By Liam Niemeyer

Kentucky Lantern

Kentucky’s utility regulator approved last week more than $2.5 million in electricity discounts over several years from utility Kentucky Power to a cryptocurrency mining operation in Pike County.

As  part of its approval, the Kentucky Public Service Commission (PSC) is requiring Kentucky Power follow several conditions to make sure the costs of the discounts given to Cyber Innovations Group don’t harm Kentucky Power’s ratepayers, who  already pay the highest average monthly bills in the state.

According to a filing by Kentucky Power, Cyber Innovations Group has stated that in exchange for the discounts it would invest about $3.5 million in its facility and that it already has another separate cryptocurrency mining facility operating in the county. The company had already hired 10 employees and planned to hire three more for its second Pike County facility.

The PSC in its order stated Kentucky Power, which serves about 163,000 customers in 20 counties in Eastern Kentucky, didn’t dispute that it lacks the necessary in-house power generation to supply Cyber Innovations Group’s seven-megawatt power demand for its second facility. The utility, a subsidiary of American Electric Power, exited a contract in December to buy electricity from a coal-fired power plant in southern Indiana and has faced an in-house power shortfall since.

The utility has said it would purchase available electricity from the multi-state grid operator PJM Interconnection to meet the Pike County cryptocurrency mining operation’s power demands, something Kentucky Power argued recently in another case involving a much larger cryptocurrency mining operation in which the PSC denied electricity cost discounts.

The commission in its order stated that because Kentucky Power had insufficient power supply, Cyber Innovations Group would have to cover Kentucky Power’s costs of buying power from PJM Interconnection by reducing the discounts the Cyber Innovations Group received on a “dollar-to-dollar basis.” The PSC is also requiring Kentucky Power in future rate cases to demonstrate through a cost analysis that the discounts aren’t burdening ratepayers.

Cryptocurrency mining typically uses enormous amounts of electricity to run high-powered computers. Those machines solve complex equations that secure virtual transactions of the currencies. In the case of the popular cryptocurrency Bitcoin, mining companies are rewarded for solving the equations with Bitcoin itself. Each Bitcoin is valued at around $25,000 as of mid-September.

A Kentucky Power spokesperson did not respond to a request for comment on the order.

Both Attorney General Daniel Cameron and a coalition of renewable energy, environmental conservation and legal groups opposed the discounts in part because of Kentucky Power’s lacking in-house power generation. A spokesperson for Cameron’s office did not respond to a request for comment.

Thom Cmar, an attorney with the environmental law firm Earthjustice representing the coalition of groups, in a statement said the commission’s “safeguards” will reduce the risk to ratepayers but that the discounts should have been altogether denied.

“We are grateful the Kentucky Public Service Commission is trying to protect Kentucky Power customers. I doubt you will find any family in Kentucky who would volunteer to see their electricity rates go up so that a crypto mining company can pay less,” Cmar said. “We hope the Commission will keep a close eye on this crypto mining facility and others in Kentucky.”

The groups also question whether the millions of dollars of electricity cost discounts should go to cryptocurrency mining operations like Cyber Innovations Group that produce relatively few jobs, similar concerns the groups have had in other PSC cases that investigated the reasonableness of economic development incentives given to cryptocurrency mining operations.