Pinal County supervisors question data center water risks ahead of development applications

Uh supervisor Miller is going to be absent today. He's at the uh Water Infrastructure Finance Authority of Arizona meeting with a board. And first item on the agenda is an executive session. So, gentlemen, may I please get a motion to convene to executive session? So, I have a motion. Second. And I got a second. Motion second. Those in favor, please indicate by saying I. I. Opposed? Hearing none, we're in executive session. Back in a few. I'm to reconvene the regular session.

I may get a motion, please, to adjourn executive session. So moved. I have a motion, sir. I have a motion and a second. Those in favor, please indicate by saying I. I. Opposed? Hearing none, motion passes. Thank you very much. We are back in regular session. That brings us to item number four, which is what the heck is here?

Discussion approval disapproval to authorize the execution of a conflict waiver as to outside counsel so that outside counsel may represent both Pinal County and Lucid USA in separate unrelated matters. Mr. Durrani, you are up, I believe. Oh, no, I'm I'm sorry. Even Even better, Ms. Roberts. [laughter] Thank you, Chairman Chairman Board of Supervisors. I have before you today a request for a conflict waiver.

Um we Pinal County has retained Dickinson Wright to in some matters uh regarding a commercial real estate transaction against Lucid. Lucid also would like to retain Dickinson Wright in a separate unrelated matter to which Pinal is not involved and not a defendant. Ethically, in order for Dickinson Wright to be able to represent both Pinal County and Lucid in these unrelated matters, they have to conflict waiver from each client. So, this is what we're we're asking approval for.

Um there would be no confidential information shared between the parties and should should sometime if anytime a litigation arises between Lucid and Pinal County, then Dickinson Wright would have to remove themselves from that situation. Right. Thank you. Um any questions from the board for Ms. Roberts? Nope. Hearing and seeing none, thank you very much. Yeah. Uh in that case, uh may I get a motion, please, on item number four? Mr.

Chair, I'd like to make a motion that we approve um the understand that we um I just say we Just say you want to approve item number four says, that's what we want to do. [laughter] I'd like to make a motion that we uh vote on number four as presented. Is that what I think we stumbled through that one just fine. I have a motion, is there a second? Second. You have a motion and a second. Those in favor of um this motion please indicate by saying I. I. I. Opposed? Hearing none, motion passes.

Thank you very much. Yeah, I did slaughter that though. I would say. You're really good at that. Read the words. Okay. So, uh item number five is a work session. It's a presentation discussion to provide education and understanding on how data centers may influence and impact the county's economic and community conditions. Mr. Lou, you are up first. Thank you. Good morning, Mr. Chairman. I hope I can stumble through this introduction.

[laughter] So, with advances in computing technologies in our cars and our appliances and [clears throat] workstations here, um data centers have been um proliferated around the country and interest in our state um and in our county. So, you all have asked um from the dais there on multiple occasions if we can do work sessions to help educate um the board, the staff, the public on um what questions, concerns, benefits um are around these data centers.

Um and where, you know, the technology has been in the past, um where it's now, and where it's going to be in the future. And so, we've put together um some speakers to come do just that, and we think that um with the content involved, there will be multiple work sessions because we couldn't do it all in one morning. Um so, and for the record um today, we do have a revised um Arizona State University presentation.

We have a new um Salt River Project SRP presentation and a new Arizona Commerce Authority presentation that will be added to the record into the minutes. Um and I think they will all help to give historical perspective, concerns around things like utilities, water, um etc. and um where we're at today and where we're going in the future.

So, first um presenter this morning we have Kelly Barr, who is the Associate Vice President and Chief Alliance Officer at the Global Futures Laboratory with Arizona State University. Um welcome and thank you, Kelly, for being here. Thank you very much. I'm happy to be here. Good morning. Good morning. I can we put that on Oh, there you go. Perfect.

Uh uh As uh he indicated, I am Kelly Barr, I'm the Associate Vice President and Chief Alliance Officer of the Global Futures Laboratory, the world's largest the longest title ever. Um most people aren't familiar with the Global Futures Laboratory, so if I can just take a minute and explain that, I might I think it might be helpful to provide some context.

About seven or eight years ago, uh ASU President Michael Crow looked around and said, "Hey, um I see that we have national laboratories for weapons and for nuclear and for jet propulsion, but we don't have a national laboratory for the future of the planet." And so, he decided to create one. And so, he did just that. Um and that is where I work. Um he he styled it in an interesting way. He made it a university within the university.

And he allowed us, if you think of this is ASU, um he allowed us to kind of uh span the entire university. And And by that, I mean we are able to reach down across the entire university, reach into engineering, reach into the business school, reach into liberal arts to pull together teams of people to work on complex global challenges like climate change, like water quality and water quantity, like energy.

Um we have about scientists and scholars who uh work at the at the Global Futures Laboratory. Um and so, uh I think that hopefully that helps you explain uh why we why we got involved in data centers and why we're interested in this topic. Um before joining ASU, I worked at SRP for more than three decades. Um my last role there was as the Chief Strategy Planning and Sustainability Executive. And so, I know a little bit about energy.

Um and so, about a little more than a year ago, my colleagues at DFL came to me and they said, "Hey, Kelly, um you used to work at a utility.

Let's do something on data centers." And I said, "You know, I think that's a great idea, but instead of us just assuming we understand what the needs are for data centers, why don't we first uh invite the ecosystem, the data center ecosystem in to visit with us and share their opportunities and challenges." So, for the more than a a year, we've been meeting every other week. It started out to be about 10 scientists and scholars on this team. It's now up to 20.

And we meet for 45 minutes, and we bring people in from the outside to talk with us about what those opportunities and challenges are. So, we have heard from data centers, Google, Amazon, QTS, others. We've heard from all of the utilities. They came in and visited. You'll hear from them today. Um we've heard from cities who are grappling with data centers as as they get planned for their communities. We've heard from environmental groups and from uh uh community activists.

And we've heard from um economic development professionals. And And so, at the end of that year together, we said, "You know, we really learned a lot." And we had some surprising things. And Sarah Porter is going to talk with you about one of our surprises, which was around water use in data centers. Um and I'm going to let her do handle that surprise for you. Um but there were things that we absolutely learned.

And so, we decided that we would have in one day try to share everything we learned that it took us a year to to pick up. And so, you know, on February 11th, we invited uh 300 community folks, folks from cities, folks from the governor's office, folks from the legislature, folks from all across um uh the state to come in and hear um a a series of panels.

So, we had a panel of data centers, a panel of utilities, a panel of economic development professionals, a panel of water or sorry, a panel of um community folks, and then cities. And interspersed was that with with those panels were some ASU experts. Sarah presented, so you're going to hear from her today. She She talked about water. We have an expert at SRP who focuses on heat emissions from data centers. Um and a um an expert on chips, semiconductor chips. Like, what is the future of chips?

Is it possible we'd build all these data centers and they wouldn't be necessary? So, um as a result of doing that on February 11th, your team from Pinal County reached out to us and asked if we might come and share at least part of those learnings and that's what we're going to do today. So, next slide unless I know how to do that. Let's see. Oh, you're doing that. Um I'm going to handle uh quickly data centers 101. Uh I'm going to turn it over to Sarah. Sarah's going to discuss water.

And then in separate presentations today, you're going to hear from both APS and SRP. They're going to talk about energy-related issues. And then the last presenter today is going to from is from the Arizona Commerce Authority and he's just going to he's going to talk a little bit about the the growth of data centers and who's interested in locating here. So, that's what we're going to do today. Next slide, please. So, in in terms uh oh, not covered here. This is an important slide.

Um there are some very complex tradeoffs associated with data centers and it really comes down to a community decision. It really um every community is going to needs to assess the benefits and the costs associated with the data centers and make their own determination of what's right for their own community. And we are not taking a position on any particular data center deciding a siting decision here. We want to make that clear.

This is uh during that our February 11th event, we had some cities who were very pro data centers and they were asking all data centers to come locate in in their community. And we had others who were not that excited about data centers and lots of folks in between. So, it really is something that each community has to decide for themselves. What we're trying to do is just provide facts that you can use to make those those decisions for yourselves. Okay, next slide.

So, data centers are the fastest growing industry in the world. Um uh This is really driven by our increased appetite for both AI and cloud services. Um by the end of 2026, um global data data center usage will top 1,050 terawatt hours. And I know for people who are not in the utility industry, that doesn't seem like a very big number.

But so, to put that in context, if you treated that like a country, the energy usage of those data centers by the end of 2026, it would be the fifth largest country in the world for for energy consumption. So, there is a lot of energy consumed by data centers. And that's just in 2026 and that is intended to grow over time. Um this is a slide that was put together by the Electric Power Research Institute. Um and this was done interestingly in 2023.

And they said, "Hey, you know, could it what's what would low growth of data centers look like? What would moderate growth? What would high growth? Higher growth?" Um that was 2020 in 2023 where they thought maybe it would be kind of in the blue area. It's in the purple area and in Arizona, it's definitely in the purple area. So, very significant growth of data centers. Um And and here's why. So, uh geography matters. Can you next slide, please? It's not happening everywhere in every state.

Um uh there it is concentrated in a few states and Arizona happens to be one of those states. Texas has um it although this slide doesn't depict it, it's it's actually growing very very vigorously. But Arizona uh is one of those states where um data centers really look to to to try to locate here. Um next slide. And here's here's why they want why why they like to locate in Arizona.

And so, when our data center folks came in to visit with us, we asked them this was one of the questions, why why are you interested in locating here or why have you located here? And they talked about the exemption from the from the state, county, and local sales tax and use taxes. Um that's a a significant incentive um and it uh it actually it drives a lot of interest in Arizona. Low operating costs, um very competitive utility rates for water and power.

Um business continuity in Arizona, of course, we don't have a lot of natural disasters. It's hot here, but that can be that can be monitored. We don't have hurricanes, we don't have floods, we don't have earth earthquakes. And then finally, um uh network uh efficiency. So, um data centers obviously have to have access to fiber and they want to be as close as possible to the final end user. Um this is particularly relevant for automated uh vehicles, autonomous driving, or um VR, virtual reality.

Um so, they want low latency. So, they want to be located close to key markets. And so, that they liked Pinal County. I'm sure it would be a very attractive place for them to locate. Um they like they like the Arizona area because it's close to a lot of um major cities. Next slide, please. There it in there are two basic types of data centers and I'm just going to walk you through this real quick and then um happy to answer any questions. And I should have said that at the beginning.

I should have explained that in order for this to be fun and interesting and engaging, we're hoping that you will ask questions and interrupt all of us at any time and that includes the utilities and my friend from ACA. At any point, if you get tired of listening to me drone on, just interrupt with a question. So, there are two two Cameron. Yes. So, I do have lots of questions, but I don't want to hijack your presentation.

Well, I think we're all waiting to hear what you get to and then we'll do some questions. Unless unless we think you're veering off of where a question might be inserted. Yeah, sure. Absolutely. So, there are two types of data centers, small scale. And by that, I mean that can be a room in a building. Uh that can be you know, a lot of times that's there's a uh a small uh room within a corporate building or um uh a a small um building that would serve a small campus.

Um So, permission interrupt one Yeah, please. So, so you're not just talking a server. Some some big buildings have a huge server. Right. You're saying they're beyond being just a server, they're an actual data center. Yeah, and and it can be a a rack of data of servers in a in a room in a back room someplace. But they're usually just processing for the people in that building. It's a very small and and low energy use and that's been happening for a long time.

If you know, data centers are needed for all kinds of processing of information, banking information, hospitals, uh uh universities. So, that's small scale. What I On the large scale side, this is where where a lot of energy and excitement and emotion has arisen on the large scale side. So, let me just describe briefly. And and you're also you're gearing your whole uh presentation towards Arizona. We are. But this is going on all over the whole country.

And if you look in the the NACO publication, every county in the country is being bombarded with this. We're not the only people that are hearing about this. So, it's it's all over. So, so that's something else we're looking at, too, which hopefully we'll get to. Yes, absolutely. Um uh The United States is the largest um home of data centers in the world. We have more than half of the data centers are located in in the United States.

Uh and just given our thirst for AI and and cloud services, we anticipate that that will grow, but it is a worldwide global issue. So, on the large scale side, there's enterprise uh data centers and those are um data centers that are owned and operated by a single company. So, think Microsoft or Google or Meta. They'll have a a data center. It's their data center. They bought they bought the land. They constructed the data center. They own everything in it.

