Two of Arizona’s major utilities have acquired natural gas capacity from Energy Transfer’s Transwestern Pipeline Desert Southwest expansion project to meet surging demand from the data center sector.

The Arizona Public Service (APS) and Salt River Project (SRP) both announced that they would acquire capacity from the pipeline to support new gas-fired power plants. The agreements will provide the utilities with priority delivery of natural gas from the pipeline.

The pipeline currently spans 2,590 miles, delivering 0.9 billion cubic feet a day (Bcf/day) of gas from the Permian Basin in southwest Texas to Arizona. The expansion - expected to cost around $5.3 billion - will expand the system by 516 miles and add 1.5 Bcf per day of capacity to the system.

The expansion was driven by increased demand for natural gas to power large power plants, according to Tom Long, co-CEO of Energy Transfer. “We continue to see a significant level of activity from demand-pull customers to supply, store, and transport natural gas for gas-fired power plants, data centers, and industrial and onshore manufacturing,” Long said.

APS will act as the project's anchor customer and use the gas to power plants that will serve data centers within the utilities' service territory, according to Ted Geisler, chairman, president, and CEO of Pinnacle West Capital Corp., APS’ parent company.

APS has said it expects to spend up to $7.3bn over 25 years on buying gas from the expansion project. It intends to bring the power plants online at the same time as the pipeline expansion is completed, which is slated for sometime in 2029.

At present, APS has almost 4.5GW of committed, high-load customer demand in its interconnection queue, mostly from the data center sector. In addition, it has more than 20GW of uncommitted large load customers.

APS provides energy to around 1.4 million customers across 11 of Arizona’s 15 counties.

Arizona is fast becoming a regional hub for data centers, with upwards of 129 data centers currently operating in the state. Hyperscalers, Meta, AWS, Google, and Microsoft all have a presence in the state.

Arizona is highly reliant on natural gas for its electricity. According to the US Energy Information Administration, gas-fired power plants produced 45 percent of the state's energy, with nuclear at 27 percent, solar at 13 percent, and coal at eight percent.

This has led gas pipeline companies operating in the state, such as Energy Transfer, to target the data center sector as a significant growth area due to its surging demand. The company has already signed three deals with data centers to supply them with natural gas. Most recently, in February, it signed a ten-year supply agreement with CloudBurst to power its planned 1.2GW data center in Texas.