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Fortis' (FTS) Tucson Electric Power Gets Nod for New Rates

Zacks Equity Research
·3 min read

Fortis Inc. FTS recently received an approval for new rates from the Arizona Corporation Commission in response to its Arizona-based unit Tucson Electric Power's (TEP) general rate application. The new rates will be effective Jan 1, 2021.

The rate base of $2.7 billion is sanctioned by the commission, which includes $1.2 billion invested since the last rate order. Also, the utility got an approval for allowed return on equity of 9.15% and equity capital structure of 53% compared with the prior figures of 9.75% and 50%, respectively. The regulatory nod includes a 0.20% return on fair value increment.

Transition in Utility Space

Fortis has been making efforts to shift to cleaner energy resources by replacing coal-fired units with renewables from wind farms, solar arrays and energy storage systems. To this end, the utility has a cost-effective plan in place that will provide reliable and affordable services from increasingly sustainable resources to its customers. Also, it will help the company combat climate changes from its end.

In June, the company announced plans to reduce 80% of carbon emissions from its TEP by 2035, which will lead to a cutback of more than 50 million tons of carbon emission within a span of 15 years. TEP’s gradual shift to clean energy and emission control is part of its Integrated Resource Plan (IRP).

Per IRP, TEP will use wind and solar energy to generate 40% power in 2030, more than 60% by 2033 and more than 70% by 2035. These plans are likely to result in significant cost-savings, post 2030.

TEP has plans to upgrade its transmission and distribution systems to serve the Tucson area's expanding population and meet its customers' evolving energy demand, which will require substantial funding. The new rates coming into effect will support Fortis’ plan to provide sustainable energy service to the local communities in Tucson.

Fortis apart, utilities like Duke Energy DUK, DTE Energy DTE and Xcel Energy XEL drafted plans to supply 100% clean energy to their customers over the next few decades.

Zacks Rank & Price Performance

Currently, the company has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Fortis have gained 7.8%, outperforming with the industry’s growth of 5.6% in the past six months.

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