ESG/Sustainability Performance

Providing safe, reliable and increasingly sustainable service while positively impacting the lives of our employees, customers and communities

Tucson Electric Power is voluntarily providing sustainability performance information for customers, investors and other stakeholders seeking information about our Environmental, Social and Governance (ESG) performance. Guided by goals established by our Officer team, the company actively manages our ESG strategy. As part of a family of utilities owned by Fortis Inc., Canada’s largest investor-owned gas and electric utility holding company, TEP also contributes to Fortis’ commitment as a Task Force for Climate-Related Financial Disclosures supporter.

Below, you will learn more about how our company’s values are driving our work around environmental, social and governance measures that will drive positive change for generations to come.

About Our Company

Our values define how we work and who we are

Our journey is rooted in our vision, to be an exceptional energy provider that positively impacts the lives of our employees, customers and communities. Our values represent our fundamental beliefs, guiding our behaviors and supporting our long-term strategic ambitions.

In our commitment to drive sustainability, we:

  • work to protect and preserve our environment
  • promote and support prosperity, growth and wellbeing in our communities
  • work efficiently, use resources responsibly and partner with customers to care for our planet.

The word drive is no accident. It’s not enough that we support sustainability. We have to make it happen, through our investments in grid technology, through the infrastructure we’re developing for electric vehicles, and through our strategic philanthropic investments and community support.

Our ESG quantitative metrics are one way to help understand our company’s focus on social, environmental and governance intentions and actions.

By the Numbers

1,075 MW

Total renewable generating capacity, including community scale and DG systems

1,155

Square miles of territory

1,770

Employees

9,971

Hours volunteered in 2021

tep-2020-integrated-resource-plan

Environmental

Energy resource diversification and carbon emissions reductions are major components of TEP’s sustainability strategy.

At Tucson Electric Power, we’re significantly increasing our use of solar and wind power and battery storage as part of a reliable, affordable and increasingly sustainable energy portfolio. Our plan calls for the elimination of coal-fired power to allow us to transition to less carbon-intensive resources at a cost-effective pace while working toward a thoughtful transition for our employees and their community.

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), represents a reduction of more than 50 million tons of carbon dioxide (CO2) emissions compared to TEP’s previous plan. The 2020 IRP was developed through extensive analysis and comprehensive, transparent stakeholder engagement.  For example, from 2019 through 2020, TEP partnered with the University of Arizona’s Institute of the Environment to identify a science-based carbon emissions goal that measured emission reductions in terms of global temperature change and considered climate change impacts to the community, cost, sustainability, reliability and risk.

TEP's Planned CO2 Emissions Reduction

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 has already started expanding its cost‐effective renewable resources. In 2021, TEP started delivering clean energy from new 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 in New Mexico, about 25 miles east of Springerville, includes 34 turbines that produce a combined 99 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 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 will have retired 638 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 reducing groundwater use by 70 percent.

In 2022, TEP is looking to expand its wind and solar generation, energy storage systems and other resources such as energy efficiency and has issued an all-source request for proposals.

An all-source RFP provides an open and competitive process that allows us to gather information on the cost and availability of different resource types to determine how they can best fit into our comprehensive plan and complement our existing portfolio of resources.

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 air emissions. The energy marketplace also is evolving to help utilities address intermittency and use traditional resources more efficiently. TEP joined the California Independent System Operator’s Energy Imbalance Market (EIM) in May 2022, allowing it to execute real-time energy trades in 15-minute increments to address short-term energy needs.

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 offers pricing plans and incentives to 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.

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.

0

Megawatts of new wind, solar and storage online in 2021

0%

of energy delivered today comes from wind and solar

0%

of TEP’s power will come from renewable resources by 2035

0%

lower carbon emissions from 2005 levels by 2035

TEP supports statewide plan to get 1 million EVs on the road by 2030.

We’re doing our part as well, with a commitment to transition our entire light-duty and passenger vehicle fleet to all-electric or hybrid vehicles by 2030.

esg-social

Social

Our dedication to service extends beyond providing safe, reliable energy services. We are committed to improving the quality of life in the communities we serve.

TEP is dedicated to being a good neighbor and providing assistance to our most vulnerable residents, helping to address complex issues such as homelessness and poverty, social inequities, hunger, domestic violence and other areas of need.

By working to address these needs, we’re giving individuals and families new opportunities for a better life, and supporting our business community in efforts to create a stronger, healthier and more vibrant community.

TEP’s dedication to service extends beyond providing safe, reliable power. For nearly 130 years, we’ve remained true to our vision of improving the quality of life in the communities we serve.

TEP contributed more than $2.1 million to charitable causes in 2021 with funds from corporate resources, not customers’ rates. Our employees contributed nearly 10,000 hours to 176 nonprofit groups serving our community.

We also work to serve as our customers’ trusted energy partner, helping commercial and residential customers meet their own energy goals. Just a few of those efforts have included:

Protecting wildlife and preserving the environment is also a focus of our community investment work with community partners and through our employee volunteers.

We do this by directing resources and funding to support a variety of nonprofit organizations whose projects and programs protect and preserve our natural resources, including land, water, air and wildlife. From buffelgrass pulls that protect the desert, to cactus relocation and raptor protection, our environmental stewardship is part of our commitment to sustainability in everything that we do.

