esg-2021-report

ESG/Sustainability Performance

Tucson Electric Power Company
ESG/Sustainability Template

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Additional Information
Tucson Electric Power

UNS Energy is a subsidiary of Fortis, a leader in the North American regulated electric and gas utility industries. About 93 percent of Fortis’ assets are associated with the delivery of electricity and natural gas. Few electric subsidiaries own generating resources, which account for about 7 percent of Fortis’ assets. These generating resources are primarily owned by UNS Energy subsidiaries.

UNS Energy is the Tucson, Arizona-based parent company of Tucson Electric Power (TEP). TEP, which provides electric service to more than 433,000 customers in Southern Arizona.

TEP is voluntarily providing sustainability performance metrics for customers, investors and other stakeholders seeking information about our Environmental, Social and Governance (ESG) performance.

Environmental

Energy resource diversification and carbon emissions reductions are major components of TEP’s sustainability strategy. TEP’s 2020 Integrated Resource Plan (IRP) demonstrates how the company is planning to build a cleaner, more flexible resource portfolio.

TEP Carbon Emissions Reduction & Resource Portfolio Diversification

In 2020, TEP announced plans to reduce carbon emissions 80 percent below 2005 levels by 2035. The carbon emissions reduction goal, described in the company’s 2020 Integrated Resource Plan (IRP), was developed in partnership with the University of Arizona’s Institute of the Environment. The goal represents the company’s fair share of worldwide efforts to limit warming to align with the 2015 Paris Agreement. The plan supports global efforts to reduce climate change and represents a reduction of more than 50 million tons of carbon dioxide (CO2) emissions compared to TEP’s previous plan.

TEP—Direct CO2 Emissions

TEP’s 2020 IRP also describes the company’s plans to provide 70 percent of its power from renewable resources by 2035. The company will significantly expand its wind and solar power resources and has proposed retirement of its remaining coal-fired power plants by 2032.

TEP Retail Energy Mix 2035

The portfolio energy charts above represent the energy resource mix to serve TEP’s retail customers. TEP’s goal to deliver 70 percent renewable power to retail customers by 2035 primarily will be based on utility-scale resources and some distributed generation.

TEP has already started expanding its cost‐effective renewable resources. In 2021, TEP started delivering clean energy from its newest and largest wind and solar facilities including:

  • The 250-megawatt (MW) Oso Grande Wind farm in southeast New Mexico, which generates enough power each year to serve nearly 100,000 homes. The site was chosen for its proximity to transmission lines and strong wind resources, particularly during the morning, evening and overnight hours when solar arrays produce little or no power.
  • The Wilmot Energy Center (WEC) located south of Tucson, which includes a 100-MW solar array and 30-MW battery energy storage system. The batteries will be charged exclusively by 314,000 solar panels that can track the movement of the sun for increased production. Wilmot produces enough energy to serve the annual electric needs of about 26,000 homes.
  • The Borderlands Wind Project, located about 100 miles south of Gallup, New Mexico, includes 34 turbines that produce a combined 100 megawatts (MW). Over the course of a year, the wind farm will generate enough power to serve the annual electric needs of more than 26,000 homes.

These three new systems more than doubled TEP’s large community-scale renewable energy resources.

The company is reducing and ultimately eliminating its reliance on coal. TEP’s 2020 IRP announced plans to ramp down and ultimately retire TEP’s two coal-fired units at the Springerville Generating Station (SGS) by 2032. From 2015, when TEP ended use of coal at the H. Wilson Sundt Generating Station in Tucson, to mid-2022, when TEP plans to end participation at the San Juan Generating Station in New Mexico, the company expects to retire 638 megawatts (MW) of coal capacity, a 41 percent reduction.

Ramping down reliance on coal-fired resources will help keep service affordable for TEP customers while significantly reducing air emissions and water consumption, eliminating the use of surface water for power generation and reduce groundwater use by 70 percent.

