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Maryland PSCSupplier Licensing Information

Dan Norfolk 410-767-8045

dnorfolk@psc.state.md.us

Michael Lee, Directormlee@psc.state.md.us

Integrated Resource Planning DivisionMaryland Public Service Commission

http://www.psc.state.md.us

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Presentation Outline

• How to obtain a supplier license

• Current licensing process

• General problems concerning suppliers and licensing

• Ongoing supplier obligations

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What is an Electricity Supplier

• An electricity supplier means a person:– Who sells:

• electricity;• electricity supply services; or• competitive billing services; or

– Who purchases, brokers, arranges, or markets electricity or electricity supply services for sale to a retail electric customer.

• An electricity supplier includes an electric company, an aggregator, a broker, and a marketer of electricity.

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What is a Gas Supplier

• A gas supplier means a person:– Who sells:

• gas;

• gas supply services; or

• competitive billing services for gas supply services; or

– Who purchases, brokers, arranges, or markets gas or gas supply services for sale to a retail gas customer.

• A gas supplier includes an aggregator, a broker, and a marketer of gas.

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In Maryland a Broker is Considered a Supplier

• A broker is an entity or individual that acts as an agent or intermediary in the sale and purchase of electricity or gas but does not take title to electricity or gas.

• A broker is considered a supplier.

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How are you doing business in MD?(Service Territory & Customer Class)

• Electricity– BG&E– Choptank– Delmarva Power– Allegheny Power– PEPCO– SMECO

• Gas– BG&E– Washington Gas & Light– Columbia Gas– Chesapeake Utilities– Elkton Gas

• Customer Class:– Non-residential

• Commercial• Industrial

– Residential

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Step-by-Step Instructions for Accessing Supplier Application Forms

• Commission’s home page is located at: www.psc.state.md.us

• The “Resources” column at the home page contains an “Applications and Forms” link which includes the supplier applications, or

• Submenu topics are listed on left side of the home page (Gas, Electric, Telecommunication, etc.).– “Electric” contains an electricity supplier application

form.– “Gas” contains a gas supplier application form.

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Supplier Licensing Process

• Download and complete the supplier application.• Submit the application and required material to the

Commission.• Commission Staff’s IRP Division reviews the application

and writes comments.• The Staff Counsel Division reviews the IRP comments.• The application for license is scheduled on an

administrative meeting agenda.• The Commission reviews the application, including Staff

comments, and then makes a ruling: grant or deny supplier license.

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Supplier Licensing Requirements

• Electricity supplier licensing requirements: PUC Article §7-507 and COMAR 20.51.

• Gas supplier licensing requirements: PUC Article §7-603 and COMAR 20.54.– Gas statute grants the Commission the same

authority to license gas suppliers as it has to license electricity suppliers.

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Overview of Supplier License Application Requirements

The following information is required from supplier license applicants:

• Completed application.• Proof of technical and managerial competency.• Proof of financial integrity.• A $10,000 bond is required for brokers.• A $50,000 bond is required for suppliers accepting prepayments or

deposits.• Certificate of good standing from the state of Maryland (Maryland State

Department of Assessments and Taxation).• Certificate of good standing from the state of formation.

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Supplier Licensing Requirements

• All supplier applicants are required to: – submit an application; – demonstrate technical and managerial

competency; – provide proof of financial integrity; and– provide proof of qualification to do business in

the state of formation and in Maryland.

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Supplier Application

• Potential suppliers must complete and file the appropriate application. The application includes:– General information (name, contact information).

– Maryland specific information (intended customers, intended utility area of operation).

– Tax Affidavit (agree to pay taxes).

– General Compliance Affidavit (agree to comply with state consumer protection laws, environmental laws, PSC regulations, and PSC fees and assessments).

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Common Applicant Oversights

• All applications must be officially filed with the Commission.

• Original application and attachments.• 17 copies and an electronic version on CD.• $400 fee for each application.

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Staff Review of Applications

• Commission Staff reviews applications for:– Technical and Managerial Competency, and– Financial Integrity

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Technical and Managerial Competency

• To demonstrate technical and managerial competency, suppliers are requested to submit:– Resumes,– Past work experience,– Company description or profile, and– Other relevant information that demonstrates

technical and managerial competency.

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Financial Integrity Overview

• Suppliers submit financial statements for Commission financial integrity test.

• Suppliers may pass financial integrity test with $2 Million PJM unsecured credit limit.

