Tucson, AZ-based UniSource Energy Corp. reported first-quarter results that were down substantially compared to the same period in 2006, but the downturn was mitigated somewhat by nearly $5 million net income from the company's relatively small natural gas utility operations in its UNS Gas unit. Tucson Electric Power (TEP) is UniSource's primary subsidiary and reported first-quarter profits of $800,000, compared to $16.6 million for the same period last year.

Because of prolonged coal-fired generation outages in the first quarter, TEP lost $8 million in power margin for the quarter and sustained an additional $7 million in operations/maintenance costs for the quarter, according to UniSource senior executives who talked about the results in a conference call with analysts Friday.

Of UniSource's nearly $5 million of net income, $4.5 million came from its natural gas utility operations, and UNS Electric and TEP reported net income of $1.1 million

UniSource said scheduled maintenance outages at three different coal-fired TEP generators contributed to the year-over-year decline in earnings. Unit 2 at TEP's Springerville Generating Station (SGS) was taken off-line in March for a turbine replacement that will reduce the likelihood of future unplanned outages, while units at the San Juan and Navajo Generating Stations were off-line for other planned maintenance, according to UniSource CEO James Pignatelli.

Pignatelli said these outages and other unplanned outages led to increases in fuel, purchased power and operating/ maintenance expenses. They also limited the energy sales opportunities that provided TEP with higher-than-usual wholesale revenues in the first quarter of 2006.

"We scheduled much of this work during a period when demand is typically low so our units would be ready to run smoothly during southern Arizona's hot summer months, when our customers' energy use reaches its seasonal peak," Pignatelli said.

Nevertheless, he said TEP's continued growth is expected to contribute to increased energy use this summer. TEP's customer base grew 2% in the past year, exceeding 394,000 by the end of the first quarter.

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