Tucson to hold May special election to decide on TEP agreement, new utility surcharges

Tucsonans will be able to vote on a new 25-year franchise agreement with Tucson Electric Power that could raise monthly utility rates by .75%. The Tucson City Council voted 7-0 on Tuesday to hold a special election in May for residents to decide on the agreement.

TEP is the main power provider for residents and businesses in the Tucson metropolitan area, but the private company relies on the franchise deal with the city to use public spaces and rights-of-way for power lines.

Residents already pay TEP a 2.25% franchise fee on their monthly utility billa, and Tucson collects about $14 million a year from the fee. Only TEP customers living inside city limits pay the fee.

The existing fee is set by the current 25-year agreement TEP has with the city, which was approved by voters in 2000 and took effect in 2001. That will expire by April 2026. By law, each franchise agreement can only last up to 25 years.

While the base utility rates charged by TEP must be approved by the Arizona Corporation Commission, the local franchise deal and fees paid to the city must be OKed by voters here.

The agreement will go to voters on May 16. The city conducts all-mail elections.

The city wants to increase the franchise fee to 3% with a new .75% "community resilience fee" to ​​fund its Climate Action Plan, which aims to make Tucson carbon neutral by 2030, as well as to build a portion of a planned major cross-town transmission line underground.

The city has pushed the utility company to plan to underground the Kino to DeMoss-Petrie transmission line along North Campbell Avenue. The line will connect TEP’s Kino and DeMoss-Petrie substations to help power central Tucson and buildings at the University of Arizona and the University Medical Center.

Putting the line underground, rather than strung from giant poles, is expected to cost about $40 million, and the cost will be prioritized for the first 10 years of the franchise deal with the revenues from the fee. In the meantime, Tucson's Climate Action Plan will receive 10% of the revenue from the fee.

Which climate action projects are funded would be up to a committee made up of an equal number of members from TEP and the city.

"The Kino to DeMoss-Petrie line needs to be built to meet the power needs of the UA and University Medical Center," Councilman Kevin Dahl, who will have the line cross his ward, said at Tuesday's meeting. "If we approve the franchise agreement this year, then we can get started right away."

The funding of Tucson's Climate Action Plan with the franchise fee "was tacked on at the end," Dahl, who ran on a climate change platform and worked as a conservationist, said, but he added that Tucson has "done a really good job of enabling positive funding" for the plan.

Addressing climate activists Tuesday, Dahl said the goal of the new agreement was "primarily to take care of infrastructure needs."

"This agreement started out as a solution to a problem that didn't have anything to do with climate change," he said. "It had to do with getting funds for this undergrounding project."

TEP's initial plans to put the transmission lines on power poles along Campbell ran into fervent opposition from residents of the Sam Hughes neighborhood and other areas near the university.

Tuesday's meeting was attended by about 25 activists from the AZ Youth Climate Coalition, who spoke during call to the audience and held up placards reading "Delay the Vote" during the meeting. The city of Tucson and TEP also co-hosted a informational public meeting on the franchise agreement, where officials hear similar complaints.

Concerned residents and climate activists wanted more urgency by City Council to fight climate change. Ben Morse, a member of the group who spoke at both the meeting and information session, said "we don't want action in 10 years, we want action now" and was worried about the city's plans to prioritize the undergrounding.

Colleen Nichols, a Tucson resident and member of the city's Undergrounding Coalition Steering Committee, brought up the same concern at the meeting, saying people were concerned all "$5 million a year would be directed to undergrounding the project... and only that for the next 8 to 10 years."

"During that period, none of the funds would be available for climate action projects," Nichols said. She suggested that the funding period for the undergrounding project be extended another few years to put more money towards the Climate Action Plan sooner.

Mayor Regina Romero clarified that Tucson is committed to climate action but that the undergrounding is the priority, saying "the infrastructure is failing us" and that's "the reason a May election for this is so important."

"We're going to have to pay another $12 million in new infrastructure in order to delay the possibility of having another special election next year," Romero said. "That could be another $12 million thrown down the drain and that users of our electric company have to pay out of our pockets."

The additional .75% surcharge is expected to bring in an additional $5 million per year for the 25-year term, for a total of about $125 million from the new franchise agreement. Under the City Charter, that agreement first needs to be approved by voters, however.

According to estimates from the city, the added .75 surcharge being proposed would increase utility bills by different amounts based on users:

• The average residential utility bill will likely increase about $0.93 per month, more in summer months.
• “Small general commercial” users, as the city refers to businesses such as small restaurants or a dentist office would see an increase by about $2.65 per month.
• “Medium general services” includes small motels and big restaurants, among other similarly sized businesses, and they would see an increase of about $48.36 per month.
• “Large general services, which includes large department stores, large hotels and big box stores would see an increase of about $147 per month.
• A“large power user” such as Davis-Monthan Air Force Base would see an increase of about $3,777 per month.

The city of Tucson also imposes a separate 2.25% utility tax that will remain the same.

TEP will have to pay for the election, per the Charter, and it’s expected to cost them about $815,000 because of the cost of facilities, staff and equipment. Tucson will receive the money from TEP and conduct the election.