Arizona Attorney General Kris Mayes is challenging a Dec. 10 decision by the Arizona Corporation Commission that authorized Tucson Electric Power to enter into a private energy agreement to supply electricity the data center project known as Project Blue.
In a filing with the Commission, Mayes cited concerns over transparency and consumer protections, arguing that the agreement allows electricity rates to be set privately, outside the Commission’s public ratemaking process. The deal involves TEP, Humphrey’s Peak Power LLC, and its affiliate, Beale Infrastructure Group.
“The loophole created for the developers of this data center to secretly set electricity rates behind closed doors and outside of the public process is new, rare, and a dangerous recipe for massive price hikes for Arizona consumers,” Mayes said in a statement. “That’s why my office is stepping in.”
According to the Attorney General’s office, a more thorough review by the Commission could have addressed what it describes as a fundamental flaw in the agreement: a provision that permits TEP and the data center customer to establish electricity rates without explicit Commission oversight. The agreement does not clearly specify whether deviations from approved tariffs would require Commission review or approval.
Mayes argues that this arrangement conflicts with Article 15, Section 3 of the Arizona Constitution, which grants the ACC exclusive authority over ratemaking decisions; authority that cannot be delegated to private entities.
“By approving an agreement that allows a utility and a customer to ‘choose their own rate,’ the Commission abdicated its constitutional and statutory authority and its duty to protect ratepayers,” Mayes said.
The filing also raises concerns about the potential financial impact on customers. The project is expected to require significant new generating capacity, with associated costs passed on to ratepayers. By 2028, TEP estimates it will supply approximately 286 megawatts of electricity to Project Blue — an amount roughly equivalent to the energy needed to cool about 57,000 homes.
Mayes is requesting that the Commission schedule a full evidentiary hearing and grant intervention status to both the State of Arizona and the City of Tucson. The request includes full procedural rights, such as pre-hearing discovery, the presentation of oral and written evidence, cross-examination of witnesses under oath, and the authority to subpoena witnesses.
“The public deserves transparency and accountability when utilities enter into unprecedented agreements that may affect electricity rates and grid reliability across Arizona,” Mayes said. “The Commission must ensure that its decisions are grounded in a complete record and made in the public interest.”
The ACC’s decision comes amid a surge in hyperscale data center development across Arizona. Unlike traditional data centers that typically serve a single organization’s information technology needs, hyperscale data centers are massive, high-density operations designed to support potentially millions of end users and require enormous amounts of power to operate.
