Dive Brief:
- A public takeover of Tucscon Electric Power would cost the city more than $4 billion and increase electric bills by $5.8 billion over 20 years, according to a Brattle study commissioned by the Arizona utility and published Tuesday.
- Brattle’s white paper responds to a city-commissioned study last year that concluded a takeover was feasible. A petition calling for the city of more than a half million residents to form a public utility has garnered about 4,000 signatures.
- The petition is championed by the Tucson Democratic Socialists of America, who say formation of a public utility could lower electricity rates and provide residents with local control of their energy. TEP is owned by Canadian-based Fortis.
Dive Insight:
TEP’s response to the city-led feasibility study concluded public utility ownership would be a “risky, expensive proposal [that] would threaten reliability, reduce available funding for clean energy investments, compromise economic development, and create significant new financial challenges for the city.”
According to Brattle’s analysis, the additional cost of service from a city-run utility would add $162/year to the bill of an average residential customer in its first year of operations, rising to an additional $900/year after two decades.
The 2025 city-backed study found consumers could see savings of $20/month in the early years of a city-run utility, and $90/month in later years. Those savings depend on the city purchasing TEP’s assets for around $1.4 billion — significantly lower than the utility values them.
“A government takeover of our system would be an unrealistic, unaffordable and unnecessary distraction,” TEP CEO Susan Gray said in a statement.
And TEP officials maintain residents like their electric service. A survey of 500 local residents in November and December found more than 80% are satisfied with their utility overall and more than 90% are satisfied with its service reliability, the utility said.
But less than half of those survey respondents live in the city of Tucson, public power advocates countered. They say they have spoken with a larger sample size of community members and see numbers of customers who are unsatisfied and struggling to pay rising costs.
“We are members of the Tucson community and we are part of the growing number of working class people who are struggling to pay our TEP bills in an environment that can be deadly if you can’t afford electricity,” the group said in a statement. “TEP’s study is not independent. It is bought and paid for propaganda.”
TEP says energy demand on its system could rise by more than 50% over the next decade, led in part by data centers. Despite inflation, average monthly residential bills dipped about 4% last year, the utility said.
Brattle’s report noted that a large data center has been proposed in TEP’s service area and the utility expects the additional revenue to “create rate benefits” for other TEP customers.
“Project Blue” is a proposed data center campus with an initial phase of construction representing approximately $3.6 billion in capital investment, with the first building potentially operational by 2027, according to Brattle. The Arizona Corporation Commission approved an energy supply agreement in December allowing TEP to supply the project, with multiple ratepayer protections included.
“The Project Blue agreement adds more consumer protections than required, ensuring other customers are shielded from financial risk through safeguards like minimum demand payments, credit requirements, and termination fees,” TEP said in a press release.
But public power advocates are skeptical of the utility.
“No one believes electric bills will come down with the addition of data centers to the grid,” the Tucson DSA said in a statement. “No one believes customers are highly satisfied with TEP. No one believes TEP’s accounting.”
