LINCOLN – The town will side with Lincoln Paper & Tissue LLC as it presses the state Public Utilities Commission to drop a $1.2 million fine that could come as the company seeks to buy electricity on the open market, officials said Wednesday.

“We’re not asking for a rate break. We are just looking to buy electricity at a more competitive rate,” mill co-owner Keith Van Scotter said Wednesday.

Lincoln Paper buys electricity from a variety of suppliers at what is called the standard offer rate, which at the moment is much more expensive than buying electricity from the open market, Van Scotter and Lincoln Paper’s attorney, Anthony W. Buxton, said.

LP&T has been shopping for an open-market rate and supplier and will have to pay standard offer until that supplier is found, Town Manager Glenn Aho said.

To guard against chaos caused by consumers jumping between standard offer and open market rates, the PUC mandated that consumers stay on one rate system for six months. It devised a fine of approximately twice the two highest monthly bills over the six-month period – in LP&T’s case, about $1.2 million – for users who leave before the period lapses.

Van Scotter called the opt-out fee rule “very punitive.” He, his attorney and Aho argue that it should be waived in Lincoln Paper’s case because the company intends to buy power on the open market long term, not jump between rate systems.

The company was forced to take the standard offer rate because, as a start-up, it could not immediately secure the high credit rating sufficient to buy in the open market, Buxton said. Now it can, having been in business more than a year. It also needs a lower rate to be competitive, he said.

“We hope that the state of Maine understands that you can’t do this to major employers,” Buxton said. “[Lincoln Paper] has competitors who are paying competitive costs for energy. You can’t trap them into paying excessive fees.”

The company uses about 10 million kilowatt-hours per month, Van Scotter said.

“Every day they charge me is big money that I want to spend on an expansion and bringing more jobs to the state of Maine,” he said.

Lincoln Paper is installing a new tissue-making machine as part of a $36 million plan to double the plant’s tissue-making capacity. It will make 100 tons of high-end tissue per day.

The new machine is part of a plan to add 40 new full-time jobs to the plant’s 354-member, $21 million payroll, and alleviate backlogs on the plant’s two 50-ton-capacity tissue machines.

The new tissue machine will be operational by late fall 2006. Preliminary construction began in late October and is on schedule, Van Scotter said Wednesday.

The investment could generate as much as $794,000 a year in tax revenue.

The town filed a petition to intervene in the appeal Friday, arguing that as the town’s largest employer, Lincoln Paper deserved the opt-out rule waiver.

Mitchell Tannenbaum, a hearing examiner with the state PUC, said the commission hopes to have a ruling or a hearing within a month.