PHOENIX, Arizona — As households across the American Southwest grapple with the economic pressures of inflation and extreme weather, a new report sounds the alarm on a major regional utility’s energy strategy. Published jointly by the Sierra Club and Synapse Energy Economics, the comprehensive study—titled Passing the Buck: How APS’s Gas Rush Risks Ratepayer Dollars—examines the trajectory of Arizona Public Service (APS), the state’s largest electric utility.
According to the findings, APS’s heavy and expanding reliance on methane (fossil) gas is locking customers into decades of volatile fuel costs, compounding environmental degradation, and threatening public health. The report’s release coincides with a contentious regulatory battle, as APS pushes for a sweeping 14% rate hike that would hit residential customers hard at a time when clean, renewable energy alternatives have never been more economically viable or accessible.
Main Facts
The core of the controversy centers on the financial and operational decisions being made by APS. The utility is currently pursuing what environmental advocates and energy analysts term a "gas rush," planning more new fossil gas capacity than any other utility in Arizona. Prominent examples include the proposed Desert Sun Power Plant and the Redhawk Expansion Project, which involves the construction of eight new methane gas-fired generating turbines in Maricopa County.
Maricopa County is already a focal point for environmental and public health concerns. It is consistently ranked by the American Lung Association’s State of the Air Report as suffering from some of the worst air quality in the United States. Adding multiple new gas-fired turbines to the region threatens to exacerbate ozone pollution and particulate matter concentrations, directly impacting vulnerable populations.
Simultaneously, APS is requesting a 14% general rate increase from regulators. If approved by the Arizona Corporation Commission, this adjustment would drive up the average residential customer’s utility bills by approximately $240 annually. This comes on top of a broader pattern of rising energy costs, marking what would be the third rate increase imposed on captive ratepayers in just five years.
Furthermore, APS is seeking approval for "formula rates"—a regulatory mechanism that would allow the utility to automatically adjust and raise prices on an annual basis with diminished regulatory oversight and reduced public input. Critics argue these compounding financial burdens arrive just as the utility is rolling back its clean energy commitments, stepping away from zero-carbon targets, and reneging on a prior pledge to retire the coal-fired Four Corners Power Plant by 2031.
Chronology of Events and Escalating Tensions
The friction between Arizona ratepayers, environmental advocates, and APS has unfolded over a multi-year trajectory characterized by shifting corporate commitments and mounting regulatory battles:
The Early 2020s (Commitments to Transition): In line with broader industry trends and mounting pressure from climate scientists and state regulators, APS initially staked out ambitious climate goals. The utility publicly committed to achieving zero-carbon power by mid-century and established a specific timeline to exit coal generation, including an agreement to shutter the massive Four Corners coal plant in northwestern New Mexico by 2031.
The Pivot to Fossil Gas: Over the subsequent years, citing rising electricity demand, grid reliability concerns, and the rapid expansion of energy-intensive industries (such as data centers and advanced manufacturing in the Phoenix metropolitan area), APS shifted its resource planning. Rather than leaning aggressively into battery storage and localized solar, the utility pivoted toward fossil gas buildouts, making it the state’s leading proponent of new gas infrastructure.
Recent Rate Applications and Policy Shifts: As capital expenditures for these fossil projects mounted, APS filed for its current 14% rate increase while simultaneously signaling a retreat from its earlier zero-carbon milestones. The utility introduced the concept of formula rates to streamline future price increases, drawing immediate pushback from consumer advocacy groups.
September 2026 (The Passing the Buck Report): Marking a critical escalation in public pushback, the Sierra Club and Synapse Energy Economics released their joint report. The study provides quantitative backing to what consumer advocates have long argued: that APS’s strategy shields shareholders from financial risk while unfairly exposing everyday households to the volatile economics of the global gas market.
Supporting Data and Economic Analysis
The Passing the Buck report dives deep into the mechanics of utility resource planning, focusing heavily on how fuel costs are managed and distributed. At the heart of the analysis is a structural critique of APS’s financial incentives.
Under the utility’s current regulatory framework, APS maintains virtually no financial incentive to mitigate fuel cost volatility. The utility is permitted to pass 100% of its fuel and purchased-power expenses directly through to its customers dollar-for-dollar. When global methane gas prices spike—as they did dramatically following international supply chain disruptions and geopolitical conflicts—APS customers bear the full brunt of those financial shocks on their monthly bills. Conversely, when fuel prices dip, the immediate savings rarely translate into long-term structural relief for households.
