Red Horse Expansion project

Panels in the original section of the Red Horse Expansion project with the wind farm in the background, west of Willcox, AZ. The solar panels send renewable energy to Tucson Electric Power customers.

Customers of Tucson Electric Power Co. will pay a little more on their bills starting next month under a new renewable-energy plan and related surcharge changes approved by state regulators.

The 2019 plan belatedly approved last week by the Arizona Corporation Commission allows TEP to spend $54.6 million on renewable energy projects and programs including major new battery-storage projects to help better utilize renewable power.

But TEP is authorized to collect $60.9 million from surcharges customers pay to support the programs, including $6.3 million in carryover costs TEP was unable to collect under its prior renewables plan.

The plan is designed to help TEP meet a statewide mandate that state-regulated electric utilities get 15 percent of the power from renewables like solar and wind by 2025.

TEP plans to add 353 megawatts (AC) of new utility-scale solar and wind through the end of 2020, more than doubling its output to 638 MW.

Under the new plan, the usage-based rate for surcharges all TEP customers pay to support the renewable-energy project will decline to 1.27 cents per kilowatt-hour from 1.3 cents per kWh.

But because the caps on the amount of the monthly surcharges were increased — to $7.50 monthly from $5.50 for home customers — the average surcharge customers will pay is expected to rise to $5.95 per month from $4.42 under the 2018 plan.

Also last week, the Corporation Commission approved an increase in a separate surcharge customers pay to partially offset the revenue TEP loses when customers reduce their bills through energy efficiency and renewable energy programs.

A typical residential customer with average usage of about 800 kWh per month will pay about $3.09 a month after the new LFCR takes effect, up 63 cents from the average under the prior rate.

TEP didn’t get all it wanted from regulators in the new renewables plan.

The utility said it plans to spend $15 million annually on up to 10 megawatts of energy storage, and it wanted to begin recovering those costs through the renewable-energy program.

But the commission staff said TEP should recover its costs through future general rate cases, since the utility proposed no specific new projects.

The commission agreed and denied TEP’s request, but also ordered the utility to return with detailed plans for specific storage projects.

The company has been adding large battery energy-storage systems to its system mainly to help support the grid as solar and wind systems deliver power intermittently, but it is looking at more storage to help meet demand peaks.

TEP is expected to meet its overall state requirement of 9 percent renewable-energy generation this year, and the company said it expects to meet the standard as it increases over the next six years.

But it sought a permanent waiver to rules requiring that it get a certain amount of renewable energy from customer-owned rooftop solar installations.

TEP said though it has more than double the required rooftop-solar generation on its system, it hasn't been able to collect renewable-energy credits for customer-owned solar systems since a system of upfront incentive payments was discontinued several years ago.

But at its staff's recommendation, the commission approved only a one-year waiver.

Contact senior reporter David Wichner at dwichner@tucson.com or 573-4181. On Twitter: @dwichner. On Facebook: Facebook.com/DailyStarBiz

Reporter

David joined the Star in 1997, after working as a consumer and business reporter in Phoenix for more than a decade. A graduate of Ohio University, he has covered most business beats focusing on technology, defense and utilities. He has won several awards.