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Data Centers: How We’re Protecting Customers While Planning for Big Energy Needs
Data centers are a hot topic right now, making headlines around Arizona and the nation. We want to share with you what APS is doing to protect reliability and affordability for residential customers while working to meet the needs of this unique business sector.
The data center industry is growing quickly, driven by the increase in cloud computing services, artificial intelligence and other online data-driven companies. These companies support essential services we all count on and bolster our state’s tech leadership and prosperity.
APS was proactive in developing a high load factor rate in 2017 to ensure rates paid by these customers reflected the cost to serve them. Now, as circumstances and the magnitude of growth have changed, APS is proposing to update this rate so that high load factor users will cover their increasing costs and to ensure residential customers are not subsidizing data centers.
It’s important to note, in 2025, data centers were a relatively small portion of our total peak energy demand – about 5%. The future is bringing new challenges and opportunities, with many data centers and other large energy users looking to come to our state. In fact, the Phoenix metro area ranks second in North America for proposed data center development.
This is a challenge — both here and nationally — because data centers are different from other customers. They require significant levels of energy, operating near peak capacity 24 hours a day, 7 days a week.
Given these factors, we do not yet have enough power plants, transmission lines, and key infrastructure to serve all these new requests. We will need to build more.
We are committed to doing this in a responsible way — keeping costs as low as possible for our existing customers, ensuring that customers driving growth pay the associated costs, and maintaining some of the country's most reliable electric service our customers count on every day. APS's residential rates and bills remain just below the national average and we are working hard to maintain that.
To meet this challenge, we are doing two main things:
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Making sure data center rates match the true cost to serve them
In our June 2025 rate request to the Arizona Corporation Commission, we proposed a 45% rate increase for these extra-large energy users. This rate adjustment would help to ensure that data centers, not families or small businesses, continue to pay for their costs of service.
We also included something called formula rates in our rate request. This would allow APS to check each year how much it costs to serve customers and make adjustments. If extra-large customers like data centers cause costs to rise, those costs will be assigned to them.
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Developing infrastructure for future demand
The future demand for energy from these users is unprecedented, and the timeline to develop infrastructure for their needs has increased. APS is developing an innovative approach through which future infrastructure needs are paid for by the data center customers who would use it, not by existing residential or business customers. Data center customers would sign long-term contracts covering the costs to build and maintain infrastructure over the long-term, ensuring that their service will not be subsidized by existing customers.
Bottom line: As Arizona grows, APS is committed to making sure our existing customers are protected while being a good partner to prospective customers who would like to be a part of the state’s continuing success story. APS will continue to take proactive measures to ensure that data centers, chip makers and other extra-large users will pay the full costs of the energy and upgrades they need, so we can continue delivering safe, reliable service without shifting those expenses to our existing customers.
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