Local opinion: TEP needs a fact checker

Tucson Electric Power’s recent op-eds by Erik Bakken and Eric Bronner ask Tucsonans to accept the same premise: trust the utility. Trust that its rate increase is necessary. Trust that Project Blue will not shift costs and risks onto everyone else. That is not a serious response to the public’s concerns. It is a demand for unearned deference.

Start with Bakken’s response to Attorney General Kris Mayes’s expert, Mark Ellis. As Tim Steller summarized it, Ellis’s core point is that Arizona customers are being asked to pay monopoly utilities more than investors require, turning regulation into a wasteful wealth transfer from customers to shareholders. Bakken does not answer that point. He says Ellis is an outlier, notes that commissions have not adopted his approach, and warns that Moody’s and other credit watchers may not like lower monopoly returns.

But “outlier” is not a rebuttal, and Moody’s is not a substitute for basic math.

Even if lower allowed returns caused some increase in borrowing costs, that effect would still have to be compared against the much larger savings from reducing inflated equity returns. Bakken never does that comparison. He never shows Ellis is wrong on the economics. He just changes the subject from what customers are paying to what Wall Street prefers.

His APS example is just as bad. Bakken claims APS had to stop issuing debt and equity after the ACC lowered its return on equity in 2019. But APS’s own SEC record shows repeated debt offerings every year after that decision. That is not what a company shut out of capital markets looks like.

And when APS chose not to issue equity because doing so would dilute existing shareholders, that did not prove investors would not buy it. It proved they *would* buy it, just not at a price management liked.

That matters because utilities treat any challenge to excessive monopoly returns as a threat to reliability itself. But regulated utilities are not ordinary firms in a competitive market. They have captive customers, protected service territories, and the ability to recover investments through regulated rates. Publicly owned utilities also finance major infrastructure, but without the same built-in demand for excessive shareholder returns. The burden is on TEP to prove that the returns it wants are necessary. It has failed to do so, and Attorney General Mayes and Mr. Ellis deserve praise for pursuing this sharp line of financial analysis.

Bronner’s op-ed on Project Blue uses the same playbook. He says there is “no connection” between Project Blue and TEP’s pending rate case. But TEP’s own public materials say the Project Blue agreement will be served, at least in part, by Roadrunner Reserve, which TEP’s current rate case is seeking recovery for. If a ratepayer-funded system asset is being used to satisfy the load requirements of a new hyperscale customer, there is plainly a connection.

Bronner also treats “existing resources” as though they are free resources to be given away at cost. They are not. ACC Commissioner Rachel Walden’s dissent on the Project Blue contract explained why. Project Blue’s load is 286-350 MW, around 10% to 15% of TEP’s current generating capacity. TEP maintains a reserve margin of about 15% for reliability, and Walden noted that capacity freed by canceling wholesale contracts would cover only about half of the project’s load. Her point was simple: existing does not mean free. If Project Blue eats a chunk of the capacity that supports TEP’s reserve margin, replacement generation has to come sooner, and replacement is expensive. Project Blue must be contractually assigned that expense now, not later. TEP cannot be allowed to kick the can down the road and hide or launder the new, higher expense in future rate increases.

This is the pattern in both op-eds. They do not rebut the underlying economics. They wave away criticism with public relations misdirection. If TEP wants public trust, it should stop dismissing legitimate questions about monopoly over earning, cross-subsidies, and stranded cost as “false narratives.”

Reliable power does require reliable facts.

That is exactly why TEP needs a fact checker.