FERC Seeks $5 Million Penalty Against Generator, Alleging Manipulation

FERC ordered Maxim Power Corporation, Maxim Power (USA), Inc., Maxim Power (USA) Holding Company Inc., Pawtucket Power Holding Co., LLC, Pittsfield Generating Company, LP and Kyle Mitton to show cause why they should not be found to have violated section 1c.2 of the Commission’s regulations and section 222 of the Federal Power Act (FPA), through an alleged scheme to obtain payments for reliability dispatches based on the price of expensive fuel oil when Maxim in fact burned much less costly natural gas.

FERC directed respondents to show cause why they should not be assessed civil penalties in the following amounts:

• Maxim and its Named Subsidiaries (jointly and severally): $5,000,000

• Kyle Mitton: $50,000

According to the show cause order, FERC's Enforcement Staff alleged that, "principally through its employee Kyle Mitton, Maxim engaged in a series of transactions with ISO-New England (ISO-NE) and misleading communications with the ISO-NE Internal Market Monitor (IMM) for the purpose of obtaining inflated make-whole payments at high fuel oil prices when a Maxim plant was dispatched for reliability, even though the plant was actually burning much less expensive natural gas."

"During July and August 2010, Maxim regularly submitted Day Ahead offers to ISO-NE at high oil prices, but on 22 days when it got reliability commitments, burned much less expensive gas to produce all or almost all of the plant’s energy," FERC Staff alleged.

"Because Maxim’s plant was being called on to ensure the reliable operation of the grid, rather than because of economics, the ISO’s rules provided that Maxim could be paid make-whole payments (called Net Period Commitment Payments) based on its fuel price. The OE Staff Report alleges that when the IMM asked Maxim about its offers, Maxim (through Mitton) responded with communications giving the impression that Maxim was unable to obtain gas and was therefore burning more expensive oil. Maxim gave those responses to the IMM even though, on many days, Mitton had bought large quantities of gas before submitting a Day Ahead offer based on oil prices," FERC Staff alleged

Commissioner Tony Clark dissented from FERC's show cause order, stating, "Having reviewed the OE Staff Report and Maxim’s responses, I do not find that the record sufficiently supports the Commission moving forward with this Order to Show Cause."

Docket No. IN15-4