Pennsylvania Adopts Final Order Streamlining Process For Retail Suppliers To Renew Lower Financial Security Amounts
November 2, 2018 Email This Story Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • email@example.com
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The Pennsylvania PUC adopted as final without modification a previously issued tentative order which streamlines the process for those electric generation suppliers, which have already received a reduction in their security amounts from 10% to 5% of their reported annual gross receipts, to renew their ability to meet the security requirements at the lower 5% level
The PUC previously issued an order allowing retail electric suppliers to petition the PUC for a reduction in the security requirement from 10% to 5% of gross receipts. A Secretarial letter implementing such order held that a reduction in an EGS’s security level to 5% is effective only for one year, subject to annual renewal by the Commission. Under the renewal process, suppliers must file a formal petition with the PUC for renewal of the reduced security level.
The Retail Energy Supply Association petitioned the PUC for a streamlined process for suppliers to renew the grant of the 5% security level. RESA proposed a program under which suppliers would submit a compliance filing, with various information, rather than a formal petition. RESA noted that an EGS is not required to submit a formal petition each year to renew its security at 10% of its gross receipts. However, for an EGS to renew its security level at 5% of gross receipts it must submit a formal petition to the Commission each year.
The primary issue RESA has with the Commission’s process for renewing an EGS’ 5% security level is the 90-day time frame between the due date for the renewal petition and the expiration of the current security instrument. Within that time frame, the EGS must file its petition to renew the 5% security level, wait to receive approval from the Bureau of Technical Utility Services (TUS), then submit an appropriately dated new financial security instrument. RESA said that such time frame is difficult for an EGS to manage and any delays can cause problems for the EGS. Although an EGS can take steps to resolve those problems, those steps may be expensive and time consuming.
The timing issue arises when the petition to renew is approved just before the current security expires or when the petition is not approved until after the current security expires. When that happens, the EGS may have to renew its security instrument at the 10% level then adjust it back down to 5% after approval is secured. The EGS can manage such a situation using a short-term security instrument; however, that fix can be expensive and time consuming.
Under the proposal from RESA, the EGS would submit the following information with its compliance filing:
-- Its most recent 12 months of gross receipts and a 5% gross receipt calculation.
-- An original financial security instrument covering 5% of its most recent 12 months of gross receipts or evidence that the original security instrument has been sent to the Commission.
-- If the EGS has on file with the Commission a security instrument containing an automatic renewal provision and the amount of that instrument is enough to cover the new 5% gross receipt calculation, a letter so advising the Commission.
-- An attestation signed by an officer of the EGS that the EGS will pay all taxes it is subject to in Pennsylvania
RESA proposed that the compliance filing be due 30 days before the expiration of an EGS’s security instrument, which it said will give TUS enough time to review the filing and communicate any deficiencies to the EGS for correction
The PUC in the now-final tentative order adopted a streamlined compliance process envisioned by RESA, but with several modifications to RESA's proposal
"[W]e approve RESA’s suggestion that an EGS, with an approved 5% reduction to their financial security, may provide an annual compliance filing in lieu of an annual petition to renew its reduced security level," the PUC said in the tentative order which was adopted as final
However, the PUC found that RESA's proposal that EGSs file their compliance filings 30 days prior to the expiration of the current security does not provide enough time for PUC review, and ordered that such renewal compliance filings be due 90 days before security expiration
"We find that submission of the annual compliance filing 30 days prior to the EGS’ financial security expiration date does not provide adequate time for the Commission to administratively process the filing. The 2016 Guidance Letter stated that to be eligible for the renewal, an EGS must provide annual documentation of its eligibility for a financial security reduction at least 90-days prior to the current security’s expiration date. Commission staff review the filing may involve some or all of the following; a request for additional data if the filing is not complete or clear; request the EGS to correct any deficiencies in language or amount on the financial security; and potentially issue a formal decision to deny the 5% renewal. We find that submission of the annual compliance filing at least 90 days prior to the expiration of an EGS’ financial security is reasonable and necessary for Commission staff to process the renewal request prior to the expiration of the EGS’ current security. Therefore, we affirm the directive provided in the 2016 Guidance Letter that a 5% financial security renewal request must be filed at least 90 days prior to the expiration date of the EGS’ current financial security," the PUC said in the now-final tentative order
The PUC further said, "In addition, RESA proposes that a timely and properly filed annual compliance filing would not require a formal approval, by Secretarial Letter, but result in an EGS’ 5% financial security reduction being continued unless the Commission formally acts to deny the renewal. We agree and will adopt RESA’s proposal as the requirement that an EGS file its annual compliance filing at least 90 days prior to the expiration of its current financial security provides sufficient time for Commission staff to work with an EGS to correct any deficiencies in the filing or reject the renewal and require the EGS to renew its security at the 10% level. We note that under this renewal process, the EGS is to provide an original bond, letter of credit, rider, amendment, or other financial instrument in an amount equal to 5% of the EGS’ most recent 12-months of gross receipts. Acceptance of this financial instrument, without request for modification or rejection, we find is adequate to inform the EGS that its renewal was approved. Accordingly, we rescind the requirement set forth in the Final Security Order that TUS issue a Secretarial Letter approving the bond reduction renewal."
