A Wisconsin ratepayer advocacy group says We Energies’ proposed “very large customer” rate for data centers could shield other customers from cost increases, though it’s calling for several changes to the plan.
Citizens Utility Board Executive Director Tom Content yesterday weighed in on the utility company’s proposal during a panel discussion at Marquette University Law School in Milwaukee.
“With some changes, we think … this whole plan could live up to the goal of paying your own way,” Content said, referring to claims made by data center operators that they will cover the cost of energy and related infrastructure needed to power their operations.
He pointed to “a few loopholes” in the plan, arguing state regulators need to address them in order to truly protect customers.
“The financial guarantees in case things go sideways need to be stronger,” he said. “We think that the tech companies should be responsible for contracts that are longer than 10 years. We think the proposal should apply to smaller data centers than the very large 500 megawatt threshold the utility chose.”
Meanwhile, WEC Energy Group Senior Corporate Counsel Kate Phillips yesterday said the We Energies parent company has already adjusted its plan after getting “a lot of feedback” from CUB and others. The plan is currently before the state Public Service Commission, and Phillips said the company is hoping to get a decision “fairly quickly” by the state agency.
“I think that we’ve listened to those concerns and we’ve made some changes as a result of that,” she said.
The Milwaukee-based utility began developing this plan when Microsoft announced its data center plans in southeastern Wisconsin. Its goal is to avoid “cost-shifting” to other customers and ensure the very large customers — namely, data centers — would pay for generation, transmission and distribution for these energy-intensive facilities in the state, according to Phillips.
Along with the VLC rate, We Energies is proposing a dedicated resource rate under which data centers would have to subscribe to dedicated generation resources as a condition of service, she explained.
That includes two options: full benefits, under which the very large customer pays all the costs and gets all the benefits; and capacity-only, which involves a 75%-25% cost split with the very large customer covering only the larger portion.
Content said this “very complex framework” for covering data center energy costs was initially negotiated without input from other customer advocates, noting We Energies and the tech companies are beholden to their shareholders while CUB is looking to protect ratepayers.
He said the group would prefer that “customers aren’t on the hook for that 25%” under the capacity-only plan, given the billions of dollars of development expected in the near future.
“Our primary concerns are … with the utility industry now becoming part of this AI tech wave and all the hype associated with that, and in particular the concern about if business plans change, if there’s a tech bubble that bursts,” he said.
Content noted residential and small business energy customers are worried about having to foot the bill for the new energy infrastructure if the AI industry fails to meet expectations.
In response to those concerns, Phillips noted We Energies has proposed a “safety valve” provision to go into effect if actual costs exceed projected costs.
“We have said that we will modify those percentages, the 75-25, so that our other customers aren’t paying more than their fair share of the facility,” she said.
Phillips also pointed to requirements in the proposed service agreements for very large customers that if they shut down the data center early and the facility can’t be repurposed, the VLC would be required to pay the utility the net book value of those assets. That would ensure those costs wouldn’t be shifted to other customers, she argued.
“I think we’ve done our best to try to address those issues,” she said.
