Lewis County PUD GM David Plotz Discusses Clean Energy Implementation Plan, Data Centers

In the latest episode of Public Power Now, David Plotz, General Manager of Washington State’s Lewis County PUD, discusses the PUD’s development of a Clean Energy Implementation Plan, details the PUD’s current generation mix and talks about how partnering with bitcoin mining companies as a form of data center load can enhance a utility’s appeal.

Transcript

Paul Ciampoli: 0:09

Welcome to the latest episode of Public Power Now. I'm Paul Ciampoli, APPA's news director. Our guest on this episode is David Plotz, General Manager of Washington State's Lewis County PUD. David, thanks for joining us. Hey, Paul, thanks for inviting me. Sure thing. So David, just to get our conversation started, I want to give you the opportunity to provide an overview of the PUD in terms of things like its history, number of customers served, and current generation mix. I'd be happy to.

David Plotz: 0:33

So Lewis County PUD, founded in 1936, part of the initiative number one of Washington State. We're about 35,000 customers, the meters out there, and we have about 3,000 miles of electrical line out. We're a pretty wide county. We cover essentially the county plus a little bit more. The only part of the county we don't cover is the city of Centralia. They have their own municipal lighting system there. So we're a bit of a semi-rural county, if you will. We're about 95 miles wide east-west and 25 miles north-south approximately. We have a lot of trees and a lot of long spans. So, in that sense, we're not very dense population-wise. We're a Bonneville customer. We've been slice block slice products for the past decade and a half. And we're going to switch, we just made the election to switch to Bonneville's provider of choice contract, the blockless shaping. So, why we do that is we have some generation inside of our territory. We have Caleb's Falls Hydro Project. And since we're essentially a large, small utility or a small, large utility, depending how you measure it. Because of that, we want to take a little bit more control of our future state, by managing our own needs and generation builds. It's kind of I was looking at some of the APPA statistics, and if you look at the largest, hundred largest public power utilities by electric customers served in 2023, we're number 97. So I wear that with pride. I think it's it's good. We're not that small anymore. And we we have to take a lot more control of our of our destiny. And our commissioners are all behind that. There we're doing a few projects, not only that for renewable requirements such as wind, but we're exploring other small hydro pump storage and geothermal inside of the district.

Paul Ciampoli: 2:30

Just real quick, just out of curiosity, any elaboration you could do in terms of the things that you just said you were looking at in terms of possible timing on that?

David Plotz: 2:38

Sure. And actually it's gonna be part of the conversation today, too. I think I don't want to go too much into detail because we we're really at the beginning. Yeah, that's fine. Um, but small hydro, we're we're we we abut the Cascade Mountains. And so because of that, there's a number of small hydro opportunities that haven't been tapped. Pump storage as well. Uh as it becomes more economical, uh given the value of energy, um, we we're looking into a couple of different potential areas. Geothermal probably has the biggest flash in any media. We're in the well down the first stages of investigation. We haven't drilled any holes yet, but we're doing a number of different studies in conjunction with uh PNL Pacific Northwest National Labs uh and have received grant funding for that. And I should also mention this is just an aside, we're also in the broadband space. We do get about $50 million of grants, both state and federal, to roll out broadband, fiber optic broadband to the rural communities and rural people here in Lewis County. So back to the generation, those projects are probably the earliest seven years out. So it's we're just at the beginning stages.

Paul Ciampoli: 3:50

Gotcha. Gotcha. Okay, great. So just switching gears here, David. In a piece published over the summer in the Northwest Public Power Association's Bulletin Magazine, you make the case that partnering with Bitcoin mining companies as a form of data center load can enhance a utility's appeal by enabling lower rates and reinforcing grid infrastructure. And a note for our listeners, along with his role at PUD, David is founder and CEO of L E G R L E G L E J R, L L C and Modulo LLC. LEGR provides Bitcoin and financial tax auditing services while Modulo specializes in physical Bitcoin security solutions. So against that backdrop, could you provide for our listeners additional details on the potential benefits that can flow from utilities partnering with Bitcoin mining companies as a form of data center load? Sure.

