LINCOLN, Maine — The Federal Energy Regulatory Commission is seeking $4.4 million in civil penalties plus $379,016 in “unjust profits” made by Lincoln Paper & Tissue LLC, alleging in documents released Wednesday that the papermaker fraudulently manipulated the energy market with its participation in a load-response program five years ago.
LP&T President and CEO Keith Van Scotter said FERC’s allegations were part of a dispute with the energy regulatory body over interpretations of guidelines for an ISO New England power management plan the company had participated in.
“This is stuff that is 5 years old. The last conversation we had with them was almost two years ago. We are very upset and we strongly dispute their findings,” Van Scotter said Wednesday.
“What they are proposing just doesn’t make any sense and what they are alleging we strongly disagree with. We just have to wonder why this is something they sat on so long and then just dropped on us yesterday,” he added.
In an order dated Tuesday, the commission alleged that Van Scotter and other mill managers “deliberately curtailed internal generation at the mill by approximately 3 [megawatts] during the five-day period when Lincoln’s initial baseline load was established” for the IS0 New England power management plan in 2007-08.
Instead of operating the generator to supply Lincoln with virtually all of its energy needs, about 20 megawatts, “Lincoln curtailed its generator and bought replacement energy during the baseline period at a $10,000 cost,” the order reads. “By purchasing energy, instead of producing it on-site, Lincoln reported larger energy consumption to ISO-New England than otherwise would have been the case, thereby establishing a false and inflated baseline.”
The commission alleges that New England consumers paid $445,901 for demand response that never occurred, with Lincoln receiving $379,016 in revenues.
A spokesman for FERC did not return a telephone message left Wednesday.
The commission staff’s investigation of Lincoln and other ISO New England demand response participants included nine depositions and extensive discussions, including settlement negotiations that ended without an agreement, the order states.
FERC’s staff gave the paper mill written notification on July 5, 2011, of its intent to recommend the filing of the Order to Show Cause issued on Tuesday. Lincoln managers responded on Aug. 4, 2011, that they did not violate commission regulations and that Lincoln’s behavior is consistent with commission policy, the order states.
Mill leaders have 30 days to show cause why their alleged violation should not warrant the assessment of the civil penalties and to pay back the $379,016, plus interest, according to the FERC document.
Van Scotter said he found it absurd that FERC would expect to get more than 10 times the originally disputed amount in civil fines when the company was acting on advice from its energy advisers and attorneys.
“It was clear that the program wasn’t particularly well designed. It was developed by ISO and approved by FERC and we had these experts that were advising us, but it seems that wasn’t enough,” Van Scotter said.
“What they are proposing would ruin us. We don’t have that kind of money,” he added.
Get them, lying and cheating should always be punished. Let’s bring back ethics and honesty!
Sure, let’s cheer on one of our bloated and bureaucratic federal bullies as they try to punish one of the few legitimate manufacturing entities left in this state. You stand and cheer on the wrong side of the field.
right. all i can think is “oh great another few hundred unemployed in this area.” i am not saying they are innocent. but it will be a shame if one of the biggest employers in this area has to shut down. there are already too many jobless.
We are innocent, the government (Lapage) is trying to find money anywhere they can find it, this has been going back in forth for years, they could not find a good explaination so they go to BDN who my father that died in 1965 called The Rebublican Rag was calling it right than and now!
Would just like to point out that in this situation, it is the Federal Government (Obama) that is going after the money, not Lepage as you imply. This is one of those areas where our Senators and Rep. Mike Michaud need to get the key people in the Obama administration to tell FERC to back off and resolve this without an undue burden on the mill.
idk about anything else you said…. but BDN the republican rag? bdn is so liberal it isnt even funny…
Sounds like more bluster and threatening since they got caught.Put down the cookie jar.
Personally, I’m neutral about this until someone is proven to be in the wrong. But, are you saying that “one of our few legitimate manufacturing entities left in this state” should be allowed to bilk consumers without any threat of punishment?
