Deal crucial to building Kentucky’s largest cryptomine rejected by state regulators
A proposed deal to offer discounted electricity rates to a Chinese company looking to build the state’s largest cryptocurrency mine in Eastern Kentucky was denied by a commission of state regulators Monday.
A year ago, Kentucky Power, the utility company which serves nearly 165,000 people in 20 Eastern Kentucky counties, reached a deal to lease 55 acres of land adjacent to a gas power plant in Lawrence County to Ebon, a Chinese crypto company. The contract for the deal laid out potentially discounted electricity rates for Ebon.
Ebon planned to invest nearly $250 million to build a crypto mining and data center facility next to the Big Sandy Generating Station in Louisa. The facility would have the capacity to use 250 megawatts of power, which critics said was enough to power 25,000 homes. The deal required approval by the Kentucky Public Service Commission (PSC), a state commission which regulates utilities.
The PSC denied the deal in an order Monday, citing concerns that Kentucky Power lacked the energy supply needed to power the crypto mining facility without possible risks to its other customers.
Through case filings, Kentucky Power told the PSC that it planned to buy the power capacity needed for the Ebon facility through a regional electricity market.
Buying the power, the PSC contended in its order, would leave Kentucky Power’s customers with higher bills should the price of that energy increase.
It’s unclear exactly what Monday’s denial means for Ebon. In a letter sent from Ebon to Kentucky Power in March, the company said it “cannot and will not develop” the facility without the special contract the companies negotiated.
Kentucky Power is reviewing the PSC’s order, said Sarah Nusbaum, a spokesperson for the utility, in an emailed statement.
“We believe economic development is imperative to improving the future of eastern Kentucky,” Nusbaum said. “Moving forward, we will continue to work diligently in this area while providing safe and reliable power to our customers.”
The crypto mining facility in Lawrence County has long been opposed by detractors — including multiple environmental groups, utility rate watchdogs and the state Attorney General’s office — all of which contended the facility would raise electricity rates locally.
“Hardworking people shouldn’t have to pay higher utility bills so that a cryptocurrency company can get millions in subsidies they don’t deserve,” Thom Cmar, an Earthjustice attorney who helped multiple groups coordinate their opposition to the proposal, said in a provided statement.
The PSC’s denial was a blow to Kentucky Power, which had maintained that the Ebon facility would lower customer bills and be a boost to local economic development. Ebon planned to create 50 to 100 jobs, case filings showed.
Kentucky Power customers already face some of the highest bills in the state and the utility is in the process of seeking a 18.3% price increase for its residential customers next year. As population numbers in Eastern Kentucky have declined, the utility has lost customers — over 10,000 since 2008, the company told the PSC in a separate case. Bills for existing customers have gone up as the company has had to rely on fewer customers to cover the fixed costs of generating power.
The decision in the Ebon case comes as the PSC weighs multiple crypto mining-related contracts throughout the state. Kentucky Power is still awaiting a PSC decision on another deal to provide power to a significantly smaller mine in Pike County.
“The Public Service Commission did the right thing for Kentucky Power customers,” Cmar said. “We hope the commission will reject the wasteful subsidies in the other case they are weighing now.”
In early August, the PSC approved a deal that allowed Louisville Gas and Electric and Kentucky Utilities to offer economic development incentives to a Western Kentucky crypto mining operation owned by Alliance Resource Partners, the coal company headed by billionaire philanthropist Joe Craft. That 13 megawatt facility is also significantly smaller than the planned Ebon facility in Lawrence County.
In recent years, mines have found a home in Kentucky, in part because the state legislature passed bills creating tax breaks meant to attract cryptocurrency mining operations. The U.S. has become a global leader in crypto mining ever since China began taking steps to abolish the power-thirsty practice within its borders in 2021.
Companies have scoured the country in search of locations with cheap land and low industrial power costs to set up rows and rows of humming, specialized computers. Those computers mine cryptocurrencies like Bitcoin, which Tuesday morning was valued at over $27,000 per coin.
This story was originally published August 29, 2023 at 12:28 PM.