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What Tucson Electric Power’s Proposed 2023 Rate Increases Mean for Solar Customers

The basics of TEP’s rate proposal

Back in June of 2022, Tucson Electric Power (TEP) filed an application with the Arizona Corporation to increase their rates for electric service. According to TEP, this rate increase is to account for increased costs, allow them to transition to cleaner energy sources, and allow them to better support the communities they serve. Other stakeholders such as ratepayer advocates have different perspectives, of course.

For residential customers, the proposed rate increase would be quite significant. It would raise bills on average around 12%, or about $14/month. Small residential users would see a slightly smaller increase, averaging around 11% or $12/month, while some large homes would see a 16% increase or more, with an average monthly increase of $35-45.

For commercial customers, small and medium sized businesses would experience similar percentage increases in their average monthly bills, while larger businesses would experience closer to a 6% monthly increase.

What Specific Changes is TEP Proposing?

For residential electric customers, your power bills typically have three components: Fixed charges, energy charges, and taxes & fees, as shown in the image below.

Fixed charges are pretty simple to figure out–you just pay that amount each month. TEP calls this charge the Basic Service Charge. For residential customers, TEP is proposing to increase these fixed charges by $2.00 each month. Most homeowners with TEP currently pay either $13.00/month for the residential basic plan or $10.00/month under the time-of-use plan.

Energy charges (often called “volumetric charges”) get a lot more complicated. These charges are based on the energy you buy from your utility. Depending on the specifics of each utility tariff, you might pay more for energy you use in summer compared to winter, or pay more for energy used during particular “peak” times during the day.

Many utility companies (including TEP) also have what are called “inclining block rates.” 

For example, the image below shows the summer rates proposed for TEP’s residential basic plan:

This means that when you use over a certain amount of energy each month, each additional amount of energy will cost you more per kWh. For example, very small users who only use 500 kWh/month would pay 14.35¢/kWh. But larger users would pay 16.50¢ for each additional kWh 3 they use in the 501-1,000 kWh block, and any kWh over 1,000 used in a month would cost 17.29¢. Although I’m only showing summer rates for clarity, there is also a difference in price depending on time of the year, and energy is more expensive in the summer.

For the residential basic plan that many non-solar homeowners use, TEP is proposing increases to the volumetric rates from around 12.5¢ to 15.5¢ for a typical customer–a significant increase! 

For the residential time-of-use rate that solar customers not on net metering must use, the volumetric rates are more complicated. This rate has an inclining block structure and seasonal differences, but also has peak and off-peak periods. As you can see from the image below, TEP is proposing that electricity would cost a lot more in the summer months during on-peak periods.

These are significant increases from the current rates. Currently, customers on the residential time-of-use rate pay a maximum of around 15¢/kWh for summer peak rates, with off peak and winter rates around 11-12¢/kWh.

Last, we have taxes, fees, and adjustments. They usually scale with the size of your bill, and can be between 5-20% of your total bill. They include things like state sales tax, city sales tax, fees to support the Arizona Corporation Commission, and adjustments for higher or lower fossil gas prices.

TEP is proposing several changes to the fees and adjustments on your bill, which they often call “Riders.” They are proposing eliminating Environmental Compliance Adjuster (ECA), the Renewable Energy Standard Tariff (REST) charge, and the Demand Side Management (DSM) charge. In place, they propose a new “Resource Transition Mechanism.” TEP says this fee would be used to facilitate lower-carbon resources and gradually pass these costs on to customers. TEP is proposing this charge be capped at 3% for now.  

How would TEP’s proposed rates affect existing solar customers who have net metering?

Solar customers who submitted an interconnection request to TEP prior to October 2018 had the option to use net metering. To learn more about how net metering works with TEP electric bills, see our post from 2017.

Because customers can stay on net metering for twenty years from the date of their installation and net metering stays with the house even if you sell it, there are still plenty of customers who have net metering.

