Tucson voters to decide on TEP's 25-year franchise renewal

Tucson voters will decide in November whether Tucson Electric Power can continue using the city’s streets, alleys and other public rights of way under a new 25 year franchise agreement. The decision could shape how the utility and city coordinate construction and maintenance projects for decades, while also tying the franchise renewal to proposed investments in heat resilience, clean energy and assistance for low income households.

The current agreement began after voters approved it in November 2000. It established a 2.25% franchise fee on TEP customers’ bills, with the money collected by the utility and sent to the City of Tucson. TEP says it does not keep or profit from the fee. The existing agreement is scheduled to expire in April, although TEP officials say it would remain in effect for another year whether or not voters approve a renewal.

The proposed renewal, Proposition 421, would be paired with an Energy Collaboration Agreement between TEP and the city. Under the proposal, TEP would provide shareholder funds for projects selected as city priorities. The agreement is described as providing $2 million each year, with the investment increasing by 2% over time. One account described the total investment as $64 million, while TEP representatives cited a total of $56 million over 25 years. The money would not come from increased electric rates, and the existing franchise fee would not change under the proposal.

Potential projects include planting more shade trees, improving Tucson’s ability to cope with extreme heat, supporting clean energy efforts and helping low income households reduce their energy use. City Chief Resiliency Officer Fatima Luna said community feedback helped shape the proposed programs. Residents who participated in seven town halls last year emphasized weatherization, home retrofits, solar installations and workforce development, as well as making sure those efforts were paid for with utility shareholder funds rather than customer charges.

The city and TEP are expected to discuss the proposed franchise renewal and Energy Collaboration Agreement at a March 17 study session. Tucson residents were also offered public comment opportunities, including an in person meeting at TEP’s downtown headquarters attended by about a dozen people and two virtual sessions held March 11. Residents could submit feedback on the energy agreement through March 15. The Mayor and Council would need to decide whether to place the franchise renewal on the November ballot before voters make the final decision.

The agreement has drawn opposition from Tucson Democratic Socialists of America and Public Power for Tucson. The groups say residents who attended last year’s public meetings asked for a much shorter, five year franchise agreement, a path toward a publicly owned electric utility, stronger renewable energy requirements and more safeguards against rising rates. They argue that Proposition 421 does not include those conditions. Their concerns have intensified because TEP has filed for another rate increase and has committed to providing power for Project Blue, a proposed data center development that has faced opposition in the community.

Public meetings about the proposal have also exposed questions about who would control the agreement after the election. TEP communications director Joe Salkowski said the Energy Collaboration Agreement could be changed or ended by either the utility or the city at any time. That prompted questions about whether voters would retain meaningful control if they approve a package that officials could later amend or cancel without returning to the electorate. Residents also questioned why the proposed climate investments would be structured as annual payments instead of a larger upfront contribution that could address community needs sooner.

The public meeting included a protest from three attendees who chanted “Public Power Now!” for more than 10 minutes and challenged TEP’s relationship with data center developers in Pima County. Other participants voiced support for municipal ownership of the electric grid, an approach that has gained interest among some Tucson residents as a potential way to address affordability. Questions also focused on the proposed annual increase in TEP’s investment, described during the discussion as a 2% increase every other year by AZPM, compared with other descriptions of a yearly increase.

Proposition 421 follows another unsuccessful attempt to renew the city’s agreement. In 2023, Tucson voters rejected Proposition 412, which would have renewed the franchise and added a 0.75% fee on top of the existing 2.25% charge. The additional money would have paid to place power lines underground in midtown. That vote remains part of the backdrop for the new proposal, as city officials and TEP seek support for a longer agreement while residents continue debating electric bills, climate preparation, renewable energy and whether Tucson should eventually operate its own power system.