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Utility Targets Bitcoin Miners With Power Rate Hike (datacenterfrontier.com)
1sockchuck writes: A public utility in Washington state wants to raise rates for high-density power users, citing a flood of requests for electricity to power bitcoin mining operations. Chelan County has some of the cheapest power in the nation, supported by hydroelectric generation from dams along the Columbia River. That got the attention of bitcoin miners, prompting requests to provision 220 megawatts of additional power. After a one-year moratorium, the Chelan utility now wants to raise rates for high density users (more than 250kW per square foot) from 3 cents to 5 cents per kilowatt hour. Bitcoin businesses say the rate hike is discriminatory. But Chelan officials cite the transient nature of the bitcoin business as a risk to recovering their costs for provisioning new power capacity.
Bitcoin miners are only making money speculatively. No reason the power company shouldn't treat servicing them the same way.
Bitcoin businesses say the rate hike is discriminatory
So what? There are only a very few things (race, ethnicity, etc) that you can't legally use to discriminate. Being a bitcoin miner is not one of them.
Any new capacity probably actually costs more than 5 cents per kWh for customers of under 5-10 yrs duration, depending on energy source.
This seems like an issue of how you want to allocate the costs of risk, not a terribly uncommon problem: Building the additional capacity will cost the utility a nontrivial amount of money, and if the demand that originally justified the buildout dries up, they won't exactly be able to return it for a refund(and, if they can't operate it profitably, its resale value is unlikely to be very exciting).
Unless one simply wishes to deny that, and pretend that this sort of capital investment is risk free, which is silly; the question is really just how the cost of the risk is paid: If you want the utility to bear the risk, giving you the ability to purchase or not purchase power from month to month as you see fit; they'll want to make up the cost of the risk by increasing the price. If you offer to take on the risk; but making a long-term commitment to purchasing a given amount of power, I'm sure they'd be happy to offer you a suitably lower rate.
This is only 'discriminatory' if, in fact, 'bitcoin businesses' are not a more volatile and hard to predict customer base than other electricity users; but the utility is just treating them as though they are. If they are in fact more unpredictable, it is only reasonable that the utility would want them to pay more: the rate you pay is basically their operating costs, plus the cost of the initial investment in building the generating capacity. If you are highly predictable, they'll be content to be paid back for that over the long term. If you might be gone in six months without a replacement, they need to be repaid faster. Not fundamentally different from paying more for credit if you are considered a lousy repayment risk.
The issue is demand volatility: when you incur a large capital cost to build a generating unit, you need to set the price such that you cover operating expenses and recover the capital cost before the end-of-life of the unit.
If your customers are 100% predictable, there is room for squabbling about how much profit you get(and added complexity because the time value of money may change depending on conditions in other markets); but it is relatively simple to set a price that meets this goal.
If there is a nontrivial risk that a source of demand may arrive, require a new build-out, and then vanish relatively quickly; you'll lose most of your initial investment unless you set rates to recover that investment over a shorter timespan.
Consider the two (largely hypothetical, but convenient) limit cases: if you want to buy a new power plant, nobody will sell for less than the amount of money it costs to build it. If you are buying power from a plant with perfectly stable demand and an unlimited lifespan, your rate would closely approach the cost of production as the initial investment can easily be recovered.
In real life, obviously, no source of demand is 100% risk free; and utility customers are not asked to pay 100% of the price of the infrastructure up front; but different sorts of customers are more and less risky(both in that they, individually, will leave unexpectedly; and more importantly that they and everyone like them might experience a highly correlated change in demand and leave all at once without replacement).
For not terribly shocking reasons, this utility suspects that bitcoin miners are (a)risky and (b) likely to enter or exit the market in large groups, unpredictably. Depending on what the price of bitcoins does, miners can either demand as much electricity as you can deliver to them, or potentially shut down everything but the emergency lights in a matter of minutes to hours if mining becomes uneconomic.
It's not that they care what you use the electricity for, it's that they care how likely you are to be a predictable customer. It's like why getting a hotel room for a night is more expensive, per hour, than getting an equivalent apartment for a year: it's not that the sellers care what you are doing with the room; but they do care about the odds that they'll have a paying customer for it on any given day.