No.
You know nothing about this and you want them punished??
Please help me understand why someone would make a comment like that! Please? Speaking of ethics?
>>>
the company was acting on advice from its energy advisers and attorneys.<<< Lincoln should sue their energy advisers and attorneys for giving them advice.
Soooooo Lord, what makes you think the advice from the advisers and attorneys is the wrong advice? Do you know something we don’t know or are you making comments just to make comments?
I don’t know about you but, my lawyers job is to keep me out of trouble.
Now you are talking, lawyers suing lawyers…I bet the taxpayer gets the tab for that…
I thought that is what lawyers are trained for.:)
We work at the mill, this is a very poorly written article. Instead of using allegedly, that word is never used. It is totally untrue that is why the DEP did not respond. The articale is manipulated by biased people, if you want me to go into technical detail I will be happy to do that, just let me know!
Let’s hear the details.
Of course, as always, the BDN does not check their sources, I can not tell you how many times I have called them on it from social to political issues, they need to step way up on their accuracy!
The Feds first resort invariably involves intimidating alleged offenders by threatening with grossly outsized fines, only to settle for a fraction in the end. It’s a practice that should have no place in the US.
Ask the widows of the coal miners how that system worked for them.Don Blankenship walked away without even a tiny wrist slap.
No argument there but, if anything, that could only further underscore the inconsistencies between agencies and the way laws are applied and enforced.
The fines here seem outrageous. FERC could easily negotiate a settlement with LP & T. It is in nobody’s interest to force this type of burden on a marginally profitable company that has struggled to make it against tough odds. Besides, how many other companies out there found some way to position themselves as favorably as they could?
Seems that the Lincoln mill is not the only one. Here is part of a story by Tux Turkel in the Portland Press Herald:
“Federal energy regulators have charged a Portland businessman with hatching a scheme to manipulate the regional energy market and have recommended a $1.25 million civil penalty.
In a notice filed Tuesday, staff at the Federal Energy Regulatory Commission named Richard Silkman, a principal at Competitive Energy Services LLC, with violating the agency’s rules.
The behavior, according to FERC, cost New England electricity consumers more than $3.3 million. Competitive Energy Services received $166,841 in revenue during the period, FERC says.
The charges stem from what FERC staff say was Silkman’s fraudulent advice to Rumford Paper Co., owned by New Page Corp. The advice was related to a program run by New England’s 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 purchase energy for a five-day period, to set an artificial baseline. That ultimately benefited the paper mill when it was called on to reduce consumption, over six months in 2007 and 2008.”
I wonder if Silkman isn’t the one who also advised the Lincoln mill? Nick Sambides should have dug into the story to find out who provided the Lincoln mill with the bad advice. BTW, Richard Silkman is involved in wind and solar development, which also de-frauds the taxpayers. Whattaguy!!!
Do you have a link to the PPH article that you are quoting from, please?
Oops! Sorry, it was late at night. Here is the link: http://www.pressherald.com/news/FERC-charges-Portland-businessman-with-energy-market-scheme.html
Thanks, I’ll have a look.
Make their case in Court and do the Pre-Trial Agreement as far as the money goes. Make a monitoring process part of it, subject to Court approval, and that should satisfy everyone. BUT, and that’s a HUGE ‘but’, the next time that LP&T gets caught manipulating they had better be ready for the literal Wrath of God to come down and get ‘slammed’ appropriately. Power manipulation, 1st Wind notwithstanding, is what got California and the Western State’s, not to mention the economy as a whole, into so much trouble because of this. That it took over 8 years for it, and the resulting ENRON scandal, to come out and be seen for what caused it is the real story. Before we all go and do the ‘funky chicken’ it might be a good idea to look down the road and see if Maine is headed that way and take steps, now, to stop it before we get ourselves into a similar California-type mess. Responsible monitoring & oversight, not regulation for regulation’s sake, can go a long way toward keeping this from happening again. And if it does happen again then those that get caught have no excuse for getting the ‘slam’ of their live’s. Fool us once, shame on you. Fool me twice, shame on me. And what you get the 2nd time is what you earned, interest included !
