Surety Bond Encyclopedia

Natural Gas Supplier Bond - Philadelphia Gas Works in Pennsylvania

Brief Summary

PGW usually tells a supplier at the PUC license stage that no bond is needed yet. The call comes later, after PGW approves you and before your first enrollment, and the amount follows your firm pool. Having a surety lined up for that moment means customers enroll on schedule without a cash deposit sitting with PGW.

A natural gas supplier serving firm customers on the Philadelphia Gas Works system must give PGW security before enrolling customers. PGW accepts a cash deposit, a standby irrevocable letter of credit from a bank it approves, or a performance bond from a surety it approves. The first year amount is based on the supplier's estimated firm pool size and is updated each year on actual pool size. PGW is the obligee, and posting this security is how a supplier meets the security condition 52 Pa. Code 62.111 attaches to its PUC license.

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How to Apply for a Natural Gas Supplier Bond:

Obtain or apply for the natural gas supplier license from the Pennsylvania PUC, including PGW's bonding letter.
Complete PGW's firm transportation supplier application and include the $400 nonrefundable credit investigation fee.
Submit audited financial statements, an annual report, 10-K or comparable filings with the application.
Build an estimate of your first year firm pool size, since PGW sizes the security on it.
Post the bond, letter of credit or cash deposit after PGW approves the application and before enrolling customers.
Expect PGW to update the amount each year based on your actual firm pool.

Detailed Information About the Pennsylvania Natural Gas Supplier Bond:

Two separate moments

A supplier applying to the Pennsylvania Public Utility Commission for a natural gas supplier license files a bonding letter from each distribution company it plans to serve. PGW's letters in those PUC files say the applicant does not need to post a bond or other security at that time. In one recent bonding letter, PGW explained that upon final approval of the supplier's application to PGW and prior to enrolling customers, security in the first year for firm pools will be required based on the estimated firm pool size, and that it will be updated annually based on actual firm pool size. The license comes first. The PGW bond comes when you are ready to sign up customers in Philadelphia.

How this bond fits the PUC license

Under 66 Pa.C.S. 2208 and 52 Pa. Code 62.111, a supplier license will not be issued or remain in force until the licensee furnishes proof of a bond or other security. The regulation ties the amount to the financial exposure the distribution company or supplier of last resort would face if the supplier defaulted or went bankrupt, and says it should reflect the difference between the cost of gas the utility incurs and what the supplier's customers owe during one billing cycle. Each distribution company must publish its rules and formulas for this in a tariff. That is why the obligee on this bond is Philadelphia Gas Works and not the Commission, and why a supplier active in other utility territories posts security with each of them separately.

What PGW reviews before it sets the figure

PGW's firm transportation supplier application requires a valid PUC natural gas supplier license, a $400 nonrefundable credit investigation fee, and current audited financial statements, an annual report, 10-K or similar regulatory filings. The supplier must meet PGW's credit requirements to PGW's sole satisfaction. A pool must have at least 50 customers or customers whose combined usage is at least 5,000 Mcf a year, and an approved supplier can enroll both residential and commercial or industrial monthly metered customers.

Brokers

In a 2025 letter, PGW told an applicant that would only provide aggregating, brokering and consulting services, without taking title to gas, that it did not need to post a bond or other security in PGW's territory. PGW kept the right to require security if those services change.

Eligibility and Requirements for a Pennsylvania Natural Gas Supplier Bond:

A valid natural gas supplier license from the Pennsylvania Public Utility Commission.
Philadelphia Gas Works named as obligee, with a surety acceptable to PGW.
Credit requirements met to the sole satisfaction of PGW.
A firm pool of at least 50 customers or at least 5,000 Mcf a year.
Security kept in place and adjusted as the firm pool changes.

Pennsylvania Natural Gas Supplier Bond FAQs:

Do I need the PGW bond when I apply for my PUC license?

Usually not. PGW's bonding letters filed with the PUC say the applicant does not need to post security at that time. Security is required after PGW approves the supplier's application and before customers are enrolled.

How does PGW set the amount?

For the first year it is based on your estimated firm pool size, and it is updated annually based on actual firm pool size. 52 Pa. Code 62.111 requires the amount to relate to PGW's exposure over one billing cycle if the supplier defaults. Get the current figure from PGW before the bond is issued.

What forms of security does PGW take?

A cash deposit, a standby irrevocable letter of credit drawn on a bank acceptable to PGW, or a performance bond issued by a surety company acceptable to PGW.

Is this the same as the security the PUC requires?

It is the security the PUC license depends on. The regulation requires proof of a bond or other security for the license, while the distribution company sets the amount under its tariff and holds the instrument. On the PGW system, PGW is the obligee.

We are a broker and never take title to gas. Do we post this bond?

PGW told one such applicant in 2025 that it did not need to post a bond or other security, while reserving the right to require it if the services change. Confirm your own status in writing with PGW Gas Management.