Cheney powers bitcoin mining

Cheney Light Department Director Steve Boorman said it’s not typical practice for utilities to enter into involved contracts with potential industrial users. In fact, contracts with these customers are seldom required at all.

But in the case of the new customer occupying the former AMX/Harman site on Cheney-Spokane Road, Boorman and other city officials felt the power demands being made merited just such a move — which the City Council unanimously approved, with the exception of Councilman Dan Hilton who was absent, at its March 13 meeting.

The council approved two separate resolutions with BitPro, a bitcoin mining company setting up shop in the former location of the company that designs and engineers products including car stereos, audio and visual products, automation solutions and connected services. AMX/Harman began shutting its doors in May 2017, officially letting its final Cheney employees go in October.

Bitcoin is a cyber currency that is attached to no centralized government or bank, such as the dollar is attached to the U.S. government through its production and financial backing. Mining bitcoins is complex, requires a lot of math, special computer programs to analyze transactions and — specifically to Cheney and BitPro — a lot of power.

In a March 19 interview, Boorman said Cheney typical usage averages 18-19 megawatts (mw). Over the last year, peak usage hit 28.6 mw during a very cold January 2017, with the low point of 18.5 MW coming in September.

Within that that average, Eastern Washington University uses an average of 6-7 MW of power over its 329-acre campus. By contrast, the much smaller BitPro on Cheney-Spokane is proposing to use an average of 3 mw.

“These guys are pushing half the size (in power usage) the size of Eastern,” Boorman told the council.

The council first approved a contract that spelled out terms of the five-year agreement such as termination rights, responsibilities of each party regarding infrastructure, established the rate structure and — unique to the user — set up a method of calculating a “prepayment security” — essentially a deposit. The prepayment security requires BitPro to pay Cheney the equivalent of two months of “total expected monthly charges and payments,” with the city holding onto the prepayment amount in a way that it “constitutes available funds of Cheney and may be used by Cheney for any purpose under this contract.”

The amount will be based on “installed capacity,” and Boorman said this could be done in phases. Based upon the contract’s formula, BitPro could be required to prepay $77,000 for 1 mw of installed capacity, $153,000 for 2 mw and $229,000 for 3 mw installed capacity.

“I don’t know if they’ll (BitPro) go all in or in phases,” Boorman said. “It’s up to them the way they want to go.”

The contract also requires the city to design and build distribution facilities as it determines are needed to provide power, but with BitPro paying the entire quoted amount prior to any construction. To this need, the council approved the purchase of two, 13.2 kilovolt, 1,000 kilovolt amp transformers, valued at just over $67,000 at its Jan. 16 meeting.

Boorman said the transformers have not been ordered yet from Cooper Power Systems.

Finally, the contract also includes a termination clause that city attorney Stanley Schwartz told the council is similar to clauses for failure to pay set up with regular utility customers.

BitPro is currently an existing customer whose power usage hasn’t gone over its current load requirements yet. Boorman said he didn’t know when they will begin requiring more power, and added they were not built into the city’s load forecast in 2017 when it estimated it would require 1.924 mw of additional power this year, and 2.143 mw in 2019.

Boorman said BitPro’s power needs shouldn’t affect Cheney’s Tier 2 power purchases, which are done from third-parties in megawatt blocks. Tier 1 power from the Bonneville Power Administration will most likely be able to accommodate the usage, with the rate Cheney pays for its power getting recalculated as it does every two years when BPA analyzes the peaks and valleys of power usage by its utility customers.

“The additional (power usage) will get picked up by the load shaping charge,” Boorman added.

John McCallum can be reached at [email protected].