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FERC Issues Formal Notice of Investigation into New England Generator Over Capacity Payments, Make-Whole Payments

November 4, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC issued a formal notice stating that, "in a nonpublic investigation pursuant to 18 C.F.R. Part 1b, the staff of the Office of Enforcement (Enforcement) of the Federal Energy Regulatory Commission has preliminarily determined that Maxim Power Corporation (Maxim) engaged in three schemes in ISO-New England (ISO) that violated section 222(a) of the Federal Power Act and the Commission’s Anti-Manipulation Rule, 18 C.F.R. § 1c.2 (2014)."

Maxim Power had previously disclosed to investors that FERC was engaged in an investigation of its behavior.

"Enforcement staff also concludes that Maxim executives John Bobenic and Kyle Mitton engaged in certain of these schemes," the FERC Staff notice states.

"In the first scheme, conducted during 2012-13, Maxim gamed an ISO-New England market rule intended to mitigate the market power of generators needed for reliability. Through this scheme, Maxim received millions of dollars of inflated make-whole payments from the ISO," the FERC Staff notice states.

"In the second scheme, carried out in July and August 2010, Maxim told the ISO it needed to offer based on high oil prices because of supposed gas supply problems, and collected make-whole payments based on those high prices, but in fact burned much less expensive gas. In many cases Maxim had already purchased gas when it submitted Day Ahead offers based on oil prices because of supposed gas supply issues," the FERC Staff notice states.

"In the third scheme, executed from 2010 through 2013, Maxim obtained inflated capacity payments from ISO-NE by artificially raising the reported output of three of its plants. Maxim did this by employing extraordinary measures during capacity tests that it did not use, and did not intend to use, during the ordinary operation of the plants," the FERC Staff notice states.

In a statement, Maxim Power said, "The Notice is not a determination by FERC that any violation has occurred and, to the knowledge of MAXIM, no such determination has been made. FERC's regulations state that the 'issuance of a Notice has no substantive legal effect, and does not conclusively or otherwise affect the rights of the subject. Issuance of a Notice is entirely separate and unrelated to any findings the Commission may or may not later make with regard to the investigation.'"

"MAXIM has not yet had any opportunity to take any formal discovery or otherwise defend itself concerning these alleged violations before FERC or in a Federal District Court. Should the Notice culminate in the commencement of a formal proceeding, MAXIM intends to vigorously defend itself before FERC or a Federal District Court and is confident it can demonstrate that the conduct set forth in the Notice did not violate FERC's anti-manipulation rule or any other rule," MAXIM said.

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