Microsoft challenges Wisconsin data center power cost plan

Microsoft is challenging a proposal tied to the power needs of its Mount Pleasant data center, arguing that a transmission cost plan filed with federal regulators does not go far enough to protect Wisconsin customers and was advanced without the company’s input.

The dispute centers on a recent filing by We Energies and the American Transmission Company, or ATC, that would set a minimum transmission charge for Microsoft based on the facility’s anticipated electricity demand. Wisconsin ratepayer advocates have also asked federal regulators to pause the proposal, saying it could still leave other utility customers exposed to costs linked to large data center infrastructure.

A $500 million transmission buildout

ATC expects to spend more than $500 million on upgrades to connect the Mount Pleasant facility to the electrical grid. Transmission costs are passed through to customers in electric bills, and We Energies estimates that transmission-related costs make up about 10% of customers’ bills.

Earlier this spring, the Wisconsin Public Service Commission approved a workaround requiring We Energies to establish a minimum transmission charge for large data center customers using the same electricity projections relied on to plan transmission upgrades. The federal filing from ATC and We Energies mirrors parts of that approach.

Under the proposal submitted to the Federal Energy Regulatory Commission, We Energies would pay ATC for the data center’s projected transmission capacity and pass that cost to Microsoft. The arrangement would last 15 years and would begin once ATC finishes the infrastructure needed for the site.

"This is a customer protection mechanism that follows the ‘cost causer, cost payer’ methodology", an ATC spokesperson wrote in an email to Wisconsin Watch.

Microsoft says plan was filed without consultation

Microsoft objected that the utilities submitted the plan without consulting the company beforehand. In a protest filed with FERC on Aug. 21, the company’s attorneys warned that the process itself could create problems for the project.

"The entire purpose of these agreements, by ATC’s own description", is to serve the Mount Pleasant data center, Microsoft’s attorneys wrote in a protest to FERC on Aug. 21. Moving ahead without Microsoft’s input, they added, would risk "the timely interconnection and operation of this infrastructure."

Microsoft’s filing said the proposal contains "systemic" flaws. Among the issues raised by the company is an early termination fee that, according to its attorneys, could require Microsoft to pay "excessively more" than the remaining value of the transmission infrastructure if it exits before the 15-year term ends.

The company also said the plan would not require the utilities to seek Microsoft’s input before changing some contract terms and would not "create a clear path for Microsoft (or anyone else) to inquire and scrutinize the scope or prudence of expenditures made on its behalf."

Microsoft’s attorneys called that opacity "a recipe for future misunderstanding and litigation."

Ratepayer advocates raise separate objections

The Citizens Utility Board also filed a protest on Aug. 21, saying the proposal may improve on current practice but still does not fully protect other customers from data-center-related transmission costs.

In that filing, CUB regulatory affairs director Corey Singletary said the minimum charges would be based on ATC’s standard interconnection rates.

"The electric demands and associated supporting infrastructure investments are so large relative to traditional loads and investments" that ATC will almost certainly undershoot the actual cost of data centers’ transmission needs, Singletary wrote.

"While ATC’s proposal would likely be an improvement over the status quo", he added, it still falls short of shielding the utility’s other customers from data-center-driven transmission costs.

Microsoft’s attorneys made a similar point, noting that Microsoft signed the White House’s Ratepayer Protection Pledge this spring. That pledge commits companies to "pay for all new power delivery infrastructure upgrades required to service (its) data centers" and "ensure that these expenses are not passed on to the ordinary household."

Scrutiny of utility relationships

Microsoft also pointed to the relationship between the two utilities involved. We Energies’ parent company, WEC Energy Group, is ATC’s largest shareholder.

"A negotiated bilateral contract between them - especially one involving such large sums - should be further scrutinized", Microsoft’s attorneys wrote.

Microsoft has asked FERC to refer the matter to a settlement judge so parties can work through the disputes. As another option, the company said the commission should reject the proposal. CUB, for its part, asked the commission to establish a uniform transmission cost allocation process for all large data centers in ATC’s territory, including those in Port Washington and Beaver Dam.

ATC had not yet filed a response to the protests at the time of the original report, but a spokesperson said the utility planned to defend the agreements.

"ATC is reviewing Microsoft’s filing and will respond through the established FERC process to demonstrate that existing customers are fully protected by the agreements", a spokesperson wrote in an email on Aug. 25. "We remain committed to cost transparency and protection of existing customers while ensuring reliable transmission service."

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