Good points, Cal. got defrauded by Enron to the tune of 30 billion. It would be nice if companies stopped letting lawyers run their business, big and small. Legal schemes are just that and energy gamers are running rampant in the wind industry with RGGI and RPS Gov. grants , etc.
Here’s an interesting connection. The wind industry is the prodigy of Enron. First Wind CEO Paul Gaynor was an executive of Enron Wind. The same thieves under different names. The other tie in to Enron is the inspiration for REC’s, which are simply paper transactions that reap profits for the windustry.
Energy fraud? You want energy fraud? Just look at the ridges outside of Lincoln! If the paper mill is going to be fined for tweaking some numbers and getting a few hundred thousand dollars, what about First Wind? If First Wind were fined $1,000. for every lie, deceit, and misrepresentation they did, they would be fined more than the $4.4 million proposed for the paper mill! So, threaten the financial livelihood of a company that actually makes something useful and employs directly & indirectly through suppliers more than 500 people, but ignore the travesty of First Wind, which produces nothing and employs 5 people. FERC is putting the spotlight on the wrong company!
One corporate scoundrel at a time, TruthinMaine!
Here is something for FERC or the Maine Attorney General or some government entity that should be the watch dog for taxpayers and ratepayers. This is worse than anything that the Lincoln paper mill did.
For years, First Wind was always vague about the actual cost of the Rollins Wind project in Lincoln Lakes. Nick Sambides often referred to $130 million project. On December 29, 2011 First Wind received a check of Taxpayer Money for $53.2 million for building the 40 turbine project that sprawls over 7 miles of ridgelines. This was from the ARRA Section 1603 program, part of Obama’s gift to the wind industry in his economic recovery program. In Section 1603, the taxpayers paid 30% of the construction cost of a wind project like Rollins.
Here’s the rub: Divide $53.2 million to get the amount the 30% is based on and it comes to $177.3 million! How could First Wind be so way off? $177 million, not $130 million–that is 36% cost over-run. Is this another of their lies but this one costs the taxpayers millions of dollars? Something stinks in Lincoln, and I’m not talking about the paper mill! How about looking into this, FERC?
And let’s keep in mind that some of that money made its way back to Obama’s re-election campaign! Why is a company that accepts welfare making huge donations to Obama?
According to a recent article carried in the Washington Post and WSJ:
“Employees of First Wind have given the most of the five (top contributors), contributing $2,100 to Obama’s 2008 campaign and $14,000 to his current re-election campaign. The wind energy firm has ties to a bundler for Obama’s campaign and received $452 million in stimulus grants, according to the Standard-Examiner.”
Reduced valuation so they get charged less taxes plus the town almost gives them 50% of their money back(TIF)…they would have if some had not made a fuss and got a 60-40 deal…big deal…it should have been more…FoulWind should be investigated.
pay up Van Scotter then lay off 50 workers to make up for it…Gov. is just getting to big, even in state gov.
They have 30 days to prove their case. If they ran at full capacity they’ll have the records to prove it.
Just because you hired “experts” to advise you on how to game the system, doesn’t make it right. I wonder if the adviser was Silkman, who was also fined by FERC for similar advice to New Page.
So, we, the consumers of electricity from the iso-ne market pay companies to NOT use the electricity from the grid. Can iso-ne or FERC explain, in numbers, how we save on our bills with this “demand response” program.
The idea is pretty simple.. as load begins to approach the installed capacity of operating generators, older units have to be brought online to keep up with demand. These older units are expensive to run, but in the spirit of reliability, they are forced to begin operating. This drives the price of energy up due to this high priced incremental energy. If we shed load, then these units can remain offline effectively keeping the price of energy stable. It sounds better in theory than practice, but it seems to me that conservation is always the best solution, regardless.
