Tucson Electric rate hikes for underground lines to go to voters

An agreement to increase Tucson Electric Power bills to fund the undergrounding of future utility line projects will go before voters in May, the Tucson City Council decided Tuesday.

City staff and TEP are proposing updating an agreement that allows the utility to operate in Tucson to include a 3% fee on TEP customers’ monthly electric bills, an increase from the current 2.25% franchise fee. The changes would raise the average residential TEP customer’s bill by an estimated 93 cents a month and raise small business customers’ bills by $2.65 a month.

The current franchise agreement generates about $14 million a year, and the .75% increase would generate about $5 million extra, according to the city.

That additional revenue could be used to cover the costs of undergrounding high-voltage transmission lines, such as TEP’s Kino to DeMoss-Petrie 138-Kilovolt Transmission Line that has faced pushback from the city and residents of historic neighborhoods over ordinances that ban overhead power lines in scenic and gateway corridors. TEP has said undergrounding the project would be too expensive.

The power line would pass through several historic Tucson neighborhoods on overhead lines and poles up to 110 feet tall from a substation near East 36th Street and South Kino Parkway north past the University of Arizona campus and up North Campbell Avenue to a power station near Interstate 10 and West Grant Road.

While initial consideration of the fee increase focused on creating a mechanism to underground power lines, conversations have evolved to also use the funds to support Tucson’s climate action goals. That could include projects that support rooftop solar, pursuing local renewable energy resources and improving electric vehicle charging infrastructure.

“We have a number of franchises across the state, it’s really standard operating procedure for our operations. With these changes, this franchise will be the most progressive likely in the state, and really tackling some of the issues that are important to Tucson,” TEP’s Chief Sustainability Officer Erik Bakken told the council Tuesday.

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Mayor Regina Romero said she’s received assurance from TEP CEO Susan Gray that the utility will work with Tucson “on a power purchase agreement that will take us to 100% renewable energy as soon as possible,” which would further the city’s goal of becoming carbon-neutral by 2030.

A power purchase agreement is different from the franchise agreement that will go before voters on May 16, it instead would result from negotiations between the city and TEP on how the utility sources its power. It’s unclear when such a negotiation would happen.

Council member Steve Kozachik said public outreach for the proposed franchise agreement “was extremely troublesome,” with only 24-hours’ notice given before a public meeting was hosted for to provide information and gather community feedback, and expressed dismay at the lack of “specific, measurable, explicit commitments” for climate resiliency funding in the language of the agreement.

Bakken told the council TEP is “going to be engaging the community however, and whenever, we can” and will “try to really nail down some of those details.”

If approved by voters, the new franchise agreement includes two points of reconsideration 10 and 15 years into the 25-year agreement “for the city to renegotiate some of those key terms if they’re not working as we expect them to,” City Attorney Mike Rankin said.

TEP will cover election-associated expenses, which is estimated to cost around $815,000.