TEP Requests Rate Review to Support Safe, Resilient and Reliable Power
Tucson Electric Power has asked for a rate review to help cover rising costs and support recent investments in safe, reliable service. New rates, which could take effect in September 2026, would help us continue to deliver some of the nation’s most reliable electricity in the face of more extreme weather and higher temperatures.
Our current rates reflect costs from 2021 and have been reduced in both 2024 and 2025 to pass along energy cost savings. In late 2026, we will need to start recovering $1.7 billion of recent investments in our local energy grid and passing along the higher costs we’ve been paying to reliably serve our community’s expanding energy needs.
"We know our customers count on us every day for the energy that powers their lives," said Susan Gray, TEP President and CEO. "They also need us to keep our bills as low as possible, which is why we work so hard to control costs. Our proposed rates reflect those efforts as well as cost-effective investments in a modern, resilient grid and a secure energy supply to ensure reliable, affordable service around the clock, all year long.”
We project that the proposed rates would increase residential customer bills by about 14 percent when they take effect. That would be less than the level of inflation since 2021, the year used to set our current rates.
Our proposal would increase the bills of residential customers with median monthly usage of 638 kilowatt hours (kWh), on average, by roughly $16 under TEP’s Basic pricing plan. That change varies with usage, so customers who use more energy should expect a larger increase. 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.
Reliable Service
Despite escalating prices, rising interest rates, and an increasingly strained regional energy supply, TEP continues to provide top-tier reliability. We’ve ranked in the top quartile of all electric utilities across the country for service reliability for 12 years in a row.
Maintaining this high standard will be harder in the future. TEP expects that hotter weather and economic growth will drive our community’s peak energy demand 3 percent higher in 2025. We’re anticipating even larger increases in the future due to growing demand from new high-usage businesses and other customers.
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. According to data from the U.S. Bureau of Labor and Statistics, consumer prices increased 15 percent from December 2021 to April 2025. These higher costs have impacted all aspects of our service, from materials to labor and supplies.
Our ability to propose new rates that would increase less than inflation reflects the success of our continuous focus on efficiency. We work closely with our vendors to secure the most favorable pricing without compromising safety, workmanship or reliability. We also encourage employees to seek efficiencies in their day-to-day work. As one example, we have installed advanced meters that allow for remote reads and service connections.
We’ve also protected customers from financial volatility. Even though interest rates tripled from 1.5 percent in 2021 to 4.7 percent at the end of the test year, TEP’s sound financial management practices helped limit borrowing costs that customers would otherwise pay to less than half a percent higher than current rates. Any interest rate change can be significant, since TEP has issued more than $1 billion in long-term debt since 2022.
Our Roadrunner Reserve battery energy storage system also provides the Company with the opportunity to leverage lower-priced market power and offset higher cost generation. TEP estimates that the project will reduce fuel and purchased power costs by $25 million from June 2025 through September 2026.
Cost-Effective Energy
New rates would support investments that will reduce our long-term energy costs. The ability to store energy helps us take advantage of excess solar energy for use later in the day, supporting the key objectives articulated in our most recent Integrated Resource Plan.
Roadrunner Reserve is the latest addition to a balanced mix of resources, including solar and wind, that support a cleaner energy future. Energy storage is an important component in satisfying energy demands during peak usage periods by storing low-cost energy generated off-peak.
Additionally, TEP and other Arizona utilities have announced that we will be joining Markets+ starting in 2027. Markets+ is a real-time and day-head energy market of interconnected electricity providers that will provide greater access to substantial cost-effective renewable power, including wind and solar, to help meet customers’ needs.
Assisting Customers
Our new rates would expand our Lifeline low-income discount, providing greater relief for the most vulnerable customers. Qualifying customers would see discounts of between 20 and 50 percent, depending on income, with higher discounts in the summer to offset traditionally higher seasonal bills.
“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. “These adjustments to our rates will begin recovering the increased costs of providing safe, reliable service that keeps pace with our customers’ expanding energy needs.”
TEP provides additional support for our community through philanthropic giving and volunteerism. In 2024, TEP contributed more than $1.6 million and more than 13,000 volunteer hours to help 167 nonprofit groups.
More Gradual Changes
TEP’s proposed rates include an Annual Rate Adjustment Mechanism that would result in more gradual rate changes in the future.
This formula rate mechanism would allow for the elimination of certain other surcharges on TEP’s bills. All costs would remain subject to ACC oversight to ensure that only necessary, cost-effective investments and prudently incurred expenses are recovered.
Next Steps
The proposal will go through an extensive review by the Arizona Corporation Commission, a five-member elected panel that approves the rates charged by energy providers. TEP anticipates that the review will conclude with approval of new rates in late 2026.
Frequently Asked Questions
The following questions and answers provide more details about TEP’s new rates.
