By Nick Myers

Over the past year, as I have zig-zagged across the country meeting with national and state regulators, the national conversation has centered around one single topic: data centers. Conference after conference, panel after panel all seem to focus on the rapid growth of data centers and the challenge of integrating them into the electric grid while maintaining reliability and keeping rates affordable for customers.

I wholeheartedly agree with the Trump administration’s “America’s AI Action Plan” when it states that the United States is in a race to achieve global dominance in artificial intelligence (ai.gov). I agree that our economic competitiveness, technological achievements and national security in the coming years and decades will largely depend on our AI ecosystem.

So, on the one hand, as a state regulator I know that a wave of data centers is coming. For example, in its recently filed rate case, Arizona Public Service (APS) reported that it is contractually committed to serving approximately 3,296 MW of data center load, of which 2,081 MW is from data centers expected to come online by the end of 2028. Further, APS is in conversations with additional data centers representing another 16,908 MW of potential load.

On the other hand, as I travel across Arizona, I consistently hear from residential customers who are understandably concerned that data centers will drive up their rates. Data centers require massive amounts of generation resources and often significant grid upgrades. I understand why residential customers may be concerned. As a regulator, my commitment is to evaluate each new proposal once all the relevant data has been presented and rigorously reviewed.

The good news is that regulators and utilities are fully aware of the potential cost-shift and subsidization problems data centers pose. A commitment to “growth pays for growth” and properly structuring tariffs and energy supply agreements (ESAs) can ensure that data centers are paying all their costs, even if their projected load does not materialize.

Not only that, many residential customers may be unaware that data centers can also apply downward pressure on the rates of all other customers. Instead of driving up residential rates, data centers may help keep them lower. Also, data centers can provide significant economic benefits to local communities. This means data centers not only help advance national AI priorities, but they can also contribute to the flourishing of local communities where they are located.

Data Centers Can Drive Down Rates

Instead of driving up rates, data centers— with properly structured tariffs or ESAs— can help drive down rates for all other customers, including residential customers. Electric utilities have fixed costs (power plants, distribution and transmission lines, substations and so on) that are spread across a utility’s customer base. As a utility’s customer base grows, these fixed costs are spread across more customers so the average cost per customer goes down.

The same applies when a high-load customer is added to a utility’s grid. Because high-load customers, like data centers, use a lot of electricity, they pay a significant share of those fixed costs. Therefore, under standard ratemaking, adding data centers to a utility’s customer base will reduce upward pressure on rates for all other customers.

Adding data centers to a utility’s grid may also result in added grid efficiencies that benefit all customers. For instance, Tucson Electric Power (TEP) recently explained that adding a 286-MW data center in its service territory will “reduce the overall cost for TEP to serve all its customers” because the data center’s “energy use will help flatten [its] overall system load profile thereby making more efficient use of the grid.” This flattening of its load profile will allow TEP “to operate its generation fleet and energy delivery system in a more optimal manner while spreading its fixed cost over a greater volume of energy.”

In addition to spreading fixed costs and improving asset utilization, data centers also provide long-term, stable demand that may reduce the financial risk of utilities and lower their borrowing costs to the benefit of all customers. In service territories where load is declining or flat, large new customers like a data center may help maintain revenue adequacy without having to raise rates on existing customers.

Data Centers Can Boost Local Economies

Data centers can also provide significant economic benefits to local communities. According to Loudoun County, Va., the data center industry in the county has significantly reduced the tax burden on residential taxpayers. The county’s real property tax rate has dropped from $1.285 per $100 assessed value in 2008 down to $0.805 in 2025. Based on the 2025 average assessed value for a residence in the county, this amounts to real estate tax savings of roughly $3,600 a year.

Closer to home, the Arizona Corporation Commission recently approved an ESA between TEP and a planned data center in Pima County developed by Beale Infrastructure Group, a $3.6 billion capital investment expected to bring in $152 million in tax revenues over 10 years, including $58.5 million to Pima County and $93 million to the state of Arizona. In addition to increased tax revenues that directly benefit local schools, Beale has committed to invest an additional $15 million in the community, with $5 million allocated for STEM and trade school education. The data center will also generate 3,000 construction jobs over the multiyear period and 180 on-site jobs by 2029 with an average annual salary of $64,000.

Conclusion

In the end, the data center conversation should focus on two core realities. First, with properly structured tariffs or ESAs that prevent cost-shifts, data centers can help drive down rates for other customers by spreading fixed utility costs across more load, improving grid efficiency and providing stable, long-term demand that benefits all ratepayers. Second, data centers can serve as powerful engines of local economic growth — expanding tax bases, creating high-quality jobs and attracting significant private investment. With sound regulatory oversight and a clear commitment to ensuring that growth pays for growth, data centers can strengthen both our electric grid and our local communities, while also advancing national priorities.

Nick Myers is chairman of the Arizona Corporation Commission.