Oracle is building a huge AI data centre in Port Washington, Wisconsin, with Vantage and OpenAI. The nearly one-gigawatt Lighthouse Campus is a roughly $15 billion project. To get the electricity to run it, though, Oracle first has to satisfy the local regulator, and that is proving expensive.

In a sworn affidavit, Oracle says the rules would force it to post a letter of credit “exceeding $7 billion,” at an annual cost that “could exceed $100 million.”

Why the regulator won’t budge

The Public Service Commission of Wisconsin tightened the terms in May. It stripped the utility’s power to waive the guarantee case by case. It also set an exemption bar few can clear: an A-/A3 credit rating.

The commission has since “declined to take action” on Oracle’s petition to reopen the decision, telling the Financial Times the rule protects existing customers. The logic is simple. A giant data centre books a whole power plant’s worth of generation. If it walks away, someone pays. The regulator wants that someone not to be ordinary ratepayers.

The awkward timing

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Oracle’s whole case is that it is rock-solid. The market just wobbled on that. On 9 July, S\&P cut Oracle to BBB-, from BBB, citing its AI-infrastructure spending and weaker cash flow.

That sits below the A-/A3 exemption bar. And it lands as Oracle burns cash. The company has guided capital spending to $90bn to $95bn this fiscal year, with a forecast free-cash-flow deficit near $42 billion.

There is a bigger shadow, too: OpenAI. S\&P estimates the startup makes up about half of Oracle’s $638 billion in booked future revenue. If OpenAI cannot pay, S\&P warns, Oracle could be left with data-centre leases it cannot fill. That is the exact default risk Wisconsin is guarding against.

Oracle’s pitch

Oracle is not taking it quietly. Its affidavit argues that BBB firms meet their obligations 99.87% of the time. It notes Oracle is one of the 20 largest companies in the world, with around $600 billion in equity. It also raised $30 billion in a single day this year.

So it has offered a deal: post 10%, about $700 million, as a letter of credit, and cover the rest with a parent guaranty. It also plays the national-security card, arguing that China is racing ahead on grid and AI while US projects snag on red tape.

A fight coming everywhere

This is bigger than one campus. As AI data centres balloon, regulators are asking who carries the risk if the bill outlives the boom. Wisconsin’s answer is to make the tech giant, not the town, post the collateral. Whether that shields ratepayers or just pushes builders to another state is the question everyone is about to face.