Durham energy company accused of ‘brazen’ fraud, fined $722 million by feds
AI-generated summary reviewed by our newsroom.
- FERC described the case as one of its largest and most brazen frauds.
- American Efficient denies wrongdoing and has sued FERC.
- The commission’s unanimous order followed a probe into wholesale capacity market conduct.
The Federal Energy Regulatory Commission has penalized a Durham company for what the agency called “one of the largest and most brazen frauds” in its history.
On Wednesday, FERC ordered American Efficient, LLC to pay a $722 million civil fine and repay $410 million in past profits, plus interest, following a multi-year investigation into the company’s actions in wholesale electric capacity markets. The company denies it acted illegally.
The five-member federal commission of three Republicans and two Democrats issued the order unanimously. Founded in 1977, FERC oversees interstate power transmissions, including natural gas, oil and electricity.
American Efficient works out of a Foster Street office in downtown Durham. It is part of a holding entity named Modern Energy that is led by Benjamin Abram, the husband of North Carolina state Sen. Sophia Chitlik, a Democrat from Durham County.
Abram’s company has operated in federally regulated capacity markets since 2014. These regional markets are meant to ensure grid reliability, particularly during periods of peak usage. Companies bid to be their suppliers and are compensated for promising to deliver future power capacity if needed.
American Efficient considers itself an “energy efficiency aggregator.” It doesn’t generate power during peak times but instead commits to deliver demand reductions to grid operators. The company does this by paying those who make, distribute and sell energy-efficient goods like LED lights and insulation for the environmental rights to their products, which it then bids out to the wholesale markets. On its website, American Efficient says its work across more than two dozen states has erased the need for four conventional power plants and helped avoid the equivalent of 10 million metric tons of carbon dioxide.
FERC accused American Efficient of running a “sweeping money-for-nothing” scheme to generate revenue from two regional capacity markets — one in the Midwest and Deep South (called MISO) and another in the Midwest and Mid-Atlantic (called PJM) — by falsely asserting ownership of energy-efficiency resources.
“American Efficient never had these rights, despite repeatedly attesting in its submissions to PJM and MISO that it did,” FERC wrote in its order.
The commission determined American Efficient failed to deliver additional energy reductions beyond what would already have occurred. It’s program, FERC wrote, “was designed to extract rents on sales of (energy efficient) products over which American Efficient had no influence.”
“We conclude that American Efficient made material misrepresentations to PJM and MISO in filings between 2014 and 2017,” the commission found. “Including by falsely claiming that its program lowered the price of EE products to consumers.”
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FERC Commissioner David LaCerte recommended the commission refer American Efficient to the U.S. attorney general for possible criminal charges. LaCerte, an appointee of President Donald Trump, also encouraged PJM Interconnection to stop any payments to the North Carolina-based company.
“PJM has reviewed the recent FERC orders and will take appropriate action to maintain the integrity of our markets and protect consumers,” organization spokesperson Jason McGovern wrote in an email to The News & Observer on Friday. “As noted in the FERC order, energy efficiency resources are no longer eligible to be offered into PJM’s capacity market.”
American Efficient blasts investigation
In a statement Friday to The N&O, American Efficient wrote the company “strongly rejects the findings and assertions in FERC’s ruling.”
“At no point did American Efficient violate the law or seek to mislead anyone,” its statement read. “PJM, the market operator FERC alleges was defrauded, reviewed and approved American Efficient’s participation based on detailed, transparent submissions over 30 separate times in a 10-year period.”
“We are aware of no case in FERC’s enforcement history in which the alleged victim has denied being a victim at all,” the company added, in reference to PJM. “FERC’s allegations are baseless and unprecedented, and we are confident a federal court will agree.”
The company told The N&O it won’t pay any fines as it fights FERC’s case in court.
American Efficient has sued the agency in the Middle District of North Carolina, alleging the commission lacked constitutional authority to issue penalties without going through a jury trial. In November, U.S. District Judge Thomas Schroeder denied American Efficient’s request to halt future FERC actions until the lawsuit concludes.
In a response to FERC the following month, American Efficient evoked Trump in calling for the agency to end its investigation. “It is long past time for the Commission to terminate this proceeding,” the company wrote. “Which represents precisely the sort of bureaucratic overreach and weaponization of government resources that President Trump has directed agencies to root out and stop.”
