Understanding how our PUD gets power for its customers is key to recognizing misinformation
Allrise/Bitmain claim that the control of our Box Canyon Dam is essential to restarting the former Ponderay Newsprint Company paper mill in Usk is a red herring designed to distract our PUD’s citizen-owners away from the fact that they need to derail our current and future contracts with Shell Energy and Clark County PUD which could force the PUD to sell them steeply discounted electricity to salvage their failing Bitcoin mining business. But his discount for Beijing’s Bitcoin mining would have to be paid out of the pocketbooks of the residents and business of Pend Oreille County.
Recognizing the Red Herring requires understanding how our PUD gets the electricity it provides to its customer-owners.
The electricity for the citizens and businesses of Pend Oreille County is provided by Pend Oreille County's Public Utility District (PUD). The PUD is a citizen-owned, public nonprofit corporation that provides power and transmission services. Our PUD serves around 9,600 customers throughout the county.
Our PUD is part of a larger grid of federal, county, municipal, and private (for-profit) power utilities that make up an electrical grid organized around the watershed of the Columbia River. This regional electricity grid is called the Mid-Columbia Hub (Mid-C).
These numerous utilities-- there are a total of 40 in Washington-- are connected together by the federal nonprofit Bonneville Power Administration (BPA). The BPA has substantial electricity generating ability of its own, including the Albeni Falls Dam which is operated by the US Army Corps of Engineers. The BPA also owns the transmission infrastructure, like transmission lines and substations, which connect utilities and power producers into a grid.
Our PUD has four sources of power from which it can serve its industrial, commercial, and residential customers. From least expensive to most expensive they are:
1) ~ 44 MW Assignment from Boundary Dam near Metaline Falls (operated by Seattle Power and Light)
2) ~ 24 MW Block from BPA at Tier 1 pricing (BPA cost)
3) ~ 52 MW Production from Box Canyon Dam near Ione (owned and operated by our PUD)
4) Mid-Columbia Hub Market (limited only by power infrastructure)
Boundary Dam
While it is located in Pend Oreille County near the US boundary with Canada, Boundary Dam is owned and operated by the municipal utility Seattle Power and Light. At 340 feet tall, the Boundary Dam can generate over a gigawatt of electricity. Before Boundary Dam was constructed, both our PUD and Seattle Power and Light wanted to build a hydroelectric dam at the site. The federal government ultimately chose Seattle Power and Light to build and operate the dam instead of our PUD. However, as a compromise to our PUD and the citizens of the county, the federal government mandated that Seattle Power and Light “assign” a certain amount of the electricity generated by the dam to our PUD at cost. The low cost of this power is why we pay substantially less for electricity for our homes and business than the State and National averages.
But there is a limit to this least expensive electricity. In 2021our PUD was able to negotiate an increase in that assignment to around 44 megawatts. This assignment of electricity from Boundary Dam is sufficient to meet the electricity requirements of all of our PUD’s current residential, commercial, and industrial customers. This assignment will also be able to fully meet additional growth in our county for some time to come. The single exception is CDM because their electricity requirements are several times the total average assignment from Boundary Dam.
However, the assignment from Boundary Dam does not provide our PUD with the same amount of electricity every month. The amount our PUD receives is “shaped” to match our County’s differing seasonal requirements. For example, the assignment during the winter months when we need more electricity to heat our homes peaks at around 65 megawatts before dropping closer to 30 megawatts during the warmer summer months.
Recognizing the Red Herring requires understanding how our PUD gets the electricity it provides to its customer-owners.
The electricity for the citizens and businesses of Pend Oreille County is provided by Pend Oreille County's Public Utility District (PUD). The PUD is a citizen-owned, public nonprofit corporation that provides power and transmission services. Our PUD serves around 9,600 customers throughout the county.
Our PUD is part of a larger grid of federal, county, municipal, and private (for-profit) power utilities that make up an electrical grid organized around the watershed of the Columbia River. This regional electricity grid is called the Mid-Columbia Hub (Mid-C).
