AZ — Power Infrastructure Updated 2026-07-17

Arizona

WECC Natural Gas Storage Coal Queue Bottlenecks

1. Grid operator / regional context

Arizona is not in a centralized RTO/ISO. Its largest electric utilities, including Arizona Public Service (APS), Salt River Project (SRP), Tucson Electric Power (TEP), and UniSource Electric (UNSE), plan and procure resources under Arizona Corporation Commission (ACC) oversight for regulated utilities or through public-power governance for SRP. This makes Arizona’s data center policy especially dependent on utility-specific interconnection studies, bilateral electric service agreements, rate cases, and ACC dockets rather than a single regional queue process.

The most important statewide energy proceeding for data centers as of July 17, 2026, remained ACC Docket No. E-00000A-25-0069, opened for large-load and data-center issues. ACC’s April 2026 workshop materials framed Arizona as a top-five data center capacity state, with about two dozen operating data centers, more than 2,000 MW of existing data center load, and more than 10,600 MW of additional planned data center load (Arizona Corporation Commission, 2026-04-20). No Commission-wide large-load tariff or final interconnection rule had been adopted in that docket by the July 17 cutoff; utility-specific queues, contracts, and rate cases therefore remained controlling.

At the federal level, FERC on June 18 ordered the six Commission-jurisdictional RTOs/ISOs to explain or revise their large-load interconnection rules. Because Arizona is not in an RTO/ISO, that proceeding does not directly set APS, SRP, TEP, or UNSE retail-load rules, but it adds regional pressure for standardized study, co-location, and cost-allocation practices (Federal Energy Regulatory Commission, 2026-06-18).

2. Interconnection queue status and reforms

Utility queues and large-load requests

The ACC’s April 16, 2026, large-load/data-center workshop showed that Arizona’s binding constraint is no longer only generator interconnection; it is also the utility-side process for screening, contracting, and energizing very large retail loads. APS and SRP told the Commission that customer interest exceeds near-term capacity to serve, while TEP and UNSE reported one contracted data center project with a 286 MW forecast, roughly 800 MW of other prospective projects, and an additional speculative data center queue of 8-10 GW (Arizona Corporation Commission, 2026-04-20).

SRP reported that it already serves 59 large-load customers with a combined load of nearly 7,000 MW, and the ACC’s workshop summary reported an APS estimate of approximately 13.1 GW in 2026 for large-customer peak demand (Arizona Corporation Commission, 2026-04-20). The latter is a large-customer pipeline or planning figure, not APS’s total-system summer peak: APS separately forecast a 2026 system peak of 8,648 MW. The distinction matters because queue interest and system coincident peak are not additive measures (Arizona Corporation Commission, 2026-04-16).

New statutory large-load framework

HB 2756, signed June 4, 2026, created the state’s most direct statutory response to data center and other extra-high-load-factor interconnection risk. The law requires covered utilities and public-power entities serving more than one million connections to report semiannually on new extra-high-load-factor interconnection requests and completed interconnections. It also authorizes the ACC to establish service characteristics for regulated utilities, including minimum bills, minimum contract lengths, early-exit terms, collateral, guarantees, and customer payment for infrastructure improvements (Arizona Legislature, Laws 2026 Chapter 111, 2026-06-04; LegiScan HB 2756 status, 2026-06-04).

On request, HB 2756 requires covered regulated utilities and qualifying public-power entities to file cost-of-service studies showing the cost allocation for new extra-high-load-factor customers. The act’s findings support new customer classes, rate designs, and allocation formulas intended to prevent residential cost shifts, but expressly state that the Legislature is not setting any particular utility rate (Arizona Legislature, Laws 2026 Chapter 111, 2026-06-04).

3. Ratepayer-protection issues

Arizona’s 2026 ratepayer-protection debate has four active tracks.

First, the ACC’s large-load workshop identified broad agreement that data centers and other large users should shoulder the costs of new generation and infrastructure rather than shifting those costs to existing customers. Workshop topics included universal large-load tariffs, electric service agreements, “bring your own power” concepts, upfront financial support, minimum bills, and stranded-asset mitigation (Arizona Corporation Commission, 2026-04-20).

