Considering Costs

A closer look at what TEP customers pay - and why

TEP is committed to providing great value for our customers. Because cost is an important part of that calculation, we'd like to provide some additional details about the costs that customers typically pay for safe, reliable electric service.

The table below shows typical residential bills from 2024. In our desert climate, it should come as no surprise that bills are higher in the summer, when the increased need for air conditioning results in higher energy use. The average monthly residential electric utility bill is about $190 nationally, according to J.D. Power, a consumer insights authority.

Month, 2024	Average Bill	Median Bill
January	$141.05	$117.36
February	$120.64	$99.67
March	$106.62	$88.84
April	$103.30	$86.17
May	$113.48	$80.56
June	$157.25	$138.87
July	$209.61	$189.00
August	$202.80	$182.00
September	$202.82	$181.76
October	$166.19	$149.19
November	$113.42	$95.51
December	$112.13	$93.39
	$146.40	$117.84

These figures include all surcharges and taxes. TEP generally uses median bills to describe the typical customer experience, as that figure represents the midpoint of all residential customers - half pay more, and half pay less. The average bill is calculated by totaling all bills paid and dividing by the number of bills. As a result, the average can be significantly influenced by very high or very low bills. The median is less affected by extreme values.

Daily Energy Cost

We think it's helpful to consider what you pay for energy on a typical day. The table below shows those figures.

In 2024, average daily costs were highest in August, at about $7, and lowest in December, at $3.47. Median daily costs were lowest in December, at $2.90, and peaked in July at $6.31 a day.

Over the course of the year, the average daily cost of service was $4.91, while the median cost was $4.09. You can review your own average daily cost on your monthly TEP bill. Learn more about other features on your bill here.

Daily energy cost helps you compare the cost of electricity - which reliably powers your cell phone, cable, appliances and lighting - with what you might on other everyday purchases.

Month, 2024	Average Daily Cost	Median Daily Cost
January	$4.33	$3.62
February	$4.17	$3.48
March	$3.68	$3.09
April	$3.57	$3.02
May	$3.92	$3.37
June	$5.27	$4.67
July	$6.97	$6.31
August	$7.00	$6.30
September	$6.70	$6.03
October	$5.71	$5.14
November	$3.89	$3.30
December	$3.47	$2.90
	$4.91	$4.09

The System Behind the Switch

Fleet

TEP has about 1,100 vehicles used by employees in power plant operations, substation maintenance, metering, relay/communications and other areas. Our fleet includes about 115 specialty vehicles for line construction work, including bucket trucks, cranes and diggers. Average cost:

88’ bucket, for transmission work: $550,000
50’-60’ bucket, for distribution work: $300,000
40’ bucket, for our first response Troublemen: $249,000

Poles

TEP has more than 107,000 power poles. Purchase and installation:

Distribution, 40’-55’ Steel Pole: Avg. $18k-$20k
Transmission, 60’-75’ Steel Pole: Avg. $35k-40

Substations

TEP has more than 120 of these facilities, which house equipment to control and monitor electricity flow.

Average cost: $25 million -$30 million

Line locating

Before any digging can occur to perform upgrades or make repairs safely, underground lines must be marked. Average cost:

A new set of line locating equipment: $7,500

Automated meters

TEP has more than 500,000 electric meters in our system that ensure accurate readings, provide a streamlined customer experience and improve efficiencies by reducing the need for employees to manually read meters. Average cost:

Typical residential meter: $116

$429 millionDistribution

$350 millionRoadrunner Reserve

$329 millionTransmission

$353 millionGeneration

$134 millionSupport Infrastructure

$74 millionSoftware

You Asked, We Answer

We know it's hard to hear that TEP needs to increase rates. The following questions and answers address concerns raised when we requested review of higher rates to take effect in September 2026.

Why does it seem like rates are always increasing?

We do communicate extensively about our requests, but base rate increases only happen every few years.

Our rate requests are reviewed by the Arizona Corporation Commission in a public process that takes more than a year. So customers hear about them regularly, including when we propose them, during the review, and when they eventually take effect. By the time our current request takes effect, it will have been about three years since our previous base rate increase in 2023.

