All three members of the Public Service Commission criticized the lack of transparency from Meta and Alliant Energy during a meeting Thursday in which the body approved a contract for the social media giant to obtain power for its planned data center in Beaver Dam. 

Meta is in the process of spending more than $1 billion to construct a hyperscale data center campus that, when completed, would use six to eight times more power than the city of Beaver Dam’s current energy load. 

Like similar massive data center projects across the state, Meta’s Beaver Dam project has drawn opposition from local residents. For months, the project was shrouded in secrecy with Meta operating under the name Degas LLC. Opponents have complained about the lack of openness, the massive use of energy and the impact the construction and operation of the center could have on the community. 

PSC Chair Summer Strand said in her opening remarks she didn’t understand “why it needed to be this difficult” to achieve a transparent process. 

“To me, transparency is not a cliche, feel good, bare minimum, check the box concept,” Strand said. “If there’s one takeaway from our discussion and decisions today I want it to be clear that, whether you’re a large load customer coming into Wisconsin for the first time, or regulated entity familiar with our process, transparency — and by that I mean actual and real transparency — is the foundational expectation and a necessity.”

Commissioner Kristy Nieto said in her opening remarks Thursday morning that the case is one of the “most consequential” decisions the PSC has seen. 

“It bears repeating, existing Wisconsin customers should not pay a single cent to subsidize the service of data centers, not now and not decades from now,” Nieto said. “This means these very large customers must bear the full cost of the infrastructure required to serve them — generation, transmission and distribution — and that those costs must be fully and transparently assigned.” 

The three members of the commission lamented the redactions that had initially been made to the documents submitted in the case — which were later removed after objections from outside parties including members of the public, Clean Wisconsin and the Citizens Utility Board. 

The commissioners also decided that moving forward, hyperscale data centers constructed within Alliant’s territory must pay for and receive energy through a standardized tariff, rather than a one-off contract negotiated without public scrutiny. Late last month, the PSC made a similar ruling for large customers in WE Energies territory. 

Under the PSC order, Alliant will have to develop a tariff that applies for any data centers using more than 100 megawatts of energy. The Meta campus is expected to use 220 megawatts. 

“This is not going to be the last data center contract we see from this utility, and I will say Alliant needs standard guidelines and rules for its data center customers,” Nieto said. “A clear public tariff would create consistent, transparent rates and rules for future data centers, instead of handling each one through separate, confidential negotiations.”

While Alliant was ordered to develop a tariff rate for large customers, the PSC on Thursday approved the contract negotiated between Meta and Alliant with some modifications meant to insulate regular customers from bearing the costs of Meta’s energy use and any related infrastructure upgrades by Alliant. Nieto said denying the agreement while the tariff rate is developed would have allowed Meta to operate for up to a year without any guardrails, an outcome she said didn’t think would benefit anyone.

Brett Korte, a staff attorney with Clean Wisconsin, said the PSC putting a halt to the development of a case-by-case patchwork of data center energy deals in Alliant’s territory — which covers parts of more than a dozen Wisconsin counties — will protect Wisconsinites.

“Tariffs create a consistent, transparent framework that helps protect the public interest,” Korte said in a statement. “Without them, Wisconsin risks a patchwork system where costs and responsibilities are unclear and potentially shifted onto other utility customers.”

After the meeting, consumer advocacy and environmental groups were complimentary of the PSC’s actions.

“Today, the Public Service Commission highlighted the importance of transparency and oversight: accountability is a must, and it cannot be bypassed,” Britnie Remer, organizing director of climate advocacy group 350 Wisconsin. “The Commission also recognized that protecting Wisconsinites from subsidizing billion-dollar data centers needs to be front and center when it comes to these massive projects. With more data center proposals inevitable, requiring tariff filings in the future will ensure large energy customers pay for their costs, not our families and small businesses.”

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Large data centers served by We Energies will pick up the entire tab for new power plants, solar farms and other generators needed to power the massive structures in eastern Wisconsin. 

But the full picture of a payment structure the Wisconsin Public Service Commission unanimously approved Friday is more complex. 

The new agreement, among the first of its kind in the Midwest,“has the potential to fundamentally reshape the utility system,” Commissioner Kristy Nieto said. It will set a  precedent for how the utility will divide the costs and benefits of the vast generation buildout needed to support new data centers, including campuses set to open in Port Washington and Mount Pleasant.

The payment structure diverged from We Energies’ initial proposal in several key ways. Most notably, it requires data center operators to cover the full cost of generators and fuel needed to power their facilities. 

