TEP, Tucson pressing on after Prop. 412 flop

It’s back to the drawing board for Tucson Electric Power Co. and its plan to build a new high-voltage transmission line through midtown Tucson, and city efforts to minimize the line’s impact and boost future city climate-action initiatives.

City voters on Tuesday soundly defeated a ballot measure proposing a new, 25-year city franchise agreement with TEP that would have imposed a new monthly fee on city residents to help fund underground installation of the line, as well as future city climate-action programs.

The franchise agreement embodied in Proposition 412 was losing by a margin of about 45 percent to about 55 percent, with 129 or 144 precincts reporting, according to preliminary results released about an hour after the polls closed Tuesday night. A final tally is expected Monday.

The proposed Kino to DeMoss Petrie high-voltage transmission line would run from a substation at South Kino Parkway and East 36th Street, to a new substation on the north edge of the University of Arizona campus to an existing substation near West Grant Road and Interstate 10.

The city and neighborhood activists want the TEP to install the high-voltage lines underground, but TEP says that would be prohibitively expensive — an estimated 13 times the cost of overhead lines or up to $60 more — and the company wouldn’t pay for the difference or seek to increase its state-regulated general rates to pay for the excess cost.

In January, city officials and TEP proposed a new franchise agreement including a fee that would have added an average 93 cents monthly to the TEP bills of home customers in the city limits, on top of a current franchise fee, initially to pay for burying the transmission line but also to fund future city climate-change programs.

TEP plows ahead

TEP said in a prepared statement it was disappointed voters defeated Prop. 412, “as it offered a collaborative response to important energy-related issues.”

“We must now address those issues directly in ways that support affordable, reliable and increasingly sustainable energy for our community,” the company said.

TEP previously had said that if Prop. 412 failed, it would need to spend more than $12 million on stopgap measures to reinforce Midtown’s older, lower-voltage system to help maintain service.

In the near term, TEP will resume development of a new 138-kilovolt transmission line to serve growing energy needs in central Tucson, in consultation with area residents and stakeholders to identify the best route for the line, TEP spokesman Joe Barrios said.

The company says it will restart its review of potential routes for the project through central Tucson.

“Because the line is urgently needed to maintain reliable service, we will seek to complete it by the summer of 2027 — the same timeline we hoped to achieve if Prop 412 had passed,” the company said, adding that more details will be provided soon to area residents.

Reopening debate

Mayor Regina Romero and other city council members said they were disappointed with the election outcome but pledged to continue to work on the TEP line and climate-action issues.

“TEP and the city put together a franchise agreement that tried to be responsive to the different needs our community was asking for, like undergrounding, investing in climate resiliency and creating EV (electric-vehicle) infrastructure in public rights of way,” Romero said in a prepared statement posted online Tuesday night. “I respect the voters’ decision not to approve.”

Council Member Steve Kozachik said he’s already offered to facilitate a meeting between community members and TEP to start discussing terms of a new deal.

But he said the utility will still be subject to Tucson ordinances that ban overhead power lines in Tucson’s designated scenic and gateway corridors.

As for the climate resiliency measures baked into the agreement, Kozachik said TEP should consider what he sees as a new opportunity with the proposition’s failing “to take a kind of groundbreaking position that is not typical of utilities across the country.”

“This is a $200-plus million corporation,” Kozachik said, referring to TEP’s 2022 profit of about $217 million. “Their shareholders need to understand that communities in which they’re operating deserve a much more robust commitment to decarbonization and climate mitigation than simply passing the bill on to ratepayers.”

The steering committee of the Neighborhood Undergrounding Coalition, a group of about a several neighborhood associations opposed to overhead lines, said in a prepared statement that members were disappointed that Prop. 412 did not pass but the group intends to stay involved in discussions with TEP as the project moves forward.

“The problem remains as to how to prevent a long series of 85- to-110-foot high industrial-sized pylons carrying overhead transmission lines, stretching for miles straight through the heart of town, from being built, consistent with the city’s gateway and scenic route ordinances,” said the committee, citing negative impacts that the visual blight would have on property values and economic development.

The group estimated that the property value losses at $40 million to $60 million, in the ballpark of the cost to underground the line.

