PHOENIX – Arizona Public Service (APS) revealed plans Thursday for a natural gas power plant to help meet the growing demand for energy from data centers without denting other customers’ wallets.
The Desert Sun Power Plant will be capable of adding up to 2,000 megawatts to the grid, enough to power 3,000 homes, APS said.
“It’s designed in a way that it will not impact residential rates,” Jacob Tetlow, the utility company’s executive vice president and chief operating officer, told KTAR News 92.3 FM’s The Mike Broomhead Show.
How will data centers pay for part of Desert Sun Power Plant?
The project west of Gila Bend will consist of two phases, the first of which will support the increasing demand from existing and future residential and commercial customers.
Phase 2, meanwhile, will provide power for extra-large energy users like data centers, who will pay for their share of the project through a “growth for growth” subscription model.
“Part of this power plant is to serve that existing (residential and commercial) growth, and the other part is saying, ‘Hey, data centers, you want to get served? We’re great with that. We will serve you, but you’re going to have to pay for it because we’re not going to create a cost shift,’” Tetlow said.
Construction of the Desert Sun Power Plant is expected to begin in 2028, with Phase 1 operational by late 2030. The timeline for the second phase will be developed in collaboration with participating extra-large customers.
Projections suggest APS could have to boost its current energy generation levels threefold to support future data center usage.
“We’ve never sat in a position before where somebody’s asking you to triple the size of your company,” Tetlow said. “Now, while we know that’s not all real and we have to sort that out, we’re trying to create an innovative program for that Desert Sun Power Plant Phase 2 where growth pays for growth.”
Why is APS using natural gas to power new plant?
The Desert Sun Power Plant will generate energy using natural gas delivered from the Permian Basin in Texas through a new pipeline.
“If you remember a few months ago, there was an announcement on a new pipeline to Arizona,” Tetlow said. “Arizona did not have the ability to get more natural gas for generation. And with this pipeline announcement, (it) allows us the opportunity to build a new power plant.”
APS plans to build a new natural gas plant west of Gila Bend. By pursuing a ‘growth pays for growth’ strategy, this project protects affordability for existing customers while addressing requests from large energy users like data centers. https://t.co/w86uoZ2Sqw pic.twitter.com/irNJaS8E4u
— APS (@apsFYI) October 30, 2025
APS seeks to maintain a balanced energy portfolio, including investments in solar, wind, batteries, nuclear and coal.
“We need more incremental dispatchable gas generation to ensure reliability, keep costs affordable while we continue to deploy renewables as well,” Tetlow said.
Energy generated from natural gas can help keep the grid powered when solar and wind energy isn’t available.
“They really complement each other well,” he said. “Sometimes I like to tell people, ‘Well, if I put in more gas, that actually enables more renewables on the system, too.’”
APS, which is owned by publicly traded Pinnacle West Capital Corp., is Arizona’s largest electricity provider. It serves 1.4 million homes and businesses in 11 of the state’s 15 counties. The service area includes a portion of Phoenix along with Valley suburbs to the west and north.
In June, the utility company filed an application with the Arizona Corporation Commission to raise rates by 14% to cover its rising costs.