Under the utility’s original proposal, data centers could have paid for just three-quarters of the cost of new generators. Other customers would have covered the remaining quarter — along with fuel costs — in exchange for revenue from selling excess power during periods of high electricity demand. 

“Existing Wisconsin customers should not pay a single cent to subsidize the service of data centers,” Nieto said during Friday’s marathon hearing. 

Vast data center energy needs

The scale of data centers’ energy needs leaves utilities and regulators in uncharted territory. 

The soon-to-open Vantage data center in Port Washington and Microsoft data center in Mount Pleasant will likely require a volume of electricity “comparable to a mid-sized metro area,” PSC Chair Summer Strand said.

The Midcontinent Independent System Operator (MISO), which oversees most of the Midwest’s grid, anticipates the region may need to add new generation capacity at twice the current rate to avoid shortfalls within the next five years, largely to accommodate rising electricity demands from new data centers.

We Energies’ new arrangement with data center customers follows a year of negotiation with ratepayer advocates, data center developers and the PSC, which regulates the state’s utilities.  

From the outset, We Energies said it aimed to shield current customers from worst-case rate hikes. 

Data centers “can and will” operate in Wisconsin with or without a payment model tailored for their needs, Strand said Friday. Over the past year, We Energies argued that without a new rate structure, data centers would pay for electricity as if they were ordinary large industrial customers. 

That status quo, We Energies Vice President for Regulatory Affairs Richard Stasik testified in January, would leave other customers paying too much for generators needed to power data centers. 

Even under the utility’s original proposal, Stasik argued, customers would have saved $1.5 billion compared with a scenario in which data centers paid under the same structure as smaller industrial customers. 

But ratepayer advocates, clean energy groups and some elected officials said We Energies’ proposal would have saddled existing customers with unfair costs and risk.

Critics said customers should not pay at all for power plants needed to serve data centers, even if that means giving up potential revenue. 

“Requiring the large customers to own both the costs and the benefits,” wrote Cassie Steiner, a senior campaign coordinator with the Sierra Club of Wisconsin, is the “safest” option for the rest of We Energies’ ratepayers. 

The We Energies proposal covered only the largest tier of data centers, critics noted. That would have left Wisconsinites to shoulder costs arising from future facilities that, while smaller than those in Port Washington and Mount Pleasant, would still rank among the state’s largest energy users. 

“Smaller data centers pose the same level of risk,” Steiner wrote in an email to Wisconsin Watch. 

The PSC echoed such concerns on Friday. Commissioners said the structure they approved offered stronger ratepayer protections without tossing aside much of what We Energies  negotiated with Vantage and Microsoft.

“I disagree with those that suggested we should simply reject the proposal and send the applicants back to the drawing board,” Commissioner Marcus Hawkins said. He acknowledged  the utility’s willingness from the outset to protect non-data center customers, including supporting a requirement that data center operators pay the full cost of generators built to serve them even if they withdraw early from their service contracts.

The three commissioners unanimously agreed that the new payment structure also applied to  data centers far smaller than those in Port Washington and Mount Pleasant. Under the new structure, any customer using more than 100 megawatts at peak demand must “subscribe” to enough generators, either existing or newly built, to meet that peak.

The PSC retained We Energies’ plan to give data center operators leeway to overshoot their “subscribed” supply before paying a premium for extra electricity. 

Ratepayers will still bear transmission costs

Some forms of cost-sharing are mostly outside the PSC’s jurisdiction. The new data centers also require a vast buildout of transmission infrastructure. That undertaking is largely the responsibility of American Transmission Company (ATC), in which Wisconsin’s largest utilities own a majority stake. Because Friday’s case did not directly involve ATC and federal regulators have substantial say in the company’s billing practices, the PSC could only partially address its concerns about the amount non-data center customers will pay to plug in data centers.

By 2027, We Energies’ existing customers will likely pay $63 million for transmission infrastructure needed to serve data centers, Hawkins said. That figure will approach $100 million by 2028. 

ATC has not yet reached an agreement with data center operators to limit rate hikes for other customers, but the company is in talks with We Energies on the subject. In what Nieto called a “temporary stopgap measure,” the PSC voted to require a minimum payment for transmission costs based on data centers’ projected energy needs.

If data centers use less electricity than anticipated, Hawkins said, other customers could be left paying more than expected for overbuilt transmission infrastructure — a “huge stranded asset.” The minimum payment requirement could partially shield existing customers in that scenario, but Hawkins added, the issue remains far from resolved.

Despite the loose ends, ratepayer and clean energy advocates welcomed the PSC’s decision as a victory. 

