Bills and Rates

More public power utilities respond to cryptocurrency mining

Two more public power utilities have taken action in response to power-hungry cryptocurrency mining operations.

The City of Salamanca, New York, in August imposed a moratorium on cryptocurrency mining. And in late July, the Franklin Public Utility District in Washington State put a temporary moratorium on “high density load” applications. Both utilities have access to cheap hydropower that is attractive to cryptocurrency mining operations.

Public power utilities across the nation have been imposing bans on the so-called mining operations because they can overload a utility’s system.

Cryptocurrencies – Bitcoin is probably the most well-known example – use blockchain technology to store the data from individual transactions securely and anonymously. Cryptocurrency miners earn money by adding blocks to the blockchain and by releasing more cryptocurrency by solving complex mathematical operations.

Since Bitcoin was first introduced in 2009, demand has soared, leading to ever more sophisticated mining operations that require more sophisticated – and energy hungry – computers to conduct those operations. Rising demand has been created, in part, by self imposed limits how much cryptocurrency is in circulation. Bitcoin, for instance, has capped the amount of Bitcoin in circulation at 21 million.

Locating mining operations in places with low cost electricity gives cryptocurrency miners a competitive edge, so many miners are looking to set up shop in the territories of public power utilities.

In the case of Salamanca, the city imposed a temporary halt on issuing permits for cryptocurrency mining operations in its service territory, as well as for applications or proceedings for those permits.

“We are putting the moratorium in place for the same reason others have put them in place,” Dennis Hensel, general manager of the Salamanca Board of Public Utilities, said. “We are trying to keep fly-by-night people from requesting power we don’t have.”

Hensel said Salamanca is dealing with one person who set up shop in a shopping mall he owns, who is intercepting service meant for the tenants. Running those high-power computers day and night has already compromised wiring and has caused customers’ bills to “skyrocket,” Hensel said.

Hensel also pointed out that new rules for Salamanca regarding cryptocurrency mining have not yet been put in place. Before that can happen, the rules would have to be approved by the state’s Public Service Commission.

Even though Salamanca is a public power utility, it is subject to PSC rules because it buys power, low cost hydropower, from the New York Power Authority and the New York Municipal Power Agency.

Salamanca’s proposal has to first go through the required public hearings before it can be voted on by the PSC. The proposal is not yet on the PSC’s docket, Hensel said.

Meanwhile, for Salamanca, cryptocurrency mining “keeps us in winter loads all year round,” Hensel said. “We don’t want the rest of our customers charged because of one individual,” he said.

For guidelines, Hensel said he is using recent New York PSC decisions and what PUDs are doing in Washington State.

In March, the New York PSC ruled that upstate municipal power authorities could charge higher electricity rates to cryptocurrency companies that require large amounts of electricity to conduct business.

The New York Municipal Power Agency, or NYMPA, an association of 36 municipal power authorities in New York ranging in size from 1.5 MW in the Village of Silver Springs to 122 MW in the City of Plattsburgh, had petitioned the commission regarding concerns that high-density load customers, such as cryptocurrency companies, were having a negative impact on local power supplies. The Salamanca Board of Public Utilities is an NYMPA member.

“The ruling was needed to level the playing field and prevent local electricity prices for existing residential and business customers from skyrocketing due to the soaring local demand for electricity,” the PSC said in a news release related to that order.

In July, the PSC approved new electricity rates for public power utility Massena Electric Department that the PSC said will allow high-density load customers, such as cryptocurrency companies, to qualify for service under an individual service agreement.

The PSC said that the individual service agreement tariff includes provisions that will protect existing customers from increased supply costs resulting from the new service.

Plattsburgh, New York, earlier this year imposed a moratorium on cryptocurrency mining.

Massena Electric Department and the Plattsburgh Municipal Lighting Department are also members of NYMPA.

Franklin joins other PUDs in responding to cryptocurrency miners

Meanwhile, 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.

Other public power utilities in Washington State are also taking steps in response to cryptocurrency mining operations.

Commissioners for Washington state’s Grant County PUD unanimously agreed on May 8 to move forward with the creation of a new customer rate class for cryptocurrency miners that would protect the interests of the utility’s existing customers.

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.