Kentucky PSC rejects AEP utility’s 250-MW cryptomining power supply contract

The Kentucky Public Service Commission on Monday rejected Kentucky Power’s proposed power supply contract for a planned 250-MW cryptomining operation over concerns it would increase rates for other customers.

The American Electric Power utility subsidiary in October proposed a discount-rate power supply contract with Ebon International, which plans to build a facility in Louisa, Kentucky, next to the utility’s 295-MW, gas-fired Big Sandy power plant, for cryptocurrency mining, and blockchain and data processing.

Ebon plans to spend about $50 million on its facility and hire up to 100 people, spurring economic development, according to Kentucky Power.

The proposal called for Kentucky Power to supply the Bitcoin mining operation under a demand response tariff, with 225 MW subject to interruption. If Ebon ignored a request to curtail its load, it would have to pay back part of a monthly demand response credit.

Kentucky Power doesn’t have enough capacity to cover its customers’ load starting in 2026, and planned to buy capacity in the PJM Interconnection market, including for Ebon’s cryptocurrency facility, according to the PSC’s decision.

The 10-year contract was opposed by the Kentucky Attorney General, Kentucky Industrial Utility Customers, a trade group, and a coalition that included Mountain Association, Kentuckians for the Commonwealth, Appalachian Citizens’ Law Center, Sierra Club and Kentucky Resources Council.

In its decision, the PSC said Kentucky Power’s lack of adequate capacity creates significant risks. If energy prices rise, as a net purchaser of energy, the power bills of all Kentucky Power customers will increase, the commission said. Also, Kentucky Power may not be able to curtail Ebon’s load and the utility may incur capacity costs that are not fully recovered from Ebon.

“Uncertainty regarding the cost of adding a significant amount of capacity via market purchases leaves too great a risk that the rate revenue from Ebon will not exceed the marginal cost of service, including the cost of capacity,” the PSC said.

Also, growing transmission costs will eat into any margins from the proposed contract, according to the commission.

“If Kentucky Power’s marginal costs assumptions prove inaccurate due to failure to interrupt [service to the Ebon facility], poor hedging of large energy market exposure, high capacity purchase costs in terms of price and volume, an inability to accurately recover costs from Ebon through rates or increases in transmission expenses, other customers will bear the burden,” the PSC said.

Earthjustice, which represented the advocacy groups in the case, praised the decision.

“Hardworking people shouldn’t have to pay higher utility bills so that a cryptocurrency company can get millions in subsidies they don’t deserve,” Thom Cmar, an Earthjustice attorney, said in a press release Monday.

The PSC is expected to make a decision in September on Kentucky Power’s proposed 7-MW power supply contract for a Cyber Innovation Group cryptomining facility in Hatfield, Kentucky, according to Cmar.

Ebon is part of Singapore-based Ebang International Holdings, which had $4 million in revenue in the first six months of this year, according to a report filed Friday with the U.S. Securities and Exchange Commission. The company posted an $8.4 million net loss in the first half of this year compared to a $10.9 million net loss in the same period in 2022.