Environmental, Indigenous and Natural Resources Blog

On December 21, 2022, Order in Council No. 692 (OIC 692) came into effect, ultimately subjecting the BC Utilities Commission (BCUC) to the Direction entitled “British Columbia Utilities Commission Respecting Cryptocurrency Mining Projects” (the Direction).^[1] Ultimately, OIC 692 aims to preserve B.C.’s clean electricity supply to support the Province’s climate action and economic goals by suspending electricity connection requests from cryptocurrency mining (i.e., “crypto-mining”) operations for 18 months. In other words, the B.C. Government has temporarily paused the obligation of BC Hydro – the primary electricity utility in B.C. – to supply service to new crypto-mining projects.

Overall, OIC 692 calls into question how crypto-miners can acquire the abundant electrical supply necessary to support and expand crypto-mining operations across the Province.

How does OIC 692 function?

The BC Government issued the Direction to the BCUC (i.e., the regulator of rates and standards of service quality for electricity and natural gas utilities in B.C.) through its powers under Section 3 of the Utilities Commission Act, RSBC 1996, c 473 (the UCA). Section 3 permits the B.C. Government to issue a direction to the BCUC with respect to the commission’s exercise of powers and performance of duties. In particular, Section 3 allows the B.C. Government to require the BCUC to exercise a power or perform a duty, or refrain from doing either, as specified in the direction. In response, the BCUC must comply with the issued direction.

In relation to OIC 692, the parameters associated with the 18-month suspension of BC Hydro’s obligation to supply service to crypto-mining projects is set out in the Direction. In particular, Section 3 of the Direction relieves BC Hydro of two core obligations:

1. the obligation to supply service to new low-voltage cryptocurrency projects, including the obligation to accept design deposits in relation to those projects; and
   
   
2. the obligation to supply service to new high-voltage crypto currency projects, including:
   
   1. entering into system impact study agreements in relation to new high-voltage projects; and
      
      
   2. entering into facilities study agreements in relation to paused projects.

Ultimately, Section 3 applies to crypto-mining projects at various stages of development. However, projects already connected to BC Hydro’s grid as well as a small number of projects well advanced in BC Hydro’s connection process will not be affected by the suspension. Currently, there are seven operational crypto-mining sites in the Province with a further six sites in advanced stages of the connection process, totalling a load of 273 megawatts.

However, those projects that have yet to begin the connection process cannot initiate that process as a result of the Direction. Similarly, those projects in the early stages of the process are halted. These latter projects are referred to as “paused projects” – high-voltage projects subject to varying system impact study agreements dated December 1, 2021 to June 20, 2022.

Why suspend the obligation to serve cryptocurrency?

The B.C. Government recently explained that the temporary suspension of BC Hydro’s obligation to serve new crypto-mining projects is dual purpose:

1. The suspension will preserve the Province’s electricity supply; and
   
   
2. The 18-month suspension period will afford the Province and BC Hydro sufficient time to engage with industry and First Nations to develop a permanent framework for future crypto-mining operations.^[2]

These motivations connect with a number of contextual factors:

1. The nature of crypto-mining: Crypto-mining consumes massive amounts of power on a 24/7/365 basis. Also, supplying such projects may not carry extensive social benefits since crypto-mining operations are often not permanent with operators frequently moving across jurisdictions in search of cheap, stable power sources. The stability of cryptocurrency itself – a sector fraught with volatility and unclear regulatory purview – is also a key concern when considering to dedicate ample current loads from B.C.’s energy supply to energy-intensive crypto-mining projects.
   
   Overall, servicing crypto-miners poses significant obstacles in relation to the B.C. Government’s dual goal of electrifying and de-carbonizing the Province through a shift away from natural gas. In order to fulfill these decarbonisation goals, BC Hydro requires a significant electricity supply which could be limited by additional crypto-mining operations.
   
   
2. BC Hydro’s mandate: Generally speaking, BC Hydro has an obligation to serve customers who wish to connect to its power grid. Ultimately, BC Hydro does not discriminate between loads and serves customers on a first-come, first-serve basis. With electricity considered an essential service, BC Hydro cannot – on its own – decline to serve crypto-mining projects. However, Section 28(3) of the UCA permits the BCUC to relieve BC Hydro from the obligation to supply service should the BCUC consider such relief proper and in the public interest.
   
   Nevertheless, it is very rare for the BCUC to exercise the power afforded under Section 28(3). Alternatively, a direction from the B.C. Government issued to the BCUC pursuant to Section 3 of the UCA (as described above) affords a similar vehicle to facilitate such relief.
   
   
3. Precedents outside British Columbia: B.C. is not the first jurisdiction to temporarily suspend electrical supply to new crypto-mining projects or further regulate the cryptocurrency sector. In November 2022, Manitoba similarly suspended new connections to its electrical grid by crypto-miners in order to analyze options for a regulatory framework to approve large connections to its grid. Also, Hydro Quebec has asked its provincial regulator to suspend allocation of electricity to the blockchain industry.
   
   On the international stage, China, Egypt, Iraq, Qatar, Morocco, Algeria, Tunisia, and Bangladesh have formally banned crypto-mining. Further, in November 2022, New York became the first US state to temporarily ban crypto-mining projects that do not operate on 100% renewable energy.

The Suspension Period – A Time for Planning

In conclusion, OIC 692 will provide the B.C. Government time to better accommodate continual interest in crypto-mining projects as the cryptocurrency industry grapples with outstanding stability concerns and governments and regulators address clean energy concerns and goals in the context of emerging digital markets.

If you are considering the development of crypto-mining operations in British Columbia or are directly affected by the B.C. Government’s temporary suspension detailed above, please feel free to contact a member of our Environment & Regulatory team.

For those interested in the regulation of cryptocurrency in the context of Alberta, see our previous articles here:

• Hashing out the Regulation of Cryptocurrency Mining in Alberta: A Look at AUC’s Exemption and Self-Supply Criteria for Power Plants Under 10 MW
• Alberta Energy Regulator Requests Information Regarding Cryptocurrency Mining Operations

_{[1] OIC 2022/692,}

_{[2] BC Government, Ministry of Energy Mines and Low Carbon Innovation, “Province hits pause on electrical connections for cryptocurrency mining” (21 December 2022): https://news.gov.bc.ca/releases/2022EMLI0067-001928}