Net metered customers would see an increase in their monthly fixed rates from $10.00 to $12.00. They would see the REST surcharge (currently $6-8 a month) go away, but other charges and fees would increase.

However, if you have a net metered solar electric system and your solar electric system produces 100% of the electricity you use in a year, you would experience a fairly small increase in your overall electricity bills.

If you have a net metered system and produce only a portion of your electricity use from solar, you’ll pay increased charges of around 11-15% on the net monthly electricity you purchase from TEP. 

What would the effects be for solar customers with export rates?

Newer solar electric systems have what we call export rates. These systems work in three different “modes” during a typical day – grid use, self-generation, and energy export. To better understand, please see our infographic.

TEP’s proposed rates would affect each of these modes in different ways.

First, let’s tackle grid use, when we’re importing energy from the grid. Solar customers would see the full increase in rates for this portion of the energy they use, with proposed increases in the 11-15% range, depending on how much energy they import from TEP. And on top of this, they’ll pay taxes and fees on any electricity they import. Not great.

Next, let’s look at self-generation (also called self-consumption). In this case, a home is producing energy from the sun, and using it immediately in the home. This reduces the need to purchase expensive electricity from TEP, saving customers more money if the proposed rate increases are approved.

Let’s now look at exported energy. Under TEP’s export rates, solar homeowners are paid a fixed rate for any energy they send out to the grid. This rate is fixed for ten years based on when a solar customer applied to interconnect their solar electric system with TEP’s grid. So even though electricity rates would be higher for energy TEP sells to you, they won’t pay you more for energy you sell to them. 

The image below shows the average prices for imported and exported energy for solar customers with export rates:

Last, like net metered customers, customers on export rates would see increased fixed charges of $2.00/month, but would no longer have to pay the $6-8 monthly REST surcharge.

The end result of the proposed changes is that all solar customers wouldn’t have as large of an increase in their power bills as folks without solar on their homes if the proposed rates are approved. However, all residential TEP’s service territory should expect at least small increases in their bills, even with solar.

How about for homeowners who install solar in 2023 or later?

For new solar customers, the effect of proposed rates would be similar to those experienced by current customers on export rates. Higher rates means higher savings from solar, but also higher cost for any energy imported through grid use. This means that solar becomes a more attractive option, both for current savings, but also as a hedge against any future increases in electricity prices.

For a home with average energy use that consumes 9,641 kWh per year, our preliminary modeling shows simple payback times for new solar installations will likely drop by about six months on average. For larger residential users that consume 18,741 kWh per year, we estimate that simple payback times may drop by as much as 3.5 years.

What happens next?

The rate case is currently moving through the Arizona Corporation Commission. Various stakeholders such as ratepayer advocates, large businesses like Walmart and Kroger, community groups, and solar organizations have “intervened” in the rate case. This means they are able to request data from TEP, fully participate in various hearings with judges and the ACC, file expert testimony, and respond to TEP and other stakeholders throughout the process. You can read all the filings on the rate case docket.

The administrative law judge in the case has also set out a schedule for the rate case. She’s scheduled several public comment sessions (the first tomorrow, February 21st), where TEP customers and other stakeholders can make comments via phone, or for some dates, in person at the ACC’s Tucson offices. 

The judge has also scheduled thirteen days of hearings starting March 29th, at the ACC’s Tucson offices. After final public comments are given on the first day, TEP, ACC staff, and intervenors will give expert testimony, and the same parties will be able to cross examine these expert witnesses.

From there, the case will go to the ACC for a vote, or if TEP, ACC, staff and intervenors agree, they may propose a negotiated settlement to be presented to the ACC for approval.

Questions? Please comment below!

Is Your Arizona Solar Installer Telling You the Whole Story?

It’s a great year to go solar! Prices for installation have never been lower. We have high-quality equipment that is designed to last for more than a quarter century, with 25-year warranties for solar modules, energy conversion equipment, and racking products.

