Data Centers and SRP

A data center is a facility that houses networking equipment, computer servers and storage systems used to securely process, store and manage large amounts of digital data.

There are many reasons data centers are located, or seeking to build, in Arizona:

• The Arizona legislature passed a tax incentive for data centers in 2013 that offers sales and use tax exemptions.
• Arizona experiences minimal natural disasters such as floods, hurricanes, etc.; has a robust fiber optic network and large amounts of land for housing data centers.
• Arizona utilities like SRP offer access to reliable and cost-effective electricity.
• The Phoenix area offers available land, workforce, and proximity to companies like Intel and TSMC, which manufacture technology used in data centers, such as semiconductor chips.

Data centers have a wide range of energy use. Some data center sites require just a few megawatts, while newer large scale data centers may require hundreds of megawatts of power. Large data centers are still a relatively small part of SRP’s overall customer base, having contributed 5.1% to SRP’s summer 2025 peak demand record. However, data centers are projected to be SRP’s fastest growing customer segment.

For perspective, SRP’s current generation capacity is approximately 8,000 megawatts (MW.) Some of the larger data centers in our system have a capacity load of 200 MW.

SRP relies on the customer to provide accurate power load estimates so we can size equipment and infrastructure such as needed generation, transmission and distribution, and correctly plan for future demand. We supplement the customer-provided information with knowledge from industry best practices and our own experience with data center customers to meet this substantial load, without risking the reliability of the entire system.

This data center load is further incorporated in SRP’s total system through its Integrated System Plan, which aligns generation, transmission, and distribution strategies. This approach prepares SRP for electrification, integrating distributed energy resources, and managing rapid load growth, while keeping power affordable and reliable.

SRP’s current pricing plans require and are designed so that large commercial and industrial customers, including data centers, pay the costs associated with adding new and updating existing infrastructure needed to serve them so those costs are not shifted to residential customers. To help prevent cost shifts to residential customers, SRP has taken two important steps:

• In 2025, SRP introduced the Large Customer Integration Process (LCIP) to address requests for electricity for new large-load customers such as data centers. This process determines what specific new infrastructure would be needed for new large-load customers. After the study is complete, SRP gives these proposed customers cost estimates for their specific upgrades. These new large load customers must pay upfront for their upgrade costs and meet certain conditions, so these costs are not paid by other SRP customers.
• SRP’s updated E-67 commercial and industrial price plan, which was approved in 2025, requires new large customer accounts with at least 20 megawatts (MW) of forecasted load be subject to minimum billing requirements. This cost will be based on whatever is greater: their actual demand or 80% of their forecasted load. This helps prevent large customers from overestimating their needs and shifting costs to other customers.

SRP is among the most reliable utilities in the nation, according to the U.S. Energy Information Administration. SRP will continue to take appropriate steps to maintain this level of reliability even with large data centers.

SRP conducts extensive system planning to prepare for and accommodate load growth while maintaining reliable and affordable power.

SRP has a defined service territory within the Phoenix metropolitan area. To the extent a data center receives the appropriate zoning and approvals, like any other customer in our service territory, SRP will serve their electric needs.

Most cities in SRP’s service territory have policies for water use that require new industrial water users, including data centers, to limit water use. In some cases, high intensity water users are required to acquire their own water supplies to avoid impacts to existing water users.

SRP is a raw water provider to local municipalities and does not provide water directly to data centers. As careful stewards of one of the Phoenix metropolitan area’s largest water supplies, SRP continues to work with our state and local municipalities to support a strong economy and plan for future growth. Recent studies have shown that newer data centers have significantly reduced their water consumption and incorporated newer re-use technology to become much more efficient in their use of water.