David Plotz: 4:37

There's a lot to unpack here. So I before I get too far, and I, you know, I want to be able to explain it clearly for your listeners, but to understand what I'm talking about, one really has to understand the concept of how Bitcoin operates and how it's somewhat of a it changes the paradigm for energy use. So I'll try not to be too basic, but put simply is that Bitcoin as a fine a new financial instrument and a new product that the world has created is a is an energy intensive, but at the same time, energy valuable use case for utilities. So what do I mean by that? Utilities up to now had to we've been good. We've been essentially following load, building as as need arose, when and we're public power, so we're at cost, and we're working hard to keep you know safe, reliable, low-cost electricity for our ratepayers. And that's that still goes today. When Bitcoin showed up on the scene, it was a bit of a Wild West, as I said in my magazine article. But what has evolved out of Bitcoin for the past 15, 16, 17 years is uh people are realizing that it has consistency of value. And that consistency of value exists uh and not in the price per the exchange rate to price of other currencies, but the consistency of how it works. It just continues to operate in a in a method that's predictable and understandable. So Bitcoin miners tend to be also called data centers. And as everyone um who is listening probably understands, data centers are coming. And data centers provide various different benefits. There's data centers that provide your cloud storage, there's data centers that provide Bitcoin mining, there's data centers that do AI language learning and training models. And those are the big categories, there's probably more out there that I'm leaving out. But Bitcoin mining holds a kind of a special spot in all of that. Because what is Bitcoin mining? Bitcoin mining, when I explain to people, it's essentially the accounting function of Bitcoin. Now I'm a CPA and a CFA, so I tend to see things through these lenses. But all mining is doing is it's providing the accounting of transactions of the global transaction of Bitcoin. That's all mining does. There's extra pieces to it, like the rewards aspect and how the calculation is done, but all miners are doing is they're trying to compete to make the next journal entries on onto the Bitcoin blockchain and be rewarded for that. Why that matters for utilities is because before this time, all that accounting and the financial aspects are all being done by banks, by various firms in the world. And that's fine. It's but what Bitcoin brought to the table was saying, hey, anybody can do it. Anybody can get involved. And so businesses have sprung up around the country and around the world that specifically operate as Bitcoin mining companies. And that's good for them. We're a public utility, we don't get into Bitcoin mining. And I to make it clear for you, Paul and your listeners, I'm not advocating right now, at least, I'm not advocating for public utilities to go out and start mining. That's a different business model, and we're not in that. And I don't want to be in that. I leave it to the specialists for this Bitcoin mining. What I'm saying is let's let's partner up, let's figure out how we can both benefit from this energy-intensive business. So I outlined in my article some of these benefits, and and I boiled it down to essentially three different things. Um, you build ahead of growth. And what does that mean? It means you build new generation uh with anticipation that these miners will show up and start mining with that new generation. So you don't have to try to predict your growth inside your utility. What you can say is if I build this, I can get ahead of it and do power contracts with uh Bitcoin miners for certain periods of time, whether it's eight years or 16 years or whatever it is, to take that offtake. And then when your other load shows up after those points of time, you can then have that power readily available for those newly arriving loads. And embedded in that is a subsidization aspect. So up to now through history, we've built new projects, we built dams, we built uh you know, hydro projects, we built uh gas, coal, whatever they may be, with the idea that the load will arrive. But until that load arrives, existing ratepayers subsidize that newly constructed project. It's it's it's common, and ideally, you don't build it too far ahead that you go, you bankrupt your ratepayers. So very good planning was always necessary, and it still is today. But the idea that you can predict predictably bring in Bitcoin mining right at the point of energization means there's no more cross-subsidization. In fact, it makes it even more clear that you can say historical preference raise off the federal system can be reserved for these types of customers and for the newly arriving loads, Bitcoin mining loads, you can be very specific that these new projects are now being used to deliver the energy to them. So that's the first point. Second point is the concept of demand management. As we move into a more connected and technologically complex grid, demand management is uh becoming more and more a larger aspect of delivering additional capacity to existing load and/or newly arriving load. So uh shaving peaks, storing energy over time, all those aspects of demand management uh are important. And Bitcoin miners can come in and also do the same thing. And this has already been shown down in that ERCOT and over in PJM, where miners have uh essentially contracted with the uh system operators to curtail when demand is peaking, when loads are high, or when prices are high. And the unique thing about Bitcoin miners is they can shut up very quickly. Now, given cloud storage can probably shut off just about as quickly, but you don't want a situation where you cannot access your files. Uh, whereas Bitcoin miners, the relationship between being on and being off uh is very economical. There's no kind of ongoing carry costs when you shut down. Your primary driver of your costs is your electricity bill. So the moment you curtail as a Bitcoin miner, your costs go down significantly. I won't say going to zero, but going near zero. So that demand management aspect is a second important concept that utilities and Bitcoin miners can uh both benefit from. And the third, and I think this is the most important, most related, Paul, to uh what we're doing here in Lewis County is we're looking at assets, generation, potential generation locations around the county. Great. And if those are right near transmission lines, even better. But if they're not, then I need to start thinking do I want to build transmission lines up into the mountains that will be for small hydro and may or may not economically pencil out? And that has to be decided early on. Whereas if you have a Bitcoin mining partner or company or companies, it doesn't have to be just one, who are saying, okay, for a short decade or a decade and a half, we're willing to put our miners right next to that hydro project up in the mountains. You don't need to build the transmission line because what they're doing is they're converting that energy generated to Bitcoin and then converting it to dollars for our utility. And we use those dollars then to lower the overall rates for the district. So the idea there is we're now using Bitcoin and Bitcoin mining to I don't want to say subsidize, but essentially cap the value that already exists inside the district's borders for the benefit of the rate payer.

