§ 54.40. Bonds or other security.
(a) A license will not be issued or remain in force until the licensee furnishes a bond or other security approved by the Commission. See section 2809(c) of the code (relating to requirements for electric generation suppliers).
(b) The purpose of the security requirement is to ensure the licensee’s financial responsibility, the payment of gross receipts tax as required by section 2810 of the code (relating to revenue-neutral reconciliation), and the supply of electricity at retail in accordance with contracts, agreements or arrangement. See section 2809(c) of the code.
(c) The initial security level required from each applicant is $250,000. Modifications of this amount commensurate with the nature and scope of business anticipated to be conducted in this Commonwealth may be granted where substantial evidence is submitted in support of the modification. A request for modification of this initial security level may be made in conjunction with the filing of the application. The license will be issued contingent on the submission of proof that the applicant has obtained a bond, or other approved security in the amount directed by the Commission.
(d) After the first year that the license is in effect, the security level for each licensee will be reviewed annually and modified primarily based on the licensee’s reported annual gross receipts information. The security level will be 10% of the licensee’s reported gross receipts. See section 2809 (c)(1)(i) of the code. Maintenance of a license will be contingent on the licensee providing proof to the Commission that a bond or other approved security in the amount directed by the Commission has been obtained. A licensee may seek approval from the Commission of an alternative level of bonding commensurate with the nature and scope of its operations.
(e) Payments pursuant to the security may result from the licensee’s failure to pay the full amount of Gross Receipt Taxes, or failure to supply electricity or other services in accordance with contracts, agreements or arrangements.
(f) The bond or security shall include the following:
(1) The Pennsylvania Public Utility Commission, Commonwealth as the sole beneficiary.
(2) The purpose of the bond as follows:
This bond (or other security) is written in accordance with Section 2809(c)(1)(i) of the Public Utility Code, 66 Pa.C.S. § 2809(c)(1)(i), to assure compliance with applicable provisions of the Public Utility Code, 66 Pa.C.S. § § 101, et seq., and the rules and regulation of the Pennsylvania Public Utility Commission by the Principle as a licensed electric generation supplier; to ensure the payment of Gross Receipts Tax as required by Section 2810 of the Public Utility Code, 66 Pa.C.S. § 2810; and to ensure the supply of electricity at retail in accordance with contracts, agreements or arrangements.
(3) A listing of the prioritization of claims for payment under the security from highest priority to lowest priority as follows:
(i) The Commonwealth.
(ii) EDCs for the reimbursement of Gross Receipts Tax.
(c) Private individuals.
(4) A statement that the security shall be interpreted under law of the Commonwealth, or in the alternative, no choice of law is specified.
(g) The applicant may request the use of a security other than a bond. See section 2809 (c)(1)(i) of the code. The application shall include specific information about the licensee’s need to use a security other than a bond; and shall provide the name, business address, the nature of the business of the entity issuing the security, and if available, the financial rating of the entity. The applicant shall demonstrate that the financial protection afforded by the security is equivalent to that of a bond.
(h) Licensee liability for unreasonable service, or for violations of the code and Commission orders and regulations is not limited by these security requirements.
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