Arizona Regulators Approve TEP's Decade-Long Power Deal for New Data Center
December 7, 2025
In a decision that underscores the complex balancing act between fostering economic development and protecting utility customers, Arizona regulators have approved a major energy supply agreement to power a new data center in Pima County. The move highlights the critical role of regulatory oversight as power-hungry data centers place unprecedented demands on regional grids across the United States.
The Arizona Corporation Commission (ACC) voted 4-1 to approve a 10-year Energy Supply Agreement (ESA) between Tucson Electric Power (TEP) and Humphrey’s Peak Power LLC. The deal will provide power for a proposed data center project, with the approval coming after significant public commentary during the Commission's Open Meeting. The sole dissenting vote was cast by Commissioner Rachel Walden.
Central to the approved agreement are robust consumer protections designed to shield TEP's existing residential and business customers from bearing the costs of new infrastructure required for the data center. The ESA mandates that Humphrey’s Peak Power LLC is financially responsible for all dedicated infrastructure. It also includes provisions for termination fees, minimum monthly billing, and a structured 18-month ramp-up period for the facility's power load to ensure grid reliability for all customers.
Commissioner Lea Márquez Peterson emphasized that protecting ratepayers from cost shifts was "vitally important to the region." Vice Chair Nick Myers stated the measures should prevent other consumers from enduring additional expenses and argued that adding the data center could help lower transmission costs for others. However, Commissioner Walden dissented, arguing the contract's safeguards for existing customers were insufficient and that the developer should cover more upfront infrastructure costs to avoid leaving "existing customers holding the bag."
The approval reflects a strategic approach to managing Arizona's surging electricity demand, largely driven by large-scale energy users like data centers. Commissioner Rene Lopez highlighted the importance of such tailored contracts for maintaining grid reliability, safety, and affordability amid rapid load growth. This regulatory framework sets a precedent for future negotiations, aiming to attract digital infrastructure investment while ensuring incumbent utility customers are not financially disadvantaged.
Source: hoodline
Arizona Regulators Approve TEP's Decade-Long Power Deal for New Data Center
