FERC Issues $10 Million Penalty to End-Use Customer

Rumford Paper Company will pay a civil penalty of $10 million, and disgorge $2.8 million, under a settlement with FERC to resolve allegations that Rumford engaged in fraudulent conduct in its participation in ISO-New England, Inc.'s (ISO-NE) Day-Ahead Load Response Program (DALRP)

Rumford neither admits nor denies the allegations under the stipulation.

According to FERC's order, its Enforcement Staff, "concluded that Rumford violated 18 C.F.R. § 1c.2 when the company adopted and implemented a scheme to defraud ISO-NE of demand response payments proposed by an energy consultant, Competitive Energy Services, LLC (CES) and CES's Managing Member, Dr. Richard Silkman. Enforcement found that Rumford curtailed its internal generation by approximately 30-40 MW during the five-day period when Rumford's initial baseline load was established for the DALRP. Instead of operating the generator to supply Rumford with virtually all of its energy needs (as was typical for the facility) during this time, Rumford and CES purchased replacement energy during the baseline period at a $120,000 cost. Enforcement concluded that by intentionally ramping down the generator and purchasing energy, instead of producing energy on site, Rumford established a false and inflated baseline."

"Enforcement determined that, once in the DALRP, Rumford's artificially inflated baseline allowed the company to claim load reductions (the difference between its baseline load and its normal operations) without actually reducing any load. Enforcement concluded that for over six months from 2007 to 2008, Rumford engaged in a scheme that ensured the baseline never appreciably changed, causing electricity consumers in New England to pay $3,336,964.63 for demand response that never occurred, of which Rumford received $2,836,419.08," FERC's order states.

The parent of Rumford previously declared Chapter 11 bankruptcy, and the stipulation is subject to approval of the bankruptcy court.

Docket No. IN12-11