UniSource closes deal to buy Citizens

UniSource Energy Service signs are at offices of Citizens Arizona Electric and Gas offices, the sale of Citizens assets to UniSource completed.

Most of the Citizens gas and electric employees are now working for UniSource Energy Services, and local customers will see little change in company operations, corporate communications director Art McDonald said.

A 22 percent increase in electric rates and 21 percent increase in gas rates became effective with the close of the sale Monday.

The applications for rate increases began after the summer of 2000, were changed several times and finally approved in July as part of the sale agreement with UniSource Energy Corp.

of Tucson, which was announced in December.

In both cases, Citizens was trying to recover increased wholesale costs for electricity and natural gas.

In the case of electricity, the company was trying to cope with wholesale prices that jumped during the summer of 2000 because of the power crisis in California, which had deregulated its electricity market.

Citizens did not own generating facilities and purchased power for its customers on the wholesale market, all of it from Arizona Public Service.

UniSource will continue that agreement.

Another UniSource subsidiary, Tucson Electric Power, does own generating capacity.

About $150 million in increased wholesale electric costs that was not recovered by Citizens through rate increases was absorbed by Citizens Communications, the Citizens parent company based in Stamford, Conn.

The purchase was completed Monday for $220 million plus operating capital adjustments.

UniSource Energy Services, a new subsidiary of UniSource Energy, has acquired natural gas systems serving 126,000 customers and electric systems serving 77,500 customers in northern and southern Arizona.

"This purchase offers a unique opportunity to extend our core utility operations and significantly expand our customer base without leaving our home state," James S.

Pignatelli, chairman, president and chief executive officer of UniSource Energy, said in a statement.

"We're looking forward to providing safe, reliable energy to all of our customers across Arizona."

UniSource Energy's approximately 550,000 customers across Arizona now include about 360,000 Tucson-area customers served by Tucson Electric Power.

UES and its 338 employees provide natural gas in Mohave, Coconino, Navajo, Yavapai and Santa Cruz counties as well as electric service in Mohave and Santa Cruz Counties.

Dennis R.

Nelson, senior vice president of utility services for UniSource Energy, will serve as Chief Operating Officer of UniSource Energy Services.

Tom Ferry, former vice president and general manager of Citizens electric operations in Arizona, and Gary Smith, former vice president and general manager of Citizens gas operations in Arizona, will serve in those same capacities for UniSource.

The company's Web site continues to operate, so UES customers can continue to pay bills and conduct other business online.

The new Web address is www.uesaz.com.

UniSource Energy's primary subsidiaries include Tucson Electric Power, Arizona's second largest investor-owned electric utility, and Millennium Energy Holdings, parent company of UniSource Energy's unregulated energy businesses.

UniSource Energy's Web site is www.unisourceenergy.com.