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Rumford Paper to Pay $3 Million to Settle Energy Manipulation Claims
03/27/2013   Reported By: Tom Porter

Rumford Paper Company has agreed to pay more than $3 million to federal regulators to settle claims that it manipulated the energy market for its own gain. The Federal Energy Regulatory Commission, or FERC, alleges that Rumford Paper effectively defrauded a program that compensated large energy users for using less electricity during peak hours of demand. Tom Porter reports.

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FERC alleges that the company claimed load reductions without actually reducing its power usage.

The company received $3 million in compensation payments - money that's now to be returned. Rumford Paper was also fined a civil penalty of $10 million, but because parent company NewPage has filed for bankruptcy, FERC said it would be satisfied with a cash payment of the $3 million-plus amount.

In a written statement, company spokesman Tony Lyons says Rumford Paper neither admits nor denies guilt, but has agreed to settle the allegations.

FERC claims that the fraudulent scheme was adopted by Rumford at the suggestion of a Portland-based energy consulting company called Competitive Energy Services. The charges against CES also mention by name Richard Silkman, the company's founding partner and a high-profile figure in the field of energy markets and regulation.

"Everything that CES advised, and everything that Rumford took action on, was completely in alignment with the guidance that we received from FERC on the program," says CES spokesman Dustin Brooks.

Brooks says the company followed the rules laid down by federal regulators. "It's also important to note that FERC, in 2008, actually ended up canceling this program, which they designed, because they found that the design was flawed," Brooks says.

As for why Rumford agreed to return the $3 million: "To us, the settlement appears to be part of Rumford settling up part of its bankruptcy proceedings," Brooks says. "Rumford has agreed to return about $3 million that it earned from the program, so it looks they just are returning that money to close it up."

FERC is seeking penalties of more than $8.5 million from CES and Silkman. Brooks says CES has no intention of paying up, and looks forward to its day in court.

Rumford is not the only Maine paper company locked in a dispute with FERC. Similar charges of market manipulation are being made against Lincoln Paper and Tissue, and FERC is seeking a civil penalty of $4.4 million against the company.

Chief Executive Keith Van Scotter says the matter is currently in the hands of the commission. "And should they choose to pursue this we will go to court with them," he says. "We continue to strongly dispute their allegations and we think we've got a very strong case."

Staff at the Federal Energy Regulatory Commission, or FERC, did not respond to a request to be interviewed for this story.



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