| (ii) tangible net worth greater than or equal to $100
million, a minimum current ratio (current assets divided by current
liabilities) of 1.0, and a debt to total capitalization ratio not
greater than 0.60, where all calculations exclude unrealized gains
and losses resulting from valuing to market the power contracts and
financial instruments used as supply hedges to serve load, and such
calculations are supported by an affidavit from an executive officer
of the REP attesting to the accuracy of the calculation.
(B) A REP electing to meet the requirements of this
subparagraph must demonstrate shareholders' equity, determined in
accordance with generally accepted accounting principles, of not less
than one million dollars for the purpose of obtaining certification,
and the REP or its guarantor must provide and maintain an irrevocable
stand-by letter of credit payable to the commission with a face value
of $500,000 for the purpose of maintaining certification.
(i) The required shareholders' equity of one million
dollars shall be determined net of assets used for collateral pledged
to secure the irrevocable stand-by letter of credit of $500,000.
(ii) For the period beginning on the date of certification
and ending two years after the REP begins serving load, a REP shall
not make any distribution or other payment to any shareholders or
affiliates if, after giving effect to the distribution or other payment,
the REP's shareholders' equity is less than one million dollars, net
of assets used for collateral pledged to secure the irrevocable stand-by
letter of credit of $500,000. The restriction on distributions or
other payments contained in this subparagraph includes, but is not
limited to, dividend distributions, redemptions and repurchases of
equity securities, or loans to shareholders or affiliates.
(iii) A REP that began serving load on or before January
1, 2009 is not required to demonstrate the shareholders' equity required
pursuant to subparagraph (B) of this paragraph, and is not subject
to the restrictions on distributions or payments to shareholders or
affiliates contained in subparagraph (B) of this paragraph.
(2) Protection of customer deposits and advance payments.
(A) A REP certified pursuant to paragraph (1)(A) of
this subsection shall keep customer deposits and residential advance
payments in an escrow account or segregated cash account, or provide
an irrevocable stand-by letter of credit payable to the commission
in an amount sufficient to cover 100% of the REPs outstanding customer
deposits and residential advance payments held at the close of each
month.
(B) A REP certified pursuant to paragraph (1)(B) of
this subsection shall keep customer deposits and residential advance
payments in an escrow account or segregated cash account, or provide
an irrevocable stand-by letter of credit payable to the commission
in an amount sufficient to cover 100% of the REP's outstanding customer
deposits and residential advance payments held at the close of each
month. For purposes of this subparagraph only, to qualify as a segregated
cash account, the account must be with a financial institution whose
deposits, including the deposits in the segregated cash account, are
insured by the Federal Deposit Insurance Corporation, the account
is designated as containing only customer deposits, the account is
subject to the control or management of a provider of pervasive and
comprehensive credit to the REP that is not affiliated with the REP,
and the terms for managing the account protect customer deposits.
(C) In lieu of the requirements of subparagraph (B)
of this paragraph, a REP certified pursuant to paragraph (1)(B) of
this subsection that is providing electric service under the provisions
of §25.498 of this title (relating to Retail Electric Service
Using a Customer Prepayment Device or System) shall be required to
keep all deposits and an amount sufficient to cover the credit balance
that exceeds $50 for all customer accounts that have a credit balance
exceeding $50 at the close of each month in an escrow account, or
to provide an irrevocable stand-by letter of credit payable to the
commission in an amount equal to or greater than the amount required
to be deposited in the escrow account.
(D) Each escrow account and segregated cash account
shall be reconciled no less frequently than at the close of each month
to ensure that it equals or exceeds deposits and residential advance
payments held as of the end of the month, and shall maintain at least
that amount in the account until the next monthly reconciliation.
(E) Any irrevocable stand-by letter of credit provided
pursuant to this paragraph shall be in addition to the irrevocable
stand-by letter of credit required by paragraph (1)(B) of this subsection,
if applicable.
(3) Protection of TDU financial integrity.
(A) A TDU shall not require a deposit from a REP except
to secure the payment of transition charges as provided in §25.108
of this title (relating to Financial Standards for Retail Electric
Providers Regarding Billing and Collection of Transition Charges),
or if the REP has defaulted on one or more payments to the TDU. A
TDU may impose credit conditions on a REP that has defaulted to the
extent specified in its statewide standardized tariff for retail delivery
service and as allowed by commission rules.
(B) A TDU shall create a regulatory asset for bad debt
expenses, net of collateral posted pursuant to subparagraph (A) of
this paragraph and bad debt already included in its rates, resulting
from a REP's default on its obligation to pay delivery charges to
the TDU. Upon a review of reasonableness and necessity, a reasonable
level of amortization of such regulatory asset shall be included as
a recoverable cost in the TDU's rates in its next rate case or such
other rate recovery proceeding as deemed necessary.
(4) Financial documentation required to obtain a REP
certificate. The following shall be required to demonstrate compliance
with the financial requirements to obtain a REP certificate.
(A) Investment-grade credit ratings shall be documented
by reports of a credit reporting agency.
(B) Tangible net worth shall be documented by the audited
financial statements of the REP or its guarantor for the most recently
completed calendar or fiscal year, and unaudited financial statements
for the most recently completed quarter. Audited financial statements
shall include the accompanying notes and the independent auditor's
report. Unaudited financial statements shall include a sworn statement
from an executive officer of the REP attesting to the accuracy, in
all material respects, of the information provided in the unaudited
financial statements. Three consecutive months of monthly statements
may be submitted in lieu of quarterly statements if quarterly statements
are not available. The requirement for financial statements may be
satisfied by filing a copy of or by providing an electronic link to
its most recent statement that contains unaudited financials filed
with any agency of the federal government, including without limitation,
the Securities and Exchange Commission.
(C) Shareholders' equity shall be documented by the
audited and unaudited financial statements of the REP for the most
recent quarter. Audited financial statements shall include the accompanying
notes and the independent auditor's report. Unaudited financial statements
shall include a sworn statement from an executive officer of the REP
attesting to the accuracy, in all material respects, of the information
provided in the unaudited financial statements. Three consecutive
months of monthly statements may be submitted in lieu of quarterly
statements if quarterly statements are not available. The requirement
for financial statements may be satisfied by filing a copy of or by
providing an electronic link to its most recent statement that contains
unaudited financials filed with any agency of the federal government,
including without limitation, the Securities and Exchange Commission.
(D) Segregated cash accounts shall be documented by
an account statement that clearly identifies the financial institution
where the account holder maintains the account, and that clearly identifies
the account as an account that is designated as containing only customer
deposits and residential advanced payments. Segregated cash accounts
shall be maintained at a financial institution that is supervised
or examined by the Board of Governors of the Federal Reserve System,
the Office of the Controller of the Currency, or a state banking department,
and where accounts are insured by the Federal Deposit Insurance Corporation.
(E) Escrow accounts shall be documented by the current
account statement and the escrow account agreement. The escrow account
agreement shall provide that the account holds customer deposits and
residential advance payments only, and that the deposits are held
in trust by the escrow agent and are not the property of the REP or
in the REP's control unless the customer deposits are applied to a
final bill or applied to satisfy unpaid amounts if allowed by the
REP's terms of service. The escrow agent shall deposit the customer
deposits and residential advance payments in an account at a financial
institution that is supervised or examined by the Board of Cont'd... |
