Kentucky Power doesn’t have capacity for customers and $250 million cryptomining facility
An international company that mines cryptocurrency wants to build a $250 million facility beside a natural gas power plant in eastern Kentucky. Kentucky Power wants to cut them a deal for electricity.
The utility will not have enough power for both residential customers and a proposed cryptomining facility beginning in 2026 Kentucky Power Vice President Brian West told regulators at a hearing on Thursday.
“Currently that is what [our plan] says, we are working on our plan as we speak,” West replied to Kentucky Public Service Commission Chairman Kent Chandler.
Chinese-owned Ebon International proposed the $250 million computing complex on 55 acres leased from Kentucky Power at the Big Sandy Generating Station, according to PSC testimony. The specific terms of the discounts the crypto company would receive are confidential, but several groups, including the Attorney General’s office, say customers could end up paying higher bills as a result.
In late June, the Public Service Commission alleged Kentucky Power had violated state law for failing to provide adequate service following a shortfall during a winter storm last December. As a result, Kentucky Power had to purchase wholesale electricity from independent grid operator PJM at a cost of around $3,500 per megawatt hour, compared to a regular wholesale price of around $35 per megawatt hour, according to the Kentucky Lantern.
That shortfall serves as a worst-case scenario of what can happen when a power company doesn’t have the adequate power supply to cover its service area.
In a separate case, Kentucky Power is proposing an 18% rate increase on residential customers, resulting in them paying about $35 more per month. Kentucky Power says the proposed rates are a reflection of the challenges facing the utility, which include natural disasters and population loss.
In Thursday’s testimony, West said the proposed contract with Ebon would bring $96 million in economic development to Lawrence County in its first year in operation and as much as $27 million each year afterward. He also said it would bring around 100 jobs that pay as much as $76,000 annually.
However, Attorney Michael Kurtz, who represents Kentucky Industrial Utility Customers, said the vast majority of the jobs would pay $18 or less.
“These are still significant jobs for this location,” West said in response.
Kentucky’s seen a wave of interest from crypto companies as the result of tax incentives passed by the Legislature. House Bill 230, which became law in 2021, provides sales and use tax exemptions on electricity and on the tangible personal property directly used in commercial mining of cryptocurrencies.
In testimony, Kurtz questioned whether Kentucky Power could even sue the parent company, Ebang International Holdings, in the case of a dispute.
“Well, you understand if there's a dispute, a lawsuit between Kentucky Power and the LLC, you're limited to the LLC, you can't go after the parent company. Do you understand that?” Kurtz said.
West said Kentucky Power’s contract has significant protections for the utility and its ratepayers.