Wisconsin’s Public Service Commission (PSC) has no plans to reconsider We Energies’ request to loosen credit rating rules for data center developers.
The commission voted in April to require data center developers with below-threshold credit ratings to provide financial guarantees before receiving electric service from We Energies. Ratepayer advocates say the requirement shields other customers from financial risk if a data center operator can’t afford to pay for infrastructure built on its behalf.
That requirement could cost tech giant Oracle, the co-developer of a Port Washington data center campus, over $100 million per year. We Energies asked the PSC to reconsider the rule last month, arguing that the added cost could dissuade other companies from operating in Wisconsin.
The three-member commission has until Friday to act on the request. The commissioners did not include the request on Thursday’s meeting agenda, and, as of Thursday evening, had not scheduled a Friday meeting to consider it. State law requires the commission to notify the public of scheduled meetings at least 24 hours in advance.
The PSC will instead defend the credit rating requirements in Ozaukee County Circuit Court, where Oracle sued the agency last month.
Guardrails
Commissioners approved the credit rating rules as one of several guardrails in We Energies’ new “very large customer” rate structure to prevent cost shifts from data center developers to the utility’s other customers.
The new rate structure requires We Energies to bill data center customers alone for power plants built to serve them. A single power plant can cost hundreds of millions of dollars — or, in the case of the proposed Red Oak Ridge plant in the town of Paris, more than a billion dollars. If a data center developer goes bankrupt, We Energies’ other customers could be on the hook for any remaining costs tied to the power plants.
With that worst-case scenario in mind, the PSC set a credit rating threshold for data center developers seeking We Energies electric service. Credit ratings measure a company’s financial health and likelihood of repaying debts on time. Developers with credit ratings below A- must provide financial guarantees to receive service. Those financial guarantees would help cover costs if a developer runs into financial trouble.
Wisconsin’s Citizens Utility Board and other ratepayer advocacy groups supported the “belt-and-suspender” approach to protecting smaller customers.
Exemption sought for Oracle
Oracle, a Texas-based cloud computing giant, currently holds a BBB credit rating — a tier below the A- threshold but still considered investment-grade by ratings agencies. The company’s aggressive borrowing in support of its artificial intelligence ventures pushed Oracle’s debt-to-equity ratio above 400% as of May, and its stock price has tumbled more than $50 in the past month alone.
The PSC-approved rate structure would require the Oracle subsidiary involved in the Port Washington project to provide more than $100 million a year in cash deposits or letters of credit to receive We Energies service.
“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,” We Energies wrote in its June 10 request that the PSC reconsider the credit rating rules.
The utility urged the commission to exempt companies with “investment-grade” credit ratings, including BBB ratings, and to waive the Oracle subsidiary’s financial backing requirements.
We Energies maintains that concerns about Oracle’s credit-worthiness are misplaced.
“In practical terms, tens of billions of dollars in Oracle’s value would need to be destroyed before creditors or counterparties, such as Wisconsin Electric and its other customers, could experience losses,” the utility’s attorneys wrote in their petition.
Friday’s deadline is the commission’s last chance to act on the request, but We Energies doesn’t expect any last-minute action.
“We are disappointed the commission chose not to revisit the financial support requirements under our Very Large Customer rate,” We Energies spokesperson Brendan Conway wrote in an email to Wisconsin Watch on Thursday. “We believe updating the financial support requirements will help ensure the policy meets the goal we all agree on: protecting customers while supporting jobs and economic growth in Wisconsin.
The environmental advocacy group Clean Wisconsin, on the other hand, applauded the commissioners.
“The Public Service Commission did the right thing when it created this special rate structure for AI data centers, and it’s doing the right thing now by rejecting the petition,” Brett Korte, the nonprofit’s attorney, wrote in a Thursday press release. “This is about protecting We Energies’ other customers — families, small businesses, schools, manufacturers — and shielding them from the risks associated with these enormous energy users.”
Oracle is asking the Ozaukee County Circuit Court to intervene.
In its June 19 lawsuit, the company argues the commission acted outside its authority and without sufficient evidence to justify the rule. Oracle also maintains that the A- threshold isn’t “needed to prevent harm” to We Energies’ other customers or shareholders.
