Oracle this morning dropped its lawsuit against state monopoly utility regulators, in a significant win for Wisconsin and the We Energies customers represented by the Citizens Utility Board of Wisconsin.
“CUB is pleased that Oracle has dropped its suit. We were confident the PSC would win and that the consumer protection safeguards the CUB team sought would remain in place,” said Tom Content, the utility watchdog’s executive director.
Steve Kihm, CUB chief economist, identified significant risks in the technology area that raised the question of whether data centers would have trouble meeting their obligations in the long run.
CUB believes the safeguards the PSC established are critical to protect We Energies customers from the risks of tech companies overextending their borrowing, calling into question the long-run solvency of those 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
Whenever there are unrecovered utility costs a battle arises between the customers and utility investors as to who should pay. CUB pointed out that this is a false dilemma because there is another entity here — the tech company that owns and operates the data center. The tech company should be on the hook for all costs that serve the data center whether it hangs around for all of the decades that power plants built for it are in service.
We Energies also recognized this, too, proposing credit guarantees for data center customers that were not of what it believed to be of reasonable “credit quality.” Those that were not high quality would have to provide tangible credit support (sources of cash) that the utility could draw upon if the data center terminated operations.
But CUB found the utility’s shield to be porous, as it would allow weaker companies –including Oracle, given its current credit rating – to take service without the credit support. CUB objected, and made that clear to the PSC, and the regulator found our arguments compelling.
It didn’t take long for this issue to move from abstract conjecture to financial reality, and clearly that has become a widening concern with Oracle over the past six to eight months.
When credit rating agencies lowered Oracle’s bond rating, mere weeks after We Energies objected to the safeguards sought by CUB, in our mind it reinforced that state regulators did the right thing to protect customers from unnecessary risks.
And that was confirmed when the utility’s CEO told investors that WEC fully expected Oracle to comply with the credit security protections.
“This was no technicality. This was no unintended consequence,” Content said. “This was a key plank among the changes the CUB team sought to revamp the WEC data center pricing plan, in order to protect the We Energies customers we represent.”
In May, the PSC voted unanimously to overhaul the We Energies data center pricing plan, saying more safeguards were needed. At the time, Commissioner Kristy Nieto said non-data center customers should not have to pay “a single cent” for the massive energy and utility needs of data centers.
Looking for more information on data centers? Check out https://cubwi.org/data-centers/
Founded in 1979, CUB is the sole consumer advocate representing small businesses, homeowners and renters in proceedings involving Wisconsin’s monopoly utilities. CUB is an independent, nonpartisan nonprofit utility watchdog. More information is at https://cubwi.org.