Surety Bond Encyclopedia

Sale of Electric Power Bond - Jersey Central Power & Light Company in Ohio

Brief Summary

JCP&L accepts a surety bond in place of an investment grade credit rating, but only from an issuer carrying at least an A senior unsecured debt rating, on JCP&L's own surety format. Getting that right the first time is what clears the creditworthiness step of supplier registration so EDI testing can start.

A third party supplier selling electric generation to customers on the Jersey Central Power & Light system must meet JCP&L's creditworthiness standard under its Third Party Supplier Agreement. A supplier or guarantor rated at least BBB- by S&P or Fitch, or Baa3 by Moody's, is creditworthy. Everyone else posts a parent guaranty, a letter of credit, a surety bond or a cash deposit. If no load estimate is submitted, JCP&L requests an initial credit amount of $250,000, and the exposure is recalculated after power has flowed for 30 days.

We can help with all Ohio bonds!

How to Apply for a Sale of Electric Power Bond:

Hold a New Jersey BPU third party supplier license or provisional license.
Execute JCP&L's Third Party Supplier Agreement and the related registration documents.
Submit JCP&L's credit history summary form and either a rating for the supplier or guarantor or an alternative form of security.
Estimate your initial load, or plan on JCP&L's $250,000 initial credit amount if you cannot.
Have the surety bond written on JCP&L's format by an issuer rated at least A.
Complete EDI testing after the credit review and post additional security if the recalculated exposure rises.

Detailed Information About the Ohio Sale of Electric Power Bond:

About the state on this listing

This bond is filed under Ohio in our directory. Jersey Central Power & Light is FirstEnergy's New Jersey utility, and the requirements below come from JCP&L's New Jersey supplier registration program and the New Jersey Board of Public Utilities.

The rating test comes first

Under JCP&L's creditworthiness rules, a supplier or its guarantor is creditworthy if it carries a senior unsecured debt rating of at least BBB- from S&P, Baa3 from Moody's or BBB- from Fitch. If no senior unsecured rating exists, the corporate issuer rating is used, discounted one notch. A supplier that falls short must provide a guarantee of payment from a creditworthy parent, an irrevocable letter of credit or surety bond issued by a bank or other financial institution with at least an A senior unsecured debt rating, or a cash deposit. JCP&L posts its own surety bond format, and the bond must be satisfactory to JCP&L in form and substance.

How the amount is set

A supplier can submit an estimate of the initial load it plans to serve, and JCP&L publishes a credit calculator for working out the exposure. If the supplier cannot give an estimate at application, JCP&L requests an initial credit amount of $250,000. After power has flowed for 30 days, the credit exposure is recalculated. When the adjusted exposure exceeds the security posted, JCP&L notifies the supplier and asks for more.

What the bond answers for

Article 7 of the Third Party Supplier Agreement requires creditworthiness or satisfactory alternative arrangements to be maintained throughout the term of the agreement. Under Section 6.3, a supplier in default forfeits the full amount of its posted security and any alternative credit arrangements.

This is not the BPU license bond

The New Jersey Board of Public Utilities separately requires a licensed third party supplier to file a surety bond of at least $250,000 with the Treasurer, State of New Jersey as obligee, under N.J.A.C. 14:4-5.4(f). A company licensed for both electric and gas files two of those bonds. The BPU bond protects the state. The bond on this page protects JCP&L. A supplier without a qualifying credit rating carries both.

Where it fits in registration

JCP&L's supplier registration requires a BPU license or provisional license, an executed Third Party Supplier Agreement, written evidence of PJM membership, a completed creditworthiness review and EDI testing, which begins after the credit review is complete.

Eligibility and Requirements for a Ohio Sale of Electric Power Bond:

Jersey Central Power & Light Company as obligee.
Surety or bank with a minimum A senior unsecured debt rating.
Security satisfactory to JCP&L in form and substance.
Written evidence of PJM membership.
Security maintained for the full term of the Third Party Supplier Agreement.

Ohio Sale of Electric Power Bond FAQs:

Is this the same as the $250,000 BPU license bond?

No. The BPU license bond runs to the Treasurer, State of New Jersey under N.J.A.C. 14:4-5.4(f). This bond runs to JCP&L under its Third Party Supplier Agreement. A supplier serving JCP&L customers needs the license and must also satisfy JCP&L's creditworthiness rules.

How much security will JCP&L require?

It depends on your credit exposure, which JCP&L calculates from your estimated load. Without an estimate, JCP&L requests an initial credit amount of $250,000. The figure is recalculated after power has flowed for 30 days and can go up if exposure exceeds what you posted.

Our parent company is rated BBB-. Do we still need a bond?

A guarantee of payment from a parent that meets JCP&L's rating test is one of the accepted alternatives. JCP&L decides whether the guaranty is satisfactory in form and substance.

Can any surety write this bond?

JCP&L requires a letter of credit or surety bond issued by a bank or other financial institution with a minimum A senior unsecured debt rating, using its posted surety format. Check the surety's rating before the bond is issued.

What happens to the bond if we default?

Section 6.3 of the Third Party Supplier Agreement says a supplier in default forfeits the full amount of its posted security and any alternative credit arrangements.