The New York State Public Service Commission on March 15 said that it has ruled that upstate municipal power authorities could charge higher electricity rates to cryptocurrency companies that require huge amounts of electricity to conduct business.
The commission noted that the ruling was needed to level the playing field and prevent local electricity prices for existing residential and business customers from skyrocketing due to the soaring local electricity demand.
Electricity costs for high-density load (HDL) customers will increase beginning this month, while costs for non-HDL customers will return to their previous levels, the commission said.
The New York Municipal Power Agency (NYMPA), an association of 36 municipal power authorities in New York ranging in size from 1.5 MW in the Village of Silver Springs, Wyoming County, to 122 MW in the City of Plattsburgh, Clinton County, petitioned the commission regarding concerns that HDL customers, such as cryptocurrency companies, were having a negative impact on local power supplies the commission said. NYMPA represents customer-owned municipal electric systems that acquire low-cost power, typically hydro, and distribute the power to customers at no profit, the commission said, adding that the low-cost electricity is a significant reason for HDL customers to locate in that region.
The commission noted that in recent months, several municipal power authorities have seen an increase in requests for new service from new commercial customers for disproportionately large amounts of power; those requests come mainly from similar types of potential customers: server farms, generally devoted to data processing for cryptocurrencies.
Cryptocurrency entities, such as Bitcoin developers, use massive banks of computers to run a complex software program that will create, or “mine,” digital currency, the commission said. Cryptocurrency companies generally seek to occupy existing commercial or industrial facilities where they can gain access to the large amounts of power required for their operations, the commission noted, adding that as some of those customers have come online, it has become clear that the type of electricity load demand was of a different character than load characteristics typically seen by NYMPA members.
In some cases, those customers account for 33% of the municipal utility’s total load, the commission said, adding that by comparison, a large paper manufacturer, which might employ hundreds of workers, uses roughly one-fourth the amount of electricity on a per square foot basis that those HDL customers.
There are at least three cryptocurrency companies operating in upstate New York, according to NYMPA, the commission said. The addition of HDL customers can drastically increase the amount of supplemental power needed by the systems and significantly increases costs to existing customers, the commission noted.
To mitigate the impact on existing customers, the commission said that it will allow municipal power authorities to create a new tariff focusing on HDL customers that do not qualify for economic development assistance and have a maximum demand exceeding 300 kW and a load density that exceeds 250 kWh per square foot per year, a usage amount far higher than traditional commercial customers.
According to the commission’s order, NYMPA claims that HDL customers are generally involved in high-volume data processing for cryptocurrencies, and are attracted to municipal systems due to their low energy costs. The order noted that according to NYMPA, those HDL customers move into existing commercial spaces and make little capital investment in the local community; employ few people; and are highly mobile, which increases the uncertainty in the utilities’ supply needs and the ability to recover utility-funded infrastructure investments.
Because HDL customers impose unique costs, NYMPA seeks to serve HDL customers under the proposed Rider A, which would define HDL customer applicability, detail application requirements and conditions for HDL service, as well as provide specific rates, charges, and a NYMPA tariff purchase power adjustment clause (PPAC) methodology for HDL customers. The order added that barring NYMPA’s proposed modifications, the costs imposed by HDL customers would be paid for by all ratepayers within the municipality.
NYMPA provided the estimated impact that providing service to a prospective 5-MW HDL customer would have on the annual average power supply costs in the Village of Akron, indicating that those costs would increase by about 54%. The order added that the average residential customer would experience an estimated increase in the total bill of about 30% as a result. Two HDL customers with a combined demand of more than 11 MW currently operating in the City of Plattsburgh caused energy costs to rise by more than $200,000 in January, and, as a result, the average residential customer experienced an increase in the total bill of more than 6% due to increased power costs, the order said.
NYMPA’s proposed Rider A applies to new and existing customers receiving service under any service classification that:
- Maintain load-consuming equipment that exceeds 250 kWh/ft/year
- Use or request a maximum demand exceeding 300 kW
- Do not qualify for the New York Power Authority (NYPA) Municipal and Rural Cooperative Economic Development program
The order added that NYMPA proposes that the rider be applicable to service to new buildings and premises, as well as to increased service to existing buildings and premises.
Per NYMPA’s proposal, a customer requesting to take service under Rider A will be responsible for contacting the utility, in writing, with details of its proposed load. The order also noted that the customer will be responsible for the reasonable costs of conducting a feasibility study to evaluate whether the requested load can be safely served by the utility, and identify any upgrades to the utility’s system required to serve the customer.
NYMPA indicates in the filing that the customer will be responsible for a reasonable contribution to the cost of adding or enlarging the facilities whenever the customer is unable to give assurance that the taking of the increased service shall be of a sufficient duration to render the supply reasonably compensatory to the utility. The order further noted that the customer is to provide financial security in an amount and form acceptable to the utility for the customer’s payment of its cost contribution, rates, and charges.
NYMPA clarified its proposal indicating that the contribution required of Rider A customers would be set equal to the entire upgrade cost, the order said. In the event a contribution to the cost of adding or enlarging infrastructures is necessary, the commission said in its order that it concurs that the contribution should be in the form of an upfront payment.
NYMPA proposes that customers served under Rider A will pay the rates and charges applicable to their respective service classification, except for the PPAC. Instead, the order added, Rider A customers would pay an HDL purchased power adjustment (PPA), which will recover the incremental purchased power cost incurred by the utility needed to serve such customers. The HDL PPA will be included in the HDL PPA rate statement, the order said, noting that the HDL PPA will be calculated using monthly inputs for energy and demand costs incurred by the municipal utility for load served under Rider A, and will be recovered on a per kilowatt-hour basis.
The order noted that the addition of HDL customers could significantly increase the amount of supplemental power needed by NYMPA members’ systems. Since supplemental power is generally more expensive for customers than the NYMPA members’ allocation of low-cost hydropower from the NYPA Niagara Project, HDL customers will increase power supply costs to existing customers through the current PPAC. The order added that NYMPA’s proposed HDL PPA prevents those additional costs from being imposed on current customers, and is therefore reasonable.
Among other things, the commission said that any incremental non-supply related revenues associated with customers served under Rider A will be deferred for future disposition by the commission for the benefit of ratepayers.