S&P downgrades Oracle credit rating during Wisconsin data center fight
S&P Global Ratings downgraded Oracle's credit rating, citing uncertainty around its AI investments, just as the company is challenging new credit requirements from the Wisconsin Public Service Commission (PSC). These requirements, aimed at protecting ratepayers, mandate high credit ratings or collateral for data center operators seeking electric service in We Energies territory, where Oracle is building a large data center.
S&P Global Ratings, a prominent credit rating agency, downgraded Oracle's credit rating from BBB to BBB- on July 9, citing increasing credit risk due to the company's rapidly expanding AI infrastructure business, high capital spending, and an uncertain path to profitability. This downgrade closely followed Oracle's lawsuit against the Wisconsin Public Service Commission (PSC) in Ozaukee County Circuit Court.
Oracle is developing a significant data center campus in Ozaukee County, which requires substantial electrical service from We Energies. The lawsuit challenges new rules approved by the PSC, which mandate that data center operators with less than a AAA- credit rating must post substantial collateral, potentially $100 million or more annually for Oracle. These rules are designed to protect We Energies' ratepayers from the cost of new power plant construction should a data center operator become insolvent.
We Energies had asked the PSC to reconsider these credit requirements, arguing they unfairly penalize Oracle. However, the PSC declined the request. In response to Oracle's lawsuit, the commission accused the company of attempting to circumvent regulatory oversight and dictate preferential service terms. Wisconsin’s Citizens Utility Board (CUB) and Clean Wisconsin, a renewable energy advocacy group, have voiced support for the PSC’s credit rating requirements, emphasizing the need to protect ratepayers from potentially stranded investments.
Adding context, the article mentions a similar regulatory challenge in Michigan earlier this year, where the Michigan Public Service Commission approved an electrical service agreement between DTE Energy, Oracle, and OpenAI, an expedited process that drew criticism from ratepayer advocates and Michigan Attorney General Dana Nessel.