TEP Seeks New 2023 Rates to Support Reliable Service, Cleaner Energy

Tucson Electric Power (TEP) is seeking updated rates in late 2023 to support safe, reliable service and its transition to cleaner energy. The proposed rates would cover the cost of new wind and solar energy resources, grid improvements, technology and security upgrades and other key investments that support service reliability, including:

• The Oso Grande Wind project in southeastern New Mexico, which produces enough clean energy to satisfy the annual energy needs of nearly 100,000 Tucson homes.
• New substations, substation upgrades and other improvements to TEP’s local energy grid.
• New IT systems that facilitate smart grid operations and participation in regional energy markets.
• Safer, more secure facilities that provide enhanced protection against increasing physical- and cyber-security threats and support efficient operations.

TEP’s request, filed today with the Arizona Corporation Commission (ACC), would increase the average monthly bills of typical residential customers by 11.7 percent, or $14.22, over current levels starting in September 2023. That change would vary with usage, and customers will be able to mitigate the impact through energy efficiency and Time-of-Use pricing plans that offer lower rates during off-peak periods.

TEP has effectively managed its costs amid rising prices for equipment, parts, construction materials and other necessities since 2018, the year upon which current rates are based. The company’s operations and maintenance (O&M) costs increased just 2.4 percent annually, on average, from 2018 through 2021 despite average annual inflation of 3.6 percent during that period.

“The cost of providing safe, reliable service is increasing rapidly as inflation exacerbates the impacts of supply chain challenges, regional energy capacity constraints and extreme weather events,” said Susan Gray, TEP’s President and CEO. “Our proposed rates are needed to support systems and infrastructure that protect and upgrade our grid, expand our use of cleaner energy and help us serve the expanding energy needs of our growing community.”

Peak energy demand on TEP’s local energy grid has increased by 5.7 percent since 2019, driven by record heat events and the addition of more than 14,000 new homes and businesses to its customer base over the past three years. The cost of fuel and wholesale energy also has increased significantly in recent years, driving up expenses that, like O&M costs, are passed along to customers without any markup.

Supporting Cleaner Energy

TEP’s proposed rates support investments that will help the company manage long-term energy costs through increased use of wind and solar power systems that will generate 70 percent of its power by 2035. They also support the company’s plan to ramp down and ultimately retire its two units at the coal-fired Springerville Generating Station in eastern Arizona in 2027 and 2032. Those steps will help TEP end its use of coal and achieve an 80 percent reduction in carbon dioxide emissions by 2035, key objectives articulated in its 2020 Integrated Resource Plan, which the ACC acknowledged as being in the public interest.

TEP also is proposing more gradual recovery of anticipated costs related to its transition to cleaner energy. This proposal would support the development of wind farms, solar arrays, battery storage systems and other investments that help reduce our community’s carbon footprint. Allowing these costs to be passed along as they occur will mitigate the larger impacts that result from accumulations over longer periods between rate requests.

Assisting Customers

The proposed rates will increase the Lifeline discount from $18 to $20 per month for customers whose household income does not exceed 200 percent of the federal poverty level. They also would eliminate TEP transaction fees for most credit card payments from residential and small business customers as well as for cash payments made at third-party payment processors.

TEP has supported customers and our community during the ongoing pandemic through increased philanthropic giving, delayed recovery of higher energy expenses, direct bill credits and a campaign to connect qualifying customers to expanded federal aid and other bill payment assistance – efforts that have included door-to-door visits. Including all federal funding, contributions and other resources, TEP has directed nearly $33 million in assistance to customers and our community since 2020.

“We know our community has faced real challenges over these past few years because we’ve been there with support every step of the way,” Gray said. “Our systems and employees have delivered admirable reliability and strong service for customers throughout this extraordinarily difficult period. I am very proud of our company’s performance in living up to our values and the expectations of our customers.”

Additional information about TEP’s rate proposal is available online at tep.com/rate-proposal. Images and video clips showing some of the recent upgrades that would be reflected in the proposed rates are available online at tep.com/key-investments-gallery/.

TEP provides safe, reliable electric service to more than 438,000 customers in Southern Arizona. For more information, visit tep.com. TEP and its parent company, UNS Energy, are subsidiaries of Fortis Inc. (TSX/NYSE: FTS), a leader in the North American electric and gas utility business, with regulated utilities that serve more than 3.4 million customers across Canada and in the United States and the Caribbean. For more information, visit fortisinc.com.

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