Advocates Disappointed by Michigan PSC Decision to Fast-Track Opaque DTE Deal for Massive Oracle and OpenAI Data Center

Today, environmental and ratepayer advocates voiced disappointment over the decision of the Michigan Public Service Commission to fast-track approval of DTE Electric Company’s application for two special contracts to serve a 1.4-gigawatt data center proposed  by Oracle and OpenAI. The rushed approval of DTE’s significantly redacted proposal foreclosed the ability of the public to scrutinize and meaningfully weigh in on an application that will have significant consequences for their communities and could substantially increase utility bills. While the PSC placed some important conditions on its approval intended to ensure that the data center and/or utility foot the bill for the billions of dollars of costs of serving the data centers, the stringency and effectiveness of those after-the-fact requirements is an open question, and one that could have been evaluated through a contested case before any approval. 

The PSC approved DTE’s request to proceed on an ex parte basis, denying a request for a contested case and hearing from advocates Sierra Club, Michigan Environmental Council, Natural Resources Defense Council, and Citizens Utility Board of Michigan, represented by Earthjustice and Troposphere Legal. Similar requests from the Michigan Attorney General, industrial customers, and others were also denied. The decision clears the way for one of the largest single new electric loads in Michigan history — an increase of more than 10 percent to DTE’s peak demand and potentially more than 25 percent to its total energy sales — without public scrutiny.  While the PSC and Staff reviewed the materials provided by DTE (including materials that were hidden from public review), intervenors were denied the opportunity to seek discovery, submit expert testimony, or question the company’s witnesses. 

The PSC decision relied on its acceptance of DTE’s claims that the project’s enormous energy demand will not drive higher costs for existing DTE customers, and that Oracle, which is facing increasing credit risks and declining stock values, had provided adequate financial guarantees for the billions of dollars of costs.  DTE failed to provide support for either of those claims in the public record.  While the PSC did condition approval on costs and financial risks being borne by the data center, Oracle, and DTE, rather than ratepayers, enforcement of those conditions would require careful watchfulness in numerous future proceedings along with a regulator willing to actually enforce them.  At the same time, the PSC decision largely punts to future proceedings how DTE will meet Michigan’s renewable energy, clean energy, and energy efficiency requirements with the addition of so much energy load, and whether the data center or residential utility customers will end up paying the costs for doing so.

“We are disappointed that the Commission conceded to DTE’s demand for a rushed ex parte review of a heavily-redacted 19-year contract for one of the largest new electric loads in state history.  While billions of dollars and massive amounts of energy will be needed to serve the proposed Oracle data center, DTE provided virtually no support for its claim that the project somehow won’t raise costs for everyday customers or undermine Michigan’s clean energy laws. While our disappointment is tempered by the ratepayer protection provisions that the Commission conditioned its approval on, such provisions can only be effective if future proceedings are open, transparent, and guided by regulators willing to enforce them. We will certainly be there every step of the way to ensure that multi-billion dollar data center companies do not harm Michigan’s ratepayers or clean energy standards,” said Shannon Fisk, attorney and director, State Electric Sector Advocacy for the Clean Energy Program at Earthjustice. 

In addition to the roughly 1.4 GW of data center demand directly at issue in this case, DTE has announced that it is in “[a]dvanced discussions with multiple hyperscalers for ~3 GW of additional load,” and that there are “[m]ultiple other co-locator data center opportunities for an additional 3-4 GW of new load,” according to DTE’s most recent Earnings Conference Call. To make matters worse, Oracle is facing mounting debt, raising the possibility that the company could leave Michiganders on the hook for the costs to serve data centers that the tech behemoths end up abandoning.  While DTE, unlike Consumers Energy, has not sought PSC approval of a tariff to govern service to data centers, the PSC decision does notably require the utility to do so within 90 days, and requires a contested case proceeding regarding that proposal. In addition, the PSC decision requires an analysis in DTE’s next rate case of cost allocation methodologies that will hopefully help ensure that the costs of serving data centers will not be unfairly shifted to other ratepayers. 

“Unfortunately, the Commission has signaled that it’s willing to forgo reasonable public process and scrutiny when big tech wants to make a backroom deal with a utility. This kind of behavior puts all of us at risk, and clearly signals that everyday ratepayers aren’t playing at the same level. The disclosures the Commission is seeking belong in a contested case hearing where impacts are reviewed prior to approval – not after,” said Sierra Club Michigan Director Elayne Coleman. “We remain focused on our mission to protect Michigan’s air, water, and land from all threats, including the interests of big tech billionaires.”

“The Environmental Council continues to assert that we should not be rushing forward with approving massive, special deals without a full vetting. Frankly, the Commission’s decision to approve the contract for this 1.4 GW data center while still demanding extensive analysis in other cases only serves to support our argument that the transparency and vetting people have been calling for is necessary and important,” said Charlotte Jameson, Chief Policy Officer with the Michigan Environmental Council. “The Commission provides no clarity on why it is deferring the analysis to other cases when they could have opened a contested case and gotten the critical answers we need now. We appreciate the Commission’s efforts to shield other ratepayers from harm from the data center, but the contested case process exists exactly to do this and skipping over it sends the wrong message to other companies looking to do business in Michigan.” 

“Michiganders are demanding greater transparency and accountability for these corporate deals. The role of the Michigan Public Service Commission is to look out for the public, for all of us – and with huge swaths of this deal blacked out, we have no way to know whose interests are being protected,” said Derrell Slaughter, Michigan Policy Director for Climate and Energy at NRDC (Natural Resources Defense Council). “This sets an alarming precedent: if this is how it starts, where does it end with these massive deals that have enormous implications for our grid and state resources?”