These numerous utilities-- there are a total of 40 in Washington-- are connected together by the federal nonprofit Bonneville Power Administration (BPA). The BPA has substantial electricity generating ability of its own, including the Albeni Falls Dam which is operated by the US Army Corps of Engineers. The BPA also owns the transmission infrastructure, like transmission lines and substations, which connect utilities and power producers into a grid.
Our PUD has four sources of power from which it can serve its industrial, commercial, and residential customers. From least expensive to most expensive they are:
1) ~ 44 MW Assignment from Boundary Dam near Metaline Falls (operated by Seattle Power and Light)
2) ~ 24 MW Block from BPA at Tier 1 pricing (BPA cost)
3) ~ 52 MW Production from Box Canyon Dam near Ione (owned and operated by our PUD)
4) Mid-Columbia Hub Market (limited only by power infrastructure)
Boundary Dam
While it is located in Pend Oreille County near the US boundary with Canada, Boundary Dam is owned and operated by the municipal utility Seattle Power and Light. At 340 feet tall, the Boundary Dam can generate over a gigawatt of electricity. Before Boundary Dam was constructed, both our PUD and Seattle Power and Light wanted to build a hydroelectric dam at the site. The federal government ultimately chose Seattle Power and Light to build and operate the dam instead of our PUD. However, as a compromise to our PUD and the citizens of the county, the federal government mandated that Seattle Power and Light “assign” a certain amount of the electricity generated by the dam to our PUD at cost. The low cost of this power is why we pay substantially less for electricity for our homes and business than the State and National averages.
But there is a limit to this least expensive electricity. In 2021our PUD was able to negotiate an increase in that assignment to around 44 megawatts. This assignment of electricity from Boundary Dam is sufficient to meet the electricity requirements of all of our PUD’s current residential, commercial, and industrial customers. This assignment will also be able to fully meet additional growth in our county for some time to come. The single exception is CDM because their electricity requirements are several times the total average assignment from Boundary Dam.
However, the assignment from Boundary Dam does not provide our PUD with the same amount of electricity every month. The amount our PUD receives is “shaped” to match our County’s differing seasonal requirements. For example, the assignment during the winter months when we need more electricity to heat our homes peaks at around 65 megawatts before dropping closer to 30 megawatts during the warmer summer months.
BPA Block Contract
The second least expensive source of power that our PUD uses is electricity produced by the federal Bonneville Power Administration. Our PUD has a contract with BPA for a fixed block of electricity averaging 24 megawatts a month that goes through 2028. Because the BPA is itself a federal nonprofit corporation, our PUD is able to purchase this block (and only the amount of this block) at cost.
Like the assignment of power from Boundary Dam, the amount of electricity our PUD receives from the BPA each month is also “shaped.” For example, in January when the County’s electricity needs peak because of the cold, our PUD receives 54 megawatts, but only receives 10 megawatts in August. In May and June, when the Mid-C market price for electricity is typically cheapest due to melting snowpack maximizing regional hydropower, our PUD receives no power form the BPA. In addition to the generation cost, our PUD must also pay transmission costs for the power.
Electricity from the BPA is not CETA-compliant. The BPA currently does not specify the source the electricity comes from.
Box Canyon
Our PUD owns and operates Box Canyon Dam near Ione. Box Canyon Dam produces only a small fraction (only 5 to 8%) of the amount of electricity produced by its downstream companion, Boundary Dam. Box Canyon Dam is both substantially smaller and is a different type of dam (called run-of-the-rive). Box Canyon Dam has a maximum electricity generation ability of 90 megawatts, but typically produces an average of 52 megawatts because of seasonal variations in river flow due to melting snowpack or drought conditions. Because of its smaller scale, Box Canyon power is also more expensive to produce—around $15 more per megawatt than the BPA’s average.
Our PUD currently contracts with Shell Energy for total electricity output from the dam. Last October, our PUD entered into a lucrative contract with Clark County PUD for the dam power from 2025-2041. This contract covers the cost of the dam plus a 10 percent annual "profit" that will financially benefit the County's residents.
