FERC-Rumford settle; Portland firm fights on

BY TUX TURKEL

Portland Press Herald

A $3 million settlement between the Federal Energy Regulatory Commission and Rumford Paper Co. about allegations involving energy market manipulations hasn’t changed a Portland energy company’s plans to fight related charges in court.

“It is telling that Rumford did not accept any of FERC’s allegations in this settlement and that FERC avoided having to prove its case in court,” Competitive Energy Services LLC said in a prepared statement. “This confirms our belief that FERC’s case will not hold up to scrutiny in a fair, judicial setting.”

FERC charged last summer that Richard Silkman, a principal in the energy company, gave improper advice to Rumford Paper. The advice was related to a program run by New England’s power grid operator, in which big power users are paid to reduce electricity consumption during times of high demand.

Silkman allegedly advised Rumford Paper to reduce its internal power generation and buy energy for a five-day period, to set an “artificially inflated” baseline.

That ultimately benefited the paper mill over six months in 2007 and 2008 whenever it was called on to reduce consumption, according to FERC.

The commission says the actions cost New England electricity consumers more than $3.3 million. Competitive Energy Services received $166,841 during the period, FERC says.

In a consent agreement, Rumford Paper agreed to a total fine of $10 million, but FERC accepted $3 million to settle the case. Rumford Paper is owned by NewPage Corp., which emerged from bankruptcy protection last December.

Tony Lyons, a spokesman for Rumford Paper, issued a statement saying the company “neither admits nor denies liability.”

Silkman is widely known as an expert in Maine’s energy industry. He is a partner in Grid Solar LLC, a solar technology and nontransmission alternative development company. He also was a partner in Kennebec Valley Gas Co., which developed plans for a natural gas line through central Maine before being sold to Colorado-based Summit Utilities.

CES reiterated that the company hadn’t violated any rules or regulations, and the program cited by FERC was later found to have a design flaw and was terminated by the commission.

It suggested NewPage’s financial problems may have been a factor in the settlement.

“Friday’s settlement exclusively addressed the Rumford Paper matter,” CES said in its statement. “It appears that the company needed to resolve this to conclude its bankruptcy proceedings and effectively agreed to give back the roughly $3 million it had earned in the Day Ahead Load Response Program.”

In a related case, FERC recommended a $4.4 million civil penalty against Lincoln Paper & Tissue LLC for fraudulently manipulating the energy market. It said Lincoln’s behavior was “particularly problematic” because senior managers orchestrated and implemented Lincoln’s fraudulent scheme.

Lincoln’s president said Wednesday that his company will continue to fight the charges.

“We have responded to the show-cause order,” said Keith Van Scotter. “It is now up to the commission to decide what they want to do. As I indicated previously, we strongly disagree with the FERC staff allegations, points we thoroughly made in the response. If the commission decides to pursue, we will then proceed to court for our due process.”

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