New Tucson Electric Power rates that took effect on January 1 will expand bill-payment assistance for low-income customers while supporting the company’s investments in efficient new energy resources that help our community transition to a cleaner, greener energy grid.
The new rates were approved on Dec. 22 by the Arizona Corporation Commission. The changes are expected to increase the average monthly bill of a typical residential customer using TEP’s Basic pricing plan by approximately $5.20 compared to current bills. The actual impact will vary monthly with usage, and customers who use more energy will see a larger increase.
The increase helps cover the cost of flexible new generating resources, more resilient energy systems and other upgrades that are already serving customers. Our previous rates didn’t reflect costs related to approximately $1.2 billion in investments made since June 2015 to update our generating portfolio and maintain reliable service for customers.
The new rates, requested more than 20 months ago, are projected to produce a revenue increase that amounts to less than 1 percent per year since TEP’s last base rate increase in February 2017.
“We’re doing everything possible to keep our service affordable as we build a smarter, stronger grid with lower emissions and more wind and solar resources,” said Susan Gray, who succeeded David Hutchens as TEP’s President and CEO on Jan. 1, 2021. Hutchens now serves as President and CEO of TEP’s parent company, Fortis Inc., which owns utilities in the U.S., Canada and the Caribbean.
“TEP is on track to provide 30 percent of our power from renewable resources this year with rates that reflect our commitment to safe, efficient operations,” Hutchens said. “The company is now well-positioned to provide affordable, reliable and sustainable service for years to come.”
The new rates also provide more assistance to low-income customers through TEP’s Lifeline program. Monthly discounts for qualifying customers have been increased from $15 to $18 and are available to families with household income up 200 percent of the federal poverty level – an increase from the previous 150-percent cap. That change was approved by the ACC earlier in December.
The expanded assistance program provides supplemental support for customers whose income has been affected by the coronavirus pandemic. TEP and sister company UniSource Energy Services donated $1 million last year for local COVID-19 relief efforts and bill payment assistance. TEP also suspended service disconnections and late fees through Dec. 31, created extended payment plans for overdue balances and delayed implementing an energy cost increase. More information about TEP’s customer assistance during the pandemic is available here.
Building a Cleaner, Greener Grid
The new rates help cover the cost of clean, flexible reciprocating internal combustion engines that became operational this year at the H. Wilson Sundt Generating Station in Tucson. With a combined capacity of 182 MW, these efficient natural gas-fueled units have replaced two older steam-fired units, reduced emissions and water use while supporting the addition of new wind and solar resources.
TEP’s new rates also reflect the cost of purchasing a second unit at the natural gas-fired Gila River Generating Station in 2019. The unit will replace more than 500 MW of capacity at the coal-fired Navajo Generating Station, which was retired in 2019, and the San Juan Generating Station, scheduled to retire in 2022.
The unit’s cost will be partly offset by long-term fuel and operating cost reductions. Replacing the output of San Juan and Navajo with power from Gila River Unit 2 will save TEP customers nearly $75 million annually. TEP also saved an estimated $83 million by purchasing the unit from Salt River Project instead of remaining in a long-term agreement to purchase its output.
The new generating resources support our plan to provide more than 70 percent of our power from renewable resources and reduce carbon emissions 80 percent by 2035. These changes, outlined in TEP’s 2020 Integrated Resource Plan, will avoid the production of more than 50 million tons of carbon dioxide over the next 15 years – equivalent to taking three-quarters of a million cars off the road.
Controlling Costs, Serving Customers’ Needs
We work diligently to keep costs low by carefully managing operations and maintenance expenses while seeking new efficiencies. For example, we are converting all of our dusk-to-dawn streetlights to use LEDs to reduce maintenance costs and provide higher-quality lighting. Transmission crews also have adopted new work practices allowing them to perform maintenance on high voltage lines without the need for line outages, which reduces operations and maintenance costs.
The new rates include the cost of transmission and distribution systems upgrades needed to serve Tucson’s expanding population and changing energy needs while supporting economic growth. Our energy grid has accommodated record peak energy demands and thousands of new customers while improving our already strong reliability. The average number and duration of power outages has dropped over the past three and a half years, ranking TEP among the most reliable electric utilities in North America, according to the Edison Electric Institute, an electric industry association.
We’ve also improved our customers’ experience with new online options and more responsive service. Customer phone wait times were reduced by more than 50 percent in 2018, and our Customer Care Center now offers translation services in more than 200 languages.
The new rates include an updated economic development incentive, an expansion of our GoSolar Shares program for large commercial and industrial customers and other improvements. For more details, visit tep.com/new-rates.