Creditworthiness

Overview
The electricity supplier must satisfy BGE's creditworthiness standards.  These standards are scalable and will take into consideration the scope of operations of each electricity supplier.  The primary scaling criterion is the projected total monies due BGE from the electricity supplier.  The purpose of BGE's credit review will be to provide reasonable and satisfactory assurance of the following.

• The electricity supplier's ability to pay the applicable Credit Amount, Supplier Coordination Services Charges, and/or any applicable amounts included in the BGE Electricity Supplier Coordination Tariff; and

• The electricity supplier's ability to process and remit applicable payments due BGE, if the electricity supplier will be performing consolidated billing; and

• The electricity supplier's ability to pay any other charges, fees, or penalties authorized by the Commission and payable to BGE.

Finding of Creditworthiness

BGE shall apply, on a non-discriminatory basis, financial standards to determine the acceptability of the electricity supplier's overall financial condition.  Such credit appraisal will include, but not be limited to, (1) a review of the electricity supplier's Balance Sheet, Income Statement, Statement of Cash Flows, and any other material information identified by BGE, and (2) the calculation of various financial ratios focusing on the electricity supplier's liquidity, profitability and capital structure.

To become a qualified electricity supplier, the electricity supplier will be required to provide collateral as defined in the Determination of Risk Exposure & Required Collateral section below which may be in the form of liquid collateral (Letter of Credit, Surety Bond, or a Guaranty).  In certain limited cases, an electricity supplier may be classified as unsecured.  If the electricity supplier elects to use a guaranty or requests to be unsecured, the Guarantor or the electricity supplier, respectively, shall submit all requested financial information and satisfy a credit appraisal by BGE.  

BGE Supplier Credit Application & Financial Documents

The electricity supplier shall submit the completed BGE Supplier Credit Application provided by BGE with no changes or alterations and one set of supporting financial documents as required in the application.  Submittal of the Credit Application and supporting documents by e-mail or facsimile is permitted.  However, if the submittal is by e-mail or facsimile, it is the burden of the electricity supplier to ensure that BGE received the e-mail or facsimile.

The electricity supplier and any Guarantor are required to provide annual financial documents to BGE within 5 business days of the standard filing dates required by the Securities and Exchange Commission (SEC) for annual financial statement filings.  The unsecured electricity supplier or the Guarantor is also required to provide quarterly financial documents within 5 business days of the standard filing dates required by the SEC for quarterly financial statement filings.  Submittal of the required documents to BGE by e-mail or facsimile is permitted.  However, if the submittal is by e-mail or facsimile, it is the burden of the electricity supplier to ensure that BGE received the e-mail or facsimile.

Credit Review Timelines

Timelines for processing the BGE Supplier Credit Application begin when a fully completed Credit Application, including all required supporting documents, is received by BGE.  Initial submittal of the Credit Application and the initial and annual submittal of all required supporting documents by e-mail or facsimile are permitted provided the documents are also provided using a method that verifies that delivery took place as required above.  BGE will evaluate the electricity supplier's Credit Application and all supporting documents for completeness and notify the electricity supplier of any missing elements within 5 business days of receipt.  Such notification will be in writing and specify the elements needed to complete the Application.  The notice will be delivered by overnight delivery, facsimile, or e-mail.  The credit review timelines will re-start when BGE receives the missing elements.  BGE will complete its initial and annual credit evaluation within 30 calendar days and the electricity supplier will not become disqualified while BGE is performing its review, except as may be appropriate under other provisions of the BGE Electricity Supplier Coordination Tariff. 

Determination of Risk Exposure & Required Collateral

The determination of the risk exposure is the inclusion of two months of estimated electricity supplier charges as set forth in Schedule 1 of the BGE Electricity Supplier Coordination Tariff.  For electricity suppliers who elect to offer electricity supplier consolidated billing to customers, the determination of the risk exposure will be the inclusion of two months of estimated electricity supplier charges and the inclusion of two months of estimated BGE charges.  The required collateral must be for an amount equal or greater than the risk exposure amount.  However, in no event shall the amount of required collateral be less than $5,000 unless the electricity supplier is rated unsecured or a Guaranty is provided.  If a Guaranty is provided, the minimum required collateral amount is $6,000 to account for expenses of enforcement under the financial cap of the Guaranty.

Unless the electricity supplier is approved by BGE as unsecured, the electricity supplier will be required to provide the required collateral, which must either be in the form of a Letter of Credit or a Surety Bond from an investment graded company, or a Guaranty from an acceptable party pursuant to the requirements below. 

If the required collateral is not in place by the respective due dates, BGE may suspend the electricity supplier's ability to add new customers until the required collateral is provided to BGE.  The required collateral may be called upon to satisfy any undisputed costs incurred by BGE related to the electricity supplier's participation in the Maryland Customer Choice program, including, but not limited to, legal and collection costs associated with the electricity supplier's failure to comply with the terms of the BGE Electricity Supplier Coordination Tariff. 

