The Wisconsin Public Service Commission has voted on WE Energies’ proposed Very Large Consumer Tariff aimed at new data centers. Megan Novak analyzes what it means for regular consumers.
The Public Service Commission last Friday voted on WE Energies’ proposed Very Large Customer tariff, a decision that will shape how Wisconsin handles some of the largest new electricity users the state has ever seen.
WE Energies proposed that the Commission establish a tariff for “Very Large Customers” (VLCs) who have a combined 500 megawatts or greater of new electric load (new large data centers). The initial proposal from WE Energies would have left Wisconsin ratepayers on the hook for 25% of the infrastructure costs.
These decisions come after $2.2 billion in rate hikes approved by the Commission since 2019, moving Wisconsin from the lowest rates in the Midwest to the second highest energy rates in our region. Additionally, the decisions made last week did not discuss or impact the hundreds of millions more in rate hikes still pending before the regulators.
Historically, many critics believe the PSC “rubber stamps” utility requests without tough regulatory scrutiny or public engagement. This time however, with increased grassroots pressure over the last two years, it was clear during the proceedings that the Commissioners are finally looking to provide some protections for ratepayers, but truly only time will tell how earnest they are in these efforts.
The proceedings focused on the question of who should pay for the energy buildout to service the “Very Large Customers”, mostly data centers, being built in Wisconsin, and how, if at all, other ratepayers would be protected. The request from WE Energies was broken into over 20 decision points. Here are the decisions that have the greatest likelihood of impacting everyday ratepayers.
Transmission Costs: Who Pays?
One of the most important issues was how to handle transmission upgrades needed to serve large new customers. This matters because of the timing of building transmission lines. Transmission projects can begin affecting everyone’s bills before a large customer is fully online.
WE Energies originally requested to simply pass the costs of new transmission along to all customers. The utility argued that there was nothing they could do about regional, federally-approved rules for rate recovery. The utility argued the costs and benefits of new transmission would eventually balance out over time.
The PSC did not buy the utilities’ argument about transmission benefits over time. One Commissioner called WE Energies’ advocacy for the status quo “disingenuous” given the unprecedented nature of the infrastructure buildout. The PSC voted to require tariff revisions to address the risk of transmission cost shifting from data center customers to existing customers. The PSC ordered additional reporting requirements to provide visibility into how the tariffs work in practice and created a mechanism for the Commission to make future adjustments if needed.
At one point during the proceedings, PSC Commissioner Marcus Hawkins specifically called out the grassroots pressure around transmission costs, saying “I’d also like to acknowledge the attention the issue of transmission costs has gotten from intervenors and the public. Without the large and loud engagement on this topic, I doubt we would have seen the movement we have from the applicant and ATC to evaluate creative solutions to this issue.”
The question remains whether the Commission required strong enough safeguards to make sure the customer driving the project is the one paying for it, not everyone else.
The 75–25 Issue: Shared Costs, Delayed Benefits
Another major decision involved the so-called 75–25 structure.
Under this approach, large customers would get reliable power set aside for them, while regular customers would help cover part of the cost upfront, with the idea that they might benefit later.
WE Energies requested a “Capacity-Only Bespoke Resource” for a data center to subscribe to paying 75% of a power plant’s cost minus fuel costs, with the remaining 25% and fuel costs paid for by non-participating customers.
Even the utility’s own analysis showed that costs from the 75-25 could show up in the early years, while any benefits may take much longer to materialize, meaning bills will be increasing up front while hoping protections come through later on.
The PSC voted to remove the Capacity-Only option that would allow data centers to only pay for 75% of the costs of generating facilities. This vote was critical. If problems do arise for protecting ratepayers, waiting years to address them would have meant customers could already be paying higher costs before regulators step in. The removal of this Capacity-Only option and the approval of the “Full-Benefits” resource model protects existing customers by requiring the data centers to pay 100% of their costs. It removes a key “stranded asset” risk. Wisconsin customers are already on the hook for $1 billion worth of shuttered power plants.
Customer Commitments and Accountability
The Commission also addressed how much responsibility data centers must shoulder, including contract terms and eligibility rules.
The PSC voted to extend the VLC tariff minimum initial term length to 15 years. This change was made to prevent cost-shifting to existing customers.
The Commission also reduced the energy demand threshold for tariff eligibility from 500 MW to 100 MW. This change expands tariff applicability to smaller data centers, which further shields existing customers from data center-related costs.
These details matter because they determine whether large customers are locked into paying for the infrastructure they require, or whether gaps remain where costs could be left behind.
The Commission also voted to approve additional reporting requirements to provide visibility into how the tariffs work in practice and created a mechanism for the Commission to make future adjustments if needed. The PSC ordered additional reporting requirements to bring greater transparency to agreements between the utility and its data centers.
That will determine whether ratepayers can actually see if costs are being shifted in future rate cases, or whether they are asked to rely on assurances.
What this Means for Wisconsin
These decisions set the rules for how Wisconsin handles the next wave of large-scale energy demand. While the initial applications from WE Energies left current ratepayers on the hook, the PSC Commissioners seemingly took steps to ensure the current Wisconsin customers are better protected.
However, if the rules approved by the PSC are not strong enough, the costs of that growth can end up spreading across customers who had no role in creating them. Ratepayers have already seen years of PSC-approved rate increases and are still paying for past utility investments, including facilities that are no longer in service. The decisions today were made while hundreds of millions more in rate hikes have already been requested.
While there were safeguards approved by the Commissioners today, the fact remains that only time will truly tell just how protected Wisconsin ratepayers will be.