Second, APS’s 2025 rate case proposes a new treatment for extra-large energy users such as data centers. APS states that its proposal would increase rates for those extra-large users by more than 45 percent and use a formula rate process to assign costs associated with data center growth to those customers rather than to other customer classes; the same rate case would increase a typical residential 1,000-kWh monthly bill by about $20 if approved as filed (APS, 2026-05-18). The 31-day evidentiary hearing began May 18 and concluded July 7. The Extra High Load Factor class and proposed Formula Rate Adjustment Mechanism were among the litigated issues; an administrative-law-judge recommendation is expected in late November, the Commission vote is due by December 31, and any approved new rates are expected in early 2027 (Arizona Corporation Commission, 2026-07-10).

Third, HB 2756 authorizes the ACC to establish minimum bills, contract duration, collateral, guarantees, and infrastructure-payment terms for regulated utilities serving extra-high-load-factor customers. Large public-power entities are subject to the act’s reporting and requested cost-of-service-study provisions, but not the ACC service-term authority (Arizona Legislature, Laws 2026 Chapter 111, 2026-06-04). More prescriptive proposals did not survive: HB 2949 would have required public power entities to charge data centers of at least 100 MW for associated fuel, generation, and transmission costs and bar shifting those costs to other customers, but it died without a hearing; a similar large-data-center amendment to HB 4030 failed on the House floor and HB 4030 itself died in the House (Arizona Legislature HB 2949 introduced text, 2026-02-04; LegiScan HB 2949, 2026-02-05; LegiScan HB 4030, 2026-03-11).

Fourth, the Project Blue dispute in Pima County became a live test of special energy agreements. Attorney General Kris Mayes appealed the ACC’s approval of TEP’s agreement with Beale Infrastructure on February 19, 2026, arguing that the agreement improperly allowed the utility and developer to set rate schedules outside the Commission’s exclusive ratemaking authority (Arizona Attorney General, 2026-02-19).

4. Generation adequacy and resource planning

Governor Hobbs’s Arizona Energy Promise Task Force reported in April 2026 that utilities expect peak demand to grow by up to 40 percent over the next 15 years, driven in part by large commercial and industrial users. The task force’s 31 consensus recommendations included faster permitting coordination for generation and transmission, responsible water-use transparency in project development, support for ACC Docket No. E-00000A-25-0069, large-load tools to prevent cost shifts and stranded assets, exploration of “bring your own capacity” approaches, and updates to tax and financial incentives (Governor Hobbs, 2026-04-02).

The ACC workshop similarly highlighted utility interest in standard contracts, extra-high-load-factor rate structures, upfront financial support, and bring-your-own-power policies. These recommendations reflect a planning shift from simply forecasting load to requiring large-load customers to demonstrate financial commitment, resource sufficiency, and cost responsibility before utilities build generation and grid infrastructure around them (Arizona Corporation Commission, 2026-04-20).

SRP’s April board and council election also changed the governance context for the state’s largest public power utility. Renewable-energy advocates gained seats but did not win a majority, leaving a more divided board to decide how SRP meets rapidly growing demand, including data-center load, and how it balances new gas generation with renewable resources (Associated Press, 2026-04-09).

Project-specific generation proposals are also becoming part of Arizona’s data center land-use debates. The ACC voted 5-0 on February 4 to approve a Certificate of Environmental Compatibility for Project Baccara’s proposed 700.2 MW natural-gas plant serving its planned data-center complex; county, air-quality, military, and construction approvals still apply (Arizona Corporation Commission, 2026-02-06). La Osa/Vermaland’s Pinal County proposal similarly involved data centers, gas generation, battery storage, and related energy infrastructure before the applicant reportedly offered to scale the plan from 3 GW to roughly 1 GW after public opposition (Pinal County Planning & Zoning Commission action summary, 2026-04-16; KJZZ, 2026-05-28).

Two broader resource-policy developments also changed the context in which utilities will serve this growth. On March 4, the ACC voted to repeal the Renewable Energy Standard and Tariff rules after utilities reached the rules’ 15 percent-by-2025 target; the repeal was not a data-center tariff decision, but it removed a statewide renewable-procurement mandate from future resource planning (Arizona Corporation Commission, 2026-03-05). On July 2, APS announced plans to convert two retired Cholla coal units to natural gas, restoring approximately 380 MW in 2029 if construction and approvals proceed. APS tied the proposal to reliability and regional growth generally, not specifically to data-center load (APS, 2026-07-02).

