Kentucky Rejects Controversial Subsidies for Cryptomining Company

The state of Kentucky’s utility regulators rejected a controversial proposal by Kentucky Power to give millions in energy price discounts to a planned cryptomining facility in Louisa, Kentucky.

Today’s decision comes at a time when Kentucky Power has proposed a whopping 18% increase in rates for families and individuals. Critics warned the proposed discounts could have ultimately caused power rates to rise even more for other customers.

Ebon International is proposing the 250 MW cryptocurrency mining facility, which would make it a massive energy customer. The proposed facility is contributing to the delay in closure of the polluting Big Sandy gas plant until 2041. In fact, the cryptominers want to use so much energy that it would use up almost all of the energy generated by the gas plant.

At a hearing in July 2023, Kentucky Power admitted that it doesn’t have enough generating capacity to serve its existing customers, let alone this new facility, and will need to buy energy off the market to serve this new facility with its other customers being forced to share in those increased costs.

There is a surge in these energy intensive and wasteful facilities in the U.S. since they were banned in China, where Ebon is based. Cryptomining is gobbling up more power in Kentucky than most other states and generates more carbon dioxide in Kentucky than anywhere else in the U.S.

Proof-of-work cryptocurrency mining, which is designed to consume enormous quantities of energy, effectively entails millions of computing machines racing to solve a complex, but meaningless, problem.

“Hardworking people shouldn’t have to pay higher utility bills so that a cryptocurrency company can get millions in subsidies they don’t deserve. The Public Service Commission did the right thing for Kentucky Power customers. We hope the commission will reject the wasteful subsidies in the other case they are weighing now,” said Thom Cmar, an Earthjustice attorney for public interest groups in this case. The groups that intervened in the case and requested the investigation that led to today’s decision include the Mountain Association, Kentuckians for the Commonwealth, Appalachian Citizens’ Law Center, Sierra Club, and Kentucky Resources Council.

The proposal rejected today is also opposed by Kentucky’s Attorney General and the Kentucky Industrial Utility Customers group.

Nationwide, cryptomining companies frequently seek state and local subsidies for economic development, but in most cases the promises of investment and job creation are vague and unsupported. In reality, cryptomining facilities are simply structures containing computers that are extremely energy intensive but provide few lasting community benefits or jobs.

In September the Kentucky Public Service Commission (PSC) is expected to issue another decision rejecting or approving Kentucky Power’s proposed rate discounts for a Cyber Innovation Group cryptomining facility in Hatfield. In August 2023 the PSC approved more than $4 million in subsidized rates from Kentucky Utilities for a Bitiki-KY Bitcoin mining facility in Waverly which says it will create just up to five jobs. The facility was up and running well before the rates were approved, calling into question whether there is any need for these subsidies to create even this small number of jobs.

The PSC approved $12.7 million in transmission upgrades for Big Rivers Electric to provide service to Blockware Mining in Paducah, and other Big Rivers’ customers will be required to share in those costs.

Josh Bills, Commercial Energy Specialist with the Mountain Association, said, “In the past 20 years, the cost for electricity provided by Kentucky Power has increased by more than 200%. Eastern Kentuckians could not have accommodated subsidies to a volatile and speculative industry. We are pleased that the Public Service Commission recognized this significant risk, and we will continue to do our part to look out for ratepayers in other crypto subsidy cases.”

Byron Gary, Program Attorney for the Kentucky Resources Council, said, “We are pleased with the decision in this case, and grateful the Commission has decided to take a closer look at the ongoing subsidies provided to these wasteful facilities. We hope the Commission will continue to place consideration on the impacts of its decisions on the average ratepayers already struggling with high electric utility bills.”

Megan Wachspress, Staff Attorney for the Sierra Club Environmental Law Program, said, “We’re relieved to see state regulators fulfilling their role of protecting ratepayers and ensuring that economic development rates do just that – spur economic development. Huge cryptocurrency mining operations should pay their fair share for the massive load they’re putting on Kentucky’s grid.”