Wisconsin’s utility regulators are staunchly defending a new rule requiring strong financial guarantees for data center developers in the face of a legal challenge brought by tech giant Oracle, which is developing a $15 billion artificial intelligence data center campus in Port Washington alongside OpenAI and Vantage.
The Public Service Commission July 10 submitted a response to the Texas-based tech company’s lawsuit in Ozaukee County Circuit Court, rebutting Oracle’s objection to the financial guarantee rule, which requires all companies with a credit rating below A- to post guarantees in the form of cash or lines of credit.
Oracle’s credit rating is at the center of the legal fight.
Because it falls below the PSC’s threshold, the company will have to post collateral to the tune of $100 million annually, according to the company’s complaint.
When Oracle filed its lawsuit on June 19, the company held a BBB credit rating – considered investment grade but below the commission’s threshold – largely because of debt raised to finance AI data center projects across the U.S.
But just one day before the PSC filed its response, Oracle’s rating with a major credit rating agency dropped to BBB- at the bottom level of the S&P Global Rating’s investment-grade tier. If the rating falls further, it will land in a tier defined by “significant speculative characteristics,” signaling higher investment risk.
The company’s legal team argued the new rule was added to the rate structure improperly based on evidence excluded from the formal record.
The Public Service Commission’s response called the complaint a “red herring” that “obfuscates the true nature” of Oracle’s lawsuit: to exempt itself from oversight in data center-related dealings with We Energies.
“[Oracle] asks this Court to overturn over one-hundred years of established caselaw and allow it to dictate one-off preferential terms of service with the utility, bypassing Commission oversight altogether,” the response said.
The new credit rule seeks to hold data centers responsible for their immense energy needs and protects other electric customers from higher costs, according to the commission.
It asked the court to dismiss Oracle’s lawsuit.
We Energies asked the commission in June to loosen credit standards and allow it to waive requirements for tech companies below the threshold it deemed otherwise creditworthy, subject to commission approval. Oracle joined in support.
Commissioners refused to rehash the rule, letting the petition expire on July 10.
Several other groups have submitted statements to the court on Oracle’s lawsuit.
On July 13, the Citizens Utility Board of Wisconsin, which represents residential and small business electric customers, joined the Public Service Commission in asking for dismissal.
“If a data center customer suffers financial distress and proves unable to pay those billions of dollars, WEPCO – and potentially all its other customers – will be left holding the bag,” CUB wrote. “The financial security requirements are intended to protect against that risk.”
Clean Wisconsin also filed a statement July 13 in support of upholding the credit rating rule.
We Energies filed a statement July 9 in support of Oracle based on its petition.
Oracle could not be reached for comment on July 16.
Contact Claudia Levens at clevens@usatodayco.com. Follow her on X at @levensc13.
Francesca Pica can be reached at fpica@usatodayco.com.
This article originally appeared on Milwaukee Journal Sentinel: PSC rebuts Oracle’s objection to data center credit rating rule
Reporting by Claudia Levens and Francesca Pica, Milwaukee Journal Sentinel / Milwaukee Journal Sentinel
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By Claudia Levens and Francesca Pica, Milwaukee Journal Sentinel | USA TODAY Network