Synapse Energy Economics modeled the long-term economic trajectory of this dependency. By locking capital into long-lived fossil gas infrastructure that operates for decades, APS risks stranding ratepayer capital. As federal regulations on greenhouse gas emissions tighten and renewable generation paired with battery storage continues to drop in cost, these gas plants risk becoming expensive liabilities.
Moreover, the report highlights the contrast between the capital expenditures flowing into fossil fuels versus the untapped potential of Arizona’s world-class solar resources. With abundant sunshine, Arizona is uniquely positioned to lead a distributed energy transition. Instead, the current regulatory structure encourages capital-heavy utility investments in traditional generation assets, which guarantee a regulated rate of return for utility shareholders regardless of whether those investments represent the most cost-effective option for the public.
Official Responses and Stakeholder Perspectives
The release of the report has galvanized a broad coalition of community leaders, environmental advocates, and energy economists, who are calling on state regulators to intervene.
Sandy Bahr, Director of the Sierra Club’s Grand Canyon Chapter, pulled no punches regarding the public interest implications of the utility’s strategy:
"Building significant amounts of additional gas generation is just not in the public interest. High and volatile gas prices and the availability of lower-cost alternatives demonstrate that it is increasingly uneconomical to lock in fossil gas that degrades the environment by polluting the air and worsening climate impacts. The price is simply too high. Passing the Buck makes clear that ratepayers will remain on the hook unless the utility is required to protect its customers."
From an analytical standpoint, Elspeth McGarvey, Principal Associate for Synapse Energy Economics and author of the report, emphasized the structural policy changes needed to correct the imbalance:
"As it stands, APS has no real incentive to manage its fuel cost risks, enabling it to pass 100% of its fuel and purchased-power costs through to its customers. If the utility were simply required to share a portion of those fuel costs, it would encourage the utility to reduce reliance on fuel-dependent power plants, and encourage a transition to renewable energy."
The human and intergenerational cost of these decisions was underscored by local voices who see the long-term economic and environmental consequences taking shape in real-time. Shaela Patel, an Organizer representing Arizona AANHPI Advocates, shared her perspective as both a young resident and an APS ratepayer:
"As a student and APS ratepayer, to learn that the utility isn’t making choices that set us up for a clean energy transition is frustrating. The future, both preparing and planning for it, occupies almost every aspect of my mind. Imagining one that features a prolonged dependence on fossil fuels is unsettling, especially as we consider what rising rates will look like. I’ll still be covering the cost of APS’s added gas decades down the line."
Implications for Arizona’s Energy Future
The debate over APS’s resource portfolio and rate structure carries profound implications that extend far beyond the balance sheets of individual households.
1. Regulatory Accountability
The outcome of the current rate case before the Arizona Corporation Commission will serve as a bellwether for utility regulation in the American West. If the commission approves the 14% rate hike and institutes formula rates without demanding stricter fuel-risk management or accountability, it could embolden other utilities to double down on fossil fuel investments under the guise of grid reliability. Conversely, mandating a "fuel cost-sharing mechanism"—where utilities absorb a percentage of fuel price spikes—would fundamentally alter utility planning, forcing companies like APS to aggressively hedge against volatility by procuring fixed-price renewables and storage.
2. Environmental Justice and Public Health
Maricopa County’s designation as a non-attainment area for air quality means that every additional ton of nitrogen oxides and particulate matter emitted by new gas turbines carries a measurable cost in public health. Increased rates of asthma, cardiovascular disease, and lost work or school days disproportionately impact lower-income communities and communities of color situated near major industrial infrastructure.
3. Stranded Asset Risk and Climate Goals
Arizona has a legal and moral imperative to address climate change, particularly in a desert state experiencing severe warming and intensifying drought. By walking back zero-carbon targets and extending the operational lifespan of high-emitting assets like the Four Corners coal plant while building new gas infrastructure, APS is working counter to global decarbonization trajectories. If federal or state carbon regulations tighten in the coming years, the billions of dollars sunk into these new gas plants could become stranded assets—leaving ratepayers responsible for paying off equipment that can no longer legally or economically operate at capacity.
The Path Forward
As the regulatory proceedings continue, the findings of Passing the Buck provide consumer advocates with a detailed roadmap for reform. The message to APS, its shareholders, and state regulators is clear: the era of rubber-stamping fossil fuel expansion at the expense of everyday Arizonans must end. Protecting ratepayers requires aligning utility financial incentives with economic reality, prioritizing clean and resilient renewable resources, and ensuring that the true cost of energy production is borne not by captive families, but by the utility companies steering the ship.
