New Rates to Support Reliable, Sustainable Electric Service
Tucson Electric Power is seeking updated rates to support development of a smarter, greener grid to serve our community's growing energy needs.
TEP's current rates do not reflect approximately $1.2 billion our company has invested since June 2015 to maintain and improve service while transitioning to a cleaner, more flexible and resilient energy portfolio. We are expanding our energy resources, updating our grid and working to more than double our use of wind and solar power by 2021.
The Arizona Corporation Commission (ACC) is reviewing this request and is expected to vote on the proposal later this year.
More Reliable, Sustainable Energy
New rates will support a continuing transition to a cleaner, more flexible, and resilient energy portfolio. By 2021, TEP plans to provide more than 28 percent of its power from renewable energy resources, enough to power two-thirds of Tucson homes. The company also is retiring hundreds of megawatts of coal-fired resources and less-efficient gas-fired steam generating units.
New rates will cover costs associated with purchasing new, more efficient natural gas-fired generators. For example, the reciprocating internal combustion engine (RICE) units at the H. Wilson Sundt Generating Station in Tucson will be able to adjust production quickly and efficiently in response to intermittent changes in the energy production of new wind and solar resources.
In combination with the planned addition of new battery energy storage systems, new natural gas resources will provide the flexibility needed to better support the integration of additional renewable energy systems and quickly satisfy peak energy demands. A well-balanced energy portfolio will support reliable, affordable service with reduced water use, lower carbon dioxide production and reduced emissions.
TEP investments since 2015 to maintain safe, reliable service for more than 425,000 customers include:
- $343 million of upgrades to TEP’s distribution system, which delivers electric service to customers’ homes and businesses. This work includes building and upgrading substations, power lines and power poles throughout TEP’s service territory.
- $149 million in improvements to TEP’s transmission system.
- $444 million in upgrades for TEP’s existing generating resources.
New rates also would cover the costs of installing clean, flexible reciprocating internal combustion engine (RICE) units in Tucson and efficient natural gas systems to replace retiring coal-fired resources. These new resources will support new wind and solar systems, which will more than double over the next two years.
TEP’s provides service to more than 425,000 customers with a modern electrical grid that spans 1,155 square miles and includes approximately 5,100 miles of transmission and distribution lines, more than 4,300 cable-miles of underground distribution lines, nearly 100,000 power poles and transmission structures and more than 100 substations.
TEP’s electric infrastructure is under constant stress. Warmer summer weather and the addition of 9,000 customers has driven up peak usage levels by 9 percent since mid-2015. Continual maintenance and system improvements are necessary to ensure safe, reliable service for existing customers while meeting the needs of new homes, small businesses and large commercial customers. Two-way power flows from more than 21,000 rooftop solar systems also have placed additional strain on TEP’s electric infrastructure. In addition, TEP must bring more efficient, flexible resources online to replace retiring coal-fired resources and to accommodate a significant expansion of renewable resources.
The company works diligently to manage operations and maintenance costs through continuous improvement efforts, closely monitoring labor expenses and initiating new efficiencies.
For example, TEP converted all company-managed dusk-to-dawn streetlights to LED lights, which will reduce maintenance costs and provide higher-quality lighting. And beginning in 2017, transmission crews implemented new work practices allowing them to perform maintenance on high voltage lines without the need for line outages, which reduces operations and maintenance costs.
Cost is also an important consideration in TEP’s resource decisions. For example, TEP projections indicate that the replacement of two coal-fired generating resources with equivalent energy from Gila River Unit 2 will save TEP customers approximately $75 million a year in fuel and non-fuel expenses.
TEP works hard to reduce the power supply charges customers pay. Beginning April 1, customers will begin seeing a credit on their monthly bills to pass along savings from the company’s successful efforts to secure affordable energy resources. Learn more.
TEP is proposing a modest $2 increase to the monthly Customer Charge for residential customers. If this change is approved, TEP’s basic service charge would match the basic service charge for electric customers of its sister company, UniSource Energy Services. It also would remain among the lowest electric utility customer charges in the state.
TEP is proposing a proportionate increase in non-fuel energy and demand charges across the board for all non-lighting rate classes, including residential, small business, large commercial and industrial customers. These proposed changes provide a better match between the costs TEP incurs and the bills customers pay.
The company is proposing two new adjustor mechanisms, including one that would reflect significant changes in income tax law. If approved, this mechanism initially would be used to pass along some of the tax savings that will result from reduced federal corporate income tax rates.
