TEP to seek a 14% increase in residential rates

The proposed rate boost would add about $16 per month, on average, to electric bills for households with median usage of 638 kilowatt-hours per month, TEP said in a news release. The month-by-month impact would be higher in the summer and lower in the winter, and customers who use more energy would see higher impacts, the utility said.

The utility’s announcement came just hours after the Pima County Board of Supervisors voted to approve and sell land for a massive proposed data center known as Project Blue. The board was not told of the proposed rate increase while discussing the data-center project earlier Tuesday, when it was assured that TEP ratepayers will not be affected by the large amount of electricity the data centers will use and the increased demand they will put on TEP’s system.     

County Supervisor Matt Heinz is now calling for the board to reconsider its approval as a result of TEP’s move.

“In light of the new information we learned literally minutes after the conclusion of the June 17th Board meeting through a TEP press release, namely that TEP is now preparing to go to the Arizona Corporation Commission requesting a rate increase of 14% on residential customers, I believe the Board must reconsider the assurances we were given and the overall project proposal at hand,” Heinz wrote in a memo Tuesday evening to County Administrator Jan Lesher.

TEP said in its news release that the rate boost is needed to recover investments it has made in electric grid upgrades and in new energy resources.

The proposed residential rates also reflect the impact of inflation on the cost of maintaining TEP’s service reliability “in the face of more extreme weather,” the utility’s news release said.

The increase will have to be approved by the Arizona Corporation Commission. It last approved a TEP rate increase, of 10%, in 2023. If approved by the commission, the new increase would take effect in September 2026, the utility said.

Heinz had voted with the majority earlier Tuesday in the Board of Supervisors’ 3-2 vote that approved amending the area’s plan and rezoning for the data center near the Pima County fairgrounds, while supervisors Jen Allen and Andrés Cano voted no.

The board then approved selling the 290-acre site owned by the county for nearly $21 million, to Humphrey’s Peak Properties, LLC, of San Francisco. The sale passed 4-1 with Allen voting no.

The data center developer, Beale Infrastructure, along with Tucson Water and TEP would not say how much water or electricity the complex could use, nor would they give estimates when asked during Tuesday’s board meeting. County and city officials and others have signed nondisclosure agreements with the companies involved. 

The data center complex will have a long-term power agreement with TEP to “protect existing rate payers, promote overall system reliability, and help create a cleaner energy portfolio,” Lesher wrote to the board before the vote, in recommending approval of Project Blue.

Over time, Project Blue will become one of TEP’s largest customers, county officials said. 

TEP President Susan Gray wrote in the utility’s press release, “We know our customers count on us every day for the energy that powers their lives. They also need us to keep our bills as low as possible, which is why we work so hard to control costs and why our proposal is focused on increasing support for our most vulnerable customers.

“Our proposed rates reflect those efforts as well as cost-effective investments in a modern, resilient grid and a secure energy supply to ensure reliable, affordable service around the clock, all year long,” Gray said.