Bitcoin mining firms getting pushback from New York state for trying to profit from cheap electricity

  • Plattsburgh's city council voted unanimously Thursday to approve an 18-month moratorium on applications or permits for new commercial cryptocurrency mining operations.
  • Separately, the New York State Public Service Commission said Thursday that electricity costs for "high-density load customers" — primarily cryptocurrency companies — will increase beginning this month, while costs for customers using less electricity will normalize.
  • "Had the new rates been in place in January, the two cryptocurrency companies in Plattsburgh would have seen a more than 60 percent increase in their monthly electricity costs," the commission release said.

A small town in northeastern New York has banned the launch of new bitcoin "mining" firms for the next year and a half, just as the state's public utilities arm ruled that upstate municipal power authorities can charge higher electricity rates for miners.

Mining refers to the production of cryptocurrency bitcoin, which is up about 700 percent over the last 12 months to $8,000. The creation process requires enormous computing power, causing miners to gravitate toward regions with ultra-low energy costs. Thanks to hydropower and subsidies, some parts of New York state offer electricity rates that can compete with the hot Chinese bitcoin mining market, while naturally lower temperatures reduce the costs of cooling facilities.

Cryptocurrency farming
Christinne Muschi | Bloomberg | Getty Images
Cryptocurrency farming

Plattsburgh's city council voted unanimously Thursday to approve an 18-month moratorium on applications or permits for new commercial cryptocurrency mining operations. The law gives the city time to evaluate the best way to handle a surge in electricity demand that has raised energy bills for residents. Vice first reported the ban, apparently the first in the U.S.

Plattsburgh

Source: Google Maps

"The moratorium allows the City to review its zoning laws and building codes and to update them to include large Bitcoin operations," Bill Treacy, manager of Plattsburgh's Municipal Lighting Department, said in an email.

Plattsburgh is located 20 miles south of the Canadian border and has a population of just 19,000. But it is home to at least two cryptocurrency mining companies.

One local bitcoin mining operation, Plattsburgh BTC, says on its website that it is a family owned business that started in an apartment in 2015 before moving to a larger space the following year in order to access more power.

"This was a positive move for the city of Plattsburgh and crypto mining," David Bowman, founder and CEO of the mining company, said in an email.

"We will be actively working with the city right away to find solutions that works in all of our interests, like possibly shutting off the machines if we are in danger of going over the city's quota, looking into energy recapture as a way to heat buildings," he said. "Anything is on the table."

New York utilities commission acts

Separately, the New York state Public Service Commission said Thursday that electricity costs for "high-density load customers" — primarily cryptocurrency companies — will increase beginning this month, while costs for customers using less electricity will normalize.

"Had the new rates been in place in January, the two cryptocurrency companies in Plattsburgh would have seen a more than 60 percent increase in their monthly electricity costs," the commission release said. The ruling was made in response to a petition from the New York Municipal Power Agency, an association of 36 municipal power authorities including that of Plattsburgh.

Plattsburgh's electricity rate as of January 2010 was as low as 2.37 cents per kilowatt-hour for large commercial customers using more than 6,000 kilowatt-hours a month, according to a document on the city's website. Residential rates ranged from 2.55 cents per kilowatt-hour to 4.53 cents, the document showed.

The general rule of thumb for those wanting to compete with Chinese miners is to keep electricity costs at 4 cents or less, said Shone Anstey, co-founder of Blockchain Intelligence Group.

The average U.S. rate is 10.27 cents per kilowatt-hour, and 14.47 in New York state broadly, according to the U.S. Energy Information Administration.

Low energy costs in upstate New York could encourage more business investment in the region.

"We are in the process of moving again since that space was maxed out at 26 kW," Plattsburgh BTC says in its website's "about us" section. "Plattsburgh is ideally situated for cryptocurrency mining as it has some of the cheapest electric rates in the country and has a cool climate."

Cryptocurrency mining company Coinmint's subsidiary, North Country Data Center, also operates in Plattsburgh and expects to expand its local staff from the current six to 10 to 15 permanent employees, according to a Jan. 30 New York Power Authority memorandum.

The data center is planning to expand to a former Alcoa East plant in Massena, New York, and intends to invest $165 million in the new operation, the memorandum said. Over the next two years, North Country Data Center says it will hire at least 150 full-time employees for positions such as security personnel, IT technicians and electricians with average wage and benefits of $46,000. NCDC has told the state that it plans to be fully operational by next June and ultimately expects to oversee 15 percent of the global cryptocurrency business.

New York Power Authority trustees approved a conditional 15,000 kilowatt allocation to the data center.