Regulators reject Kentucky Power contract for $250M cryptomining facility
Utility regulators at the Kentucky Public Service Commission denied Kentucky Power’s deal to discount electricity for an international cryptomining company on Monday. The three-member commission found Kentucky Power lacked the necessary power and would likely have increased costs for ratepayers.
The Chinese-owned Ebon International proposed a $250 million computing complex on land leased from Kentucky Power at the Big Sandy Generating Station in Lawrence County.
Kentucky Power and Ebon executed a contract last August for the utility to provide up to 250 megawatts of power at a discounted rate subject to commission approval. In return, Kentucky Power said that Ebon would create as many as 100 jobs in an otherwise economically challenged part of the state.
Commissioners quashed the deal Monday, saying the risks outweigh the potential economic benefits. Among those risks, the commission said Kentucky Power will lack the power to meet its existing customers’ demand beginning in 2026, let alone the new crypto facility, based on the utility’s future plans.
“Kentucky Power’s lack of capacity that can produce energy creates the risk that energy prices rise in the footprint, and as a net purchaser of energy, the power bills of all customers will go up,” the commission wrote in its order.
Attorney General Daniel Cameron’s Office joined environmental groups including the Sierra Club, the Kentucky Resources Council, the Mountain Association, Earthjustice and others in opposing the deal. All of them argued that costs incurred from the deal would fall on ratepayers.
“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,” said Thom Cmar, an Earthjustice attorney for public interest groups in this case.
Kentucky Power’s plans
The decision comes as Kentucky Power asks the commission for an 18% rate increase on residential ratepayers. The utility has said the proposed rates are a reflection of the challenges facing the utility, which serves more than 163,000 homes and businesses in eastern Kentucky.
In the years since the last rate increase, the service area has experienced devastating wind storms, an ice storm and historic flooding. It’s also lost more than 11,000 ratepayers including large industrial customers. And, in April, Kentucky Power’s parent company American Electric Power terminated a $2.6 billion sale to Liberty Utilities.
Utility officials were looking to Ebon to fill the gap, boost electricity sales and help cover the fixed costs of things like power plants and transmission lines. A spokesperson for Kentucky Power said they are currently reviewing the order.
“We believe economic development is imperative to improving the future of eastern Kentucky. Moving forward, we will continue to work diligently in this area while providing safe and reliable power to our customers,” said Sarah Nusbaum with Kentucky Power.
A wave of cryptomining in Kentucky
Cryptomining is an energy intensive process that uses massive amounts of computing power to complete so-called “proof of work” calculations that reward “miners” with digital currency like bitcoin.
Advocates argue putting these facilities on former coal mines gives the land a second life, while also plugging crypto companies directly into the utilities to give them the vast amount of power they need. Opponents say there’s not much to keep companies around once the discounts expire because they could pick up their servers and relocate.
Environmental groups criticize the industry as a waste of energy at a time when the world needs to end its reliance on fossil fuels to avoid the worst impacts of climate change.
The Ebon facility, for example, would have used as much as 250 megawatts of electricity, which is nearly as much electricity as Kentucky Power’s Big Sandy Power Plant is capable of generating.
Crypto companies have taken an interest in Kentucky since the Legislature passed a series of tax incentives over the last few years. Those include sales and use tax exemptions on electricity and on property used in commercial mining of cryptocurrencies.
Earlier this month, the PSC approved a similar kind of contract between Kentucky Utilities and the company Bitiki for a $25 million cryptomining facility on a former coal mine in Union County.
The commission is expected to issue another decision in September on a proposed electricity rate discount contract between Cyber Innovation Group and Kentucky Power for a facility in Pike County.