• When required, supplier financial integrity bonds are $250,000.

• Brokers are are required to submit a $10,000 bond.

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Financial Integrity

• An Applicant for a license shall demonstrate financial integrity. The Commission utilizes separate financial integrity requirements for:– suppliers, and – suppliers operating as brokers.

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Financial Integrity Test for Suppliers

• Based on balance sheets and income statements for the two most recent 12-month periods available.

• To demonstrate financial integrity, applicants shall have:– positive working capital, – positive stockholder’s equity, and – positive net income.

• Applicants failing one or more of above tests may still pass based upon conditional tests described in the regulations.

• For Applicants with less than 12 months of history, alternative indicators will be used.

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Broker Financial Integrity

• Historically, suppliers operating as brokers submit a bond in lieu of passing Commission financial integrity test. – Applicants seeking to act solely as a Broker

of supply or supply services must post a $10,000 bond.

• Commission Staff distributes a bond template to suppliers during the application process.

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Withdrawal of Existing Bond

• A licensed electricity supplier (excluding brokers) may seek to withdraw a bond, or other form of financial integrity guarantee, if PJM grants the electricity supplier an unsecured credit allowance in excess of $2 Million.

• Similarly, an electricity supplier may submit new financials and request a review by Commission Staff.

• Broker bonds may not be withdrawn.

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Summary of Financial Integrity

• Suppliers submit financial statements for Commission financial integrity test.

• Suppliers may pass financial integrity test with $2 Million PJM unsecured credit limit.

• When required, supplier financial integrity bonds are $250,000.

• Broker bonds are $10,000.

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Prepayments or Deposits from Customers

• Suppliers that intend to collect prepayments or deposits from customers must post a $50,000 bond.– The bond is not required if prepayments or deposits are

collected from larger customers (Monthly Load: > 1 MW or > 325 dekatherms)

– The bond is reviewed after six months.• The bond amount must be greater than the

deposits/prepayments collected.

• Commission Staff distributes a bond template to suppliers during the application process.

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Summary of Requirements for Supplier License Applications

The following information is required from supplier license applicants:

• Completed application.• Proof of technical and managerial competency.• Proof of financial integrity.• A $10,000 bond is required for brokers.• A $50,000 bond is required for suppliers accepting prepayments or

deposits.• Certificate of good standing from the state of Maryland (Maryland State

Department of Assessments and Taxation).• Certificate of good standing from the state of formation.

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General Supplier Problems

• The majority of applications are submitted incomplete. – (e.g., broker bond not included, not all

application questions are answered)

• Licensed suppliers do not maintain accurate information with the Commission.

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Ongoing Supplier Obligations

• A licensed supplier is required to notify the Commission of:– Any material change, and– Any change to information contained in the

suppliers original application.

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Material Change Ongoing Supplier Obligations

• Material changes include:– PJM reduces the licensee’s unsecured credit

allowance to a level below $2 Million;– Licensee is denied credit by a Maryland electric

company;– At least two of the nationally recognized credit

rating organizations reduce the licensee’s rating by two or more grades, or to a level below investment grade;

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Material Change Ongoing Supplier Obligations

(continued)

– Licensee files for bankruptcy protection or is subjected to involuntary bankruptcy proceedings;

– Licensee has had a license revoked, suspended or restricted in another state;

– Parent corporation or other person who is guaranteeing the licensee’s financial integrity withdraws the guarantee.

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Material Change Ongoing Supplier Obligations

(continued)

• Within 10 business days of a material change, a licensed supplier shall file updated or supplemental information, including:– Technical and managerial competency, and– Financial integrity.

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Changes to information contained in the original application

Ongoing Supplier Obligations

• A licensed supplier is required to notify the Commission of any change to information contained in the supplier’s original application:– Supplier name,– Address,– Contact person,– Area of operation,– Customer class,– Official actions against the supplier (e.g., fines,

suspensions),– Other relevant items.

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Summary of Ongoing Supplier Obligations

• Licensed suppliers must notify the Commission of:– Any material change, and– Any change to the information contained in the original

application.

• After a change occurs the Commission may require the Supplier to file statements of technical and managerial competency, and financial integrity.

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QUESTIONS AND COMMENTS

Dan Norfolk

410-767-8045

dnorfolk@psc.state.md.us

Michael Lee, Directormlee@psc.state.md.us

Maryland Public Service Commission

Integrated Resource Planning Division