APS Uses ‘Growth Pays for Growth’ Model to Develop New Natural Gas Plant

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10/30/2025 - 09:00 AM

Thoughtful plan shelters existing customers from paying for data centers, extra-large users

PHOENIX--(BUSINESS WIRE)-- Arizona Public Service (APS) announced plans today to develop a site west of Gila Bend, Ariz., capable of adding up to 2,000 megawatts (MW) of reliable, flexible generation to the state’s energy portfolio. The Desert Sun Power Plant will be a state-of-the-art natural gas facility designed to meet Arizona’s rapidly growing needs, support unprecedented demand from extra-large energy users and enhance integration of renewable energy resources – all while protecting affordability for residential and small business customers.

This two-phase project will support current customer growth through our competitive procurement process in Phase 1 and enable new extra-large customer investments via an innovative subscription model in Phase 2.

“Arizona’s energy needs are growing faster than at any time in our history,” said Jacob Tetlow, APS Executive Vice President and Chief Operating Officer. “Additional natural gas generation is essential to support our existing customers and to begin addressing unprecedented requests from extra-large energy users, such as data centers. By pursuing a ‘growth pays for growth’ strategy, this project protects customers while supporting data centers needed for the U.S. to compete globally.”

The proposed subscription model ensures that Phase 2 would be paid for by the extra-large customers who would use it – not by existing residential or business customers. Extra-large users would sign long-term contracts covering the capital costs and assuming development risks.

How residential and small business customers benefit from this plan

By having extra-large energy users fund a portion of the plant’s capacity through long-term subscription agreements, APS can accelerate infrastructure development without shifting costs to existing customers.

This approach:

Helps protect and maintain fair prices for all customers.
Safeguards reliable service around-the-clock, even when energy use is highest.
Strengthens Arizona’s energy grid and transmission infrastructure.
Supports a balanced energy portfolio that includes nuclear, solar, wind, battery storage, natural gas and coal.

“Phase 1 will support all customers, helping to meet spikes in demand – such as those on hot summer afternoons – and keeping electricity flowing when renewable power from solar and wind isn’t available,” Tetlow said. “Phase 2 ensures that as Arizona continues to grow, we are relying on innovative solutions to help protect existing customers from the costs associated with expansion. Partnering with our extra-high load customers to maintain cost fairness is a part of our plan.”

Why a balanced energy mix is important

APS’s balanced energy portfolio is designed to ensure strong reliability and affordability for customers. By 2028, APS plans to add nearly 7,300 MW of new resources to support our state’s rapid growth and maintain service during high-demand conditions. Natural gas continues to play a vital role in providing flexibility and ensuring consistent power around the clock.

“Natural gas is an important partner to the large quantity of renewable resources we’re adding to our portfolio and provides flexible, on-demand energy to ensure reliability for customers, especially on our hottest summer days,” Tetlow said.

Nuclear energy and coal add important base-load components that make the system resilient.

Energy grid projects benefit Arizona’s workers and future

“Natural gas generation is a critical component of a reliable and affordable grid,” said Representative Gail Griffin, Chairwoman of the Arizona House of Representatives Natural Resources, Energy and Water Committee. “I applaud APS for its investment in Desert Sun Power Plant which will provide firm, dispatchable energy to support quality service for existing and future customers in Arizona.”

“The strength and reliability of Arizona’s energy grid serves as a competitive advantage in the global competition for 21st century jobs and economic development,” said Christine Mackay, Greater Phoenix Economic Council (GPEC) President and CEO. “APS’s Desert Sun natural gas facility will play an important role in supporting our state’s growth and help ensure Arizona remains an attractive destination for leading businesses, advanced manufacturers and cutting-edge start-ups to invest in.”

“Reliable energy infrastructure is the foundation of a prosperous economy,” said David Martin, President of the Arizona Chapter of the Associated General Contractors. “APS’s investment in Desert Sun will not only ensure Arizona has a strong power supply, but it will also support good paying contractor jobs for skilled men and women in our community.”

Economic and community impact

The Desert Sun Power Plant is expected to be a significant driver of economic growth in Arizona:

Job creation: Hundreds of construction jobs along with a smaller number of long-term operational positions.
Business partnerships: Collaboration with local suppliers, contractors and service providers.
Tax revenue: Increased contributions to local and state tax bases.

APS will host public open houses, maintain a project website at aps.com/desertsun and gather community feedback as part of its proposal. The new plant will feature advanced emissions controls to meet federal and county air quality standards and will operate with higher efficiency to limit emissions output.

APS intends to supply the plant with natural gas via the proposed Transwestern Pipeline’s Desert Southwest expansion project. To deliver electricity to customers, APS expects to build transmission infrastructure to connect Desert Sun to the grid. Phase 1 of the power plant is scheduled to begin serving customers by late 2030; Phase 2’s operation date will be determined through a collaborative process with participating extra-large customers.

Meeting Arizona’s growth head on

Arizona is one of the fastest growing states in the nation, with Maricopa County leading U.S. population gains since 2016. In 2024 alone, APS installed more than 32,000 new residential meters – the highest in more than a decade. At the same time, demand from extra-large energy users has surged, with requests exceeding 19,000 MW – more than double APS’s 2025 peak energy demand record of 8,631 MW.

APS serves 1.4 million homes and businesses in 11 of Arizona’s 15 counties and is a leader in safely delivering reliable, affordable electricity in the Southwest. APS maintains a diverse range of energy resources, including nuclear from Palo Verde Generating Station, natural gas, coal, solar, wind and energy storage – a mix that’s about 54% clean. With 140 years of experience serving Arizona, APS is the main subsidiary of Pinnacle West Capital Corp. (NYSE: PNW).