Commission meeting recap for June 26, 2018

Proposed new Rate 17 could mean big increase for crypto miners (1:59:20 on Commission Audio)

Cryptocurrency mining companies and other businesses that fit Grant PUD’s new “Evolving Industry” rate classification would see their monthly power bills more than double under a staff proposal presented to commissioners Tuesday.

The Evolving Industry rate classification would currently apply to cryptocurrency miners, but could apply to other businesses that fit the same risk profile.

Under the proposal, companies or individuals that operate their evolving-industry businesses under Residential Rate Class 1 — currently billed for service of less than 200 kilowatts — would be moved to the new Rate Schedule 17A. They’d then see their energy rate increase to just over 13 cents per kilowatt hour from the current 4.5 cents, and their basic monthly charge increase to $1.04 per day from the current 55 cents per day.

Larger evolving-industry businesses currently operating under Rate Schedule 7 (large commercial customers) would be moved to new Rate Schedule 17b. They’d then see their energy rate increase to 7.1 cents per kilowatt hour from the current approximately 2 cents per kilowatt hour. The basic charge would increase to $1,000 per month from the current $148.32 per month. Their demand charge would increase to $6 per kilowatt from the current $4.96.

The proposal would apply to both new and established evolving-industry businesses.

The proposal for the new Rate 17 is the result of seven months of Grant PUD staff analysis into how to provide service to these higher-risk customers while protecting the investments and safety of new and existing traditional customers.

Evolving industry businesses meet the following criteria:

  • They are vulnerable to changes in regulation that could render their industry unviable for the foreseeable future.
  • They lack a proven ability to pay power rates long term due to the price volatility of their main product.
  • They are part of a large concentration of like businesses whose collective requested demand for electricity exceeds 5 percent of Grant PUD’s total average load (energy demand) countywide. Total average load in Grant Count is currently just under 600 megawatts.

The proposed rate is consistent with Grant PUD’s rate-setting policy approved by commissioners as Resolution 8768. The policy requires rates to be set based on the cost to serve each customer class. The policy sets a target that by 2023 no rate class will pay less than 20 percent below its cost of service nor 15 percent above its cost.

The Evolving Industry Rate 17 also takes into account an added cost to compensate Grant PUD and its customers for the high cost of the high-capacity power lines, poles and transformers that would be left without users if these evolving-industry companies stopped operating here.

And, like Grant PUD’s industrial customers, who also use large amounts of electricity, the rate paid by the evolving industry companies would be set at a rate above the cost to supply them with power. This above-cost rate helps subsidize continued below-cost rates for Grant PUD’s “core” customers — residential, irrigators and small and medium-sized businesses.

Grant PUD Financial Analyst Jeremy Nolan said after Tuesday’s commission meeting that cryptocurrency miners who now pay a residential or small-business rate and use 10,000 kilowatt hours of energy monthly would see their monthly power bills increase to approximately $1,370 from their current $563.

Larger cryptocurrency operations that use 1 million kilowatt hours of energy monthly would see their bills increase to approximately $80,000 per month from the current $32,000.

These rates would be on top of new cost-to-connect fees currently under development that would cover costs to the PUD for engineering studies and upgrades to power lines, poles and transformers needed to serve these high-energy-use, evolving-industry customers. Grant PUD staff plans to discuss proposed cost-to-connect fees at the July 10 and 24 commission meetings.

Cryptocurrency miners and a consultant to the crypto industry told commissioners the proposed rates would put them out of business. They called the proposed increase “catastrophic,” “short-sighted” and an effort to “punish” those cryptominers who have been operating legally in Grant County, investing millions of dollars and creating jobs.

“This rate schedule does not seem to be a good idea to me,” said Jonathan Tommim, owner of a bitcoin mining operation in Moses Lake. He suggested a contract or other arrangement that would allow evolving-industry business to cover the added risk via a one-time payment, up-front, rather than elevated, ongoing monthly costs.

After hearing these comments, several commissioners asked staff for more discussion time and options.

Commissioner Bob Bernd asked for more information about Tommim’s suggestion of an up-front payment to lower monthly costs.

Commissioner Dale Walker added, “I feel with what we’ve seen so far, we need a better understanding of the charge up-front. It behooves us to take the time.”