The second least expensive source of power that our PUD uses is electricity produced by the federal Bonneville Power Administration. Our PUD has a contract with BPA for a fixed block of electricity averaging 24 megawatts a month that goes through 2028. Because the BPA is itself a federal nonprofit corporation, our PUD is able to purchase this block (and only the amount of this block) at cost.
Like the assignment of power from Boundary Dam, the amount of electricity our PUD receives from the BPA each month is also “shaped.” For example, in January when the County’s electricity needs peak because of the cold, our PUD receives 54 megawatts, but only receives 10 megawatts in August. In May and June, when the Mid-C market price for electricity is typically cheapest due to melting snowpack maximizing regional hydropower, our PUD receives no power form the BPA. In addition to the generation cost, our PUD must also pay transmission costs for the power.
Electricity from the BPA is not CETA-compliant. The BPA currently does not specify the source the electricity comes from.
Box Canyon
Our PUD owns and operates Box Canyon Dam near Ione. Box Canyon Dam produces only a small fraction (only 5 to 8%) of the amount of electricity produced by its downstream companion, Boundary Dam. Box Canyon Dam is both substantially smaller and is a different type of dam (called run-of-the-rive). Box Canyon Dam has a maximum electricity generation ability of 90 megawatts, but typically produces an average of 52 megawatts because of seasonal variations in river flow due to melting snowpack or drought conditions. Because of its smaller scale, Box Canyon power is also more expensive to produce—around $15 more per megawatt than the BPA’s average.
Our PUD currently contracts with Shell Energy for total electricity output from the dam. Last October, our PUD entered into a lucrative contract with Clark County PUD for the dam power from 2025-2041. This contract covers the cost of the dam plus a 10 percent annual "profit" that will financially benefit the County's residents.
Mid-Columbia Hub Market
The last, and currently most expensive, source of electricity is the Mid-Columbia Hub. Our PUD can purchase electricity on an exchange and pay other utilities or the PUD to move that electricity through the grid to the County. Should our PUD have excess power from its assignment of power from Boundary Dam or its BPA Block Contract beyond the needs of its other customers, it will sell that power to Allrise/Bitmain. However, our PUD rarely has substantial amounts of power left over, let alone amounts near what Bitcoin mining requires. Accordingly, Allrise/Bitmain must therefore purchase the electricity for most of their needs from the Mid-C market (through our PUD).
Variability of cost is the most significant attribute of market power. In the past the price of market power has frequently been lower than the cost of power from Box Canyon Dam. At the time Allrise Capital purchased the PNC paper mill in spring 2021, market power was, and was expected to continue to be, substantially less expensive than electricity produced by Box Canyon. At that time, Ms. Kim Gentle, spouse of County Commissioner John Gentle, was working with current local Allrise/Bitmain executives Monty Stahl and Russ Pelleberg on another large crypto business venture. She reported to Pelleberg that the Mid-C market price would stay around three cents per kilowatt hour ($30 / mwh) over the next decade – less than two-thirds the cost of Box Canyon power. Accordingly, Allrise/Bitmain was not interested in Box Canyon power.
However, in 2022 the end of Covid lockdowns combined with drought and extreme weather conditions in the Western US caused the price of
market power to surge making "market power" the most expensive source of electricity for our PUD-- at least right now. Market prices may decrease significantly in the future-- or not.
The chart below shows the price of Mid-C market power between 2021 and March 2023.
The last, and currently most expensive, source of electricity is the Mid-Columbia Hub. Our PUD can purchase electricity on an exchange and pay other utilities or the PUD to move that electricity through the grid to the County. Should our PUD have excess power from its assignment of power from Boundary Dam or its BPA Block Contract beyond the needs of its other customers, it will sell that power to Allrise/Bitmain. However, our PUD rarely has substantial amounts of power left over, let alone amounts near what Bitcoin mining requires. Accordingly, Allrise/Bitmain must therefore purchase the electricity for most of their needs from the Mid-C market (through our PUD).
