New Rates Support Investments in Safe, Reliable Service

New, higher electric rates for Tucson Electric Power customers took effect Sept. 1, 2023 to help cover rising costs and support recent investments in safe, reliable service. The new rates:

recover the cost of grid improvements, technology and security upgrades, new wind and solar power resources, and other investments made since 2018, the year reflected in our current rates;
pass along higher energy and operating costs; and
help us serve the increasing energy needs of our growing community.

The proposal was approved by the Arizona Corporation Commission, a five-member elected panel that sets the rates charged by public service providers.

The new rates are expected to increase the average monthly bills of residential customers with typical usage on TEP’s Basic pricing plan by about $11. That change varies with usage. Customers can mitigate that impact by saving energy, possibly in combination with Time-of-Use pricing plans that offer lower rates during off-peak periods.

Managing Higher Costs

TEP has been working hard to manage costs in the face of rising prices for equipment, parts, construction materials and other necessities. Due to ongoing inflation, consumer prices are now more than 15 percent above the levels reflected in TEP’s rates.

“The cost of providing safe, reliable service is increasing rapidly as inflation exacerbates the impacts of supply chain challenges, regional energy capacity constraints and more extreme weather,” said Susan Gray, TEP’s President and CEO. “Our 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 demands on our local grid have increased 5.7 percent since 2019, driven by hotter summer weather and the addition of more than 14,000 homes and businesses over the past three years. The cost of fuel and wholesale energy also has increased significantly, driving up costs that we pass along to customers without any markup.

Despite these challenges, TEP has provided top-tier reliability through the ongoing coronavirus pandemic. We continue to rank in the top quartile of all electric utilities across the country for service reliability. We’ve also connected record numbers of rooftop solar arrays to our system and have made upgrades to our local distribution grid that allow us to accommodate even more.

View TEP's Key Improvements Image Gallery

Supporting Cleaner Energy

The rates support investments that will reduce our long-term energy costs through increased use of wind and solar power systems.

Those steps will help us end our use of coal and achieve an 80 percent reduction in carbon dioxide emission reductions by 2035, key objectives articulated in our most recent Integrated Resource Plan. Our plan will help avoid the production of more than 50 million tons of carbon dioxide over 15 years – equivalent to taking three-quarters of a million cars off the road.

Assisting Customers

TEP’s monthly Lifeline low-income discount increases from $18 to $20 under the newly approved rates for qualifying residential customers whose household income does not exceed 200 percent of the federal poverty level.

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 higher costs can be hard to face, which is why we offer so many ways to help customers who are having difficulty paying their bills,” Gray said. “We really need higher rates to begin recovering the increased costs of providing safe, reliable service that keeps pace with our customers’ expanding energy needs.”

Read the Press Release

Frequently Asked Questions

The following questions and answers provide more details about TEP’s new rates.

Why are new rates needed?

We’ve upgraded our local energy grid to provide more power to more customers since 2018, the last year reflected in our current rates. Our system serves more than 442,000 customers and spans 1,155 square miles. It requires ongoing maintenance and upgrades to 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 120 substations.

TEP has invested nearly $1.8 billion since 2018 to upgrade and reinforce our system and facilities. Some of those investments include:

New wind and solar resources, including the Oso Grande Wind project, 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 our local energy grid. Especially in response to more extreme weather and higher temperatures.
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.

These improvements help our system withstand extreme heat and powerful thunderstorms and stand up to the stress caused by increasing peak energy demands.

Learn more about our infrastructure investments here.

Why has TEP needed to upgrade its system?

Our electric infrastructure is under growing stress. Warmer summer weather and the addition of more than 14,000 households and businesses over the last three years have increased peak usage by 5.7 percent since 2019. Just as your vehicles and home need regular repairs, our grid must be well-maintained to support reliable service under increasingly challenging conditions. We’re also bringing cleaner, more efficient and flexible resources online to replace retiring coal-fired power plants.

