Our company started providing power to Arizona residents beginning in 1880, before Arizona even declared statehood. Learn how our company grew to become the second-largest investor-owned utility in Arizona and the largest corporation headquartered in Southern Arizona.
Electric power came to Tucson in the 1880s, but it wasn't until 1892 that a handful of business and community leaders formed a company that grew into the enterprise of today known as Tucson Electric Power, the principal subsidiary of UniSource Energy Corporation.
Tucson had a population of less than 7,000 in 1892. The first generating equipment was housed in a one-story building on North Church Street, across from the present Pima County Courthouse.
In the fall of 1892, enterprising Tucsonans, aided by an ingenious jack-of-all-trades, Frank E. "Red" Russell, formed The Electric Light and Power Company. Albert Steinfeld, a merchant, was the first president. The company generated power with an electric lighting plant bought from General Electric Company.
The company took over the Tucson Gas Company in 1896, paying $14,000 for the property, payable over four years.
The new company soon faced the same problem executives would have in later years -- how to keep pace with demand and pay the bills. Therefore, it seemed a good opportunity when, in late 1901, J. J. Henry of Denver offered to buy the company for $35,000 cash and take over about $15,000 in debt.
"When we unloaded on him we all thought we had caught a sucker and were tickled to death," Russell later admitted. But the "victim" obtained a 25-year franchise from the City of Tucson, returned to Denver and sold his newly acquired assets to a new Colorado corporation called Tucson Gas, Electric Light and Power Company. The sale price: $299,500 in stock and $175,000 in bonds.
In 1905, controlling stock in TGELP & Co. was held by the United States Light and Traction Company of Denver.
Back in Tucson, demand was outstripping the capacity of the direct current generators, and in 1903 management pioneered use of alternating current generators. It was soon boasted that Tucson had the finest electrical system available. Carbonized bamboo filament bulbs glowed in more than 300 homes and businesses.
The conservation ethic came early for the company. Early street lighting contracts stated expressly that the lights didn't have to be turned on when there was a full moon.
In 1904, the company needed more room and moved its generating facilities to West Sixth Street, which later served as company headquarters from 1967 to 1999. The following year an executive worried that the closing of gambling establishments would deprive the company of "considerable revenues." The efforts of reformers notwithstanding, revenues and profits continued on an upward trend.
"Red" Russell was an English-born mariner who came ashore in San Francisco and stayed on land. He came to Tucson with the Western Union, loved to tinker with electricity and became so indispensable that he ran the company from the beginning until his death in 1923. Russell's letters to the home office in Denver offered a "Who's Who" of Tucson with names like Kitt, Randolph, Manning, Blenman, Drachman, Samaniego, Ronstadt, Hughes, Hoff and Corbett.
Russell fought off competitors, promoted gas and electricity consumption as new appliances came on the market and was a pioneer in community efforts to attract new business.
On August 31, 1910, the company had assets of $761,693 and a surplus and net profits of $92,498. The directors declared the first dividend in the company's history -- 5% on preferred stock and 3% on common stock. By February 15, 1911, Federal Light and Traction Company of New York City owned all but a few shares of stock.
Statehood arrived in 1912 and with it came the Arizona Corporation Commission (ACC), which began regulating rates and overseeing the state's utilities. The City of Tucson quickly filed a complaint, charging that the company discriminated by charging some customers more than others and claiming that a 50-cent monthly meter charge was "excessive and unreasonable." The city prevailed.
Russell kept pace with technical developments and in 1915 began converting to the new diesel systems. Diesels had a low fuel consumption and soon were credited for helping develop agriculture around Tucson by providing power for irrigation pumps at low rates.
On October 11, 1920, fire badly damaged the gas plant. Russell had been promoting the use of gas for heating homes, so he had the plant back in operation in 17 days.
The company's business offices were on North Stone Avenue, in the block now occupied by the Main Library. They were refurbished in 1925 and officially reopened with a "housewarming" for the townspeople.
Sam Headman, who was to become one of Arizona's leading consulting engineers, succeeded Russell. He served until 1926, when Max A. Pooler was named manager. Pooler led the company through the Great Depression, keeping it profitable despite poor business conditions and the necessity to cut rates.
