Port data center operator drops PSC lawsuit

Oracle America Cloud Services on Monday abruptly filed a motion in Ozaukee County Circuit Court to end its quest for judicial review of the Wisconsin Public Service Commission’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.

Oracle wasn’t seeking a review of the entire PSC rate case decision, just the financial security and credit requirements for customers seeking the so-called “very large customer tariff and bespoke resource tariff.”

These requirements, the tech giant said, could cost the company $100 million annually because it does not meet credit rating requirements outlined in them.

The motion to dismiss the case does not list a reason, and a call to Oracle’s attorney was not returned.

In a statement, the PSC said it is “pleased with this request and stands firmly behind its final decision, which ensures strong financial guardrails to protect customers now and in the future.”

Oracle and OpenAI will be the tenants at the $15 billion Vantage Data Centers Lighthouse Campus in Port currently under development.

The tariffs put into place at the request of We Energies this year are intended to protect other customers from paying for the investment in energy production required by these large users.

The utility’s proposal called for additional financial requirements if a large user’s credit rating from Standard and Poors was BBB, and it also allowed the utility to waive the requirements. The PSC decision tightened that by increasing the credit rating requirement to a score of A- and eliminated the utility’s ability to easily waive the requirements.

In its lawsuit, Oracle challenged a requirement that companies  that fail to meet the standards would have to post financial guarantees to reduce the risk of shifting costs if they run into financial trouble.

Oracle’s credit rating was BBB at the time, and it has since fallen to BBB-.

These additional costs “are wholly disproportionate to the risks the financial support requirements are intended to mitigate,” according to Oracle’s lawsuit.

But in its response to the suit, the PSC reiterated that the standards it approved are needed to ensure the proposed rate structure for large electrical users are “just and reasonable and did not subject non-participating customers ... to harm or increased risk.”

Oracle claimed that the requirements were not based on substantial evidence, but the PSC called that a “red herring.”

“This is inaccurate and obfuscates the true nature of the petitioner’s complaint, which is that it wants its dealings with Wisconsin Electric Power Co. exempted from commission scrutiny all together,” according to the response.

Citizens Utility Board, a utility watchdog group that sought to weigh in on the case, said in a statement that it is pleased Oracle is dropping the lawsuit.

“We were confident the PSC would win and that the consumer protection safeguards the CUB team sought would remain in place,” Executive Director Tom Content said.

The statement noted that CUB believes the safeguards established by the PSC “are critical to protect We Energies customers from the risk of tech companies overextending their borrowing, calling into question the long-run solvency of these companies.

“The risk is that after the utility builds facilities to serve a data center’s intensive energy needs, at some point prior to the utility collecting all those costs, the data center would close.”

At that point, there is typically a debate about whether investors or customers over should pay, but CUB said the tech company “should be on the hook for all costs that serve the data center, whether it hangs around for all the decades that power plants built for it are in service.”

It also noted that the fact Oracle’s credit rating fell not long after the lawsuit was filed “reinforced that state regulators did the right thing to protect customers from unnecessary risks.”