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Data center regulations in Arizona

Graded Moderate and tightening. 14 laws, orders, rulings and local actions, each with its source, reviewed 23 October 2026.

Reviewed 23 October 2026 · Part of the Data Center Rulebook

Three-year pause on the data center tax exemption began July 2026

Moderate↑ TighteningGrid: The West outside California14 items
9in force
3pending
0local pauses
paused or sunsettax break
3.2combined index (5 most)
9.7cper kWh, industrial
23 October 2026reviewed
Regulation3.0 / 5
  1. Grid connection4

    APS, the largest utility, has taken no new data center customers since 1 Jan 2024 (stated Sept 2026); SRP makes 20 MW loads prepay studied upgrades.

  2. Power rates3

    TEP's Project Blue contract (3 Dec 2025) carries minimum bills and exit fees, SRP bills 80% of forecast load, and the Aug 2026 coop checklist bars subsidy.

  3. Siting and land use2

    Tucson's 5 Aug 2026 ordinance and Phoenix's 2025 rules add approvals and buffers in both main markets, but no local pause is in force.

  4. Tax treatment4

    HB 4168 bars new Computer Data Center exemption applications from 1 July 2026 to 30 June 2029; certified sites keep theirs.

  5. Permits and water2

    HB 2756 (April 2026) puts semiannual reporting and on-request cost studies on utilities, not developers; Tucson asks for a water plan above 7 million gallons.

Scored on rules in force, 1 to 5. 5 is the most regulated. Pending rules set the arrow.

Arizona stopped taking new applications for its Computer Data Center sales tax exemption from 1 July 2026 to 30 June 2029, and Governor Hobbs wants it ended for good, though she said in September 2026 that she opposes the statewide moratorium Attorney General Mayes has called for. The Corporation Commission applies a 'growth pays for growth' approach: it approved the Tucson Electric Power contract for Project Blue with minimum bills and exit fees, set a standard review for cooperative large-load contracts, and is deciding an APS rate case that resets the extra high load factor rate. APS says grid limits have kept it from committing to any new data center customers since January 2024. Hobbs has twice vetoed bills that would have let data centers add small nuclear reactors outside county zoning. Cities are tightening: Tucson now requires council approval above 20 MW, Phoenix faces property-rights claims over its 2025 rules, and Pinal County turned down a large rezoning.

Outlook for the next year

The Corporation Commission must vote on the APS rate case by 31 December 2026, with a recommended order expected by late November and new rates in early 2027. Microsoft is contesting the proposed 45% increase for data centers, and on 21 October 2026 Attorney General Mayes moved to disqualify Chairman Nick Myers from the APS and TEP rate cases for bias, which he refuses; a separate Residential Utility Consumer Office suit against formula rates is pending in Superior Court. Mayes's call for a statewide pause would need legislation in the 2027 session, and Governor Hobbs has said she does not support it. The 3 November 2026 elections for governor, attorney general, where Mayes faces Senate President Petersen, and commission seats will shape what happens next. The tax exemption window reopens on 1 July 2029 unless lawmakers act.

Does Arizona have a data center moratorium in force?

No. As of 23 October 2026 no statewide or local moratorium on data centers is in force in Arizona. Proposals and expired pauses are not counted.

Is Arizona tightening or loosening its rules on data centers?

Tightening. Arizona is graded Moderate, which means incentives alongside new costs, limits or local pushback. Three-year pause on the data center tax exemption began July 2026. The outlook above says what is pending.

Which grid operator covers Arizona?

Arizona sits in The West outside California. The grid operator decides how a new large load is studied, what it must bring or pay, and whether it can be curtailed first; the state decides siting, permits, tariffs and incentives.

Has Arizona cut its data center tax incentive?

Yes. Arizona has paused, narrowed or ended a data center incentive in 2025 or 2026: HB 4168: three-year pause on the Computer Data Center tax exemption.

How regulated are data centers in Arizona?

On Genloop's five-line rubric (1 least regulated, 5 most) Arizona scores grid connection 4, power rates 3, siting and land use 2, tax treatment 4, permits and water 2, a mean of 3.0. The most regulated line is tax treatment: HB 4168 bars new Computer Data Center exemption applications from 1 July 2026 to 30 June 2029; certified sites keep theirs.

Every item, newest first

14 items: each is a law, order, tariff, ruling, utility action or local decision that changes what a data center must do, pay or disclose, or where it may be built. Failed and pending measures are marked. Each links to its source.

  1. RegulatorArizona Public Service and Tucson Electric PowerOct 2026costs and tariffsPending

    Attorney General seeks recusal of ACC chairman from APS and TEP rate cases

    On 21 October 2026 Attorney General Kris Mayes filed motions in the APS and TEP rate cases asking Chairman Nick Myers to disqualify himself for bias and for prejudging the formula rate policy he voted to adopt; Myers says he will not step aside. The APS case carries the proposed extra high load factor rate for data centers and must be decided by 31 December 2026, and a separate Residential Utility Consumer Office suit against formula rates is pending in Superior Court.

