The Federal Energy Regulation Commission has proposed hefty penalties against Richard Silkman, managing partner of Competitive Energy Services in Portland, and Lincoln Paper & Tissue Co. for allegedly manipulating energy markets. Silkman is facing a $1.25 million proposed penalty, and his company a $7.5 million fine, while the Lincoln company faces a proposed $4.4 million penalty.
In an order issued Tuesday, FERC said Silkman "conceived of a fraudulent scheme" related to advice he gave Rumford Paper Co., owned by NewPage Corp., on how to participate in ISO New England's Day-Ahead Load Response Program. The program offers incentives to large users who reduce their electricity usage during peak times. According to FERC, Silkman advised the company -- and Rumford Paper followed the advice -- to curtail its internal energy generation during the baseline period and buy replacement energy, "intentionally creating a misleading baseline." The company was then able to receive payments for "phantom load reductions," even though it did not reduce its usage.
FERC said Rumford received more than $3.3 million for load reduction that never occurred, money that came from electricity users in New England. CES also received more than $166,000 in revenue from the alleged scheme, which FERC has directed it to surrender.
FERC and Silkman attempted to settle, but negotiations fell through, according to the report. Silkman faces a civil penalty of $1.25 million, while his company faces a $7.5 million penalty. FERC also proposed a $13.5 million fine against Rumford Paper Co. and directed it to surrender more than $2.8 million in payments it received for participating in the load response program. All respondents have 30 days to file a response.
FERC issued similar claims against Lincoln Paper and Tissue. The order also directs the company to surrender $379,016 it received.
In a statement, CES said neither the companies nor Silkman engaged in any improper behavior. Keith Van Scotter of Lincoln Paper and Tissue also disputed the claims, saying the company and FERC had a dispute over the program's guidelines five years ago, but that he hadn't heard from FERC in two years, according to the Bangor Daily News.