Earlier this week, Arizona Attorney General Kris Mayes contested the Arizona Corporation Commission’s approval of a private energy agreement between Tucson Electric Power and the developers of Project Blue, a data center in Pima County.
The agreement allows TEP to provide 286 megawatts of power to the data center during the project’s first phase – roughly the amount of energy it would take to cool about 57,000 homes or about 10-15% of the utility company’s current capacity according to the filing.
Mayes said her office is demanding transparency in her request for a re-hearing of the Dec. 10 decision, which she argues was made without fully understanding the impact to local ratepayers.
“We are intervening in both the TEP rate case and also the [Arizona Public Service] rate case to make the argument that data centers need to pay for themselves and that the residents of Arizona should not be subsidizing them,” she said.
The filing states that “Arizona has become a preferred destination for the national data center boom. Drawn by Arizona’s tax incentives, cheap land, low natural disaster risk and a strategic Western US location, as of December 2025 Arizona had 16 operating data centers and 22 planned projects.”
It was reported earlier this week that Governor Katie Hobbs is considering ending tax incentives for data centers.
“Do we want to become the data center capital of the world? I don’t think most Arizonans want that and I also don’t think that this is our economic savior of the state. Data centers are what I call the cotton candy of economic development. They don’t really come with all that many jobs,” Mayes said.
Mayes said that the agreement allows TEP and the data center developers to set their own rates without clear oversight from the Commission and doesn’t state whether changes to approved rates require the utility regulator’s approval.
Only the Commission has the authority to set electricity rates. The power cannot be handed over to private companies.
“There’s an entire section associated with the energy service agreement between TEP and the company that is redacted, totally blacked out,” Mayes said. “I’ve never seen that in my entire time watching the Corporation Commission and the people of Tucson deserve transparency around this deal”
She said the state cannot allow agreements between utilities and data centers to be negotiated outside of public view.
Mayes’ office has asked the Commission to vacate its decision and hold a public rehearing.
If that does not happen, she said her office will assess its options.
The Attorney General’s Office is hosting a town hall on Tuesday, Jan. 13 at the YWCA of Southern Arizona in Tucson to hear from residents about TEP’s proposed 14% rate hike.
