Lincoln mill owner decries FERC probe

Posted Jan. 31, 2011, at 7:41 p.m.

LINCOLN, Maine — Without any form of due process or an explanation of the accusation’s economic scope, a federal agency has issued a public notice accusing Lincoln Paper and Tissue LLC of defrauding the public, mill co-owner Keith Van Scotter said Monday.

A Federal Energy Regulatory Commission Staff Notice of Alleged Violations released last week on FERC’s website claims that FERC staff “has preliminarily determined that Lincoln Paper and Tissue, LLC (Lincoln) violated the Commission’s Prohibition of Electric Energy Market Manipulation.”

The notice continues:

“Staff alleges that Lincoln violated [federal law] by engaging in a fraudulent practice to collect payments in the Day-Ahead Load Response Program (DALRP) operated by ISO New England, Inc. (ISO-NE). Specifically, staff alleges that Lincoln intentionally curtailed on-site generation during DALRP program hours when it enrolled in the DALRP. Staff believes that this practice artificially inflated the participant’s baseline load and misrepresented the participant’s load profile to ISO-NE.

“Staff also alleges that Lincoln took actions to ensure that its baseline did not appreciably change for over six months. Lincoln was paid for the difference between its inflated baseline load and its normal operational load as a ‘load reduction’ even though no load reduction actually occurred,” the notice continued. The alleged violations occurred from July 2007 through February 2008.

FERC officials contacted Friday said they could not comment on the specific allegations because they remain confidential at this point.

“We can’t discuss it because it’s nonpublic,” said Mary O’Driscoll, press secretary for FERC. “It’s just a process that works this way.”

Van Scotter said Lincoln Paper officials cooperated fully with the investigation, which began two years ago. But aside from the staff notice, which was released on Jan. 26, paper company officials have no idea of what they are accused of, he said.

“This is the damnedest thing I have ever seen,” Van Scotter said Monday. “This notice is going out and [with its publication on the FERC website] we are prosecuted, tried and convicted, and there have been no hearings, no due process of any kind. They have asked us for information, deposed me and some other people within Lincoln, and we were told this was a confidential investigation. Then this notice comes out.

“We have no idea how they reached this conclusion,” he added.

As part of its operations and DALRP, Lincoln Paper can be paid by ISO New England, which operates the electric utility grid in New England, not to draw electricity from the grid, or to draw less, including on days when the grid might be too overloaded to handle Lincoln Paper’s demands, O’Driscoll said.

LP&T has its own generator and can make as much as 13 megawatts of electricity to meet its own demands.

Officials at ISO New England declined to comment on the matter when contacted Friday.

FERC officials last contacted Lincoln Paper about a year ago, Van Scotter said.

When Lincoln Paper attorneys contacted FERC last week to ask about the notice, FERC officials said that the agency “was ordered to release [the notice] on a rushed basis by FERC commissioners,” Van Scotter said.

Officials from the regulatory agency are due to meet with Lincoln Paper officials in Washington, D.C., on Wednesday, he said.

The commissioners are attempting to comply with a federal law passed in 2009, requiring FERC to operate with more transparency, O’Donnell said. The law came in response to complaints that FERC was settling investigations without any significant public notice or involvement. The notice released on Jan. 26 was among the first notices publicly released in compliance with the new law, she said.

FERC is an independent agency that regulates the interstate transmission of electricity, natural gas and oil.

When asked whether he found outrageous FERC’s release of the notice, Van Scotter wryly replied that he won’t know whether he would consider it so until Wednesday’s meeting.

“We are very concerned about how this is handled,” Van Scotter said. “We want to ensure that we follow all laws and regulations, and we put a lot of effort into doing that.”

As the process typically runs, FERC’s investigators and commission can determine whether a complaint is unsubstantiated, settle a complaint or take an alleged violator to federal court, O’Donnell said.

FERC has been investigating complaints for about five years.

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