ACC denies proposed settlement agreement on TEP rate case and holding company.

TUCSON, Ariz.--(BUSINESS WIRE)--Jan. 19, 1996--The Arizona Corporation Commission (ACC) today denied a proposed settlement agreement between Tucson Electric Power Co. (NYSE:TEP), the ACC Staff and other parties to the company's rate and holding company applications.

The ACC voted 2-1 against the proposed agreement at an open meeting held in Tucson. In light of the decision, TEP will evaluate how it will proceed with its rate and holding company applications.

Had the proposed settlement been approved by the ACC, TEP's customers would have benefited from price stability and more choices in managing their energy costs. The agreement called for a one-time base rate increase of 2%, followed by a commitment from TEP not to seek another increase in base rates before Jan. 1, 2000. TEP also proposed establishment of a $4.5 million fund to assist residential customers having difficulty paying electricity bills.

"We are deeply disappointed by the vote because we negotiated an agreement with the ACC Staff and other intervenors that we believe was a fair and equitable solution for all parties," said Charles E. Bayless, TEP Chairman, president and CEO. "While a settlement would have resolved these issues without a prolonged process -- and allowed us to forge ahead with the important business of managing our costs and serving our customers -- we still believe we have a strong case supporting our requests."

CONTACT: Tucson Electric Power Co., Tucson

Alan Lee Bunnell, 520/884-3797 (media)

Caroline Gardiner, 520/884-3931 (analysts)