APS's Efforts to Increase Capacity: Real Expansion or Just the Status Quo?

APS's Efforts to Increase Capacity: Real Expansion or Just the Status Quo?

Based on the details from APS's June 2025 rate case filing and related public announcements, there's evidence of genuine, if not entirely "drastic," efforts to boost capacity amid skyrocketing demand—especially from data centers. However, it's not a complete overhaul with brand-new mega power stations popping up overnight. Instead, it's a mix of expanding existing infrastructure, securing fuel supplies, and optimizing what they already have, all within Arizona's regulated utility framework. This isn't just a "pay as you go" cash grab without substance; the investments are tied to specific projects aimed at handling projected 40% load growth by 2031, driven largely by data centers that could add up to 17,000 MW of demand. But let's break it down step by step, drawing from the rate proposal and broader APS plans.

Is There Real Effort to Increase Capacity Drastically? New Power Stations?

Yes, APS is actively planning capacity additions, but it's more evolutionary than revolutionary—focusing on bolt-on expansions rather than building entirely new power plants from scratch. The rate case itself requests funding to support over $2 billion in annual capital expenditures (capex), with a specific emphasis on $2.7 billion for generation investments from 2025 through 2027 to secure about 2 gigawatts (GW) of new power supply. This is in response to record-breaking peak demands (e.g., 8,631 MW on Aug. 7, 2025) and a 4-6% annual sales growth through 2027, mostly from large loads like data centers (4.5 GW already committed, plus 20 GW in potential).

Key examples of capacity efforts:

• Redhawk Power Plant Expansion: This is the most concrete project tied to the broader strategy. APS plans to add eight new natural gas-fired units at the existing Redhawk facility near Phoenix, boosting capacity by up to 397 megawatts (MW)—enough to power about 63,520 homes. Construction starts in 2026, with completion by spring 2028, pending permits. It's designed to provide reliable peak-hour power (late afternoons/evenings) to complement solar and batteries, directly addressing the 40% load growth forecast. While not explicitly for data centers, it fits the narrative of handling "significant energy demand growth" from such users.
• Fuel Supply for Gas Generation: To fuel these and future expansions, APS (along with Salt River Project) committed as anchor customers to a $5.3 billion Transwestern Pipeline expansion, adding natural gas capacity specifically for powering plants that will serve data centers. This isn't a power plant itself but enables more gas-fired generation, which critics note could mean building additional methane-burning plants to meet the surge.
• Battery and Renewables Storage: The rate case highlights expansions in battery energy storage at solar and wind sites to store excess daytime power for evening peaks, effectively increasing usable capacity without always needing fossil fuel builds. This is part of a "diverse energy mix" strategy, but no specific MW figures or timelines are detailed in the filing.

Is this "drastic"? 397 MW from Redhawk is substantial (about 4-5% of APS's current ~8-9 GW peak capacity), and the 2 GW total generation push over three years is meaningful for a utility serving 1.4 million customers. But with data centers potentially tripling demand (up to 17 GW requested), it's incremental—more like catching up than leaping ahead. No announcements of massive new greenfield power stations (e.g., a whole new 1 GW plant) in the immediate pipeline; it's leveraging existing sites to minimize costs and permitting hassles.

Or Just a Pay-As-You-Go System?

It's fundamentally a "pay as you go" model in the sense of the regulated monopoly utility system—Arizona's investor-owned utilities like APS (owned by Pinnacle West) recover costs through rate cases, passing capex onto customers via higher bills. The 2025 proposal seeks $662 million more in base revenue (13.99% net increase) explicitly to fund these investments, with rates frozen until mid-2026 implementation. You're essentially prepaying for future reliability through your bill, and if demand forecasts miss (e.g., fewer data centers materialize), you might overpay. But it's not arbitrary; the Arizona Corporation Commission (ACC) reviews and can adjust, and APS ties it to measurable needs like peak records and load commitments. Critics argue it's subsidizing corporate growth (data centers) at residential expense, with the ACC opening a docket in April 2025 to protect customers from this.

How Vague Is APS on "Investments"?

Pretty vague in the rate case itself— the word "investments" is thrown around broadly to cover a laundry list: "$2 billion+ annually" for "maintaining and improving infrastructure," including pole replacements, substation tech, fire mitigation, vegetation management, and "power plant upgrades" like at Palo Verde nuclear and Redhawk. No line-item breakdowns (e.g., $X for batteries vs. $Y for poles), and terms like "innovative technologies" or "resilience enhancements" sound buzzword-y without specifics. The filing uses 2024 test-year data but proposes including $306.7 million for "post-test year plant" (future builds), which feels hand-wavy. For deeper dives, you have to look at separate project pages (like Redhawk) or ACC dockets, where things get more concrete. It's standard utility speak: high-level in public filings to justify hikes, with details emerging in hearings (starting May 2026).

Maintenance of an Old J.P. Morgan Model?

Spot on—this is classic early-20th-century utility playbook, echoing J.P. Morgan's era of consolidating power companies into regulated monopolies (think the 1907 panic and his role in stabilizing finance, which extended to utilities). APS operates as a for-profit, investor-owned utility: it invests shareholder money in assets (plants, lines), earns a regulated return (proposed 10.7% ROE in the case), and recoups via customer rates. A big chunk is maintenance—upgrading aging grid (Arizona's infrastructure dates back decades) to avoid blackouts—but the rate case blends it with growth capex like Redhawk's new units. It's not purely "old model" stagnation; there's a push toward renewables and batteries for decarbonization (Arizona's clean energy goals), but gas expansions keep the fossil-heavy status quo alive, especially for baseload data center power. If it feels like maintenance propping up a monopoly, that's because it is—rates ensure steady profits while shifting risks (e.g., overbuilding for data centers that might not all come online) to you.

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In short, APS is stepping up capacity with targeted expansions like Redhawk and fuel deals, but it's measured and integrated into the old regulated model. If you're a residential customer, the vagueness might frustrate, but public comments to the ACC (docket E-01345A-25-0105) could push for more transparency. For the full filing, check aps.com/ratecase or azcc.gov.