TEP asks regulators to approve electricity service for Project Blue — at original site

TEP and Beale Infrastructure filed the request Monday with the Arizona Corporation Commission "for electric service to be provided by TEP to a planned data center" campus near the Pima County Fairgrounds.

The filing reveals TEP signed the agreement on July 22, before the Tucson City Council unanimously voted on Aug. 6 against annexing the site and providing water to it. The end user would be Amazon Web Services, according to a 2023 county memo. 

Pima County Supervisor Andrés Cano said in a social media post Monday night that the application "amounts to corporate collusion between our region’s main energy utility and an out-of-state shell company seeking to deplete our energy and water in Southern Arizona."

"Make no mistake: this filing is designed to bypass our community's will and lock in power for a project that has already been rejected at the local level," Cano said. "Now that Tucson's Mayor & Council has rejected Project Blue, Beale and TEP are asking state regulators to do what local leaders and residents refused to endorse."

The Pima County Board of Supervisors, with Cano voting no, sold the 290-acre parcel of land to the developer in June for nearly $21 million. Part of the deal was contingent on the land being annexed into Tucson so the project could receive service from Tucson Water, the city-owned utility.

After the City Council nixed that plan, amid loud public outcry against Project Blue — more than 1,000 residents packed a public meeting — the council pushed for and approved an ordinance regulating large water users such as data centers.  

Project Blue’s developers have been talking to other local jurisdictions as well, including Marana. 

But it doesn't appear the data center developers are moving on from the project, or the location. Cano said the energy application would be for Phase 1 of Project Blue "on a yet-to-be-disclosed property." However, attorneys for TEP indicated in the ACC filing that the parcel of land Pima County sold is still the focus for the data center's construction.  

TEP is seeking approval to provide 286 megawatts of electricity, which is less than city officials projected Project Blue would use. 

The agreement "is designed to meet the specific power needs of (Project Blue) while also ensuring that all other customers are protected from any cost or reliability impacts," the filing says. "The Customer's planned data center campus represents a significant economic opportunity for Southern Arizona" and the proposed agreement "provides substantial protection for customers," it says. 

Project Blue would not receive a discounted rate from TEP, according to the filing.

In his social media post, Cano included copies of a memo sent by Beale Infrastructure to Pima County Administrator Jan Lesher.

Beale says in the memo that "multiple protections" are included in the energy agreement for existing TEP customers, such as Beale paying the same approved rate "as other large customers," that power being supplied is from TEP's existing grid "and enabled by clean energy resources already under development," that there would be a "gradual ramp-up" of that power supply over 18 months of service, starting in May 2027, and that termination fees are included if the agreement is cut short.

Additionally, Beale said, it will have to make minimum monthly payments to TEP to ensure that revenue "exceeds the cost of service and other customers are protected," and that the project "will provide financial security which will guarantee its financial obligations are met and other customers are not impacted," without going into detail on those obligations.

"TEP is not building new power plants to serve this project. Instead, the data center will use available capacity and help TEP increase its electricity sales, which benefits everyone," Beale said in its memo. "Additionally, the company will cover all the costs to connect to TEP's grid, so there is no cost to other customers for that either."