Increasingly diverse, sustainable generation will create operational challenges that require new ways of managing the intermittency and variability of renewable resources. Through a partnership with the University of Arizona, TEP is using unique and highly customized forecasting models to predict solar and wind system production.

TEP’s efficient and cost effective  natural gas generation resources will support the expansion of solar and wind systems while also reducing water usage and emissions. The energy marketplace also is evolving to help utilities address intermittency and use traditional resources more efficiently. TEP is preparing to join the California Independent System Operator’s Energy Imbalance Market (EIM) in April 2022, allowing it to execute real-time energy trades in 15-minute increments to address short-term energy needs.

TEP is committed to a “green investment” strategy as the company transitions from coal-fired generation to providing more renewable and natural gas-fired power. TEP already is recognized as an industry leader in development of energy storage systems and offers an online dashboard that shows customers how much renewable power the company’s community-scale wind and solar power systems are generating in real-time throughout the day. TEP’s commitment is also evidenced by its 2021 Credit Agreement, which offers the potential for annual adjustments to interest rate spreads and fees based on TEP’s achievement of certain sustainability-linked metrics.

Social

Community Investment

As a provider of a critical service, TEP has remained vigilant about supporting public health and ensuring the continued availability of safe, reliable energy during the coronavirus pandemic.

TEP has taken proactive steps to limit unnecessary risks of exposure for employees and the public. The company stands ready to help customers affected by the pandemic with payment extensions or enrollment in short-term assistance and bill discount programs. TEP voluntarily suspended electric service disconnections beginning in March 2020 through early 2021 to provide additional flexibility for customers facing financial hardship during the coronavirus pandemic. TEP and sister company UniSource Energy Services also donated a combined $1 million to bill payment assistance and other coronavirus relief efforts in the communities they serve across Arizona.

TEP invests significantly in the success of the community, contributing more than $2 million to charitable causes annually with funds from corporate resources, not customers’ rates. Employees also contribute thousands of volunteer hours each year to hundreds of nonprofit groups throughout the Tucson area.

In addition to support for established funding initiatives including low-income assistance, education and environmental protection, TEP invests in efforts that promote diversity and social justice while supporting local nonprofit organizations that work effectively to strengthen equity and inclusion in our communities.

The company also sponsors employee activities and other initiatives that promote unity and inclusion among employees and in the communities they serve. Since 2017, UNS Energy’s employee-led Women in Energy group has supported the development of leadership qualities in women, fostered camaraderie and connections among employees of all genders and encouraged more young women to pursue careers in traditionally male-dominated industries, such as energy.

TEP provides commercial customers with affordable energy, economic development discounts and energy efficiency programs. TEP’s economic development rates are designed to attract new employers and encourage existing businesses to expand their operations.

TEP is driving adoption of electric vehicles (EVs), which are transforming the transportation sector and providing multiple benefits in the process, from cleaner air to expanded customer choice and affordable electric rates. TEP is developing new pricing plans and incentives for customers who invest in EVs, and is accelerating the development of charging infrastructure to support these zero-emission vehicles. TEP participated in the development of a statewide plan, submitted to the Arizona Corporation Commission, with a goal of placing over 1 million EVs on the road by 2030.

Safety

Safety is the highest priority for TEP. The company and its employees are committed to working in a manner that prevents injury through a robust workplace safety program that promotes situational awareness through information sharing.

TEP promotes public safety through advertising, customer communications and collaboration with local utilities and first responders. It runs annual “Stay Away, Stay Alive” advertising campaigns to educate electric customers about electrical safety.

Reliability

As providers of safe, dependable energy services, reliability performance is key. TEP and UniSource consistently benchmarked in the top quartile among our peers for reliability performance over the last several years, and achieved performance records in 2020. Both are committed to doing even better. According to TEP’s System Average Interruption Duration Index (SAIDI) scores, the average outage duration in 2020 was just 48 minutes — three minutes better than its previous record. SAIDI describes, in minutes, the sum of all customer interruption durations divided by the total number of customers served.

