ACC Approves New Rates, Energy Efficiency Programs for TEP Customers

The Arizona Corporation Commission (ACC) has approved new rates for Tucson Electric Power (TEP) customers that will take effect on July 1.

The new rates include TEP’s first base rate increase since 2008. Early this year, TEP and ACC staff entered into a settlement agreement that was endorsed by more than a dozen groups including representatives of customers, low-income residents, organized labor, homebuilders, advocates of energy efficiency and renewable energy and other interests. The new rates will allow TEP to recover costs of investments that have resulted in greater system reliability and improved safety performance.

“Nearly 20 parties were involved in settlement discussions and the majority of them signed on with their support,” said Paul Bonavia, Chairman and Chief Executive Officer of TEP and its parent company, UNS Energy Corporation (NYSE: UNS). “The settlement process was open, transparent and inclusive, satisfying many diverse interests.”

The average monthly bill of a residential customer with average usage of about 800 kilowatt hours (kWh) is expected to increase by less than $4.

“This modest increase will allow us to continue improving reliability and investing in our infrastructure, which delivers value, comfort and convenience to our customers every day,” Bonavia said. “Our new, simplified rate structure will help to reduce confusion and allow our customers to more easily choose the best rate options for their lifestyles.”

TEP’s new rate structure includes simplified time-of-use rates that allow customers to pay less for power at certain times of the day. Customers on some time-of-use rates and other rates will be automatically enrolled in new rate plans. Customers can level out their monthly bills by participating in TEP’s Budget Billing program.

Customers can partially offset monthly bill increases associated with higher base rates by participating in one or more of the company’s energy efficiency programs. The ACC will hold a proceeding at a later date to discuss issues related to energy efficiency.

As part of today’s approval, TEP’s Purchased Power and Fuel Adjustment charge will initially appear as a credit on customers’ bills. Low income customers will benefit from increased bill payment assistance support from TEP.

Two new surcharges, both of which may only be adjusted by a limited amount each year, will help smooth out future bill impacts by giving customers the opportunity to adapt to modest changes in their monthly bill. The new Environmental Compliance Adjustor, which will allow TEP to recover the costs of complying with environmental standards required by federal or other governmental agencies at TEP’s generating plants, will not take effect until May 2014. The Lost Fixed Cost Recovery mechanism, which allows TEP to recover certain non-fuel costs, will not take effect until July 2014.

TEP filed a request for new rates in July 2012. The new rates represent only the third base rate increase in the last 20 years. TEP’s previous rate structure was based on costs incurred by the company in 2006. Since then, the company has invested more than $1 billion to strengthen its distribution system, upgrade its power plants and make other improvements to serve customers’ needs.

During that time, employee safety indicators have improved, average customer outage times have fallen and power plant availability has increased. In 2012, TEP’s Occupational Health and Safety Administration (OSHA) rate of recordable injuries and illnesses was just 1.27 per 1,000 employees. The company’s average customer outage time decreased by more than 20 percent while company-owned power plants were available to produce power for customers nearly 90 percent of the time, a three-point increase over 2011.

Tucson Electric Power provides safe, reliable electric service to approximately 406,000 customers in southern Arizona. To learn more, visit tep.com. For more information about TEP’s parent company, UNS Energy (NYSE: UNS), visit uns.com.