DULUTH (From news reports) - Minnesota Power is seeking millions from Verso Corp., the previous owner of the Duluth paper mill, and warns that other ratepayers could be on the hook if state regulators don't step in to sort things out.
The Duluth-based utility asked the Minnesota Public Utilities Commission (PUC) this week to determine that Verso owes payments under the terms of a power contract.
Verso, which permanently idled the Duluth mill last summer and sold it to ST Paper in May, contended in a letter to the utility that "Minnesota Power appears to be trying to take advantage of Verso's decision to close the mill to unjustly enrich itself" since a new power contract is now in place with ST Paper.
Minnesota Power said the contract provisions "unambiguously" require separate payments by Verso through January 2023 in case the paper mill's electricity demands drop to zero.
The payments amount to "millions of dollars," the utility said.
Verso stopped making weekly payments when ST Paper took over in May, and "thereby put all other Minnesota Power customers at risk of bearing system costs that should be covered by Verso's contractual obligations," Minnesota Power wrote in a filing.
Verso said Minnesota Power should seek to sell its electricity elsewhere to "mitigate damages," something the utility says state regulators would need to approve.
The mill is one of several large industrial customers that comprise a majority of the utility's electricity sales. Minnesota Power has asked for a quick resolution to the case "because Verso is currently accumulating hundreds of thousands of dollars in arrears."
Verso maintains that Minnesota Power's agreement with the mill's new owner will "more than mitigate any and all potential damages" caused by the mill's closure.
"Minnesota Power, however, apparently believes it should now get to collect capacity and energy payments under multiple separate [contracts] from both the facility's prior owner and its current owner at the same time," wrote Brian Potts, an attorney for Verso. "Such double-collection is not only nonsensical, it is illegal."
On Wednesday, Minnesota Power's parent company Allete reported net income of $21.7 million, up 28% over last year's second quarter, on revenue of $335.6 million, up 38%. A resurgent steel industry has fueled a rebound at Iron Range taconite plants.
"Electric sales to these industrial customers have been robust so far in 2021, and we anticipate continued strength through the remainder of the year," CEO Bethany Owen said in a news release.