Corporation Commission approves regulatory process change for rural utilities powering large users

Data centers are showing a growing interest in setting up shop in rural parts of Arizona. And that has rural utilities looking for a new regulatory process to review contract applications with potential power-hungry customers, like data centers.

The Arizona Corporation Commission recently approved an application from the Arizona Electric Power Cooperative, and some of its rural utility members, that would set up a checklist for the commission to refer to when reviewing energy service agreements.

The applications would include information like the location of the facility and whether it will provide some of its own power.

Corporation Commission staff will then review the application and send to the commissioners a proposed order that will address whether the agreement is in the public interest and whether costs for providing power to large users would be shifted to residents and other customers.

The commissioners would then decide on whether to approve or deny the agreements.

Arizona has had data centers for decades, which have largely supported cloud computing.

As artificial intelligence has boomed in recent years, the demand for data centers as the infrastructure to support the boom has skyrocketed as well. And now data centers are requiring more energy than before to supply the new technology.

“What is new is the size of the data centers that are starting to come. And I think what you're seeing is data centers are, they're coming whether we like it or not,” said Nick Myers, chair of the Corporation Commission.

Public opposition against the facilities is increasing as well, as people worry that they will be on the hook to pay for the resource usage of data centers.

While Arizona data centers have largely been built in metro Phoenix, developers are now looking to build in rural parts of the state. The application from the cooperatives says they are seeing new inquiries from large load users who are looking to connect to their grids.

“People don't want the data centers in their own backyard. So you're seeing a lot of zoning and whatnot that are turning down data centers in populated areas. So it's kind of forcing them to move outward a bit,” Myers said.

But rural Arizona utilities often don’t have the capabilities to handle the size of the new facilities.

“The problem is that you've got these co-ops that are relatively small in nature compared to an SRP or an APS. And they would have trouble serving a massive load. APS would have trouble serving a massive load,” Myers said.

The co-ops say the load growth now means there needs to be this new regulatory process to provide certainty for the utilities and their prospective customers.

“What it does is it gets a lot of the information that we need as a commission to evaluate the energy services agreement, puts it all in a standard kind of template,” Myers said, “and in exchange for them doing that, we as a commission agree to try to get those turned around within 90 days. So it's just kind of a streamlined process.”