UniSource receives tentative OK to buy Citizens divisions

An administrative law judge has recommended approving the sale of Citizens Arizona Gas and Citizens Arizona Electric to UniSource Energy Corp.

In rulings filed Monday, Judge Dwight Nodes also recommended approval of rate increases by the company.

The Arizona Corporation Commission could consider the matter when its meets July 1-2.

Public comment will be taken until June 25.

The text of Nodes' ruling is on the Internet at www.cc.state.az.us.

Heather Murphy, ACC communications director, said the commissioners are unlikely to discuss the agreement prior to their July 1-2 meeting.

The rate approvals recommended by Nodes include a 22 percent increase in electric rates.

UniSource reduced the request from the 45 percent filed by Citizens Arizona Electric in September 2000.

In its purchase agreement, UniSource said it would forego $135 million in uncollected pass-through energy costs, which Citizens accumulated while buying power on the wholesale market during the California power crisis during the summer of 2000.

Citizens also incurred increased wholesale power costs through a new contract with Arizona Public Service.

UniSource also reduced the gas-rate increase request from 29 percent to 23 percent after discussions with the ACC staff.

Nodes' ruling calls for a 20.9 percent increase in basic gas rates.

Interveners and interested parties have until June 25 to comment about Nodes' ruling.

UniSource Energy Services, a new subsidiary of UniSource Energy Corp., will operate the former Citizens electric and gas utilities and expects to be serving customers as early as July, chief operating officer Dennis R.

Nelson said.

"We are an Arizona company that is well known by the ACC and we have a long-term relationship with them," Nelson said.

"The ACC are familiar with us and our operations in Arizona."

The sale to UniSource, parent company of Tucson Electric Co., would put current Citizens customers in a family of Arizona companies that have provided electric power generation and distribution of electricity and natural gas in Arizona for many years.

Nelson is a graduate of Williams High School, Northern Arizona University and the University of Arizona Law School.

"We understand rural, nonmetro Arizona," Nelson said.

"We have generating facilities in Springerville, where we employ about 200."

Nelson said most of the current employees of Citizens gas and electric will be retained.

Steve Lynn, UniSource vice president for communications and government relations, said local customers would be served by a Tucson-headquartered company with deep roots in the state.

"We have a long history of working in the community at TEC and UniSource," Lynn said.

"We know Kingman will see that same community experience from us."

Nelson said that although a UniSource subsidiary, Tucson Electric Co., generates power for retail customers, the new UniSource Energy Services subsidiary would be an electric distribution company, the same as Citizens, buying power on the wholesale market.

Lynn said the sale includes the current power supply contract that Citizens has with Arizona Public Service.

He said Mohave County customers will continue to receive electric power supplied by APS after the sale is completed.