State regulators have approved a rate increase for Tucson Electric Power Co. that will boost the average residential bill by about $3 to $4 per month.
But while approving the new rates on Tuesday, the Arizona Corporation Commission put off approval of new TEP energy-efficiency programs that have been awaiting an OK for more than two years amid concerns over costs.
The original rate settlement would have increased rates by less than $3, down from $11 that TEP originally requested. That figure rose because the Corporation Commission voted to fund limited energy-efficiency programs through an increase in an existing surcharge for "demand-side management" programs.
Based on initial calculations, the rate deal will boost the average monthly TEP residential bill by $3.66, or 4.4 percent, to $86.02. The new rates, which go into effect July 1, are the first change since TEP's rates were frozen in the last rate settlement in December 2008.
On Tuesday, the Corporation Commission approved on a 4-1 vote an amended version of a settlement reached among TEP, the commission staff and other parties.
Besides boosting base rates, the settlement:
• Allows TEP to simplify its rate structure by eliminating many rates that are no longer offered to new customers; ratepayers on some time-of-use rates and other rates will be automatically enrolled in new rate plans.
• Allows TEP to recover more fuel costs from base rates and reduces a monthly surcharge that covers purchased power and fuel costs (initially creating a credit).
• Adopts a new "environmental compliance adjuster" to cover more than $300 million in costs expected to stem from new federal environmental regulations on coal-fired plants. The surcharge must be justified and is capped at 0.25 percent of total TEP retail revenue.
At Tuesday's commission meeting, amendments offered by Commissioners Brenda Burns and Gary Pierce removed from the rate settlement TEP's latest plan to meet a state energy-efficiency mandate.
Instead, the commission decided to keep only those energy-conservation programs that it has previously approved, while suspending consideration of nine new programs until new hearings on the cost-recovery issue are held. A surcharge adopted to pay for the energy-efficiency programs is due to go into effect in July 2014.
The lone commissioner on the all-Republican commission to vote against the rate settlement, Susan Bitter-Smith, said she supported most of the agreement.
But Bitter-Smith said she opposed any further delay in approval of TEP's energy-efficiency plan, citing comments from many TEP customers who told the commission they were eagerly awaiting the new programs.
Under standards unanimously approved by the Corporation Commission in 2010, TEP is required to achieve cumulative energy savings of 22 percent by 2020.
TEP suspended some of its energy-efficiency programs last year when the commission repeatedly put off approval of the plan amid concerns over ratepayers' costs to reimburse the utility for lost sales. The commission has previously granted cost-recovery mechanisms to Arizona Public Service Co. and Southwest Gas Corp. for their own energy-efficiency plans.
Under the plan approved Tuesday, existing TEP energy-saving programs such as low-income home weatherization, discounts on shade trees and incentives to upgrade home cooling systems will remain available.
Nine proposed new programs - including appliance recycling incentives, residential energy-efficiency project financing and an incentive program for schools - are on hold pending further hearings.
Several TEP ratepayers trekked to Phoenix to urge the commission to adopt the long-delayed energy-efficiency plan.
TEP ratepayer Dan Millis said he's interested in working with his landlord on energy-efficiency improvements to his rental home.
"I have one of these old houses, with an addition and no insulation between it and the house, so obviously we need to address some energy-efficiency improvements," Millis said. "I don't mind if my electric bill gets a little bit higher, because that benefits everyone and supports clean jobs in the community."
TEP customer Jim Hannan said he views expanded energy-efficiency programs as an investment that will pay dividends for years by reducing energy use and slowing the need to build new power plants.
But Hannan said he opposed the rate settlement because it will increase the basic monthly service charge to $10 from $7, noting that because it is a fixed charge, customers can't avoid it by conserving energy.
More than 200 consumers filed written comments opposing the increase, many zeroing in on the basic-charge increase.
"As someone who doesn't use a lot of energy, this is really a hit," said Hannan, who said he lives on a fixed income.
Hank Krzysik, a Tucson architect who has worked on energy-efficiency projects for local churches through the Pima County Interfaith Council, said such projects help fulfill a sacred obligation to protect the planet.
But Krzysik also opposed the increase to the fixed service charge, saying, "This will be a hardship on many people."
TEP had contended it needed an increase in the fixed charge to cover fixed costs, as the still-struggling economy has tamped down energy demand and crimped customer growth.
TEP customers who are part of the utility's Lifeline rate program for low-income ratepayers will see a smaller increase of $2 to $3 monthly, according to the rate settlement.
Contact Assistant Business Editor David Wichner at firstname.lastname@example.org or 573-4181.