Arizona’s Corporation Commission approved a controversial formula-based rate system last year that now allows utilities to increase rates annually instead of going through traditional multi-year reviews. The policy, adopted in a rushed vote despite warnings from the commission’s own expert that such systems have led to large rate increases elsewhere with no measurable service improvements, shifts financial risk from utilities to consumers. Arizona Attorney General Kris Mayes, a former commissioner herself, argues the commission’s decision enables utilities to pass unexpected cost swings directly to ratepayers.
Now taking advantage of this new system, Arizona Public Service and Tucson Electric Power are both seeking 14% rate increases for 2026, citing unprecedented energy demand from data centers, extreme heat, and infrastructure costs. APS wants to increase data center rates by nearly 30% and create a separate customer class, while TEP is awaiting approval for an energy agreement with an Amazon-linked data center that would consume as much electricity as 260,000 Tucson homes monthly. The commission, which functions as the referee between monopoly utilities and their captive customers, must now decide whether to approve these formula-based increases that their own analyst warned against.
