This story was originally published on Utility Dive. To receive daily news and insights, subscribe to our free daily Utility Dive newsletter.
Arizona Public Service Co. and Salt River Project will buy capacity on Transwestern Pipeline’s just-announced Desert Southwest expansion project, which aims to deliver natural gas from the Permian Basin in Texas to Arizona, the utilities said Wednesday.
APS, the project’s anchor customer, will use gas from the pipeline for gas-fired power plants that will support planned data centers in the utility’s service territory, said Ted Geisler, chairman, president and CEO of Pinnacle West Capital Corp., APS’ parent company, during a Wednesday earnings call.
Two Fortis utilities — Tucson Electric Power and UniSource Energy Services — and the City of Mesa, Arizona, are finalizing negotiations with Transwestern, an Energy Transfer unit, according to the utilities.
All existing interstate gas pipelines serving Arizona are fully subscribed, according to the utilities.
Transwestern owns a 2,590-mile gas pipeline that can deliver 0.9 billion cubic feet a day from southwest Texas to Arizona. APS, SRP and TEP buy gas that is delivered on the pipeline.
Transwestern plans to spend about $5.3 billion to expand its system by building 516 miles of 42-inch pipeline and adding compressor stations in Arizona, New Mexico and Texas, Energy Transfer said Wednesday. The project would add 1.5 Bcf/day of capacity to the Transwestern system, according to the company. Energy Transfer aims to complete its project by late 2029.
Energy Transfer said it will launch an open season this quarter and expects the remaining capacity on the pipeline expansion to be fully subscribed. Depending on the results of the open season, the project could be expanded, the Dallas-based oil and gas infrastructure company said. Transwestern is considering more than doubling the pipeline’s capacity by using 46-inch pipe, Marshall McCrea, co-CEO of Energy Transfer, said Wednesday during an earnings conference call.
APS expects to spend $7.3 billion over 25 years buying gas on Transwestern’s expansion project, Pinnacle West said in a filing with the U.S. Securities and Exchange Commission.
The Phoenix-based utility plans to bring power plants online when the pipeline project begins operating, according to Geisler. APS’ contract with Transwestern is flexible so the utility can buy more gas if it needs it, he said.
APS has close to 4.5 GW of committed, high load customer demand, mainly data centers and some manufacturing, in its interconnection queue, with an additional 20 GW of uncommitted, potential large load customers, Geisler said.