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Minnesota Power seeks 'millions' from Verso

The paper company stopped making minimum payments to the utility after it sold its Duluth mill last spring. If it doesn't make the "millions" in payments, Minnesota Power said other customers will need to make up the difference.

File: Verso aerial.jpg
The former Verso paper mill in West Duluth on July 1, 2021. Steve Kuchera / Duluth News Tribune
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The former owner of Duluth's paper mill will owe Minnesota Power millions of dollars but has stopped making payments, which violates a contract between the two companies and could mean ratepayers foot the bill, the utility told regulators earlier this month.

In an Aug. 2 petition filed with the Minnesota Public Utilities Commission, Duluth-based Minnesota Power said Verso Corp. stopped making the minimum payments required under the electric service agreement when it sold the facility to ST Paper last spring. Verso was supposed to make the payments through January 2023, but argues that since it sold the mill, it should be off the hook for the minimum payments because Minnesota Power has entered into a separate electric service agreement with the new owner. Verso accused the utility of trying to "double-collect for the same facility."

Without the payments from Verso, Minnesota Power will miss out on "millions of dollars," according to the petition. The exact amount is a trade secret and was redacted from the public petition documents

"It's significant enough that we're taking this action," Frank Fredrickson, Minnesota Power vice president of customer service, said in an interview with the News Tribune on Monday.

If Verso doesn't pay, other Minnesota Power customers will have to cover the costs.

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The company was already planning in November to ask the PUC to raise electricity rates for its customers , though an exact amount has not been made public. If Verso doesn't agree to pay by then, Minnesota Power will seek to make up the difference in its upcoming rate case, Fredrickson said.

Verso's Duluth mill produced supercalendered paper until it closed in June 2020 . ST Paper bought the mill in May and plans to produce tissue there.

Fredrickson said that ST Paper's purchase of the mill from Verso did not include the remainder of its power contract, leaving Verso on the hook for payments through January 2023. And while ST Paper has entered into its own power contract with Minnesota Power, it is smaller than the one the company has with Verso and would not offset the loss of Verso's payments, Frederickson said.

According to letters from Brian Potts, an attorney representing Verso, the paper company first warned Minnesota Power that it would close permanently and planned to stop making payments in a January 2021 letter. Potts said that both the former and current paper companies paying separate electric service agreements for the same facility is a move by Minnesota Power to "unjustly enrich itself."

"Verso stopped paying invoices for capacity and energy at the (Duluth mill) after it transferred ownership of the (Duluth mill) to ST Paper. Minnesota Power, however, apparently believes it should now get to collect capacity and energy payments under multiple separate (electric service agreements) from both the facility’s prior owner (Verso) and its current owner (ST Paper) at the same time," Potts wrote. "Such double-collection is not only nonsensical, it is illegal."

Fredrickson said Minnesota Power is "obviously in disagreement with" that characterization.

Potts did not immediately respond to the News Tribune's request for comment Monday afternoon.

Jimmy Lovrien covers energy, mining and the 8th Congressional District for the Duluth News Tribune. He can be reached at jlovrien@duluthnews.com or 218-723-5332.
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