Paul Ciampoli: 12:17

And in terms of of data centers, any elaboration in terms of uh proposals in the service territory for the PED? You know, we have.

David Plotz: 12:27

And I can't get into it too much detail, but I can tell you at a high level, we've been we've got a number of inquiries over the past couple of years. I've only been in the feed for three years, going on to the fourth year now. And over that time, we've had a number of inquiries. Our number one problem, though, is that these data centers want a gigawatt and they won it yesterday. Okay, well, we're we don't have a gigawatt of spare capacity for sure. Our utility only operates around 125 average megawatts. So transmission's a big issue. But if you've followed anything around Washington State or in the Pacific Northwest, transmission's a big issue. We essentially have a lot of congestion. We're right on the I-5 corridor between Seattle and Portland, and transmission new builds to this area is a difficult thing. So it takes time, and that time has basically had people come, look at the area, and then leave. Because even if we could get the energy, getting in here is the harder part. So we've we've had a few inquiries from smaller sized data centers, but again, uh they just they tend not to move too fast uh or they want to move faster than what we can do within this location.

Paul Ciampoli: 13:35

And I guess in terms of the kind of going forward, uh on on the one hand, you you you you have the luxury of kind of putting further thought into the idea of if if another company comes at some point in the future, you may have uh a better sense as to the practicality of a proposal. Or I mean I guess what I'm getting at is, is it realistic to possibly address some of the stumbling blocks to further data data center development there?

David Plotz: 14:03

It is, it is. Because right now then we're looking at these potential geothermal and small hydro and pump storage situations, and we're able to say, well, we don't have a PPA, but we know we can say with some confidence that that the expenditures on the studies and getting us down the road will be filled if a data center or a new, I don't know, an industrial plant doesn't show up. We have the backstop of Bitcoin landing. Because I've already had inquiries from Bitcoin miners after that article is published, say, hey, we're interested. How far out are you? And I tell them it's a number, you say, I say, okay, we'll be back at your door again in three or four years and we'll start talking about interest and how we can potentially put something in. So the the the certainty that comes from having Bitcoin mining creates uh uh it's it's I forget the virtuous circle here, right? Where you can start getting further down the road and not having to wait for the load to arrive.

Paul Ciampoli: 14:56

Okay. Yeah, yeah, no. And so for my final question, I wanted to give you the chance to talk about the PUD's development of its clean energy implementation plan, which I I came across uh as part of preparing for this interview. And as you know, that's required by the state's Clean Energy Transformation Act. So, you know, one of the things I'm interested in knowing about is how is the PUD engaging with customers to get feedback from them as a developments plan and as a develops plan and also kind of just maybe provide additional details on the plan itself.