5. Utility load forecasts and data center demand

ACC’s April 2026 workshop provides the clearest current statewide demand snapshot:

  • Arizona had roughly two dozen operating data centers with more than 2,000 MW of load, plus more than 10,600 MW of planned additional data center load (Arizona Corporation Commission, 2026-04-20).
  • SRP reported 59 existing large-load customers totaling nearly 7,000 MW (Arizona Corporation Commission, 2026-04-20).
  • The ACC workshop summary reported an APS estimate of approximately 13.1 GW in 2026 for large-customer peak demand, a planning or pipeline measure distinct from APS’s 8,648 MW total-system summer peak forecast (Arizona Corporation Commission, 2026-04-20; Arizona Corporation Commission, 2026-04-16).
  • APS said data centers accounted for about 5 percent of its 2025 peak. Its public planning page shows an 8.7 GW 2025 peak, a 12.0 GW 2035 peak forecast, and a separate 19 GW uncommitted data-center queue; that queue is an expression of interest and should not be added to committed-load or system-peak forecasts (APS, accessed 2026-07-17).
  • For near-term system context, the April summer-preparedness workshop reported 2026 peak forecasts of 8,648 MW for APS, 8,869 MW for SRP, 2,513 MW for TEP, 529 MW for UNSE, and 717 MW for Arizona Electric Power Cooperative, with roughly 24,500 MW of total capacity including required reserves (Arizona Corporation Commission, 2026-04-16).
  • TEP and UNSE reported one data center project under contract with a 286 MW load forecast, roughly 800 MW of other prospective data center projects, and 8-10 GW in speculative data center inquiries (Arizona Corporation Commission, 2026-04-20).
  • Project-level additions during the update window included Edged’s newly opened 36 MW Mesa facility and Prime’s start of construction on the first 144 MW of a planned 240 MW Avondale campus; these are developer-reported critical IT capacities and should not be added mechanically to utility peak-demand forecasts (Edged US, 2026-04-02; Prime Data Centers, 2026-05-21).

These figures supersede the narrower February 2026 framing in this file. The key updated point is that Arizona utilities and regulators now describe data center load as a system-planning category large enough to require dedicated tariffs, contracts, reporting, and resource-adequacy rules.

6. Behind-the-meter and co-located generation

Arizona developers are increasingly pairing data center concepts with dedicated generation or “bring your own power” claims. The ACC workshop included utility discussion of bring-your-own-power policies and special service agreements for extra-high-load-factor customers (Arizona Corporation Commission, 2026-04-20). Governor Hobbs’s Energy Promise Task Force also recommended exploration of large-load energy-management tools and bring-your-own-capacity concepts to protect households and small businesses from costs created by large users (Governor Hobbs, 2026-04-02).

At the project level, Project Baccara and La Osa show that co-located generation is no longer a theoretical issue in Arizona. Baccara’s 700.2 MW gas plant has its state siting certificate, while La Osa’s filings group data-center, gas-generation, and battery-storage elements in the same land-use package (Arizona Corporation Commission, 2026-02-06; Pinal County Planning & Zoning Commission action summary, 2026-04-16). HB 2456, which began as a proposal addressing small-modular-reactor/data-center co-location and was amended into a broader nuclear-ready-community planning bill, failed House final passage 28-27-5 on June 9 (LegiScan HB 2456, 2026-06-09).

7. Transmission constraints and planned upgrades

The 2026 policy posture is to treat transmission, generation, and large-load contracting as linked decisions. The Energy Promise Task Force recommended centralized permitting coordination and faster timelines for generation, transport, and transmission assets, while the ACC workshop focused on large-load interconnection, tariffs, and stranded-asset mitigation (Governor Hobbs, 2026-04-02; Arizona Corporation Commission, 2026-04-20).

HB 2756 adds statutory reporting and cost-allocation tools to that transmission-planning context by requiring recurring reports on extra-high-load-factor customer interconnection activity and authorizing the ACC to include customer-specific infrastructure-payment terms in regulated-utility service requirements (Arizona Legislature, Laws 2026 Chapter 111, 2026-06-04).

8. Notes and monitoring points

  • ACC Docket No. E-00000A-25-0069 should be checked after July 17 for proposed tariff language, model electric service agreements, or additional workshops; no final statewide tariff or rule had been adopted by the cutoff (Arizona Corporation Commission, 2026-04-20).
  • APS’s rate case, Docket No. E-01345A-25-0105, could set the first concrete statewide precedent for assigning data-center growth costs to an extra-large customer class; the next material milestones are the expected late-November recommended order and a Commission vote by December 31 (Arizona Corporation Commission, 2026-07-10).
  • The Project Blue appeal could clarify how much flexibility utilities and large customers have to structure special energy agreements before full ACC ratemaking review (Arizona Attorney General, 2026-02-19).