The New York State Public Service Commission on March 15 ruled that upstate municipal power authorities could charge higher electricity rates to cryptocurrency companies that require large amounts of electricity to conduct business.
“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 its order.
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.
NYMPA represents customer-owned municipal electric systems that acquire low-cost power, typically hydro, and distribute the power to customers at no profit and the PSC said that the low-cost electricity is a significant reason for high-density load customers to locate in this region.
The PSC said that as a direct result of the intense computer data-processing efforts, these companies are using extraordinary amounts of electricity, typically thousands of times more electricity than an average residential customer would use.
“While such a significant amount of electricity usage might go unnoticed in large metropolitan areas, the sheer amount of electricity being used is leading to higher costs for customers in small communities because of a limited supply of low-cost hydropower,” the commission said.
In Plattsburgh, for example, monthly bills for average residential customers increased nearly $10 in January because of the two cryptocurrency companies operating there.
The PSC noted that in recent months, several municipal power authorities in the state have seen an increase in requests for new service from new commercial customers for disproportionately large amounts of power.
These requests come mainly from similar types of potential customers: server farms, generally devoted to data processing for cryptocurrencies.
Cryptocurrency entities, such as Bitcoin developers, use massive banks of computers to run a complex software program that will create, or “mine”, digital currency, the commission said. Cryptocurrency companies generally seek to occupy existing commercial or industrial facilities where they can gain access to the large amounts of power required for their operations.
“As some of these customers have come online, it has become clear that the type of electricity load demand was of a different character than load characteristics typically seen by NYMPA members,” the commission said in the news release.
In some cases, these customers account for 33 percent of the municipal utility’s total load, “an extraordinary amount of power for a single customer to use.”
In its petition, NYMPA cited a request from a cryptocurrency company for 5 MW of electricity to be added to the Village of Akron. If Akron were to comply with the request at existing rates, Akron’s annual average bulk power supply costs would have increased 54 percent with a direct impact on retail rates.
The NYMPA’s petition noted that these customers do not bring the economic development traditionally associated with similar load-sized companies.
First, these customers tend to require high quantities of power and have extremely high-load density and load factors and second, the customers have few associated jobs, and make little to no capital investment in the local community.
“As experienced by NYMPA members and others, because many HDL [high-density load] customers undertake minimal infrastructure investment in existing, low-cost commercial spaces, there is no impediment to customers to pull up stakes and simply truck their equipment to another location. Some of these loads have already done just that,” the NYMPA told the PSC.
“The potential for sudden relocations results in unpredictable electrical use fluctuations in the affected areas,” the NYMPA said.
There are at least three cryptocurrency companies operating in upstate New York, according to NYMPA. The addition of high-density load customers can drastically increase the amount of supplemental power needed by the systems and significantly increases costs to existing customers, the PSC noted.
PSC will allow for creation of a new tariff
In order to mitigate the impact on existing customers, the PSC will allow municipal power authorities to create a new tariff focusing on high-density load customers that do not qualify for economic development assistance and have a maximum demand exceeding 300 kW and a load density that exceeds 250 kWh per square foot per year, which the commission said is a usage amount far higher than traditional commercial customers.
With the decision, electricity costs for high-density load customers will increase beginning in March, while costs for non-high-density load customers will return to their previous levels.
Had the new rates been in place in January, the two cryptocurrency companies in Plattsburgh would have seen a more than 60 percent increase in their monthly electricity costs, the commission said.