Regulators say former Duluth paper mill owner must continue paying Minnesota Power

DULUTH – State regulators say the former owner of Duluth's paper mill owes Minnesota Power ongoing payments despite the sale of the mill earlier this year.

The Minnesota Public Utilities Commission voted 5-0 on Thursday to order Verso Corp. to "continue full minimum firm demand payments" through January 2023. Those payments are part of a disputed power sales contract between Verso and Minnesota Power that the Duluth-based utility asked the PUC to interpret.

The Verso payments amount to "millions of dollars," Minnesota Power officials say, but a precise number was not made public. The utility warned other ratepayers could be on the hook if Verso did not meet its "take or pay" obligations.

Verso shut down the Duluth mill in summer 2020 and sold it to ST Paper in May. Verso then stopped making weekly payments that were required when the mill's electricity demand dropped to zero, according to regulatory filings.

Verso argued it was Minnesota Power's responsibility to mitigate those losses, but PUC Commissioner Valerie Means said Thursday that Verso "wants the commission to imply a mitigation provision where there is none" in the contract.

A handful of large industrial customers such as mines and paper mills account for more than half of Minnesota Power's electricity sales in a typical year. Disruptions to that revenue can leave other customers with increased costs through rate increases.

Take or pay provisions help shield ratepayers by guaranteeing minimum payments from large customers even when demand is reduced.

"Minnesota Power has a huge load," PUC Commissioner John Tuma said. "The potential for that shutdown negatively impacting the rest of the system is gigantic."

Ohio-based Verso said in a statement the company "respectfully disagrees with the decision by the MPUC and has no further comment at this time." The company had asserted in a letter to regulators that Minnesota Power was trying to "unjustly enrich itself" since it had entered into a new agreement with ST Paper.

Minnesota Power said in filings: "ST Paper is taking service on a wholly new contract that does not change Verso's take or pay obligations."

Thursday's decision "was to affirm the interpretation of the contract and commission jurisdiction over electric service agreements; however, Minnesota Power was not asking the commission to order Verso pay damages, for which jurisdiction belongs in the courts," spokeswoman Amy Rutledge said in an e-mail.

Brooks Johnson • 218-491-6496