“This decision signals that the PSC commissioners heard loud and clear that Wisconsinites have significant concerns about energy affordability and AI data centers,” said Tom Content, executive director of the Citizens Utility Board of Wisconsin. “How this gets implemented in future rate cases remains to be seen, but customers’ interests are in a better place.”

We Energies also raised no public objections to the outcome. The ruling “underscores the importance of our plan to ensure data centers pay their full share for the power they use in our state,” spokesperson Brendan Conway said in a press release. “That is important to us and to the data center companies we are working with.”

The decision could reshape We Energies’ separate rate case before the PSC. That case, filed earlier this month, includes a projected 9.2% increase in customers’ electricity rates over the next two years, in part to accommodate the construction of new generation capacity to support data centers. 

The PSC and ratepayer advocates alike said Friday that the new payment structure may set a precedent within Wisconsin and beyond. The decision will not go into effect until the PSC issues a final written order.

Wisconsin regulators: Data centers must cover full cost of their energy needs is a post from Wisconsin Watch, a non-profit investigative news site covering Wisconsin since 2009. Please consider making a contribution to support our journalism.

The Wisconsin Department of Natural Resources held a public hearing Tuesday on a request from the AI data center company Vantage for an air quality permit to operate 45 diesel backup generators at the company’s proposed hyperscale data center in Port Washington.

The department has already granted a preliminary approval to the permit request. Members of the public complained at the virtual hearing that the DNR chose not to conduct a full environmental impact assessment — despite southeastern Wisconsin’s existing classification as a high air pollution region. 

Michael Greif, an attorney with Midwest Environmental Advocates, said that all 45 generators operating at once for one hour would emit the same amount of nitrogen oxides as more than 5 million cars driving over one mile of nearby Interstate 43 — or seven times the hourly nitrogen oxide emissions for all of Ozaukee County. Exposure to nitrogen oxides have been tied to respiratory issues such as asthma. 

“It is also one of the first hyper scale AI data centers proposed in Wisconsin,” Grief said. “So it raises new and unreserved questions about energy use, climate impacts, air pollution and public health, and for all those reasons and more, DNR is legally required to prepare an EIS for the Vantage data center.”

Residents of the area put it more simply, complaining about the air pollution they’re already dealing with every day. 

“Our lakeshore is at capacity,” Sheboygan resident Rebecca Clarke said. 

Many speakers also expressed frustration at their lack of a voice in the state’s surge in data center development and proposals. 

“This community has not been given a fair process,” Port Washington resident Carri Prom said. “We’ve been speaking about this process for months. We’ve largely been ignored, and yet, here we are.”

The air pollution permit is one of the DNR’s few chances to weigh in on a data center proposal that has drawn widespread opposition in Port Washington and across the state. The Public Service Commission, the agency that regulates utility companies in Wisconsin, has given the public little confidence it will do enough to prevent electric bills from increasing.

Local zoning boards and city councils, enticed by the promise of property tax revenue, have often signed off on data centers after agreeing to non-disclosure agreements to keep the details away from their constituents. 

“I think things are very backwards, and that we’re proceeding with all of these projects before we even have any idea of how to protect residents,” said Sarah Zarling, an environmental organizer who’s been involved in the data center fight. 

Over the past year, as the number of data centers operating, under construction or proposed has continued to increase, public opposition has grown. Multiple pieces of legislation for regulating data centers were proposed by lawmakers of both parties, yet none passed  before legislators adjourned for the year. Data centers have become a big issue in the Democratic primary for governor and a number of environmental groups have called for a moratorium on data center development until stricter regulations can be put into law. 

Brett Korte, a staff attorney at Clean Wisconsin, told the Wisconsin Examiner in a statement after Tuesday’s hearing that the disconnected government approval process only highlights Wisconsin’s lack of a coherent plan.

“One of the pressing issues related to the data center boom currently underway in Wisconsin is that there is no overarching plan to ensure they don’t harm communities in our state,” he said. “Nor is there even an effort to fully understand the harm they will cause. Local governments make zoning decisions, the PSC approves the construction of power plants and transmission lines, and the DNR implements water regulations and issues air permits.” Yet no state office is responsible for looking at all of the issues raised by data centers at once.

Korte added that a better process for planning future renewable energy sources, stronger carbon emission standards and a more concrete plan for achieving Gov. Tony Evers’ goal of powering the state with 100% clean energy by 2050 would help the state better manage data center growth. 

“No one is asking: Do the benefits of data centers outweigh their environmental harm?” he continued. “That is why Clean Wisconsin continues to call for a pause on data center construction until the state has a comprehensive plan to regulate their development.”

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