We understand that many people are worried that their electric bills are going up. When money is tight, any bill can feel too big.
But here’s some good news: Even as inflation increased the cost of almost everything else, Tucson Electric Power’s rates have been remarkably stable. TEP’s residential customers paid, on average, about $140 per month last year – the same amount they paid in 2023. Our typical bills also remain much lower than the national average of about $190 a month.
That national average has increased steadily since 2021, prompting some to blame data centers for “skyrocketing” electric rates. But two new studies show that most states, including Arizona, have seen only modest increases – thanks, in part, to data centers and other large energy users.
What’s really happening
National average rates are being driven up by unique circumstances in just two regions, according to a new analysis by Charles River Associates. In the Northeast, energy costs have increased due to a lack of long-term generating capacity. In California, meanwhile, big wildfire costs have caused rates to rise.
Outside of those areas, Arizona and most other states experienced only modest changes, often less than the level of inflation. If this is surprising, it could be because a handful of vocal critics claim the exact opposite – and they have it exactly wrong.
CRA’s findings are consistent with a separate study published in October by the Lawrence Berkeley National Laboratory and The Brattle Group, which also shed more light on the real impact of data centers and other large energy users.
Sharing the load
That study found that states with increasing energy demand saw average rates decline in inflation-adjusted terms over the past five years. Meanwhile, states where usage fell often saw steeper than average increases.
The reason? Electric rates are driven largely by grid upgrades, operating expenses, and other “fixed” costs that don’t change much when energy use rises or falls. So, when there’s more usage, those costs can be shared more widely, allowing lower rates.
That’s why TEP’s customers would benefit from the initial phase of the proposed “Project Blue” data center. Because TEP can power the facility from resources that are already online or in development, the data center’s electric bills will help cover costs that would otherwise be paid by other customers.
Effective regulation and management
In Arizona, utility rates are set by the Arizona Corporation Commission (ACC) based only on proven historic costs, not potential future needs tied to data centers. The ACC’s oversight results in transparent, publicly accountable operations. It also encourages energy providers to build robust, diverse energy portfolios that provide reliable, affordable power through even the hottest summer weather.
TEP promotes affordability by carefully managing costs, investing in technology that improves efficiency, and choosing a cost-effective energy mix. Although we’re significantly expanding clean energy resources, some critics insist that adding even more would reduce rates. But they ignore the rate-impact of those up-front costs and the added investments needed to maintain around-the-clock service with intermittent resources. That’s why we’re diversifying our energy mix at a pace that supports both reliability and affordability.
These responsible practices can’t entirely offset the increasing cost of maintaining a reliable, resilient energy system. That’s why we’ve requested higher rates – to pay for upgrades we’ve already made. The 14% increase we’ve proposed is less than the level of inflation since 2021 and would still leave our bills well below the national average.
Even relatively affordable rates can pose challenges for some households. That’s why our proposed rates would provide more support for our most vulnerable customers. Qualifying customers would see discounts of between 20 and 50 percent, depending on income, with larger discounts in the summer to offset higher seasonal bills. More details are available at tep.com/2026-rates.
We know electric bills always seem too high, particularly when hotter weather makes it more expensive to stay safe and comfortable. But the evidence shows that TEP’s rates are relatively low and stable, and we’re working hard every day to keep them that way.
