Wisconsin Public Service Commission to Consider Data Center Utility Rates

The Wisconsin Public Service Commission will consider the first utility rate for new large customers, including data centers, at its upcoming open meeting on April 24, 2026.

As data center development continues in several parts of Wisconsin, many question the potential impact on utility prices. The Wisconsin Public Service Commission (the Commission) is poised to take up that issue later this week in its first discussion of proposed rates that would be paid by new large customers, such as data centers. All parties involved in the proceeding, including the potential data center customers, agree that any approved rate design must fairly assign costs to those new data center customers.

There are two proposals pending before the Commission designed for data center customers: We Energies’ Very Large Customer (VLC) rate and Wisconsin Power & Light’s (WPL) Individual Contract Rate (ICR) Agreement. While We Energies’ VLC is a new rate that would apply to all eligible large customers, WPL’s ICR Agreement was developed under an existing WPL rate that allows the utility to negotiate individual contracts with large customers, subject to Commission approval. Both structures are intended to assign any costs caused by new data center customers directly to those customers, though each proposal takes a slightly different approach.

We Energies’ VLC Rate

The Commission will discuss the proposed VLC rate at its open meeting on Friday, April 24. We Energies’ proposal is unique in that it includes two different rates — the VLC rate and the Bespoke Resources rate — that work together to ensure the large customers pay the costs incurred to serve them.

Under the proposed VLC rate, all customers with use over a certain threshold (likely between 250-500MW, though the final level will be set by the Commission) will be directly assigned costs for energy purchases, dedicated distribution facilities and substation infrastructure, transmission services, administrative costs and other charges incurred by We Energies to serve the large customer.

Under the proposed Bespoke Resources rate, a large customer will pay for new generation resources constructed to serve it (bespoke resources). This means, for example, that if a data center would like to be served with renewable energy, it can work with the utility to develop new wind or solar projects and pay directly for the proportion of those new projects used to serve it. 

WPL’s ICR Agreement

WPL’s ICR Agreement similarly seeks to assign costs caused by the data center customer to that customer while ensuring the contractual commitment lasts long enough for the utility to recover the full cost of service. However, because WPL currently has more generation capacity than needed to serve other customers, the utility is seeking to leverage that excess capacity to serve the new data center customer. WPL asserts that this approach will benefit all ratepayers by further distributing current system costs. 

Addressing Term Length, Transmission Costs and Carbon-Free Energy

A few issues have taken center stage in the discussion leading to the Commission’s decision on these new rate proposals.

Contract Term Length

First, parties have debated the appropriate contract length and termination provisions in each case. Long-term commitments from data center customers provide more certainty that utilities will recover the full cost of investments necessary to serve these new customers, while also providing data center customers with more predictable costs into the future.

WPL’s proposed ICR Agreement will require a 10-year commitment. We Energies’ proposed VLC rate will also require a 10-year commitment, coupled with the Bespoke Resources rate, which obligates the new large customer to pay for a bespoke resource for the life of the resource or 20 years in the case of solar or wind. Should these new customers end service before the term ends, each will be required to pay certain termination costs. This construct avoids leaving the utility with stranded assets and prevents those costs from being shifted to existing customers.

Transmission Costs

Both dockets included significant discussion on whether the proposed data center rates will sufficiently protect other customers from transmission-related costs. American Transmission Company (ATC) provides transmission service to both WPL and We Energies, which pass those ATC charges through to their end-use customers.

WPL’s proposal would pass to the new data center customer all charges ATC bills WPL for transmission services specifically related to that customer. WPL is also proposing a minimum demand level which, according to the utility, is designed to ensure recovery of customer-specific transmission investments.

We Energies similarly proposes passing through ATC transmission charges directly attributable to each new data center or other large customer. At its upcoming public meeting, the Commission is expected to address whether it will accept We Energies’ proposal or one of the alternative approaches proposed by other parties, which include prepayment requirements, large upfront deposits and implementing minimum demand charges.

Complicating the transmission discussion is recent testimony from We Energies, indicating that We Energies and ATC — both subsidiaries of WEC Energy Group — have reached an agreement that would change the allocation of transmission costs to these new large customers. According to the testimony, the utilities intend to seek approval of this agreement from federal regulators at the Federal Energy Regulatory Commission (FERC), in a separate proceeding from the currently-pending cases at the Wisconsin Commission.

Carbon-Free Energy and Behind-the-Meter Generation

Carbon-free resources and behind-the-meter generation have been other frequent points of discussion in these dockets.

Both WPL and We Energies’ rate proposals would allow a large customer to procure and directly pay for carbon-free generation within certain parameters. However, in both cases, the carbon-free generation must be procured through the utility, allowing the utility to earn a return on those resources.  

WPL’s proposal would allow behind-the-meter generation if explicitly agreed to by the utility. We Energies, however, contends that behind-the-meter generation should not be permitted under its proposal, despite the objections of renewables advocates and other intervenors in the case. The Commission is expected to address the reasonableness of this limitation at the open meeting.

One additional feature of both proposals is that, if approved, new data center customers would contribute to Wisconsin’s Focus on Energy program at a level higher than is required by state law, substantially increasing the statewide energy efficiency fund.

Similar Issues Outside of Wisconsin

These proposals come as utility regulators nationwide consider new rate structures designed for data center customers. The primary focus — in Wisconsin and elsewhere — has been protecting existing customers from the costs of new infrastructure needed to serve data center customers, while recognizing that some infrastructure investment is needed to serve existing customers as well.

Common features include long-term contracts and termination fees to protect existing ratepayers should data center load not materialize. For example, commissions in Indiana and Kansas approved data center rates last year that included 12-year contract terms and penalties for termination or reductions in capacity.

Fredrikson’s Energy Regulatory team will continue to monitor developments in utility rate proposals affecting large energy users, including data centers. We regularly assist industry participants in navigating the regulatory environment. Please contact us if we may assist you with any of your energy regulatory needs.