July 19, 2012

Feds seek $1.25 million penalty against Kennebec Valley Gas Co. partner

Portland's Richard Silkman, accused of rigging New England energy market, denies claims

By Tux Turkel tturkel@pressherald.com
Staff Writer

Federal energy regulators have recommended a $1.25 million civil penalty against a Portland businessman, saying he hatched a scheme to manipulate New England's energy market that cost electricity users more than $3.3 million.

In a notice filed Tuesday, the staff of the Federal Energy Regulatory Commission says Richard Silkman, a principal in Competitive Energy Services LLC, violated the commission's rules.

The FERC staff says Silkman, a former director of Maine's State Planning Office, gave improper advice to Rumford Paper Co. The advice was related to a program run by New England's power grid operator, in which big power users are paid to reduce electricity consumption during times of high demand.

Silkman is also a partner with the Portland-based Kennebec Valley Gas Co., a company that has proposed a natural gas pipeline project in central Maine. Another firm, Summit Natural Gas, has signed a contract to acquire Kennebec Valley Gas, a deal that's contingent on state approval to provide the gas service.

So far, the state hasn't done that. Instead, approval has gone to a smaller gas project proposed by Maine Natural Gas, a subsidiary of Central Maine Power Co. parent company Iberdrola USA. Summit/Kennebec Gas has appealed the state's decision.

According to the federal regulators, Silkman allegedly advised Rumford Paper to reduce its internal power generation and buy energy for a five-day period, to set an "artificially inflated" baseline.

That ultimately benefited the paper mill over six months in 2007 and 2008 whenever it was called on to reduce consumption, according to FERC.

At the same time, the commission says, it cost New England electricity consumers more than $3.3 million. Competitive Energy Services received $166,841 in revenue during the period, FERC says.

In a prepared statement, Competitive Energy Services denied any suggestion that Silkman or Rumford Paper did anything unreasonable or improper.

The company said it hasn't violated any rules or regulations, and the program cited by FERC was later found to have a design flaw and was terminated by the commission.

Competitive Energy Services also says that, until Tuesday, FERC never responded to any of the evidence the company submitted -- although the order says the commission considered all of Silkman's submissions.

"We welcome the opportunity to end this accusation and to clear our name," the statement said.

Silkman is widely known as an expert in Maine's energy industry. He has been involved in two small wind power projects in Maine, Beaver Ridge Wind LLC, which is operating, and Mount Harris Wind LLC, which is on hold because of community opposition.

Silkman is a partner in Grid Solar LLC, a solar technology and nontransmission alternative development company.

FERC's order gives Silkman 30 days to file a response.

The company said in its statement, "We believe there is no basis for this FERC action, dispute that we engaged in or even could be capable of market manipulation, and look forward to a transparent process that will yield a fair and open hearing before an impartial federal court. That hearing will demonstrate that our actions were entirely lawful, appropriate, and proper under the governing rules."

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