Creditworthiness
As part of the Application process, Pennsylvania Power Company (Penn Power) requires a supplier submit with their Application Materials a Credit History Summary form in order to asses creditworthiness.
As disclosed in the Credit Requirement section of the Electric Generation Supplier Tariff, Penn Power will apply, on a non-discriminatory and consistent basis, reasonable financial standards to assess and examine an supplier’s Creditworthiness. These standards will take into consideration the scope of operations of each supplier and the level of risk to Penn Power. Penn Power requires an initial credit amount of $250,000 and shall adjust the amount required commensurate with the financial risks placed on Penn Power by an supplier, including recognition of an supplier’s performance. The Credit Requirement must be satisfied before the registration is considered complete. An supplier or its parent (if applicable) shall satisfy its Creditworthiness requirement and receive an unsecured credit limit by demonstrating that it has, and maintains, investment grade long-term senior unsecured bond ratings from any two of the following four rating agencies:
| AGENCY | SENIOR SECURITIES RATING (BONDS) |
|---|---|
| Standard & Poor’s | BBB- or higher |
| Moody's Investors' Services | Baa3 or higher |
| Fitch IBCA | BBB- or higher |
| Duff & Phelps Credit Rating Company | BBB- or higher |
Penn Power shall make reasonable alternative credit arrangements with a supplier that is unable to meet the aforementioned criteria and with those supplier’s whose credit requirements exceed their allowed unsecured credit limit. The supplier may choose from any of the following credit arrangements in a format acceptable to Penn Power:
- A guarantee of payment, satisfactory in form and substance to the Company, from a parent Guarantor deemed to be creditworthy
- An irrevocable Letter of Credit or Surety Bond, satisfactory in form and substance to the Company, issued by a bank or other financial institution with a minimum “A” senior unsecured debt rating
- A Cash Deposit
The following files are available to assist an supplier in demonstrating creditworthiness using an alternative credit arrangement. Penn Power request that the supplier use the following files in their substantial form and substance.
Guaranty of Payment
Letter of Credit
Surety Bond
Cash Deposit
Once the initial Credit Requirement is satisfied, the supplier will not be required to post additional credit until the customer load responsibility served by the supplier requires such an increase. The Company will use the following example as one of the tools to asses credit exposure:
Supplier Exposure Formula Slide
Supplier Support must be informed of the specific alternative credit arrangement that the supplier will use to demonstrate creditworthiness.