Arizona opinion: TEP rate increase likely to sail through pro-utility ACC

If you are a Tucson Electric Power customer, instead of the red and blue, you will soon start seeing black and blue.

TEP is pushing for an eye-popping windfall by demanding an extra $194 million in Base Rate Revenue — a 16.5% increase, although it nets to 14% after taking into account other changes.

Worse yet, the monopoly is also seeking to ram the ratepayers with ARAM, an annual rate adjustment mechanism, to ensure it gets future increases on an annual autopilot, which will dispense with obstacles that get in the way of monopolies reaching into our pockets faster.

Looking out for the customers?

The latest demand by TEP follows a $100 million increase in non-fuel retail revenue, representing a 10% increase it received in late 2023. Commissioner Anna Tovar cast the lone vote against it, saying, “We have an obligation to think of more than just the utility’s bottom line; we must also look out for the customers.”

Sadly, looking out for customers was and remains a minority view on the corporation commission, which is supposed to regulate monopolies and protect ratepayers from their overreach.

A commission that was consistently neglecting consumer interests has become even more aggressively pro-utility and anti-consumer.

They dismantled programs that reduce peak demand and increase energy efficiency.

They opened a new docket regarding the influx of new data centers, but prematurely assumed that the data center industry is paying its fair share, which experts say is impossible to verify, even for the regulators, because they are not privy to secret contracts.

They looked the other way when APS returned two years later with a 1,000 times higher balance on the fuel surcharge, and instead of ordering an audit, approved an even higher surcharge for years to come.

And they began cheerleading the nuclear expansion announcement as if to signal pre-approval without a single hearing. Now, remember that two nuclear reactors at Plant Vogtle in Georgia, first U.S. reactors built from scratch in decades, were a boondoggle of historic proportions: seven years late and $17 billion over cost — and possibly the most expensive power plant ever built.

The sharply higher power bills are already squeezing Georgians, with the fifth-highest monthly utility bill in 2022. (Arizona was close behind with the 9th highest.)

Stagnant sales, but skyrocketing profits?

All regulated utilities have a perverse incentive to engage in accumulating excessive amounts of capital. The more the “steel in the ground,” known as the rate base, the higher their shareholder profits are at guaranteed, double-digit margins.

TEP is no exception. It says the company deserves a 10.5% return on equity. And it jumped on the nuclear bandwagon, claiming to support growing energy needs because the energy demand in Arizona is increasing rapidly.

While that may be somewhat true for other utilities because of the data center demand surging at a 100 times faster rate, it certainly isn’t true for TEP.

TEP’s total electricity sales have been as flat as a pancake for the last decade, so much so that it sold 1% less electricity in 2024 than it did in 2015, according to the EIA data.

And yet, TEP’s average residential bill increased by 33% over that period, although households reduced their average usage by 2%.

Ay, here’s the rub: TEP’s profits soared by a jaw-dropping 126% over that period, peaking at $289 million in 2024! You can only guess what its net income will be if the current rate hike is rubber-stamped.

Project Blue, the massive data center complex, would be a grand slam for TEP. The utility assured the Pima County Board of Supervisors that TEP ratepayers would be “protected,” and the board then voted to approve the project hours before TEP’s announcement.

Cozy commission enabling corporate greed

Can you imagine any other business with stagnant sales for a decade that can more than double its profits anyway? Only if it has captive customers and a commission looking after its bottom line.

TEP’s Canadian parent, Fortis, worth $24 billion, has bragged about providing a total annualized shareholder return of 10.7% over 20 years, or 666% in total, far exceeding the industry benchmarks.

And yet, the cozy commission is focused on protecting the utility’s bottom line rather than protecting captive ratepayers. Absurdly enough, commission chair Kevin Thompson seems most concerned about the monopolies filing for bankruptcy than about the financial struggles caused by their exorbitant rates.

The three for-profit monopolies regulated by the commission, APS, TEP, and UNS, were already charging higher prices than in 38 states.

If you want to know where TEP is headed, look to its sister company, UNS Electric, which has jacked up its rates by 51% and boosted its revenue by 77% over the last decade to become the most expensive utility in Arizona.

A petition signed by about 15,000 people to push back against the UNS rate hike last year and their request for a rehearing fell on deaf ears at the wrongheaded commission.

Like I said, bear down!