Unlike governments that set taxes based on the coming year's costs, we charge rates based on historic costs. Our current rates are based on costs from 2021. But we've invested $1.7 billion since then to maintain the safe, reliable service our growing customer base has come to expect. The new rates we've requested would allow us to begin recovering those costs in late 2026.

Certain energy cost charges on our bills do change from year to year to reflect market price changes; we don't profit from those portions of the bill. Thankfully, those charges were reduced in both 2024 and 2025, lowering costs for our customers.

Your proposed increase is just too high.

Our proposed new rates would increase less than inflation, in a time when the U.S. Bureau of Labor and Statistics reports that consumer prices increased 15 percent from December 2021 to April 2025.

As a regulated utility, TEP is allowed to recover the costs necessary to ensure reliable power, but only after a comprehensive review that makes sure the investments we’ve made are prudent and reasonable. We also have the opportunity to earn a reasonable rate of return. That return is used to fund new infrastructure improvements and to compensate our investors. Your rates are an important part of how we both fund our essential service and repay the shareholders who help make such large infrastructure investments possible.

The reality is that we have a very capital-intensive business. Big projects can take a lot of investment, such as our new $350 million energy storage facility, which supports reliable service and helps us leverage cheaper solar energy during the day. But even our everyday equipment adds up, and particularly as we’re facing rising costs for equipment, parts, construction materials and other necessities. A substation costs about $30 million. A single bucket truck can cost $550,000 and a steel transmission pole can cost up to $40,000.

Don't state regulators always approve your requests?

Not without significant review and, often, meaningful revisions. The Arizona Corporation Commission and its staff carefully scrutinize rate proposals from TEP and other regulated utilities to ensure that our investments were prudent and that any approved rates serve the public interest. As part of their process, they consider the perspectives of customer advocates, specific customer representatives and members of the public.

Why should TEP be able to profit from providing a service we all need?

Our regulated profits help us finance investments in our energy grid and systems that provide service to customers every day. Our investor-owned model has two key advantages for customers:

It grants us affordable access to capital for critical investments that serve our community’s expanding energy needs and help us transition to cleaner energy resources.
It creates a powerful incentive to control costs, promote efficiency and achieve excellence.

We don’t earn a return on our day-to-day operating and maintenance expenses or energy costs, such as fuel and the power we buy to deliver to our customers. Those costs are passed along without any markup, helping to keep rates as low as possible.

Our only opportunity to earn a profit is through infrastructure investments that regulators determine to be both necessary and prudent. Profit is not guaranteed, however, and our regulated rate of return on capital is 9.5%, a level that was consistent with average investor-owned utility returns across the country when it was set in 2023. We must work hard to control costs and make every dollar count if we hope to achieve that level of return. We carefully monitor and control our processes, expenses and staffing so we can continue to provide top-tier service and reliability as cost-efficiently as possible.

Through 2028, we anticipate investing more than $3.4 billion in new generation, transmission, distribution and other necessities. We could not attract that much capital on affordable terms if our investors lacked the opportunity for a reasonable return.

Does TEP even care if its rates are unaffordable?

Affordability is among our highest priorities. We want our service to cost as little as possible without compromising safety or reliability

Proposing higher rates is not a step we take lightly. We understand that energy costs impact household budgets, especially as the prices for food, housing and other basic necessities are on the rise. Unlike nationwide retailers, our company's success is directly linked to the success of the community we serve. That's why we work hard to keep costs down, since it helps support local prosperity and attract new employers.

While we’re doing our part to keep rates as low as possible, individual energy usage contributes significantly to monthly bills. Offering an assortment of pricing plans provides customers with more choice and control and is an important part of the services we provide our community.

We also have great resources to help you understand your bill, manage bill payment and discover ways to save energy and money, including:

Budget billing: Pay the same amount for energy every month, even if your usage varies with the seasons.
Time of use pricing: If you can reduce your energy use during peak usage periods, you may be able to save money on a pricing plan that features time of use, demand pricing or both.
Energy saving tips and rebates: We offer room-by-room tips for saving energy throughout your home. We also provide rebates for smart energy investments, from air conditioning tune-ups to efficient appliances.
Payment assistance: We all need a little help sometimes. Our team can help you find a solution that works for you, from our low-income discounts to payment extensions and other options.
Track your usage: Knowing how you use energy each day can help you adjust your habits to save on your monthly bill.