The Kentucky Public Service Commission (PSC) has reportedly opened a formal investigation into two proposed contracts that would offer discounted electricity prices to new crypto-mining operations.

According to a Dec. 5 statement from environmental law group Earthjustice, the government department would be looking to determine whether subsidizing crypto mining operations will raise electricity costs for Kentucky residents.

The two mining contracts under investigation include one between Kentucky Power and Ebon International LLC, which runs a 250-megawatt mining facility in Louisa, as well as mining company Bitki-KY, which operates a 13-megawatt facility in Waverly, Kentucky.

The contract proposes to give discounted electricity rates to the Ebon Facility, while the Bitki-KY has already received a $250,000 tax credit from the state of Kentucky after the passing of a Kentucky tax break bill for local crypto miners.

Earthjustice argued in its statement said that crypto mining is “extremely and exponentially energy-intensive by design” and that the discounted rates for the facilities “could result in higher electric bills for everyday Kentuckians.”

A senior attorney for the environmental group, Thomas Cmar, said it was “looking forward to the upcoming hearings and discovery process so Kentuckians can know exactly what they would be paying for by subsidizing these facilities, ” adding:

“I’m hopeful that the Commission will see these cryptocurrency mining companies' empty promises that they will benefit local communities [...] and give more scrutiny to contracts like these in the future.”

“Cryptocurrency mining is a largely unregulated and highly energy intensive industry that could cost everyday Kentuckians big,” he added.

The group also claimed that crypto-mining companies rarely create employment opportunities because of the highly automated nature of mining operations.

Lane Boldman, the executive director of the environmental advocacy group Kentucky Conservation Committee, added that the burden of costs associated with building new crypto mining facilities “often lands on everyday people” as “everybody else's electric bills go up to cover the costs.”

Related: Eager to work: Bitcoin switch to proof-of-stake remains unlikely

Kentucky has become a hotspot for crypto mining companies, which is reported to now contribute 20% of the country’s computer power for proof-of-work mining activities, which ranks second among all U.S. states after New York, according to an Oct. 9 CNBC report.

But while many environmental groups want Bitcoin (BTC) and other proof-of-work blockchains to transition to proof-of-stake due to energy concerns, the Bitcoin Mining Council recently published a report suggesting that Bitcoin could soon become a “zero-emission network” by “combusting stranded methane gas to mine BTC that would have otherwise been emitted into the atmosphere.”

Cointelegraph reached out to the PSC for confirmation and details behind the investigation but has not received an immediate response.

Earthjustice noted that it collaborated with the Kentucky Resources Council to file comments on behalf of a broad coalition of Kentucky-based environmental groups and requested for the PSC to look into the matter.