| (iii) As the number of ESI IDs served by the REP increases,
the irrevocable stand-by letter of credit must be adjusted to reflect
the required value as determined in clause (i) of this subparagraph.
As the number of ESI IDs served by the REP decreases, the irrevocable
stand-by letter of credit may be adjusted to reflect the required
value as determined in clause (i) of this subparagraph.
(iv) For the first 24 months a REP is serving load,
a REP must not make any distribution or other payment to any shareholders,
affiliates, or corporate parent's affiliates if, after giving effect
to the distribution or other payment, the REP's shareholders' equity
is less than one million dollars. Distributions or other payments
include dividend distributions, redemptions and repurchases of equity
securities, and loans to shareholders or affiliates.
(v) After a REP has continuously served load for 24
months, a prescribed amount of maintained shareholders' equity is
no longer required.
(2) Customer deposits and prepayments. A REP certified
to collect customer deposits must comply with this paragraph and the
requirements of §25.478 of this title (relating to Credit Requirements
and Deposits). A REP certified to collect customer prepayments must
comply with this paragraph and the requirements of §25.498 of
this title (relating to Prepaid Service).
(A) A REP must maintain customer deposits and prepayments
in an escrow account, segregated cash account, or provide an irrevocable
stand-by letter of credit.
(i) If a REP is certified to collect both customer
deposits and prepayments then the REP must use and maintain either
an escrow account, segregated cash account, or irrevocable stand-by
letter of credit to protect customer deposits and prepayments. If
a REP uses an escrow account or segregated cash account, the same
account must be used for customer deposits and prepayments. More than
one irrevocable stand-by letter of credit can be provided to protect
customer deposits and prepayments.
(ii) For customer deposits, the escrow account, segregated
cash account, or an irrevocable stand-by letter of credit must be
adjusted, as necessary, to maintain a minimum of 100% coverage of
the REP's outstanding customer deposits held at the close of each
calendar month.
(iii) For customer prepayments, a REP must maintain,
at minimum, protection for all customer prepayments that equals or
exceeds $50. The balance of an escrow account, segregated cash account,
or an irrevocable stand-by letter of credit must be adjusted, as necessary,
to maintain a minimum of 100% coverage of customer prepayment funds
equal to or exceeding $50 held at the close of each calendar month.
(B) Any irrevocable stand-by letter of credit provided
under this paragraph must be in addition to the irrevocable stand-by
letter of credit required by paragraph (1)(B) of this subsection.
(3) Bankruptcy disclosure. If a REP files a petition
for bankruptcy, is the subject of an involuntary bankruptcy proceeding,
or in any other manner becomes insolvent, including being in default
with the applicable independent organization or with a TDU:
(A) The REP must notify the commission within three
working days of this event and must file with the commission a summary
of the nature of the event; and
(B) The notification must be filed in the commission
control number established for notices prescribed under this paragraph.
If the REP has filed a petition for bankruptcy, then the REP must
include in its filing the petition that initiated the bankruptcy.
(4) Financial documentation requirements. The following
must be provided by an applicant to demonstrate compliance with the
financial requirements under paragraphs (1), (2), and (3) of this
subsection, as applicable. Additionally, the applicant must provide
the month and last day of the applicant's reporting fiscal year or,
if the applicant has a guarantor, the guarantor's reporting fiscal
year. The applicant must also provide a summary of any history of
insolvency, bankruptcy, dissolution, merger, or acquisition of the
applicant or any predecessors in interest during the 60 calendar months
immediately preceding the filing of the application.
(A) Investment-grade credit ratings must be documented
by reports from a credit reporting agency. The report the applicant
provides must be the most recently released report by the credit reporting
agency.
(B) Tangible net worth, current ratio, and debt to
capitalization ratio calculations must be supported by a signed, notarized
affidavit from an executive officer of the guarantor that attests
to the accuracy of the calculations and be documented by audited or
unaudited financial statements of the guarantor for the most recently
completed quarter.
(i) Audited financial statements must include the independent
auditor's report and accompanying notes.
(ii) Unaudited financial statements must include a
signed, notarized affidavit, in addition to any other provided affidavits,
which attests to the accuracy, in all material respects, of the information
provided in the unaudited financial statements.
(iii) Three consecutive months of monthly statements
may be submitted in lieu of quarterly statements, if quarterly statements
are not available.
(iv) The requirement for financial statements may be
satisfied by filing a copy of, or providing an electronic link, to
the guarantor's most recent financial statements filed with any agency
of the federal government, including the U.S. Securities and Exchange
Commission.
(C) Shareholders' equity must be documented by the
audited or unaudited financial statements of the applicant for the
most recently completed quarter.
(i) Audited financial statements must include the independent
auditor's report and accompanying notes.
(ii) Unaudited financial statements must include a
signed, notarized affidavit, in addition to any other provided affidavits,
which attests to the accuracy, in all material respects, of the information
provided in the unaudited financial statements.
(iii) Three consecutive months of monthly statements
may be submitted in lieu of quarterly statements, if quarterly statements
are not available.
(iv) The requirement for financial statements may be
satisfied by filing a copy of, or providing an electronic link, to
the REP's most recent financial statements filed with any agency of
the federal government, including the U.S. Securities and Exchange
Commission.
(D) Segregated cash accounts must be documented by
a current account statement and the executed agreement with an unaffiliated
person that controls the segregated cash account.
(i) The account statement must clearly identify:
(I) the name of the financial institution where the
applicant has established the account;
(II) the account number; and
(III) the account name, which must clearly indicate
the account is designated for containing only customer deposits, prepayments,
or both.
(ii) The account must 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 Comptroller of the
Currency, or a state banking department and is a:
(I) U.S. domestic bank; or
(II) a domestic office of a foreign bank with an investment-grade
credit rating.
(iii) A REP must provide an executed agreement with
a provider of credit that governs the control and management of the
account. The provider of credit must not be affiliated with the applicant
or the applicant's corporate parent. If the segregated cash account
contains customer deposits, the agreement must specify that the customer
deposits are not the property of the REP or in the REP's control,
unless, if allowed by the REP's terms of service, the customer deposits
are applied to a final bill or to satisfy unpaid amounts.
(E) Escrow accounts must be documented by a current
account statement and the executed escrow account agreement.
(i) The account statement must clearly identify:
(I) the name of the financial institution where the
applicant has established the account;
(II) the account number; and
(III) the account name, which must clearly indicate
the account is designated for containing only customer deposits, prepayments,
or both.
(ii) The account must 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 Comptroller of the
Currency, or a state banking department and is a:
(I) U.S. domestic bank; or
Cont'd... |
