Business Segments

6 Months Ended

Jun. 30, 2011

Business Segments [Abstract]

BUSINESS SEGMENTS

NOTE 3. BUSINESS SEGMENTS

Based on the way we organize our operations and evaluate performance, we have three reportable segments:

(1)

TEP, a regulated vertically integrated electric utility and UniSource Energy’s largest subsidiary;

(2)

UNS Gas, a regulated gas distribution utility business; and

(3)

UNS Electric, a regulated electric distribution utility business.

Results for the UniSource Energy and UES holding companies and the Millennium and UED subsidiaries are included in Other below.

We disclose selected financial data for our reportable segments in the following table:


	Reportable Segments												UniSource
			UNS		UNS					Reconciling			Energy
	TEP		Gas		Electric		Other			Adjustments			Consolidated
	-Millions of Dollars-
Income Statement
Three Months Ended June 30, 2011:
Operating Revenues — External	$	292	$	25	$	52	$	1		$	—		$	370
Operating Revenues — Intersegment		3		1		1		7			(12	)		—
Income Before Income Taxes		40		1		5		—			—			46
Net Income		25		—		3		1			—			29


Three Months Ended June 30, 2010:
Operating Revenues — External	$	266	$	25	$	49	$	(1	)	$	—		$	339
Operating Revenues — Intersegment		9		1		—		7			(17	)		—
Income (Loss) Before Income Taxes		43		1		3		(5	)		—			42
Net Income (Loss)		28		1		2		(5	)		—			26


Six Months Ended June 30, 2011:
Operating Revenues — External	$	528	$	84	$	102	$	—		$	—		$	714
Operating Revenues — Intersegment		7		1		1		14			(23	)		—
Income Before Income Taxes		47		11		8		1			—			67
Net Income		30		7		5		—			—			42


Six Months Ended June 30, 2010:
Operating Revenues — External	$	488	$	81	$	89	$	—		$	—		$	658
Operating Revenues — Intersegment		18		2		1		13			(34	)		—
Income (Loss) Before Income Taxes		59		10		8		(4	)		1			74
Net Income (Loss)		38		6		5		(4	)		1			46

When UniSource Energy consolidates its subsidiaries, we have additional significant reconciling adjustments that include the elimination of investments in subsidiaries held by UniSource Energy.


	Reportable Segments
			UNS		UNS
	TEP		Gas		Electric		Other
	-Millions of Dollars-
Intersegment Revenue
Three Months Ended June 30, 2011:
Wholesale Sales — UNS Electric to TEP (⁴⁾	$	—	$	—	$	1	$	—
Wholesale Sales — UED to UNS Electric		—		—		—		3
Gas Revenue — UNS Gas to UNS Electric		—		1		—		—
Other Revenue — TEP to Affiliates ⁽¹⁾		2		—		—		—
Other Revenue — Millennium to TEP & UNS Electric⁽²⁾		—		—		—		4
Other Revenue — TEP to UNS Electric ⁽³⁾		1		—		—		—

Total Intersegment Revenue	$	3	$	1	$	1	$	7


Three Months Ended June 30, 2010:
Wholesale Sales — TEP to UNS Electric ⁽⁴⁾	$	6	$	—	$	—	$	—
Wholesale Sales — UED to UNS Electric		—		—		—		3
Gas Revenue — UNS Gas to UNS Electric		—		1		—		—
Other Revenue — TEP to Affiliates ⁽¹⁾		2		—		—		—
Other Revenue — Millennium to TEP & UNS Electric⁽²⁾		—		—		—		4
Other Revenue — TEP to UNS Electric ⁽³⁾		1		—		—		—

Total Intersegment Revenue	$	9	$	1	$	—	$	7


Six Months Ended June 30, 2011
Wholesale Sales — TEP to UNS Electric ⁽⁴⁾	$	1	$	—	$	—	$	—
Wholesale Sales — UNS Electric to TEP (⁴⁾		—		—		1		—
Wholesale Sales — UED to UNS Electric		—		—		—		5
Gas Revenue — UNS Gas to UNS Electric		—		1		—		—
Other Revenue — TEP to Affiliates⁽¹⁾		5		—		—		—
Other Revenue — Millennium to TEP & UNS Electric⁽²⁾		—		—		—		9
Other Revenue — TEP to UNS Electric ⁽³⁾		1		—		—		—

Total Intersegment Revenue	$	7	$	1	$	1	$	14


Six Months Ended June 30, 2010
Wholesale Sales — TEP to UNS Electric ⁽⁴⁾	$	13	$	—	$	—	$	—
Wholesale Sales — UNS Electric to TEP (⁴⁾		—		—		1		—
Wholesale Sales — UED to UNS Electric		—		—		—		5
Gas Revenue — UNS Gas to UNS Electric		—		2		—		—
Other Revenue — TEP to Affiliates⁽¹⁾		4		—		—		—
Other Revenue — Millennium to TEP & UNS Electric⁽²⁾		—		—		—		8
Other Revenue — TEP to UNS Electric ⁽³⁾		1		—		—		—

Total Intersegment Revenue	$	18	$	2	$	1	$	13


⁽¹⁾		Common costs (systems, facilities, etc.) are allocated on a cost-causative basis and recorded as revenue by TEP. Management believes this method of allocation is reasonable.

⁽²⁾		Millennium provides a supplemental workforce and meter-reading services to TEP and UNS Electric. Amounts are based on costs of services performed, and management believes that the charges for services are reasonable.

⁽³⁾		TEP charges UNS Electric for control area services based on a FERC-approved tariff.

⁽⁴⁾		TEP and UNS Electric sell power to each other at prices based on the Dow Jones Four Corners Daily Index.