data-center-esa

Data Center Campus Proposal

TEP is seeking regulatory approval for an agreement that would protect customers from costs associated with serving a potential data center development southeast of Tucson.

TEP’s proposed agreement with Humphrey’s Peak Power, LLC would provide 138-kilovolt (kV) service to a planned data center just north of the Pima County Fairgrounds. The agreement was submitted Aug. 25 for Arizona Corporation Commission (ACC) review. It includes a termination fee, credit security requirements, minimum demand payments, and other terms that mitigate risk if the project is not built or does not operate as anticipated.

“We’ve gone above and beyond to ensure that this project would pay its own way,” said Susan Gray, TEP’s President and CEO. “This agreement would allow us to satisfy our obligation to serve this new customer without compromising reliable, affordable service for the rest of our community.”

Customer Protections

The agreement includes numerous protections, including:

  • Full cost service: The project would pay the ACC-approved rate for TEP’s largest customers, with no financial incentives or discounts, ensuring that residential customers and other retail customers are not subsidizing the project.
  • Capacity limits: The agreement would provide up to 286 megawatts (MW) of capacity, which TEP can satisfy with existing resources plus clean energy projects already under development.
  • Termination fee: Starting in May 2027, Humphrey’s Peak Power, LLC can only terminate the agreement upon multi-year notice and would be subject to a termination fee, supported by financial security, if it does not meet its contractual obligations.
  • Minimum payments: The project would be required to pay minimum monthly bills to protect other customers in the event its actual energy demand is less than it requested, guaranteeing enough revenue to more than cover its service costs. Large energy users typically support greater affordability for other customers by covering a higher percentage of a utility’s fixed system costs.

Energy Capacity

TEP would have enough energy capacity to serve the project, due in part to solar and storage projects currently in development pursuant to our 2023 Integrated Resource Plan, including:

  • Roadrunner Reserve, a 400-MW battery energy storage system (BESS) coming online in two phases in 2025 and 2026.
  • Babacomari Solar: 160 MW solar, in Cochise County (2026).
  • Wilmot Energy Center expansion: 100 MW solar plus 100 MW BESS (2026).
  • Winchester Solar: 80 MW solar plus 80 MW BESS, in Cochise County (2027).

Next Steps

The ACC will review the energy supply agreement in a public process to ensure that it satisfies all regulatory requirements and provides adequate protections for other TEP customers.

“Our obligation is to provide safe, reliable energy at the lowest possible cost within our service area, and this agreement is consistent with that mission,” Gray said. “We stand ready to serve new businesses that support our local economy through thoughtful partnerships that provide broad benefits to our entire community.”