Arizona Commission Approves a Checklist for Rural Co-op Data Center Deals: Eight Disclosures, a 90-Day Review, No Rate Yet

Between the staff draft and the applicants’ final text, one parenthetical changed twice. The cooperatives’ April application said a large-load contract would be filed “redacted, if necessary” ^[1]. Staff’s July 29 proposed order changed that to “subject to a non-disclosure agreement, if necessary” ^[2]. The version AEPCO filed Aug. 5 reads “with unredacted copy provided to Staff per Protective Agreement, if necessary” ^[3]. A Sulphur Springs Valley member in Pearce caught the drift and wrote in. “The changes in language suggest that the co-ops are aware that data centers prefer to delay revelations about their plans to establish operations in rural communities,” the comment says ^[4].

On Aug. 12 the Arizona Corporation Commission approved the process unanimously ^[5]. What it adopted is a filing checklist and a review standard for rural co-op contracts with data centers and other large customers. It is not a tariff, and it carries no rate.

What the commission approved in Docket E-01773A-26-0123

The applicants are Arizona Electric Power Cooperative (AEPCO), the not-for-profit generation and transmission co-op that supplies all or most of the power its members sell, and five of those members: Duncan Valley, Graham County, Mohave, Sulphur Springs Valley and Trico electric cooperatives ^[1]. They filed April 16, saying they were fielding inquiries from customers looking at rural Arizona. “These customers span a variety of industries, including industrial, manufacturing, greenhouses, and data center developers,” the application says ^[1].

Serving those loads, the co-ops said, will take three-party contracts among AEPCO as wholesale supplier, the local co-op as retailer and the customer, each contingent on commission approval ^[1]. What they wanted was “additional detail and regulatory certainty regarding the Commission’s approval process” and clearer timelines to give prospects ^[1].

The process works in three parts ^[2,3]:

• The filing. Shortly after a co-op board approves a multi-party agreement, AEPCO and the co-op apply for approval. The application covers, where they apply, eight items: the customer and its claimed local benefits; the agreement itself and how it departs from the standard tariff; any self-generation such as solar or storage; whether the load is interruptible or curtailable; new facilities, their approximate cost and who funds them; interconnection; location, including any borderline agreement if the site sits outside the co-op’s territory; and anything else unique.
• The test. Staff uses “best efforts” to file a memorandum and proposed order within 90 days, addressing whether the agreement is in the public interest, whether the rates are reasonable, and whether it “will not result in any other customer class of either AEPCO or the Distribution Cooperative subsidizing the commercial activities of the customer” ^[2].
• The caveat. Approval “does not guarantee any future ratemaking treatment for the agreement” ^[2].

Staff added two things. The first spells out the contract terms the agreement description must cover: minimum billing or demand obligations “requiring payment for a fixed percentage of contracted demand,” termination or exit fees, advance notice for capacity adjustments, capacity reassignment, and any customer payments toward the capital cost of interconnection ^[2]. Staff’s reason was practical: it would ask for those terms anyway, and “it would be more efficient to collect this information up front” ^[2]. The second is a new section stating that the order’s language “is not intended to limit the questions Staff may ask and the analysis Staff may perform when reviewing future applications” ^[2]. AEPCO said Aug. 5 that the applicants support the proposed order ^[3].

What the checklist does to cost and timing

Timing is the clearest gain for developers. A prospect talking to Trico or Mohave now knows what the filing will contain and that staff aims to finish its review in about 90 days. The 90 days is a staff target, and the commission still has to vote afterward ^[2].

On cost, the process sets the test and leaves the numbers to each contract. The no-subsidy criterion is the operative protection: staff must find that AEPCO’s and the co-op’s other classes are not carrying the customer ^[2]. Staff’s footnote points to a NARUC paper for the list of terms it added ^[2]. That paper describes minimum demand provisions as making the customer “pay no less than a fixed percentage of their contracted demand, regardless of whether they actually reach their contracted demand,” and says termination fees “are often a meaningful percentage of the expected contract revenue” ^[6]. The Arizona process names those terms as disclosures. It does not set a percentage, a contract length or a collateral level ^[2,3].

One word differs between staff’s text and AEPCO’s. Staff wrote exit fees “to cover excess assets” ^[2]; AEPCO’s compliance version says “to cover stranded assets” ^[3]. Staff confirmed the AEPCO version is consistent with its understanding, according to the filing ^[3]. The signed decision will settle which wording governs.

On location, the checklist asks where the customer sits and requires a borderline agreement, approved or pending, when a site lies outside the co-op’s own territory ^[2]. That is the only siting element. Water, land use and noise are not on the list.

Not one document in the docket names a prospective customer or gives a megawatt figure, and the process sets no threshold for what counts as “large-load” ^[1,2,3]. The commission’s release says the co-ops are in talks with “several prospective large-load businesses” ^[5].

Where the sides stand

The commissioners framed the vote around who pays. Chairman Nick Myers said the process “allows rural Arizona to capture the economic growth responsibly without being subsidized by other customers of the utilities” ^[5]. Commissioner Lea Márquez Peterson noted that “every cooperative is structured a little differently and represent diverse communities across the state” ^[5]. Commissioner Kevin Thompson said large-load customers will cover all costs of commercial service, “including new infrastructure and transmission construction” ^[5]. That is a stronger statement than the process text, which requires a no-subsidy finding without a specific rule for who pays for transmission ^[2,3].

The cooperatives asked for the process and accepted every staff change ^[3].

Members who wrote in were neutral on the approval and asked for more daylight. The Pearce member urged the co-ops to keep members “informed in meaningful ways from the very beginning of large-load proposals,” questioned relying on applicants’ own statements of community benefit, and pointed to the Willcox groundwater basin, which the comment describes as among the state’s most threatened aquifers ^[4]. A Sierra Vista member asked that any co-op filing such an application be required to notify all of its customers. “I wouldn’t want to hear about it when it was essentially already a done deal,” the comment says ^[4]. Neither request appears in the staff proposed order or in AEPCO’s compliance text ^[2,3].

Developers and consumer advocates are absent from the record this column draws on. No data center company or ratepayer group filed in the docket before the vote; the only outside filings are the member comments ^[4].

Georgia offers a contrast. As this column noted on Aug. 6, a Georgia Power data center contract can take effect there without a commission vote if staff does not object. Arizona’s co-op process goes the other way: the commission itself approves, denies or amends each agreement ^[5].

What I’m watching

The compliance filing. The co-ops must file the approved process in the docket within 15 days of the decision date ^[2]. Its wording on confidentiality, and on excess versus stranded assets, is what future applicants will be held to.

The first agreement. The first multi-party filing under the checklist will be the first time the record shows a customer, a load and a price for an AEPCO co-op. Then the 90-day clock starts ^[2,3].