In 2024, Tucson’s weather broke records for the hottest July and October and for 109 consecutive days of triple-digit heat.
As the climate heats up, Tucsonans have a growing need for cooling power, even as rates rise and the region struggles with a higher poverty rate than both the state and country.
At the same time, Tucson is working to meet climate goals that include a shift toward renewable energy. The city aims to be community-wide carbon neutral by 2045, which means balancing how much carbon is put out with the amount absorbed by natural or artificial means.
On Wednesday, the Tucson city council heard an update from a study on two options that could address these dynamics: converting the current electricity provider into a public utility, or providing the power alongside Tucson Electric Power’s delivery services.
The analysis of the two options is being conducted by GDS Associates, a consulting and engineering firm based in Georgia.
The most significant of those would be the public power option, which would end Tucson’s relationship with Tucson Electric Power. TEP, which is owned by Canada-based energy delivery company Fortis, announced a rate hike of about $11 a month for the average customer beginning in Sept. 2023, but that is on top of rising rates over the last decade.
Wednesday’s meeting put forward an initial cost for some of the public utility portion: $820 million to purchase the city’s share of the TEP plant.
As the feasibility study has moved ahead, a group of organizers with the Democratic Socialists of America have launched a campaign for the public power option. Since October 2024, the group has shared flyers around the city, spoken at public meetings and delivered a petition with around 1,800 names in favor of the option.
Lee Ziesche, with the group, says they understand the cost seems high but with energy costs growing, having a public utility is the best way to protect residents in an uncertain climate future.
TEP’s analysis of energy needs is that peak demand requirements will grow at about 1.5% annually, according to the analysis update shared Wednesday. That means “the cost of power supply will increase to all customers regardless of utility provider.”
Study shows complex nature of utility services
The initial draft of the study shows a breakdown of costs for both the public power and community choice option, and how close they would get the city to its green energy goals.
Under the public power utility option, the city would own and operate electric distribution. That transition would include buying current TEP assets, procuring a power supply and considering what to do with ongoing TEP power purchase agreements.
“The Public Utility could purchase energy from third parties, or the Public Utility could purchase output from TEP-held resources,” the report said.
The cost of purchasing the city’s share of the TEP plant is estimated at $820 million, the report said. That’s in line with the cost of a new jail proposed for Pima County, which reports said would cost over $800 million; the effort was tabled in 2024.
That option also includes costs to separate from the Tucson system. “We will be leaving about half of the customers with Tucson Electric, so we have to make sure those customers are not worse off from the city leaving,” said Amber Gschwend, managing director with GDS Associates.
TEP spokesperson Joe Salkowski told Arizona Luminaria that TEP was reluctant to comment on the figures cited in Wednesday’s analysis because the full cost to switch to public power would include a range of fees and other considerations that would likely push the cost above the estimate for the TEP plant.
“The consultant has not yet offered the city even an estimate of the total cost of acquisition, or the legal fees and other expenses that would be needed to close a transaction,” said Salkowski. “When a government seizes assets through condemnation, the owner must be compensated based on the market value of the acquired assets, as well as for other costs that result from acquisition.”
Still, GDS Associates estimates the public power option would move the city to 50% renewable energy as soon as 2028, and 100% greenhouse gas free by 2045. “Right off the bat, the city would be providing greener power supply to its citizens,” said Gschwend.
With a Community Choice Aggregation program, Tucson would provide the power supply portion of electric service while TEP continues to provide transmission and delivery services. Of every dollar of current TEP residential rates, 30 cents covers delivery services, while 70 cents is for the power supply.
That model gives local communities more control and often better access to green energy options, according to the Environmental Protection Agency. LEAN Energy, a nonprofit tracking the transition to green energy, reports that Community Choice Aggregation programs are currently authorized in 10 states, including California and Illinois.
The community choice option is also stymied because it would require the state legislature to pass a law enabling localities to choose Community Choice Aggregation as an option.
Mayor Regina Romero, speaking at Wednesday’s meeting, shared her concern about investigating an option that wasn’t immediately viable. “With community choice not being possible, how do we move from that?” she said. “We have no capacity to influence the state legislature. I’d like to make sure the feasibility study is clear in terms of cost and what the city cannot do.”
Public power offers strong step toward renewable energy
As part of its study weighing these two options, the firm requested data from TEP that included system asset maps, customer accounts, rate info, and operational costs. Those numbers offer a snapshot of electrical customers inside Tucson city limits: there are approximately 250,000 customers. Tucson’s TEP-related electricity usage peaks during the month of August, the preliminary report said.
Tucson Electric Power gets about 30 percent of its energy from renewable sources, and the rest from fossil fuel power plants, according to Tucson Resilient Together, the city’s climate action plan. TEP plans to transition away from coal by 2032, and increase its renewable energy share to 70% by 2035, the report said.
The study also notes that, whatever option Tucson chooses, it will take several years to become fully operational but would be a strong step toward offsetting greenhouse gases (referred to as GHG in the report). “Our base scenario provides 50% renewable energy in the first year of operation, and it achieves the 2045 GHG neutrality goal by purchasing a combination of renewable energy and GHG offsets.”
The next part of the energy analysis will be a virtual public workshop in February to give the public a chance to weigh in before the next report. In March, the city is expected to publicly share an initial draft of the results. The final report is expected in May.
Paul Cunningham, of Ward 2, said he is interested in learning about the public power option but hopes it can open the conversation for more local microgrids, which he argues would offer residents renewable energy without the high cost of buying a power grid or taking on any of TEP’s debt in the sale.
The small, local electrical systems can either operate independently or connect to a larger power grid, and can help with local power generation, according to the National Renewable Energy Laboratory.
“Whether or not the purchase of TEP is feasible or not, it’s worth looking into, but it absolutely opens the door to consider the city starting its own municipal power alternatives.” Cunningham said he’d be interested in solar energy on roofs as well as neighborhood-level microgrids.
Butler said along with the two main options, the firm was also looking at solar service agreements and city microgrids.
When the initial report comes out, the analysis will gauge both the cost of the project and whether the energy option delivers lower rates to customers.
TEP spokesperson Salkowski says they will continue to cooperate and share data for the study, but warned about the outcome for customers of Tucson taking over power operations. “We are confident that a government takeover of electric service would result in higher rates for TEP customers and much higher costs for local taxpayers,” he said.
The Democratic Socialists of America Tucson chapter say they will continue to push for the public power option.
Ziesche points to Winter Park, Florida as a success story. The town split from its utility company in 2005. Since then, the city has more than 14,000 energy customers and paid back the $14 million advanced by the city’s general fund for the purchase, The Orlando Sentinel reported in 2015.
“We’re gonna keep talking to people out in the streets of Tucson because most people still have no idea that TEP is owned by a Canadian corporation,” said Ziesche. “When they find out, people from all walks of life and political backgrounds seem to be on board with a public takeover.”
Meanwhile, a looming deadline for a decision from the city is the expiration of its contract with TEP, which will end in April 2026. Voters would have to approve an extension of the agreement, according to city documents. A 2023 ballot measure to approve this renewal failed to pass.
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