Arizona Public Service, the state’s largest electric utility, is awaiting a recommended order from a regulatory judge after concluding one of the longest rate case hearings in Arizona Corporation Commission recent history. The 31-day proceeding began May 18, 2026 and concluded July 7, 2026 and centered on a request to raise annual revenues by roughly $580 million.
One of the longest hearings on one of the largest requests
APS’s application proposes a net base rate increase of $579.52 million, representing a net increase of approximately 14 percent. APS last filed a rate case in 2022, which resulted in the ACC approving new rates in 2024 based on costs from 2021, 2022.
The utility argues that costs have climbed significantly since those rates were set, pointing to infrastructure expenses as evidence of the gap.
The hearing lasted a total of 31 days, one of the longest utility rate case hearings in the ACC’s recent history; the majority of rate case hearings take about two weeks or less. Nearly three dozen intervenors participated, more than 50 witnesses testified, more than 300 exhibits were admitted into evidence, and about 3,400 data requests were submitted by Staff and other intervenors to the utility from June 2025 through June 2026.
If the current request is approved as proposed, the monthly bill impact to a typical residential customer using 1,000 kilowatt-hours would be around $20. The rate review process started in June 2025 and will likely continue through the end of 2026.
Data centers at the center of the debate
The case has become a national flashpoint for two issues: APS’s proposed Formula Rate Adjustment Mechanism that would allow annual rate increases without a full rate case, and a proposed rate increase of more than 45 percent specifically for data center customers.
Many residential customers have raised concerns about data center costs being passed on to them, but since APS relies on historical test years, the most recent boom in data center electricity demand is unlikely to be reflected in the rates approved by the commission this year.
The data center surcharge proposal mirrors actions already taken in other states. Oregon recently approved a separate 29.7 percent rate increase for data center customers under the POWER Act, which created a new rate class to ensure that the fast-growing electricity needs of data centers do not contribute to increasing utility bills for Oregon households and small businesses, while cutting residential bills, and California’s Southwest Gas rate case illustrates how regulators elsewhere are navigating similar cost-allocation battles.
APS’s rate case introduces measures, according to the company, to protect residential and small business customers by making sure that new large energy users, like data centers, continue to pay their full cost of service, proposing a rate increase of more than 45 percent for data centers and updated cost allocation for system investments. The formula rate request, APS contends, would provide an annual process to ensure other customers are not receiving cost increases associated with data center growth.
Infrastructure costs driving the filing
Current APS rates are based on costs from five years ago, and inflation and rising expenses mean those rates no longer cover what it takes to operate and strengthen the electric grid.
Transformer costs are, on average, 49 to 90 percent higher now than when rates were last set.
APS serves 1.5 million homes and businesses in 11 of Arizona’s 15 counties and maintains a diverse range of energy resources, including nuclear from the Palo Verde Generating Station, natural gas, coal, solar, wind and energy storage, a mix that is about 58 percent clean.
The company is an investor-owned monopoly utility, meaning it cannot set its own prices for electric service and instead must ask the commission to approve those prices. The constitutional responsibility of the ACC is to establish just and reasonable rates and ensure the utility is providing safe and reliable service to its customers; simply denying a utility’s application on the basis of not wanting to increase rates would be a violation of the Arizona Constitution (Article 15).
What comes next
Following the close of the evidentiary record, an administrative law judge will issue a Recommended Opinion and Order for the commission’s consideration. APS and intervenors will have an opportunity to file exceptions or responses to that order, after which the ACC will publicly review and vote on the case.
A final decision is expected toward the end of the year. The commission anticipates that if rates are approved, they would go into effect early next year.
The Arizona Corporation Commission has posted a public timeline of remaining steps in the proceeding, including deadlines for intervenor briefs before the recommended order is issued.
The APS case is one of the largest rate proceedings in the commission’s recent history by both dollar amount and hearing duration, and its outcome is expected to influence how Arizona regulators handle the cost-allocation question that data center growth is raising for utility commissions across the country.