Variability of cost is the most significant attribute of market power. In the past the price of market power has frequently been lower than the cost of power from Box Canyon Dam. At the time Allrise Capital purchased the PNC paper mill in spring 2021, market power was, and was expected to continue to be, substantially less expensive than electricity produced by Box Canyon. At that time, Ms. Kim Gentle, spouse of County Commissioner John Gentle, was working with current local Allrise/Bitmain executives Monty Stahl and Russ Pelleberg on another large crypto business venture. She reported to Pelleberg that the Mid-C market price would stay around three cents per kilowatt hour ($30 / mwh) over the next decade – less than two-thirds the cost of Box Canyon power. Accordingly, Allrise/Bitmain was not interested in Box Canyon power.
However, in 2022 the end of Covid lockdowns combined with drought and extreme weather conditions in the Western US caused the price of
market power to surge making "market power" the most expensive source of electricity for our PUD-- at least right now. Market prices may decrease significantly in the future-- or not.
The chart below shows the price of Mid-C market power between 2021 and March 2023.
Notes on chart:
Prices are in dollars per megawatt hour (mwh). Prices were cut off at $200 per mwh for charting purposes.
The green line marks the future market price Allrise/Bitmain expected at the time they purchased the PNC mill.
The red line marks the average cost to produce Box Canyon power.
The black line marks the trend in market power prices since 2020.
Prices are in dollars per megawatt hour (mwh). Prices were cut off at $200 per mwh for charting purposes.
The green line marks the future market price Allrise/Bitmain expected at the time they purchased the PNC mill.
The red line marks the average cost to produce Box Canyon power.
The black line marks the trend in market power prices since 2020.
Bitcoin Mining Requires 3x More Electricity than the rest of Pend Oreille County combined
Allrise Capital and Bitmain control a joint venture LLC named Cascade Digital Mining (CDM) that purchases the required electricity for Bitcoin mining from our PUD. How do CDM's power requirements compare to the power available to our PUD?
The following chart shows the number of customers by type and the revenue received in 2021, which is a good base year for comparison because neither the mill nor the crypto facility was operating.
The following chart shows the number of customers by type and the revenue received in 2021, which is a good base year for comparison because neither the mill nor the crypto facility was operating.
This chart illustrates two important facts:
1) The value of our PUD's $22 million/year contract with Clark County PUD for the electricity of the Box Canyon Dam is more than our PUD's revenue from all of its industrial, commercial, and residential customers combined in 2021.
2) Cascade Digital Mining requires substantially more power than the rest of the County put together-- more than 3x more.
The following chart compares Cascade Digital Mining’s power requirements with the requirements of our PUD’s other 11 industrial customers and 9,600 total customers. The first column shows CDM’s annual requirement in megawatt hours. The second column compares CDM's requirements with all other industrial customers in the County. The last column compares their requirements with all other industrial, commercial, and residential customers in the county. This shows that the CDM’s requirements substantially exceed the total generational capacity of the PUD and that CDM will require substantial purchases of market power even if they had access to Box Canyon power.
1) The value of our PUD's $22 million/year contract with Clark County PUD for the electricity of the Box Canyon Dam is more than our PUD's revenue from all of its industrial, commercial, and residential customers combined in 2021.
2) Cascade Digital Mining requires substantially more power than the rest of the County put together-- more than 3x more.
The following chart compares Cascade Digital Mining’s power requirements with the requirements of our PUD’s other 11 industrial customers and 9,600 total customers. The first column shows CDM’s annual requirement in megawatt hours. The second column compares CDM's requirements with all other industrial customers in the County. The last column compares their requirements with all other industrial, commercial, and residential customers in the county. This shows that the CDM’s requirements substantially exceed the total generational capacity of the PUD and that CDM will require substantial purchases of market power even if they had access to Box Canyon power.
It is significant to note that our PUD's second largest industrial customer after CDM uses only 2 percent of the electricity that CDM requires. These numbers show why our PUD has a policy that requires industrial customers that use more than 2 megawatts of electricity to purchase electricity from the Mid-C market. Our PUD also requires CDM (and any other potential industrial customer with similar outsized power requirements) to bear the potential extra cost of market power instead of passing the higher costs on to its other customers in the form of higher rates. CDM would like to change this policy and transfer responsibility for its higher power costs to our PUDs other customers.
