December 27, 2013

Maine energy consultant seeks dismissal of fraud lawsuit

Richard Silkman’s attorney also argues that if the federal case proceeds, it should be moved to a court here.

By Tom Bell tbell@pressherald.com
Staff Writer

Portland-based energy consultant Richard Silkman is asking that a federal lawsuit accusing him of fraud either be dismissed or be transferred to a court in Maine.

Federal officials brought suit in U.S. District Court in Boston to force Silkman and his company, Competitive Energy Services LLC, to pay $8.75 million in fines to settle charges that he helped a client fraudulently earn millions of dollars by manipulating a program designed to save energy.

The case should be moved because all the relevant information and witnesses are in Maine, said Peter Brann, an attorney speaking on Silkman’s behalf. “The bottom line is they waited too long, sued the wrong people, and it should be tried” here, Brann said.

The Federal Energy Regulatory Commission alleged in a lawsuit filed Dec. 2 that Silkman helped his client, Rumford Paper Co., mislead ISO New England, the region’s power grid operator.

A program run by ISO-NE paid large commercial users to reduce their electricity consumption during periods of high energy demand. Silkman allegedly advised Rumford Paper to reduce the power it generated with its own equipment, buying extra electricity from utilities for a five-day period to set an “artificially inflated” baseline. Over six months in 2007 and 2008, Rumford would then generate more of its own electricity and buy less from utilities, making it only appear as if the plant was conserving power, FERC alleged.

In a related lawsuit filed Dec. 2, FERC alleges that Lincoln Paper and Tissue also established a false and inflated baseline. The federal regulator is seeking $5 million in damages from the Lincoln paper mill.

The managers of the Lincoln mill have denied the allegations and are ready to make their case in court, said Keith Van Scotter, the mill’s president and CEO.

“This is our first opportunity to have due process, and we are looking forward to it,” he said.

The Rumford mill, owned by NewPage Corp., never admitted to wrongdoing. In March, however, it paid $3 million in fines connected with the charges.

Silkman, former director of the Maine State Planning Office, is widely known as an expert in Maine’s energy industry. He has been involved in small wind-power projects in Maine and is a partner in both Grid Solar LLC, a solar technology and non-transmission alternative development company, and in Kennebec Valley Gas Co., which proposed a natural gas line through central Maine. Kennebec Valley was sold last year to Colorado-based Summit Utilities.

The Rumford mill, which has a generator on site that burns fuel derived from wood chips and discarded tires, is able to produce 100 percent of the energy it uses, according to information on the company’s website.

During a five-day period in 2007, in which a company’s typical electrical use was being measured for the ISO New England program, the Rumford mill increased the amount of electricity it buys from the grid, according to an Aug. 29 FERC order that assessed the fine on Silkman. FERC alleged that the mill’s managers were following the advice of their energy consultant, Silkman, who enrolled the mill in the ISO-NE program.

After the measurement period was concluded, the company returned to is normal practice and increased the amount of energy it generated on site, FERC said.

During times of peak energy demand, ISO-NE paid the Rumford mill for “phantom load reductions,” according to the FERC lawsuit. The payments, made from July 2007 to the end of February 2008, totaled $3.3 million, according to the suit. FERC alleges that Silkman’s compensation amounted to 5 percent of the payments, or $167,000.

In a motion filed last Friday, Brann argued that FERC filed its lawsuit too late, and that the statute of limitations has expired. He also argued that FERC’s anti-manipulation statute and rules do not apply to consultants.

Brann also filed a motion for change of venue from Massachusetts to Maine if the case does proceed.

ISO New England, which is based in Holyoke, Mass., declined to comment. FERC also declined to comment.

Tom Bell can be contacted at 791-6369 or at:

tbell@pressherald.com

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