Arizona Regulators Approve Power Deal for Controversial Pima County Data Center
December 10, 2025
Arizona utility regulators have approved a critical power supply agreement for a major, yet contentious, data center project in Pima County, highlighting the growing tension between rapid digital infrastructure expansion and local community concerns over energy costs and environmental impact.
The Arizona Corporation Commission voted 4-1 last week to approve a 10-year Energy Supply Agreement between Tucson Electric Power (TEP) and the developers of 'Project Blue,' Beale Infrastructure Group and Humphrey’s Peak Power. The deal authorizes TEP to supply electricity to the planned facility starting in 2027, drawing from its existing generation portfolio. Utility executives stated this capacity is becoming available due to the expiration of several wholesale contracts and the deferral of other industrial loads in the coming years.
Under the agreement, TEP will supply up to 286 megawatts of power to the data center by 2028—an amount equivalent to the electricity needed to cool approximately 57,000 homes. The contract includes standard monthly billing rates for large customers and features a three-year cancellation notice clause backed by monthly billing requirements.
The approval followed a lengthy public hearing where nearly two hours of testimony was heard in opposition. Residents and officials raised concerns about potential cost burdens on residential ratepayers and questioned whether they would subsidize new renewable infrastructure required for the project. Questions also persisted about the facility's ultimate operator, following reports that Amazon Web Services had withdrawn.
During the meeting, Commissioner Rachel Walden, the sole dissenting vote, pressed TEP on cost allocation, asking, “You’re going to drum up the 300 megawatts of power, that power the data center should be paying for. What I’m hearing... is that the 300 megawatts is being socialized across the full rates for everybody.” Erik Bakken, TEP's Senior Vice President, countered that Project Blue developers would bear all additional costs, stating they would pay for system resources and help “offset the need for future rate cases.”
The deal carries significant implications for Arizona's energy landscape. Beale Infrastructure has committed to matching 100% of the project's energy use with renewables, a target TEP's current portfolio cannot meet. Sam Arons, Beale's Vice President of Energy and Sustainability, acknowledged that renewable energy credits would initially be used to bridge the gap, with specifics on new green infrastructure and on-site backup power—potentially diesel—still under determination. Commissioners emphasized their role in balancing development with consumer protection. “This is not an us versus them,” said Commissioner Rene Lopez, noting data centers are a modern necessity. Chairman Kevin Thompson warned that protecting ratepayers from infrastructure cost overruns remains an ongoing concern.
The decision underscores the complex challenges regulators face in accommodating the massive power demands of data centers while safeguarding public interests, a debate that is likely to continue as similar projects emerge.
Source: azpm