"Additionally, RESA proposes that EGSs be allowed to file the financial security covering the 5% gross receipt amount at the time of the its filing. The current protocol requires the EGS to submit the financial security after Commission approval of the 5% bond reduction renewal petition. RESA further purposes that if an EGS has a financial security instrument on file with the Commission that contains an automatic renewal provision and the amount continues to cover the 5% gross receipts calculation, the EGS must state this in its filing and not be required to submit a new financial instrument," the PUC noted in the now-final tentative order
"Since we are replacing the annual 5% bond reduction renewal petition and associated approval via Secretarial Letter with an annual compliance filing, we find the RESA proposal reasonable and we adopt it. We note that the financial security submitted with the annual compliance filing must have an effective date that coincides with the expiration/anniversary date of the EGS’ current financial security," the PUC said in the now-final tentative order
In another modification from RESA's proposal, the PUC rejected RESA's request that an attestation from an EGS officer concerning tax compliance be permitted in lieu of documentation from the Department of Revenue
"Finally, regarding RESA’s request that an EGS be permitted to include an attestation signed by a corporate officer verifying that it will pay all taxes it is subject to in Pennsylvania in lieu of providing any documentation from the Department of Revenue as required by the Final Security Order and the 2016 Guidance Letter, we find that an attestation is inadequate. The 2016 Guidance Letter detailed several items that must be filed to be eligible for a 5% financial security reduction renewal. One of the items was the Letter of Good Standing from the Department of Revenue. RESA submits that the process for EGSs to obtain the Letter of Good Standing has been lengthy and tedious for some EGSs. RESA states that some EGSs without any outstanding tax issues, wait months for a response from the Department of Revenue to the request for a Letter of Good Standing. RESA avers that while the process for obtaining the letter appears to be more streamlined recently, suppliers should not be subject to Department of Revenue impediments that create unnecessary delays and administrative burdens for EGSs," the PUC said in the now-final tentative order
"We do not agree that an attestation signed by an officer of an EGS verifying compliance with Pennsylvania gross receipt tax obligations is sufficient. We find that Department of Revenue compliance documentation is necessary. In addition to the Letter of Good Standing, TUS staff has required that an EGS requesting a 5% financial security reduction file the Department of Revenue’s REV-423 PA Corporation Specialty Tax Estimated Payment form (REV-423 form). This form is used to verify the requirement in the Final Security Order that an EGS provide the amount of gross receipts taxes it has prepaid toward its estimated taxes for the current year," the PUC said in the now-final tentative order
"As the specific purposes of the security requirement are (1) to ensure payment of the GRT owed to the Department of Revenue; (2) to ensure the supply of electricity at the retail level in accordance with contracts, agreements, or arrangements; and (3) to ensure payment of any alternative compliance payments owed to the Pennsylvania Sustainable Energy Funds under the AEPS Act, a Letter of Good Standing and a recent REV-423 form from the Department of Revenue demonstrates that the EGS has substantially meet its GRT obligations. We note that the GRT is 5.90% of the EGS’ gross receipts. Obviously, a 5% bond alone, would not cover the entire 5.90% and may not cover the EGS’ AEPS obligations if it were to default on those obligations. We find that having a Letter of Good Standing and a recent REV-423 form from the department of Revenue demonstrates that the EGS is in substantial compliance with its GRT obligations and that the EGS is has substantially met its financial obligations pursuant to its business operations and practices. Such a business practice makes it more likely than not that a 5% bonding level will cover any remaining financial liability related to GRT, supply of electricity at retail and the AEPS Act obligations that may arise," the PUC said in the now-final tentative order
"Regarding RESA’s assertion that acquiring the necessary documentation from the Department of Revenue is difficult and time consuming, we find, even if true, eliminating such inconvenience does not outweigh the requirement that the bonding levels must be in the form and amount to meet the EGS’ financial obligations related to GRT, supply of electricity at the retail, and the AEPS Act. We also find it significant that, as RESA acknowledges, the process for obtaining the Letters of Good Standing from the Department of Revenue has improved, reducing any inconvenience the EGSs may have experienced in the past. Accordingly, we will require both a Letter of Good Standing and the most recent REV-423 form from the Department of Revenue to demonstrate past and present gross receipt tax compliance in order to maintain a 5% bonding level," the PUC said in the now-final tentative order
To summarize, the tentative order which was adopted as final provides that an EGS seeking to maintain a previously approved 5% financial security reduction, the EGS must make an annual compliance filing at least 90 days prior to the EGS’s current financial security expiration date. The annual compliance filing must include the following information and documentation:
-- Intent to renew 5% Financial Security Reduction.
-- EGS’ licensed name, docket number, and utility code.
-- EGS’ contact information (name, address, email, and phone number).
-- The expiration/anniversary date of its current Financial Security.
-- Certificate of Service showing that the 5% annual compliance filing was served on the statutory advocates and all affected EDCs.
-- A recent Department of Revenue Tax Status Letter of Good Standing.
-- EGS’ most recent Department of Revenue REV-423 PA Corporation Specialty Tax Estimated Payment form.
-- EGS’ most recent 12-months of gross receipts.
-- EGS’ 5% gross receipts calculation using the EGS’ most recent 12 months of gross receipts.
-- An original bond, letter of credit, rider, amendment, or other financial instrument in an amount equal to 5% of the EGS’ most recent 12-months of gross receipts (effective on the expiration/anniversary date of the EGS’s current financial security).
As noted in the Final Security Order, Commission staff may seek more information from an EGS as required.
Under the new compliance process, the PUC will no longer require a petition for renewal to be filed with the Commission’s Secretary’s Bureau or a $350 filing fee.