TEP's rate hike taking effect - Tucson Local Media: Business

TEP's rate hike taking effect

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Posted: Wednesday, December 10, 2008 12:00 am | Updated: 8:03 am, Thu Mar 24, 2011.

A 6-percent increase in Tucson Electric Power’s electrical rates took effect Dec. 1, after unanimous approval by the Arizona Corporation Commission.

The bills of typical residential customers are expected to increase 4 percent under the new rates, part of TEP’s first increase since 1996.

“Heavier power users will incur larger percentage increases, while customers with below-average consumption will face smaller increases or even a slight decrease,” a release said.

“The rate design results in lower average rates for customers who use less energy, and higher average rates for customers who use more energy,” explained TEP spokesman Joe Salkowski.

“Half of our residential customers will see an increase of just 1.2 percent or less under our new rates,” said James S. Pignatelli, chairman, president and chief executive officer of TEP and its parent company, UniSource Energy Corporation. “Any customer who wants to minimize the impact of our new rates can do so by conserving energy.”

TEP is discounting the first 500 kilowatt-hours (kWh) per month while charging a higher rate for monthly usage in excess of 3,500 kWh. “Customers who use less power pay lower average rates,” the release said.

The average TEP residential customer uses about 900 kWh per month over the course of a year, with seasonal fluctuations and higher demand during the hot seasons, Salkowski said.

The 500 kWh threshold “represents what we would say is a low use of energy for a residential customer.”

The TEP rates also provide  funding for new energy-saving programs, including rebates for energy-efficient heat pumps and air conditioners, discounts on compact fluorescent light bulbs, and incentives for business owners who invest in energy-efficient equipment.

The new rates were contained in a settlement agreement reached earlier this year with the ACC staff.

The utility said the settlement was endorsed by groups representing customers, low-income residents, power producers and other interested parties.

The agreement resolved a rate case TEP filed in July 2007.

TEP’s rates had remained unchanged since July 2000, when the last of three annual 1-percent rate decreases took effect.

Rates were last increased in 1996, and the subsequent reductions resulted in rates that remained below the levels charged in 1994.

TEP’s new rates include a “Purchased Power and Fuel Adjustment Charge” that allows the utility to recover energy costs not reflected in its base rates.

The PPFAC is expected to remain at zero through at least April 2010 due to a credit from funds previously collected from customers.

Low-income customers who qualify for TEP’s Lifeline discount are not subject to the base rate increase or the PPFAC.

Lifeline also provides a discount of $8 per month to eligible customers whose household income does not exceed 150 percent of the federal poverty level.

That eligibility limit is currently $2,651 per month for a family of four.

Tucson Electric Power provides electric service to nearly 400,000 customers in Southern Arizona.

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