Thanks to these efforts, TEP has provided record reliability during a global pandemic and punishing heat. We continue to rank in the top quartile of all electric utilities across the country for service reliability.

How does TEP work to keep costs down?

TEP works hard to manage its operations and maintenance (O&M) costs through continuous improvement efforts and consistent scrutiny of expenses. The success of these efforts is reflected in the fact that TEP’s operations and maintenance costs, on average, from 2018 through 2021 grew at a lower rate than average annual inflation during that same period.

We also took steps to reduce other costs. Our finance team has issued nearly $1 billion of new debt since 2018 to help finance capital investments that were necessary to maintain safe and reliable service, as well as to retire higher-cost debt. TEP’s strong investment-grade credit ratings allowed us to access capital markets on favorable terms, helping us reduce our average cost of debt from 4.65 percent in 2018 to 3.81 percent in 2021.

Many of our investments are designed to reduce long-term costs. For example, we upgraded systems to improve the efficiency of our power generation dispatch and support our participation in the Western Energy Imbalance Market. That marketplace has expanded our access to clean energy and balancing resources and is expected to lead to lower long-term energy costs for customers.

How do the new rates support cleaner energy?

The new rates will pay for several new projects that are supporting our transition to cleaner, less carbon-intensive energy. The largest is our new Oso Grande wind farm in southeast New Mexico, which more than doubled our large-scale renewable energy resources when it came online in 2021. Combined with the substations that help deliver its clean energy to Southern Arizona, the wind farm plays an important role in our effort to provide more than 70 percent of our power from wind and solar resources while reducing carbon emissions by 80 percent by 2035.

We also built a new substation and other infrastructure to connect the new Wilmot Energy Center south of Tucson, which includes a 100-megawatt (MW) solar array and a 30-MW battery energy storage system – each the largest of their kind on our local grid. The new rates would recover those costs as well as other upgrades that have allowed customers to continue connecting rooftop solar arrays to our system without compromising safety or reliability.

Our plans for a cleaner, greener grid, outlined in TEP’s most recent Integrated Resource Plan, will avoid the production of more than 50 million tons of carbon dioxide over 15 years – equivalent to taking three-quarters of a million cars off the road.

What assistance is available to low-income customers?

Our Lifeline program now provides an increased monthly discount of $20 – up from $18 – to qualifying residential customers whose gross household income does not exceed 200 percent of the federal poverty level. We also:

help low-income families make energy efficiency improvements to their homes through our weatherization program
work with community partners to provide emergency bill payment assistance to qualifying customers. TEP received and processed over $9.7 million in agency funded bill assistance in 2021, an amount bolstered significantly by federal pandemic relief aid.

How would TEP’s new rates affect residential customers’ bills?

The new rates are expected to increase the average monthly bills of residential customers with typical usage on TEP’s Basic pricing plan by about $11. The impact will vary with usage and is likely to be higher during hot weather and lower in cooler months, TEP can help customers mitigate the impact through energy efficiency programs, rebates and advice available on tep.com.

Impacts will also vary, depending on pricing plans. Customers with typical usage will experience an increase in their monthly bills of about:

Time of Use (TOU): 9 percent, or $11
Demand: about 10 percent, or about $13
Demand TOU: about 9 percent, or about $12

How would TEP’s new rates affect business customers’ bills?

All of the projected impacts described below vary significantly with usage and the customer’s chosen pricing plan.

The average bill for a typical Small General Service customer on our Basic pricing plan will increase by 7.6 percent, or about $12 per month, under the proposed rates compared to current levels.

The average bill for a typical Medium General Service customer will increase by 9.5 percent, or about $446 per month, compared to current levels.

The average bills of larger businesses that use TEP’s Large General Service pricing plans will increase by 3.3 percent, or about $494 per month, though this figure varies widely depending on usage.

All of these forecasts are based on average usage within each customer class. The potential impact for individual customers varies depending on their electric usage, and customers with above-average usage should expect higher bills.