Arizona legislative session focuses on energy policy Image By EPN Staff Key Points Arizona lawmakers introduced nearly 40 bills addressing grid reliability, affordability, renewables, data centers and oversight of the Arizona Corporation Commission, as major utilities seek 14% rate increases. Rapid data center growth, Arizona has 155 facilities, is linked to higher electricity demand, water use concerns and debate over tax exemptions, with bipartisan efforts to revisit those incentives. As peak demand records are broken, lawmakers are divided on energy priorities, with some pushing to restrict utility-scale renewables and others proposing that affordability and reliability take precedence over emissions reduction. Faced with rising electricity costs, Arizona legislators on both sides of the aisle have introduced nearly 40 bills related to grid reliability, energy affordability, renewable energy, data centers and the Arizona Corporation Commission (ACC), the agency that regulates public utility companies. The Arizona legislative session began the second Monday in January and runs for 100 days unless both chambers agree to extend it. Why it matters In late January, Arizona Public Service, the state’s largest utility company, asked the ACC for a 14% increase in customer rates. If approved, it will be the third increase in four years. Tucson Electric Power (TEP) is asking for the same level of increase. The growth in data centers has contributed to higher rates. Phoenix is the nation’s third-largest data center market. In fact, Arizona is home to 155 data centers, according to the Data Center Map. Last year, a proposal for a controversial data center in the Tucson area was opposed by the Tucson residents and the city council over concerns about a lack of transparency and water use, the Arizona Capitol Times reported. Gov. Katie Hobbs, in her Jan. 12, 2026, State of the State address, questioned the state’s exemption for data centers. Water, critical in the state of Arizona, is one of the ways data centers cool their large computer systems. Additionally, members of both parties introduced bills to end the tax exemption. Qualification is based on the level of financial investment. The ACA and the Arizona Department of Revenue administer the tax break. In 2021, the legislature voted to extend the program. But data centers aren’t the only subject of legislation as lawmakers work to balance the grid, making it more reliable and affordable. Republican Reps. David Marshall and Ralph Heap introduced House Bill 2267 to limit utility-scale solar and wind projects. They have also introduced legislation to make it more difficult for utility-scale solar and wind to get zoning approval and property tax subsidies. The lawmakers call renewable energy projects a backyard “nuisance.” Rep. Justin Olson introduced House Bill 2912 to direct the ACC to require utilities to prioritize affordability and reliability over carbon and emission reduction. Gov. Hobbs vetoed a similar bill, Senate Bill 1119, last year. The bigger picture Last summer, the state’s two largest electricity utilities, APS and Salt River Project, exceeded their previous peak demand records. The third-largest provider, Tucson Electric Power, nearly hit its highest all-time peak for demand, News Data reported. Natural gas (44%) and nuclear (36%) supply most of the state’s electricity, with coal (14%) and renewables (6%) contributing the remainder, according to federal sources. SUGGESTED STORIES Arizona copper mining legal battle One of the world’s largest untapped copper deposits likely sits 7,000 feet below a rocky Arizona landscape. Mining companies and an American Indian tribe have fought over control of the mine for two decades in court, and in August a federal appeals cou Read more What the downfall of an environmental powerhouse could mean for conservative policy Over the past decade, some progressive movements have adopted rigid ideological positions that may be limiting their effectiveness on key issues. As a result, new opportunities for more pragmatic, market-based approaches to energy and environmental policy may be gaining tra Read more At a glance: Arizona Arizona is the 14th most populous state in the U.S., with 7,582,384 residents across its 113,653 square miles according to the U.S. Census Bureau. The state ranked No. 12 for business in 2025 by CNBC. Arizona is home to key economic industries, including manufacturing, aerospace, defense, a Read more
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