FERC Fines Energy Consultant, End User for Market Manipulation

In separate cases and orders, FERC issued civil penalties to Competitive Energy Services, LLC (CES), Dr. Richard Silkman (CES's managing member), and Lincoln Paper and Tissue, LLC for activity in ISO New England, Inc.'s (ISO-NE) Day-Ahead Load Response Program (DALRP) which FERC found violated section 1c.2 of the Commission's regulations and section 222 of the Federal Power Act (FPA), which prohibit energy market manipulation.

With respect to Competitive Energy Services and Silkman the Commission made similar findings that, "CES devised and implemented a scheme to inflate Rumford's [customer Rumford Paper Company which previously reached a $10 million settlement with FERC, click here] customer baseline and thereby permit Rumford and CES to be paid for demand response that Rumford never intended to provide or actually provided. CES, based on the scheme devised by Dr. Silkman, submitted to ISO-NE demand response registration information falsely claiming that Rumford had capability to reduce its load by up to 20 MW even though CES knew that under the scheme it designed Rumford would be paid only for demand reduction reflected in its artificially inflated customer baseline," FERC said.

CES was ordered to pay a $7.5 million penalty and to disgorge $167,000 plus interest. Silkman was ordered to pay a civil penalty of $1.25 million.

Separately, with respect to Lincoln Paper and Tissue, FERC found that, "Lincoln devised and implemented a scheme to inflate its customer baseline and thereby be paid for demand response that it never intended to provide or actually provided ... This conduct resulted in the creation and the fraudulent communication to ISO-NE, of a higher, false customer baseline in those DALRP participation hours."

FERC found that Lincoln, "subsequently accept[ed] demand response payments without altering its operations to provide the required demand reduction."

FERC ordered Lincoln to pay a civil penalty of $5 million and to disgorge $379,000 plus interest.

For all penalties described above, FERC will allow the use of a FERC-approved payment plan to alleviate any concern about the ability to pay the penalty.

Dockets: IN12-10, IN12-12, IN12-13