Article published Oct 24, 2007

Another dam agrees to pay rent to state

By MATT GOURAS

Associated Press Writer

HELENA — Another utility has reached a settlement with Montana over the state's effort to collect rent payments for state-owned land underneath hydroelectric dams.

The Montana attorney general's office said Tuesday that Avista Corp. has agreed to pay the state $4 million a year in rent, leaving just PPL Montana to fight the state's plan in court.

Avista Corp. of Spokane owns Avista Utilities, which serves about 350,000 electricity customers in eastern Washington and northern Idaho. The company told investors Tuesday that it would seek to recover the rent by raising rates.

Attorney General Mike McGrath called it a "very fair" agreement. "Both sides worked very hard to get to this point," McGrath said in a statement.

Avista, which owns two dams on the Clark Fork River, said the settlement amount is about half of what was being sought at trial. One dam sits in Montana, while the other has a reservoir that stretches into the state.

"We have an obligation to supply energy to our customers at the least cost possible," Avista spokesman Hugh Imhof said. "These kinds of things do get passed on to customers."

Imhof said the company predicts the rent could result in a rate increase of less than 1 percent, although it is not known how much regulators will allow the company to recover by raising rates.

PPL Montana, which owns more dams and could be hit with a much larger bill, continued its court fight Tuesday against the state.

PPL spokesman David Hoffman said he does not believe any settlement talks were taking place since both sides were focused on the trial, which began Monday. He added Avista's settlement does not affect their case.

District Judge Thomas Honzel in Helena has already decided the land under the dams belongs to the state.

The state says the last real issue to be decided at trial is exactly how much rent should be charged.

PPL Montana argues the dams are governed by the federal licenses it holds for the projects and are not subject to state claims.

It also says it was unfairly targeted and has warned other river users the state could come after them next.

The state said the Avista lease for the dam includes an annual inflation increase through 2016, when it can be renegotiated. Both sides said it was signed Friday and sealed until Tuesday because of regulatory concerns.

The agreement includes a provision that would reduce the Avista rent if PPL ends up with a better deal through the ongoing litigation. The settlement must be approved by the court and the state Land Board.