Tucson Electric Power says a city-run electric utility would cost taxpayers more than $4 billion.
The city of Tucson has explored the possibility of transitioning to a munipally-owned utility since 2023.
The electric utility company commissioned a preliminary feasibility study that states, “It would not be financially feasible for the City of Tucson, Arizona to condemn the electric distribution assets owned and operated by Tucson Election Power to form a municipal utility.”
Joe Barrios, spokesperson for TEP, says the study is in response to results from a separate city-commissioned study published last April, that suggested public control could lower consumer costs and help the city accomplish its green energy goals.
“We felt like it was overstating how quickly a municipal utility could be formed and understating the setting up of a new electric utility and overstating the savings to residential and other customers,” he said.
The city’s study estimates that it could cost taxpayers between $1.4 and $3.6 billion for a takeover.
TEP’s study suggests that residential electric bills would rise by $162 during the first year of operations, $480 after 10 years and $900 after two decades.
The study also estimates that establishing a new municipal utility would cost Tucson customers about $290 million more annually over the next 20 years.
Barrios says TEP calculated these figures by taking into account the cost of equipment: all components of the energy grid, fleet vehicles, poles and wires and other tools that deliver service to customers.
The report also states that because a data center has been proposed in TEP’s service area, the utility estimates that revenue provided by the data center’s energy use would create rate benefits for other TEP customers.
“We’re certainly interested to hear what city leaders feel about the study and we’re certainly happy to provide information and respond to any questions that they might have,” Barrios said.
Last year, TEP officials called the preliminary study completed by GDS Associates, Inc. and Best Best & Krieger LLP, “flawed.”
Susan Gray, CEO of TEP said in a press release that, “The study seems intent on driving a wedge between the City of Tucson and TEP at a time when we should be working together to address our city’s long-term needs.”
The electric utility franchise agreement between the City of Tucson and TEP is set to expire this April after a 25-year term, which is why the city has seriously weighed whether to renew the current agreement, according to the city-commissioned study.
TEP says that the terms of the current franchise will remain in force for a year after its expiration, until April 2027.
Barrios has clarified that the franchise agreement and consideration of a grid takeover by the city are disconnected and that TEP does not need a franchise to continue to sell power but that it’s beneficial for customers to have one in place.
City leaders, AG ask for public comment##
On Tuesday, the Tucson City Council will discuss public power at the request of Mayor Regina Romero and Ward 6 Councilmember Miranda Schubert due to increasing public interest in pursuing municipalization of the local grid.
During the study session, elected officials will discuss the logistics of a municipally-owned utility — like where the city would procure power for residents and businesses and what becoming a retail electric provider would look like.
Tucson officials have heard growing concerns for rising energy costs.
Grassroots organizer Lee Ziesche with the Tucson Democratic Socialists of America has been a vocal supporter for public power.
Last week, she and Councilmember Schubert co-hosted a town hall about rising energy rates.
“If we had a public power utility instead, there’d be no rate of profit and the feasibility study that the city did found that would save us over $200 a year within the first five years of a takeover and over $1,000 a year for the average household longer down the line,” Ziesche said.
Attorney General Kris Mayes has also expressed interest in rising utility costs and has intervened TEP’s rate case that proposes to raise rates by 14%
Last month, Mayes filed expert testimony that argued that the rate hike could be cut down to 4%.
“TEP’s proposal is blatant corporate greed plain and simple,” Mayes said in a press release.“Our expert analysis proves that customers are being asked to pay far more than is needed.”
When asked about community feedback about TEP’s shareholder profit from the rate increase, Barrios said that shareholders play a significant role in maintaining the local grid and bear the risk of those investments.
“Our ability to access the capital we need to maintain the grid at an affordable cost depends on the potential profit investors hope to earn,” he said.
At a recent townhall, Mayes has encouraged TEP customers to submit comments and speak at several upcoming public meetings regarding the rate case this month and in April in downtown Tucson, at the State of Arizona Building at 400 W Congress St.
The meeting dates are:
- Thursday, March 19, from 5:30 to 8 p.m. Public comment is only permitted telephonically, Mayes' office says.
- Monday, March 23, from 10 a.m. to 12:30 p.m. Public comment can be made in person or telephonically.
- Wednesday, April 1, from 5:30 p.m. to 8 p.m. Public comment can be made in person or telephonically.
- Tuesday, April 7, from 5:30 p.m. to 8 p.m. Public comment can only be made telephonically, Mayes' office says.
- Wednesday, April 22, at 10 a.m., prior to the beginning of the first day of the hearing. Comments can be made in person or telephonically.
The Attorney General's Office said for telephonic comments during the meetings, call 1-877-309-3457 and use the passcode 246011833204##.
