Oracle may pay over $100M a year to secure Wisconsin data center power

Oracle could incur more than $100 million in annual financing costs to back power commitments for a nearly 1 gigawatt data center campus planned in Port Washington, Wisconsin with Vantage and OpenAI. The cost stems from a Wisconsin regulatory decision on utility tariff terms that the state’s Public Service Commission says is meant to protect existing electricity customers and make large data center energy demands more transparent.

The campus, called Lighthouse Campus, is supported by local utility We Energies. The total project cost was not disclosed, but the power requirement puts it among the larger AI infrastructure developments now testing whether utilities, regulators and cloud providers can allocate grid costs without pushing them onto other ratepayers.

The Public Service Commission of Wisconsin told the Financial Times it had “declined to take action” on a petition seeking to reopen or reverse an earlier decision. In April, the commission reviewed We Energies’ request for Very Large Customer and Bespoke Resources Tariff treatment connected to the data center. One change to the tariff was designed, according to the commission language, to address the risk that transmission costs tied to data center users could be shifted to existing customers.

Oracle said in an affidavit supporting the rehearing petition that the current requirements would force it to provide financial security through either a cash deposit or a letter of credit. Based on its projections, Oracle said it could ultimately need to post more than $7 billion in financial security, likely through a letter of credit, with annual costs that could exceed $100 million.

The dispute is less about whether Oracle pays for power and more about the form and size of the guarantee. To qualify for an exemption under the tariff, Oracle would need to satisfy several tests, including credit ratings of at least A- from S&P and A3 from Moody’s. At the time of the commission’s decision, S&P rated Oracle BBB. S&P later cut the rating to BBB- earlier this month.

S&P tied part of its concern to Oracle’s exposure to OpenAI. The ratings firm estimated that OpenAI accounts for roughly half of Oracle’s $638 billion in remaining performance obligations. S&P said OpenAI’s ability to meet its commitments and raise outside capital depends on continued AI demand and its models staying market-leading. If OpenAI could not pay Oracle, S&P said Oracle could be left with large data center leases it may struggle to exit or would need to re-lease on worse terms.

Oracle said in its affidavit that it had expanded its committed credit line to $10 billion, supplied by a bank group that includes Bank of America and JPMorgan Chase. An Oracle spokesperson said the company remains committed to covering its full share of energy costs and supplying guarantees so Wisconsin ratepayers are not exposed. The spokesperson said We Energies’ proposal provides collateral equal to 100% of Oracle’s contractual obligations and uses a mix of collateral sources supported by Oracle’s credit standing.

The spokesperson also said the Port Washington project is being developed with the community and would create thousands of jobs, support local businesses and drive long-term economic growth in Wisconsin. Oracle did not disclose in the statement the expected cost of the campus or the specific amount of power-related collateral it believes would be commercially workable.

Oracle’s AI infrastructure push has already changed its financial profile. Its valuation rose in September last year after it disclosed $455 billion in remaining performance obligations, of which $300 billion was later identified as tied to OpenAI. Since then, Oracle has raised debt to fund data center construction and has been generating negative free cash flow. S&P said Oracle’s capex guidance for fiscal 2027, which began in June, increased to between $90 billion and $95 billion from a prior forecast of $60 billion. For the same period, S&P now forecasts negative free operating cash flow of $42 billion, compared with its earlier estimate of negative $24 billion.

This story draws on original reporting from The Register.