EDITORIAL: Perilous times in the electric world

It’s a mad rush. Companies are racing to start feeding the insatiable appetite of artificial intelligence from hyperscale data centers in Wisconsin. 

In a relatively short time, at least seven are expected to be operating in the state. The biggest of all will be in Port Washington and folks here are seeing firsthand what data center urgency looks like—massing of earth-moving and construction equipment on the scale of a military operation, around-the-clock work in a brilliantly-lit thousand-acre theater, country roads backed up with truck traffic, workers arriving daily to populate a construction workforce of more than 4,000.

Wisconsin is not ready for the Port Washington data center alone, much less the others that will soon be in operation. It doesn’t have enough of the raw material essential for the data center product—electricity.

The Oracle/OpenAI data center in Port Washington and the Microsoft data center in Mount Pleasant together are forecast to require more electricity than all of the homes in Wisconsin combined.

Residents of Ozaukee and Washington counties who may be in thepath of the high-voltage power lines needed to bring electricity to the Port data center from wherever it can be found are already feeling the direct impact of artificial intelligence’s demands for electric power, but soon every Wisconsinite will be feeling it.

The state’s largest electric utility, We Energies, is gearing up to generate gigawatts of additional electricity for data centers, and its shareholders are delighted. As a regulated monopoly, the company is guaranteed a 9.98% profit on the enormous investment it is about to make.

Wisconsin ratepayers are already burdened with electricity bills inflated to bail We Energies out of costly mistakes. Customers are being charged for the debt on power plants that have been or will be shut down plus the profit margin on those failed investments. The total remaining debt on what are euphemistically known in the power-plant world a “stranded assets” is hovering around $1 billion.

A substantial part of that burden derives from the massive coal-fired power plant in Oak Creek, which will be completely shut down in 2026. It was a dubious decision several decades ago, about the same time the Port Washington plant was converted from coal to natural gas, to invest heavily in increased coal-burning capacity at Oak Creek. Then in 2011, We Energies doubled down on that mistake and invested another $1 billion in ratepayer dollars in the plant even as the cost of coal-based technology was rising to comply with environmental regulations imposed on the dirty fuel.

Debt of hundreds of millions of dollars will remain on the shuttered Oak Creek plant and will be billed to customers plus the nearly 10% profit guaranteed to its owner.

As new power-generating capacity is built to meet the data-center surge, it is likely more existing power plants will be replaced, with ratepayers stuck with paying off old debt-plus-profit along with the cost of the new power sources.

These are perilous times for Wisconsin electricity customers and they need better protection than they are getting from the long-standing arrangement of the Public Service Commission with three members appointed by the governor as essentially the sole check on utility charges.

The unprecedented data-center impact on electric power sources demands a bigger regulatory role for elected state government. Gov. Tony Evers and several Wisconsin legislators have tried to start that process but without success. Two Republican state senators introduced a bill to allow the PSC to require utilities to use a financial process call securitization to exempt debt on stranded assets from the guaranteed profit margin. The bill did not get a hearing.

Evers put a requirement for limiting profit on debt related to out-of-service utility assets in the 2025-27 budget, but the Joint Finance Committee erased it.

Republican legislators also showed their disdain for enhanced utility regulation by removing an outspoken consumer advocate and clean energy supporter from the PSC when it refused to ratify the governor’s reappointment of Tyler Huebner. 

The demands of data centers for electric power are unique; no other type of industrial operation, no matter how huge, comes close to their power consumption. Regulations specific to data centers are needed.

Requiring data centers to provide all of their power needs by building their own generating sources is an attractive idea that is not likely to be palatable to Wisconsin legislators or those of any state. As was evident from the support of the Port Washington data center by the Evers administration and the Legislature, which passed a bill to specifically enable tax incremental financing for the development, states want data centers, and the self-powered requirement would scare them away.

A more practical solution is to require data centers to pay the cost of new wind, solar and gas power sources equal to their power usage, subject to stringent clean energy requirements.

A priority need in Wisconsin is protecting ratepayers from electric bills being padded to compensate utilities for the profits lost on abandoned power plants. If the artificial intelligence boom ever goes bust and data centers go dark, a lot of those stranded assets are going to be left on utility company books.