TUCSON, Ariz. (KGUN) — The Arizona Attorney General on Wednesday filed expert testimony arguing that Tucson Electric Power’s (TEP) request for a roughly 14% rate increase is excessive and could be reduced to about 4% without jeopardizing reliability or the company’s credit rating. TEP’s communications team pushed back, saying the Attorney General’s proposal would make it harder to raise the equity needed to maintain and improve the local power grid.
Attorney General Kris Mayes’ filing contends independent analysis shows TEP is seeking shareholder returns well above what investors actually require. The expert testimony says aligning allowed returns with TEP’s “real-world cost of capital” would save customers about $148 million a year — roughly $200 per residential customer annually — while preserving reliable service. The AG’s statement accused TEP’s models of using “inflated growth rates, exaggerated risk estimates, and circular logic” that produce an overstated cost of equity.
“TEP’s proposal is blatant corporate greed plain and simple,” the Attorney General said, adding that customers “should not be forced to pay more than necessary to enrich TEP’s shareholders.”
TEP’s communications manager, Joseph Barrios, told me that the Attorney General’s recommendation is out of step with Arizona Corporation Commission (ACC) precedent and with testimony submitted by other parties reviewing TEP’s filing. Barrios said the AG’s numbers would “damage our ability to raise funds needed to invest in the reliability and increasing sustainability of our local energy grid.”
Barrios emphasized that TEP’s rate application includes more than 1,600 pages of testimony, cost documentation and supporting data, and noted the company has invested more than $1.7 billion in the local grid since 2021. “Equity plays a critical role in funding capital investments required to continue providing safe, reliable service,” he said, adding that shareholders expect a return for the risk they take and that a too-low return on equity (ROE) would impede TEP’s ability to attract capital.
The filings show a wide spread of recommended ROE levels among parties in the case. Barrios said the Attorney General recommended a ROE of 6.07 percent; the Residential Utility Consumer Office (RUCO), which represents residential customers, recommended 9.0–9.2 percent; and ACC Staff recommended 9.75 percent. A nonprofit intervenor, Wildfire, did not provide a recommendation on ROE, according to Barrios. The AG’s press release argues, however, that modern-market evidence and academic research support a much lower allowed return.
The conflict underscores a common tension in utility rate cases: regulators must balance customer affordability against a utility’s need to attract capital and maintain system reliability. The AG’s filing says the savings would come from aligning customer charges with TEP’s actual cost of capital, not by cutting service or infrastructure spending. TEP counters that shareholders’ expected returns are necessary to fund investments and to protect long-term service quality.
The filings are part of a public ACC process that allows intervenors to scrutinize and counter testimony. According to TEP, additional intervenor testimony is due Feb. 25, and the company plans to file rebuttal testimony on March 13.
The case will be decided by the Arizona Corporation Commission, which must weigh the competing technical analyses and policy considerations before setting rates that affect hundreds of thousands of customers in southern Arizona. The Arizona Corporation Commission hasn’t announced a firm date to vote — but the schedule in filings and public notices points to hearings through spring, with a decision likely before TEP’s requested effective date in September 2026.
