Starting April 1, 2019, cryptocurrency miners and other “evolving industry” firms will pay the first of a three-year, graduated increase to a new, above cost electric rate designed to protect Washington state’s Grant County PUD from risk and preserve below-cost rates for core customers.
Grant PUD Commissioners on Aug. 28 unanimously approved the new “Rate 17” for evolving industries, following nearly a year of analysis, staff outreach to the county’s cryptocurrency firms and public comment on the new rate at every commission meeting since the rate’s initial proposal in early May, the PUD noted.
At this time, all Grant PUD customers in the evolving industry profile are miners of cryptocurrency, including bitcoin, each with very high energy demand. Grant PUD said it will evaluate the rate class annually and adjust it, based on the anticipated change in total megawatts needed by existing and incoming evolving-industry customers.
“Your industry is unregulated and high-risk,” PUD Commissioner Tom Flint told a group of cryptocurrency miners who attended the meeting. “This is the best way to ensure our ratepayers are not impacted by this unregulated, high-risk business.”
Other commissioners agreed and differentiated cryptocurrency mining from other data centers that own land and buildings, pay taxes, have solid credit records, store customer information and provide internet-based services.
The PUD noted that Rate 17 customers will receive a 15 percent increase next year, a 35 percent increase in 2020 and a 50 percent increase in 2021, when the new rate will be fully in effect.
Any new evolving industry customers would come in at the rate phase in effect at the time they begin operations. Each annual increase will be calculated on the difference between what the evolving industry customer is paying now (per kilowatt hour) and the higher, target rate, the PUD noted.
“The new rate compensates Grant PUD for extra risk and obliges evolving-industry customers to pay more than the cost to supply their power — just as Grant PUD’s other big power-users do — to subsidize sustainable below-cost rates for residential, irrigation and small and medium-sized business customers,” the PUD said.
As a result of recently adopted board policy, evolving industry applicants for new power hookups are placed in their own waiting queue. Power applicants from agriculture, manufacturing or other traditional-type industries are in a separate queue that must be fully addressed before Grant PUD will consider hooking up new evolving-industry customers.
Evolving industry customers must pay upfront the cost for lines, poles, transformers, studies and other equipment needed to expand or connect.
Grant PUD staff recommended a gradual phase-in for the new rate to limit rate shock for existing evolving industry firms, while giving Grant PUD staff time to see how prospective evolving industry customers respond to the new rate.
The PUD said that evolving industry firms present three main types of risk for Grant PUD: (1) Regulatory Risk: They are vulnerable to potential changes in regulation that could render the industry unviable within the foreseeable future; (2) Business Risk: They are an unproven industry with higher potential for cessation due, in part, to large swings in the value of their primary output; and (3) Concentration Risk: They pose the potential for significant concentration of electrical load and revenue risk to Grant PUD if one or all stop operating in a short period of time.
Since the summer of 2017, Grant PUD has received new service inquires for more than 2,000 megawatts of power — more than three times the electricity needed to power all Grant County homes, farms, businesses and industry.
Approximately 75 percent of those requests are from cryptocurrency miners.
Grant PUD General Manager Kevin Nordt discussed topic in interview
In a recent interview with the American Public Power Association, Kevin Nordt, the PUD’s general manager, noted that cryptocurrency mining showed up on the PUD’s radar screen several years ago.
Other PUDs in Washington State are also grappling with cryptocurrency mining.
Bitcoin miners have been drawn to the Pacific Northwest states of Oregon and Washington, which feature some of the lowest electricity rates in the country, thanks to available hydropower.
In late July, the Franklin Public Utility District in Washington State put a temporary moratorium on “high density load” applications.
Franklin PUD says it has seen a sharp rise in customers requesting high load service, many of whom are thought to be cryptocurrency miners looking to take advantage of cheap hydropower in the Pacific Northwest.
The PUD said the moratorium would give it time to study how those customers affect its system before it goes back to its board of commissioners to talk about putting a new policy in place.
Mason County Public Utility District 3 commissioners on April 10 approved a moratorium on accepting applications for service to “cryptocurrency” operations.
The city of Wenatchee, Wash., this year also imposed moratoriums on cryptocurrency mining.
In March, Washington state’s Benton PUD said that in response to growing customer interest in cryptocurrency mining and blockchain operations, coupled with concerns about distribution system safety and reliability, its Commission approved an electricity intensive load policy.
That same month, Chelan County PUD stopped taking or processing applications for electric service for cryptocurrency mining.
On Aug. 6, Chelan County PUD commissioners heard comments on a proposed rate for cryptocurrency operations that reflects the cost of buying variable-priced market power to serve miners and assures cost recovery for any new infrastructure investments.
Following the hearing, PUD commissioners extended the moratorium until Aug. 20 to allow time for staff and board members to consider what they heard.