What's at Stake?
Crypto plans in power negotiations would cost Citizens of POC millions, throttle local economy
Cascade Digital Mining, the LLC representing the bitcoin-mining joint venture between Beijing's Bitmain and Allrise Capital, recently began negotiations with our PUD for a new power contract to take effect in October. The stakes for the residents and businesses of Pend Oreille County are enormous.
If Allrise/Bitmain get their way, residents and businesses will face substantially higher power rates, our citizen-owned PUD will risk financial insolvency, and the county's economy will be throttled.
Based on records describing their previous negotiations obtained through public records requests and public statements and actions, it appears that Allrise/Bitmain will be seeking at least three major changes to their existing contract that would be disastrous to our PUD and its citizen-owners.
1. They want our PUD's other customers to subsidize their electricity by transferring part of the cost of purchasing their higher-priced market power to all PUD customers.
2. They want our PUD's citizen-owners to accept and pay for the risk collateralization of their high-risk business,
3. They want to nullify our PUD's lucrative and highly beneficial long-term contract with Clark County PUD for the output of our Box Canyon Dam and force our PUD to sell them the power at a monetary loss to its citizen-owners.
Allrise/Bitmain do not want and cannot afford a long-term contract with our PUD, but desperately needs the lower power costs that such a contract would offer. So, they have adopted a bait and switch strategy by invoking the financially impractical and effectively infeasible restart of the former PNC paper mill. By combining the mill siren song with misinformation campaigns by their local surrogates seeking to discredit our PUD, they hope to manufacture public pressure they can leverage against our PUD's management and commissioners to accede to a power contract that would otherwise be imprudent and unreasonable.
Let's examine each of these changes.
1. Subsidizing Beijing's Bitcoins. As we previously reported here: PUD Industrial Policy protects low rates for residents and businesses, Does NOT hurt economic growth - PROTECT PEND OREILLE, because Allrise/Bitmain's power requirements are more than three times the rest of the county combined and far exceed our PUD's own electricity resources, our PUD must purchase enormous quantities of electricity for sources outside of the County. Because Allrise/Bitmain neither wants nor can afford a long-term contract, this power is purchased on a month-ahead basis on the volatile Mid-Columbia Hub market. Since Allrise/Bitmain began large-scale bitcoin mining last September, these prices averaged more than 14 cents per kilowatt hour (compared to the 6.34 cents PUD residential customers currently pay). Our PUD requires that Allrise/Bitmain (and any other equally needy potential customer) pay for the extra cost involved in purchasing this power for their exclusive use instead of averaging the cost among all its customers-- which would raise rates for everyone else. Allrise/Bitmain is currently conducting a misinformation campaign through its local executives and surrogates who are claiming that our PUD's policy for its large industrial customers may be constraining economic growth in the County. See the report linked at the beginning of this paragraph to see why that is not the case.
2. Get citizens to pay for the risk. Just in case you have been living in a hole for the last year, Crypto is a high-risk industry and Allrise/Bitmain's recent fortune (or more accurately their lack of a recent fortune) is representative of the risk. However, the combination of crypto and Allrise Capital is even higher risk. During negotiations last summer, Merkle CEO Steve Wood complained the about having to obtain a $16 million performance guarantee that would protect our PUD's citizen owners against default, even though as former CFO of the PNC mill, Wood was intimately aware of how the mill's inadequate risk collateralization saddled the residents of Pend Oreille County with $22 million in debt that triggered large rate increases for customers. And Allrise's financials have likely worsened since last summer as most of their investments plummeted in value. At the public PUD meeting on March 7, Allrise/Bitmain local execs begged our PUD for a 50 percent reduction in their risk collateral. Fortunately, our PUD declined such a large decrease because less than a week later, Allrise/Bitmain failed to make their power payment after the top three crypto-servicing banks in the US, including Allrise's servicer, Silicon Valley Bank, failed within one week.