If the nat gas generator in Veazie puts out 520 mwh at 40% capacity why not bump it up to 60% until demand lessens? Is the energy purchasing structure not conducive to spot demand?
I have no intelligence as to how the natural gas plant in Veazie operates. I am guessing that a portion of their power is sold via contract, leaving a portion to enter into the spot market. Generators of that size are like big ships. They react slowly. It takes time to ramp up.. and then again back down. Since no one can accurately predict what the next hourly price of energy is going to be, the window may be too short for a large unit like that to react. Smaller, faster reacting plants are the ones that ramp up and down in an effort to match load.
The other thing to consider is that a large generator like that trying to serve increasing load is NOT looking to serve load in Maine. The load centers of New England are in MA and CT. Transmission constraints make it difficult for a generator to get their energy out of Maine. Wind or no wind… Maine has excess generation and the only way to leverage it is to get it into MA and CT. CMP’s upgrade is trying to accommodate this.
It’s interesting that people seem to think that since Maine has excess generation, we should stop building generation because we can’t get it out of here. The actual solution is to find a way to get it out of here and produce MORE generation. That would be like slowing down the fishing industry because there are not enough boats and trucks to get it to market. I think everyone would agree that the solution to that problem would be to find alternative forms of delivery. Electricity is no different.
Funny how $379,016 in unjust profits gets its own article, yet not a single word was written by any newspaper in Maine on July 1 when CMP quietly increased its transmission rates by 19.6% affecting over half a million ratepayers in the state. Talk about a jobs killer.
Google” “What every Maine ratepayer needs to know”.
It’s all about Angus King, John Baldacci and Kurt Adams rigging the system so the poor ratepayer funds otherwise unnecessary transmission lines for the thieving wind industry.
Well said.
That’s it FERC, close down yet another paper mill. The mill is guilty until proven innocent. Wonder what the legal bill will be to fight this out. A horrible use of resources brought to you by the Obama administration.
The Lincoln Paper Mill is being fined for two reasons, the Enron model of doing business is
1)Close power plants
2)Hike prices
3)Export energy
3 power plants were scheduled to close to make room for wind farms. So, FERC and Iso New England saying it was ok”It was clear that the program wasn’t particularly well designed. It was developed by ISO and approved by FERC and we had these experts that were advising us, but it seems that wasn’t enough,” Van Scotter said.
This fits right into the plan of closing power plants to make room for wind farms. Anti trust law suit is in order against FERC and Iso New England . 2 power plants had to sell to make room for wind farm energy as the grid was at capacity. Iso New England did not pay the agreed upon price to Indeck and a power plant in Fort Kent.
Here is evidence that the grid was at capacity for export to southern New England.
Google it. United States of America Before The Federal Energy Regulatory Commission Docket No. ERO8-190-000
No one is “forced” to close to make room for anything. It’s purely economically driven. If they can’t compete with lower priced forms of energy, then they make the decision themselves to shut down. If they were first on the transmission line (which it sounds as though there were), then they have priority over any new customers (wind farms, hydro, solar, you name it) that gain access to the same line. You explanation is just not the way the energy market works. EVERYTHING you need to know is public information and can be read on the ISO-NE website. The industry is drive by 1) reliability and then 2) price. If you are a low priced source of energy, you are going to be just fine. It’s that simple.
The plants everyone loves to talk about are biomass plants. They are uneconomical and cannot compete with natural gas, hydro.. and in many cases, even wind. They have a horrible (and slim) supply of fuel. They are costly to operate as well. Back in the days before wind was everyone’s target, it is a little known fact that biomass plants were getting paid $65 (Maybe it was $85) per MWh. This was in a time when energy was trading for about $25/MWh. It was a subsidy… sort of. That rate was folded into the rate base and the customers had to pay it. When that guaranteed price expired, they realized that it cost them MORE to produce 1 MWh than most sources were selling it for. The sun is setting on biomass unless some sort of government invention keeps them alive.
