Tucson officials debated Tuesday whether the city should move toward public ownership of its electric system as a franchise agreement with Tucson Electric Power nears expiration.
The city manager’s office presented four potential options to the mayor and city council, ranging from small-scale developments for new construction to a full acquisition of existing TEP infrastructure.
Ward 6 council member Miranda Schubert, opened the discussion with a background on the interest in public power that has only risen with the potential increase in electricity prices and debate over the massive Pima County data center known as Project Blue.
“So far, nearly 1,600 people have written to the mayor and council thanking them for the feasibility study and rejecting Project Blue and asking us to move forward exploring public power,” Schubert said.
The city’s 25-year franchise agreement with TEP is set to expire this year after voters rejected a proposed renewal in 2023. The agreement allows the company to utilize city property to operate but is not necessary for TEP to sell electricity to its residents.
TEP is also asking the Arizona Corporation Commission to approve a rate hike that would raise residential bills an average of 14% this fall. Arizona Attorney General Kris Mayes opposes the increase, calling it “blatant corporate greed.”
The discussion led to a failed motion by Schubert, who wanted an update on public power from the city manager’s office in 90 days discussing the path to public ownership of power, including full ownership. Vice Mayor Lane Santa Cruz instead successfully proposed a motion to keep the discussion over public ownership of power in the hands of the city’s Commission on Climate, Energy, and Sustainability.
Fatima Luna, the city’s chief resilience officer, opened a presentation about options, acknowledging public sentiment on power in the city.
“We are consistently hearing concerns about raising energy costs, a desire for a more long-term certainty, interest in aligning our energy supply with climate goals and a broader interest in local control,” Luna said.
She, along with Michael Catanzaro, the city’s energy manager, presented the following four options:
Get involved
Provide comments to the Arizona Corporation Commission about TEP’s rate-hike request at the following public meetings. In-person meetings will be held at the ACC’s Tucson office at 400 W. Congress, Room 222. For telephone-only, call 1-877-309-3457 and enter code 24601833204##:
- Thursday, March 19, 5:30-8 p.m., telephone only
- Monday, March 23, 10 a.m. to noon, in-person and telephone
- Wednesday, April 1, 5:30-8 p.m., in-person and telephone
- Tuesday, April 7, 5:30–8 p.m., telephone only
- Wednesday, April 22, , beginning at 10 a.m., in-person and telephone
Find future meetings and agendas for the Commission on Climate, Energy, and Sustainability here
Attend future Tucson City Council meetings and speak during the public comment section, schedule available here
Contact the mayor or your council member. Contact information is available here
1. Community choice aggregation: In this model, the city would take on the role of procuring power for residents and businesses within its jurisdiction. This allows the community to have more control over their energy supply without necessarily owning the distribution infrastructure. Luna said this model is not currently legal in Arizona but is on the legislative agenda.
“Until the state law changes, this option is not immediately available to us. So this is more of a long-term policy consideration than an operational one at this moment,” Luna said.
2. Municipal utility serving an existing city facility: This option involves establishing a municipal utility specifically to serve a single, large facility owned by Tucson. This approach is designed to create a controlled pilot environment, allowing for operational learning before a potential expansion.
“This would be a controlled low-risk environment. It would support resilience infrastructure because there would no doubt be batteries and some other things associated with it,” said Catanzaro. “It would allow internal testing of some of the utility functions like billing, procurement of power and those things.”
3. Municipal utility for new development: This option would allow Tucson to create a city-run electric utility for new neighborhoods or development areas built from scratch. Under this option, Tucson would be responsible for constructing and owning new distribution infrastructure, as well as procuring wholesale power for the development.
“This utility would be formed specifically for a new subdivision, district or campus. The infrastructure would be built from the ground up,” Catanzaro said.
Ward 4 council member Nikki Lee said this option appealed to her, especially with development in her ward.
“Being in Ward 4 and seeing houses going up in neighborhoods of 1,500 homes or more at a time or a lot of state land that could be used for large high-wage long-term job employers,” she said. “I see potential there.”
4. Full municipalization of TEP inside city limits: This is the most comprehensive option, where Tucson would become the retail electric provider for the entire area within its limits. This would entail a full acquisition of TEP distribution infrastructure. This is also the most costly option.
“Some of the characteristics or challenges with that is the asset valuation,” Catanzaro said. He noted that according to a study procured by the city, it would cost between $1-3 billion to acquire TEP infrastructure while TEP has estimated their value at $4 billion. The company released their own report highlighting the infeasibility, saying it would “increase electric bills in the city by $5.8 billion over 20 years.”
Mayor Romero was among the many who spoke against the idea, especially in the immediate future..
“To be honest with you, I’m not interested in purchasing TEP’s infrastructure. I’m not,” she said. “I don’t want to spend 10 years and the possibility of $4 billion. It just would be an exercise in futility.”
Rather, she said, she wants to approach public ownership “Tucson’s way” by creating a plan or a map.
Luna said that feedback from several community town halls have informed an energy collaboration agreement and franchise agreement whose drafts are set to be released for public comment soon.
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