Local opinion: Project Blue lawsuit shows why TEP’s rate case needs scrutiny

Arizonans are used to sunshine. What we should never get used to is secrecy, especially when it comes to the decisions that determine what we pay for electricity.

State Attorney General Kris Mayes’ ongoing legal challenge to Tucson Electric Power’s “Project Blue” data center agreement isn’t just a courtroom fight over process. It’s a warning light about a broader pattern in southern Arizona: big, high-stakes utility decisions being made with too little transparency, while everyday customers are asked to pay more.

According to Mayes’ appeal, the Arizona Corporation Commission approved a special energy agreement between TEP and a data center developer that includes a provision allowing the utility and the developer to set electricity rate schedules “between themselves.” Mayes argues that crosses a constitutional line, because the Commission, not private parties, has the exclusive authority to set “just and reasonable” rates.

That detail matters. When key terms are hidden, the public can’t evaluate whether a deal protects ratepayers or shifts risks and costs onto them.

Those concerns are not abstract. In an earlier statement contesting the Commission’s approval, Mayes warned that the “loophole” created for the developers to “secretly set electricity rates behind closed doors” is “a dangerous recipe for massive price hikes for Arizona consumers.” Her filing also notes that by 2028, TEP estimates it would be providing 286 megawatts to the project, which is comparable, the Attorney General’s office said, to the energy needed to cool about 57,000 homes.

TEP is asking regulators to approve new rates that it projects would raise residential bills by about 14%, including roughly a $16 monthly increase for a household with median usage under its basic plan.

In other words, while a massive, power-hungry development is at the center of a dispute over hidden rate terms, the utility is simultaneously requesting a double-digit increase for everyone else and proposing additional charges that undermine one of the most practical tools customers have to manage rising bills: rooftop solar.

Mayes’ office isn’t just objecting on principle. It filed expert testimony stating that TEP’s proposed 14% hike could be reduced to about 4% while maintaining reliable service and a strong credit rating, and that TEP’s proposal would transfer approximately $148 million per year in unnecessary profits to shareholders. The same filing says the alternative approach would save the average residential customer about $200 per year compared with TEP’s plan.

Customers have every right to ask: if an independent expert analysis says we can keep reliability while charging significantly less, why are families being asked to shoulder such a steep increase?

And then there’s another long-running issue that rarely makes it into the headlines but shows up in rates all the same: whether customers are forced to pay for utility political influence. Reporting by the Energy and Policy Institute cites TEP filings indicating the company spent $2.1 million (and intended to collect it from customers) on memberships in political trade associations, chambers of commerce, and similar groups across roughly 20 months in 2023–24.

These stories are a part of a single question Arizona must answer: will utility regulation be transparent and customer-focused, or will it drift toward a system where large customers negotiate special terms in the shadows, utility lobbying costs find their way onto bills, and ordinary ratepayers are told there is no alternative but to pay more?

The Corporation Commission can start restoring confidence by insisting that rate-setting happens in the open — no redactions that hide the core economics of major deals. It can rigorously test whether TEP’s requested return and revenue requirement are truly necessary, taking seriously expert evidence that significantly lower increases could still support reliability. And it can protect the rights of customers to invest in solutions, like rooftop solar and batteries, rather than continuing to reduce solar export rates that devalue those investments and leave families more exposed to future hikes.

Arizona’s energy future will include growth, new loads, and hard choices. But one principle should be nonnegotiable: the public should not be asked to sign a blank check in the dark.