Box Canyon Dam won't meet Cascade Digital Mining's Bitcoin mining needs, let alone power a paper mill as well
The Box Canyon Dam has a maximum output of 90 MW but actually produces an average of 52 MW due to seasonal variations in water conditions. The Box Canyon Dam is not a good direct source for an industrial facility because of the variation in output throughout the year.
The following chart compares the current and projected requirements of Cascade Digital Mining against the production of the Box Canyon Dam. It shows how many Box Canyon Dams would be required to meet Cascade Digital Mining’s current and reported future electricity requirements. For example, just to meet CDM’s current electricity requirement for its Bitcoin mining operations would require 1.9 Box Canyon Dams.
The following chart compares the current and projected requirements of Cascade Digital Mining against the production of the Box Canyon Dam. It shows how many Box Canyon Dams would be required to meet Cascade Digital Mining’s current and reported future electricity requirements. For example, just to meet CDM’s current electricity requirement for its Bitcoin mining operations would require 1.9 Box Canyon Dams.
Conclusions
1) Our PUD treats Cascade Digital Mining differently from the rest of its customers because it has to. CDM's power requirements substantially exceed the PUD's native resources. Our PUD has done its best to meet CDM's requirements with the lowest-cost power available without unfairly transferring CDM's costs to the rest of its customers. The price of power provided by our PUD to CDM would be extraordinarily competitive for almost any other industry.
2) The scale of the amount of electricity for CDM's current and projected needs dwarfs the requirements for our PUD's other 9,600 industrial, commercial, and residential customers AND our PUD's sources for non-market and CETA-compliant electricity.
3) CDM's current financial difficulties are largely due to the failure of Allrise Capital to conduct basic due diligence by reviewing the known limitations of the power infrastructure supporting the former PNC paper mill and our PUD's ability to provide the extraordinarily large amounts of power required for crypto mining from its native resources.
4) Box Canyon Dam can not meet the electricity requirements for either CDM's existing Bitcoin mining or a paper mill, let alone both. However, the output of Box Canyon Dam combined with the total BPA Block Contract would provide could provide just enough electricity to meet CDM's current Bitcoin mining operation most months of the year.
5) Allrise/Bitmain seek to nullify our PUD's recent contract with Clark County PUD for the output of the Box Canyon Dam so that our PUD would be forced to sell the output to them at a discounted rate and without a long-term contract (which they cannot afford). This could increase the potential profitability of their Bitcoin mining operations but at a significant financial loss to the residents of Pend Oreille County.
6) Our PUD has sufficient sources of inexpensive, clean energy to support a substantially higher growth rate than our County has experienced over the last decade for the foreseeable future.
2) The scale of the amount of electricity for CDM's current and projected needs dwarfs the requirements for our PUD's other 9,600 industrial, commercial, and residential customers AND our PUD's sources for non-market and CETA-compliant electricity.
3) CDM's current financial difficulties are largely due to the failure of Allrise Capital to conduct basic due diligence by reviewing the known limitations of the power infrastructure supporting the former PNC paper mill and our PUD's ability to provide the extraordinarily large amounts of power required for crypto mining from its native resources.
4) Box Canyon Dam can not meet the electricity requirements for either CDM's existing Bitcoin mining or a paper mill, let alone both. However, the output of Box Canyon Dam combined with the total BPA Block Contract would provide could provide just enough electricity to meet CDM's current Bitcoin mining operation most months of the year.
5) Allrise/Bitmain seek to nullify our PUD's recent contract with Clark County PUD for the output of the Box Canyon Dam so that our PUD would be forced to sell the output to them at a discounted rate and without a long-term contract (which they cannot afford). This could increase the potential profitability of their Bitcoin mining operations but at a significant financial loss to the residents of Pend Oreille County.
6) Our PUD has sufficient sources of inexpensive, clean energy to support a substantially higher growth rate than our County has experienced over the last decade for the foreseeable future.