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Duluth to modify electric fee to help paper mill

Electric lines feeds into the Verso paper mill in West Duluth. (file photo / News Tribune)

Duluth Mayor Emily Larson announced Tuesday that her administration will ask the City Council next week to amend its ordinance which raises the city's electric utility franchise fee from 1 percent to 3 percent starting next year, bending to the complaints from the Verso paper mill that said the higher fee could force its closure.

Larson said the new proposal will see the fee rise to 3 percent as already approved but the fee will be capped at $420,000 annually for any single business.

The fee is charged directly to Minnesota Power for the right to provide electricity to customers in the city. Minnesota Power simply passes it on as a line item on home and business monthly bills.

Larson will ask the City Council to modify the 3 percent fee proposal at its Monday meeting.

While it's the city's first electric franchise fee increase in 20 years, many large electric users — such as Verso and the Western Lake Superior Sanitary District — complained that it would be unusually burdensome.

"Good policy making is a give and take," Larson said in a statement. "With this thoughtful and specific modification, we can all move forward with clarity and confidence for the future long-term health of our community."

The $420,000 cap would impact only Verso, the only business in Duluth that uses that much electricity. The compromise fee is more than the $270,000 the mill currently pays at 1 percent but far less than the $810,000 annual fee it would have paid at the full 3 percent. Company officials and employees said that extra $540,000 annually may have been the straw that broke the mill's competitive back, noting the coated paper industry already faces global competition and razor-thin margins.

The West Duluth mill employs about 250 people.

John Bastian, Verso mill manager, said the compromise fee is workable.

"This amendment, which mirrors Electrical Franchise Fee language that exists in many other Minnesota municipalities, is not only a fair and practical solution for the city and the mill, but importantly, keeps Duluth an attractive destination for new businesses," Bastian said in a statement. "The Verso Duluth Mill appreciates the open and honest discussions and engagement by Mayor Larson and the city staff and urges the City Council to pass this measure."

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