Make Oracle ante up

What in the world is Oracle doing in an Ozaukee County courtroom?

The short answer is that the giant information technology company has sent its lawyers to the Ozaukee County Circuit Court in an attempt to dodge a regulation enacted to protect Wisconsin electric ratepayers.

The context is that Oracle will soon be operating data centers on one of the largest data-center campuses in the country, which happens to be located about three miles away from that Ozaukee County Justice Center courtroom.

Oracle’s massive buildings are rising on the north side of Port Washington at a time when the mood of the public has turned sharply against data centers with backing from local and state governments, which helps explain Oracle’s court fight here.

A Gallup poll taken in May found that 71% of Americans would oppose data centers being built in their areas. Another poll found that more than half of the population supports a national ban on data centers.

The opposition is fueled by a grass-roots uprising against data centers’ harmful impact on the environment and community aesthetics, resistance to what is widely viewed as an unchecked technology juggernaut and fears that data centers’ insatiable hunger for electric power will inflate the cost of electricity for homeowners.

A number of states and cities have responded to the anti-data center surge by enacting restrictions or moratoriums. In Wisconsin, the Public Service Commission, the state’s utility regulating agency, made a decisive move to protect electric ratepayers by requiring data-center operators that use an extremely large wattage of electric power and fail to meet specified credit standards to put money in escrow as a guarantee against default.

The rule issued by the PSC makes a direct hit on Oracle and its Port Washington data centers. Oracle responded by suing the PSC in Ozaukee Circuit Court to overturn the rule.

For Oracle, the requirement to put up a guarantee that would likely be around $100 million is an inconvenience. For the people of Wisconsin, it’s a necessary protection from one of the risks that accompany the data-center boom in the state, particularly in the case of the outsized Port Washington campus.

Powering the data centers Oracle will operate in partnership with Open AI in Port Washington will require an enormous investment in electrical infrastructure. Under an agreement with We Energies, Oracle is supposed to pay for it, but if the company’s Port Washington operation should fail, that burden could fall on other ratepayers.

To prevent that outcome, the PSC is requiring data center operators with a credit rating lower than A-minus to post a guarantee. Oracle’s rating is BBB-minus, one digit above the rating given to highly speculative investments like junk bonds.

For Oracle, which is valued at $342 billion, the money put in escrow would be pocket change. The company is profitable, but its low credit rating reflects the enormous debt it has taken on to cash in on the artificial intelligence tsunami.

S&P Global Ratings explained that if the relationship with Open AI didn’t work out as planned, Oracle could be left with “massive” unfulfilled data center leases.

The idea that the AI bubble might somehow burst, or that accelerating technology could render today’s data centers obsolete, leaving vacant buildings in their wake, adds to the resistance movement. In the past 18 months, 65 state and city restrictions on data centers have been enacted. At least half of the data centers planned for 2026 in the U.S. have been canceled or delayed.

The backlash comes too late to affect the data-center development here, even though, ironically, Port Washington’s experience was a factor in causing it. The story of a sprawling data-center campus taking over more than 1,000 acres of farm and residential land beside a scenic small town in Wisconsin resonated nationwide as evidence of the collateral damage that comes with the AI phenomenon.

The people of Port Washington and their Ozaukee County neighbors will have to endure the ongoing nuisance of the monumental construction project and then the operation of the data centers for years before it is known if the tax windfall and other benefits promised by the City of Port Washington mayor and Common Council members who made the mistake of inviting the data centers here will ever appear.

They should not have to also worry about skyrocketing electric bills caused by data centers’ extravagant power demands. Oracle’s lawsuit should be dismissed and the PSC should enforce the cash guarantee rule.