Oracle files suit in county over PSC rate decision

Oracle America Cloud Services, a subsidiary of Oracle Corp., filed suit in Ozaukee County Circuit Court last week seeking a judicial review of the Public Service Commission of Wisconsin’s approval of a special electric rate for very large customers, such as data centers like the one being built on Port Washington’s north side.

The case, which has been assigned to Circuit Judge Sandy Williams, doesn’t seek a review of the entire PSC rate case decision but instead is asking for a review of financial security and credit requirements for customers seeking the so-called “very large customer tariff and bespoke resource tariff.”

The tariffs were put in place to protect other customers from paying for the investment in energy production required by these large users, the suit notes.

Oracle and OpenAI will be the tenants in Vantage’s Lighthouse Campus that’s currently under construction in Port Washington.

The $15 billion project is described in the lawsuit as “one of the largest private investments in Wisconsin history.”

Wisconsin Electric, which will provide power to the data center, sought the new rate structure to ensure that customers that use a significant amount of power would pay for the facilities needed to serve them, including new power generation infrastructure.

To qualify for this rate, a customer must meet financial security requirements.

In April, the PSC approved the new tax rate but changed credit rating requirements and removed Wisconsin Electric’s ability to waive the requirements at its discretion.

“The financial security/credit support requirements the commission ultimately approved will impose significant costs upon Oracle, which could exceed $100 million annually,” the lawsuit states — costs the company would not have incurred under the original rate plan submitted by We Energies.

The PSC agreement requires these large customers with credit ratings below A- to post financial guarantees to reduce the risk of shifting costs if they run into financial trouble.

“The commission’s modifications ... will make it logistically difficult for customers” to invest in these facilities,” the suit states, and that will deter firms from developing facilities in Wisconsin.

The suit also contends that the “magnitude of these costs are wholly disproportionate to the risks the financial support requirements are intended to mitigate.”

Oracle’s credit rating is BBB, which means it would have to provide cash deposits or a letter of credit that could cost the company $100 million annually under the PSC approved rate structure that it otherwise would not have had to pay, according to the lawsuit.

Oracle relied on We Energies’ original rate plan when making its investment in the Port data center, the suit notes.

In a petition asking the PSC to reconsider the credit rating requirements filed prior to the lawsuit, Oracle is described as having a “strong financial position.” It is one of the 20 largest companies in the world with an equity value of almost $600 billion, the petition states, and it holds about $40 billion in cash and cash equivalents, “which provides a significant buffer to protect creditors and counterparties like Wisconsin Electric and its customers.”

The lawsuit asks that the rate structure approved by the PSC be set aside and the matter remanded to the PSC with instructions to approve the initial proposal submitted by Wisconsin Electric.

The PSC did not have substantial evidence to support the change, the lawsuit states, and the changes are neither reasonable nor “needed to prevent harm” to the utility’s other customers.

The suit also claims that the PSC did not consider the “significant, adverse impacts that its modifications ... would have on Oracle or other similarly situated customers.”

The lawsuit was filed nine days after Wisconsin Electric Power Co., Vantage Data Centers and Cloverleaf Infrastructure petitioned the PSC to reconsider the credit rating requirements for data center developers. If the commission grants the petition and reopens the proceedings, the suit states, Oracle “intends to move to stay these judicial review proceedings” while the matter is being heard.

In its petition, Wisconsin Electric said some discretion is needed in determining the financial support requirements.

“There are situations in which highly creditworthy companies may not satisfy the tangible net worth or liquidity tests, but nonetheless present a relatively low default risk to Wisconsin Electric and its customers,”  it states, while in other cases the full financial support requirements are “necessary to protect customers.”

The PSC has 30 days to decide whether to grant the rehearing petition, according to the lawsuit.

Brendan Conway, a Wisconsin Electric spokesman, said, “We believe revisiting the financial support requirement issue will help ensure the policy meets the goal we all agree on: protecting customers while supporting jobs and economic growth in Wisconsin.

“The recent changes to these requirements add significant cost and remove flexibility, which could make it harder for companies to invest in Wisconsin.

“We understand concerns about very large customers, which is why this rate is designed so data centers pay the full cost of the infrastructure needed to serve them.”