Tech firm Oracle is suing Wisconsin’s Public Service Commission (PSC) in Ozaukee County Circuit Court, opening a new front in a fight over financial protections for Wisconsin ratepayers.
The June 19 lawsuit comes as Oracle and We Energies — the utility set to power the company’s planned data center in Port Washington — are asking the PSC to reconsider credit rating requirements for data center developers that could cost the company millions of dollars a year.
Oracle’s lawsuit seeks to accomplish the same ends through the courts.
The PSC approved We Energies’ “very large customer” rate structure in April, requiring the utility to exclusively bill data center customers for new energy generation infrastructure needed to serve them, among other protections for existing ratepayers. The agreement also requires data center developers with credit ratings below A- to post financial guarantees to reduce the risk of shifting costs to other customers if a developer runs into financial trouble.
Oracle currently holds a BBB credit rating — a tier below the PSC standard, but still considered investment-grade by ratings agencies — largely because of aggressive borrowing to finance new artificial intelligence infrastructure. Under the current rate structure, the Oracle subsidiary involved in the Port Washington project would need to provide cash deposits or letters of credit exceeding $100 million per year to receive service from We Energies.
“If the Commission does not reopen its decision on this issue, the implications for Wisconsin would be significant and limit the ability of numerous investment-grade companies to invest in Wisconsin,” the utility’s attorneys wrote in a June 10 request to reopen the case.
We Energies also contended that Oracle runs little risk of defaulting on its obligations.
“Tens of billions of dollars in Oracle’s value would need to be destroyed before creditors and counterparties, such as Wisconsin Electric and its other customers, could experience losses,” the utility’s attorneys wrote. Even in a bankruptcy, they added, generators built to serve data centers “will still have value and will be able to provide electricity to other customers.”
We Energies and Oracle asked the PSC to consider a stepped approach to security requirements that eases the burden on companies with “investment-grade” credit ratings, including BBB ratings, and to waive the Oracle subsidiary’s financial backing obligations.
In its lawsuit, Oracle asked the court to “set aside, reverse and remand” the credit rating limits in the PSC-approved agreement, arguing that the commission acted outside of its authority and without sufficient evidence to justify the rule. The company maintains that the A- bar isn’t “needed to prevent harm” to We Energies’ other customers or shareholders, and that the commission “failed to consider the significant, adverse impacts” of the requirement on Oracle.
Ratepayer advocates and clean energy groups support the PSC credit rating requirements, and some of the same groups are pushing back against Oracle’s efforts to reopen the issue.
“We believe that PSC did its job,” Clean Wisconsin spokesperson Amy Barrilleaux said. “It cannot leave all these other thousands of customers vulnerable.”
The company hired attorneys from the Madison office of law firm Husch Blackwell. One of those attorneys, David Zoppo, has previously represented investor-owned utilities before the PSC. Oracle’s attorneys did not immediately respond to requests for comment.
The credit rating dispute could shape future electrical service contracts between data center developers and utilities.
Northern States Power Company, a subsidiary of utility giant Xcel Energy that provides electrical service to parts of northwestern Wisconsin, asked the PSC on Monday for its own “very large” customer rate structure.
That proposal would set the credit rating bar at BBB-, the lowest investment-grade category. Potential data center customers below that threshold would need to provide additional financial guarantees.
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