Oracle warns Wisconsin power ruling could cost $100M a year

Oracle says a Wisconsin regulatory ruling tied to its planned Lighthouse Campus datacenter could leave it paying more than $100 million a year in financing costs to back the site’s power commitments.

The company is developing the nearly 1 GW campus in Port Washington with Vantage and OpenAI, backed by local utility We Energies. But the Public Service Commission of Wisconsin told the Financial Times it had “declined to take action” on a petition to reopen or overturn an earlier decision on the power arrangement.

In April, the PSC reviewed We Energies' application for Very Large Customer (VLC) and Bespoke Resources Tariff status for the datacenter. The regulator said changes to the tariff were meant to reduce the risk that transmission costs would be shifted from datacenter customers to existing ratepayers.

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In an affidavit supporting the petition, Oracle said the current terms could force it to provide security through a cash deposit or letter of credit.

“Based on our current projections, we anticipate that, under the current mandated requirements, we will ultimately be required to post financial security, likely in the form of a letter of credit in an amount exceeding $7 billion, at an annual cost that could exceed $100 million.”

To qualify for an exemption, Oracle would need credit ratings of at least A- from S&P and A3 from Moody’s. At the time of the PSC decision, S&P rated Oracle BBB, and earlier this month cut it to BBB-.

Credit pressure and OpenAI exposure

S&P said it estimates OpenAI accounts for roughly half of Oracle’s $638 billion in remaining performance obligations.

“OpenAI’s ability to meet its contractual obligations and raise external financing will be contingent upon AI tailwinds continuing and its models being market leaders. If OpenAI were unable to pay Oracle, we believe Oracle could be left with massive datacenter leases that it might be unable to exit or have to re-lease to new tenants under less-favorable terms.”

Oracle said it has increased its committed credit line to $10 billion, provided by a bank syndicate including Bank of America and JPMorgan Chase.

An Oracle spokesperson said the company remains committed to covering its share of energy costs and providing guarantees so there is no risk to Wisconsin ratepayers. The spokesperson also said the We Energies proposal offers collateral equal to 100 percent of Oracle’s contractual obligations.

The Wisconsin project arrives as Oracle ramps up datacenter spending. In September last year, the company said it had $455 billion in remaining performance obligations, including $300 billion from OpenAI. Since then, Oracle has raised debt to fund its datacenter buildout and is running negative free cash flow.

S&P said Oracle’s fiscal 2027 capex guidance, for the year that began in June, has climbed to $90 billion to $95 billion, up from an earlier $60 billion forecast. It also now expects negative free operating cash flow of $42 billion, worse than its previous estimate of negative $24 billion.