Arizona Ratepayers Held Hostage by IOUs–But There’s a Way Out
By Shelly Gordon
Arizona’s two largest investor-owned utilities (IOUs)–Arizona Public Service (APS) and Tucson Electric Power (TEP)–are pushing for rate hikes of up to 14%, sticking average Arizonans with monthly increases while also securing over 9% ROI for shareholders, all likely rubber-stamped by the Arizona Corporation Commission (ACC) during the next rate case.
While most Arizonans tighten their belts to keep the A/C on, IOUs are planning to spend $5.3 billion to build up to 600 miles of gas pipeline from Texas to feed their addiction to fossil fuels–and that doesn’t even cover the cost of the gas itself.
Why the frenzy? Two words: data centers. Given projected AI, crypto, and cloud power needs, APS now claims it will need 40% more power by 2031 to meet load demands. At an August 26 ACC workshop, all five commissioners–the supposed watchdogs of Arizona’s IOUwere remarkably in sync: build much more gas.
Who’s picking up the tab besides data centers? Residential and small business customers–again. Even if big industrial users pay the same rate per kilowatt-hour, everyday Arizonans will still be saddled with the costs of generation and infrastructure. In IOU territory, we’re captive customers: no choice of provider, no influence over rates, no say in how dirty or expensive our electricity is.
But there is an alternative: Community Choice Energy (CCE). It’s already working in 10 states, serving 40 million people. Also known as Community Choice Aggregation, CCE lets city and county governments take control of the power supply–choosing cleaner, cheaper energy while leaving transmission and delivery, grid maintenance and billing to the utility.
Under this model, customers can opt out and stay with the IOU if they choose. CCEs must earn their customers by keeping rates competitive and energy clean. And if they fail? Customers can return to their utilities with impunity. This is accountability–something Arizona IOUs never face.
When customers switch to a CCE, the IOU gets an exit fee to cover its “stranded costs,” with the goal of ensuring that remaining utility customers aren’t harmed by others choosing cleaner, cheaper options.
The City of Tucson recently completed an energy study on CCE and municipalization. It confirms that a Tucson CCE is financially viable: reducing customer bills by 10%, and generating $800 million in profits over 10 years, even after covering power purchases, debt service, and operations. Those funds could be reinvested locally, instead of enriching shareholders.
On October 1, 2025, Tucson Councilmember Paul Cunningham is hosting a virtual briefing of the energy study for Arizona cities and counties–to potentially spark a statewide effort to transform local energy.
Arizona doesn’t have an energy problem–it has an IOU problem. Our regulators let monopoly utilities chase corporate growth at the expense of the public good. CCE offers an alternative–more local control, cleaner energy, lower rates, and community reinvestment.It will take state legislation to enable CCE.
To learn more about Tucson’s energy study, and to invite your city leaders to attend the October 1 briefing, email info@az4cc.org.
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Shelly Gordon is the State Director of Arizonans for Community Choice, a statewide NGO advocating for CCE and enabling state legislation.
