        PART II - OTHER INFORMATION

ITEM 1. -  LEGAL PROCEEDINGS
-----------------------------------------------------------------------------

TAX ASSESSMENTS

     See  Note  4 of Notes to Condensed Consolidated Financial Statements,
Contingencies.

ACC ORDER on the SIERRITA CONTRACT

      See  Note  4 of Notes to Condensed Consolidated Financial Statements,
Contingencies.



ITEM 5. - OTHER INFORMATION
-----------------------------------------------------------------------------

ADDITIONAL FINANCIAL DATA

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

                                                   12 Months Ended
                                                   ---------------

                                               March 31,     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 March 31, 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:  May 11, 2000                /s/      Ira R. Adler
                                   ----------------------------
                                            Ira R. Adler
                                     Executive Vice President and Principal
                                            Financial Officer



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


Date:  May 11, 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.