Solar electric systems installed before the end of 2019 are eligible for a full 30% federal tax credit, as well as a $1,000 Arizona tax credit.

But before you sign a contract with a solar installer, make sure that they thoroughly understand how solar can save you money, and that your installer has done their homework before giving you a quote. Read on to learn how solar has changed in Arizona, how you can put it to work for you, and how to avoid being taken for a ride by a shady solar contractor!

A solar electric system installed on the west side of Tucson.

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TEP is Now Providing Customers Easy Access to their Energy Data

Great news! Tucson Electric Power is now complying with Arizona Corporation Commission’s decision from September 2018, requiring that TEP provide “the hourly load data of its customers available in an easily downloadable file from its website” within 60 days, or tell the ACC why they can’t provide this to customers.

TEP has been providing interval data through a clunky request process and providing the info by email (and waiving data request fees), but this has been taking up to ten days, and is certainly not an easily downloadable file! 

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3 Years of Solar: Summary of my 3rd Year with a Solar-Powered Home

In this guest post, Justine Schluntz shares an update on her experience living with solar, after three years of producing clean energy. Thanks Justine!

January 14 marked the 3-year anniversary of my solar PV system getting connected to the grid. Each of the past two anniversaries, I’ve written up a summary of my solar data for the year and shared it here (click for year 1 data and year 2 data). My love for numbers hasn’t gone away and neither has my goal to help others learn more about solar energy, so I’ve decided to continue the tradition and share my system and cost data for a third year.

Schluntz Solar Electric System

Before I continue, it’s important to note that the financial picture for residential solar energy in Arizona has changed since I had my system installed in 2015. This means the numbers I report for costs won’t be consistent with numbers for someone installing a system in Tucson this year. Nevertheless, for many people, solar energy can still be a sound decision from a financial standpoint. If you want to find out what the numbers look like for your home, I encourage you to talk to the very knowledgeable staff at Net Zero Solar, the company I got my system from…

Proposition 127, the Clean Energy for a Healthy Arizona Initiative

We’ve shared a lot of info on Prop 127 on our social media and in a August blog post, but we wanted to directly address some of the recent questions we’ve heard.

We have quite an opportunity on November 6th to transform our energy use here in Arizona! Proposition 127 would require 50% of energy sold by most electric utilities in Arizona to be renewable by 2030!

We strongly support Proposition 127. Ideally, it would not be necessary to put such a measure in the AZ Constitution, but due to the influence of lots of utility money at the Arizona Corporation Commission, it’s our best path to a clean and cost-effective energy future. A 50% renewables will be a good step for a state like Arizona that has a lot of great renewable resources, and the timeframe is reasonable for implementation. It would also create about 16,000 new jobs!

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Let’s Change Arizona through Energy Policy!

A Critical Part of Our Future

When you hear “energy policy,” what comes to mind? Do you think of lawyers and regulators sitting in drab rooms, interminable questions about arcane matters, and stacks and stacks of paper, with all this conducted over months and months? Does “boring” seem a fitting descriptor?

In some sense, this is true. Energy policy, like any public policy, is typically a long, deliberative process, conducted within a legal framework, with many stakeholders who hold diverse opinions. If we focus only on the process, it can seem boring. But that’s wrong. The illusion masks the actual nature of energy policythis work is how we get to a better energy future! We have the choice to fundamentally change how we generate and use electricity, or to remain in the old paradigm that no longer serves either the desires of consumers or greater societal goals.

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What’s the Status of Net Metering for TEP & UNS Electric Customers?

A solar electric system installed in Tucson.

Update Wednesday, September 5th, 2:25pm. The Arizona Corporation Commission has placed consideration of TEP and Unisource Electric rate cases on the agenda for their September 11th-12th Open Meeting. At least until the ACC makes their decision, customers can continue to submit applications for solar electric systems with net metering.