For several years the city and company had worked to bring natural gas to Tucson. A pipeline bringing gas from Texas was completed in 1933, and the occasion was marked by a big celebration that featured Mayor Henry O. Jaastad using a Roman candle to ignite gas from a pipe near Sentinel Peak that shot a 40-foot flame into the air. Metropolitan Tucson's population grew steadily.
In 1937, company employees formed a union that became Local 1116 of the International Brotherhood of Electrical Workers. Currently, two-thirds of the employees are covered by the bargaining unit, which represents all but management, supervisory and executive personnel.
Pooler was named president in 1940. It was under his direction that the company geared up to meet increased demand when Southern Arizona became a major military and war production center in World War II. Expanded facilities provided service to a primary flight school at Marana, the heavy bomber base at Davis Monthan, Consolidated-Vultee aircraft modification center at the municipal airport, Ryan School of Aeronautics and the Army base at Fort Huachuca.
In 1943, the Securities and Exchange Commission had ordered Federal Light and Traction Company to make divestiture of its holdings. The Tucson utility was offered to the City of Tucson, and J. R. Snider was sent to Tucson to work out details of the sale.
Snider wasn't too happy about selling out to a municipality, and he was glad when negotiations collapsed. In June of 1946, a total of 147,000 shares of common stock in Tucson Gas, Electric Light and Power Company were offered to the public. By December, there were 1,927 stockholders from 40 states and the District of Columbia.
The city had filed a condemnation suit against the company in 1944. While it was pending, the company could not expand, fearing that major expenditures would not be reimbursed if the city was allowed to assume ownership. In February of 1948, the Arizona Supreme Court ruled the condemnation action unconstitutional.
When TGEL&PCo. became a publicly held company in 1946, Snider took over as president and general manager and organized a new board of directors, carefully selecting members representing a cross section of Tucson to join company officers C. L. Clawson, J.H. Saunders and himself.
The newcomers were:
Planning began for the expansion that eventually would be needed to provide gas and electric service for the growing population. There were jobs available so some war workers stayed on and there was an influx of discharged service men and women returning to the area because of its favorable climate. Educational opportunities were offered by the University of Arizona. Another important factor in area growth was the development of a low-cost evaporative cooler that made living indoors bearable in the summer.
The day after the condemnation suit was ruled unconstitutional, the company announced it would build an $11 million generating station at DeMoss-Petrie Road and the Southern Pacific Railroad tracks, a site now bordered by Interstate 10 and West Grant Road. The plant had an initial capacity of 24 megawatts, which grew to 98 megawatts by 1954.
As service expanded in the postwar period, the need for more generating capacity was matched by a need for larger quarters for the administrative and customer services sections. On July 5, 1949, general offices were moved from 81 N. Stone Ave. to leased space in the Tucson Title Insurance Building at 35 W. Pennington St. The staff was back to within a few feet of where Russell cranked up the first generators more than five decades earlier. The move to the West Sixth Street headquarters came in 1967.
On December 22, 1955, Snider announced the Irvington Generating Station would be built on a 280-acre site at South Alvernon Way and East Irvington Road at an initial cost of $25 million. The plant would eventually generate 422 megawatts of power from four units that burned oil or natural gas as fuel. In the 1980s, the largest generator was modified so that it would also burn coal. Today, Unit 4 also burns methane gas that is pumped three miles from the Los Reales Landfill to generate enough electricity for about 5,000 homes.
The summer of 1955 saw the arrival on Snider's staff of J. Luther Davis, a law and business graduate of the University of Arizona, who had been serving as city manager.
J. Luther Davis was named president in February 1959 and was elected a director in 1961. Upon his shoulders fell the task of preparing the company's first request for a general rate increase.
In 1961, the company asked the ACC for permission to increase electric and gas rates by about 12 percent. After hearings that took only three days, the commission approved new rates raising electric revenues about 10.5% and gas revenues about 9%.
In 1964, the company ended its status as a "foreign corporation" in Arizona, changing the name and domicile from Tucson Gas, Electric Light and Power Company, a Colorado corporation, to Tucson Gas & Electric Company (TG & E), an Arizona corporation.
