The Arizona Corporation Commission voted 4-1 to approve an agreement under which Tucson Electric Power will provide electric service to the Project Blue data center complex on Tucson's far southeast side.
The commission heard two hours of public testimony mostly opposing the deal and questioned TEP about it for at least another hour before voting Wednesday night at a meeting in Phoenix. The ACC majority essentially accepted assurances from utility officials that residents and other utility ratepayers won't have to shoulder costs of building new power plants, transmission lines or other infrastructure to provide electricity to the data centers.
The commission approved what's known as an energy supply agreement. It defines that as a legal contract between an energy producer and a customer for buying and selling energy with terms for delivery and payment outlined in a legally binding document. The agreement is between TEP and Humphrey's Peak Properties LLC, which plans to buy the project's 290-acre site from Pima County.
After the meeting, opponent Vivek Bharathan of the Tucson-based No Data Center in the Desert Coalition said "the big story of the night" was what he called an acknowledgment by Project Blue officials that as of now, they don't have a company lined up to operate the centers once built.
Amazon Web Services originally planned to operate the centers, previous Pima County government memos showed. But earlier this week, three sources told the Star that Amazon is no longer involved in the project. They said Meta, the company that operates Facebook and Instagram, was negotiating with Project Blue developer Beale Infrastructure to become the operator. Meta officials didn't return an email from the Star seeking comment.
"That speaks to the strength of our movement. We have scared off Amazon and Meta," Bharathan said, although whether Meta might be involved is an open question. "If this thing still gets built, which we certainly hope it doesn’t, Beale will have a data center and no one occupying it," he said.
However, Beale officials told the commission at Wednesday's meeting they remain confident of getting an operator for Project Blue, and noted the project isn't scheduled to go online until 2027 following construction.
When a commissioner asked if the project might have to wait to design the project to meet a specific customer's specifications, a Beale official replied that the company employs several people who have cumulatively worked in the data center industry for decades, and the company is confident it can build a center designed to whatever any customer would want.
The approval of the TEP service agreement came over passionate testimony opposing the agreement from numerous Tucson activists and other residents who said it didn't offer ratepayers enough protection against future rate hikes due to the data centers' construction.
"Today’s ACC decision goes against the very purpose of the ACC, which is a body mandated to protect ratepayers from unreasonable risk," said the No Desert Data Center Coalition in a written statement after the vote.
The four commissioners who supported the service agreement also generally approved of commitments by TEP officials that its ratepayers would be protected from facing higher bills should the data centers fail economically during the 10-year contract the Project Blue officials will sign with TEP to buy electricity.
Utility officials cited a 3-year line of credit that Project Blue developers will have to provide to ensure there will be backup funds to pay for infrastructure in the event of a data center failure.
Eric Bakken, a TEP vice president, told the commission that "first and foremost under rules of this commission we have an obligation to serve" Project Blue. He said the utility added protections in the agreement, including that the project use a minimum of 75% of the total electrical capacity the utility provides, and requiring a three-year cancellation period in which the project operators would have to pay the utility's rates for electricity before completely exiting the project.
"It's hundreds of millions of dollars, significant protection for customers," said Bakken, who is also TEP's chief administrative officer.
Rachel Walden, the only commissioner on the all-Republican panel to vote no on the agreement, plied TEP officials with questions and concerns about what would happen in the event of economic failures of the centers.
Saying she supports the project and supports growth and development in general, Walden told fellow commissioners, "There's a lot of projects where nobody has a crystal ball. During recessions, a lot of projects ended up being halted. All my questions are about the terms of the contract. What TEP could do it take it back and renegotiate it."
Opponents also questioned Project Blue's plans to buy what was described as renewable energy credits to satisfy its pledge to use 100% renewable supplies to provide it electricity. The opponents said they want to see actual renewable energy facilities built, such as wind farms and solar plants, but supporters said the purchase of credits from other sources will ensure the use of renewable energy until such infrastructure can be built.
Out of arounc two dozen people who spoke before the ACC, the only one to support the agreement was Grace Appelbe, executive director of the Arizona Manufacturers Council. Also speaking on behalf of the Arizona Chamber of Commerce, she said, "Arizona employers rely on stable, reliable energy. The ability to attract major manufacturers relies on energy certainties."
"This agreement includes full cost recovery, strong safeguards, and no cost shifting to residential, small business or commercial customers," Appelbe said.
Commissioner Lea Marquez Peterson
Lea Marquez-Peterson, the only commissioner from Tucson, told the audience at the Phoenix meeting before voting, "We are not approving or disapproving Project Blue. We are approving financial terms to protect ratepayers. If this agreement were not approved, TEP's existing (rate structure) applies and that would dictate rates for the project without protection for consumers. It would be irresponsible for me to vote no because of the special protections it provides."
Renee Peters, of the No Desert Data Center Coalition, called the commission's vote "utterly devastating and infuriating at the same time." She said opponents submitted about 500 written comments to the commission opposing the agreement and testified against it on a number of grounds for two hours Wednesday.
"It feels like ... they ask for public comments, they say 'We want to hear from you and you are a part of the democratic process,' and it's all a farce," Peters said. "Myself and others spent months of our time doing unpaid research, becoming educated on the issue, and we are very passionate about what's going on with this project. . . and when we are patronized and ignored like we were, it is extremely infuriating and extremely depressing."
But commissioner Rene Lopez said, before he voted, "TEP has provided power for many generations, is working to cool your homes, charge electric vehicles and to cool your businesses.
"Data centers are not the enemy. I know they've become a pariah recently. (But) data centers are used by all of us. Everyone taking pictures for social media, who does social media meetups or does Apple Pay, relies on data centers. They are going to be around. Embrace the change, or as my son says, embrace the chaos."
The Pima Board of Supervisors agreed by a 3-2 vote in June to sell the land, near the Pima County Fairgrounds, to Project Blue but the deal hasn't closed yet. Project officials now are pushing to have the sale closed by Dec. 25.
The No Desert Data Center Coalition's statement late Wednesday said, "The people will remember how the ACC voted and how the Pima County Supervisors and Administrators enabled this project to move forward despite substantial public objection. There will be political consequences for those who side with Big Tech and corporate oligarchs."
