Oracle Sues Wisconsin Regulators Over Data Center Financing Rules
Tech giant says PSC’s strict financial requirements could push its $15 billion Port Washington project elsewhere.
This is an aerial rendering of what the planned data center campus in Port Washington could look like. Source: City of Port Washington
Tech giant Oracle is suing the Public Service Commission of Wisconsin over financial requirements for data centers as work is underway on its $15 billion campus in Port Washington.
The tech giant’s subsidiary filed the lawsuit Friday in Ozaukee County Circuit Court. Milwaukee-based utility We Energies, Vantage Data Centers and Cloverleaf Infrastructure are separately asking the PSC to revisit financial requirements regulators approved in April to protect ratepayers.
Oracle is asking a judge to reverse the commission’s financial provisions and order the PSC to approve financial support requirements proposed by We Energies. Oracle’s subsidiary said it could spend more than $100 million each year under the decision by utility regulators.
“The Commission’s modifications to Wisconsin Electric’s proposed Financial Support Requirements will create harmful and unintended consequences that will force significant investment outside of Wisconsin. The cost of posting the required security will deter investment in the state from many firms, who will likely pursue opportunities in other jurisdictions,” the filing states.
A PSC spokesperson said the commission doesn’t comment on pending litigation, and each commissioner is reviewing the petition filed by We Energies and others.
Oracle said it would hold off on court proceedings if Wisconsin utility regulators revisit the decision.
The PSC approved the utility’s proposed “very large customer” rate in April, but it removed the ability of We Energies to waive financial support requirements and strengthened them. The PSC required an A- credit rating from Standard & Poor’s or A3 rating from Moody’s, which considers companies at low risk of default.
Oracle currently has a BBB credit rating, which is an investment-grade rating below the PSC requirement. Under the changes, Oracle’s subsidiary would be required to post a letter of credit or cash deposit at what it called a “substantial and unreasonable” cost.
Julia Robin, vice president of infrastructure capacity and sourcing for Oracle, said only a handful of companies worldwide could meet the requirements in an affidavit submitted in support of We Energies’ petition.
“The Commission’s decision imposes one of the most stringent—if not the most stringent—credit support requirements I have seen,” Robin said. “Even tariffs that regulators recently approved in Indiana, Michigan, and Ohio do not impose inflexible mandates for customers to post cash deposits or letters of credit equivalent to the net book value of generation assets built to serve them.”
The Citizens Utility Board said in a filing to the commission that tightening the financial security requirement was a “reasonable approach” to protect customers, saying commissions in Ohio and Indiana have adopted an A- credit rating.
Tom Content, CUB’s executive director, highlighted fears of an AI bubble as companies invest trillions of dollars to develop data centers. He pointed to testimony filed by one of its experts that highlighted a Vanderbilt University paper that underscored Oracle’s high debt load and credit rating just above junk status.
“If a company is running short on cash, that’s going to be the one of the hardest times for them to do more borrowing, and so that’s why we wanted a sign of somewhat stronger financial strength than what was being proposed,” Content said.
CUB’s expert also noted that the failed energy and commodities firm Enron had an investment-grade rating four days before the company filed for bankruptcy protection.
Oracle has said the company is willing to post a letter of credit of $700 million or 10 percent of the PSC’s financial requirement. The company is partnering to build its massive multi-billion-dollar Lighthouse campus in Port Washington.
We Energies has previously said the commission’s changes would “add significant costs and remove flexibility” and its rate was designed so data centers pay the full cost of infrastructure to serve them.
Environmental group Clean Wisconsin recently urged regulators to reject the petition filed by We Energies and others to reopen its data center rate case. Amy Barrilleaux, the group’s communications director, said the PSC acted well within its authority to impose collateral and credit rating requirements on tech companies.
“This helps shield all those other customers from the risks associated with these enormous energy users,” Barrilleaux said. “We Energies says it’s going to double its electricity generation capacity in just the next five years as AI data centers come online. That is something unlike anything we’ve ever seen.”
Oracle argues the PSC did not have substantial evidence to support its decision and acted outside authority granted by the Legislature. The company said regulators misinterpreted the law and unlawfully exercised their discretion.
Oracle sues Wisconsin utility regulators over financial requirements for data centers was originally published by Wisconsin Public Radio.
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