Tucson Electric Power (TEP) is seeking new, higher rates no later than August 2013. The rates TEP proposed today in a filing with the Arizona Corporation Commission would increase typical residential customers’ average monthly bills by about $13, or less than 16 percent. The average residential monthly bill would remain under $100.
These new rates would represent TEP’s first base-rate increase since 2008 and only the third such increase in the last 20 years. TEP’s base rates have risen just 8 percent since 1992 while the Consumer Price Index has increased nearly 60 percent over that time.
TEP’s rate-increase request will be reviewed by the ACC, a five-member panel of elected officials that sets utility rates and oversees other aspects of the company’s operations. That review typically includes public hearings before an administrative law judge who recommends a proposed order for the ACC. The review process typically takes about a year.
Other rate components such as renewable energy and energy efficiency surcharges required to satisfy state-mandated programs, and a fuel surcharge, have contributed to bill increases during that period.
TEP’s current rate structure is based on costs incurred by the company in 2006. Since then, the company has invested more than $1 billion on its distribution system, upgrade its power plants and make other improvements to serve customers’ needs. Operating costs also have increased over the last five years due to such things as rising materials costs, cyber security enhancements and expanding environmental regulatory requirements. During this period, sales have remained essentially flat due in part to a weak economy and government mandates.
Those investments include adding new solar generating facilities in the Tucson area, enhanced power generation environmental controls, a new downtown headquarters building, improved information technology systems that support automating distribution functions, and online customer service options. TEP also retired a lease and took full ownership of its largest local power plant, generating long-term savings and supporting plans to develop a solar thermal system on the site.
The proposed rates will adjust annually to reflect required environmental upgrades at TEP’s generating plants, where compliance with new regulatory mandates are expected to increase costs significantly in the near future.
Additional details about TEP’s rate proposal are available at tep.com, including frequently asked questions, a virtual tour of recent system improvements and a copy of the application.