Well in advance of anticipated shortages of natural gas and fuel oil for electric generation, Davis and his staff began to plan to utilize the Southwest's vast coal reserves. The search led in 1965 to formation of a consortium of utilities to build a large coal-fired plant, the Four Corners Project, near Farmington, N. M.
Snider ended his involvement in daily operations in 1967, turning over the chairmanship to Davis and becoming a director emeritus.
Trading in company common stock moved from over-the-counter to the New York Stock Exchange in 1969. That year plans were announced for additional coal-fired ventures. The company would be a partner in the San Juan Generating Station in northwestern New Mexico and in the Navajo Generating Station near Page, in northern Arizona.
Construction of 500 miles of transmission lines to Tucson from New Mexico generating locations involved "aesthetic and ecological considerations that are without precedent in a line of that size and length." President Davis said.
In 1972, the company determined to meet the increasing demand for energy by joining with other utilities in plans to build a nuclear generating plant 60 miles west of Phoenix. The operating target date for the first unit was 1981. However, by 1975 it was decided that demand could be met with less expensive coal-fired generation. The company sold its share of what would be the Palo Verde Nuclear Generating Station.
The search for expertise to help cope with the increasingly complex financial situation led, in 1974, to Theodore M. Welp leaving a utility in California to join the company as senior vice president for finance and as a director. In May 1976, Welp was named president. Shortly after Welp was hired, Einar Greve joined the company and he became executive vice president after Welp's promotion to president.
At that time the company was selling substantial amounts of power to other utilities to utilize the excess generating capacity. In 1977, these sales amounted to 35% of energy sales.
Management decided co-ownership of power plants restricted flexibility of operation, so when demand forecasts projected the need for additional capacity in the late 1980s and early 1990s, the board voted to build a wholly owned, coal-fired plant at Springerville, in east-central Arizona.
In 1979, the gas operations, hampered by moratoriums on gas caused by shortages, were sold to Southwest Gas Corporation of Las Vegas, Nevada. Southwest had greater gas resources available and was able to get the state to lift the restrictions. The company's name changed again -- to Tucson Electric Power Company.
A dispute arose in 1979 over construction of the $1.5 billion Springerville station. The company said it chose an open shop contractor when agreement could not be reached with organized labor. Unions protested, sponsoring a demonstration before the May 13, 1981, annual meeting in which nearly 7,000 marchers participated. The plant was built by the non-union company.
Sales of assets, which had not been charged to TEP customers, produced more than $200 million in cash in 1983. The company created subsidiaries to invest the capital in securities and varied businesses, including real estate.
In July 1984, the board of directors voted to transfer the basic wholesale power sales business, including ownership in two generating units, to a subsidiary, Alamito Company. Later that year the board authorized a spinoff of Alamito from TEP, approving distribution of a dividend to shareholders consisting of all the common stock of Alamito. On January 4, 1985, Greve was elected president to replace Welp, who resigned in order to continue as chairman and chief executive officer of Alamito. Two years later, Davis resigned as chairman and Greve was elected to succeed him.
Under Greve's leadership the company attempted to complete a merger with San Diego Gas & Electric Company in 1988. The California utility had been buying power from TEP since 1979, and negotiators believed the merger would result in long-term savings and increased value for both companies. But Southern California Edison Company moved to block the merger and acquire SDG&E itself a plan later rejected by California's regulatory commission.
In 1990, TEP sued, claiming interference with the merger. An out-of-court settlement was reached in September of 1992 under which Southern California Edison Company and its parent, SCECorp, agreed to pay $40 million in damages and costs.
The collapse of the merger agreement left the company facing serious financial problems. The 10-year sales agreement with SDG&E would expire in 1989, but TEP was obligated – because of a contract entered into while Alamito was still a company subsidiary – to buy the total output of Springerville Unit 1.
Another setback came in midyear 1989 when the ACC authorized a $43 million rate increase instead of the requested $102 million increase. In addition to the financial crisis faced by TEP's electric utility operation, a downturn in the economy led to heavy losses in the subsidiaries. The net result was that the company posted an overall loss of more than $82 million in l989.
Greve's resignation was tendered on July 17, 1989, after he sold substantially all of his holdings of company stock. The board elected John P. Schaefer as chairman and Thomas C. Weir as president.
