BUSINESS

Businesses' energy deals called fraudulent

Staff Writer
Columbus CEO

Federal regulators are suing a Maine consultancy that does business in Massachusetts, alleging that the firm helped a client steal millions of dollars from New England electricity customers by gaming an energy conservation program.

The suit, against Competitive Energy Services LLC, of Portland, is one of two similar cases the Federal Energy Regulatory Commission filed in US District Court in Boston this month. The agency contends that Competitive Energy and its chief executive, Richard Silkman, helped manipulate energy data to allow one of the firm's customers, Rumford Paper Co., to get paid for cutting power consumption during times of peak demand when it wasn't really conserving.

The second case accuses another Maine company, Lincoln Paper and Tissue LLC, of being part of the same type of scheme.

That paper mill, which has denied wrongdoing, was not a client of Competitive Energy Services.

Together, the two paper mills and their consultants were paid nearly $4 million by ISO New England, the region's grid operator, for what the FERC described as "doing nothing." The suits seek to levy nearly $13.8 million in penalties against Competitive Energy, Silkman, and Lincoln Paper, and make them return roughly $546,000 in "unjust profits."

''Retail customers throughout New England pay for the value of the saved energy," the FERC wrote in the suits, filed in Massachusetts because the grid operator is headquartered here. "When that load response is fraudulent that participant is effectively stealing money from retail customers."

The FERC regulates the interstate transmission of electricity. Its spokeswoman declined to comment.

Silkman is a former director of the Maine State Planning Office. He and Competitive Energy deny the allegations.

''We fully expect that the judicial process will expose the major flaws in FERC's accusations," the company said in a statement. "CES and Dr. Silkman categorically deny that they engaged in market manipulation in advising Rumford Paper on its participation in this complex and flawed program."

The suit stems from Rumford Paper's participation six years ago in a now-defunct demand-response program run by ISO New England. Under the program, the grid operator pays companies for cutting electrical loads when the power system is stretched near capacity, such as on hot summer afternoons. The program helps avoid brownouts and blackouts, as well as buying expensive power to meet the high demand.

The FERC contends that on the advice of Competitive Energy Services, Rumford Paper artificially inflated the amount of electricity it pulled from the regional power grid while ISO New England was collecting baseline data for the conservation program. Rumford turned off an on-site generator normally used by the mill to supply itself with energy to draw more electricity from the grid, the FERC alleged.

Then, after qualifying for the program, the mill turned the generator back on, making it appear it had cut its energy load when it was just operating as usual.

In a response filed with federal regulators, Rumford Paper said it first began using the generator to avoid buying costly power from the grid at peak times, and was simply seeking compensation under the program.

''In fact, all Rumford did was receive an 'additional financial benefit' for its ongoing demand response," the mill's filing said.

Rumford Paper ultimately settled its case with the FERC by agreeing to a $10 million civil penalty and returning roughly $3 million in payments made under the program.

A spokesman for Rumford could not be reached.

Competitive Energy said in its statement that it explained the Rumford situation to ISO New England officials, and none objected to the mill's participating in the program. ISO New England declined to comment.

Competitive Energy's clients in Massachusetts include the University of Massachusetts system, Amherst College, and Wheaton College.