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People's Counsel Seeks Tiered Bonding Requirements For Retail Suppliers, Up To $2 Million
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The Maryland Office of People's Counsel proposed several changes to retail energy supplier licensing requirements, including a tiered bond structure based on customers served
OPC's comments were made in response to a PSC order seeking stakeholder comment on changes to retail electric and natural gas licensing procedures, including license withdrawal, as many suppliers are relinquishing their residential licenses
Under OPC’s proposed formula for a tiered bonding requirement, a retail supplier would be required to post a $250,000 base bond, plus an additional $100,000 for every 2,500 customers served, up to a maximum bond amount of $2,000,000.
While most of OPC's recommendations regarding licensing, as noted below, were specific to residential customers, OPC did not explicitly limit the additional proposed bonding levels to suppliers serving residential customers
OPC also proposed to eliminate a current rule that allows suppliers meeting certain "financial integrity" provisions contained in the licensing rules to avoid posting a bond. OPC called this bond exception, "vague and undefined".
Under the rules, a supplier may avoid posting a bond if the supplier: (1) Receives an unsecured credit allowance greater than $2,000,000 from PJM Interconnection, LLC, and provides documentation of the credit allowance; or (2) demonstrates financial integrity by meeting several conditions enumerated in the rule (for electric, COMAR 20.51.02.08), such as positive working capital, positive stockholder equity and positive net income
"All suppliers -- regardless of self-reported financial strength -- should be required to obtain and maintain a bond as a condition of licensure and renewal. The financial integrity exception creates unjustified disparities in customer protections and increases the risk that financially unstable suppliers will operate without sufficient safeguards. Uniform bonding requirements are necessary to ensure equitable treatment among suppliers and consistent protection for Maryland consumers," OPC said
OPC also recommended revising the bond provisions to clarify that the bond requirement is continuous and must be maintained throughout the duration of a supplier’s operations in Maryland.
OPC would also require that, in the event that a bond is cancelled, the licensed supplier shall obtain a replacement bond from an alternative surety provider before the 60-day cancellation period expires.
"This change reinforces that a lapse in bond coverage is unacceptable," OPC said
OPC proposed to subject certain retail suppliers -- those with a history of complaints -- to more strenuous license renewal reviews
"OPC recommends the Commission implement a three-tiered review framework based on the supplier’s complaint history with the Commission’s Consumer Affairs Division (CAD). This approach ensures that license renewals are not treated as routine for suppliers with a demonstrated pattern of
misconduct, while minimizing unnecessary regulatory burden on compliant suppliers," OPC said
Under this tiered structure, retail suppliers with a history of complaints involving misrepresentation, slamming, or other "serious" consumer protection violations should be subject to the "highest level" of scrutiny during the renewal process, OPC said
OPC proposes that a show cause proceeding be required for renewals of such suppliers, requiring the supplier to demonstrate why its license should not be revoked.
OPC would prohibit such suppliers from enrolling new customers while the status of their license remains unresolved.
In another tier, retail suppliers that have had one or more complaints filed with CAD within the past three years -- but with no complaints involving misrepresentation or slamming -- would be subject to a "formal, conditional" review process, but not as severe as the show-cause tier described above. In these cases, the renewal request would be presented to the Commission at an administrative meeting for deliberation, OPC proposed
"If the Commission grants renewal, it should be on a conditional basis. The renewed license should require the supplier to submit a report to Commission Staff for any future CAD complaints, detailing the nature of the complaint, the circumstances that gave rise to it, and how the issue was resolved," OPC said
In another tier, a streamlined process, with no need for presentation at a PSC administrative meeting, would apply to suppliers that have not had "any" complaints filed against them with CAD in the past three years
"Retail suppliers that have not had any complaints filed against them with CAD during the preceding three years should be eligible for expedited license renewal. For these suppliers, renewal requests should be reviewed and approved by Commission Staff without the need for presentation at a Commission administrative meeting. This streamlined process reflects the supplier’s clean record and allows the Commission to focus its resources on entities with demonstrated compliance risks," OPC said
Consistent with recent actions sought by OPC in individual cases (as previously reported), OPC also proposed that the PSC should require any retail supplier seeking to relinquish its license, but which has served Maryland residential customers within the preceding three years, to maintain both its license and bond, "for a period sufficient to address potential consumer claims and regulatory obligations."
However, OPC specifically recommends that the Commission require suppliers that have served residential customers within the past three years to retain their license and bond for a minimum of three years from the date they last served a Maryland residential customer
OPC also proposed that the Commission should require any retail supplier transferring residential customers to another supplier to submit to the PSC and OPC a copy of the assignment agreement, or other written documentation outlining the terms and conditions of the transfer, to ensure transparency and enable regulatory oversight. As previously reported, OPC has sought production of such asset purchase agreements on an individual basis when such transfers have come before the PSC
OPC said that a supplier transferring its customers to another supplier should be required to demonstrate that it has either: (1) transferred all liabilities associated with the customers and other assets it is transferring to the receiving supplier, such that residential customers retain access to meaningful remedies and financial protections; or (2) if the transferring supplier retains liability and has served residential customers within the past three years, that it will maintain its Maryland residential supplier license and bond for a period of three years from the date it last served a Maryland customer.
OPC also sought a rule to expressly authorize the use of bond proceeds to satisfy customer refunds when violations of law or regulation have caused harm.
OPC generally requested that the PSC initiate a rulemaking to adopt the proposals described above, but said that the should PSC institute such proposed policies immediately on a case-by-case basis as license issues come before the PSC (such as residential relinquishments), under the PSC's "broad" existing statutory authority for licensing under PUA §§ 7-507(c)(4) and 7-603(b)
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June 30, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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