Retail energy marketers in Maryland said they favor current licensing rules and oppose erecting additional financial reporting requirements on retail energy marketers who want licenses to operate in the state. The Maryland Public Service Commission’s (PUC) recently requested comments on whether its current policy of requiring proof of financial integrity for all natural gas and electric suppliers in the state is adequate and does not restrict market entry.

Proof of financial integrity has become more of a hot button issue in the energy industry in the wake of Enron’s bankruptcy and subsequent rapidly declining credit quality of many other energy merchants and power producers.

Currently, applicants for an electric or gas supplier license in the state of Maryland are required to file audited balance sheets and income statements for the most recent 12-month period or for the most current fiscal year. A new start-up company must file year-to-date information if a full year is not available. If applicants are relying on a parent company to establish financial integrity, the parent company must submit a notarized letter of guarantee signed by an officer of the company as well as the guarantor’s financial statements.

PUC staff then analyzes the applicant’s current financial viability by examining assets, liabilities, stockholders equity, revenues, expenses and other operating data. The commission noted that important attributes examined include whether the applicant is generating positive net income and if it is generating positive working capital. Many applicants have failed this traditional analysis of financial integrity.

Likewise, the commission said applicants that are applying for broker/aggregator licenses are not required to demonstrate financial viability to the same extent as suppliers who take title to the power they deliver. It has become standard practice of the commission to require that a surety bond in the amount of $10,000 be submitted with a license application, limited to broker/aggregate services in lieu of being subjected to the financial viability test.

Earlier this month, the commission asked for comments on the appropriate process for establishing and periodically reviewing the financial integrity of electric and gas suppliers. Initial comments were due to the commission by Aug. 23, with reply comments due Sept. 20.

Washington Gas Energy Services (WGES), BGE Home, UGI Energy Services Inc./Gasmark and Pepco Energy Services Inc. all indicated that regulators should not go beyond the current financial requirements and might improve the situation by removing some of the existing red tape.

“Suppliers in Maryland now file annual updates of financial data that should be sufficient for the commission to monitor the financial integrity of licensees,” WGES said.

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