A bill intended to manage the impact of cryptocurrency mining operations on Nebraska’s electrical grid advanced to the second round of debate on Thursday, April 3, after lawmakers amended it to remove a proposed excise tax.

Because of the electricity demand of cryto-mining, Sen. Mike Jacobson sponsored LB 526 at the request of Gov. Jim Pillen. The bill would have imposed an excise tax of 2.5 cents per kilowatt-hour on the energy used by facilities to conduct cryptocurrency mining operations in excess of 1,000 kilowatt-hours per year.

A Revenue Committee amendment, adopted 32-0, removed the proposed tax. Nevertheless, a public power supplier could require direct payment or a letter of credit from a cryptocurrency mining operation.

The original proposal would have allowed public power suppliers to impose certain requirements on all cryptocurrency mining operations for the cost of infrastructure upgrades that are needed to serve them.

Under the amendment, the requirements would apply only to operations that are1,000 kilowatt in size or greater.

“LB 526 is a proactive measure that ensures that large-scale crypto users are treated fairly but not given a free pass,” he said.

Jacobson said the amendment addresses the concerns of cryptocurrency miners while protecting the “long-term integrity” of the state’s electrical grid and ensuring that utilities have the capacity to serve other industries.

Under the amendment, a public power supplier could require direct payment or a letter of credit from a cryptocurrency mining operation or impose terms and conditions as long as the requirements are fair, reasonable and not unduly discriminatory.

The amendment would require a public power supplier to conduct a load study before imposing any requirement and list the number and annual energy usage of cryptocurrency mining operations under its jurisdiction on its website.

Anyone intending to install a cryptocurrency mining operation would be responsible for notifying the local public power supplier. Additionally, an operation would have to allow a supplier to interrupt its electric service according to its established rate schedules and policies.

“This protects grid reliability for homes, farms, hospitals and critical industries,” Jacobson said.

The requirements would go into effect Oct. 1.

Sen. Dave Murman of Glenvil supported the amendment, saying cryptocurrency mining operations have created jobs in rural parts of the state.

According to the South Central Public Power District, he said, cryptocurrency miners are “ideal” customers because they provide a more consistent base load and their energy use can be curtailed when electricity demand is high.

Elmwood Sen. Robert Clements also supported the amendment, calling it a “good compromise.” He said the proposal would allow miners to operate while also ensuring that utilities can interrupt service to those operations to keep them from overstressing the grid.

Senators voted 35-0 to advance LB 526 to select file (second round debate.)

(The Bulletin staff contributed to this report. The Unicameral Update is the official news service of the Nebraska Legislature.)

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