PHOENIX—With no Arizona Corporation Commission (ACC) members present, Doris Freeman voiced the concerns of many at a recent public hearing: a proposed 14 percent rate increase from Arizona Public Service (APS), the state’s largest utility. Freeman, like others in attendance, argued she simply cannot afford the increase.
Rising Rates, Rising Concerns
APS, which reported over $600 million in profit in 2023, is seeking its third rate increase in four years. Freeman, a retiree on a $23,000 annual income, explained that previous increases have already doubled her monthly bill to $130. She has been forced to limit her air conditioning use, and her unit recently broke, a repair she fears she cannot afford even before a potential rate hike. “People are unable to make ends meet,” Freeman stated, adding that she is in the same predicament.
Others who spoke at the hearing echoed Freeman’s fears, stating they may be forced to choose which bills to pay or even face homelessness. Sandy Bahr, president of the Sierra Club’s Grand Canyon chapter, emphasized the human impact of the ACC’s decisions, stating that, in some cases, they are “a matter of life and death.”
Data Centers and Energy Demand
The proposed rate increase comes as energy demand in Arizona surges, driven not by residential growth but by an increasing number of data centers and APS’s commitment to power them with natural gas. The situation is compounded by cuts in federal funding for clean energy initiatives and programs assisting low-income families with energy costs. This week, the Department of Energy rescinded a conditional commitment of a $1.8 billion loan to APS for renewable energy, transmission, and energy storage projects, a loan initially approved during the final days of the Biden administration.
Ted Kelly, director and lead counsel of U.S. Clean Energy at Environmental Defense Fund, argued that the decision to halt the loan is counterproductive. “Arizona needs more low-cost power to keep up with its growing economy and rein in rising bills,” Kelly said. “Instead, the Department of Energy is killing much-needed clean power projects and pouring money into aging coal plants that are expensive, unreliable and dirty.”
Across the country, electricity rates are increasing due to the energy demands of artificial intelligence and data centers. Phoenix is the third-largest data center market in the U.S. Experts and environmentalists allege the ACC has been unduly influenced by APS and its parent company, Pinnacle West, through substantial financial contributions to commission elections, and that the commission fails to adequately consider the impact of its decisions on residents. Arizona Attorney General Kris Mayes has labeled the rate case “blatant corporate greed” and has intervened in the proceedings.
APS’s proposal includes establishing formula-based rates, which would allow the utility to increase charges annually without a full hearing process. Amanda Ormond, a former director of the Arizona Energy Office, explained that regulations exist to protect customers, as utilities are monopolies. APS spokesperson Ann Porter stated the utility understands the financial strain on customers and that current rates are based on costs from three to four years ago, with wood power poles alone costing 71 percent more than in 2021. APS offers assistance programs for customers struggling with bills.
A Community in Crisis
Electricity is becoming increasingly unaffordable, Ormond said, with potentially deadly consequences. Hundreds of people die each summer in Phoenix due to extreme heat, and the inability to afford air conditioning exacerbates this risk. Contributing factors include cuts to federal clean energy funding, the potential dismantling of Arizona’s renewable energy standards, and APS’s shift towards natural gas, including plans for a 400-mile pipeline from Texas and a new natural gas plant in Gila Bend.
The proposed infrastructure expansion is driven by the demands of data centers, with requests for new connections exceeding 19,000 megawatts, far surpassing the APS system’s current capacity of over 9,000 megawatts. APS has proposed a “growth pays for growth” plan, where large users would fund the second phase of the Gila Bend plant, but this requires approval. Winslow Mayor Roberta Cato testified that APS is unwilling to invest in infrastructure for her city unless businesses commit to locating there, creating a Catch-22 that hinders economic development.
Frequently Asked Questions
What is APS proposing?
APS is asking the Arizona Corporation Commission to approve a 14 percent increase in customer rates, which would be its third increase in four years.
Why is energy demand increasing in Arizona?
Energy demand is increasing due to the growing number of data centers in the state and the utility’s commitment to power them with natural gas.
What is the Attorney General’s position on the rate increase?
Arizona Attorney General Kris Mayes has called the rate case “blatant corporate greed” and has filed to intervene in the proceedings.
How will these proposed rate increases impact Arizona communities?
