BANGOR – The Internal Revenue Service wants to look at almost every document relating to the sale of electricity in Maine from 1997 through 2001.

The Maine Public Utilities Commission has been given three weeks to comply with an IRS summons for the documents so the federal taxation agency can review them as part of its investigation of the parent company of Fraser Paper of Madawaska, which is NexFor (USA) Inc.

The IRS summons, received at the PUC on March 3, does not specify why the financial services office of its large- and medium-size business division is reviewing NexFor (USA) and its subsidiaries.

On Monday, Richard Chapel, director of corporate communications for NexFor-Fraser Papers Inc., confirmed the IRS inquiry but said he did not know to what extent the IRS was going to use the pricing contracts in its investigation.

He said the IRS was interested in exploring the relationship between NexFor’s cogeneration power plant in Edmundston, New Brunswick, and the Madawaska paper mill. The power plant sells steam that is converted to electricity at both NexFor’s pulping operations in Edmundston and its paper mill across the St. John River in Madawaska.

“The IRS is interested in knowing whether the price paid for that power is fair or not,” Chapel said. “All I can say is the stated purpose of their inquiry is to determine … whether it’s a fair market price, whether it’s too high or conceivably too low.”

Sources speculated that the IRS may be questioning whether one NexFor affiliate – the power plant – sold the steam at prices higher than fair market rates to another NexFor affiliate – Fraser’s mill in Madawaska.

And the sources wondered, because the IRS is involved instead of the Federal Energy Regulatory Commission, whether NexFor may have deducted the higher prices on its taxes.

A review of the PUC documents may or may not confirm whether the power rates were comparable to market rates, the sources said.

James Testa, an IRS officer from Bangor who is assigned the case, did not return a telephone call for comment Monday.

Dennis Keschl, administrative director of the PUC, is required under the summons to produce the requested documents at a meeting scheduled by the IRS for 9 a.m. Monday, March 24, at the PUC’s office in Augusta.

Because of the confidential nature of most of the documents, the PUC sent out a letter to at least a dozen utilities and businesses late last week informing them that the IRS wants to look at contracts they signed with each other.

PUC spokesman Phil Lindley said the letter basically stated that “some of the information is subject to a protective order and you need to know we’re doing this.”

The sheer number of PUC documents sought by the IRS is tremendous, according to Lindley, who couldn’t recall a similar request ever having been made.

According to the summons, the PUC must supply “all documents and records in [its] possession … that contain information regarding the price and quantities of firm electricity capacity and/or energy offered by competitive suppliers” to each of Maine’s utilities and municipal power cooperatives.

Those documents include power supply contracts with some of Maine’s biggest companies, such as Bath Iron Works, Great Northern Paper Inc., the now defunct HoltraChem, Hannaford Bros. and Shaw’s Supermarkets.

The government’s request also extends to documents pertaining to the largest energy company transaction in Maine’s history – Central Maine Power Co.’s sale of its generators to FPL Energy of Maine for $847 million almost four years ago. And the IRS summons included documents relating to how the PUC designed its standard offer electricity rate formula for households and businesses of every size. Standard offer is the default rate that consumers pay for electricity if they haven’t selected another power supplier.

The summons is not limited to businesses and utilities in Maine. The IRS wants the PUC to forward information on certain specified energy market programs that are relevant to the Northeast, including the New England Power Pool, and eastern Canada.

The request specified that the IRS may pay “fees and costs that are reasonably necessary” to cover the state’s expenses to gather and copy the information.

NexFor is a Toronto-based forest products conglomerate that has financial interests in pulp, paper and building materials. It also has a 40 percent interest in Brascan, a North America-based company that owns and manages assets in real estate, power generation and financial sectors. Brascan, which supplies power to bankrupt Great Northern Power, is one of about six companies considering whether to buy GNP’s two mills.