3. Box Canyon for Bitcoin. Allrise/bitmain is seeking to nullify our PUD's lucrative and beneficial contract with Clark County PUD for the future output of the Box Canyon Dam. This contract will bring as much $400 million dollars into Pend Oreille County over its fifteen years and will protect the financial position of our PUD, which is essential to low rates for customers, maintaining and expanding our reliable electricity grid, and providing help to our neighbors in need. The contract is equivalent to a 15-year annuity that is low-risk, adjusts for inflation, and returns a 10 percent profit on top of the full cost of running Box Canyon Dam each year. Giving up millions of dollars each year in exchange for more bitcoin for Beijing and flimsy, ambiguous commitment to maybe, sometime think about restarting an unprofitable paper mill would be an unwarranted gamble of epic proportions.
Within a week of signing their current power contract last August, Allrise/Bitmain discovered that the gamble they had made on three cent per kilowatt hour market prices had not rolled a seven. Even though they had just conducted three months of negotiations without mentioning any power for paper, they suddenly discovered they could reopen the paper mill by November, but only on the condition that our PUD agree to provide them with discounted power from our Box Canyon Dam. The mill restart proposal was an obvious gambit to get cheaper power for Bitcoins, not for paper. In October, Bitmain/Allrise executives travelled to Vancouver, WA, and demanded that the Clark County PUD cancel its pending contract with our PUD for Box Canyon on the false grounds that the crypto crew had not been informed about the pending contract. See PUD Documents Show Allrise/Bitmain Misleading Public about Box Canyon Deal - PROTECT PEND OREILLE In February, they hired a lobbyist who tried to sell legislators on an bitcoin-exempting amendment to HB1416 that would have nullified our PUD's contract with Clark and compelled it to sell Box power at a discount for Beijing's bitcoin miming.
Allrise/Bitmain's bitcoin mining in Pend Oreille County has been a financial disaster so far. Their local executives in Cascade Digital Mining and Merkle Standard are becoming increasingly desperate. Look for the situation to explode into a publicized show-down in the coming months.
For more details:
About the papermill: PROTECT PEND OREILLE - Home
Bitcoin economics in Pend Oreille County: POC Cryptonomics - PROTECT PEND OREILLE
Box Canyon Dam and Bitcoin Mining: Box Canyon - PROTECT PEND OREILLE
If Allrise/Bitmain get their way, residents and businesses will face substantially higher power rates, our citizen-owned PUD will risk financial insolvency, and the county's economy will be throttled.
Based on records describing their previous negotiations obtained through public records requests and public statements and actions, it appears that Allrise/Bitmain will be seeking at least three major changes to their existing contract that would be disastrous to our PUD and its citizen-owners.
1. They want our PUD's other customers to subsidize their electricity by transferring part of the cost of purchasing their higher-priced market power to all PUD customers.
2. They want our PUD's citizen-owners to accept and pay for the risk collateralization of their high-risk business,
3. They want to nullify our PUD's lucrative and highly beneficial long-term contract with Clark County PUD for the output of our Box Canyon Dam and force our PUD to sell them the power at a monetary loss to its citizen-owners.
Allrise/Bitmain do not want and cannot afford a long-term contract with our PUD, but desperately needs the lower power costs that such a contract would offer. So, they have adopted a bait and switch strategy by invoking the financially impractical and effectively infeasible restart of the former PNC paper mill. By combining the mill siren song with misinformation campaigns by their local surrogates seeking to discredit our PUD, they hope to manufacture public pressure they can leverage against our PUD's management and commissioners to accede to a power contract that would otherwise be imprudent and unreasonable.
Let's examine each of these changes.
