AZ AG Kris Mayes Files Expert Testimony in Tucson Electric Power Rate Case Finding %10 Padding of Requested Rate Increase

Attorney General Mayes has filed expert testimony with the Arizona Corporation Commission (AZCC), which approves utility rate increases on a case by case basis in a quasi-judicial hearing that suggests that TEP’s requested rate hike could be slashed from 14% to just 4% and still provide a reasonable return on investment to their shareholderes. That expert analysis reveals TEP’s proposal would unjustifiably transfer $148 Million per year in unearned profits to shareholders, straight form ratepayer’s pockets.

From the AZ AG’s Feb. 11th press release (emphases added by editor, MDB):

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.”

What I find most damning about this is that the AZCC Commissioners (currently ALL Republicans*) have failed to do such indepentent analysis THEMSELVES (or at least to tell the public if they have done). Many have already made public statements in favor of approving TEP’s rate case, in advance of any hearings (a violation of ethics that certainly calls into question any biases they hold in favor of untilities over ratepayers).

*As of January 2025, the five-member Arizona Corporation Commission (ACC) has a 5-0 Republican monopoly. The current members are Chairman Kevin Thompson, Vice-Chair Nick Myers, Lea Márquez Peterson, Rachel Walden, and Rene Lopez, all of whom are affiliated with the Republican Party. 

• Kevin Thompson (R – Chairman): Elected 2022.
• Nick Myers (R – Vice-Chair): Elected 2022.
• Lea Márquez Peterson (R): Re-elected 2024.
• Rachel Walden (R): Elected 2024.
• Rene Lopez (R): Elected 2024.

Of the current Commissioners, the only one I have seen any hint of independent judgement from is Rachel Walden. She has at least expressed some reservations about the TEP rate case in particular and did not make any conclusory statements as to her support prior to the case officially coming to the Commission. However, it is Thomason and Meyers, the Chair and VC, who are up for election this cycle. I have no hesitation about recommending their replacement.

Many have alleged, with good reasons, that the AZCC has become little more than a rubber stamp for the utilities appearing before them, seeming to confirm that the AZCC has been administratively captured by the repeat players who appear before them, who regularly make very large ‘donations’ to AZCC Commissioners and candidates that favor thier interests uncritically.

If you are sick of such biased and clearly crony behavior, consider checking out the campaigns of our Democratic candidates for the two Commissioner Seats up for election this year, and seriously consider aiding their campaigns to unseat this crony Commission that our AZCC has become under Republican corruption and ideological and biased control.

Our Democratic candidates for the two open seats include three Democrats vying for our Party’s nomination, in alphabetic order: Derek Espadas, Jon Hill, and Clara Pratt. (Note: Hill and Pratt are running as a team)

Dereck Espadas is scheduled to appear at TheDGT’s Monday Zoom Show on March 16th. (You may preregister here for that event).

Hill and Pratte appeared together on TheDGT.org‘s Monday Zoom Show on Dec 15th of 2025, embedded below:

As always, I disclose the I am the First Vice President and Program Director of TheDGT.org and I would encourage interested folks to become a paid member of TheDGT.org to support our work and be eligible to participate in our organization as a voting Member. Of course, all our programming that is not intended as fundraising is free to attend and open to the public, including all of our Zoom Shows, and our Monthly Happy Hour (purcase of your own food and drink is suggested, to support our locally-owned business partners!).