20.51.02.08

.08 Financial Integrity.

A. Each applicant for a license shall file audited financial documents as listed in Regulation .02B(4) of this chapter.

B. The Commission shall consider an applicant to have acceptable financial integrity if it:

(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 under §D of this regulation.

C. Any demonstration of financial integrity under §D of this regulation shall be based on the most recent fiscal year-end and, if available, quarterly audited, financial statements of the applicant, from the parent corporation or other person that has undertaken to guarantee the applicant's financial integrity.

D. If the applicant has less than 12 months of financial history, review of financial integrity shall be based on an evaluation of indicators including:

(1) Company growth;

(2) Customer base;

(3) History of attracting capital;

(4) Productivity of assets; and

(5) Margin of safety for creditors.

E. An applicant for a license shall demonstrate financial integrity by having:

(1) One of the following:

(a) Positive working capital; or

(b) Debt service coverage equal to or greater than two times the annual interest costs;

(2) One of the following:

(a) Positive stockholder equity; or

(b) Positive working capital and a dedicated source of additional financing including a line of credit, a pending stock issuance or debt issuance, or other committed source of financing; and

(3) One of the following:

(a) Positive net income; or

(b) Stockholder equity equal to or greater than two times the amount of net loss.

F. If an applicant, a parent corporation, or other person who has undertaken to guarantee the applicant's financial integrity, cannot satisfy the financial integrity tests specified in §E of this regulation, or has not received an unsecured credit allowance greater than $2,000,000 from PJM Interconnection, LLC, the applicant, parent corporation, or other person who has undertaken to guarantee the applicant's financial integrity shall provide the Commission with security in the form of the bond described in §G of this regulation, or other security as required under §H of this regulation.

G. A bond required under §F of this regulation shall:

(1) Identify the Maryland Public Service Commission as the sole beneficiary;

(2) Be continuous and subject to cancellation on 60 days notice to the Commission unless, for good cause shown, the Commission orders that the bond be maintained;

(3) Except for an applicant under Regulation .02C of this chapter, be in the amount of $250,000;

(4) Contain the following language or similar language acceptable to the Commission: "Payment under this bond shall be due if:

(a) The Commission determines that (electricity supplier name) is financially insolvent or unable to meet its obligations as a licensed electricity supplier in Maryland; or

(b) Ordered by a Maryland court after a person who has obtained a judgment against a licensed supplier has previously attempted to collect the judgment through all other means available to the court";

(5) Permit the Commission to direct that the proceeds of the bond be paid or disbursed to satisfy the electricity supplier's financial obligations to the Commission or other Maryland governmental entity;

(6) Permit a Maryland court to direct proceeds of the bond be paid to a person that has obtained a judgment against a licensed supplier and has previously attempted to collect the judgment through all other means available to the Court;

(7) Permit payment of obligations up to the amount of the bond; and

(8) Be obtained from a company licensed in Maryland to write surety types of insurance.

H. Proof of Financial Integrity.

(1) For proof of financial integrity, an applicant may rely upon a guarantee provided by a parent corporation or other person.

(2) If a parent corporation or other person undertakes to guarantee the financial integrity of the applicant, the parent corporation or other person shall supply the information and meet the financial standards that would otherwise be required of the applicant.

(3) An applicant may submit an instrument similar to a bond, or other financial surety or guarantee, in the amount of $250,000, for the Commission's consideration.

(4) The Commission may accept an alternate form of financial guarantee in place of the bond required under Regulation .02C of this chapter or §F of this regulation.

I. Maintaining a Bond.

(1) At the request of an electricity supplier, upon expiration or withdrawal of a bond submitted under this regulation, or on a periodic basis, the Commission shall review the financial information submitted by a licensed electricity supplier.

(2) Based on new or additional information submitted by the electricity supplier, the Commission may find that the electricity supplier meets the Commission's financial integrity standards and no longer needs to provide a bond.

(3) In the absence of a Commission finding that a bond is no longer necessary, a supplier shall renew or replace a bond before the expiration of the bond.

(4) Failure to maintain a valid bond required under this regulation may result in the suspension or revocation of an electricity supplier's license.

J. A licensed electricity supplier may seek to withdraw a bond or other form of financial integrity guarantee provided to the Commission, if:

(1) PJM Interconnection, LLC grants the electricity supplier an unsecured credit allowance in an amount greater than $2,000,000; and

(2) The supplier provides documentation of the credit allowance to the Commission.

K. The Commission may in its discretion require that an electricity supplier that will have an OREC purchase obligation deliver to the Commission, no later than 30 days prior to the year in which the offshore wind energy RPS takes effect, a performance bond or other form of collateral support in such amounts, from such providers and in such form as shall be determined by the Commission to secure the payment obligations of the electricity supplier under COMAR 20.61.06.