Capex Plan for Arizona Utility Shows Broadening of State's Economy

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Written by John Egan for IIR News Intelligence (Sugar Land, Texas)

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Summary

Data centers are a potent source of economic growth in Arizona, as they are elsewhere. But in a recent presentation to investors, officials from Arizona Public Service Company, the state's largest electric utility, have highlighted other sectors that are poised to drive the state's economy forward.

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Arizona Economy Broadening

For most of the 20th century, five sectors drove the Arizona economy: copper, cattle, cotton, citrus and climate. But the Grand Canyon State has diversified its economy beyond the so-called Five C's in ways that insulate it from the traditional boom-bust cycles tied to land values and financial services that have occasionally roiled the state's economy in the past. And that economic diversification is playing into the planned capital expenditures (capex) of Arizona's largest electric utility, Arizona Public Service Company (APS), a unit of Pinnacle West Capital Corporation.

Copper remains a mainstay of the state's economy, particularly as the price of the red metal has shot up to historic highs exceeding US$6 per pound. People still flock to Arizona to retire or vacation, so the state's climate-related economic activity has, if anything, soared during the last quarter century. But cattle, cotton and citrus all have less of an impact on the state's economy than they once did.

In their place, a wide variety of business clusters within the Industrial Manufacturing sector have taken root and blossomed: data centers, semiconductor manufacturing and battery energy storage systems. Other sectors, including Electric Power, Metals & Minerals, Pharmaceutical & Biotech, automotive research & development and aerospace/defense, also are contributing to the state's economic growth.

By the Numbers

• 59: Number of APS capital and maintenance projects tracked by Industrial Info Resources.
• US$7.1: The total investment value (TIV), in billions, of APS' planned capital and maintenance projects tracked by IIR.
• US$10.8: The value, in billions, that APS plans to invest in its electric system over the 2025-2028 period.
• 12: The percentage increase over a prior four-year capex program, for the 2024-2027 period.

APS Capex Still Growing, But at Slower Pace

To meet the needs of its rapidly growing, power-intensive service area, in 2024 APS increased its four-year capex plan 24%, to about US$9.65 billion, for the 2024-2027 period. For more on that, see December 24, 2024, article - Arizona Electric Utility Boosts Planned Capex Program 24% to $9.65 Billion.

Now, it plans to boost outlays about 12%, to approximately US$10.8 billion, over the 2025-2028 period. That sum includes actual spending for 2025 as well as about US$440 million for the planned conversion of the Cholla Generation Station to burn natural gas.

Source: Arizona Public Service Company October 2026 presentation to investors

Industrial Info Resources is tracking about 59 APS capital and maintenance projects valued at about US$7.1 billion. The largest outlays are earmarked to build new electric generation in the Arizona cities of Gila Bend, Red Rock, Phoenix and Arlington. Readers can access a detailed list of planned APS capital and maintenance projects here.

As has been the case for several years, APS also is heavily investing in its transmission & distribution (T&D) network to improve electric reliability for existing customers as well as connect new loads. Between 50% and 60% of APS' planned spend will go to its T&D system.

Company officials told investors this month that APS has:

• Achieved 10 consecutive quarters of growth within or exceeding the original long-term guidance range of 4%-6%, which is far above industry averages.
• Recorded strong sales growth to commercial & industrial (C&I) customers, including a 13.6% year-to-date gain in sales to extra high load factor customers, such as data centers and semiconductor manufacturers.
• Increased its electric sales growth forecast, to 5%-7% per year through 2030, up from prior estimates of 4% to 6%.

APS officials provided a variety of third-party endorsements about the vibrancy and breadth of the state's economic growth, including:

• Arizona was ranked No. 1 in the nation for semiconductor manufacturing by Business Facilities Magazine. Taiwan Semiconductor Manufacturing Company Ltd., one of the world's largest and most successful chipmakers, has made a $265 billion commitment to build an advanced U.S. semiconductor campus site in Arizona. The first fabrication facility began operating in late 2024.
• Phoenix is ranked No. 1 out of 15 top growth markets for manufacturing by Newmark Group, a global real estate firm.
• Phoenix ranks No. 1 in Western industrial markets by sales and industrial development (3rd nationally) by Commercial Café Report, a commercial real estate publication.

The utility's peak electric demand, which reached about 8,600 megawatts (MW) in 2025, will grow by at least 4,500 MW, though officials did not specify the year. In addition, APS executives told investors that there was about 20,000 MW of additional load that had not yet committed, but that APS said it "needed to be ready to serve." Currently, the utility provides electricity to about 1.5 million customers in 11 of the state's 15 counties.

To meet projected strong load growth, APS this month announced plans to extend the operating life of the Four Corners Power Station, a two-unit, 63-year-old, 1,540-MW coal fired power plant located near the intersection of four Western states: Arizona, New Mexico, Utah and Colorado. APS owns about 63% of that station, or about 970 MW, the utility said. Prior to that October 2 announcement, APS, the station's operator, had planned to close it in 2031. Whether the plant operates after 2031 will depend on an integrated resource plan (IRP) the utility must file with Arizona utility regulators, who must approve it.

Also, in a nod to the rising level of concern about how the growth of data centers and other large energy loads could affect the electric bills of residential and small business customers, APS officials told investors that a proposed change to electric pricing including "direct assignment of generation costs (to large loads) to ensure growth pays for growth."

Key Takeaways

• Arizona Public Service Company, Arizona's largest electric utility, plans a 12% increase in planned capital and maintenance spending over the 2025-2028 period, to about $10.8 billion.
• Arizona is one of the fastest growing states in the U.S., and it has significantly diversified its economy to include a variety of energy-intensive, high-tech businesses.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).