1. Subsidizing Beijing's Bitcoins. As we previously reported here: PUD Industrial Policy protects low rates for residents and businesses, Does NOT hurt economic growth - PROTECT PEND OREILLE, because Allrise/Bitmain's power requirements are more than three times the rest of the county combined and far exceed our PUD's own electricity resources, our PUD must purchase enormous quantities of electricity for sources outside of the County. Because Allrise/Bitmain neither wants nor can afford a long-term contract, this power is purchased on a month-ahead basis on the volatile Mid-Columbia Hub market. Since Allrise/Bitmain began large-scale bitcoin mining last September, these prices averaged more than 14 cents per kilowatt hour (compared to the 6.34 cents PUD residential customers currently pay). Our PUD requires that Allrise/Bitmain (and any other equally needy potential customer) pay for the extra cost involved in purchasing this power for their exclusive use instead of averaging the cost among all its customers-- which would raise rates for everyone else. Allrise/Bitmain is currently conducting a misinformation campaign through its local executives and surrogates who are claiming that our PUD's policy for its large industrial customers may be constraining economic growth in the County. See the report linked at the beginning of this paragraph to see why that is not the case.
2. Get citizens to pay for the risk. Just in case you have been living in a hole for the last year, Crypto is a high-risk industry and Allrise/Bitmain's recent fortune (or more accurately their lack of a recent fortune) is representative of the risk. However, the combination of crypto and Allrise Capital is even higher risk. During negotiations last summer, Merkle CEO Steve Wood complained the about having to obtain a $16 million performance guarantee that would protect our PUD's citizen owners against default, even though as former CFO of the PNC mill, Wood was intimately aware of how the mill's inadequate risk collateralization saddled the residents of Pend Oreille County with $22 million in debt that triggered large rate increases for customers. And Allrise's financials have likely worsened since last summer as most of their investments plummeted in value. At the public PUD meeting on March 7, Allrise/Bitmain local execs begged our PUD for a 50 percent reduction in their risk collateral. Fortunately, our PUD declined such a large decrease because less than a week later, Allrise/Bitmain failed to make their power payment after the top three crypto-servicing banks in the US, including Allrise's servicer, Silicon Valley Bank, failed within one week.
3. Box Canyon for Bitcoin. Allrise/bitmain is seeking to nullify our PUD's lucrative and beneficial contract with Clark County PUD for the future output of the Box Canyon Dam. This contract will bring as much $400 million dollars into Pend Oreille County over its fifteen years and will protect the financial position of our PUD, which is essential to low rates for customers, maintaining and expanding our reliable electricity grid, and providing help to our neighbors in need. The contract is equivalent to a 15-year annuity that is low-risk, adjusts for inflation, and returns a 10 percent profit on top of the full cost of running Box Canyon Dam each year. Giving up millions of dollars each year in exchange for more bitcoin for Beijing and flimsy, ambiguous commitment to maybe, sometime think about restarting an unprofitable paper mill would be an unwarranted gamble of epic proportions.
Within a week of signing their current power contract last August, Allrise/Bitmain discovered that the gamble they had made on three cent per kilowatt hour market prices had not rolled a seven. Even though they had just conducted three months of negotiations without mentioning any power for paper, they suddenly discovered they could reopen the paper mill by November, but only on the condition that our PUD agree to provide them with discounted power from our Box Canyon Dam. The mill restart proposal was an obvious gambit to get cheaper power for Bitcoins, not for paper. In October, Bitmain/Allrise executives travelled to Vancouver, WA, and demanded that the Clark County PUD cancel its pending contract with our PUD for Box Canyon on the false grounds that the crypto crew had not been informed about the pending contract. See PUD Documents Show Allrise/Bitmain Misleading Public about Box Canyon Deal - PROTECT PEND OREILLE In February, they hired a lobbyist who tried to sell legislators on an bitcoin-exempting amendment to HB1416 that would have nullified our PUD's contract with Clark and compelled it to sell Box power at a discount for Beijing's bitcoin miming.
Allrise/Bitmain's bitcoin mining in Pend Oreille County has been a financial disaster so far. Their local executives in Cascade Digital Mining and Merkle Standard are becoming increasingly desperate. Look for the situation to explode into a publicized show-down in the coming months.
For more details:
About the papermill: PROTECT PEND OREILLE - Home
Bitcoin economics in Pend Oreille County: POC Cryptonomics - PROTECT PEND OREILLE
Box Canyon Dam and Bitcoin Mining: Box Canyon - PROTECT PEND OREILLE