Exhibit 99.1

UNISOURCE ENERGY REPORTS THIRD QUARTER 2010 EARNINGS,
NARROWS 2010 EARNINGS GUIDANCE RANGE

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UniSource Energy’s net income for the third quarter of 2010 was $54.9 million, or $1.36 per diluted share of common stock, compared with net income of $57.6 million, or $1.45 per diluted share, in the third quarter of 2009. Financial results from the third quarter of 2010 include $6 million of non-cash, non-operating after-tax charges at Millennium Energy Holdings, a subsidiary that holds UniSource Energy’s unregulated energy investments.

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Earnings at UniSource Energy’s primary subsidiary, Tucson Electric Power (TEP), increased $3.7 million, or 7 percent, compared with the third quarter of 2009. Cost control efforts, benefits from the operation of Unit 4 at the Springerville Generating Station (SGS) and lower depreciation and amortization expense contributed to higher earnings at TEP.

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UniSource Energy narrowed its 2010 earnings guidance range to $2.75 to $2.90 per diluted share from $2.75 to $3.00 per diluted share. The updated guidance range reflects the impact of net losses at Millennium during the first nine months of 2010.

Tucson, Ariz. – UniSource Energy Corporation (NYSE: UNS) today reported third quarter 2010 net income of $54.9 million, or $1.36 per diluted share of common stock, compared with $57.6 million, or $1.45 per diluted share, in the same period last year. For the nine months that ended September 30, 2010, UniSource Energy’s net income was $100.4 million, or $2.53 per diluted share of common stock, compared with net income of $93.8 million, or $2.40 per diluted share, in the first nine months of 2009.

UniSource Energy’s financial results primarily reflect those of TEP, which reported net income of $59.0 million in the third quarter of 2010, compared with net income of $55.3 million in the same period last year.

TEP’s retail kilowatt-hour (kWh) sales fell 0.3 percent compared with the third quarter of 2009. A year-over-year increase in sales to industrial and mining customers was offset by reduced residential and commercial sales. Although TEP’s service area experienced hotter than normal weather in the third quarter of 2010, there were 5 percent fewer cooling degree days than during the same period last year. For the first nine months of the year, TEP’s total retail kWh sales were down 1.0 percent compared with the same period in 2009.

“Our core utility businesses have performed very well,” said Paul Bonavia, Chairman, President and CEO of UniSource Energy. “We have carefully managed costs to reflect the level of sales while maintaining strong operating performance.” Bonavia continued, “The local economic conditions remain challenging, but we are seeing some signs of recovery.”

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Seasonality of Earnings

The net income and results of operations of TEP as well as of UNS Gas and UNS Electric – operating subsidiaries of UniSource Energy Services (UES) – are seasonal in nature. TEP and UNS Electric typically record the majority of their net income during the second and third quarters, when hot weather contributes to higher energy consumption. TEP’s retail prices, which include higher rates for higher levels of energy use, also shift a larger share of the company’s earnings into those periods.

Energy demand from UNS Gas customers typically peaks during the winter. Accordingly, UNS Gas records the majority of its net income during the first and fourth quarters.

Tucson Electric Power

Retail kWh Sales

TEP’s retail kWh sales declined 0.3 percent in the third quarter of 2010 compared with the same period last year. Although hot weather lifted the number of cooling degree days to 12 percent above the 10-year average for the period, weather was less extreme than that experienced during the same period last year. Residential and commercial kWh sales were down 0.6 percent and 1.1 percent, respectively, while kWh sales to industrial and mining customers were up 0.3 percent and 1.9 percent, respectively compared with the third quarter of 2009.

Retail Revenues

Retail margin revenues decreased $1 million, or 0.5 percent, in the third quarter of 2010 compared with the third quarter of 2009. These revenues do not include a $7 million increase in customer surcharges used to fund renewable energy and energy efficiency programs or a $3 million decrease in charges to cover fuel and purchased power costs.

Long-Term Wholesale Revenues

Margin on long-term wholesale sales was $6 million, which is substantially the same as that of the third quarter of 2009.

Transmission Revenues

Revenues from the wholesale transmission of electricity were $4 million in the third quarters of 2010 and 2009.

Other Operating Expenses

TEP held its base O&M expense to $53 million in the third quarter of 2010, matching the same figure from the third quarter of 2009. Base O&M excludes costs directly offset by customer surcharges and third-party reimbursements.