A colocation facility, think QTS or a collocator. Um they're essentially building the building and then they're leasing out space within the building. And so, you can walk in one of those and it's very interesting because they have it's a very large building and they'll have chain link fences and servers behind those chain link fences and that belongs to one one client and then a behind another fence is um another client.

So, it it's a large building, but it's it's a shared use and it's leased to different types of clients. And then finally, um there's hyperscale and those are very large campuses of data centers. Um this might be helpful having been in the utility industry, um I think it's helpful for sometimes to explain um to provide a little bit of context. So, if you think about a Walmart or a Target Supercenter, so think about that size. Load of that is 1 MW, about 1 MW. Okay?

So, when I worked at SRP, we would be overjoyed if we got a 25 MW load. We were thrilled. That's so exciting. 25 25 Walmarts, that is awesome. What's happening now um in these hyperscale uh data centers is they're looking at 300 MW, 500 MW, 1,000 MW, or a gigawatt. And so, if if you think about that, that's using the same energy as 1,000 Walmarts or 1,000 Target Supercenters. So, you can that help hopefully that helps you understand just how large these entities can be.

And I'm sure my utility friends will talk a little bit about the challenges of serving, you know, loads that can that can grow to be that large. And just for clarif- I mean, the colocation, you You you say it's a data center. We used to call them server farms. Right? I mean Right. 10 years ago, that was a server farm. And you walk in and sure enough, you're looking at room or chain link fence groupings of servers. So, that's all it is. Right.

So, this is my last slide, the next one is my last slide. And this it sounds like you've already been inside of a data center, so you've seen it. There we go. So, you've seen it. Um but it's just rows and rows of servers in rack stacked in racks. Um and there's a very they create a lot of heat, and so they often have fans that run in those in those corridors to try to keep the equipment cool. Um this picture at the bottom is essentially a a hyper scale data center.

So, it's trying to depict a campus of data center. So, it looks like that. It can take up a fair amount of land use, and um they're all co-located uh in one space. So, that that's my data center 101. Happy to answer any questions, or I'll turn it over to to my colleague Sarah Porter to talk about water. With your big surprise. Any questions from the board so far? Yes. No. Oh, okay. Okay, here we go. All right. Thank you very much. Thank you, and good morning.

Um So, can we go to the next slide, please? Are you Who's driving the slides? Oh, we are auto pilot. Driving. Just say next slide and it goes. It's the Waymo of data centers. Yes. I'm Sarah Porter. I am the director of the Kyle KYL Center for Water Policy at Arizona State University's Morrison Institute.

Um and I'm very happy today to come and talk with you about this issue that has certainly um become an issue that many, many people, members of the public, uh people involved with water management and utilities have been attention to. And I There's never been an issue in my 11 years as a director of the Kyle Center for Water Policy that that, you know, I've seen arouse more concern.

And I'll say that that concern about data centers coming in and using up all our water, is how I hear it, is understandable because we're facing some new pressures here in Pinal County, up in Phoenix. We're looking at deep cuts of Colorado River supplies, deeper cuts than we've ever experienced. Pinal County has already experienced the cuts to date more than any other place.

And we're also looking at the limitations, the the the physical limit of ground water, and we have a moratorium on some types of local ground water reliant uh development that you're all, I'm sure, familiar with. I know Supervisor Miller is extremely familiar with those things. So, it's understandable that when people are hearing about limitations related to water, that there would be a great deal of concern about bringing in a new industry that's reputed to be very water intensive.

We, the Kyle Center for Water Policy as part of uh Kelly's group, did a big investigation on the use of water for industrial purposes, the trends, what what are we looking at, and that would include data centers, would include other industries. Uh and we published this in February. And here's my uh the punchlines from that.

Right now, the use of water for data centers or other industrial purposes in the Phoenix active management area, in the Pinal active management area, and in the Tucson active management area, the CAP service area, is not a concern. Uh it's also very hard to quantify the use of water by data centers now. We did our best, I'll get to that. Um but I'll say it's a moving target because the technology, the efficiency, all of that is rapidly, rapidly changing.

And then finally, it's a very site specific determination, as Kelly said, whether or not a data center should use any water at all. It really is will depend on the resources available at that site, other considerations about how how much energy is available, all kinds of other considerations. So, um as that slide before said, we are not trying to make a recommendation, yes or no, as to data centers.

We're simply trying to provide information that's helpful in your own evaluation of the appropriateness. Yes, sir. So, would you say that the technology and the advancements that's been made, are we losing using less water? Yes, and we can go ahead to the next slide, Waymo, autopilot slide mover. Yes. Um And then while you while you're talking, I don't know, maybe this is part of your presentation, but I think we've got a lot of properties and things out here that have already been entitled.

And so, we've got a lot of more homes that are going to be built out in this area. And when we talk about water, we equate it to how many homes, or how many how many individuals are going to be utilizing the water, so on and so forth. Is there alternatives with that uh anyway, how many how how many households, if you were to replace a data center for how many households would that replace? So, this is very hard to answer because some data centers use a lot of water, and some don't use much.

Okay. And uh you I like to think about an acre foot, a nice uh volumetric for thinking about water, an acre of land covered with a foot of water. Uh an acre foot is 325,851 gallons of water, roughly 326,000 gallons. And in a place like the new developments coming in around here, three and a half homes will use one acre foot of water per year on average. Okay. And a good deal of that, all of the water used indoors, can be reclaimed.

So, 30 to 50, even more, greater percentage of that water can be reclaimed. And a data center that's using evaporative cooling, depending on its size, you know, depending on the heat, it's very seasonal, it might be using three acre feet in a day if it's a massive data center. A smaller data center using evaporative cooling would be using less. It, you know, depending on And that's evaporative cooling is the highest form.

But what I, you know, my the best answer to your question would be look at the data center, look at what are their projections for water use, and then compare it to three and a half homes per acre foot, remembering that all all of the water used indoors in a household can be reclaimed, whereas if a data center is using water for evaporative cooling, none of that water currently is likely to be reclaimed cuz the technology to do that is really expensive. I I've got a quick Go ahead.

But the technology has changed where we're kind of changing evolving away from the evaporative Right. processes into another. Okay. Okay. So, so when we're talking about data center water is I I got a quick question. Even in power generation, too, they're moving away from Yeah. Right. And we'll and But you can tell for your acre foot, are you saying three and a half homes? And I read in some reports where it's two homes, two and a half homes, you're saying three and a half homes.

So, you know, I I look at I kind of look at that like it's accounting, what number do I want to see at the end? it's it's just like, yeah, I live in an old part of Phoenix where we use more than a less than a third of an acre foot. Like the depending on the neighborhood, there are all kinds of variables, of course. The three and a half homes per acre foot is the Department of Water Resources estimate of the average water use by homes in single family homes in Arizona. Okay, but that's an ADWR.

It's it's from the Department of Water Resources. sure what Okay. But of course, there are neighborhoods where it's much higher. There are there are neighborhoods where it's much, much lower. Um we actually have a uh maybe I can send a link to a tool that will allow you to look at, if you want to think about the water use per acre, we at the Kyle Center have developed a map that show you the water use per acre in all of the cities in the CAP service area.

And I can say that there are some cities that have a his- they were historically farmed in the SRP water service area, they have a very high water use per acre, closer to three acre feet per acre. And then there are cities like here, around here, um and Apache Junction would be an example, um parts of Tucson, where it's less than an one acre foot per acre. So, it really varies depending on the, you know, how is the land being used? Right. So, just an Okay, but thank you very much.

So So, just excuse me, I'm sorry. On the water side of it, you know, you hear about closed loop systems, and oh, they don't use any water at all. Well, I watched probably over 200 videos from independent journalists Jeez. who keep Well, because we're getting bombarded with them. Yeah, I have no life.

[laughter] But in doing so, I'm watching these videos, and I'm scratching my head because I keep hearing the word closed loop systems, which sounds great, kind of like our I know no one make fun of my New York accent, a radiator, that it just keeps using it, right? Doesn't lose water. I get it. It does evaporate some of it, and it has to be replenished little by little.

But then I also hear about the water contaminating these, especially in Virginia, these mega centers were contaminating the water, people were getting cancer. How is that happening if it's a closed-loop system and where is that water going to contaminate the water? So, if that is happening, that's a failure of the treatment. There There often with the different systems and I don't think in I'm not sure. I haven't watched those videos.

Um but a closed-loop system shouldn't evaporative cooling will produce a brine. And if there is uh a failure of proper wastewater treatment, there's a potential for contamination.

I have never heard of that happening in connection with a data center in Arizona, but that's just all about are you is the water being appropriately treated before it's put into the wastewater treatment stream and then, you know, working with the the entity that's doing the wastewater treatment with typically the water provider, a city, maybe in uh Pima County, it's Pima County, but that's really about wastewater treatment. Typically, a uh waste water isn't just injected.

We have state regulation that by the Department of Environmental Quality that that would be um that is there to prevent that kind of contamination from happening. Okay, cuz you know, we have uh tomorrow we have a planning and zoning meeting. You never hear anything about wastewater treatment in when these data centers come to speak before us. Yeah. So, again, now I'm learning even more. Yeah.

And again, there's a P&Z meeting tomorrow that these questions need to be asked because they want us to do a comprehensive plan change and then they want to do a zoning change, but we're not getting any of these answers because we don't know the questions to ask. they want to inject brine back into the aquifer, they have to get a permit from the Department of Environmental Quality to do that. So, that would be That would be the biggest risk of contamination.

If they're putting water into a wastewater treatment system, then the entity that takes that water will have They also have to satisfy EPA regulations and they will require that uh before that water is put into the wastewater treatment system, it probably has to be treated to a certain quality if there's any kind of risk. Um so So, back back to this presentation, I appreciate the questions very much and some of those are, you know, ones that we haven't heard before like contamination.

But really, there are two ways that data centers use water. One is through cooling, often evaporative cooling, and the other is through because it takes water to generate electricity, not all types, but some types of electricity. And so, those are the two uses of water that uh people, you know, are asking questions about. Next slide, please.

Um we've already kind of talked about this, but essentially uh there are huge gains in the efficiency of cooling for uh uh for data centers and they're really in two ways. One is that chips can operate at higher and higher temperatures. So, there isn't a need to cool them as low as they used to be and that is evolving almost as we speak. Um there are scientists working.

We had a at that symposium that Kelly mentioned, we had an ASU scientist talk about this work that he's doing, this research to raise the temperature of chips. Uh and then there are these various types of cooling that are currently um you know, much more efficient than traditional evaporative cooling including the closed-loop systems.

Um there other very like the chips in water, you know, there all kinds of different systems and I'm a lawyer, not an engineer, so I'm I'm not going to go into details, but I will mention one [clears throat] thing. Sometimes the cooling system that that is going to work best for a particular site is driven by power concerns.

So, an example might be data center, there's one proposed for Phoenix that proposes to use a combination of uh air cooling all power where the water use is way off wherever the power is being generated or maybe it's solar or renewable and not using water. And then they but they also want to have evaporative cooling in order to reduce the load on very hot days.

So, they want to have this hybrid system where they're doing a little bit of evaporative cooling on very hot days so that the utility isn't burdened with uh such a high peak demand. And as far as I can tell, that particular arrangement doesn't present a water problem. There it's it's some amount of water in order to uh mitigate power peak.

So, that's just an example of where you might have uh a little higher water demand in order to meet a particular goal that they need to meet at that particular site. Next slide, please. Um so on the in So, that's kind of direct and indirect use. Thinking about uh the water for uh the indirect use for generation of electricity, this is an area where there's, you know, there's been an expression of public concern.

And it is again a bit of a moving target, but what we can, you know, we can think about the water consumption factor of different types of electric power production. And uh you know, I like to put it into perspective to point out that the use of water for the generation of electricity in the state of Arizona represents 3% of total demand of for water in the state. You know, agriculture famously represents over 70% of demand.

All the water that's delivered to taps for cities and businesses in the state of Arizona is approximately 20% demand. Power generation [clears throat] represents a very small fraction of demand in the state.

Uh in the report that I mentioned, you know, we discussed that probably as the economy evolves, there's a possibility that at some point power generation will represent a higher piece of the pie, more um power demand, but the question about oh, this data center is going to use so much electricity and it's going to require a lot of water to generate is very hard to to really narrow down because it's very hard to trace where the electrons come from.

