Company Announcements

• A City of Tucson takeover of Tucson Electric Power’s local grid would cost city taxpayers more than $4 billion and increase electric bills in the city by $5.8 billion over 20 years, according to an independent analysis commissioned by TEP.
• The risky, expensive proposal would threaten reliability, reduce available funding for clean energy investments, compromise economic development, and create significant new financial challenges for the city.
• Most residents are very satisfied with TEP and the reliability of its service, according to an independent survey commissioned by TEP.

TUCSON, Ariz.--(BUSINESS WIRE)--Feb. 24, 2026-- Tucson Electric Power (TEP) warns that a potential takeover of its local energy grid by the City of Tucson would be astronomically costly, financially infeasible, and deeply damaging to the reliability and affordability of our community’s energy service.

It would cost the city more than $4 billion to acquire TEP’s electric distribution system within city limits to establish a municipal utility, according to a study conducted by The Brattle Group for TEP. Paying off that debt and covering other costs necessary to provide service would drive rates much higher than the projected cost of continued service from TEP.

The additional cost of service from a city-run utility would escalate over time, from an extra $162 per year per average residential customer in its first year of operations to an additional $900 per year after two decades, the study found.

“These latest findings reaffirm what we have consistently stated: A government takeover of our system would be an unrealistic, unaffordable, and unnecessary distraction,” said TEP CEO Susan Gray.

“Pursuing this course would place an enormous financial burden on Tucson families and businesses while undermining the safety, certainty and stability of a critical service that our community depends on.”

Steep Unnecessary Costs

The Brattle Group conducted a thorough feasibility study with data provided by TEP. By contrast, the preliminary feasibility study provided to the City of Tucson last year by GDS Associates, Inc. and Best Best & Krieger LLP dramatically understated the time of a potential city takeover. It also understated the cost of acquiring TEP’s infrastructure and overstated its future rates.

For example, that study assumed a municipal utility could begin operating in January 2028. But seizing TEP’s local assets would require voter approval and lengthy legal proceedings, a process that has taken a decade or more in other communities. That added time significantly increases the cost of acquisition because TEP invests hundreds of millions of dollars every year to maintain reliable service.

The Brattle Group’s study highlights other critical factors that affected the conclusion reached by GDS Associates’ and Best Best & Krieger’s study regarding the financial feasibility of municipalization in the city:

• That study assumes a constant average increase in TEP’s future electricity rates based, at least in part, on historical inflation. Because this was calculated during a period when inflation was at its highest in the past 40 years, it overstates the rates against which the estimated rates of the municipal utility are compared.
• One scenario in that study assumes acquisition of TEP’s assets at net book value. This unrealistic assumption is inconsistent with recent precedent and serves to artificially reduce the projected rates of a municipal utility.

“These omissions create the false impression that a takeover is financially achievable,” Gray said. “In fact, the city would be taking on billions in new debt in an attempt to duplicate the critical services that TEP already provides efficiently across the region.”

An Unrealistic Option

Activists urging the city to start a municipal electric utility often highlight the success of public power providers that have been operating for decades. But more recent efforts to municipalize privately owned systems have been much less successful.

The Brattle Group found that, over the last 25 years, 93 percent of attempts to form public power utilities through condemnation have failed. Most efforts were abandoned or rejected by voters due to steep costs, legal challenges, and/or reliability risks. Those that succeeded involved very small communities with relatively simple, lower cost electric systems.

Reduced Efficiency, Greater Risk

Beyond whether a municipal utility would be financially feasible, The Brattle Group study also outlined numerous additional factors that stakeholders should consider before deciding to municipalize, including:

• the time and resources necessary to undertake the municipalization process;
• whether the City has expertise in providing safe, reliable and efficient electric service, and
• the potential for acquisition or other related costs to increase as more detailed studies are completed to support separation of the new municipal utility from the remaining TEP system.

Seizing TEP’s assets would force city residents to assume full responsibility for a municipal utility’s debt, cost overruns and legal liabilities, risks that are currently shared by the company. That transition also would deprive residents of the strong, transparent, independent oversight currently provided by the Arizona Corporation Commission.

“Pursuing this course of action would put our community’s energy future at risk,” Gray said. “A forced takeover would jeopardize reliability, slow clean energy development, and create roadblocks for economic development initiatives that depend on TEP’s proven ability to deliver power safely, reliably, and sustainably.”

Local Residents Support TEP

Despite a push for municipalization by some activists, most local residents are happy with TEP and its service, according to a recent survey conducted for TEP by Phoenix-based WestGroup Research.

The survey of 500 local residents, including 245 City of Tucson residents, was conducted online and by telephone between Nov. 24 and Dec. 15, 2025. It found:

• 81 percent of local residents are highly satisfied with TEP. 52 percent rated the company as 9 or 10 on a scale of 1-10, while another 29 percent offered a rating of 7 or 8.
• More than 90 percent of residents are highly satisfied with the reliability of TEP’s service, with more than 70 percent giving it a 9 or 10 rating on a scale of 1 to 10.

“The activists who have been trying to drum up support for a city takeover don’t reflect the perspective of our larger community,” Gray said. “I think most people want to see TEP and the City of Tucson focusing on what they each do best.”

TEP has collaborated with the city in support of its energy objectives, including the sustainability goals in its Climate Action and Adaptation Plan. One example: Since last year, TEP has been providing the city with 100 percent renewable power for its municipal operations through a clean energy supply program approved by the Arizona Corporation Commission.

“We’re hopeful that the city will set aside any further consideration of a TEP takeover so we can focus on collaborating to support a strong economy and high quality of life in our community,” Gray said.

TEP provides safe, reliable electric service to 457,000 customers in Southern Arizona and maintains one of the most reliable grids in the nation. For more than 130 years, TEP has invested in the energy infrastructure that powers homes, businesses, and community institutions while advancing toward a cleaner, more resilient energy future. Learn more at tep.com.

TEP and its parent company, UNS Energy, are subsidiaries of Fortis Inc., a leader in the North American regulated electric and gas utility industry. For more information visit fortisinc.com.

Brattle Group representatives are available to answer questions from members of the news media. Please contact Joseph Barrios at 520-884-3725 to request an interview.

View source version on businesswire.com: https://www.businesswire.com/news/home/20260224238669/en/

News Media Contact:
Joseph Barrios
(520) 884-3725
jbarrios@tep.com

Source: Tucson Electric Power