Cryptocurrency mining in upstate New York is going to be expensive as authorities are now allowed to charge higher electricity rates on such businesses, so as to avoid raising costs for other customers.
The New York State Public Service Commission Thursday ruled that upstate municipal power authorities could charge higher electricity rates to cryptocurrency mining companies that consume huge amounts of electricity.
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 demand for electricity, the commission said.
Cryptocurrency mining employs several computers at a single location often called farms, and these computer banks continuously solve algorithms to generate new bitcoins. The mining process consumes enormous amounts of power and generates lot of heat.
Power consumption by cryptocurrency mining companies could be thousands of times more than that of an average residential customer. Such usage may go unnoticed in large metropolitan areas, but may serve to raise costs significantly for customers in small communities.
On Thursday, Plattsburgh, a city with population of roughly 20,000, imposed an 18-month moratorium on cryptocurrency mining. This is because the monthly bills for residential customers increased over $10 in January mainly due to the excessive power consumption by the two cryptocurrency miners operating in the city.
The New York Municipal Power Agency, an association of 36 municipal power authorities, had petitioned the commission regarding concerns that high density load customers, such as cryptocurrency companies, were having a negative impact on local power supplies.
Customer-owned municipal power authorities acquire low-cost power, mainly hydro, which is distributed to customers at no profit. And it is exactly this cheap electricity that is attracting high-density customers such as cryptocurrency miners to establish their business in the region.
“We always welcome and encourage companies to build and grow their businesses in New York,” Commission Chair John Rhodes said. “However, we must ensure business customers pay an appropriate price for the electricity they use.”
Cities are not very keen to offer concessions to cryptocurrency mining companies as they do not bring the economic development traditionally associated with companies with heavy power consumption.
“If we hadn’t acted, existing residential and commercial customers in upstate communities served by a municipal power authority would see sharp increases in their utility bills,” he added.
The commission has allowed municipal power authorities to create a new tariff focusing on high-density load customers that do not qualify for economic development assistance. The two cryptocurrency companies in Plattsburgh would have seen a more than 60 percent increase in their monthly electricity costs, if the higher tariffs were in place in January.