Cash Deposits & Substitute Instruments

BGE may at its sole discretion accept a short-term cash deposit for up to 5 calendar days.  The cash deposit time limit may be extended at BGE's sole discretion in 5 calendar day increments up to a maximum term of 30 calendar days.  The electricity supplier may substitute an alternative collateral instrument of an amount at least equal to the required collateral provided there is no time gap or overlap in coverage and the substitute instrument satisfies all collateral requirements.  The substitute instrument should have an effective date consistent with the review periods defined in this paragraph.  Unless the substitute instrument is a new Guaranty, BGE will evaluate the substitute instrument and return or release the original instrument in 5 business days if the substitute instrument satisfies BGE's requirements.  If the substitute instrument is a Guaranty from a different Guarantor, all supporting financial documents for the new Guarantor must be provided.  BGE will perform its credit appraisal and return or release the original instrument in 35 calendar days if the new Guarantor satisfies BGE's financial standards. 

Unsecured Conditions

Electricity supplier will be considered unsecured provided both of the following conditions are met:

• The electricity supplier's debt is rated at least investment grade by at least two rating agencies. The electricity supplier is required to present verifiable evidence of its unsecured debt rating level from at least two of the following recognized rating agencies: Moody's, Standard & Poors, or Fitch; and 

• The electricity supplier provides the required financial supporting documents and is approved by BGE's Credit Unit based on its financial evaluation for at least the amount of required collateral.

Guaranty Conditions

A Guaranty will be an acceptable form of the required collateral provided all of the following conditions are met:

• The Guarantor's debt is rated at least investment grade by at least two rating agencies. The Guarantor is required to present verifiable evidence of its unsecured debt rating level from at least two of the following recognized rating agencies: Moody's, Standard & Poors, or Fitch.  BGE reserves the right at its sole discretion and in very limited circumstances to waive the debt rating requirement.

• The Guarantor provides the required financial supporting documents and is approved by BGE's Credit Unit for at least the amount of required collateral. 

• The Guarantor provides:

(i)       A Certificate of Authority of the individual signing the contract and/or ancillary documents;

(ii)      Documented evidence acceptable to BGE demonstrating that the Guarantor can guarantee this type of transaction for the electricity supplier; and

 (iii)    An unconditional Guaranty in an amount equal to or greater than the required collateral.  The form of the Guaranty shall be provided to the Guarantor by BGE and shall be used by the Guarantor without any additions, deletions, or alterations.

Changes From Investment Grade

If the unsecured electricity supplier's or the Guarantor's debt falls below investment grade so that there are no longer at least two rating agencies rating the unsecured electricity supplier's or the Guarantor's debt investment grade, the electricity supplier is responsible for notifying BGE in writing of the fall of the unsecured electricity supplier's or the Guarantor's debt below investment grade within 5 business days after the rating agency's action which causes the unsecured electricity supplier's or the Guarantor's debt to no longer be rated investment grade by at least two rating agencies.  At that point, the electricity supplier will no longer be considered unsecured or the Guaranty will no longer be acceptable to serve as the form of required collateral.  The electricity supplier will have 5 business days from this notification to provide BGE with an acceptable form of the required collateral in the same amount as had previously been determined.

Changes in Risk Exposure

BGE reserves the right to (a) require collateral if none is currently held, (b) re-evaluate the amount of the required collateral if the estimated Risk Exposure for the electricity supplier changes upward by more than 10 percent and (c) revise the form of the required collateral (liquid collateral or Guaranty) if there is an adverse material change in the electricity supplier's or Guarantor's financial condition, ownership or corporate structure; a transfer, sale, or assignment of an adverse material level of the electricity supplier's or Guarantor's assets; the electricity supplier or Guarantor files for a petition in bankruptcy; the assets come into the possession of a receiver, trustee, or custodian; or the good faith determination by BGE that it deems itself insecure.  If the required collateral is instituted or is adjusted as to either the amount, or the form or both, the revised required collateral shall be provided by the electricity supplier within 5 business days of notification by BGE.  An "adverse material change" is any change in the electricity supplier's or Guarantor's financial or other condition that might reasonably affect the amount of credit extended to that electricity supplier or Guarantor or may impact the electricity supplier's or Guarantor's ability to perform on its obligations.

Changes in Financial Status

Within 5 business days of such change, the electricity supplier or Guarantor shall notify BGE of any adverse material change in its financial condition, ownership or corporate structure; a transfer, sale, or assignment of a material level of the electricity supplier's or Guarantor's assets; the electricity supplier or Guarantor files for a petition in bankruptcy; or the assets come into the possession of a receiver, trustee or custodian.

Changes in Customer Enrollment Levels

The electricity supplier may request reconsideration of its required collateral or reinstatement of a Guaranty when there has been a change in its customer enrollment level of more than 10 percent or a favorable material change in its or its Guarantor's financial condition.  BGE will use its best efforts to complete its re-evaluation within 5 business days, but in no event beyond 30 calendar days from the receipt of the required supporting financial documents from the electricity supplier or the Guarantor. 

Disqualification

Upon the electricity supplier's failure to satisfy the credit requirements and upon notification by BGE that the electricity supplier no longer satisfies BGE's credit criteria as detailed in this provision, the electricity supplier is subject to disqualification at the sole discretion of BGE.  Such disqualification shall remain until such time as satisfactory evidence is provided by the electricity supplier that the electricity supplier again meets BGE's credit criteria by the electricity supplier providing collateral acceptable to BGE.