Tucson looks to renew TEP franchise agreement as public power advocates push for alternative

Tucson may hold a special election in November in which voters can decide on a franchise agreement between the city and Tucson Electric Power, but progressive advocates are pushing for a publicly owned utility option.

The City Council voted 6-0 in favor of scheduling the special election at the their meeting Tuesday. The election will only happen if TEP and the city settle on the terms of the agreement four months before the election, by July 1, in accordance with Arizona law.

“We’ve heard loud and clear that Tucsonans want a franchise agreement and energy policies that align with our bold vision of creating climate goals and adapting to climate, and they also have said very clearly that they want affordability in all of it,” said Mayor Regina Romero at Tuesday’s meeting.

Tucson’s franchise agreement with TEP allows the utility to use the city property, such as alleyways and other easements, to install power lines and other infrastructure without needing to ask for a permit each time, in exchange for a fee.

TEP customers pay the franchise fee — 2.25 percent of your monthly bill in the city of Tucson, and 2 percent in South Tucson — which is then forwarded to the city.

TEP’s current franchise deal was approved by voters in 2000 and will expire in 2026. Voters rejected a previous attempt at renewing the agreement in 2023.

“I’m hopeful that we’re going to be able to work out an agreement that works well for the city and our customers, since at the end of the day we’re all serving the same community,” TEP spokesperson Joe Salkowski told the Sentinel.

Without a franchise agreement, Salkowski said, customers would still receive power but may see higher bills and less efficient service, because securing land rights for certain projects could be costly for the private utility company.

“Over the long term, franchise agreements reduce cost for our customers,” Salkowski said.

Some Tucsonans have been advocating for a public power option — around 3,400 people signed a petition urging the mayor and Council to consider replacing TEP with a publicly owned utility. TEP is owned by Fortis, a Canadian holding company with subsidiaries throughout North America.

Outside City Hall on Tuesday — Earth Day — around 50 Tucsonans gathered to rally for public power, including members of the Tucson Democratic Socialists of America, and Pima County Democratic Party Chair Eric Robbins.

“Right now, bills are very, very expensive because we are paying for TEP’s profit on top of everything else,” said Tucson DSA spokesperson Lee Ziesche. “Fifty-four million people get their electricity from a publicly owned utility, and they not only tend to be cheaper, they tend to be more reliable and better on climate action. So overall, a public utility will just better serve working-class people.”

Ziesche pointed to cities like Sacramento, Calif. and Massena, N.Y., which operate using publicly owned electric utilities, as examples for Tucson’s potential future. Public power utilities cost consumers as much as 13 percent less than privately operated ones, and are more likely to be climate-friendly, according to the American Public Power Association.

Early estimates put the cost of the city of Tucson running its own electric utility at around $820 million.

Although Arizona’s average electricity rates were slightly lower than the national average, the state reported an average monthly electric bill of $148.40 in 2023 — the second-highest in the country behind Texas, according to a University of Arizona analysis. Researchers attributed the expensive bills to high electricity use.

TEP charges from 12.64 to 15.73 cents per kilowatt-hour, depending on usage and time of year. TEP’s highest price is almost a cent higher than the Arizona average of 14.75 cents, but still less than last month’s national average of 18.1 cents per kilowatt-hour.

Councilmember Paul Cunningham said in the meeting Tuesday he wouldn’t support a franchise agreement with TEP unless he was sure it would pass with voters.

“The best way to get us into a franchise agreement that’s advantageous to our citizens is to reduce their costs,” Cunningham said, advocating for a clause in the agreement that would discourage TEP from hiking rates.

Cunningham suggested the city keep its arrangement with TEP, but slowly purchase parts of the electric grid over time, in order to gradually switch to a public option.

“Ultimately, it may be TEP that manages that as a public utility, but we kind of change the structure of what we got,” he said.

Final results from a study commissioned by the mayor and Council that weighs the feasibility of a public power option should be available in May.