The Arizona Corporation Commission has approved an energy-supply agreement between local utility Tucson Electric Power (TEP) and the company behind Project Blue, a controversial data center development being advanced in Tucson, Arizona.

According to local reporting, TEP was approved to supply power to the project under a contract that keeps customer rates unchanged. According to TEP, the agreement will make sure that the existing customers “pay their own way and pay for their service.”

“Basically, the agreement outlines a number of protections that ensure other customers won’t be subsidizing or paying for service to this project,” said TEP spokesperson Joe Barrios.

Blue Owl-owned Beale Infrastructure is developing the project. Reports suggest up to ten buildings totaling 2 million sq ft (185,805 sqm), with a capacity of 600MW at full build-out, making the data center TEP’s largest customer.

Despite the approval of the utility connection, the project has faced significant opposition from local residents, who have criticized the lack of transparency and secrecy about the project, which was set to see its first data center go live in 2027.

Reports have indicated that the data center would use drinking water for its cooling systems for at least the first two years of operation, until it could switch to treated wastewater once a new water line was completed. Concerns were also raised about the impact it could have on ratepayers in the city, with the expectation that it could raise energy prices across the board.

In August, the Tucson City Council voted unanimously to reject the project, with Mayor Regina Romero stating that the city would also look to place limits on future data centers "to protect Tucson from this industry that is already here in Arizona."

Earlier this month, it was reported that Amazon, which was named as the end customer behind the development, had dropped out of the project.

Despite the city council’s rejection, the development seems set to go ahead via the county and utility deal. The next steps for the project will be to obtain regulatory approval for the utility connection and to conduct a public review of the impacts. Subsequently, city lawyers have requested a formal hearing, citing the potential impact of the development on rate payers.