PORT ANGELES — The Nippon paper mill should continue not paying an electrical base rate, the Port Angeles City Council decided Tuesday.
The mill at the base of Ediz Hook, owned by Nippon Paper Industries USA, consumes about 58 percent of the city’s electricity but has not paid a monthly base rate since July 2004.
That was when the council ended the base rate, which was $5,870 per month, to help keep the mill in operation.
It employed 242 people in 2010, making it Port Angeles’ second largest private employer behind Westport Shipyards, which employed 416 last year, according to the Clallam County Economic Development Council.
The city was considering reinstating the base rate at $3,800 per month, but the council nixed the idea during a budget work session, with some members citing the same concern over the mill’s viability.
“I think this is the wrong time to impose this charge,” said Councilwoman Brooke Nelson, who noted the struggling paper industry and financial assistance the city has provided to other businesses, such as for Angeles Composite Technologies Inc. and Peninsula Plywood.
Base rates are intended to cover the fixed cost of supporting a utility, such as staff time and the maintenance of infrastructure.
Unlike other electrical customers, Nippon owns its own power lines and buys its energy at wholesale rates from the Bonneville Power Administration.
But the city was considering reinstating a base charge in order for the mill to help cover other expenses associated with the utility, such as membership fees to public power groups, which is paid for with utility revenue, and the cost of processing Nippon’s energy bills.
The decision comes at a time when the city is considering raising residential base rates as a means to pay for a 14 percent BPA wholesale power increase.
The city had proposed covering the increase by raising the rate from $13 to $18.50 per month, but the council directed staff Oct. 18 to come up with another solution that does not put all of the cost on the base rate.
Without a base rate, Nippon would still be paying its share of the rate hike since it buys power at the wholesale rate.
Staff had included a Nippon base rate in its proposed rate hikes, meaning that other rate payers would have to make up the difference if it’s kept out of the budget.
To offset the impact, the council discussed using an anticipated $51,000 increase in electrical utility tax revenue next year to cover the additional cost to the utility.
Typically, utility tax revenue is deposited into the general fund, which covers core services such as police, fire, parks and street maintenance.
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Reporter Tom Callis can be reached at 360-417-3532 or at tom.callis@peninsuladailynews.com.
