FERC probes claim that Pittsfield plant overcharged ISO-New England
PITTSFIELD — A Canada-based power company with a plant on Merrill Road allegedly manipulated local energy markets, overcharging ISO-New England $3 million over two months in 2010, and the U.S. federal government now is seeking a $5 million fine against the company.
Maxim Power Corp.'s Pittsfield plant fabricated a natural gas shortage between July and August 2010 then charged ISO-New England as if it was burning more expensive oil, according to the Federal Energy Regulatory Commission. All the while, it kept burning less expensive natural gas, FERC said.
Maxim's CEO said the company is "entirely innocent." The company said it is cooperating with FERC and is prepared to mount a vigorous defense, if it comes down to it. Maxim points out that FERC "has emphasized that an order to show cause" — which is FERC's demand at this point — "does not make any finding as to whether there has been any violation of law."
The alleged activity occurred for 22 days, with each day resulting in $135,000 in superfluous charges to ISO-New England, according to FERC.
ISO-New England, which operates and oversees the region's power grid, immediately detected the upcharges and demanded to know the reason.
According to a report cited by New York law firm Cadwalader, Wickersham & Taft LLP in a statement on the case, Maxim " 'conveyed the impression' that it was burning oil at its Pittsfield Plant because it was struggling to get gas from the Tennessee Gas Pipeline. In reality, on at least 10 of the 22 days when Maxim offered oil and burned gas, Maxim workers told ISO-New England market monitors that the plant 'had already purchased large volumes of gas before it submitted day-ahead offers based on oil prices.' "
As a result of its investigation, ISO-New England forced Maxim company to pay back the $3 million within the year. The matter had stopped there, until FERC heard of it while undertaking an investigation on a separate matter.
FERC now believes an additional $5 million penalty necessary. Last month, FERC asked Maxim to present a case as to why it shouldn't levy the fine.
Maxim, based in Calgary, Alberta, vehemently denies the charge, despite willingly paying back the $3 million to ISO-New England.
"We think we are entirely innocent," said CEO and President John Bobenic.
In a statement, the company said it "intends to vigorously defend itself before FERC or, if necessary, in federal court and is confident it can demonstrate that the conduct set forth in the Order to Show Cause did not violate FERC's anti-manipulation rule or any other rule."
ISO-New England possesses emails from Maxim Director of Corporate Development Kyle Mitton claiming "daily gas restrictions on Tennessee Gas Pipeline" along with contradictory interviews with the Maxim staff who purchased and burned the gas, according to the report on Maxim's staff cited by Cadwalader.
Shortly before the alleged activity, Maxim had lost a lucrative reliability must-run agreement with ISO-New England that ensured it as the peak-time power provider at a fixed rate of $445 per megawatt hour. "[Maxim] staff alleges that when that revenue stream evaporated, Maxim adopted the 'burn gas, charge oil' strategy to maintain profits," the report on Maxim's staff cited by Cadwalader further states.
A regional transmission organization, Maxim operates wholesale electricity markets throughout New England, with plants in Pittsfield; Pawtucket, R.I.; and Hartford, Conn. Its other plants are in Butte, Mont, and Orange County, N.J.
The Merrill Road plant is the company's largest U.S. holding, producing 181 megawatts of power for use during peak times. Local people use the lion's share of the energy it produces, but it contributes to the entire regional grid, which extends to Albany, N.Y., and beyond. Worldwide, the company operates 39 plants in Canada, the United States and France.
The Pittsfield instance was one of three the company's U.S. plants allegedly engaged in between 2010 and 2013, according to FERC investigations.
Contact reporter Phil Demers at 413-496-6214.
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