Attorney General Mayes Files Expert Testimony Showing TEP Rate Hike Could Be Slashed from 14% to 4%

Expert Analysis Reveals TEP Proposal Would Transfer $148 Million Per Year in Unnecessary Profits to Shareholders

TUCSON – Attorney General Mayes today announced that her office has filed expert testimony with the Arizona Corporation Commission showing that Tucson Electric Power's proposed 14% rate increase is unjustified and could be reduced to just 4% while still maintaining reliable service and a strong credit rating.

The expert testimony demonstrates that TEP is asking customers to pay shareholder profits that are significantly higher than what it actually costs the company to maintain reliable service—resulting in an unnecessary wealth transfer of approximately $148 million per year from Tucson families to TEP's shareholders.

"TEP's proposal is blatant corporate greed plain and simple," said Attorney General Mayes. "Our expert analysis proves that customers are being asked to pay far more than is needed. Instead of a 14% rate hike, the expert testimony we just filed with the ACC shows that TEP can achieve the same reliability with just a 4% increase by aligning what customers pay with TEP's actual costs."

The Attorney General's expert witness analyzed TEP's rate request and found:

• TEP's proposed shareholder profit level is significantly higher than what it actually costs to attract and retain investment. The company is asking customers to pay returns well above what investors require in today's market.

• Customers would save $148 million per year under the Attorney General's alternative proposal, which sets TEP's allowed return equal to its actual cost of capital—what the expert calls the "ROR=COC standard."

• Every residential customer would save approximately $200 per year under the alternative proposal compared to TEP's proposal.

• TEP's proposed 14% rate increase could be reduced to just 4% while still fully compensating investors and maintaining TEP's current investment-grade credit rating.

• TEP's financial models rely on economically unrealistic assumptions, including inflated growth rates, exaggerated risk estimates, and circular logic that essentially assumes the answer in advance. In some cases, the assumptions are economically impossible.

• When the same models are applied using reasonable, market-based assumptions consistent with modern finance, they produce a much lower cost of equity than TEP proposes.

"This case is fundamentally about whether Tucson families should be forced to pay more than necessary to enrich TEP's shareholders," said Attorney General Mayes. "At the end of the day, it’s just a transfer of wealth from Arizonans struggling to make ends meet to TEP’s shareholders."

The expert testimony shows that a wide range of independent evidence—including investment firm forecasts, long-term stock market data, and academic research on utility returns—all point to the same conclusion: utilities authorized returns in Arizona and across the United States are significantly higher than what investors actually require.

The alternative proposal would not harm the reliability of TEP's service or weaken its financial position. The savings come entirely from aligning customer charges with TEP's real-world cost of capital, not from cutting service, maintenance, or infrastructure investment.

"Arizona ratepayers can have both more affordable electricity and a financially healthy utility," said Attorney General Mayes. "The evidence demonstrates there is no need to choose between the two. TEP can maintain its investment-grade credit rating, attract capital, and provide reliable service—all while charging customers significantly less."

TEP's parent company, Fortis Inc., reported net earnings of $1.6 billion in 2024.

A copy of the testimony is available here.