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July 19, 2012

Companies face millions in FERC fines

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.

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FERC order, Richard Silkman

FERC order, Competitive Energy Services

FERC order, Lincoln Paper and Tissue

FERC order, Rumford Paper Co.

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