KY PSC to Investigate If Taxpayer Subsidized Cryptocurrency Mining Will Raise Costs for Customers

FRANKFORT, KY (12/05/2022) (readMedia)-- In response to comments from Kentucky Attorney General Daniel Cameron and advocates including the Kentucky Resources Council, the Kentucky Public Service Commission is opening formal proceedings to investigate two proposed contracts that would give discounted electricity rates to new cryptocurrency mining operations. Cryptocurrency mining is extremely and exponentially energy-intensive by design, and the discounted rates for these facilities could result in higher electric bills for everyday Kentuckians.

One proposed contract, between Kentucky Power and Ebon International, LLC, would give discounted electricity rates to the Ebon Facility, a 250 MW cryptocurrency mining operation in Louisa, KY. This order follows a similar one opening an investigation into Bitiki-KY, a 13 MW cryptocurrency mining facility in Waverly, KY. Bitki-KY already has a $250,000 tax credit from the state of Kentucky. The national environmental law organization Earthjustice has been working in partnership with Kentucky Resources Council to file comments on behalf of a broad coalition of groups including Kentucky Conservation Committee, Kentuckians for the Commonwealth, Mountain Association, Kentucky Solar Energy Society, Appalachian Citizens' Law Center, and Sierra Club to request that the Commission investigate the proposed contracts with these facilities.

Read the PSC orders and comments attached.

"I'm hopeful that the Commission will see these cryptocurrency mining companies' empty promises that they will benefit local communities for what they are, and give more scrutiny to contracts like these in the future. We're looking forward to the upcoming hearings and discovery process so Kentuckians can know exactly what they would be paying for by subsidizing these facilities. Cryptocurrency mining is a largely unregulated and highly energy intensive industry that could cost everyday Kentuckians big," said Thomas Cmar, a Senior Attorney in the Clean Energy Program at Earthjustice who is based in Cincinnati.

"Our economic development funds should be used for projects that truly benefit local communities - not risky out-of-state companies that choose to leverage our resources, but run the risk of raising the utility bills in communities that are already challenged. The PSC must carefully scrutinize the contracts for Ebon International and Bitiki-KY, to ensure that Kentuckians are protected from these risks, and do the same for any future cryptocurrency miners that want to exploit our state and our wallets." said Lane Boldman, Executive Director of Kentucky Conservation Committee.

Because cryptocurrency mining operations use massive amounts of energy, they usually require new transmission or distribution lines and upgraded infrastructure from energy utilities. The burden of these costs often lands on everyday people. In 2021, the PSC approved $12.7 million in upgrades for Big Rivers Electric to provide service to Blockware Mining in Paducah, KY. Now, other Big Rivers customers are paying for it. Worse, investments like these are often made at the expense of long-overdue upgrades that would benefit everyday people.

The PSC does not have to approve this kind of spending for Kentuckians to end up stuck with the bill. Cryptocurrency mining operations are designed to be mobile. Overall, the industry seeks cheap energy as a top priority - many companies even offer mining equipment in shipping containers to make it as easy as possible to pick up and go. When a utility builds new or upgrades infrastructure for a company that then relocates, everybody else's electric bills go up to cover the costs.

This is not a new problem. In 2018, a cryptocurrency mining operation in Washington state declared bankruptcy and left more than $700,000 in unpaid utility and electricity bills. In 2019, a new cryptocurrency mining customer in Arkansas required significant upgrades, only paid the monthly minimum, and then moved its shipping containers "virtually overnight," forcing existing customers to pick up the bill. There is significant risk that this could happen with the Ebon Facility and/or Bitiki-KY, especially in the wake of the FTX scandal as mining companies are struggling financially across the board and are being forced to return their machines.

Cryptocurrency mining operations are highly automated, and rarely create significant jobs. The Ebon Facility projects hiring 50-100 new employees, while Bitiki-KY projects hiring only five – but neither have demonstrated any substantive evidence to back this up. It's common for cryptocurrency mining operations to wildly overestimate the number of jobs they'll create. A Rockdale, TX cryptocurrency mine promised more than 300 jobs in 2017, and ultimately only created 14. If these companies are being subsidized to provide economic development, they should be required to actually deliver economic benefits.

Outside of the negative economic impacts of cryptocurrency mining to everyday people, the practice also brings negative impacts to the climate, public health, and local environment. New York State recently put a temporary moratorium on fossil fuel-based cryptocurrency mining because of and to study its negative climate, energy and environmental impacts.

Even the White House has sounded the alarm about cryptocurrency mining - in September, the Office of Science and Technology Policy released a report about the industry's climate threats and the need for regulation. But cryptocurrency mining continues to grow rapidly across the country. Earthjustice and the Sierra Club recently released a new Guidebook, finding that from July 2021-22 Bitcoin mining in the U.S. alone consumed as much electricity as four states combined, emitting 27.4 million tons of CO2 - equivalent to the emissions of as much as 6 million cars annually.

Background

The cryptocurrency mining industry is growing rapidly across Kentucky. Kentucky is home to 20% of the nation's collective computing power for proof-of-work cryptocurrency mining and produces more carbon dioxide pollution from cryptocurrency mining than any other state.

Proof-of-work cryptocurrency mining is an energy-intensive process that requires thousands of machines whirring 24/7 to solve complex equations. The more machines that are running, the faster a coin is mined. Each one of these machines requires energy to run, plus more energy for cooling. Globally, Bitcoin mining consumes more energy each year than the entire country of Argentina. In the U.S. alone, Bitcoin mining produces an estimated 40 billion pounds of carbon emissions each year. Cryptocurrency mining facilities are major emitters of air pollutants.

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