PLATTSBURGH — The City of Plattsburgh is moving toward installing a moratorium on energy-sucking commercial cryptocurrency mining operations.
Such a moratorium may be the first of its kind in the nation, Mayor Colin Read said.
"This would give us some time and allow us to explore this more," he said.
"This has increased our power usage and put us over our threshold, and it is affecting our ratepayers."
The problem is that mining for cryptocurrency, such as Bitcoin, absorbs a tremendous amount of energy in generating the virtual currency, explained Municipal Lighting Department Manager Bill Treacy.
The miners identify cryptocurrency using computer banks that run complex algorythims for hours on end. The computer banks use so much energy that they throw off massive amounts of heat.
Treacy says there are two mining farms in the city that they know of — one in the former Imperial Mill and one in Skyway Plaza.
There may be some smaller private mining operations in households in the city, he said.
According to Investopedia, a cryptocurrency is a digital or virtual currency that uses cryptography for security.
"The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto.
"As of September 2015, there were over 14.6 million Bitcoins in circulation with a total market value of $3.4 billion."
That success has led to other competing cryptocurrencies, among them Litecoin and PPCoin, the site says.
Cryptocurrency miners could be considered the modern-day version of the prospectors of the 1848 California Gold Rush.
Bitcoins are mined in units called "blocks," according to Investopedia. As of mid February, the reward — offered by Nakamoto — for completing a block was 12.5 Bitcoin or, calculated at $10,000 per Bitcoin at present-day values, $125,000.
Only the first person to accumulate that block gets a payout, Investopedia said.
DRIVES UP COST
The mining farms in the City of Plattsburgh have cropped up over the past year, officials say.
And at times they have used up to 11.2 megawatts of power per month, which can be about 10 percent of the city's power supply — more than is consumed by Georgia-Pacific, one of the city's largest users.
As part of the Municipal Electric Utility Association since the 1950s, the city is allotted a certain amount of inexpensive hydropower generated on the St. Lawrence River.
The cheap power has allowed the city to maintain attractive electric rates for households and businesses for more than half a century. At one time, the city was touted as having some of the lowest rates in the nation.
But when usage is high, the system is in jeopardy of going over its allotment of inexpensive hydropower.
When that happens, the city must buy much more-expensive power on the open market to supplement its supply, which drives up the cost for consumers, Treacy said.
The hydropower costs 4.92 cents per megawatt hour, compared with 37 cents for alternative power.
BOUGHT MORE POWER
Treacy said the city had to buy additional expensive power in December and January of this winter, which had not been the case in recent winters.
The culprit was not only cryptocurrency mining operations but a long stretch of severely cold weather.
When the city has to purchase more power, its customers see a spike in their monthly bills.
Treacy said the average home will probably see an increase of $30 to $40 or more in their monthly bill.
"People are surprised when their bills are so high because they say that they turn the lights off when it is cold to save energy, but lights don't really use much power," he said. "It's the electric heat that is costly."
HEALTH AND SAFETY
Read said the moratorium is proposed not only to give the city time to explore the cost impact, but for health and safety factors.
Because of the heat created by mining operations, the city needs to be sure they are properly vented and prepared.
A local law to implement the moratorium was introduced at Thursday's council meeting.
A public hearing will be held in two weeks before the council votes on it.
"We will be looking to see if the Public Service Commission has any solutions to this," Read said.
— News Editor Suzanne Moore contributed to this report.