Energy Choice
                            

Matters

Supplier Seeks Variance From SOS Procurement Credit Requirements

August 28, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

BTG Pactual Commodities (US) LLC requested that the Maryland PSC either: (1) grant it an individual variance from bid eligibility requirements for the utilities SOS RFPs; or (2) revise the RFPs in a similar manner.

Prior to the April 2015 SOS auction, Pepco and Delmarva Power found that BTG was ineligible for participation in the 2015 SOS procurement because BTG is not credit rated and is precluded by law from providing a guaranty from its parent entity.

"BTG does not have a credit rating because it does not issue debt instruments that would require the company to obtain a credit rating. While BTG's parent entity, Banco BTG Pactual S.A., has credit ratings, it is unable to provide a guaranty because of limitations contained in Brazilian law and National Monetary Council regulations5 that prohibit guaranteeing its subsidiaries," BTG said

BTG asked that the PSC adopt a pre-bid collateral requirement approach similar to New Jersey and Pennsylvania, and proposed by Delmarva Power in Delaware.

"New Jersey and Pennsylvania do not disqualify a potential bidder from participating in the New Jersey Basic Generation Service (BGS) auction and Pennsylvania Default Service auction for lack of credit ratings or its guarantor's credit ratings. Rather, a potential bidder in New Jersey and Pennsylvania may qualify to bid up to a certain number of tranches depending on the amount of pre-bid letter of credit that the potential bidder submits to the utility. Such pre-bid letter of credit or cash collateral is held by the utilities as security to ensure that the bidder satisfies its obligations if it is awarded any part of the auction. The prebid letter of credit or cash collateral is returned to the bidder after the auction if the bidder is not awarded any part of the auction. If the bidder is awarded any part of the auction, then the pre-bid letter of credit or cash collateral is returned upon execution of purchase and sale agreement and satisfaction of post-auction collateral requirements," BTG said

"[A]llowing BTG to participate in Maryland's SOS auctions will increase competition and thereby ensure the best price for wholesale electric power, without posing any increased risk to Maryland consumers or any increased credit risk to Maryland Utilities," BTG said

If eligible, BTG would anticipate participating in the Fall 2015 auctions, and requested a decision on this matter in advance of those auctions.

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