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Mayor Regina Romero and council member Miranda Schubert focused on four different options at last week's meeting on how the city would take responsibility for providing electricity to Tucson residents and businesses.

The city and council have "significant public interest" in the potential for Tucson to pursue some form of a public power option, City Manager Tim Thomure said in a memo. But the options discussed so far are problematic and costly.

That didn't stop the council from contemplating the potential to replace TEP.

"The possibility is there," Tucson Mayor Regina Romero said. "There's some things we have to consider, especially price, but I'm happy that Mayor and Council have been leading in that direction," Romero said during the meeting.

"It is devastating the stories that I hear when it comes to utility services in our city ... it is electric utilities and those payments are becoming more of a burden to working families in our community and throughout the country, and that is something that I have kept in my mind for a long time."

Schubert, who co-hosted a public power  with the Tucson Democratic Socialists of America late last month, said during the council meeting that despite "the scary conversation about billions of dollars and the legal realities" of the city taking one of these routes to public power, "it's important to go into this conversation with our eyes wide open." 

"When the grassroots organizing effort for public power first started in earnest in October 2023, this was a pretty marginal issue that not many people were paying attention to, and now it's on a study session agenda, and it's a part of everyday conversations in Tucson," Schubert said. "So far, nearly 1,600 people have written to the Mayor and Council, thanking them for the feasibility study and rejecting Project Blue, and asking us to move forward exploring public power ... We have heard loud and clear that Tucsonans prioritize climate resiliency, affordability, transparency and accountability.

"So as we're moving forward with this conversation about really complex scenarios with pro's and con's, I just hope that we can keep it grounded in the families that are being affected by these choices, and in what's going to get us the best deal in terms of affordability, accountability to the public, transparency and energy resiliency," she said.

The four options provide pathways to a public power future, "but none of them are simple," Fatima Luna, the city's chief resiliency officer, told the council

The options:

• Creating a "Community Choice Aggregation" or CCA. Under a CCA, the city would procure power for its residents and businesses, and TEP would continue to operate the grid. But that's not legally allowed in Arizona.

• Establishing a municipal utility that would serve an existing facility. Tucson would use an existing facility like a recreation center or another municipal building that would have some level of power generation, said Michael Catanzaro, the city's energy manager. That essentially would make the city "both the utility and the customer."

• Establishing a municipal utility for a new development, like a new subdivision, district or campus.

"The infrastructure would be built from the ground up. It would avoid the acquisition of existing utility assets, which is a benefit, and it would be designed to scale with the development,"  Catanzaro said.

Catanzaro said it could be financially viable at a five megawatt capacity build-out. That can range from 1,300 to 2,000 homes, 20 to 40 acres of commercial development or one large commercial or industrial customer, he said.

"The limitations of this is identifying the location, any service territory conflicts that would arise (in the) legal environment, and then obviously the upfront capital that would be needed," he said.

• A complete takeover of TEP's grid within city limits. That would make the city Tucson's sole retail electricity provider, giving it control over rates, resources and planning, Catanzaro said.

It would face immense challenges. 

The city would first have to condemn the utility, which could take years, Catanzaro said, and cost the city even more money in-terms of the legal battle to do so. Even if the city wins the legal battle, there would be "significant political, legal and operational complexity with doing that," he said.

Efforts by cities to take over existing private utilities succeed about 10% of the time, Catanzaro said.

The city would have to get voter approval before raising the necessary funds under any of the four options, and booting TEP could take years and piles of money, City Attorney Roi Lusk told the council.

"At the opposite end of the spectrum, the TEP takeover scenario offers the greatest theoretical financial return but also carries extraordinary legal, financial, and operational risks," Catanzaro said in a memo. "Acquisition costs could reach billions, and litigation could span a decade or more. While full municipalization remains a long-term strategic option, it is not appropriate as an initial pilot."

Though it would have the largest long-term impact, Catanzaro said, it would be extremely difficult to pull off. First and foremost is the cost.

A  for the city by GDS Associates, Inc. in April said it would cost the city up to $3 billion to buy out TEP's grid and electricity infrastructure within city limits.

Meanwhile, a  for TEP by the Brattle Group said it would cost the city more than $4 billion to purchase TEP's assets outright.

The city pursuing any of these options "would start the city down a dangerous path toward a larger takeover of our local electric grid, which would result in higher bills, daunting debt, and reduced electric reliability for city residents," TEP's CEO Susan Gray said in a recent news release.

The city would drive rates "much higher than the projected costs of continued service" from the utility, TEP said in the release.

"The additional cost of service would escalate over time, from an extra $162 per year per average residential customer in the first year to an additional $900 per year after two decades," TEP said, referencing the study the Brattle Group did for the utility.

City Manager Tim Thomure also noted the city is holding about $1 billion in debt between its municipal water utility, Tucson Water, and pension obligations. The city currently spends about $100 million per year to service that debt, he said.

Adding $4 billion in debt "is something that would be well beyond the scope of anything we've attempted before," Thomure told the council.