David Plotz: 15:28

Sure, sure. Uh well, let's start with the second aspect. So the plan itself, uh it puts Washington as is is attempting to lead the climate policy as in terms of its conversion to carbon-free uh or carbon neutral, I should say, electricity, uh by 2030, and then 100% carbon-free electricity by 2045. It's a it's a strong push. And I mean, depending on your perspective, that that's a great thing or a terrible thing. The Clean Energy Transportation Act not only has the aspect of what are we going to do to get carbon-free, but it also includes provisions for energy assistance to low-income households that we're currently working through. So, for example, the Lewis County PUD has um three different methods that we acquire and provide funds to our low-income households in the county. Like I say, we're a bit rural and we're below on average the um the statewide income levels, and we do have a large amount of unemployment here. So it's a big deal to our ratepayers. And we try to uh tap every potential resource, both local, state, and federal, to deliver additional support. But ours are primarily part of it is through uh winterization. We're we're a winter peaking utility. So winterization and doing um the insulation homes, we provide free audits, we get out and into our customers, and we work really hard to help customers lower their electricity bills directly, which is a benefit to the PUD as well, obviously. We also provide funding, both internal and customer donated funding to our low-income and our low-income senior customers. So we have about three plans that help customers directly with their utility bills. There's a discussion at the Washington state level in the Clean Energy Transformation Act, CEDA, we call it. There's a discussion at the Washington state level to centralize that. And it's currently ongoing, but I don't know if that's going to come to fruition. But we don't, as Lewis County PUD operates, we've been doing this for a number of years, uh, you know, for over 10 years, 15 years. So we'll just keep going down this path until something changes at at the state level. Now, the state level rules is going to change the way we operate. Now, what does that mean? It means if we're going to be 100% carbon-free electricity by 2045, right now we're essentially 80% hydro from we're we're a Bonneville. It's a bit more because we're large enough to re to qualify for qualified to be uh mandating a renewable energy from the what we call the I-937 uh initiative, which requires a percentage of our energy uh use in the district to be uh from renewable resources, and hydro is not considered renewable under that law. So even if we're 80% hydro and we're 10% nuclear and the rest from wind and other, that's still not enough. We end up having to sell some of our hydro energy in order to purchase wind energy. It's it's somewhat ridiculous, but that's just my view on it. At the end of the day, we have to comply, and CETA will likely replace that because if you're going to be 100% carbon-free electricity, the the rules around that will be probably uh surplant the initial the I-937 Act and her rules. So our engagement with customers now, I'm getting uh back to your first point, is through the ongoing both in-law as well as what we would just do is we try to reach out to customers. We provide uh opportunities for public input both on our website and in person at our meetings, and we we get out into the public. I try to go out and talk to people at Granges around the county and provide chances to come talk to me directly uh on regularly scheduled meetings. Compliance with seed is important. It's a law whether we agree with it or not, and what we will follow, we will comply. But at the end of the day, eliminating coal by 2025 and 100% carbon-free electricity by 2045, it's gonna have an impact. It's already starting. If you know much about the area, I think the last coal plant on the West Coast was in Centralia. It's about five miles north of uh PUD headquarters here. That coal plant going away is was a baseload for Seattle. And Portland that's no longer there at the end of this year. And so replacement of that generation is a challenge. It's gonna be a challenge. It will require better planning, it will require better transmission. It'll require a number of things for this region. So it's gonna it, you know, it like I said, depending who you talk, there's opponents to CD and there's people who are all for it. But at the end of the day, we'll follow it. But we have to plan well. We have to get ahead of the issues by being more dynamic and versatile in how we're going to find generation and transmission. Boy I can talk all day on this stuff. Sorry.

Paul Ciampoli: 20:34

Yeah, yeah, no, that's that that's great information. And and I I would guess it goes without saying that as you talk to the public, you're you're noting that there's a lot of balls in the air in terms of making sure that, you know, as public power does, focusing on affordability and reliability, but there's certain things that are, you know, to some degree out of your control, right? That's exactly right.

David Plotz: 20:55

And you we'll we're gonna do as much as we can to uh avoid this, but uh the the biggest concern is that there will be these rolling blackouts that will come, and that will shock people into waking and saying, hold on a second, why are we eliminating generation before we have the replacement energy or have certainty about the replacement energy? So uh we continue to ring the bell, but we can't just hope people will kind of uh see that. So we have to, like I say, get the other balls in the air, get the other generation moving, figure out ways to conserve, figure out ways to get people behind the ability to bring more energy to this region. If you've looked around the United States, you you'll see that all these data centers and all these larger new loads are showing up on the East Coast and Texas and some in the northern Midwest, they don't show up out here. Uh yeah, we do have uh a number of data centers around the hydro projects on in eastern Washington, and it makes sense because we're right next to the generation, but that's about it. And the growth there is is happening, but it's not happening at the scale that you see in Virginia or Texas. So if we want to grow or if we want to have those jobs, we need to be a lot more proactive and more unified in the region. I believe we are. I think the movement of Bonneville to markets plus, the ability to do a region-wide resource adequacy program are all going to contribute to us working more cohesively in the West.

Paul Ciampoli: 22:22

All right, David. Well, thanks again so much for taking the time today to speak with us. It's been an interesting, very interesting conversation. And we'd love to have you back perhaps as a guest at some point next year, or we could talk about the you know, the plan that we just discussed, for example, among other things.

David Plotz: 22:35

Great. I'd love to. My view on all this is we all the more we talk about it, the more we understand it, the better, smarter people than me can come in and say, here's a better way to do it. So I appreciate the opportunity to talk. Thanks, Paul.

Paul Ciampoli: 22:48

Thanks for listening to this episode of Public Power Now, which is produced by Julio Guerrero, graphic and digital designer at APPA. I'm Paul Ciampoli, and we'll be back next week with more from the world of public power.