Opinion Editorial by Josh Bills, Commercial Energy Specialist at the Mountain Association
A Chinese cryptomining company is proposing to build a $250 million plant near the town of Louisa in Eastern Kentucky. At the same time, another cryptomining firm is proposing a plant near Waverly, Kentucky. Kentucky Power and Kentucky Utilities (KU) propose to give them special rates on their electric bills – deals that the Kentucky Public Service Commission (PSC) is currently investigating for potential negative impacts on other Kentucky Power and KU customers.
What is cryptomining? Cryptomining creates digital currency, such as Bitcoin, through an energy intensive process of competitions between computers to solve complex mathematical equations. Cryptomining facilities include banks of computers, and seek cheap energy. Depending on the size of the operation, utility bills could be millions of dollars each month, as is the case with the proposed project in Lawrence County, which would likely have bills of about $4 million each month.
Utilities are allowed by law to offer special electric rates as an incentive to get businesses to locate in the utility’s service area, on the theory that the companies will create jobs and other economic benefits that overall benefit utility customers, as well as local and state residents. In theory, a large industrial customer can help lower rates for other customers since their large electric bills can help offset a significant share of the utility's overall operating costs. That's important in Eastern Kentucky where overall economic decline since the collapse of the coal industry has contributed to a nearly 200 percent increase in the rates and fees paid by Kentucky Power and KU customers.
Yet there are still many questions to ask with each special rate proposed in order to assure that the benefits will materialize and that the costs of serving these industrial customers won’t actually end up being borne on the backs of other ratepayers.
Mountain Association, the nonprofit I work for, closely watches Eastern Kentucky’s utility companies to advocate for affordable and clean energy on behalf of ratepayers. Along with our partners, we are currently involved as either intervenors, movants or commenters in four cryptocurrency mining cases that are being considered by PSC in Frankfort. The largest proposal, by Kentucky Power, is to offer a 10-year special rate for Ebon, a cryptomine that it claims - without evidence so far - will create 50 to 100 jobs.
The proposal is to provide Ebon 250,000 kilowatts of power, or the peak capacity needed for about 25,000 homes, to fuel the future Ebon mining facility on property adjacent to the Big Sandy Plant in Lawrence County. Kentucky Power would need to build additional infrastructure over time to support the mine. The PSC will make a decision after hearing from all interested parties and has put the contract on hold until at least late April to conduct its investigation.
We are intervening in the case, which means we will have several opportunities to scrutinize the process with testimony, discovery and cross-examination. Attorneys for another intervenor, Kentucky Industrial Utility Customers, found that each ratepayer could pay approximately $36 a year to subsidize Ebon’s operation. But what has not yet been calculated is the impact if Ebon’s plans don’t pan out.
Cryptocurrencies are very volatile and speculative. In the past five years, the stock for Ebang International Holdings Inc., of which Ebon is a subsidiary, has fallen 95.3 percent. The value of Bitcoin, for which Ebon will mine, has dropped 41 percent over the past year. Other Kentucky communities have already experienced this. In Western Kentucky, a company pulled out of a deal less than a year after acquiring a 120,000 square-foot facility in Paducah. If Ebon goes out of business - or if they pull up stakes and relocate for a better deal elsewhere - ratepayers could be left to foot the bill for the investments Kentucky Power made to bring Ebon here.
Ebon is leasing the land for the project from Kentucky Power, but ratepayers will still be on the hook for any increased property taxes on the land. Kentucky Power is offering these discounted rates to Ebon at a time when it already needs to find new sources to supply electricity to its customers, and its customers could be on the hook for the costs of adding more capacity to serve Ebon if Ebon doesn't use it.
We are seeing many cases pop up In Kentucky in part due to legal changes passed in 2022 by Kentucky legislators to attract these companies despite their volatile nature. Our coalition of partners will try to intervene on behalf of ratepayers in future cases that are undoubtedly coming. We will continue to comb through the details of each proposal and ask what needs to be asked: are the jobs proposed realistic, good, long-term jobs? Does the infrastructure proposed take into account the expense of continuing to operate inefficient fossil fuel plants to power them or buying more power from somewhere else? Is it worth the risk to ratepayers to bet on the long-term viability of such a risky industry? Will there be enough protections so that ratepayers won’t get stuck with a failed company’s unpaid power bills and infrastructure costs?
With the impacts of climate change at our doors and on our bills each month, we will keep an eye on this new industry coming to our state. We want to help keep energy affordable and reliable for all Kentuckians as we push toward a more just, clean energy future.