In the Wild West that is the AI power boom, Arizona is attracting massive data centers, requiring as much as one gigawatt of power. 

The rush to attract these facilities raises an important question: Who will pay for the enormous amount of electricity and water they require? Absent clear guardrails, homeowners — not Big Tech — will pay the price.

What the state needs is an Arizona Ratepayer Bill of Rights — ARBOR — to ensure the rapid expansion of data centers does not shift financial and reliability risks onto ordinary customers, as is happening nationwide.

The ARBOR framework will ensure that data centers build and finance their own power, transmission, and backup, stay financially separate from the public utilities, and respect local control.

Is growth really paying for growth?

As more data center projects are proposed, utilities in Arizona are reporting a sharp rise in peak electricity demand. In 2025, peak demand for Arizona Public Service reached 8,648 megawatts — about 400 megawatts higher than in 2024. 

APS reported that extra-large power users’ requests exceed 19,000 megawatts, more than double the peak demand. Massive data centers are projected to consume over 20% of Arizona’s electricity by 2030.  

That growth carries real risks for everyday ratepayers. APS is currently seeking a 16.44% rate increase for residential customers, citing unprecedented growth. Yet, aggregate household electricity usage has remained relatively flat in recent years, as APS’s 2024 and 2025 investor reports show. Over that period, commercial consumption, however, has surged by 17.4% — driven largely by energy-intensive data centers.

Despite that drastic imbalance, the average rates charged to homeowners increased about 11.2% between 2023 and 2025 — nearly double the increase faced by business customers. That is not “growth paying for growth,” as APS claims. 

Under Arizona’s regulated utility model, new infrastructure built to serve large industrial loads is typically included in the rate base, meaning the public will end up paying to supply data centers.

Safety net for ratepayers

The following ARBOR principles will protect everyday ratepayers from these cost-shift and grid reliability risks. 

First, data centers should build and finance their own power generation, dedicated transmission, and backup infrastructure, rather than relying on utility systems paid for by ratepayers. Without a public grid backup, they must also cover redundancy and black-start capabilities.

Second, public utilities must keep data center investments financially separate from assets supported by ratepayers. This means no intermingling of costs, no cost allocations, no secret agreements, and no expectation of cost recovery from residential or commercial customers.

Third, taxpayers should not subsidize the industry through unnecessary incentives. The Data Center Tax Exemption, worth roughly $38 million annually, should be revoked, and a new data center water usage fee should help fund the Colorado River Protection Fund, as proposed by Gov. Katie Hobbs. Local communities should retain control over zoning and land-use decisions, deciding whether the infrastructure needed to support data centers belongs in their neighborhoods.

Responsible and accountable growth

Arizona isn’t alone in facing cost-shifting and grid reliability challenges. Across several U.S. power markets, expert analysis shows that rapid data center growth is forcing utilities to expand infrastructure — costs that are ultimately recovered from ratepayers, raising everyone’s electricity bills. 

On the PJM Interconnection, the largest electric grid operator in the United States, capacity prices jumped tenfold after PJM failed to procure enough capacity to meet its reliability target. Experts warn data center demand could equal 20 million households in five states, risking blackouts and $163 billion in added costs from 2028–2033. 

Backup power events in Virginia’s “data center alley” required emergency action and nearly damaged the grid.

Off-grid data centers are no longer a novelty, and as several projects emerge across the country, Arizona must learn from these lessons before making decisions that could shift costs onto ratepayers.

The Arizona Corporation Commission recently approved Project Baccara, a large data center project that initially generates its own power but later connects to the APS transmission system, leaving its on-site generation to operate as backup gas peaking power — one of the most expensive forms of energy. 

Project Baccara fails to meet the ARBOR criteria — and thereby potentially shifts long-term costs to ratepayers — contrary to the commission’s determination when approving it. 

None of the common-sense ARBOR safeguards would prevent Arizona from benefiting from data center investments. They simply ensure that the cost of powering the AI economy is borne by the companies causing demand and benefitting from it — not by families struggling to pay their monthly utility bills.

Arizona’s leaders still have time to put these bipartisan protections in place. If they fail to act, voters may ultimately decide that the state needs an Arizona Ratepayer Bill of Rights at the ballot box.

Abhay Padgaonkar is a management consultant and longtime consumer advocate who served as an expert witness on behalf of utility ratepayers in 2018.