Large Solar array from above

EEI ESG/Sustainability Pilot

UNS Energy is the Tucson, Arizona-based parent company of Tucson Electric Power (TEP) and UniSource Energy Services (UES). UNS Energy and its subsidiaries are committed to improving the quality of life in the communities we serve throughout Arizona.

TEP provides safe, reliable electric service to nearly 420,000 customers in Southern Arizona. UES provides electric service to approximately 95,000 customers in Mohave and Santa Cruz counties, and provides natural gas to approximately 154,000 customers in northern and southern Arizona.

UNS Energy is a subsidiary of Fortis, Inc., a leader in the North American regulated electric and gas utility industry. Fortis primarily provides transmission and distribution services, and few of its subsidiaries own generating resources. Fortis’ transmission, distribution, and other assets represent 91 percent of its total assets, with the remaining 9 percent associated with generation primarily owned by UNS Energy subsidiaries. As a result, UNS Energy produces approximately 93 percent of Fortis’ fossil-based generation and associated air emissions.

UNS Energy has worked with the Edison Electric Institute, institutional investors and other member utilities to develop reporting metrics that provide guidance in assessing Environmental, Social, and Governance (ESG) risks for each reporting utility.  UNS Energy is  providing this information for customers, investors and other stakeholders seeking information about our ESG and sustainability performance.

Over the last three years, UNS Energy has increased its renewable energy portfolio through both owned and purchased solar and wind generation as shown in the table below:

We’re also reducing our use of coal-fired power plants, which represent 20% less of our company-owned fossil fuel generating resources than they did three years ago. In order to accomplish this shift, while ensuring the continued supply of affordable and reliable power, we have increased our natural gas gross owned generation, a cleaner more efficient generation resource. TEP, the only UNS Energy subsidiary with coal-fired generation, has realized a 14% total carbon dioxide (CO2) emission reduction through diversification efforts from 2005 baseline year to 2016, and is targeting an approximate 54% reduction in CO2 emissions from coal generation by 2032.

Governance

UNS Energy’s robust commitment to sustainability is reflected in the innovations of its subsidiaries, TEP and UES. We’re expanding our renewable energy portfolio, revamping our energy efficiency offerings and providing new pricing plans that satisfy our customers’ evolving energy needs. We’re also updating our infrastructure with robust, responsive technologies that accommodate emerging energy resources, including renewables and storage.

Our commitment to sustainable growth and responsible governance enhances the value we provide to customers and other stakeholders. This commitment guides the decisions of executives, directors and supervisors at all levels and in all areas of the company.

UNS Energy’s Board of Directors draws on the energy, expertise and strong business acumen of trusted business leaders with experience from the fields of utilities, defense, science, mining and medicine. Its members value integrity, accountability, collaboration and the creation of opportunities for the company and all of its employees.

The management teams for TEP and UES value innovation and excellent performance and promote an unwavering culture of safety and a commitment to customers. With strong leadership skills and thorough knowledge of company operations, our leaders are focused on improving efficiencies and generating value for a diverse set of stakeholders.

Sustainability Strategy

All of our employees and customers and a majority of our operations are located in Arizona, one of the nation’s sunniest and fastest growing states. As the state’s communities continue to grow and change, TEP and UES must evolve to serve customers’ energy needs. The latest TEP Integrated Resource Plan and UES Integrated Resource Plan demonstrate how both companies are planning to build more flexible and cleaner resource portfolios.

TEP, for example, is diversifying its generating resources and reducing its reliance on coal by expanding cost‐effective renewable resources, particularly solar. TEP expects to retire 619 megawatts of coal-fired resources by 2032. Its goal is to deliver at least 30 percent of its power to customers from renewable resources by 2030 – twice the level TEP must achieve by 2025 under Arizona's Renewable Energy Standard.

TEP Resource Portfolio Diversification

The portfolio energy charts shown above represents the energy resource mix to serve TEP’s retail customers. Wholesale market sales are excluded from these results. By 2030, TEP’s retail customers will be served from 30% renewables. This is based on a combination of utility-scale and distributed generation resources.

The company is preparing to install cost-effective natural gas generation and transmission resources that will support the expansion of renewable resources, replace aging technology and result in lower water usage and lower emissions.

Increasingly diverse, sustainable generation will create operational challenges that require new ways of managing the intermittency and variability of renewable resources. Through a partnership with the University of Arizona, TEP is using unique and highly customized forecasting models to predict solar and wind system production.

Meanwhile, UES is expanding its renewable portfolio while also working to secure new transmission resources that will help improve service reliability for customers while lowering transmission costs.

UNS Energy subsidiaries are taking advantage of historically low natural gas prices. UES’ 2017 Integrated Resource Plan (IRP) describes the company’s continuing efforts to become more self-reliant by adding to its generating resources with cost-effective renewable energy and highly efficient gas resources.

Like TEP, UES expects to invest in fast-responding reciprocating internal combustion engines that can run efficiently at varying loads without regard to frequent starts and cycling operations. Such resources help to manage the intermittency and variability of an expanded renewable energy portfolio.

UNS Energy is committed to a “Green Investment” strategy as the company transitions from coal-fired generation to providing more renewable and natural gas-fired power.

Arizona’s regulatory environment continues to adapt to new technologies and emerging energy options. In 2016 and 2017, the Arizona Corporation Commission (ACC) approved updated retail electric rates for TEP and UES. Our new pricing plans offer more control, new savings opportunities and additional support for the sustainability of the local electric infrastructure. The ACC also is reviewing a proposal to revise rates and rules for new users of private solar power systems. Those proceedings are expected to continue into 2018.

TEP and UES are pursuing ACC approval of new energy efficiency programs for 2018. Our evolving view of energy efficiency seeks both energy saving opportunities for customers and reliability benefits for our electric infrastructure.

Our subsidiaries support commercial customers with affordable energy, economic development discounts and energy efficiency programs. TEP’s and UES’ economic development rates are designed to attract new employers and encourage existing businesses to expand their operations.

Community Investment

Our companies invest significantly in the success of the communities we serve. TEP and UES contribute approximately $1.8 million to charitable causes annually with funds from corporate resources, not customers’ rates. Our employees also contribute thousands of volunteer hours each year to hundreds of nonprofit groups throughout the state.

Safety

Safety is the highest priority for TEP and UES. We are committed to working in a manner that prevents injury through a robust workplace safety program that promotes situational awareness through information sharing among all Fortis subsidiaries. TEP and UES also promote public safety through advertising, customer communications and collaboration with local utilities and first responders.

UNS Energy Corporation
EEI ESG/Sustainability Pilot Template

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