Do they come from solar energy, which is an almost a no water form of power generation? Do they come from a power generation that's using a high degree of water? And do they come from another place, a water rich place somewhere on the on the grid? So, that's sort of our our you know, our conclusion when we're thinking about the indirect water use for data centers is keep an eye on what's happening with the power portfolio of the utility in question.

APS, SRP, Tucson Electric are all moving lower and lower in terms of their water per megawatt of production as they move to natural gas and renewables. So, we're just it's just one of those things where we sort of say, keep an eye on it. Um but right now, it it doesn't it doesn't present a loss of water resilience or greater water insecurity for the region. Next slide, please. Excuse me. What happens if you have behind the meter going on?

Well, behind the meter is um complicated, but it would again, if I were just looking at it from a water perspective, I would ask how much, you know, is it a form of power generation behind the meter that um is going to be water consumptive? And then I would look at that water consumption and say, what is the water supply for that? Who are the other people who may be impacted by that water consumption?

Um [snorts] and I I think Kelly can talk about the reasons why behind the meter isn't something we're seeing a lot of in the state of Arizona. So. Okay. Rich has been watching more YouTube than I have, so Explain to me behind the meter. I I'm lost on that one. Well, that would be where the data center is producing its own power and not even um not even feeding into the grid. Okay.

And and as and I might get this mixed up a little bit, but essentially the tax the use tax breaks that data centers benefit from in Arizona aren't available unless I think this is right. Unless they're connected into the grid. Okay. So, there's a huge disincentive because those use tax breaks are very significant. So, so this isn't something that we're seeing in Arizona. One thing Yeah. Yeah, go for it. Yeah.

[laughter] Actually, they they lose the tax break if it's connected to the grid and they they sell electrons off of the data center property. So, if they're going to provide their own generation behind the meter, they have to really island themselves off, Okay. in our experience, data centers are not that interested in doing because, you know, right, you have to build a lot of extra power cuz at some point one of those natural gas units may go down, so you got to double up.

It They just really would prefer, I think, to rely on the utility for the service. So, you're basically you're talking about what I'm trying to do up in my cabin. Behind the meter. Got it. So, so what I wanted to ask on that though is, how would we regulate or know if they are because I know one's coming and they're going to ask that's going to come before us. How do we regulate the water? You would First of all, it's hard Well, it's a very good question.

Here in Pinal County, and this is later in the slide, but I'm going to get to it. In Pinal County, it's very hard to get water. Is Is a surprise? Like if you have a new use for a large volume of water, it is challenging. There are limited options. We're looking at cuts in CAP water and the and the entities that have entitlements to CAP water are scrutinizing very carefully any new new large volume user.

If they have the water, they're thinking, "What is the opportunity cost?" And they and they're they know they're going to be experiencing cuts. We have limitations on development using the only other what Well, there's reclaimed water, but let's get to the other big water supply is water in the ground, groundwater.

You can technically, you could be a data center developer and you could go to the state of Arizona and get a permit for an industrial use well to withdraw groundwater to cool a data center. That water would not have to be replenished. And so that is a that is a question that I would be asking a data center developer if they were planning to use unreplenished groundwater. I would want to know that.

I'd want to know how much and I'd want to know, you know, I'd think about what are the other groundwater uses in the area. So that would be an issue. The state actually has the authority to limit those permits.

The director of water resources has the the authority to limit those permits if if he concludes that um I think I have the official language later in a slide, but essentially if he include if he concludes that issuing the permit would get in the way of the state meeting the goals for the groundwater regulation in place.

So that's it's these are questions that are questions that need to be asked of any data center developer that's proposing to use water either for energy or cooling, but I'll also say compared to what? Pinal County is historically an agricultural region. Um very often whatever is grown will use probably, you know, a they may it may be using a similar amount of water per acre. So um I'm happy to help you with comparisons.

I didn't bring them along, but you'd want to look at like well, okay, it's going to use a lot of water, but compared to what? And then weigh the the costs and benefits having that information. Okay. So yeah. In in saying that so I can come to you when a data center comes to us and tells us they're using X amount of water, I can come to you and you can tell me whether it's true or false?

No, I couldn't uh verify anything a data center says because that's of course information that they have exclusive access to. But what I can talk about is what are other water requirements for different land uses. I have a lot of data about that. But yeah, you'd you'd some point you're, you know, if somebody's proposing to dig a well, then it would be up to the Department of Water Resources really to verify whether or not that well, you know, is going to be able to pump that water out.

There's a very well-developed groundwater model for for this region, for the Pinal Active Management Area, and so the Department of Water Resources would have the competence to give you some really good information about that.

So it's fair to to say then that any of these data centers, just like any development that takes place on a on a on a residential development, they have to go through ADWR, they have to go through all the processes and everything to show to prove that they've got the water supply to be able to meet the demands. If they are going to use local groundwater.

If they're going to use a well and pump groundwater out for the data center then they would need to get a permit from the Department of Water all be that's all spelled out already, correct? Their well driller won't drill a well unless they have the permit. We just need to make sure of that when they come in. That's all.

Now if they're going to a water provider, you know, let's say Arizona water says, "Sure, we've got the water." Then that's up to really up to the water provider to to verify and be, you know, Okay. um to scrutinize. But there there are a lot of mechanisms in place. Yeah. So we Not left it here looking at YouTube then.

Well, I mean I think it's I guess what your questions are all spot on, but the reality is we're a scarce water state, so we already have a big regulatory framework around new high volume water uses. So even more so than any other state? I would say. I I think to some extent it's that's a fair statement. I would say that ours are very well tailored to the needs of the state. You know, especially we're particularly fortunate because we're here we are in Pinal County Active Management Area.

So this is an an extremely highly regulated area compared with other even other parts of Arizona and other states where you if you own the land, you can drill a well and use as much water as you want. You can't do that in the Pinal County Active Management Area. You can't do that in the Phoenix Active Management Area. Um next slide. So this is where data centers are. We looked at a bunch of data center maps. We we really looked in the CAP service area.

This is just so that you have a snapshot of what's going on right now. We looked at all the data centers that we could locate based on several national data center maps in the three county CAP service area um to see are they using unreplenished groundwater? Are they served by a water provider with a large water user ordinance? Are they in the comparatively water-rich SRP service area? I think that's not appearing here.

And then I won't go into a lot of details, but are they served by a water provider with a designation of assured water supply, which is a water provider who is no less frequently than every 15 years proving to the state that it has a 100-year supply of water going forward.

And you can see by all the Y's on there, the large water user ordinances, all the designation of assured water supply um and even the kind of low volume of unreplenished um groundwater use, unfortunately, you know, there's some. Um but essentially right now there's not a significant presence of data centers where where a lot of, you know, um scrutiny isn't already occurring. Uh 10 water providers in the state of Arizona have large volume water user ordinances.

Uh most of the water providers to to data centers are designated assured water supply providers, which means they're not going to agree to serve that data center if it would impinge upon their ability to meet demand for the next 100 years. Next slide.

Um and to sum it up, I guess this is just more big picture, but, you know, of 7 million or so Arizonans, over 5 million Arizonans are protected from data centers coming in and threatening their water supplies because of our these regulations, the assured water supply protections. Next slide, please. Um similarly, 4 million uh Arizonans in the CAP service area have protection because their own providers have enacted large volume water user ordinances including EPCOR.

Um this is something that if you're in conversations with water providers, you know, it's worth asking about. Do you have a large We're This is these are the only ones who have one now. But if they don't have one, it's probably a good idea to consider getting an ordinance if they're a city or a tariff if they're a private water company so that they've done the work in advance. And this isn't true only of data centers.

It's true of other industries like the hydrogen industry, other industries that may come along and want to use a lot of water. Next slide, please. Okay. So now to to sum it up, the policy gaps. Um in our uh assessment, we looked at all the industrial use permits that have been taken out in the three county CAP service area in the last uh since 2000 I think it was 2008. And we don't see any kind of increase in requests for industrial use permits.

So but and so our conclusion is the advent of data centers has not to date caused an increase in the use of unreplenished groundwater um you know, that that sort of indicates a trend or is meaningful. Um and we point out that the director, as I mentioned before, has the authority to determine not to issue an industrial use permit if it would be inconsistent with the Active Management Plan. I'll say another thing that's important.

We have a requirement in our in our Active Management Areas for any entity that is using water for cooling, large facility cooling, to report their water use across the three AMAs, we we did not see an increase in water use for large facility cooling when we looked at the annual reports where this information is required to be reported. Next slide, please. And not So here's a map that shows the Active Management Areas.

You can see that the Pinal AMA doesn't cover the entire county just like the Phoenix and Pima uh and Tucson AMAs don't cover all of Maricopa and and Tucson or Pima County. The places outside of the AMAs, the white areas on this map or even the salmon, whatever orange colored areas, these are places where there is no limitation on the use, you know, drilling a well and using the water for a beneficial purpose.

So, in in our assessment this is the the these are the regions that are from a water perspective most vulnerable to new high volume use. They're also not convenient for data centers. So, we don't see it as a real risk right now. Um there are very few proposals for data centers that aren't really close to more, you know, urban areas because they need the other infrastructure. Um next slide, please. So, here are conclusions. Um as the economy evolves, water demand is going to evolve.

We'll probably see less water going to agriculture, more water going to other types of uses including the generation of power. Um right now, data center use is not a water problem. Uh most people are protected, but we have identified these two policy gaps. One is outside of AMAs, not really applicable to where the action is in Pinal Count in, you know, Pinal County, but there might be, something to keep in mind.

And second, if a somebody came along and said, "We're going to drill a great big well and it and extract a huge amount of ground water cool or just primitive evaporative cool data center." Uh then, you know, I think it it you'd want to have a conversation with the Department of Water Resources director about whether that would be consistent with the management plan for this region. So, that's it. I I'm going to hand it back to Kelly unless there are any more questions about water.

But any any more questions Oh, Supervisor Gibbs. just to verify, but in order for them to drop a well, they got to get a permit to do it in the first place. Yes. They have to They have to apply for an industrial use permit. Right. Right.

There are some other ways of doing it, but if they want to drill a new well, they would have to go get an industrial use permit and they would have to meet a bunch of conditions including you you have to be I think it's two or you have to be a certain distance outside of the service area of a of an AMA a provider of water provider, not an AMA within an AMA. So, there are seven total conditions, but the big one is it has to be consistent with the management plan Okay. for the AMA.

Lots lots of permits just like doing like paving a driveway. Yeah. There's there's a way that you can convert an existing ground water use to a different use. Yeah. Um those opportunities have really been largely, you know, to a great extent they've been exploited. And then I think third, there's a data center in Mesa that buys long-term storage credits.

So, they they're use they're served by the city of Mesa or they're using ground water, but they're buying I can't remember exactly how they're getting their water, but they're buy they're trying to buy long-term storage credits to get to net zero. So, there are essentially that's also using ground water. Okay. So, on the industrial side of it, if you're getting an a permit for an industrial, that could be a warehouse that's Yes. I mean, that's kind of shady.

Because you have to you you quantify your well size and your use, so it's it's a little harder. You couldn't just go and say I'm going to have a little tiny well to serve my break rooms and bathrooms and then drill a massive well to pump out, you know, a million gallons a day. So, they'd have to provide what they're going to use to specify that exactly. Cuz industrial could be very small. Yeah. Okay. Yeah.

No one would actually apply for an industrial use permit to just pump out a tiny amount of water because it it you know, you could just get an exempt well to do that, a little well. Yeah. All right, thank you. Thank you very much, Ms. Porter. Appreciate it. Ms. Barr, you're back up. You're back. Very briefly, I promise you. I'm just going to introduce Patrick Bogel. Patrick is the director of data center strategy for APS.

So, he's going to come and talk about the APS situation relative to data centers and then right after Patrick's done, I'll just get both of these uh out of the way. Um Nate Tate, who's the director of transmission planning for SRP, is going to come and give you the same information from an SRP perspective. Okay. So, Patrick Thank you. Thank you. All right, thank you for having me today. Um like uh Kelly said, my name is Patrick Bogel. I'm the director of data center strategy at APS.

Um my role was built about a year and a half ago when we really saw an influx of data center interest in the APS service territory. Uh I have five people that are on my team and really our uh responsibility is to figure out how to serve the data center load that is wanting to come to our service territory, but do it in a responsible manner. Um and I'll get a little bit into what that means. Um you know, we talked to a handful of data center customers.

