Public utility debate continues as TEP calls feasibility study “flawed”

Environmentalists and city leaders are debating whether Tucson should buy the city’s electric grid from the Tucson Electric Power.

Consulting firm GDS Associates, Inc. released its initial feasibility study last week that suggests public control of Tucson’s portion of TEP could lower consumer costs and help the city accomplish green energy goals, but will likely face a logistically challenging transition if voters approve it.

In response to the study, TEP released a statement saying the report was “flawed,” and “misleading,” and that the consulting firm underestimated the amount of time and money it would take to establish a publicly owned power company.

“The study seems intent on driving a wedge between the City of Tucson and TEP at a time when we should be working together to address our city’s long-term needs,” CEO Susan Gray said in a press release.

Matthew Butler with GDS Associates defended the report in a public forum, and said that delays usually occur when a private utility company resists.

“In these circumstances, that timeline, and any difficulties associated with that timeline, is typically driven by how much the incumbent utility fights back,” he said. “To the extent that they want to fight a lot and be adversarial to the city’s interest to pursue what we consider their right to pursue, that would be the basis for why any kind of timeline estimates that we’ve included would be pushed out.”

A petition in favor of the public utility option, organized by Tucson’s chapter of the Democratic Socialists of America, has about 3,400 signatures. The group has criticized TEP’s recent rate hikes, and claims that public utilities will lower energy costs in the hot summer months.

56% of TEP’s customers live in the city. The cost for the Tucson to take over those roughly 250,000 customers is estimated to be about $820 million, according to the firm.

Senior Communications Director for TEP Joe Salkowski said the study’s most crucial error is the estimate that a condemnation and takeover process would take two and half years.

“Every cost calculation in the study flows from that mistake, and as a result, the city has been provided with a very unrealistic study that does not give it an accurate picture of the cost and consequences of trying to take over the local utility system,” he said.

The report also explored other options, such as solar service agreements and microgrids.

One of those options, known as Community Choice Aggregation, allows areas to buy electricity on behalf of their residents and offers more control over the energy source. TEP would still operate the physical infrastructure.

This method is not currently legal in Arizona, and would require policy changes and oversight from the Arizona Corporation Commission to happen.

At their April 23 meeting, the city council unanimously approved a special election for a new franchise agreement. The election will happen as long as TEP and the city agree on terms before July 1.

Michael Cantanzaro, Energy Manager for the City of Tucson, said a new franchise agreement is almost inevitable, as municipalization is unlikely before the current agreement expires. But, he said the public utility conversation can continue even with a new agreement.

“They are not mutually exclusive,” he said.

TEP spokesman Salkowski said TEP is looking forward to finalizing a new agreement with the city.