Wisconsin took a big step forward Friday for folks concerned about their rising We Energies bills.
“The Public Service Commission’s decision on data center power rates for We Energies signals that the PSC commissioners heard loud and clear that Wisconsinites have significant concerns about energy affordability and AI data centers. And that tech companies should clearly be paying their own way for the massive amounts of energy these hyperscale data centers need,” said Tom Content, CUB executive director.
The big changes made by the PSC stemmed from the fact that customers are fed up with price hikes and Wisconsinites became engaged and focused on supporting changes to this proposal in a way we don’t typically see. More than 2,000 people submitted comments or spoke at public hearings, and PSC commissioners said there was heightened attention on this case given the high stakes and outsized energy use by data centers.
“Customers of We Energies are in a much better spot as a result of these changes,” Content said. “We will be monitoring to see how this gets implemented and to check the math in future rate cases to ensure wealthy tech companies are paying their way.”
Because of the massive amount of energy AI data centers require, this case was unprecedented, and arguably the most significant case CUB has been involved in since Wisconsin created CUB in 1979. CUB is the nonpartisan, independent and nonprofit consumer advocate working on behalf of homeowners, renters and small businesses across the state. Support CUB’s work here.
The PSC’s message to utilities and tech companies was underscored by Commissioner Kristy Nieto’s comment that “existing Wisconsin customers should not pay a single cent to subsidize the service of data centers.”
CUB argued for changes to ensure customers would not be harmed. PSC Chair Summer Strand said changes were needed to do just that.
Here, at a glance, are some of the key changes the PSC commissioners made:
100% for power plants: Under one scenario proposed by We Energies, We Energies customers would have had to pick up one-fourth of the tab for new power plants being built to serve data centers. The Commission eliminated this option from the approved rates, requiring data centers to pay for 100% of all power plants built to serve them. We Energies is investing $8 billion in these projects, so that amounts to about $2 billion in savings.
Big power lines, too: We Energies, in its original proposal, would have required utility customers to pick up that tab for about $2 billion in new big power lines proposed by American Transmission Co. to serve the Port Washington and Racine County data centers. Commissioner Marcus Hawkins said it was now time to modernize how transmission costs are collected, noting that We Energies had assumed that “traditional status quo transmission cost allocation would be appropriate and reasonable.”
We Energies proposed a partial fix to the transmission cost problem recently as part of its rate case filing that also asked for a 14% price increase for residential customers over the next two years. In Friday’s ruling the PSC went further, implementing an immediate fix to make tech companies on the hook for most of these costs. But on this issue, as Hawkins noted, a second fix is still needed because ATC is the only transmission utility where existing customers pay for data center transmission lines during construction, before the data centers have started paying the bill.
The onus now is on ATC to protect customers in Madison, Janesville, Sheboygan, Green Bay, Fond du Lac and Michigan’s Upper Peninsula from facing higher costs for these projects. A proposal from ATC to the Federal Energy Regulatory Commission may be forthcoming.
Smaller data centers covered: We Energies proposed that its data center rate only apply to data centers of at least 500 megawatts. This would have meant smaller data centers (100-500 megawatts – still large enough to use as much energy as a mid-sized city — would have been on a rate plan that would have led to higher prices for everyone else. By way of comparison, Meta’s proposed data center in Beaver Dam, projected to use 220 megawatts, is an example of the kind of data center that would come under this. Power rates for the actual data center project in Beaver Dam will be decided soon, in a separate case filed by Alliant Energy of Madison.
Longer contract term: The PSC extended the contract term for agreements under the new We Energies tariff, requiring them to be 15 years instead of 10. Along with termination fees, this is designed to protect customers from being on the hook for power plants if tech companies’ business plans change suddenly.
Less costly power solutions: The PSC allowed data centers to be served bypower plants located outside eastern Wisconsin and Upper Michigan. That enables access, for example, to more cost-effective wind energy projects in windier areas such as Iowa and Minnesota. By the same token, tech companies will also be able to sign up for other more cost-effective options, such as power purchase agreements, demand response frameworks and virtual power plants. These less expensive options may also benefit other We Energies customers if more energy is needed to serve them.
Show your math: The PSC put in provisions to ensure that We Energies will have to report how much the tech companies are paying on a regular basis to allow PSC staff and CUB to analyze whether the pay-their-own-way framework is working as intended.
Financial protections: The PSC took steps consistent with other Midwest states to enhance the financial security provisions to protect customers in case the AI investment bubble bursts or in case business plans for AI companies suddenly change. CUB asked for stronger protections in this area so that all data centers would be required to provide financial security, but the action was a step forward.
Boost for energy efficiency: We Energies and the tech companies had proposed to pay in to the statewide Focus on Energy program, but the PSC took steps to ensure that would happen – and to ensure that homeowners, residents and businesses across the state will benefit from an estimated $20 million to $25 million that will be allocated to Focus on Energy in the years ahead.
Reliability concerns: The PSC appreciated testimony from CUB that flagged the potential for power outages or blackouts from data centers if they trip offline suddenly. While the PSC didn’t require the utility to do anything specifically in this case, the PSC recognized the importance of this issue – highlighted in a national industry publication last week – and said it would have other forums to tackle this.
We Energies and tech companies reacted positively to the ruling. Even with all these changes, this is still a very rewarding opportunity for the state’s largest utility and the data centers. The utility negotiated extra-high profit levels, between 10.5% and 11%, from tech companies for investment they make in power plants supplying electricity to data centers.
With that now in place, CUB this year will urgewtheurge the PSC to scale back reduce We Energies’ profit and not accept its request for even higher profit the utility’s request to receive a 9.9% return from the rest of its 1.1 million customers. After all, We Energies has the third highest power rates in the Midwest and has earned such high profits that its stock growth has outperformed the utilities and the S&P 500 over the past 25 years.
Check out CUB’s Active Cases page and Data Centers page to learn more.