Many of them were in the the cat the right category that uh Kelly presented. A lot of data center developers that you would classify as like a colo where they're basically leasing space to the hyperscaler or the end use customer. Um but we're also dealing with a number of the hyperscalers that are in our service territory as well.

So, um you know, if there's any questions towards the end, I can definitely try to to give some of the insight from the trends and things that we're seeing from those conversations um without, you know, mentioning any specific customer information. Um but yeah, we can jump into the the next slide. So, APS as a company, our service territory um is shown there on the screen. You know, we've got a mix of of different areas that we um serve.

You know, we've got 11 of the 15 county counties, 1.4 million customers, but we have some areas like Phoenix where you've got highly densely populated um you know, customers where you've got energy use, but then we have many of the rural areas of Arizona as well.

And so, that really presents different um you know, difficulties in serving because, you know, Phoenix area, you've got, you know, much higher peak usage in the summer where maybe Flagstaff and and some of the northern areas, you have a little bit different usage profile. Um and so, just in general, we've got, you know, a lot of a lot of the major metropolitan areas covered um including uh some in Pinal County and and some of that is probably some of our fastest growing territories.

You know, a lot of movement towards Eloy, Coolidge, Casa Grande um in serving additional customers. And and it's not all data center customers either. Some of it is um you know, supply chain customers that may be serving uh the semiconductor industry. Some of it might be additional mining as well. So, um we're seeing a lot of growth across the state, but but typically in Pinal County as well.

[clears throat] So, from a data center perspective, um wanted to just kind of lay out this slide a little bit. So, when you look at last summer, our peak load that we served was 8.6 gigawatts or 8,600 megawatts. So, we kind of talked earlier, a megawatt serves about like a large Super Target, Walmart, Costco type store. Um megawatt is also equivalent to about 150 to 160 customers like retail customer households, residential households. And so, that was our peak we hit last summer.

Um I will tell you last summer we hit three all-time peaks. Um so, our load continues to grow and and expect that in 2026 we will hit a number higher than that. On top of that load, we have committed to 4.5 gigawatts of data center customers. Um this is where we felt we could responsibly serve in a reliable manner. Um step back on that that 8.6 number, um that included roughly 450 to 500 megawatts of data center customers. So, that 4.5 is what's your target date on that?

Um it's really dependent on the specific projects. Let's call it through 2030, 31, 32. Um some of these data centers have much, you know, extended timelines as to what that build out looks like for them. Um but we've those are the commitments we've made. So, over the next Does that mean you can meet that demand now? Uh we not today. it. Does it mean that you'll have to evolve with them? We're going to have to evolve to support that load as well. Okay.

Hence all the power plants that are coming to us to Yeah. Yeah. Um Yeah, so The reason why I asked that question is I think it's important for us because if we see what's coming, we're we're going to be more more involved in the decision-making of what we need to look forward or look forward. If we want this to come here, we need to be thinking and having these discussions knowing what the demand's going to be, where your guys are planning on it, where SRP is going, are we willing to do that?

Okay. Yeah, absolutely. And we do a a long-term planning process. I believe our IRP filing our resource plan is is filed later this year and it will spell out some of how we're we're planning on meeting that demand um as well as theoretical cases as to what if that demand grows more. So, what other industry are you doing the similar with other industry that's coming to the areas? Like manufacturing and things like that? Can I answer that in a a second? Yeah. Okay.

Cuz I'll get to that piece specifically. Um On top of the 4.5 gigawatts we've committed to serve, we have north of 20 gigawatts of customers that have said they want to be located in our service territory, but we don't have the ability to serve them today. So, we've said we will serve you, but we need to build the capacity, the infrastructure, everything that would be required to serve you. And that's just data centers. That's uh yes, just data center customers. Wow.

And so, the interesting part about that though is and you talked a little bit about how this is happening across the country. We are not the only one with an uncommitted queue. Um you know, every you know, major state that's that's looking to add data centers has a similar queue. We've talked to a number of different utilities. You know, I I think the Texas queue is I think north of 50 gigawatts. Mhm. Um but there's others across the country that have much larger.

Virginia's got a very large queue. Um so, the why I state that is because when you talk about these queues, it's a very transient um set of projects. If they can get the power somewhere else quicker, they will take that project and they might not build it in Arizona. You know, they might build it in Virginia or or Georgia, wherever it be, right? So, when you start looking at these queue numbers, a lot of people are you always ask the question of how real is that 20 gigawatts?

Um it's really hard to kind of pinpoint because I mean that that same project could be in seven, eight, 10 different queues across the country. Yeah. So, um when we look at that number, I mean I think it's an opportunity for us to grow into the future as we get, you know, the infrastructure to reliably serve, but we're not necessarily, you know, really kind of forecasting how real do we think that 20 gigawatts is today. So, excuse me.

So, in the aspect of a data center coming, they say they're going to be working with APS or any utility. How do [snorts] I know that that's true because I've had a run-in on a different project. How do I know that they're actually working with you and if you're 5 7 years out and they're two to three years out to start building this thing, how am I supposed to approve something if I know they don't have at that particular time the power?

It's an interesting question and I I think what you've started to see I'm going to reference the city of Phoenix ordinance and and and if you aren't aware, city of Phoenix put in an ordinance to try to control data center load and where it was being placed. And um because what they were seeing is a lot of um their highest and best use economic development opportunities were being bought out by data centers and and and neces- they were trying to to kind of control that a little bit.

Um and so, part of what we discussed with the city, it was more of an education experience of when we get to a point where we are ready to serve a data center customer, there will be a uh an agreement that we put into place called a load commitment agreement [cough] going forward. And so, that is really our commitment to serve them, but it's also them making commitments to us on how much power they're going to use, what the term of that agreement will look like, etc.

Um so, when I look at Pinal County specifically, we haven't made any commitments to any data center projects that are in Pinal today. So, when you look at that 4 and 1/2 gig uh number, that doesn't include any commitments for Pinal projects today. Um How would you know that going forward? That's a good question.

I don't I don't think we have necessarily a a path on how we would deliver that um other than you know, that might be a question to ask of the data center developer specifically, do you have a commitment from APS to serve or whoever their utility be, right? It might not be us, might be others that have kind of overlapping service territories. Um but it might be a direct question to say, you know, what is your path to power and has that been committed to? Does that help? Kind of.

Just on the construction of a data center, capital intensive, right? Yeah. So, if they don't have the power, it's like they're not going to Yeah. Yeah, and that's Just just as a note, if you're going to speak, you need to come to the microphone so that we can record it. Yeah, so so back to that, I mean it is a very capital intensive business. They're they're looking to to build out even the shell, it takes about two years.

So, you know, if we're five years out on the power side, you know, typically they're not going to start that that build out of that shell until they have some kind of pathway to what that power looks like. Um you know, that can be depending on the size of the project, I mean hundreds of millions of dollars. Okay, so there is a commitment financially that they would have to put down.

So, in the case of what we're calling the load commitment agreement, that's where we're basically saying we will deliver, let's I'm going to call it a 100 megawatt project, right? You've got a 100 megawatt data center, we are committing to serve that. It will have that agreement has a load ramp as to how they're going to bring that data center online, but it's also commitments for we will serve that for a defined period of time.

Here's what you're going to pay for that period and you're going to have energy minimums built into that as well and demand minimums to ensure that if we're building out infrastructure and procuring resources to serve you, that we're getting the collection we need to make sure that other customers are not impacted by that. Okay. Next slide. So, when I talked about your your question earlier, um we've really built my team around three core principles.

One is we are not going to serve more data center load in the APS service territory if we cannot do it reliably or affordably. We're not going to put other customers at risk of of having reliability issues um in Arizona to serve more more data centers. Just not going to happen. I mean, energy is a lifeblood for the state. It is a critical aspect.

When you start looking at health and safety over the summer, I mean when you're 115° outside, you need that cooling and you need to rely on your your um utility to be able to serve that. And we're not going to put that at jeopardy just to serve more data centers. So, that's kind of principle one. We get back to the affordability concept. We will only do it in a manner that that does not create a cost shift to existing customers.

We're not going to serve more data centers and ask our our retail residential customers to pay for those data centers to come. Again, it's you know, the the the example we use is grandma down the street should not be paying for Google or or Microsoft or insert hyperscaler here to build a data center in Arizona. Um Excuse me, when you're saying that, I also saw a slide that there was a 7% increase to residential, a 3% increase to commercial and a 2% decrease in industry.

That was a slide came from your guys' website. Did that also break out the extra So, data centers are served under a rate class called extra high load factor. It just had those three categories. And so, when I saw industrial, that's why I was asking the question earlier because industrial, like I said, could be Mhm. A lot of things. Correct.

So, how are they getting you know, you say you want to protect the residential people, but they had a 7% increase, 3% increase for commercial and a 2% decrease in industrial. So, what I would point to there is we are in the process of going through a rate case at the the Arizona Corporation Commission. And in there, we have proposals for what the different rate classes will look like going forward. Um obviously that has to be kind of litigated and and voted on by the commission.

Um but in that case, um the extra high load factor customer, which is where a data center would be served, that's their rate class, is actually seen an increase of 46%. So, Seeing it's only fair that something like that's done.

We I've seen something similar to what you're talking about in my own community where utility was insufficient and the current rate payers are paying for what they had to improve from the past provider so that they can continue to grow in my community and now the current rate payers are paying for what they had to build in order to for the future. And the ACC couldn't see that back then, but it sounds to me like you guys are addressing that right now, which is good. That needs to be.

Yeah, and and I think when you look at our rate case and the the strategy that we're using, we're calling it growth pace for growth. I don't know if that was termed by us or the commission, but it's kind of been a term that all of the utilities in Arizona have adopted. Um and it's really to ensure, you know, that that each customer class is paying their fair share based on the growth caused by that customer class.

And so, we're not going to burden the you know, residential customer classes for for data center growth. And I think when you even look at that uh the rate case that's going in, it's based on a test year of costs, which was I believe 24 uh 2024, which at that point, I mean we don't have we're still building into that. our peak had 450 megawatts of data center. So, data centers are not a big driver of our load for that test year. Um less than 5%.

Um so, we're continuing to grow in and try to set these these principles in today so that when that growth happens, we're prepared to to to do it in a way that does not impact other customers. So, is SRP in the audience as well? Correct. Yeah. So, you just said that [snorts] a data center doesn't get any preference, but we just turned down a very deceptive solar company who was not going to put their power into the grid. It was going to go directly to one data center only in the Florence area.

So, that's something APS would not do. And SRP, how was that going to work, right? It was not going to help the average citizen. It was only going to help the data center. We don't know because they had no agreement. Yeah, so No agreement. None of that was done, so But that's what they were intending to do. Very unscrupulous.

And Okay, so that this is this is why we're having this discussion because a lot of these things come up and you know to the average people the average person, you know, they're tired of hearing about these. Life was good 5 years ago. Life was good 10 years ago. How much better is our life going to be when we have a data center on every corner? That's what the people don't understand and don't see. And I don't see it. I have plenty of power in my phone and my computer here.

One of the one of the questions we're going to try to get. When is enough enough? And one of the questions I've continually asked is like self cell phones. When I drive back to Apache Junction, I have a dead spot between Florence and Florence Junction. Which is why they try to do coverage with cell towers every so often every 10 15 miles. Are data centers the same way? If if let's say Wyoming doesn't have any data centers, are they not going to be able to keep up?

And we're only going to be down here in our highly techie area or I don't know if you're the one to ask that question to. Yeah, so so Kelly talked a little bit about it and the idea that data centers like to be closer to the populations they're serving. Um and so some of the demand for data centers in Arizona is driven by the populations that we have. That being said there is also a trend that I have seen where they will go to where they can get the energy the fastest.

Uh whether that's Arizona, whether that's Wyoming in your example. If they can get power somewhere, they're going to look to see if there's a a feasible way to make a project work there. And if And another question I've asked, if if one goes in in Wyoming, does it benefit us here? Yeah, so they're all connected. So let's put them all in Argentina. Let's put a thousand of them in Argentina. Why do we need any of them? Yes, I I think there is some Argentina for one thing.