Governance

TEP and UNS Energy’s commitment to sustainable growth and responsible governance enhances the value the company provides to customers, the community and other stakeholders. This commitment guides the decisions of the board of directors, executives, managers and supervisors at all levels and in all areas of the company.

TEP’s management team values innovation and excellent performance, and it promotes an unwavering culture of compliance, safety and a commitment to customers. With strong leadership skills and thorough knowledge of company operations, our leaders focus on improving efficiencies and generating value for a diverse set of stakeholders.

Cybersecurity

TEP’s robust cybersecurity measures protect customer and employee data, while using best practices to ensure compliance with regulations designed to maintain grid security. TEP employs certified cybersecurity professionals to develop continually evolving cyber protections.

Sustainability Strategy Summary

TEP is committed to improving the quality of life in the community. The company’s commitment to sustainability is reflected in the continued expansion of its renewable energy portfolio, exploring new customer options and providing pricing plans that satisfy customers’ evolving energy needs. As our community continues to grow and change, TEP will continue providing reliable service to customers while investing in new, innovative technologies and expanding cleaner energy resources.

Forward Looking Information

This report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. We are including the following cautionary statements to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by us in this report. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future economic conditions, future operational or financial performance and underlying assumptions, and other statements that are not statements of historical facts. Forward-looking statements may be identified by the use of words such as anticipates, believes, estimates, expects, intends, may, plans, predicts, potential, projects, would, and similar expressions. We disclaim any obligation to update any forward-looking statements to reflect new information, future events or circumstances, except as may otherwise be required by the federal securities laws.

Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed herein. We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable basis. However, we make no assurances that the estimates, expectations, beliefs, or projections set forth in this report will be achieved or accomplished. We have identified the following important factors that could cause actual results to differ materially from those discussed in our forward-looking statements. These may be in addition to other factors and matters discussed under Risk Factors in TEP’s Annual Report on Form 10-K for the year ended December 31, 2020, and in TEP’s other filings with the Securities and Exchange Commission and elsewhere in this report. These factors include: voter initiatives and state and federal regulatory and legislative decisions and actions, including changes in tax and energy policies and any change in the structure of utility service in Arizona resulting from the Arizona Corporation Commission's (ACC) or state legislature's examination of the state's energy policies and applications by other companies to the ACC requesting a certificate of convenience and necessity to provide competitive electric generation service to customers in TEP service territories; changes in, and compliance with, environmental laws and regulatory decisions and policies that could increase operating and capital costs, reduce generation facility output, or accelerate generation facility retirements; the final outcome of TEP’s 2019 Federal Energy Regulatory Commission (FERC) rate case; unfavorable rulings, penalties, or findings by the FERC; regional economic and market conditions that could affect customer growth and energy usage; changes in energy consumption by retail customers; weather variations affecting energy usage; our forecasts of peak demand and whether existing generation capacity and purchase power agreements are sufficient to meet the expected demand plus reserve margin requirements; the cost of debt and equity capital and access to capital markets and bank markets, which may affect our  ability to raise additional capital and use the proceeds from any capital raised as originally intended; the performance of the stock market and a changing interest rate environment, which affect the value of our pension and other postretirement benefit plan assets and our related contribution requirements and expenses; the potential inability to make additions to our existing high voltage transmission system; unexpected increases in operations and maintenance expense; resolution of pending litigation matters; changes in accounting standards; changes in our critical accounting policies and estimates; the ongoing impact of mandated energy efficiency and distributed generation initiatives; changes to long-term contracts; the cost of fuel and power supplies; the ability to obtain coal from our suppliers; cyber-attacks, data breaches, or other challenges to our information security, including our operations and technology systems; the performance of TEP’s generation facilities, including renewable generation resources; participation in the Energy Imbalance Market; the extent of the impact of the COVID-19 pandemic on our business and operations, and the economic and societal disruptions resulting from the COVID-19 pandemic and government actions taken in response thereto; and the implementation of TEP’s 2020 IRP.