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Texas REP Seeks to Mandate $2 Million Shareholders' Equity, $1 Million Letter of Credit for Certification as REP
GDF SUEZ Energy Resources NA, Inc. has recommended that the Public Utility Commission of Texas require, for certification as a REP, $2 million in shareholders' equity plus a $1 million, or more, letter of credit
"Because a higher SWOC [system-wide offer cap] results in greater risk, GDF SUEZ recommends that the Commission modify P.U.C. SUBST. R. 25.107(f)(1)(B) to require REPs serving load after January 1, 2015, to (1) demonstrate shareholders' equity of at least $2,000,000 to obtain certification, and (2) require the REP or its guarantor to provide and maintain an irrevocable stand-by-letter of credit payable to the Commission with a face value of the greater of $1 million or 7% of the REP's annual gross revenues in ERCOT," GDF SUEZ Energy Resources NA said.
Currently, REPs must have shareholders' equity of $1 million, and must post a $500,000 irrevocable stand-by letter of credit, to meet the PUCT certification requirements.
"The increase in the minimum net equity and the standby letter-of-credit requirements strikes the appropriate balance between maintaining relatively low barriers to new market entrants -- thus encouraging increased competition -- versus the public policy objective of protecting the interests of market participants from financial risks and volatility inherent in an energy-only market. A best practice, as seen in Pennsylvania and New Hampshire, increases the amount of credit support required annually in proportion to the REP's growth in annual revenues," GDF SUEZ Energy Resources NA said.
Furthermore, GDF SUEZ Energy Resources NA recommended changes to certain provisions governing the ERCOT collateral requirements, including ERCOT Protocol 16.11.3, Alternative Means of Satisfying ERCOT Creditworthiness Requirements
"To further strengthen the market, GDF SUEZ also recommends that ERCOT Protocol 16.11.3(b), dated September 1, 2013, be amended so that a bank issuing a letter of credit must have and maintain an S&P (or equivalent) credit rating of A+. GDF SUEZ also recommends that ERCOT Protocol 16.11.3(c) be deleted to remove a surety bond as acceptable credit because such bonds have proven to be notoriously difficult to collect on as compared to a letter of credit."
Project 41641
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Reporting by Paul Ring • ring@energychoicematters.com
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