And so if I have a problem, I don't want to have to call. But anyway if I could just interject real quick because what I'm hearing from you as a provider of power is that you are developing a process to where the data center, whoever's coming here, has skin in the game. They're helping pay for the increase whatever's necessary to deliver system, whatever has to happen.

Even in the case of this fake solar that was coming, they were bringing um a power source that was going to be necessary for them to function. They were bringing some type of power force to a data center that was being proposed. That was their concept. Whether they got to that point or not, that was their intent based on what we've heard from them.

But that that's what sounds to me like what you're are are requiring so that they've got skin in the game if they're going to you're not going to hurt the current base of what what we've got right now. You're putting mechanism in place to where if they're going to come they've got to they've got to pony up. Correct. And and we'll talk a little bit about the different service models here in a second. Okay. That's what I'm hearing.

Yeah, but to to that point, you know when we evaluate those resources that maybe get brought to us from a project perspective, one of the things we're looking at is does it have a reliability impact to our existing customers?

And if if there is, you know, if a resource portfolio is sometimes it's not just solar, sometimes it's there's bigger projects that maybe people propose that include solar but also gas or other resources if that can reliably serve, we would be open to a conversation potentially.

But I will say if it's just a solar type project like that, maybe potentially behind the meter it probably is not going to have a a a positive reliability impact to our customers and would be something we would say you know, again, principle one, we're not going to impact. Based on what I was told and and again, there was no final agreement made or anything else that nature. They were going to actually tie in to the grid. Okay. Yeah, I'm not familiar with the specific project there.

but again, we it never really got that far anyway, so we don't know. They never really worked out the particulars. Yeah. Okay. Um Yes, so so to the three principles, we talked about the first two. The third goes back to your um your question Supervisor Goodman is you know, how are we ensuring that there's room for growth in existing you know, it's not just data centers that are wanting to come to Arizona. I mean, we're seeing large growth in the semiconductor industry.

I think there's you know, there's viewpoints that that's a national security concern. Um you know, I think it's very public that Taiwan Semiconductor is in our service territory and looking to continue to grow. Um along with that they bring their supply chain. There's you know, all kinds of uh you know, chemicals, uh air, different I don't want to say elements, but like helium is a a big, you know, different gas components that are part of that manufacturing process.

And all of that supply chain is coming with them, which increases growth and then, you know, again, employment. You've got the residential growth. So while we are looking to serve data centers where we can, some of what we're also looking to do is ensure that we've got, you know, fostering growth in those those other uh areas as well. And so we are kind of trying to to create a balance of how do we serve data centers versus other um manufacturing as well.

And including, you know, potentially mines and others as well. So Um so pathways to service, you know, we've we've talked a little bit about this. Um if you're an existing customer in a data center uh bringing a data center, you're under what we call kind of our tariff service. So this is our traditional [clears throat] pathway that that any retail customer would get service through.

If if you want to sign up your house and and and hook into the APS system, you would take tariff service and there's a rate schedule that defines how what that service looks like. Anytime we want to change those rates, modify those rates, it has to go through a rate case that then has, you know, a whole process associated with it. So if you're an existing data center customer, you're taking service under that that that box one.

Um The folks that are sitting in the uncommitted queue are also waiting for service under that box one. So when you're you're putting your position down in that queue, it's for service under box one.

Uh we've also created kind of a different method here we we talk about in box two, which is if you're a data center and you're willing to fully cover all of the incremental costs associated with service, we may be able to serve you sooner, but you're going to have to sign a a bilateral agreement that's taken to the commission.

It's maybe outside of a tariff rate service, but it gives you a pathway to to maybe get your site in service sooner, but it also comes with a significant upfront cost and investment. And effectively, what it allows us to do is make investments sooner because we're using the balance sheet of the data center to make those investments. You know, as a utility, we've got to manage certain financial metrics and we only have so much capital we can invest every year.

And so this is kind of an opportunity to say if you're willing to pay for it upfront the the financing, you know, aspects we can have those conversations. Um but to your point, you know, again, it goes back to those principles. We're not going to do it if it's going to impact reliability or you're creating any type of cost shift to existing customers. It's off the table at that point. Okay.

So where would that power come from if you're able to move them up if you can't generate it from gas power plants taking 5 to 7 years solar's not going to generate enough battery can't supply enough uh where would the extra power come from quicker? Yeah, so let me I'll paint a little example here. Um so say you're in that uncommitted queue and you're megawatt 15,000 in that queue. Right? You might be more than a decade out from service.

But if you're willing to build a gas generator and and pay for the cost of building that gas generator yourself and all the infrastructure that would be required to serve it. I mean, you got you got gas laterals, you got transmission upgrade. There's a lot more than just building the actual turbine. And you're willing to kind of ensure that you're going to cover the costs of maintaining and operating all of that infrastructure for a 20-year period.

Like we might be able to to accept that as an option where you build the generation, but we would want ownership of that asset. Then why not go behind the meter? Well, and that's that is a an answer that they could go for.

Um but what we've heard in general is that behind the meter doesn't provide the level of reliability that a data center would expect or you're having to I think as Kelly mentioned, you're building out significantly more capacity to account for things like outages um you know, maintenance on those plants, etc. So that hasn't been a pathway we've seen a lot of folks do today. But a gas generating plant can't run 24/7 either though. Correct.

So yeah, that's where you're having to take you'd have to build either two gas generators or a gas generator or solar. And even batteries, you have to have a way to charge that battery.

So I mean, you're it's it gets complicated and and that's part of what we're looking at as, you know, we take those resource portfolios under under option two and we run them through our resource planning team that that evaluates the reliability, not just you know, they've run it through their complex models and say this can provide reliable service or it can't. Or in order to get reliable service, you would need to add X, Y, and Z to to make it a firm.

So now I hear two for two saying behind the meter it doesn't work. So whoever listening, please understand what we just heard. Thanks. We also want to have this same type of a discussion regarding SMRs and micro nuclear. Which they're saying are way out, but we think once it happens it's going to happen quickly. And I know you guys, you and SRP are both waiting for the technology to come or the funding. I think the technology is already there, it's a matter of funding.

So we're hoping that Washington will start uh urging that along as well. Yeah, and and I think I mean we've been working with SRP and TEP to to evaluate new nuclear options in Arizona. I think that's very public. Um you know, what I would say about the SMRs, I think even just yesterday I heard the largest size is about 300 to 350 MW ish. Um the level that we're talking with a 20 GW Q. Uh there could be a real need for like an AP 1000 like a full on nuclear facility, right?

Not just these small modular. You can always chain them together, but you know, our our stance has been that we don't want to be serial number number one when it comes to these these SMRs.

Um but if there's kind of an adoption rate that shows that that proves reliability, proves that we can um do this in an affordable manner, that's something we would consider potentially in the future, but it's again, we're open to kind of all nuclear options and working with the other utilities in Arizona to do that. You're going nuclear, quote unquote phrase here.

[laughter] Well, but the yeah, also the question is is that if we keep hearing this from all the different power companies, who's going to be first? I don't want to wait 20 years. So I'm just saying somebody or or a combined joint effort Correct.

might be the best way to go because again, if this is five years out and you could do it in three years, might be the way to work together and you know, again, financially it sounds like long term that nuclear is going to be or these mini mini nukes are going to be the future. Come come back to the come back to the agenda. Thank you. I know I saw you. So but come come back to the item. Okay. All right, let's let's move on to the next slide. So again, I think we talked a little bit about this.

You know, really what we're looking for is if we're doing these kind of box two type options, it's you got to bring something that's a full requirements portfolio that gives you reliable service as you evaluate that. But again, it could accelerate speed to service and and does provide some some pricing because you're a developer would be funding a significant amount of that or the cost of all of that infrastructure upgrades.

They're going to know what their pricing model potentially looks like for that 20-year period. So um we can move on to the next slide. [clears throat] So again, you know, back to what we're looking to do, you know, we're asking customers that are looking for service that are outside of that the 4.5 GW we've committed to, you're going to have to make, you know, commitments to us under that that load commitment agreement um that I talked about earlier. The standard term is 15 years.

Under our kind of subscription kind of box two, it's it's looking like 20 years will be the term. Um but you're also going to have to ensure that you're able to fund the capital needed to support either option in a manner that does not impact affordability to our existing customers and protects the company financially, you know, again, we can't get our financial metrics in a position where we're downgraded from a credit perspective.

That now has an impact to all customers because we're now paying more for the cost of debt. And so all of those things are considered as we're looking at these different options and you know, again, we're open to whatever technologies that may be. If it's SMRs in the future, you know, I'm not in those conversations today, but I mean it's it's it's not off the table I would think if if if that's where we're going as a company from a new generation perspective.

And and lastly, I mean we're going to look for whoever those customers are to protect us from a credit perspective, we're going to ask them post significant collateral to say if if this becomes a data center bubble and and and you disappear five years from now, we need to have the collateral to say that you know, we can call on that to protect our other customers from, you know, whatever commitments we made to serve you and it's not passing that back to our other customers. So.

The cost of a generator is significant. Correct. And so yeah, at this point if there's any other questions, I'm happy to stay. Otherwise I can pass it over to No other questions. Thank you very much. Appreciate it, Mr. Powell. I saw Linda giving you some last minute advice, so Uh good morning. Morning. So uh my name is Nate Tate. I work for SRP. I'm the director of transmission planning. Uh my boss, Zach Heim, gave this presentation previously. We missed the name change on the slide.

I apologize. But uh so you're you're dealing with Nate Tate. Um Thanks for the opportunity to come and talk to you about um the the growth that we're experiencing driven largely by data centers, but uh other large loads as well. And um so happy to have the opportunity to to talk about that and what it means for SRP. Um so a little bit about SRP before I jump into the content. So we're one of the nation's largest public power utilities.

We provide water and power uh to about 2 million people in in the valley of the metro Phoenix area. Uh we also manage a a pretty extensive uh watershed that feeds into the the Verde and Salt Rivers. Next slide. Um so we share a lot of the same principles that you heard from APS and we're dealing with the same challenge and have come to a lot of the same conclusions.

And so um you'll hear me say a lot of things that really parallel what you heard from APS, but uh just wanted to put the growth in perspective for you. Um so this chart shows how our peak load, peak demand has grown uh going back over 100 years uh to 1920. And so you can see that there's been periods of time where we've dealt with very significant growth rates.

Um [clears throat] but when you look at what we're dealing with today, the area that's designated in red over there, and what we're forecasting to experience in the future, that that um chart really shoots shoots up. Uh this is really unprecedented growth uh for us and maybe to put that in perspective, we can look at uh the period of time between 1960 and 1980. That was a big growth period uh for Central Arizona.

We saw 7% uh annual average growth rate, um but that only equated to uh an expansion of the power system of 72 MW a year. So we had to expand the power system so we incrementally deliver an additional 72 MW a year on average during that period. When you look at what we're dealing with today, and the numbers are a lot larger, so even though the growth rate slightly lower, um that that 5.7% growth rate equates to over 600 MW um a year of power system expansion.

So our power system today uh delivers a peak of about 8500 MW. And so adding 600 MW in additional capacity um every year is what's going to be required for us uh to deal with the growth that's here. Next slide. This is a another view um of our growth. Shorter period of time, so 2015 to 2035. The uh dash line in the center there, uh that designates where we're at today. And so it shows some historical data from a growth standpoint. So historically, we've grown at about a 2% rate.

The large business uh class, and that's where data centers would be, uh grew at about 4% historically, 4.7%. But if you look at what we're forecasting and what we're dealing with today, uh you see a lot of our growth being driven by the large business customer class, which would include data centers. And um our forecast shows in 2035 that nearly 40% of our uh peak demand is going to come from large business customers. And that's significant for a few reasons.

Um the obvious reason is we have to build a power system that can supply that. But uh large load customers have a different load profile. So um the loads that we have today are cyclical. You know, it's pretty low in the morning early hours. Then as folks get up and go to work and begin utilizing energy, we peak. Early evening hours we peak and then we come back down.

So that kind of load profile presents some opportunities for you to perform maintenance, to do other things to the system to keep it reliable. Um these large business customers, their load profile is a lot flatter. So they're using more energy uh consistently throughout the day and the night. And so you have to build the system a little bit differently for it to continue to be um reliable. And what that means is more more infrastructure. Next slide. Um we can jump to the next one.

