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Why Kentucky is scrutinizing contracts offering cheaper electricity to miners

The Kentucky Public Service Commission (PSC) has started a formal inquiry into two contracts that would grant new cryptocurrency mining firms discounted power rates.

Photo by omid roshan / Unsplash

According to an Earthjustice attorney, Kentuckians would clearly understand what they would be paying for by subsidizing the facilities after the hearings and discovery process.

The agreements under scrutiny

The Kentucky Public Service Commission (PSC) has started a formal inquiry into two contracts that would grant new cryptocurrency mining firms discounted power rates. Earthjustice, an environmental legal organization, said in a statement on December 5th (1) that the government agency will attempt to ascertain whether supporting cryptocurrency mining businesses will result in higher power prices for Kentucky citizens.

Between Kentucky Power and Ebon International LLC, which operates a 250-megawatt mining plant near Louisa, and mining firm Bitki-KY, which maintains a 13-megawatt facility, are two mining contracts being looked at. Kentucky's Waverly, where in contrast to the Bitki-KY, in which the state of Kentucky has already granted a $250,000 tax credit due to the passage of a Kentucky tax break law for nearby cryptocurrency miners, the contract intends to offer lower power prices to the Ebon Facility.

What led to the opposition?

According to Earthjustice, cryptocurrency mining is "extremely and exponentially energy-intensive by design." The facilities' discounted rates "may result in increased electric bills for regular Kentuckians. Thomas Cmar, a senior lawyer for the environmental organization, stated that the group was "looking forward to the future hearings and discovery process so Kentuckians may know exactly what they would be paying for by subsidizing these plants," adding:

"I hope the Commission will notice these cryptocurrency mining businesses' empty mines," pledges that local communities would profit from them and that greater scrutiny will be given to contracts like them in the future."
He continued that cryptocurrency mining is a largely unregulated, energy-intensive activity that might significantly increase costs for average Kentuckians.

The organization also asserted that due to the largely automated nature of mining operations, cryptocurrency mining businesses seldom ever provide job chances. As "everyone else's utility rates go up to fund the expenditures, Lane Boldman, executive director of the environmental advocacy organization Kentucky Conservation Committee, continued, that ordinary folks typically land on the costs involved with developing new crypto mining operations."

The new Crypto hub

Kentucky has emerged as a hub for cryptocurrency mining businesses, contributing 20% of the nation's computing power for operations like proof-of-work mining. According to a CNBC article from October 9th (2), it ranked second among all U.S. states behind New York. In contrast, the Bitcoin Mining Council recently released a report suggesting that Bitcoin could soon become a zero-emission network by combusting stranded methane gas to mining BTC that would have otherwise been emitted into the atmosphere.

This is even though many environmental groups want Bitcoin (BTC) and other proof-of-work blockchains to switch to proof-of-stake due to energy concerns. Earthjustice stated that it worked with the Kentucky Resources Council to submit comments on behalf of a large coalition of environmental organizations in Kentucky and asked the PSC to investigate the situation.