Last week, the Arizona Corporation Commission - the state’s utility regulator - approved an Energy Supply Agreement between Tucson Electric Power and the developers of Project Blue: Beale Infrastructure Group and Humphrey’s Peak Power.
Four out of five of the commissioners voted in favor of the agreement, Commissioner Rachel Walden was the lone nay vote.
The agreement will allow TEP to provide electricity to the planned data center in Pima County, starting in 2027, through its existing generation portfolio.
Erik Bakken, senior vice president and chief administrative officer for TEP said that this is possible because several wholesale contracts are set to expire over the next couple of years and the expected deferral of certain industrial loads will create availability.
The agreement also states that by 2028, TEP will be providing as much power to the project as it would take to cool 57,000 homes, about 286 megawatts.The 10-year long agreement includes monthly billing requirements at the same standard rate as other large customers and offers a three-year notice to cancel the contract that will be enforced by a monthly billing requirement.
The contract was filed with Arizona’s utility regulators in August, after the Tucson city officials rejected the project.
Wednesday’s open meeting began with nearly two-hours of public testimony in opposition to the data center.
Some of the concerns from the audience included how residential ratepayers in Pima County would be impacted and if they would have to subsidize the costs of additional renewable infrastructure to support the data center.
Audience members also voiced concerns about who the final operator of the data center would be after it was reported that Amazon Web Services pulled out of the project by The Arizona Daily Star.
They also reiterated that several elected officials have rejected this project.
Walden, who spent more than half an hour questioning TEP, asked how the electric service could promise that potential additional costs for additional power would not be subsidized by ratepayers.
“You’re going to drum up the 300 megawatts of power, that power the data center should be paying for. What I’m hearing and from your explanation is that the 300 megawatts is being socialized across the full rates for everybody,” Walden said.
Bakken reassured her that the developers of Project Blue would pay for any additional costs to support more energy.
“In fact they are paying for not only the system resources that we’re going to be using to serve them, but they’re helping to offset the need for future rate cases,” Bakken said.
Last month Beale Infrastructure announced that it would commit to matching 100% of its energy use with renewable energy in a press release.
TEP’s current generation portfolio does not yet meet that demand on renewable energy. However, the company is looking at developing additional green infrastructure that Beale would pay for.
Commissioner Lea Marquez Peterson asked if Beale would have to purchase renewable energy credits in order to meet that commitment and for TEP to explain its existing renewable energy sources.
Bakken said that TEP is working on its Integrated Resource Plan - a long-term plan that outlines how the utility service will generate and deliver electricity in the future- to determine what those resources would be before deferring to Beale representatives.
Sam Arons, vice president of energy and sustainability with Beale said at the site there could be more growth that would need additional power.
“We don’t know what the number is going to be at this time,” Arons said. “But for today under the current ESA that’s under consideration, those 286 megawatts are being served by the existing generation mix that TEP has.”
Arons added that they would need to make up the difference by using renewable energy credits.
Marquez Peterson also asked Arons about the plans for backup power onsite.
“Will it be diesel?” she asked.
“That is still being determined, potentially,” he responded.
If the energy supply agreement hadn’t passed, TEP would’ve pursued a tariff contract which would have delivered electric service to the data center at the 138-kilovolt transmission level without specific protections for ratepayers and TEP.
Commissioner Rene Lopez asked if Beale considered nuclear energy as a clean or reliable source of energy and later went on to tell the audience that the Commission’s role was to protect ratepayers and utilities.
“This is not an us versus them,” he said, stating that data centers are a necessity of life. “So embrace the change.”
Chair Kevin Thompson reiterated concerns for the protection of ratepayers, that TEP would not recover infrastructure costs from ratepayers if the planned data center does not meet its financial obligation.
“I don’t think this is the last we’re going to hear about this data center or the tariffs when it comes to ratepayer protections related to this project,” he said after declining to discuss the details related to TEP’s upcoming rate case.
In a separate interview with AZPM, Vice-Chair Nick Myers said that datacenters are not new to Arizona…that the only thing that has changed is their size and the amount of power that they will use.
“How do you ensure that the ratepayers are protected from not overbuilding but at the same time, get them what they need?” he said.
Myers added that the Commission has an obligation to work with monopoly utilities but that customers must prove that they actually need the amount of service they are requesting. That way, customers don’t end up paying for extra costs.
