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TEP Seeks Rate Increase To Cover Five Years Of Investment In Service Quality

Stocks in this article: UNS

Tucson Electric Power (TEP) is seeking new, higher rates no later than August 2013 to cover rising service costs, including more than $1 billion the company invested over the past five years to continue providing safe, reliable service.

The rates TEP proposed today in a filing with the Arizona Corporation Commission (ACC) would increase typical residential customers’ average monthly bills by about $13, or less than 16 percent. The average residential monthly bill would remain under $100.

“Our current rates don’t reflect the significant investments and expenses we’ve incurred over the last five years to improve upon the high level of service our customers have come to expect from TEP,” said Paul Bonavia, Chairman and CEO of TEP and its parent company, UNS Energy Corp. (NYSE: UNS). “Our proposed rates will cover those costs while supporting our continued investments in renewable energy and energy efficiency.”

“We’ve reinforced and expanded our system infrastructure, upgraded our energy resources and invested in the ongoing efficiency of our operations,” Bonavia said. “Those investments have resulted in safer, cleaner and more reliable service for our customers. That added value is reflected in our proposed rates.”

These new rates would represent TEP’s first base-rate increase since 2008 and only the third such increase in the last 20 years. TEP’s base rates have risen just 8 percent since 1992 while the Consumer Price Index has increased nearly 60 percent over that time.

Other rate components such as renewable energy and energy efficiency surcharges required to satisfy state-mandated programs, and a fuel surcharge, have contributed to bill increases during that period.

TEP’s total rates lag significantly behind its service costs. TEP’s current rate structure is 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. Operating costs also have increased over the last five years due to such things as rising materials costs, cybersecurity enhancements and expanding environmental regulatory requirements. During this period, sales have remained essentially flat due in part to a weak economy and government mandates.

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