‘Very Large Customer’ tariff may cost Oracle $7 billion

Bay Area tech giant Oracle may have to pay billions to a Wisconsin utilities company over a massive data center campus being built in partnership with OpenAI.

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In April, the Public Service Commission of Wisconsin set by its largest utility provider, We Energies. The rules, meant to protect utility customers from rising costs amid a nationwide boom in controversial data center construction, require large energy consumers to post collateral if their credit rating is too low.

The new tariffs are now hitting Oracle following S&P Global’s downgrade of the company’s credit rating on July 9 over its artificial intelligence ventures, describing them as “increasing its overall credit risk.” Julia Robin, the company’s vice president of infrastructure capacity and sourcing, argued in a  that the new rules would require Oracle to pay over $7 billion in collateral, or more than $100 million annual payments. 

“Oracle is a safe and reliable business partner for Wisconsin Electric and its ratepayers, and believes the Commission can achieve its objective of protecting those ratepayers without imposing these unnecessary security costs on Oracle,” Robin wrote in a court filing advocating for changes to the tariffs. Oracle did not respond to a request for comment.

The data center at the center of the issue is part of the Stargate Project, a $500 billion AI infrastructure initiative led by OpenAI. Oracle and OpenAI have already built two Stargate projects together in Texas and New Mexico under their own roughly $300 billion partnership, with the Wisconsin project being the latest development in the building spree. Known as the Lighthouse campus, the sprawling project outside Milwaukee would cover around 672 acres with four large data centers. 

Last month, Oracle petitioned to strike a rule state regulators added to the tariffs that prevents We Energies from waiving the company’s requirement to pay the massive security, according to the Financial Times. Though Robin called the money owed “onerous” in the court filing and that it risked “potentially discouraging future investment in Wisconsin,” the Public Service Commission declined to take action on the petition, the outlet reported.

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In April, Badger State regulators announced several other revisions to the proposal making it easier to apply the rules to more data centers. Revisions include lowering the minimum energy threshold to qualify as a Very Large Customer from 500 megawatts to 100 megawatts, striking an exemption that would have allowed data centers to only pay for three-quarters of their energy costs, and extending the length of the tariff from 10 to 15 years.

, Commissioner Kristy Nieto defended the changes. “We need to do everything within our jurisdiction to make sure data center customers will pay their own way, fully and transparently, and other customers will be held harmless,” she said. 

Work at Oracle and want to talk? Contact tech reporter Matthew Brown securely at [email protected] or on Signal at matthewbrownsfgate.11.