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Maryland Changes Financial Qualification Requirements, Address Timing of SOS Procurement Process

January 7, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The Maryland PSC issued an order addressing proposed changes to the financial qualification requirements and bid timing of the electric SOS procurement process.

The PSC ordered that the qualification requirements for bidders in Maryland’s SOS auctions shall be modified to allow unrated bidders to participate, subject to the posting of additional pre-bid collateral. Prior to the PSC's order, an SOS bidder or its guarantor was required to be rated by a major rating agency.

Specifically, under the modification, unrated bidders will be required to offer an additional $300,000 in pre-bid collateral per bid block. Accordingly, unrated bidders will be required to post a total of $600,000 of bid assurance collateral for each 50 megawatt block (given the current $300,000 requirement for all bidders)

The PSC also ruled that unrated bidders shall be required to repost the pre-bid eligibility collateral before each auction of a multi-procurement RFP.

Regarding bid timing, the PSC declined to modify the deadlines for SOS bid submissions and awards as sought by TransCanada Power Marketing.

TransCanada has argued that the current awarding of bids at 8:30 p.m. on the day of the bid leaves bidders unable to procure the needed power or hedge their obligations until the markets open the next day at 9:30 a.m.

TransCanada had sought to move deadline for notification of winning bids to 1:00 p.m., with an accompanying acceleration in the deadline for submitting bids. TransCanada's plan was opposed by PSC Staff, the PSC's SOS consultant, and Exelon

The PSC denied to modify the procurement schedule for bid submissions and awards, citing a lack of net benefits from such a change.

"First, there is little evidence that bid prices will be lower as a result of moving the schedule for bid submissions and awards to an earlier time. [PSC consultant] Boston Pacific, which possesses considerable experience in administering standard offer service auctions throughout multiple states, reported that it had not observed any measurable discounts in supplier bids in auctions with the schedule advocated by TransCanada. Similarly, Staff found no evidence to support the premise that intra-day risk is significantly different in quantity from the overnight risk that exists now under Maryland’s SOS auctions. Moreover, Staff found that the modifications in the New Jersey auction, which reduced the time bids remained open, did not increase procurement participation or reduce prices," the PSC said

"Second, the costs of implementing TransCanada’s request could be significant in terms of impairing the efficacy of the PAT Screen. We agree that utilizing 'stale' data from Friday to administer the PAT [Price Anomaly Threshold] Screen for Monday’s bids could lead to false positives that reject reasonable bids as well as false negatives that accept unreasonable bids. Either result is deleterious to ratepayers. Finally, regarding TransCanada’s suggestion to move the auction to Tuesday and utilize Monday’s data for the PAT Screen, we agree with Staff that the suggestion is impractical given the numerous milestones required in the hearing and approval process in the remaining week of the SOS procurement," the PSC said

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