On June 19, Oracle representatives walked into the Ozaukee County, Wisconsin courthouse and asked a judge to strike down part of the deal that will power its largest data center.
The filing challenges the May order that sets the terms on which We Energies will serve the roughly one-gigawatt campus going up in Port Washington for the Oracle and OpenAI Stargate partnership. That campus will be the largest data center project in the state’s history, and the financial protections Oracle wants gone are the ones regulators attached to it before letting the deal through.
Those protections come down to two letters. When the Wisconsin Public Service Commission approved We Energies’ new “very large customer” tariff, it required any data center with an S&P rating below A- or a Moody’s rating below A3 to post collateral before taking service: either in cash, a letter of credit, or a guarantee.
That’s stricter than We Energies had initially angled for — and Oracle is the one having to bear the difference. Oracle’s S&P rating is BBB after borrowing heavily to build its AI infrastructure, one notch under the new line. The hyperscaler said that clearing the state’s requirement could mean posting security of more than $100 million a year, against a collateral pool of over $7 billion.
An Oracle vice president called it “one of the most stringent, if not the most stringent,” tariffs she had seen.
But is it really so unusual? Latitude Intelligence tracks the collateral terms in large-load and data center tariffs across the country, and Wisconsin’s does not sit at the top of the list. According to our analysis, a 1-GW project in Santee Cooper in South Carolina would owe as much as 180 months of minimum bills, totaling over $8.5 billion. Florida Power and Light, Dominion, and a cluster of Midwestern utilities are all close behind.
Wisconsin’s We Energies is high, but certainly not the high-water mark.
Meanwhile, the A-/A3 line is not something Wisconsin invented. The commission adopted it because Indiana and Ohio already used it, and because both Microsoft and the Citizens Utility Board pointed regulators to those two states as a reasonable model to follow.
And Indiana Michigan Power, a subsidiary of AEP, set that same bar in a large-load settlement that Oracle’s peers Amazon, Google, and Microsoft all signed.
In other words, Oracle is suing over a threshold its largest competitors accepted elsewhere, and that one of them recommended here.
What the collateral is really pricing
What is more unusual, however, is what Wisconsin’s collateral is pegged to.
Most utilities size the security off the customer’s bill, taking some months or years of minimum charges as insurance against unpaid invoices; Evergy in Kansas, for example, requires two years of minimum monthly bills up front.
But We Energies instead sizes collateral off the net book value of the power plants and dedicated lines built to serve the customer. That’s why Oracle’s Wisconsin collateral would be $7 billion, while in another utility territory it would land closer to $1 billion. Wisconsin is not pricing the risk that Oracle stops paying a bill; it is pricing the risk that Oracle walks away from its fleet of power plants altogether, leaving everyone else to absorb them.
That risk is the one the PSC returned to again and again. It rejected a cheaper “capacity-only” option because the share left to other customers could become stranded assets, paid for by ratepayers. It required a 15-year term and a minimum billing charge for the same reason.
Oracle’s own affidavit, the one calling the rule the most stringent its author has seen, concedes the real point. It grants that Indiana, Michigan, and Ohio have comparable tariffs, then argues Wisconsin is different because it ties security to the book value of generation. That distinction is correct. It is also the most defensible part of the rule, because the book value is what the stranded asset would actually cost.
Complicating matters further is a second requirement that other utilities don’t impose. We Energies pairs the A-/A3 rating test with a tangible net worth test, so securing a full waiver requires not only the rating but also either twice the security in net worth or ten times it in liquidity. That is why Oracle, even if the company could get its rating up, is balking at the terms in Wisconsin, where every other A-/A3 utility stops at the rating.
A sequencing fight
There’s a different case that Oracle could be making, however. By striking the waiver, the commission closed the channel most regimes leave open, where a utility can vouch for a creditworthy customer and ask regulators to ease the requirement. Oracle’s more defensible complaint is not about fairness, but about process: not that the bar is too high, but that Wisconsin took away the room to make its case for relief.
For now, though, none of this is being argued in a courtroom. Oracle has offered to drop the lawsuit if the PSC simply reopens the case, and the commission has thirty days to decide whether it will. The suit is less a bid to win before a judge than a race against the clock. In theory, this is a way to pressure the commission back to the table while We Energies, Vantage, and Cloverleaf press the same request through a rehearing petition. Each commissioner is reviewing that petition now, and the PSC has declined to comment while it does.
Wisconsin’s is the only fight that happens to have a lawsuit attached. The same threshold call is being made across the country, but not always the same way. The Monday after Oracle sued, Northern States Power, an Xcel subsidiary, asked the PSC for its own very-large-customer tariff with the credit line set at BBB-, below We Energies’ bar. Every regulator standing one of these up for the first time is making the same call and landing somewhere different, while the answers converge on a single principle, that the customer, not the ratepayer, carries the risk.
Whether Oracle wins is almost beside the point. It may well get its rehearing; the PSC has not said whether it will reopen the case, and the terms it is fighting are stronger than its filing lets on.
The more interesting question, however, is what the lawsuit is really testing: whether a regulator setting up one of these tariffs for the first time should start strict and loosen as it learns, or start flexible and risk being talked out of the protections entirely later on. Wisconsin started strict. We shall see whether it holds.