Um so this large influx of interest from uh data center customers has caused us to to change our processes a little bit. And so I'll I'll just talk briefly about the way we process large load customers uh in general. And then I'll talk about the shift that we've made. Um so excuse me one second. I'm going to grab my bottle of water. be right back. Sure. Linda, give him a full bottle of water, not the empty one. Come on. Apologies.

Uh so, the way we study these large load customers, so they come to us, they talk to us about their project, they give us some characteristics, tell us how big it's going to be. And what we'll do, so they they provide some funding also to cover the cost of the study. Uh we have a computer model um of our electric system, and we can add these load customers to that model, run some simulations, and understand what the impact [clears throat] is to the system.

And so, you can imagine, you know, at the extreme end, a 1,000 MW data center wants to interconnect. So, to put that in perspective, 8,500 is our peak now. So, you add a large 1,000 MW load, it breaks some things on the system. It it overloads some lines. It may require uh additional uh infrastructure. And so, we identify what those uh needs are. We call them mitigations, and we uh attribute the cost of all of that infrastructure to that customer.

Um so, they have to pay that before uh we'll move on in the process and um allow them to interconnect. So, the way we used to do this was in a serial fashion, and typically we'd only have a handful of customers that would come and talk to us. And so, you know, in this example, it's just a a week. So, Monday we have a customer, we go through that process, we tell them we need to build three new transmission lines. This is how much it's going to cost. You're going to have to pay that.

We get another customer the next day, we go through the same process, but now with that customer we're assuming that we've already added the transmission lines that we attributed to the first customer. And so, these mitigations begin to stack. And so, you get the customer four, you know, we may have 10 new uh stations and half a dozen transmission lines that are being built, and they they have to be sequenced to serve these customers.

But inevitably, what happens is someone has to change their project. Different location, the size of the project changes, and because we've stacked these up, it puts us in a position where we have to re-study all of the projects to really understand what the impacts are to the system. And that's what happens there on Friday with the toppling uh Jenga tower there. So, if you can switch to the next slide. So, we uh had to make an adjustment and study all of these customers at once.

We call it the cluster approach. So, instead of studying them one at a time, we're taking a a group of them. So, uh we're we're doing this for the very first time right now. There's 24 customers. Uh they're all data center customers. We've put them all in the computer model, we're studying their projects, and understanding what the impacts are going to be to the system, and we're going to attribute that cost to all of the customers that are in that cluster group.

Their costs will vary based on the size of their project and their utilization of the new infrastructure. But that's the way we're doing it, and it's allowing us to get through the process much quicker, provide um an understanding to the customers what it's going to take from a an investment standpoint to to interconnect, and also put us in a position where we have a really holistic plan um to to build this infrastructure to to serve those customers. Next slide.

So, th- this is a view of the large business customers uh that are in our queue. And so, there's a ge- geographic view um of the Phoenix metro area. That geographic view correlates with uh the chart you see on the right. Um the column in the center, uh those are projects that came and talked to us before we made this adjustment to the cluster study approach. And so, about 7 GW worth of load, 35 projects that are uh being studied.

Uh and then we had the 24 projects in our cluster, uh little over 7,000 MW there, and uh they're currently being processed. Uh ultimately, what all of these customers will receive is um an understanding of the infrastructure they're going to have to fund to be built, so that we can continue to operate the system reliably, and a timeline for all of that infrastructure. And the timeline's really been a challenge because uh you can imagine, I mean, this is uh nearly tripling um the size of SRP.

And so, the amount of time it takes to build all of that infrastructure, if these projects move forward, they won't all move forward. Um but if they move forward, it's going to take, you know, 7 8 10 years to get some of this built. That was the last slide I had. Questions? Any questions for Mr. Tate? Oh. Burned up Mr. Vogel before. Okay. I I I Yeah. I guess you should just say ditto. Cuz it'd be a lot easier and quicker.

Oh, it'll take I mean, again, can you just address few of those that we asked? I mean, instead of going over the whole thing again, I'm sure they're the same exact answers. I'm sorry. He had to go first and had all those, but maybe just address a few of the highlights of the questions we asked earlier. Sure, sure, I can. So, the cost shifting question. Um so, we're doing very similar things to avoid cost shifting between these large load customers. I described the study process.

Um all of that network upgrade um infrastructure that needs to be built, we're going to get that funding before. We're going to we're going to have that funded so we can build it. Uh when it comes to the resources that are going to be required to serve those loads, uh similar uh rate plan. Um there's an 80% demand charge with some collateral requirements to ensure that we're not shifting not only the cost, but the risk uh from these large load customers onto our um residential customers.

I'm trying to think through what some of the other concerns were. So, like the rate, you know, if you're looking to adjust rates, you're going more after the data center or the big user opposed to our residents who have already gotten significant increases over the years. Correct? That's correct. Yes. Okay. And then the same thing with the behind the meter situation, you happen to agree, I assume you would agree with APS that it's not likely there's an issue with power long-term.

These generators have to run 24/7. This could be a big water use. So, you probably say ditto. Yeah, we we we agree with that assessment. That's a that's a challenging uh arrangement to come to, and I I don't think it's very likely.

And again, if we're dealing with people who are coming before us, whether it's solar, data, we have to know, and you would be able to communicate with us to say, yes or no, look, we have an agreement, we're working with them, and that's how we know as a board that whether we say yay or nay, we need to know where this power's coming from. Yeah.

Yeah, the the data center would have an agreement, some signed agreement with us where we've uh accepted their collateral, um where we've taken funding for the network upgrades. Um they they'd have some agreements they'd be able to show you. Or in the aspect of that, would it be, well, we're working with them? That doesn't really ifs, maybes, and buts don't work for me. I would assume that's the same for you same for you. It is. Yeah, it's a challenging environment.

You saw we had 52 customers that were we're working with now. Um we don't expect them all to move forward. Supervisor Goodman, do you Yeah, I think probably that would be helpful is if uh if you've got any of the queue between you and S A A APS, sorry about that. I almost called you SRP. Apologize. But if I uh it would be helpful for us as a county to know, and we probably do on some of these projects. I've just, you know, as far as cuz a lot of these have NDAs and so on and so forth.

Kind of give us an idea. I I would like to see something to where um which makes most sense as far as being able to deliver the without a lot of of Do you guys have geographical locations that you could say, you could locate it here, that wouldn't require a lot of infrastructure, that you could be able to meet the demands of what they're requesting?

I mean, do you you probably have that kind of data that would be helpful for not only for them, but I think for us as well, so that as we're looking at Do you understand my question? Yeah, that's that's a that's a challenging I know. Supervisor McClair had a look on his face like you're watching too many YouTube like you don't know what watch that. Yeah, that's that's a really challenging um question.

Um you know, on on the system, there are some areas that um may be better equipped to serve than others. The challenge is that these numbers are so huge. Okay. So, you know, if you're talking about a 10 MW project or a 15 MW project, I think we can direct you with some confidence, and we can Okay. provide that advice to you with some confidence. But when you talk about 500 MW projects, um That's an infrastructure issue for you.

I mean, Every pla- every place is a bad place for that because it's going to take a lot of time to build the infrastructure, and it's going to be very expensive. Okay. Yeah, that tells us what we're up against. Any other questions for Mr. Tate? Okay, thank you very much. Appreciate your time. Thank you. Does this include the sermon or we got more? No, I think we had ACA. Oh, yeah, I'm sorry about that. Not trying to leave you out, just sitting out there doing nothing, you know, going No worries.

And I appreciate you guys hosting chairman, supervisors. And this works. Okay. Good. Okay. Um maybe before I start, I'll introduce myself. Ryan Reese, I'm the executive vice president at the Arizona Commerce Authority. I lead our um economic development group. So, projects, attractions, manufacturing, data center, all the gambit we uh work through us to locate in Pinal County and other counties across the state.

Um one of the maybe point of clarifications I wanted to add before I start with my presentation is on the portion talking about how how do you guys know kind of who's coming into your backyard essentially and are they working with power utility providers?

Uh one of the things is is the kind of order of operations is the zoning piece has to be in place first before they get into any type of agreement with the any utility really cuz you're talking about hundreds of millions of dollars being spent in those agreements. So, they want zoning to de-risk their their project before they would get any any into any type of official agreement with uh a utility group with those projects.

Um I'm I So, we had some great presentations today already, but I'm going to walk through some of the latest data and technology and some of the real world projects that we're seeing at the Commerce Authority. Uh it I think it's an important aspect because a lot of what we're talking about here today and what we'll be talking about in the future is data centers that will locate here.

Um a lot of the maybe misconception with narrative is the a lot of narrative comes from kind of old technology or older technologies of data centers that have located 5, 10, 20 years ago. Um and so, I think it's important to kind of identify that. Uh and then one last thing before I start, servers versus data centers. I think on the server side, you're talking files, right? You're talking kind of local IT of an office.

Data centers, you're you're talking complex data sets, you're talking autonomous vehicles, uh telehealth, and these more complex things that maybe an individual server room or um could not handle. So, the on the data center side, think Waymos, right? Think robotics, think vertical and take off landing vehicles that are all autonomous, and think those kind of uh operations. And I bring that up because the proximity thing is always a a debate back and forth.

Does it matter kind of where they're at? And I'll get into that in my presentation, but one of the reasons it will matter is the more complex those operations get, the more important that the latency the latency is reduced as close to zero as possible.

Um the one thing I always think of is when they start doing um procedures in hospitals with like operating, even if it's a remote operation, when like a surgeon stops moving his hand, you want him to stop moving his hand right then and there, right? That latency is is significant. And so, I'll get right into my presentation with that. So, at a high level, data centers, they're not just really economic development opportunities, right? But we're talking about critical infrastructure.

I think we heard it mentioned a couple times about the national security perspective on this. And so, another reason why uh we really want to make sure that this data center growth that we're seeing is happening in the US versus Argentina or China or uh North Korea or other areas, right? You think of these systems support our military, our financial markets, health care systems, um and really all of our domestic infrastructure. And what we're seeing is that the location does matter.

Uh increasingly, the national focus is really on building in the capacity in the US. The US does have the largest data center market right now. I think we hold a 44% uh of the data center market. Um and China's right behind us at just under 30%. But what kind of puts that on its head is that uh the data center market is expected to double by 2030.

So, when you're talking about that delta of 14%, if it's going to double by 2030, there's no telling where it's going to be and where we want our information held. And the more uh complex the data sets the data centers kind of tabulate are, the more we want to ensure that they're local. [clears throat] Um and then with data centers, it they want to be in kind of these stable areas, these stable regions. That's why Arizona's a very kind of popular area for data centers to look.

We talk about no natural disasters, a very um stable business environment, and then the growing population and the growing advanced manufacturing that we have here. All of those are components to why these data centers want to be in Arizona. Uh as a state, I think everybody's noticed that we we've become this advanced manufacturing hub, right? And slowly but surely what we're continuing to become a part of as well as this digital backbone of the country.

The these data these data centers that are continuing to grow in Arizona, Mesa has a good chunk of them. Um Phoenix also has a good chunk of these data centers that are growing in Arizona. And a majority of them are running on some of the latest technology. Some of that technology being proven right here in the state. Um so, these digital infrastructure projects, they they're working really with artificial intelligence, cloud computing.

We mentioned the health care systems, financial services, but also on Main Street, right? The small business digital services. A lot of this stuff uh when a small business doesn't have a full marketing team, they go to chat GPT or some type of AI to to help with their marketing. And so, it's not just these major corporations, but these small businesses that use it as well, right?

Nearly every digital interaction that happens today from telehealth to financial services, all of that goes through a data center one shape one shape or form. Uh and all of that depends on infrastructure. And so, [clears throat] right now, I mentioned by 2030, they're expected to double the uh the footprint of data centers. Where that goes is really going to be dependent on where it's welcome, right? When I don't necessarily just mean Arizona, but what country it's most welcome in.

That's that's where those are going to locate. So, the question it really is who's going to capitalize on it and who's going to kind of plan it into their development. And I think that's where we have a strategic advantage as a state, and I think that's where Pinal County has a strategic advantage as well. If you look here, we we've heard a lot about the water use or I think the presentation before me really touched on uh really maybe like the lack of water use, right?

But a lot of the technology, all the projects we're seeing site in the last year and in the next 3 to 5 years, all of them already using closed loop systems. Um and what that closed loop system is is one injection of water, and then from there there's a there's a slight top off after that, but what that isn't is constant like evaporative Think of like air conditioning versus like evaporative cooling, right?

