FERC Issues Show Cause Order to Retail Energy Company Over Alleged "Fraud"

FERC yesterday issued show cause orders to a retail energy consultant, one of its employees, and one of its customers, directing the entities to show cause why they should not be subject to a civil penalty and disgorgement for what FERC Staff alleged was a violation of the ISO New England Day-Ahead Load Response Program (DALRP).

Show cause orders were specifically filed against Competitive Energy Services, LLC (CES), Dr. Richard Silkman, an employee of Competitive Energy Services, and Rumford Paper Company, a client of Competitive Energy Services.

FERC Enforcement Staff alleges that Competitive Energy Services advised Rumford to adopt, and, along with Rumford, implemented, "a plan to inflate Rumford's load baseline and then repeatedly offer load reductions at the minimum offer price in order to freeze the inflated baseline, maximizing payments for phantom load reductions."

FERC Enforcement Staff alleges that, at Competitive Energy Services' urging, "Rumford curtailed generation during the baseline period, intentionally creating a misleading baseline."

FERC Enforcement Staff alleges, "that CES offered load response by Rumford on a daily basis, fraudulently communicating a willingness and ability to reduce load ... [and] that CES understood that Rumford would not reduce load and, in fact, did not reduce load, contrary to its DALRP load reduction offers."

The alleged violations occurred during a period in 2007 and 2008.

Staff recommended a $7.5 million penalty for Competitive Energy Services and disgorgement of $166,000.

Staff recommended a $13.25 million penalty for Rumford and disgorgement of $2.8 million.

Staff recommends a civil penalty of $1.25 million for Silkman.

The companies and individual may request a hearing on the allegations.

FERC Staff said that the alleged violations resulted in a loss of $3.3 million to electricity customers in New England.