In January 1990 the board eliminated the first quarter common stock dividend and said that there was little probability that a dividend would be paid for several years.
The previous December the company hired Charles E. Bayless of Public Service of New Hampshire as senior vice president and chief financial officer. He became president in July of 1990 and began an extensive reorganization of the company. On Sept. 12, 1991, Schaefer and others resigned from the board. Bayless was elected chairman on January 29, 1992.
In their quest for financial relief, Bayless and his staff sought to restructure long-term debt and sought short- and long-term rate increases. In addition, aggressive wholesale marketing of excess capacity and internal cash conservation efforts were pursued.
In the fall of 1992, the ACC approved a plan under which the company would issue new shares of stock. Creditors would hold 50% of the stock, preferred shareholders would own 34% and holdings of common stock owners would be reduced to 16%. Additionally, the power purchase agreement with Century Power Company (formerly Alamito Company) would end and TEP would become the lessee and operator of Springerville Unit 1.
A final go-ahead was received at a stockholders' meeting held on November 17. This approval paved the way for the company to complete the restructuring on December 15, 1992.
Company officers and their staffs worked tirelessly on the reams of paperwork necessary to complete the new agreements and to prepare the stock issue. The long campaign to avoid bankruptcy ended with closing of the restructuring on December 15.
UniSource Energy officially began business Jan. 1, 1998, as the new parent company of Tucson Electric Power. Outstanding shares of TEP's common stock were exchanged for UniSource Energy stock, which traded on the New York Stock Exchange for the first time the following day.
In 1999, the Arizona Corporation Commission (ACC) approved a settlement agreement designed to transition TEP into a competitive marketplace for retail electric service. After a scheduled 1-percent rate reduction took effect the following year, TEP's rates would be frozen through the end of 2008 at levels lower than the company charged in 1994. But while TEP opened its service territory to other providers, a competitive retail marketplace did not emerge.
TEP's stability and reliability remain the keys to UniSource Energy's continued success. In 2000, TEP exceeded $1 billion in revenues for the first time in its history. That same year, Tucson voters approved a 25-year extension of TEP's franchise agreement, launching the next chapter of a productive relationship that began more than 110 years ago.
Also in 2000, TEP began clearing land near its largest coal-fired generator for a new kind of power plant. The Springerville Generating Station Solar System (SGSSS), which began that year as a modest 20-kilowatt (kW) system, was expanded year after year until it ranked among the world's largest grid-tied photovoltaic (PV) arrays. The 6.4-megawatt (MW) system now generates enough energy to meet the annual electric needs of more than 1000 Tucson homes. The SGSSS established TEP's credentials as a solar power pioneer while making efficient use of customer funds provided through the ACC's renewable energy programs.
In 2003, UniSource Energy purchased natural gas and electric distribution systems previously operated by Citizens Communications Company. The systems were organized under a new subsidiary, UniSource Energy Services (UES), which now serves more than 235,000 customers in northern and southern Arizona. The agreement was the first transmission and distribution asset acquisition by UniSource Energy since the holding company was established in 1998.
In November 2003, UniSource Energy's Board of Directors accepted an investor group's offer to purchase the company's outstanding common stock for $25.25 a share. But the ACC rejected the proposed acquisition in December 2004, and UniSource Energy remains a publicly traded company.
In November 2008, the ACC approved TEP's first rate increase in more than a decade. The new rates, which will remain frozen until at least 2013, are designed to encourage conservation and assist low-income customers. They also include funding for new, innovative energy efficiency programs and a surcharge tied to Arizona's Renewable Energy Standard (RES), which calls on TEP and other utilities to increase the percentage of power they secure from the sun, the wind and other renewable resources until that share reaches 15% by 2020.
In January 2009, Paul Bonavia replaced the retiring James S. Pignatelli as UniSource Energy's Chairman, President and CEO. Bonavia pledged to extend TEP's historic commitment to renewable energy while establishing its leadership in environmental stewardship and energy efficiency. Those efforts, which are represented by the Bright Solutions brand, will play a significant role in the company's future success.
Today, UniSource Energy is home to a growing family of energy companies serving more than 1.5 million Arizona residents. As TEP enters its third century of operations, the company continues to find innovative ways to provide reliability, service and value to customers and the community.