Working Together to Power Tucson's Future
City of Tucson voters will vote in a May 16 special election on a new, 25-year franchise agreement with Tucson Electric Power that would help support our community's long-term energy resilience and sustainability.
The agreement would grant TEP permission to build and operate its local electric grid in the city’s rights of way, similar to agreements in place with other municipalities. It would replace TEP’s current voter-approved franchise agreement with the City of Tucson, which expires in April 2026.
City staff and TEP have drafted an updated agreement that would add a 0.75-percent "Community Resilience Fee" to monthly electric bills of TEP customers within the city. The franchise fee would remain at 2.25 percent. Customers within the city also pay a 2.25 percent city utility tax that would remain unchanged.
The revenue generated by that new 0.75 percent fee could be used to cover the additional cost of building certain electric infrastructure underground, with the approval of both the city and TEP. It also could be used to fund efforts that support the city's Climate Action Plan, including new clean energy resources, electric vehicle infrastructure and heat mitigation efforts.
The proposed change would add less than $1 per month to the average monthly electric bills of residential customers with typical usage within the City of Tucson. That impact would vary with usage. Customers living outside the City of Tucson would not pay this fee.
The Tucson Mayor and Council voted unanimously on Jan 25 to call a special election on May 16 that will allow city voters to approve or reject the new franchise.
Supporting Reliability in Central Tucson
The proposed franchise agreement would support TEP’s continued investment in electric reliability and clean energy for our community, including development of a new transmission line that will be critical to providing electric service in central Tucson.
The proposed Kino to DeMoss-Petrie (DMP) 138-kilovolt (kV) Transmission Line Project would connect TEP’s Kino Substation, near South Kino Parkway and East 36th Street, to the DMP Substation at West Grant Road and Interstate 10 via a link at the proposed Vine Substation, just north of the University of Arizona’s main campus. The project is needed to serve growing energy use in the midtown area while supporting TEP’s clean energy supply agreement with the UA.
As discussed by City staff and TEP, the new fund could be used to pay the additional cost of building some portions of the Kino to DMP Transmission Line Project, and possibly other TEP projects, below ground. That revenue also could be used to fund clean energy projects or other efforts that support the city's climate action and adaptation plan, Tucson Resilient Together. The increase would raise about $5 million annually for these purposes.
The following questions and answers offer more details about the proposed franchise agreement.
What is a “franchise agreement” and why is it needed?
Broadly speaking, a franchise agreement establishes terms for a private company’s use of public spaces for the benefit of local residents. Like other energy providers, TEP typically operates under franchise agreements with the municipalities in our service territory. These agreements grant us permission to build, operate and maintain our facilities along city streets and other public rights of way, usually in exchange for a fee equal to a percentage of the revenue earned through energy sales within the city. These fees are paid by customers within those cities.
Do TEP’s other franchise agreements include provisions that raise funds for electric infrastructure?
The proposed agreement with the City of Tucson would be the first to include such provisions. We developed this language in partnership with city staff as a way to facilitate development of critical infrastructure in areas where above ground construction may be limited by city ordinances. It also potentially could be used for other electric infrastructure projects approved by both TEP and the city.
Why is most of TEP’s local energy grid built above ground rather than underground?
It costs significantly more to build and maintain underground facilities. Engineering and safety concerns sometimes justify the additional cost of installing lower-voltage distribution facilities underground. Customers who request underground installation of facilities for other reasons must pay the additional cost of doing so to avoid creating unnecessary costs for other customers. The proposed franchise agreement would provide a way for City of Tucson residents to cover that additional cost for certain distribution or transmission facilities that are developed below ground within the city to comply with city ordinances.
Would the "Community Resilience Fee" fee included in the proposed franchise agreement affect customers outside the City of Tucson?
No. Only customers within the City of Tucson pay the city’s franchise fees and utility tax as part of their monthly electric bills. Customers living elsewhere may pay a franchise fee or utility tax charged by a different municipality.
How would the money raised through the new 0.75 percent fee be used?
TEP and city officials have discussed using those funds to pay the additional cost of building a portion of the Kino-DMP Transmission Line Project underground along North Campbell Avenue, assuming TEP secures necessary approvals to develop the project along that route. Funds also could be used to fund develop other TEP projects below ground or to fund projects that support the city's climate action and adaptation plan, including efforts to:
- decarbonize city-owned and operated buildings and facilities;
- promote distributed energy resources such as rooftop solar to provide local renewable energy and enhance energy resilience;
- pursue additional local sources of renewable energy, including resource recovery and heat exchange;
- promote electric vehicles via charging infrastructure expansion;
- transition public agency fleets to zero-emission and net-zero-emission vehicles;
- establish accessible resilience hubs across all City Wards to provide information and resources related to climate preparedness and response;
- bolster City-owned and community-wide heat mitigation resources to reduce urban heat island effect and protect vulnerable individuals and communities;
- deploy and maintain equitable nature-based solutions that reduce or sequester emissions, improve ecosystem health, and bolster climate resilience; and
- bolster community and regional networks to improve community-wide emergency response and resource-sharing.
Recovering the cost of underground infrastructure would be prioritized during the first 10 years of the agreement, though 10 percent of revenues collected during that period would be used for projects that support the city's climate action and adaptation plan. Projects funded through fee revenues would be selected by a committee that includes equal representation from TEP and the City of Tucson, as outlined in the proposed franchise agreement.
How would the remaining funds raised through the franchise agreement be used?
Proceeds from the 2.25-percent franchise fee would be forwarded to the City of Tucson, as they are today. The new franchise agreement would not affect projected revenues for the city, as remittances for both the city’s franchise fee and utility tax would reflect the same percentages of electric sales as they do currently.
When will City of Tucson voters have an opportunity to vote on this proposal?
A special election will be held May 16. Only registered voters living in the City of Tucson can participate in this election. TEP will provide more information for potential voters as that date draws nearer.
What happens if voters reject the proposal?
TEP would continue to operate under its existing City of Tucson franchise, which will remain in force through 2026, and would likely continue discussions with city officials about the possibility of extending that franchise agreement at a later date.