Like the you're not seeing constant water go in and out and rush through our our waste water treatment facilities. Some of the headline news of water contamination as you were mentioning earlier, a lot of that is through the evaporative systems because water is consistently leaving the system. Um and it it is a it is actually an infrastructure breakdown, not a data center breakdown. But when it's consistently leaving the system like that, it it's harder to pinpoint like when did that start?

How long has it been going on? Versus a closed loop system, it's much more easy to control and monitor and identify if there is any breaks in the infrastructure. Um So, a couple of things here. The other thing that is interesting about this this category or this industry is that a lot of the research done in this industry the second it's published is is very much outdated already. And I mentioned that because the technology just advances so fast.

Uh I think Microsoft is the first one who's incorporated this kind of closed loop system, right? And they've incorporated it right here in Phoenix, Arizona. Um and with that, they saw a significant decrease in in the water use, just the one kind of in injection into the facility.

But all of these like breakthroughs in technology in this industry, as soon as you kind of get a report out of here's what the data the data center industry is doing, the very next day, the very next week, you see the technology upgrading, modernizing. And that's just in the operational piece of the water use, but there's also the chip side. We you guys hear that in Arizona we're making some of the most advanced chips in the world in North Phoenix.

Um and a lot of those chips are going into data center sets. And whether it be TSMC or Amkor that continue to evolve their data their um chip sets and their advanced packaging, that could will continue to advance how well resourced and how well these data center use these resources. So, a couple of things. I'm going to I think the three major categories that we typically touch on with data center really do are power, uh water, and then community impact and economic impact, right?

The community and economic impact I can bunch into one. Um so, on power, there this is a common concern that we hear across every the cost to the existing customers. I think you heard from our electric utilities already, right? It's the it's the kind of grow the strategic partnership for growth or the pay for growth um philosophy that the APS and SRP have and TEP has as well.

Uh and this I think they did a great job at learning from the mistakes of others, maybe learning from unregulated markets across the country, learning from other even regulated markets, and really seeing like how do we not leave excess capacity or stranded cost on the ratepayer? And how does that go directly to uh the end user that's incurring those costs?

Um and so with their with their program and that kind of pay-for-growth uh philosophy, it it's really been effective and it really separates the call call them hyperscalers or the people that are the companies that are really looking to grow in the area versus maybe the more speculative projects.

And just like any other type of project, there's whether it be manufacturing, R&D, or data center, there there's there's definitely great partners to have and there's maybe not so great partners to have, right? And when you talk about the hyperscalers, you talk about staying at the cutting edge of data center or advanced manufacturing, those are those are the groups you want to be with.

You want to be with the hyperscalers as they advance their technology and they advance their technology in our state. Uh the the one the other thing to include on the power side is I think they touched on it, but it includes generation, transmission, and distribution upgrades, right? So there is no cost kind of unseated when it comes to these extreme users and whether it be the advanced manufacturer that's a very high user or a data center that's a very high user.

On the utility side, they're bunched into the same bucket. The second one uh we'll talk a little bit about is noise. So one of the one of the narratives that goes around more commonly is you can always hear the noise or the buzz of the data centers. A lot of where that comes from [laughter] um is actually the cooling towers from the evap systems. The newer systems or closed-loop systems have done away with that stack in that that cooling tower. So that buzz is no longer actually a factor.

Uh 45 to 50 dBA is where these modern data centers are um have their kind of noise at and we equate that to like a uh side residential street or like a conversation in a backyard. So at the end of their property line, that's the volume that you'll hear at the end of their at the end of their site. Oh, might be missing one. So So last one So economic impact and so this is more community community engagement, right?

I think a single hyperscaler campus typically represents 1 to 1 billion dollars in capital investment into their data center campus. Um typically, it's one to four facilities is what what constitute a data center campus. During construction, that can be anywhere from 500 to 2,000 construction jobs. Um the interesting thing about these typically categorized construction job is temporary jobs. Right? These These data centers are they work in phases, so typically it's uh two to four phases.

The construction will take call it two years for their first phase, two to three years, and then their second phase, an additional two to three years. And so if they're doing four buildings, they're in four phases. So it can almost go past 10 years up to the 12-year mark for these like {quote} {unquote} temporary jobs, right? And I think that's an important key thing to touch on.

The activity sustained over a long period of time for these construction jobs, but then the other kind of misnomer, especially with these advanced facilities, is the permanent jobs, especially with the hyperscalers. Uh we're really talking anywhere between 200 and 500 full-time employees for these data center campuses.

Um and those are like hyperscale specific hyperscaler specific in these kind of AI-focused data centers, which is a I think a big misnomer from maybe the traditional narrative of like what data center staffing looks like.

And because a lot of that a lot of that was really referencing advanced server rooms or collocated data center facilities, where every company owned just a small portion, but when you're in a hyperscaler and it's all one company, there's a significant there's a significantly larger number of of employees in each of those centers. What would you say the pay scale would be roughly in something like that? Great question. So that's where we're at right here.

So when you look right here, data center technicians averaging $75,000, facilities and ops managers averaging 145,000, and these networking and system engineers 117,000. All of those we at the ACA we talk about being a well above that kind of a production wage, right? And all of those, whether you're in rural or metro, are served as well above our production wage for our qualifying for incentives. The other interesting component is the three times multiplier, right?

The indirect or the induced jobs is that that's a critical path because when you compare these these companies, these data centers, this is new money coming into the state, coming into the county. And so that's new money coming in and new money being spent, not necessarily money just getting recycled through the same municipal areas or the same county.

And so that's a that's a great thing to kind of highlight, especially when you do have up to 2,000 construction workers or 500 permanent people outside, you're talking about long-term economic benefit.

Uh and then I'm going to go back one, but on this slide, this is really just a kind of at a glance of maybe some of the older assumption and older narrative that's out there versus some of the current realities and some of the things we're experiencing in Arizona, where where whether it be water and cooling, power grid, or noise. Uh a lot of the a lot of the kind of misnomers are referencing antiquated technology. I say antiquated, but it's it's only been 8 years, 10 years.

Hasn't been that long. It's just moving that fast. Yeah. And so this is a good kind of snapshot of like what what they've already done to like address it and move forward in these areas. Excuse me, can you go to the the next slide? I just had a question or two if you don't mind. So the construction jobs, great. You know, I'd love to see thousands and thousands of construction jobs. No issue there.

The question has been I've heard anywhere on a building could have anywhere between 100 and So if 59 buildings were coming into a particular area and they're 100,000 square foot buildings, I've heard 10 jobs, 50 jobs, 200 jobs, 500 jobs. You're you're quoting that there. But then when we've had some of these data centers come here to ask us for a comprehensive plan, well, it's 100 jobs per building. Well, it's 50 jobs per building. How do you get 500 plus jobs?

Is that a 59 buildings, 60 buildings, 80 buildings of 100,000 square feet? Cuz again, the pay scale is fantastic, but is it What is the real number? Because I've heard from Chandler, the numbers were about 50 jobs per building. But when I hear 500, I get excited, but then also I hear 50 and I go, "Uh." Yeah. Yeah, and and so there's a couple of the there's a couple of variables, right? The first thing is again hyperscaler versus like a collocated facility.

It I I would say like think of it as an like a a shopping center. Right? When when every kind of cubby is a different company, the permanent employees there are not likely to be many and the {quote} {unquote} permanent employees that are there are likely contracted, which we don't necessarily count as employees cuz they're contracted through a third party that was likely already here. All right.

Where you get the 200 to 500 is what we would call like a data center campus, anywhere from maybe three to six facilities kind of in that square call it 250 to 300 acres. Uh it has four unique facilities and that's where you get that 200 and 200 to 500 employee count. So a campus, not necessarily a single building, but there are very few hyperscalers that are just going to build a single building.

They're likely going to build a campus of at least four and then within a 50-mile proximity, build another one and another one to really enhance the network effect of the data center. In addition to that, like the last number there, three times, I think that's you know, that's that's hard to calculate what the what the indirect or the what's going to be induced because of all of this. I mean, the whole industry itself is evolving Yeah. from where it was to where it is today.

And it's even going to evolve more it's going to go even more than that. I mean, I I do like some of the things that everybody's been saying in that I mean, I think of it as when I first opened up my office, I went into an executive suite. I rented a and we had a common receptionist out at the front. And I think based on what the original the first discussion in the beginning, the the young lady that introduced us the whole system in in the first place, talked about that concept.

And then it just even even on the hydro ones, the ones that are much bigger, are still the same concept. Multiple companies are going to be dealing with that. The data centers we have a data center here. People can go on our website. Might not be the best one yet, but we're working on it. But they can actually gather and gather information on a if they want to do a split a lot, they can go online and they can It's the same scenario here, just on a larger scale. Yeah, no, absolutely.

And the I think the other piece to to highlight on that three times multiplier is we talk about suppliers in all of our other industries in semiconductor, in battery technology. We even talk about building supplier parks, but suppliers here are very significant as well.

The amount of fiber that is laid in a data center, that those are companies that relocate their entire headquarters to where the activity is happening and locate their their business out of there for the foreseeable future because of the amount of activity that's happening in in that area. Well, and I you know, based on industry's taken us that direction is what I'm seeing. And I've got 80% of my population that leaves our area to go to work.

And I've always been of the mindset I want to reverse that. It's why you don't have time to watch YouTube. You're just sitting in the corner counting cars. Him down there that's been watching YouTube. That's what I say. You just count Do my job. Just another quick question on public safety. Um these buildings go up in flames. People want to know, obviously it's a bunch of computers, a bunch of plastic. It's probably the same as kind of a battery fire.

It's going to burn for an X amount of time or what? No, so definitely not the same as battery fire. Just no no lithium, right? That that's the that's the component in battery that really causes them to to be a unique. But this fire suppression here is sufficient to keep it internal, right?

All the all of these data centers The other piece to maybe note on that is that the more advanced these centers are, the more they have kind of warning mechanisms even prior to anything like that being possible to happen. Because it I mean it goes up in flames, you're talking anytime any amount of time they are offline, they're tens, hundreds of millions of dollars a day that they're losing out on, right?

And so the more advanced the data center, the more warning signs or warning systems that they would have far before any type of like fire or anything like that would happen. that question and I'm just like it's you know, same as your house, which is actually worse, but okay. I asked that question because I'm a public safety guy, so Um I'll open up to one other questions, but the one other thing I just wanted to touch on. I think this is my last couple of slides.

Um is it it really is a proven economic engine in the state already. You can see right here uh over 10 billion dollars what it's contributed since '23 to the state's GDP, the number of job creations and that does include construction jobs since '23, and then local and state tax revenues that have been collected from '21 to '23.

Um we talk about our incentives that abate the taxes for the the equipment that goes into the data centers, but what is typically left behind is the the strong base of property tax that these data centers generate going from raw land, right? Or whether it be private or state land and going to this very kind of cutting-edge most advanced facility and that that does that does numbers to the property tax base.

And so whether it be one facility or four or six that that just continues to grow the property tax base and the equipment in each of the facilities is switched out, call it every four to six years, further in increasing and and improving the the property tax in that on on that facility. And then this is the other thing and where and you guys can touch on we touched on this a little bit, but just the long-term thinking, right?

Long-term thinking One of the great things about being in Pinal County is that there is room, there is the opportunity to like to pick the development, pick where it's going, right? You're not trying to infill a data center right in the middle of a city. You can be you can very much project and move out what what these data centers will look like, what the make sure that they are in close proximity to advanced manufacturing and make sure that you have the areas where you want them to be.

And I know we work with your economic development team on a regular basis when we're citing advanced manufacturers and other projects. And when we work with them, we're Leo and Joel and when we work at the utilities, that's exactly what we're looking for. Like, hey, what makes sense? What do you guys have planned here? Where does it make the most sense to be here? And so I think that's the maybe the gold standard of what the kind of good neighbor looks like.

We want to make sure we're citing these in good places. [clears throat] Thank you, Supervisor Good Serty, that one over there. You have a question. So this might be our I asked questions from the the electric companies and they didn't have the answers, of course, cuz it's not their specialty. And this might be our only chance to get some answers because usually we're dealing with lobbyists and it's and developers.

It's they just want their projects approved, so they'll tell us whatever they think we want to hear. But a lot of I still had some questions out there. How much is an when is enough is enough? And do we benefit from them in other areas? If we do, then we don't really need to keep pace. We don't want Pinal County to fall behind other counties or other states. So do we need to keep bringing these here in order to keep pace?