In addition to support for established funding initiatives including low-income assistance, education and environmental protection, Tucson Electric Power 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 as a means of strengthening the community we serve. Since 2017, our employee-led Women in Energy group – one of several employee resource groups - 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.

Our DEI Guiding Team is helping to build a more inclusive workplace, activating meaningful steps along our journey to long-lasting change, as well as resources for employees.

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

TEP took proactive steps to limit unnecessary risks of exposure for employees and the public.

The company also stood 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 and gas service disconnections beginning in March 2020 through early 2021 to provide additional flexibility for customers facing financial hardship during the coronavirus pandemic.

TEP expanded outreach through a partnership with the Arizona Department of Economic Security to notify customers about federal funding available to help renters who are behind on their utility bills.

TEP and its 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. Learn more about TEP’s pandemic response plan.

TEP provides commercial customers with reliable energy, economic development discounts and energy efficiency programs.

Our rates are designed to attract new employers and encourage existing businesses to expand their operations.

In 2021, TEP supported the creation of more than 1,700 jobs in Southern Arizona through our continued efforts to stimulate economic development in our community, particular as businesses began to rebound after the first-year impacts of the pandemic.

Since 2016, TEP has worked directly with businesses that anticipated nearly 17,000 jobs, largely in areas of bioscience, transportation, logistics and aerospace and defense.

Community investment
of more than $2.1 million in 2021

esg-reliability

Governance

TEP’s commitment to sustainable growth and responsible governance enhances the value the company provides to customers, the community and other stakeholders.

TEP's commitment to sustainability guides the decisions of the board of directors, executives, managers and supervisors at all levels and in all areas of the company.

The TEP Board of Directors draws on the expertise and strong business acumen of trusted business leaders with experience from the fields of utilities, defense, science, mining and medicine. Its members value integrity, accountability, collaboration, sustainability and the creation of opportunities for the company and all of its employees.

TEP's management team values innovation and excellent performance, and 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.

Championed by the management team, TEP launched Employees Creating Opportunities for Sustainability (ECOS), an employee-led ‘green team’ that identifies and implements our company's sustainability initiatives and raises sustainability awareness among coworkers and in the community. The group has already revamped our recycling program, donated reusable water bottles to schools, hosted sustainability ‘lunch and learn’ meetings and other initiatives since its inception in 2020.

Safety is our highest priority, which is why we start our meetings with a safety share.

We are committed to working in a manner that prevents injury through a robust workplace safety program that promotes situational awareness through information sharing with industry leaders and fellow utilities.

We also promote public safety through advertising, customer communications and collaboration with local utilities and first responders.

We run an annual “Stay Away, Stay Alive” advertising campaign to educate electric customers about electrical safety during our summer storm season. We routinely share safe practices around electricity with our residential and business partners and help our customers protect our crews’ lives with increased awareness around work zones.

We also know safety starts early. We offer SafetyLand, an in-classroom program that teaches second graders about electrical safety through a fun, interactive board game.

As a provider of safe, dependable energy services, reliability performance is key.

TEP consistently benchmarks in the top quartile among our peers for reliability performance, and achieved performance records in 2020, as measured by Edison Electric Institute.

Investment in our system helps drive reliability, since TEP maintains a massive 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 and more than 100 substations. It’s a complex system that requires ongoing maintenance and upgrades to honor our commitment to provide industry-leading reliability.

Since the beginning of 2019, we’ve invested more than $770 million to maintain and improve our transmission and distribution systems, which we use to deliver increasingly clean energy to customers. These improvements are designed to withstand extreme heat and powerful thunderstorms as well as the stress caused by increasing energy demands.

Our highly trained workforce is critical in ensuring safe, reliable service. We support their growth and expertise through continuous training, emergency preparedness, employee support and employee development.

TEP’s robust cybersecurity measures protect customer and employee data, while using best practices to ensure compliance with regulations designed to maintain grid security.

The company employs certified cybersecurity professionals to develop continually evolving cyber protections and we have invested in safer, more secure facilities that provide enhanced protection against increasing physical- and cyber-security threats and support efficient operations.

A DEI Guiding Team, championed by the Officer Team, finalized a larger company DEI vision in 2021 and established a DEI strategic roadmap in four key pathways:

  • Building awareness and understanding
  • Expanding capacity and capabilities
  • Taking action and accountability
  • Fostering assessment and reflection

Teams have been working within their areas to refresh processes that support momentum on the company’s DEI goals. The company has also been measuring the employee experience, to ensure everyone has the opportunity to feel connected to their work, recognized for their contributions and are comfortable being themselves. The company also engages employees for help in identifying local nonprofit organizations that are working effectively to strengthen diversity, equity and inclusion in our communities, particularly since our philanthropy efforts have been continuously informed by what matters to our employees.

TEP is committed to improving the quality of life in our community.

TEP is expanding its renewable energy portfolios, exploring new customer options and providing pricing plans that address customers’ evolving energy needs. As Arizona continues to grow and change, TEP will continue providing reliable service to customers while investing in new, innovative technologies and 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, 2021, 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.

I acknowledge that I have been presented with a Forward-Looking Statement associated with TEP's Sustainability Information.