On February 2, 2015, the Commission directed Maxim Power Corporation, Maxim Power (USA), Inc., Maxim Power (USA) Holding Company Inc., Pawtucket Power Holding Co., LLC, Pittsfield Generating Company, LP (collectively “Maxim”), and Kyle Mitton, a Maxim executive (together “Respondents”) to show cause why they should not be found to have violated the Federal Power Act and the Commission’s regulations “through a 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.” The Commission further directed the Respondents to show cause why they should not be assessed civil penalties of: (i) $50,000 (against Mr. Mitton); and (ii) $5,000,000 (against Maxim).
On January 16, 2015, the Office of Enforcement (“OE”) submitted a report to the Commission in which it alleged that Maxim, primarily through its employee Kyle Mitton, engaged in a series of transactions with ISO-New England (“ISO-NE”), and a series of 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 in question was actually burning much less expensive natural gas.
Under the ISO-NE Tariff, when generation resources are called upon for reliability purposes, they are eligible for make-whole payments called “Net Period Commitment Payments” based on the fuel price used to generate the required power. According to OE, Maxim regularly submitted Day-Ahead offers into the ISO-NE market at high oil prices during July and August of 2010. However, OE contended that when Maxim received its reliability commitments, it burned natural gas to generate almost all of the resource’s power. OE further alleged that when the IMM asked Maxim about its offers into the Day-Ahead market, Mr. Mitton, on behalf of Maxim, responded with communications giving the impression that Maxim was unable to obtain natural gas, and was therefore burning more expensive oil. According to OE, Maxim gave those responses to the IMM even though, on many days, Mr. Mitton had purchased large quantities of natural gas before submitting a Day-Ahead offer based on oil prices. OE estimated that Maxim collected $2.99 million in excessive payments from this strategy.
In its February 2, 2015 Order, the Commission directed the Respondents to show cause why they should not be found to have violated:
- Section 222 of the Federal Power Act, and Section 1c.2 of the Commission’s regulations, each of which contains an explicit prohibition on manipulation of electric energy markets; and
- Section 35.41(b) of the Commission’s regulations, which requires, among other things, that sellers submit accurate and factual information to Commission-approved Market Monitors, and not submit false or misleading information, or omit material information, in any communication with Commission-approved Market Monitors.
The Commission further directed the Respondents to show cause why they should not be assessed civil penalties of: (i) $50,000 (against Mr. Mitton); and (ii) $5,000,000 (against Maxim), as recommended by OE in its January 16, 2015 report.
A copy of the Commission’s order may be found here.