    Source: kjzz.org
  2. UtilityArizona Public ServiceSep 2026grid connectionIn force

    APS has made no new data center commitments since January 2024

    APS said in early September 2026 that grid constraints have kept it from committing to serve any additional data center customers since 1 January 2024, and that it cannot do so under its current pricing. It has about 4,000 MW already committed to data centers, set a peak demand record above 9,100 MW in August 2026 and plans a 1,280 MW gas plant near Gila Bend. Microsoft has intervened in the APS rate case to oppose the proposed 45% increase for data centers.

    Source: kjzz.org
  3. RegulatorAEPCO and five distribution cooperativesAug 2026costs and tariffsIn force

    ACC standard process for cooperative large-load contracts (Docket E-01773A-26-0123)

    On 12 August 2026 the commission unanimously approved a standard checklist and review for electric service agreements between six cooperatives and large loads. Each agreement comes back for approval, and staff must find it is in the public interest, reasonably priced and not subsidized by other customers.

    Source: azcc.gov
  4. LocalTucsonAug 2026siting and zoningIn force

    Tucson large data center ordinance

    Adopted 5 August 2026 by a 6-1 vote with one abstention. Data centers over 25,000 square feet or 20 MW need council approval, a half-mile buffer from homes and 1,000 feet from commercial buildings, no more than 40% lot coverage, independent noise studies and screening, a long-term water plan above 7 million gallons a month, proof of power supply and its renewable share, and batteries or other low-emitting backup before diesel generators. The council said it still wants a legal route to a ban, which staff say Title 9 and Proposition 207 likely block.

    Source: kjzz.org
  5. ExecutiveAug 2026moratoriaProposed

    Attorney General calls for statewide pause on new data centers

    On 31 August 2026 Attorney General Kris Mayes asked lawmakers and the governor to pass a law pausing approval of new data centers, citing power bills and a planned cut of about 30% to Arizona's Colorado River supply. It has no legal force; Senate Republicans dismissed it and the industry alliance opposes it. Governor Hobbs answered on 8 September 2026 that a state moratorium is not the right approach.

    Source: azfamily.com
  6. LocalPinal CountyAug 2026siting and zoningFailed

    Pinal County rejects large data center rezoning (La Osa)

    In the last week of August 2026 the Pinal County Board of Supervisors voted down a rezoning request for a large data center after residents packed the meeting, which effectively ended the project.

    Source: azfamily.com
  7. RegulatorArizona Public ServiceJul 2026costs and tariffsPending

    APS rate case and the extra high load factor rate

    APS's rate case includes a separate rate for its largest, steadiest users. The hearing ran 18 May to 7 July 2026, a recommended order is expected by late November, and the commission must vote by 31 December 2026.

    Source: azcc.gov
  8. State lawJun 2026incentivesIn force

    HB 4168: three-year pause on the Computer Data Center tax exemption

    The fiscal 2027 budget bars the Arizona Commerce Authority from accepting new certification applications from 1 July 2026 to 30 June 2029. Centers certified before the pause keep their sales and use tax exemptions.

    Source: kpmg.com
  9. State lawJun 2026on-site powerVetoed

    SB 1418 veto: small modular reactors next to large loads

    In mid-June 2026 Governor Hobbs vetoed Sen. Frank Carroll's bill that would have let utilities build small modular reactors without environmental studies or hearings and barred counties under 500,000 people (all but Maricopa and Pima) from regulating their land use when co-located with an extra high load factor customer such as a data center. She called the catch-all approach irresponsible; similar bills were vetoed in the 2025 session.

    Source: azmirror.com
  10. LocalPima County and MaranaApr 2026siting and zoningIn force

    Project Blue and Marana campuses proceed after Tucson's refusal

    Tucson's council voted in August 2025 not to annex or supply water to the roughly $3.6 billion Project Blue; Pima County approved it in December 2025 and site work began in late April 2026. In Marana a residents' referendum bid failed and the council approved rezoning for a 600-acre Beale campus.

    Source: aljazeera.com
  11. State lawApr 2026disclosureIn force

    HB 2756: reporting on extra high load factor customers (Chapter 111)

    Regulated utilities and public power entities must file semiannual reports on interconnection requests from new extra high load factor customers and, on request, a cost-of-service study within 180 days. Cooperatives and utilities with 40,000 or fewer connections are exempt; the reporting duty ends 1 January 2034.

    Source: azleg.gov
  12. LocalPhoenixMar 2026siting and zoningIn force

    Phoenix data center zoning rules and Proposition 207 claims

    Phoenix adopted rules in summer 2025 that make it harder to build data centers near homes. Landowners have filed property-value claims under Proposition 207 (KJZZ reported eleven owners seeking $753 million), and the city has granted waivers to some sites rather than pay.

    Source: azfamily.com
  13. RegulatorTucson Electric PowerDec 2025costs and tariffsIn force

    ACC approves TEP supply agreement for Project Blue (Docket E-01933A-25-0187)

    Approved 4-1 on 3 December 2025. Ten-year agreement with Humphrey's Peak Power LLC with an 18-month load ramp, minimum monthly bills and termination fees; the developer pays for line extensions and a switchyard that serve only the campus.

    Source: azcc.gov
  14. UtilitySalt River ProjectFeb 2025costs and tariffsIn force

    SRP large-customer price plan (E-67) and integration process

    New accounts with at least 20 MW of forecast load are billed on the greater of actual demand or 80% of forecast load. Under the Large Customer Integration Process they pay up front for the upgrades a study identifies.

    Source: srpnet.com

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