The financial capability requirements for obtaining certification from the Public Utilities Commission of Ohio as a competitive retail natural gas or electric supplier have long been a source of confusion for many applicants. Direct contact with the Commission Staff has often been required in order to ascertain the specific items that must be submitted in order to satisfy the requirements for certification. Recently, however, the Commission updated its competitive retail certification applications to specifically identify the requirements:

Exhibit C-3 (Financial Statements). Exhibit C-3 requires applicants to provide their two most recent years of audited financial statements. The revised applications now make it clear that if an applicant does not have a balance sheet, income statement, and cash flow statement, the applicant may provide a copy of its two most recent years of tax returns.

Exhibit C-4 (Financial Arrangements). Exhibit C-4 has possibly been the greatest source of confusion for competitive retail applicants. In order to comply with Exhibit C-4, applicants (or their attorneys) would frequently need to contact the appropriate member of the staff in charge of reviewing the financial exhibits in order to obtain the exact requirements for demonstrating financial security. This process was, no doubt, as cumbersome for the staff members in charge of performing the review as it was for the applicants themselves.

Now, the updated applications explicitly state the requirements for satisfying Exhibit C-4 (summarized below):

New and Renewal Applicants who take title to the electricity or gas. New applicants (or those with expired certification) and renewal applicants can meet the requirements of Exhibit C-4 by:

  1. Demonstrating that the applicant has an investment-grade rating by Moody’s, Standard & Poor’s or Fitch;
  2. Demonstrating that a parent company or third-party with an investment-grade rating by Moody’s, Standard & Poor’s or Fitch will guarantee the financial obligations of the applicant to the local distribution utility (“LDU”);
  3. Demonstrating that a parent company or third-party without an investment-grade rated by Moody’s, Standard & Poor’s or Fitch, but “with substantial financial wherewithal in the opinion of the Staff reviewer,” will guarantee the financial obligations of the applicant to the LDU(s); or
  4. Posting a Letter of Credit with the LDU(s) identified as the beneficiary.

Renewal Applicants ONLY who take title to the electricity or gas. Renewal applicants can fulfill the requirements of Exhibit C-4 by providing a current statement from an Ohio LDU that shows that the applicant meets the LDU’s collateral requirements.

Applicants who do not take title to the electricity or gas (aggregators or brokers). Applicants who do not take title to the electricity or gas are not required to submit documentation in connection with Exhibit C-4.

Exhibit C-5 (Forecasted Financial Statements). The CRES and CRNGS applications now clarify that forecasted financial statements should contain information pertaining only to electric-related business activity in the State of Ohio (CRES applications) or only to gas-related business activity in the State of Ohio (CRNGS applications). The updated applications also clarify that the financial forecast should be in annualized format for the two years succeeding the year the application is filed.