The Governor’s Office of Resiliency’s Arizona Energy Promise Taskforce calls for “a suite of policy considerations to enable Arizona to accommodate economic growth without compromising grid reliability or unfairly increasing costs for existing customers.”
“The volume and pace of large-load customer growth require new, customized approaches to accommodate economic development while protecting residential and other ratepayers,” it says.
It adds that the pace of large-load facility construction is exceeding historical growth patterns and challenging how utilities make investment and planning decisions.
It also warns, “The operating profiles of large-load customers, particularly data centers that operate continuously, pose unique challenges for grid operations and maintenance.
“Arizona utilities traditionally schedule maintenance during periods of lower demand, such as winter months with reduced air conditioning use. Continuous demand from large load facilities can limit these windows, requiring changes to maintenance practices, redundancy planning, and outage management to preserve reliability.
“Large-load growth is occurring across utility service territories and impacting regional infrastructure systems, creating a need for greater coordination.”
Scores of business leaders and professionals were on the panel that produced the report.
Gov. Katie Hobbs called on them to outline how the state can “streamline and expedite plans to build energy infrastructure and expand Arizona’s energy system, while maintaining the state’s legacy of responsible natural resource management, reliability, and affordability.”
The taskforce report notes, “Community concerns related to water use, energy affordability, visual impacts, noise, and other effects can delay or halt projects. Large-load facilities can have significant implications for water use and air quality, which is particularly concerning in Arizona.”
Stating “there is no comprehensive reporting of the water usage associated with electricity generation,” it notes that “information about the water footprint of various energy sources within the state is limited.”
The report focuses on the long-term health of the state’s electrical grid as more data centers and other large electricity consumers come online.
“Supply chain limitations for critical equipment, including transformers, switchgear, and transmission components, are driving up costs and further extending construction timelines.”
And it cites a disconnect between data center operators’ time frames for connecting to power supplies and utility companies’ ability to meet them.
“Long lead times for new generation, transmission, and distribution infrastructure limit how quickly capacity can be added and may not align with interconnection timeframes requested by large-load developers,” the report states.
The task force repeatedly points to “large load” customers – a category dominated by data centers – as a defining challenge.
“These facilities can require substantial and concentrated energy demand,” the report notes, warning that such growth creates “challenges for reliability [and] affordability.”
Unlike traditional growth, which tends to be gradual and distributed, data centers can bring massive, immediate spikes in demand, requiring utilities to build infrastructure years in advance.
The state report echoes a Politico look earlier this month on the pressure data center growth is putting on the nation’s electricity grid.
“The entire system is trying to grow faster on the supply and the demand side, and we have a limited number of transformers we can crank out,” Josh Rhodes, a research scientist focused on energy with the University of Texas, Austin, told Politico.
Rhodes also said everyday ratepayers will end up paying more on their power bills, Rhodes said.
“I expect electricity prices to go up,” he was quoted as saying. “If you look at the inflation on the infrastructure that moves electricity around, it has vastly outpaced [the Consumer Price Index] in terms of inflation on things like eggs.”
Some data centers can generate $10 million in revenue in a single day, making the rising cost of transformers and other electrical equipment “negligible” in the data center owners’ eyes, one electricity provider executive told the news site.
Across the Valley, utilities are increasingly planning clusters of projects rather than single facilities – a shift driven by the scale of demand. As a result, the report states, energy demand is arriving in large, concentrated bursts.
One of the report’s most pointed concerns involves who bears the burden of building out the infrastructure needed to support that growth.
The task force calls for “greater transparency” and “fairness in cost allocation” for large users, warning that without changes, rapid expansion could place “upward pressure on rates.”
“Changes in ratepayers’ utility bills are driven by a variety of factors, including system load growth, fuel prices, and natural hazard damages,” the report states. “While data from some states have shown that load growth can decrease retail prices ... there is still uncertainty regarding the conditions that must be met to achieve such reductions.
“Importantly, cost reductions related to load growth are not guaranteed, as seen in other states.”
It also notes, “In Arizona, the largest cost driver for Arizona ratepayers is the need for cooling during heat season. A ratepayer’s total bill is thus particularly sensitive to their consumption rate.”
That raises a central question already emerging in policy discussions: Should residential customers subsidize infrastructure needed for billion-dollar data centers?
Utilities have already signaled that major investments in generation and transmission will be required — costs that could eventually flow through to ratepayers if not structured carefully.
And while “the volume and pace of large load customer growth require new, customized approaches to accommodate economic development while protecting residential and other ratepayers,” the report notes a fragmented decision-making landscape for making those decisions.
“Ultimately, the adoption of any framework and the implementation of any practices are solely within the jurisdiction of the relevant ratemaking body,” it states.
“Depending on the relevant utility or power provider, the decision-maker may be the Arizona Corporation Commission, the Salt River Irrigation Project’s Board of Directors, Co-operative Board of Directors, Tribal Utility Authorities, or others.”
The report notes that both Phoenix and Maricopa County, as well as other cities and counties in the state, have instituted new zoning requirements for data centers, though they do not apply to projects that have long been approved, including Menlo Equities’ campus.
It also calls on state policy makers to not only look at further development of new sources of energy, such as solar power.
It also urges them to examine how other states are planning to shield residential customers from a major impact on their bills.
“Many public utility commissions and utilities have initiated or implemented specialized large load tariffs to protect ratepayers and mitigate stranded asset risks,” the report states, saying over 100 of such controls already have been adopted across the country.
Those measures provide “enhanced contractual protections beyond standard utility service terms to prevent costs from falling on residential and small business customers”; “reduce speculative development and associated stranded asset risks”; and “align infrastructure investments with demonstrated demand.”
The report acknowledges that data centers, along with semiconductor manufacturing and other advanced industries, are viewed as key to positioning Arizona as a national technology hub.
“With the adoption of a statewide framework that prioritizes transparency, oversight, and community empowerment,” it says, “the state can attract responsible economic development in communities that desire it, while shielding residential and other ratepayers from cost shifts, unmitigated risk, and natural resource depletion.”
© 2026 East Valley Tribune (Mesa, Ariz.). Distributed by Tribune Content Agency, LLC.