Uh when you're talking about bringing things like Waymo, people don't care about Waymo. If we never see one of those, so that's not even on you know, we represent the citizens. We don't care what the developers think or what Waymo or people like that are going to do.

And also if you bring and we also have to weigh up here if we're bringing in 500 jobs for this data center, are we costing 20,000 jobs that they'll be replacing by technology that this would Now is it inevitable that that's going to happen anyway? But my main questions are how saturated do we have to be? Are they like cell towers or can we benefit from them from other areas? Yeah, so I'll touch on the AI piece maybe like on the job loss versus creation, right?

Because obviously at the Commerce Authority our whole premise is job creation and and advanced advanced industries. And one of the the big thing with AI and kind of this job is we see it more as an additive versus kind of a full replacement when it comes to positions, right? It's it wasn't too long ago when we're when it was like Henry Ford in the Ford assembly line, right?

And there was somebody to put together the widget and then inspect the widget and then tighten the like every everybody did one thing one thing or another, right? And now like maybe three or four of those jobs are one job, but it is not an entry-level job. It is an hourly technician that makes a great wage. I mean Lucid Motors is a great example, right? Hourly technician that makes great wage and is able to is able to kind of provide for the family.

And I so I think I we see AI and like the evolution of it more as that where it's going to enhance and make people more productive in their jobs, not necessarily replace jobs, at least I mean in our lifetime. Um on the other side, the when is enough enough? Uh on the data center side, right now they are they're building out capacity. That that that's what's happening, right? I think of it very much like the electrifying the US, right? They're building out capacity right now.

And so right now, even right now latency and proximity is important for key categories. And I reference Waymo as an example. Um and it's it's not it's one Those kind of technologies like they're not important until they are, right?

I know Pinal County is growing very very quickly and so with the manufacturing you have here in in a very short amount of time, you're going to start trying to attract headquarters here and then they're going to be looking at amenities and some of those amenities are going to be robo taxis and some of these other things that rely on data centers to to really kind of push the push it forward, right?

But there doesn't have to be when they're not going to be like cell towers where they have to be on every corner. I think the the more the better way to look at it is you want just like road infrastructure is you want to be ahead of it. You want to build and plan for the future because the more complex that these data sets get, the more that that latency is going to be critical.

The faster the technology gets in these data centers, the more it's going to be important that they're more local than across the world or across the country. And the more of our personal like as a population, the more of our personal information, whether it be health care or otherwise, that we put in there, the more critical it's going to be that we want it in close proximity. Any other Does that answer that? The more so, yes. Okay. So there there will be a point when we have enough.

And like you already said, Mesa has we don't know how many Mesa have made in Maricopa County cuz we only hear our news out here and uh you know, we heard that you know, Tucson didn't approve that huge one down there. It would have been one of the biggest ones and I know Queen Creek who's they want everything. Yeah, bring it up here, we'll take it, you know, and It'll be industry driven, I would imagine. Yeah. Yeah, and and I think it's going to be a balance, right?

Like as you get further and further built out, I think you're going to where it's it's going to be one of those topics where you have to like continue to evaluate as as you're 85, 90, 95% like built out, the space that is available that's remaining, it's something that you'll have to evaluate. What is the best and highest use for that space? And looking at those structures 30 years from now when this is all obsolete, you can't use those as warehouses.

They'll be they'll they'll have They'll be homeless shelters. I don't think they Exactly. I don't think they could be repurposed for I won't predict 30 years from now, but Yeah. Never know. All the people that you put out of a job will be living in those. So it'll be fine. It'll be fine. Okay, any other questions for Mr. Tate? Uh I'm sorry for Mr. Reese. No. Thank you. Appreciate it. All right. All right, I think that concludes the Thank you.

Uh we will then now move on to item number six, which is Pinal County Development Services. And I believe Mr. Denton, you are up. You've been so patient. Thank you. But what did you learn? I mean, I got I learned a lot. I don't know about you guys, but I did. I appreciate it. Thank you all for coming today. APS, SRP, ASU, ACA, everybody, thank you. Uh good afternoon. I'm Dedrick Denton. I'm the interim community development director.

And today I have the pleasure to present the Hillside development standards to the board. And as part as this as part of this code update, this particular ordinance is a provision in the ordinance to allow some flexible development in the Hillside or a lot that is considered a Hillside.

Uh currently we don't have like any standards out there, so but this provision is to help to create that flexibility, so people can build below above that 15% slope line and then also protect the hillside as well. So did you just say build it quick before we put a standard in place? Did what? Build it quick before we put a standard in place, is that what you just said? No. Okay, you said. [laughter] No, we don't want to mention that.

So I want to talk about like the purpose and intent and then also I want to go and do a overview of the the regulation the draft regulations, but wanted to ask you guys I could do a high level overview, but if you guys have time, we can get into the weeds and go line by line, but I will leave it to your discretion. Spray some Roundup and do the high level. High level? Okay. And then after that some of the next steps that we have in place.

So for purpose and intent Pinal County currently does not have an ordinance to address hillside development. The purpose is to allow reasonable and beneficial use of private property within areas with the hillside slope greater than 15%. And will also preserving the ridge lines. In this overview I have everything from key definitions that's in the draft regulations and then all the way down to our submission submission requirements. And That was great. Okay, thank you very much.

[laughter] Well, let me give you like a before we get there. I know it's lunch time, but before we get there, let me go a little bit over um some of the things that are high level that is also in the regulations. So with that we do have Let me go back here one more. We do have some key definitions in there that kind of address what a disturbance area means, what hillside mean and what ridge line means and then we also have some examples in there.

For example, that shows you what is a hillside lot, what does a portion of a hillside lot looks like and then also what's not considered a hillside lot. Under general provisions we also have some application triggers that let you know there's like certain things that or conditions like above the 15% cent 15% slope line that will deem a that will deem like development standards will need to be made within a a lot that's above the 15% slope line.

So for instance, prior to the issuance of a building permit in all zoning districts, the hillside development standards shall apply to the disturbance area if any portion of the land deemed hillside is disturbed for development. And then also in the general provisions we talk about this disturbance area. The code includes examples of what would be subject to hillside development standards and what areas would not be subject to hillside develop developments.

We also have a grandfather clause that would um basically um if they already pulled a permit they can just continue on instead of making them to apply to the new standards. And then also there's a provision to challenge the building safety decision regarding whether they determine that your lot meets the 15% or greater than the 15% slope line. Line, excuse me.

And then with that they would need to provide like a written report by a registered Arizona registered civil engineer will be required and then they would need to include some sealed topographic plans. So did Dedrick this is stuff we haven't been doing then, right? Correct. We don't have no mechanism in place right now. Okay. So we've got we've got these type of constructions that are being done right now. There I'm aware that some areas in the has come out of the result of all that?

Yes, cuz there were some areas in the county where they built in the hillside, but we never had any mechanisms to place any standards on that. Okay. Another tool in the toolbox. Well, that but that's been happening quite [clears throat] frequently. But you guys both now have part of that area. Where that's been happening over here, so Good luck. I live on Hilltop, so you know what I'm saying.

And then we also have some development standards that would address grading and drainage requirements for your total disturbance area, so if you're above the um you know, that 15% slope line it actually does um it actually like carve out what area of the lot that you can disturb. So it's 35% of the gross total lot area or 2,000 of 200 not 200, 20,000 square feet, whichever is smaller. So you only can disturb just a portion of the lot and not the entire lot. Okay.

We also have some requirements for sewage and disposal systems. There are some requirements for utility lines, driveway requirements. We want to make sure like the road leading up to your hillside is not too steep. Typically like 12% like grade. Yeah, yeah, we don't want them to get too steep. And then also for roadways making sure that the related hillside disturbance shall not contain within dedicated right-of-way subdivision private street tracks or easements.

Roadways within easements are included and the maximum gross lot disturbance and then roadway maximum slopes for public streets shall adhere to the requirements of the Pinal County subdivision and infrastructure design manual. We do have some requirements for the building and structure that no building or structure shall be placed outside of the lot buildable buildable area within any portion of a required yard that has a hillside slope.

This shall not be construed to prevent relief from the standards with an approval of a special use permit. Some drainage requirements and then cut and fill slope requirements. Some requirements for retaining walls that deficient that the finished surface of any retaining wall shall blend into the natural setting. Some requirements for fill pad requirements. Fill pads higher than 10 feet shall be designed by geotechnical engineer.

We also have some requirements in there for slope stabilization and restoration. And then the next section of the ordinance deals with height regulation. So on the hillside property of any property the height of all building and structure shall not exceed 30 the 30 foot plane parallel to the average natural slope.

This is measured vertically from the ground of the natural slope through any building cross section to the 30 foot plane parallel to the average natural slope, so you know, so the building doesn't get like too high up. There is some maximum height for the retaining wall that it should be no more than 8 feet and and then some um and then for the retaining wall there's some like color treatment texture and stuff, so it can blend in with the surrounding area. Do we have pictures to go with this?

It's in your packet. It was in the packet. No, I didn't know but I mean I'm just You just want No, no, I well I I'm a visual kind of a guy and I know some of them out there are visual. Oh, we do have You do have pictures. And just as just so all these you guys wrote all this stuff up. That's a picture, look. No, but I was just looking oh, there we go. That's one for the building height. When you wrote all this stuff up. though. Oh man, get your crayons quick.

When you did all this stuff though, I mean you took this from someone that's already done this, did we just write them from scratch? Did Yeah, they looked at other areas like Maricopa County in the valley and then we also had our county engineer look at them as well. Ex-county engineer. Yes, the ex yes, actually, but She's at point, you know. Some cases So anyway, okay, but but I'm just saying but we took those things and looked at them, tailored them to Pinal County, okay. Okay, thank you.

Got it. And then the last section of the ordinance just deal with um procedural like basically submitting, so they got to submit a plot plan and then the plot plan basically has to include a contour interval not exceeding two foot intervals. A a survey prepared and sealed by a civil engineer and then the scale of your site plan and then they also need to show some cross sections and graphical depictions of all the disturbed areas and shown and show the proposed methods of the final treatment.

A grading and drainage plan will be required. The location of all proposed utility lines, septic tanks and sewage disposal area, legal description and then some more like the the table for the actual plot plan. Will need to be some of those things that they would need to submit for us for review. [clears throat] That's good. It's good to be that thorough. Yeah.

And then our next step after this meeting, we do have a list of about 15 folks that we identified that would be in our stakeholders group. So we're going to send this information out to them, they get some comments and feedback from them. We also is working on a website that's kind of similar to the subdivision regulations so we can post it online so people can take a look and comment on it. Those folks that are work Is this to prioritize? Is that what that's about?

That fall into fall into prioritize. Prioritize what? Yeah. To Well, we we have some issues with with wedding venues in rural in residential neighborhoods so we'd like to like get that one to the top to get some relief as soon as possible. Yep. Yeah, we um Yeah, we're well aware We are well aware that you guys have some priorities too. I think we spoke to number of you guys and part of that is to move a lot of those things up to the top to address those issues.

Yeah, and but this one's here is [snorts] really causing some major problems in these areas where they are building in the hilltops. And it's uh But the Rather than try to do all the ordinances all together, this was they're trying to do it individually and this is one of them but I get where you're coming from too. Yeah, there's a we do have a handful of ones that we have heard from you guys that we want to prioritize. [snorts] Yeah. Okay. Address those issues.

Any other relevant questions for Mr. Denton? Just obviously this will go out to the public. This is not something that's going to just boom. So we're announcing it today. We're announcing it today that this is going to be publicized, social media, website and okay. Just want to make sure of that.

to have it out there about estimate like 30 days so the public have a chance to comment on it and after that then we're going to do a work session with P&Z and a hearing with P&Z then come back to the board. Okay, and then also the How did you determine the 15 people? That's all. Well, it was the former county engineer. He had a pretty good list of contractors that he deals with all the time. Okay. Thanks. Good. Thank you. Yep, you're welcome. there are no more questions from the board.

Thank you, Mr. Denton. Appreciate your time. Thanks for hanging out and learning all about the power stuff and data centers. Hey, I I need the information. Hey, and and I see the rest of the crew out there learning that too. That's you know, good job. Yep. All right. Thank you very much. Yep, you're welcome. And with that there's no more business before the board. We're adjourned.