"Our goal is to ensure that as much of the project as possible is undergrounded and that overhead lines occur only in the appropriate areas, such as through zones that are already dominantly or entirely industrial ones,” the committee said in an email from member Colleen Nichols.

Timing and optics

But Prop. 412 faced criticism from different opponents for varying reasons.

The Pima County Republican Party said it opposed any funding of the city’s climate-change action measures. Under the proposed franchise agreement, 90% of the money from the new 0.75% “community resilience fee” was earmarked for undergrounding TEP’s proposed transmission line for the first 10 years.

Some environmental activists contended the proposed franchise agreement didn’t go far enough to prompt TEP to move the city grid faster to carbon-free and increasingly cost-effective renewable energy.

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Other opponents said TEP shareholders should pick up at least part of the extra cost of undergrounding the new transmission line.

The franchise agreement was likely rejected, Council Member Kevin Dahl said, in part because the city “tried to do too much in having both the undergrounding and climate change on this additional fee.”

Dahl also pointed to “the unfortunate timing” of an unrelated TEP bill increase.

State regulators recently approved a fuel surcharge increase that will cost TEP home customers an average of about $10 per month for a year, while the utility also has a pending general rate request that would raise home rates 12%.

A staunch advocate for climate resiliency measures, Dahl said he was disappointed “but the voters have spoken, and we’ll move on.”

Council Member Paul Cunningham agreed the pending TEP rate changes served as “bad optics” but believes new opportunities now exist to reimagine a future franchise agreement.

“I think that we need to distribute the undergrounding money more universally to all areas of Tucson,” he said. “I think that the climate action piece requires that TEP put some actual skin in the game.”

TEP: Need for new line urgent

TEP said the company will continue to operate under its current franchise agreement with the city, which authorizes use of public rights of way for the local energy grid, and will seek a new agreement before the current pact expires in April 2026.

Barrios said TEP also will continue working toward an agreement to supply up to 100% renewable energy for city operations, under a letter of intent unveiled in early May. TEP already has a similar agreement with the UA.

“We remain committed to helping customers achieve their clean energy objectives as we pursue our own plans for a cleaner, greener grid,” the company said.

TEP said the new line is urgently needed to boost capacity to keep up with load growth along the route, which runs astride the University of Arizona campus into the midtown area.

The new franchise agreement was backed business groups including the Tucson Metro Chamber, the Southern Arizona Leadership Council and Sun Corridor Inc.

Other supporters included the Sam Hughes Neighborhood Association; and the steering committee of the Underground Coalition, which includes about a dozen neighborhood associations.

New concepts

Cunningham is interested in a future franchise agreement that would turn TEP into a public utility.

“We could add 15 years to the agreement so that we could actually purchase the utility, the city’s going to become a public utility, which is a much better model,” he said.

Council Member Nikki Lee also hopes the failure of Proposition 412 provides an opportunity to “come up with an even better solution and a better concept to put on the ballot.”

But given the outcome, she also worries about the fate of future agreements with TEP.

“I felt like we tried really hard to find something that really would address a lot of the interest from the stakeholders and we just missed the mark, apparently,” she said.

Next steps

As TEP reviews possible routes for the new for the transmission line, it has few options to avoid running through or near residential neighborhoods.

TEP presented several different proposed line route segments for the Kino-DeMoss Petrie Transmission Line and hosted a series of meetings with a community working group and public open-house meetings from 2019 to April 2022.

In 2021, TEP chose a preferred route that would run from the substation at South Kino substation along the east side of the University of Arizona campus and north up North Campbell Avenue to reach a the planned new substation at Banner-University Medical Center Tucson, before zigzagging north to West Grant Road.

The route would run through or astride several historic neighborhoods, including the Jefferson Park neighborhood north of Banner-UMC, neighborhoods including Sam Hughes near Campbell and the South Park and Pueblo Gardens neighborhoods on the south end of the line.

Once it settles on a route, TEP will have to file for approval with the state Power Plant and Transmission Line Siting Committee, which holds hearing and makes recommendations to the Arizona Corporation Commission whether to approve a plant site or line route.

TEP filed its initial plan with the state panel in August 2021, but after drawing fire from city council members and neighborhoods, the company withdrew its application in February 2022 to allow more time for negotiations.