Eastern Kentucky’s largest electricity provider entered into a 10-year contract with the cryptomining company Cyber Innovation Group in November of last year, pending the approval of utility regulators.
Utility executives say the deal will bolster revenues and help Kentucky Power ratepayers by contributing to the fixed costs that all customers pay for, like power plants and transmission lines.
Kentucky Power would offer around $2.5 million in electricity discounts over the life of the special contract, Earthjustice Attorney Thom Cmar said. In return, the utility says the deal could earn the company as little as $175,000 or as much as nearly $5 million depending on financial forecasts.
Cyber Innovation Group has plans to invest around $3.5 million in its facilities in Pike County, which are already up and running, according to PSC records. Initially, the company estimated it would bring 10 jobs to the region, but in testimony a Kentucky Power official said it would create three jobs at most.
“This process has been a very lengthy process in terms of how things started and where things are today, so I think that probably accounts for the discrepancy,” Amanda Clark, Kentucky Power external affairs manager, said.
In the last two months, regulators have reviewed three special contracts for cryptomining companies. Under these so-called “economic development riders,” utilities can offer discounted power to large energy users so long as they can prove it's in the economic interest of customers, the region and the utility itself.
The three-member commission approved one contract for a $25 million cryptomining facility on a former coal mine in Union County in August. But late last month, they denied a contract between Kentucky Power and a crypto company called Ebon International, saying the deal could raise customers’ bills.
Among the risks they highlighted in that case, the commission said Kentucky Power lacks the power to meet its existing customers’ demand beginning in 2026 based on the utility’s future plans.
That hasn’t changed, but the contract commissioners approved Friday included protections ensure Kentucky Power ratepayers won’t foot the costs of the utility’s additional power purchases. Specifically, it says that Cyber Innovation Group would have to pay the difference for any new capacity that Kentucky Power buys to meet the company's demand.
“The discount would be reduced by the amount of that new capacity that Kentucky Power would have to purchase,” said Earthjustice Attorney Thom Cmar, who participated in the case as a public interest group.
Environmental advocates, a group representing industrial customers and Republican Attorney General Daniel Cameron, who is running to unseat Democratic incumbent Gov. Andy Beshear, were among those who opposed the deal on the grounds that Kentucky Power didn’t have enough capacity to serve both customers and the crypto company.
Further, Cameron argued that Kentucky Power’s revenue analysis was flawed.
Cmar said they’re grateful the commission included customer protections, but still disapproved on the grounds that cryptomining companies are “notoriously risky,” and use large amounts of electricity for private gain.
“This facility said that at most they would be creating three new jobs at the site, I mean a new McDonalds in the area creates far more than that,” Cmar said.
The wave of cryptomining contracts comes as Kentucky Power asks the commission for an 18% rate increase on residential ratepayers.
Kentucky Power says the proposed rates are a reflection of the challenges facing the utility, which include a loss in customers, natural disasters and the termination of a $2.6 billion sale to Liberty Utilities.
