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.