Avista agrees to pay $4 million rent for Montana riverbeds

Avista Corp. said it will pay millions of dollars in rent each year to the state of Montana for riverbeds occupied by the utility’s hydroelectric facilities, including $4 million for 2007.

Avista settled rather than go to trial on a state lawsuit intended to force hydropower utilities to pay rent for the riverbeds their projects occupy. Avista issued a statement in which it said it is satisfied with the agreement.

The agreement, announced Oct. 23 by Montana Attorney General Mike McGrath, calls for Avista to pay rent each year beginning with calendar year 2007, and continuing through 2016. Although the initial amount is $4 million per year, rent is to be modified each year, with the base amount adjusted by the Consumer Price Index annual average for the calendar year for which payment is due. After ten years, payments are to be recalculated through arbitration.

The agreement also provides for Avista’s rent to be adjusted if another hydro operator, PPL Montana, receives a determination the valuation of PPL’s land is more favorable to it than valuation in the Avista settlement. Similarly, if the state enacts a statute, rule, or policy that is more favorable to Avista, then Avista’s rent would be adjusted.

Representatives of the state and Avista signed the settlement Oct. 19. The agreement was sealed until Oct. 23 to allow Avista time to comply with disclosure obligations required by the Securities and Exchange Commission. The settlement must be approved by the district court and the state land board before the agreement becomes final.

The settlement avoids a potentially costly trial in which the state was demanding about $200 million in past damages and nearly $8.4 million annually in future rental payments, Avista said. Additionally, under terms of the settlement, Avista is not liable to the state for retroactive rents.

Avista is the second hydro operator to settle. PacifiCorp settled with the state in June for the 4.15-MW Bigfork project (No. 2632). (HNN 6/20/07)

Trial of the case, now involving just one defendant, PPL Montana, began Oct. 22 in First District Court in Helena. PPL Montana also participated in settlement discussions, but was unable to come to agreement, PPL Montana spokesman David Hoffman said.

A Montana judge declared in 2006 that dam owners are not exempt from paying rent to Montana for using state-owned riverbeds occupied by their federally licensed hydro projects. The judge found the Federal Power Act and federal navigational servitude do not pre-empt the state’s claim for compensation under a Montana hydro licensing law.

Avista’s hydropower holdings in Montana include 722.9-MW Clark Fork (No. 2058). PPL Montana’s holdings include 326.9-MW Missouri-Madison River (No. 2188), 10-MW Mystic Lake (No. 2301), and 92.6-MW Thompson Falls (No. 1869).

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