Corporation Commission Approves 10-Year Energy Supply Contract For Pima County Data Center
By Matthew Holloway |
The Arizona Corporation Commission (ACC) voted 4-1 on Wednesday to approve a legally binding 10-year Energy Supply Agreement (ESA) between Tucson Electric Power (TEP) and Humphrey’s Peak Power LLC to power a planned data center campus proposed for Pima County.
The Commission underscored that its review of the agreement was limited solely to ensuring statutory compliance and safeguarding ratepayers’ interests. Regulators noted they do not hold jurisdiction over the nature or approval of the associated data center project itself, only the energy contract enabling its power supply.
As reported by the Arizona Capitol Times, the ACC meeting on December 3rd was contentious, with almost two dozen members of the public calling on the Commissioners to vote against the agreement in over three hours of discussion. Commissioner Rachel Walden was the only dissenting vote.
“I’m still wary about whether or not there is a data center at the end of this,” Walden said, according to the Times.
TEP, a regulated public utility, is legally obligated to serve all eligible customers within its designated service territory without discrimination and may not refuse service to applicants who meet interconnection and regulatory requirements, the ACC explained in a press release. Commissioners reiterated that ESA terms must provide protections not only for the contracting parties but also for the broader TEP ratepayer base.
During the meeting, TEP executives said that the data center customer will ultimately decrease other customers’ rates, arguing the facility will make a larger revenue contribution than the actual cost of serving it, according to the Times.
Erik Bakken, senior vice president and chief administrative officer at TEP, explained, “We believe that we’ve got the gold standard special contract for a data center with existing resources and existing capacity that’s available.”
In a press release, TEP said its usage-based rates are set by dividing the total revenue the utility is allowed to collect by projected energy sales. Bringing in a large new user like a data center increases overall sales, the company argued, which allows per-kilowatt-hour charges for other customers to move lower than they otherwise would be.
In comments to 13 News, Pima County Supervisor Matt Heinz told the outlet that Amazon Web Services (AWS) will no longer be the end user for the data center referred to as “Project Blue,” citing multiple sources. He stated that there are now as many as seven or eight different potential end users. The outlet reported Tuesday that Facebook’s parent company, Meta, could potentially be the new suitor for Beale Infrastructure’s project based on comments from Heinz and Tucson City Councilman Paul Cunningham.
Arizona Capitol Times reported that this shift was owed to the project switching from water-cooling to air-cooling. Beale Infrastructure, the project developer, reportedly told commissioners that it is confident an end user will be found in time for the data center’s projected completion in 2027.
The data centers’ proposed 290-acre campus in Pima County, per Beale’s ESA application obtained by AZ Luminaria, has sparked a massive public debate in southern Arizona, including questions about grid load growth, long-term power procurement, water use before Beale’s conversion to air-cooling, and whether infrastructure planning is keeping pace with rapid expansion in energy-intensive industries.
Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.