Commission President Terry Brewer also supported more discussion, but emphasized that the volume of power requests Grant PUD has received from cryptocurrency operators caused enough concern for commissioners to agree to give PUD staff for analysis and solutions.

“We have to take into account the additional risk and what it means to the District,” Brewer said. “The most important thing we do here is protect our existing customer base.”

Grant PUD is accepting public comment on the new Rate 17 for evolving industry at commissioners@gcpud.org. Commissioners will take public comment on the proposed new rate during the afternoon session of the July 10 board meeting at Grant PUD headquarters in Ephrata.

Since summer 2017, Grant PUD has received an unprecedented 125 new service requests that total above 2,000 megawatts of electricity. This is more than three times the electricity needed to power all Grant County homes, farms, businesses and industry. Approximately 75 percent of these requests are from cryptocurrency firms. (See presentation pages 40-51 of staff reports)

During Tuesday’s business meeting commissioners:

Approved a motion to reset the delegated authority level to a contract with Winterbauer & Diamond for legal services related to employment matters.  The original contract was awarded in February 2005 and the firm provides a familiarity with Grant PUD’s policies and procedures to help Grant PUD manage employment matters and defending claims. (3:15:10 of commission audio and pages 11-14 of the commission packet)

Approved a motion for a change order to a contract with Hatch Associates Consultants, Inc. increasing the not-to-exceed price of the contract by $458,000 to a new contract total of $1,998,000.  Hatch is a consultant used by Grant PUD to help evaluate the spillway at Priest Rapids Dam perform multiple roles including onsite engineering support for the most recent investigation of the internal lift joints throughout the Priest Rapids spillway.  (3:16:25 of commission audio and pages 14-19 of the commission packet)

Approved a motion for change order to a contract with Cornforth Consultants, increasing the not-to-exceed price of the contract by $500,000 to a new total of $800,000.  Grant PUD awarded a dam safety consultant contract in November 2017 with Cornforth. The contract allowed the company to provide geotechnical related engineering assistance and support seismic analysis for the embankment sections of Wanapum Dam.  Grant PUD has asked them to expand their work within the district and the approval of the change order will allow Cornforth to provide on-going dam safety and engineering support.  (3:17:30 of commission audio and pages 20-24 of the commission packet)

The commission also:

-Heard from Security Manager, Nick Weber, as he provided the quarterly update from Grant PUD’s Security Department. The security group monitors the District 24/7. To date their group has performed more than 7,000 patrol actions of Grant PUD facilities and structures. Weber highlighted a number of their key projects and showed commissioners the new electronic keys that will be used at substations and other perimeter access points across Grant PUD.  The electronic cores fit into Grant PUD’s existing padlocks and doors it also provides the ability to electronically turn off access to individual keys. It also provides insight into who is accessing the various location sites.

He also showcased a doorstop device that can be jammed into the bottom of a door and securing itself to the floor so that it makes it nearly it impossible for someone to force the door open from the outside.  The device helps to make any room a safe room in the case of an active assailant and will be used throughout the district.   (1:46:10 of commission audio and pages 25-39 staff reports)

-Heard Gary Varney of the Desert Aire Home Owners Association describe how burglaries in the Columbia River-side subdivision, near Mattawa, are on the rise. Residents suspect the burglars are accessing their private properties from the Priest Rapids Recreation Area, a nearby campground, pedestrian trail and natural area owned and managed by Grant PUD. Varney also described suspected drug deals, loitering and unlawful mischief happening after hours at the Recreation Area and how Desert Aire residents have not had good response from the Grant County Sheriff’s Office, nor from Grant PUD’s contracted security company. Varney said Desert Aire residents have hired their own security company and suggested Grant PUD use or coordinate with that same company for better security. Commissioners expressed interest in learning more. (3:03:30 of commission audio)

Received reports regarding the following topics:

  • Monthly Safety Report and quarterly update from Safety and Industrial Training report by Craig Bressan (1:01:45 commission audio and pages 1-24 staff reports)
  • An update regarding the status of the Enterprise Technology Roadmap Project by Derin Bluhm (3:36:40) commission audio and pages 52-62 staff reports)

Next commission meeting: July 10, Ephrata Headquarters

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