Net metering for TEP and Unisource Electric customers has been a long saga. Although we expected net metering to disappear early in 2018, the case has dragged on due to a variety of factors.

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Net Metering Finally Ending in Tucson

Update, 7:50am, Wednesday, June 13th: I supposed we may have cried wolf again. In an unexpected move, Commissioner Andy Tobin pulled consideration of the item yesterday afternoon, after a vigorous discussion. We are glad that he and the rest of the Commission are carefully considering how their actions would affect consumers and solar installers in Tucson. We’ll let you know when this is again scheduled at the ACC. In meantime, net metering is still available for TEP customers.

Some days, we feel like the solar folks who cry wolf. Over the past several months, we’ve told you that net metering for Tucson Electric Power customers will end on several different dates. Initial expectations were that the case would be completed in January or February. The Arizona Corporation Commission (ACC) even put it on their April open meeting agenda, but later pulled it from consideration.

But unless something happens before next Tuesday, June 12th, at 10:00am, we’re finally at the end of this long process. Items 22 & 23 on the ACC’s agenda are their “Order Relating to Phase-2 Rates” for UNS Electric and Tucson Electric Power.

A ground mount solar electric system installed in Tucson

I won’t rehash our specific thoughts on this case, but we would invite you to read our post from April, Rate Case ReckoningRead More

New TEP Bills Provide Inaccurate Suggestions for Solar Customers

Friends with solar electric systems on Tucson Electric Power’s grid, you might have heard about TEP’s new bill design.

Unfortunately, these bills provide inaccurate information for solar customers on net metering. Under their “2 Ways to Save” section, TEP suggests switching to time-of-use and/or demand rates. You can see what it looks like on the left side of the image below.

A recent TEP bill for a solar customer with net metering.

Very few (if any) solar customers will save money by switching to these rates, and it’s a bad idea to switch without doing a detailed analysis of the impact on your bills. We strongly recommend you remain on your standard residential net metering rate to preserve your solar savings.

For more information on TOU rates and residential demand charges, see our infographic,  What’s a Residential Demand Charge.

Questions? Ask them in the comments below.

Rate Case Reckoning

Update, 12:50 pm, June 5th.  The Arizona Corporation Commission has scheduled consideration of Phase II of the TEP and Unisource Energy rate cases for their June 12th Open MeetingAt least until the ACC makes their decision, TEP and UNSE customers can have their contractor submit a complete interconnection application to be “grandfathered” on net metering for twenty years.

April 26th, 2018. The day is almost upon us. After years of legal wrangling and public discussion, our elected Arizona Corporation Commissioners are expected to make their decision on the future of rooftop solar for Tucson Electric Power customers. Chairman Tom Forese and commissioner Andy Tobin will weigh in on the policies they approved in the December 2016 decision on the value of solar. Commissioner Bob Burns, who dissented in the value of solar docket will express his preferences. Newer commissioners Boyd Dunn and Justin Olson will also vote.

What will they be considering? A “Recommended Opinion and Order” (ROO) from the ACC’s Chief Administrative Law Judge, Jane L. Rodda. This 134-page document provides background on the case, including the position of TEP, solar companies, ACC staff, and other parties. More critically, it includes Judge Rodda’s careful conclusions regarding how each issue in the case should be resolved. However, the Commissioners can modify any aspect of the ROO at the planned hearing.

A Rooftop Solar Electric System in Tucson

The Good, the Bad, and the Unknown

Based on the decisions made in the Value of Solar Docket, we have known for some time that most Commissioner’s support for increased renewable energy is lukewarm at best. This is puzzling in a state like Arizona with an excellent solar resource, where the public overwhelmingly supports increased solar energy. I have found Judge Rodda to be an extremely thoughtful and intelligent public servant. Her duty is to evaluate the legal and policy issues raised in the value of solar and rate case dockets, and implement the ACC’s policy decisions. Read More