In a healthy grid, the grid is always at capacity. For the purpose of reliability, you always want more generation available than there is load to consume it. What is a large generator trips off? What is a transmission line gets taken down? You need back up sources of generation. What if Maine pulls out of ISO-NE? Then what? Then… we have enough generation to be self sufficient, that’s what. With this society’s reliance on energy, having diversity is vital to sustainability. Electricity is no longer a luxury. It’s essential for life. That in itself, is a travesty, but it is also a reality.
The energy market is not purely economically driven. Maybe it should be, but as long as the gov. keeps the wind industry afloat they might as well throw money away to the biomass plants too. The biomass boys led people to believe they would only use tree tops, roots, horrible half rotten wood etc. Instead they use any wood and everything, with clearcutting their preferred method. No wonder they were frowned upon as people saw their true colors. Would the human species survive without electricity? You bet. It is a luxury we have become accustomed to. Ask the Amish. I agree that Maine should pull out of ISO NE and conservation along with more efficient appliances and weatherization would go a long way toward curbing energy use.
The operation of the grid is based on reliability. The operation of the energy market is economical. There is a subtle difference. They will bring on an expensive unit to ensure the reliability of the grid. However, during periods of stability, generators enter a bid price that reflects what they are willing to receive for payment for a MWh. Some generators will lose money if the price of energy dips too low… they have fuel costs to take into consideration. Wind, hydro, solar.. etc… all have a fuel cost of $0. They can bid in at a lower price. How it is that people assume that wind is driving up the cost of energy when the math is right there in front of them just baffles me.
The OBVIOUS downside to Wind, Hydro and Solar is that the fuel is not always available. So, as a grid operator, you have to try to leverage those units when the fuel IS available. This offsets fuel consumption… or demand. Demand goes down, the price of fuel goes down. This is Economics 101. Every facet of energy production can ultimately benefit from proper integration of renewables into the grid. It’s not some scheme to take tax dollars and then run away. These are sustainable business models.
What they did at this paper mill is very reflective of how many participants in this market work. These sorts of dealings cost the ratepayer $MM. Renewables, just by their nature, can’t game the market like that. They don’t set a price. They are not dispatched. They just run and get paid the price that the market is set at… and that price is set by natural gas, nuclear, coal… large hydro.. etc. They are such a small player at this point, they are nothing more than noise on the grid, both in terms of production and economics.
What is even more outrageous to me is the fact that the Obama administration dumped MILLIONS into failed “green” energy via Solyndra and others, despite the fact that they knew it was, at best, suspect. Anything LP & T did/didn’t do pales in comparison to the fraud perpetrated by Obama and Company.
It’s too bad FERC appears to be legally constrained from commenting. Yes, this is a biased story but not because con artists like Angus King and John Baldacci have ALSO dabbled in ripping off the taxpayer while purporting to be ethically minded stewards of the environment.
The reason this is a biased story is because it is devoted almost exclusively to self-righteous and misleading comments made by Keith Van Scotter, Lincoln Paper’s president and CEO. Unless you’re someone of the Tea Party persuasion who has been duped into believing the corporate world’s sinister propaganda that the American people need to get rid of government, it’s hard to see any evidence of a federal conspiracy to punish the owners of Lincoln Paper.
Perhaps John Hinckley Jr. didn’t pump a bullet into President Reagan. Perhaps the Rosenbergs weren’t really atomic secrets spies. Perhaps Osama bin Laden really was a peaceful Arabian fruit merchant framed by the CIA. Perhaps…perhaps. Perhaps the folks at FERC really were doing their job. Perhaps they really did catch the mill operators at Lincoln Paper redhanded as they acted with criminal intent to steal $379,016 from the American people.