On Wednesday, the New York State Public Service Commission (PSC) ruled that municipal power companies could charge higher electricity rates to cryptocurrency miners who try to benefit from the state's abundance of cheap hydroelectric power.

Over the years, Bitcoin's soaring price has drawn entrepreneurs to mining. Bitcoin mining enterprises have become massive endeavors, consuming megawatts of power on some grids. To minimize the cost of that considerable power draw, mining companies have tried to site their operations in towns with cheap electricity, both in the US and around the world. In the US, regions with the cheapest energy tend to be small towns with hydroelectric power. (Politico recently wrote extensively about the Bitcoin mining boom in Washington state's mid-Columbia valley, a hotspot for cheap hydro.)

But mining booms in small US towns are not always met with approval. A group of 36 municipal power authorities in northern and western New York petitioned the PSC for permission to raise electricity rates for cryptocurrency miners because their excessive power use has been taxing very small local grids and causing rates to rise for other customers.

The PSC responded on Wednesday that it would allow those local power companies to raise rates for cryptocurrency miners. The response noted that New York's local power companies, which are customer-owned and range in size from 1.5 MW to 122 MW, "acquire low-cost power, typically hydro, and distribute the power to customers at no profit." If a community consumes more than what has been acquired, cost increases are passed on to all customers.

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The PSC offered a truly staggering look at the electricity demand that cryptocurrency has created in the region, saying that in some communities cryptocurrency mining requires "thousands of times more electricity than an average residential customer would use" (emphasis PSC). The document continued:

While such a significant amount of electricity usage might go unnoticed in large metropolitan areas, the sheer amount of electricity being used is leading to higher costs for customers in small communities because of a limited supply of low-cost hydropower. In Plattsburgh, for example, monthly bills for average residential customers increased nearly $10 in January because of the two cryptocurrency companies operating there.

In another instance, the power demanded by cryptocurrency companies accounted for 33 percent of the local power company's load. In the Village of Akron, a cryptocurrency mining operation requested a 5 MW increase in electricity delivery. "If Akron were to comply with the request at existing rates, Akron’s annual average bulk power supply costs would have increased 54 percent with a direct impact on retail rates," New York's PSC wrote.

Of course, cryptocurrency mining is hardly the first industry to arbitrage electricity prices to make some good's production more profitable. The practice is common in aluminum production, where the smelting process uses vast amounts of electricity to create aluminum metal from alumina. Not surprisingly, the Pacific Northwest and Upstate New York are both US regions where aluminum manufacture is common.


But the New York PSC said that cryptocurrency mining should be treated differently, because a local community doesn't benefit from cryptocurrency mining like it does from, say, aluminum processing plants. Cryptocurrency mining results in few local jobs. It also doesn't require any new factories or facilities. "As a result, there is no traditional impediment for the customers to pull up stakes and move their equipment to another location," the PSC wrote. "The potential for sudden relocations would result in unpredictable electrical use fluctuations in the affected areas."

Ultimately, the PSC decided that municipal power authorities will be allowed to increase rates for customers whose maximum demand exceeds 300kW or whose load density "exceeds 250kWh per square foot per year."

Singling out a power-hungry industry for rate increases isn't without precedent. In Boulder County, Colorado, for example, marijuana growers are charged an extra $0.0216 per kWh because they use so much power to run grow lights, ventilation systems, and air conditioners for their plants.


Correction: The point at which electricity is applied in the aluminum fabricating process has been clarified.