A second new adjustor mechanism, the Transmission Cost Adjustor (TCA), is a monthly charge or credit that would allow TEP to recover a portion of transmission costs associated with serving retail electric customers. If this is approved, TEP would calculate this amount annually based on investments in its transmission system using a formula approved by the Federal Energy Regulatory Commission (FERC). The ACC would review and approve any changes to this adjustor. The proposed TCA is modeled after similar mechanisms approved by the ACC for use by UniSource Energy Services, TEP’s sister company, and Arizona Public Service.
Our Lifeline program provides a $15 monthly discount to qualifying limited-income customers. We're recommending a $3 increase to the monthly discount. The program is available to customers whose gross household income does not exceed 150 percent of the federal poverty level.
We also work with community partners to provide short-term bill payment assistance to limited-income customers in financial distress. We support those assistance efforts with philanthropic contributions from our corporate resources, not customers’ rates.
Finally, we help limited-income families make energy efficiency improvements to their homes through our weatherization program. Additional details about these programs are available online at tep.com.
Additional Changes for Larger Businesses
Yes. The company has proposed making its GoSolar Shares program available to Large General Service customers taking service on a non-TOU rate plan. The program is already available to residential, small commercial and medium commercial customers. If approved, large general service customers would have the opportunity to buy power from TEP’s local community-scale solar systems in monthly 150 kWh shares.
The power supply component of participants’ bills would be fixed for 20 years and the solar shares would be exempt from the Renewable Energy Standard and Tariff surcharge and the Purchased Power and Fuel Adjustment Charge surcharge. The program delivers renewable energy to participating customers while offering protection against future rate increases.
Pursuant to a previous ACC decision, TEP is presenting a new Market Pricing-Experimental (MP-EX) Pilot Program that could provide medium commercial, large commercial and industrial customers with new choices for managing energy costs by purchasing power from third-party generation service providers. Participants of the program would pay existing tariff-based rates for a portion of their electric service but also could have an option to replace a portion of their loads with market-priced block purchases competitively procured in the wholesale market by TEP.
Yes. TEP is seeking to update its Economic Development Rate, which is designed to attract new business and encourage existing employers to expand their operations. The company wants to encourage participation by easing some of the current requirements while capping the total discount for each program participant at a maximum of $100,000 per month.
Economic growth provides a wide range of public benefits, including stabilizing or even reducing electric rates. Manageable customer and sales growth allows TEP to operate its system more efficiently while spreading the fixed costs among a greater number of customers. By offering an economic development rate, TEP can promote job growth and contribute to the quality of life in our community.
Potential Bill Impact
The proposed rates would increase the average monthly bills of a typical residential customer using TEP’s Basic pricing plan by an estimated $6.80 compared to 2018 levels. This estimate is based on monthly usage of 1,076 kilowatt-hours (kWh) in the summer and 615 kWh in the winter, for annual monthly usage of 807 kWh.
For typical residential customers using TEP’s Time-of-Use (TOU), Demand or Demand Time-of-Use pricing plans, the proposed rates would increase average monthly bills by an estimated $7.15 to $7.89.
These forecasted impacts would vary with usage, and the estimates do not account for changes in surcharges or taxes that will occur before new rates take effect.
TEP’s residential electric rates have been remarkably stable, increasing by about 1 percent per year, on average, over the past 20 years. Adjusted for inflation over that same length of time, TEP’s rates have actually fallen by about 1 percent per year.
The bills of typical business customers using a Small General Service pricing plan would increase by an estimated $10.72 to $14.37 per month, depending on usage and the chosen pricing plan.
Typical customers on TEP’s Medium General Service pricing plans would pay an additional $314.23 – 329.25 per month under TEP’s proposed rates, though the impact could vary significantly based on electric usage and demand.
The bills of larger businesses that use TEP’s Large General Service pricing plans would increase by an estimated $310.83 to $486.96 per month, though customers with above-average usage will pay larger increases.
Industrial users taking service under Large Power Service rates would pay an average of $13,624.91 more per month under TEP’s proposed rates, though the impacts will vary significantly with electric usage and demand.
Typical customers on Traffic Signal and Street Lighting pricing plan would see bill increases of about $9.25 a month.
All of these forecasts are based on average usage within each customer class. The potential impact for individual customers would vary depending on their electric usage.
TEP’s current rates took effect in February 2017 after the Arizona Corporation Commission (ACC) approved an increase based on a request the company filed in November 2015.
Written comments can be submitted online or by mail. Please reference Docket No. E-01933A-19-0028. Comments can be submitted online at azcc.gov or mailed to: Arizona Corporation Commission, Consumer Services Section, 1200 West Washington, Phoenix, AZ 85007. For assistance, contact ACC Consumer Services at 602-542- 4251 or 1-800-222-7000.