Depreciation expense decreased by $3 million due primarily to new and lower depreciation rates for transmission assets and lower depreciation on Unit 4 at TEP’s H. Wilson Sundt Generating Station. Those savings were partially offset by depreciation related to new plant additions. Amortization expense decreased $1 million due to a decline in the balance of capital lease obligations.

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Benefits of SGS Units 3 and 4

The December 2009 completion of SGS Unit 4 contributed to a $3 million increase in third-quarter rents and fees for the operations of SGS Units 3 and 4. Salt River Project (SRP) owns Unit 4, while Tri-State Generation and Transmission Association owns Unit 3. TEP operates all four units at the plant.

UNS Gas

UNS Gas reported a net loss of $1 million in the third quarter of 2010 and 2009. Retail therm sales were 1.1 percent below the third quarter of 2009.

UNS Electric

UNS Electric reported net income of $3 million in the third quarter of 2010 compared with $4 million in the third quarter of 2009. Higher O&M costs offset a 1.7 percent year-over-year increase in third-quarter retail kWh sales. Sales to mining and industrial customers were up 18.8 percent and 10.0 percent respectively, while sales to residential customers did not change compared to the same period last year. Weak economic conditions contributed to a 2.2 percent reduction in commercial sales compared to the same period last year.

In September 2010, the Arizona Corporation Commission (ACC) approved a base rate increase for UNS Electric of $7.4 million, or 4 percent, to cover increased capital and operating costs. The new rates took effect October 1, 2010. The ACC also approved the acquisition and inclusion of the Black Mountain Generating Station (BMGS) in UNS Electric’s rate base, subject to various conditions. UNS Electric currently purchases the plant’s output from sister company UniSource Energy Development. Upon its purchase, BMGS will be included in UNS Electric’s rate base through a revenue-neutral rate reclassification of approximately 0.7 cents per kWh from the base power supply rate to non-fuel base rates.

Millennium

Millennium recorded a $6 million loss in the third quarter of 2010 compared with no net income in the same period last year. Millennium’s results in the third quarter of 2010 include $5 million of income tax expense related to the write-off of deferred tax assets and a $1 million after-tax impairment loss related to its investments.

In the first nine months of 2010, Millennium recorded a net loss of $9 million, compared with net income of $4 million in the first nine months of 2009.

On September 30, 2010, Millennium’s investment balance was $22 million, including a $15 million note receivable plus interest of $1 million, and its cash balance was $3 million.

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UniSource Energy believes the presentation of TEP, UNS Gas, UNS Electric and Other segment net income or loss on a per basic UniSource Energy share basis, which are non–GAAP financial measures, provides useful information to investors by disclosing the results of operations of its business segments on a basis consistent with UniSource Energy's reported earnings or losses.

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Conference Call and Webcast

The company will host a conference call on Wednesday, October 27 at 10:00 a.m. EDT to discuss the financial results and outlook. To participate in the call, please dial in 5 to 10 minutes prior to the start time.

Dial-in number: (877) 582-0446
Reference code: 20481170

The conference call also can be heard live on UniSource Energy’s website. The webcast can be accessed at uns.com and will be available for replay for seven days.

Replay number: (800) 642-1687
Reference code: 20481170

In conjunction with this earnings announcement, UniSource Energy has provided detailed information on its performance during the third quarter of 2010. These materials have been filed with the Securities and Exchange Commission and are also available at uns.com.

UniSource Energy is a Tucson, Arizona-based company with consolidated assets of approximately $3.8 billion. UniSource Energy’s primary subsidiaries include Tucson Electric Power, which serves more than 400,000 customers in southern Arizona, and UniSource Energy Services, provider of natural gas and electric service for about 236,000 customers in northern and southern Arizona.
For more information about UniSource Energy and its subsidiaries, visit uns.com.

This release contains forward-looking information that involves risks and uncertainties, including factors that could affect UniSource Energy’s ability to reach the 2010 earnings guidance. These risks and uncertainties include, but are not limited to: state and federal regulatory and legislative decisions and actions; regional economic and market conditions, which could affect customer growth and energy usage; weather variations affecting energy usage; the cost of debt and equity capital and access to capital markets; the performance of the stock market and changing interest rate environment, which affect the value of the company’s pension and other postretirement benefit plan assets and the related contribution requirements and expense; unexpected increases in O&M expense; resolution of pending litigation matters; changes in accounting standards; changes in critical accounting estimates; the ongoing restructuring of the electric industry; changes to long-term contracts; the cost of fuel and power supplies; performance of TEP’s generating plants; and other factors listed in UniSource Energy’s Form 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from outcomes currently expected by UniSource Energy.

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