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 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.
Ultimately 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.
