Surety Bond Encyclopedia

Natural Gas Supplier Bond - UGI Utilities, Inc. in Pennsylvania

Brief Summary

UGI will not let a supplier serve a single Choice customer on its system until security is posted under Rule 8 of its Choice Supplier Tariff. A surety bond posts that security without pledging cash or a bank letter of credit, and it suits a supplier that has no parent company offering a guaranty.

A licensed natural gas supplier that will serve Choice customers on the UGI Utilities distribution system must post security with UGI before serving those customers. UGI's letters to PUC license applicants point to Section 8, Financial Security, of its Gas Choice Supplier Tariff No. 7S for the accepted forms and amounts. Once the security is posted, UGI treats the supplier as having shown the creditworthiness that 52 Pa. Code 62.111 makes a condition of the PUC license.

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How to Apply for a Natural Gas Supplier Bond:

Request a bonding letter from UGI as part of your PUC natural gas supplier license application.
Tell UGI whether you will serve Choice customers directly or broker for a licensed supplier.
Get the current Rule 8 Financial Security figure from UGI for the customers you plan to serve.
Choose the form of security, such as a surety bond, letter of credit, guaranty or cash.
Have the bond issued with UGI Utilities, Inc. as obligee and deliver it before serving any customer.
Watch for UGI requests to raise the security as your load or financial condition changes.

Detailed Information About the Pennsylvania Natural Gas Supplier Bond:

Supplier or broker

The first question UGI asks is whether you will serve customers yourself. In a 2025 letter filed with the PUC, UGI told a company that would act as a broker in conjunction with a licensed natural gas supplier, one that had already posted its own security, that it would not need to post security with UGI. The same letter said that if the company later wanted to serve Choice customers directly, it would have to post security first. Suppliers that take on customers of their own post it before service begins.

Where the amount comes from

UGI's bonding letters send suppliers to Section 8 of the Gas Choice Supplier Tariff No. 7S, listed in the tariff as Rule 8, Financial Security. That follows 52 Pa. Code 62.111, which requires each distribution company to publish the rules, formulas and standards it uses to calculate and adjust security in a tariff. The regulation says the amount should be reasonably related to the exposure UGI or the supplier of last resort would carry if the supplier defaulted or went bankrupt, reflecting the gap between UGI's gas cost and what the supplier's customers owe during one billing cycle. Ask UGI's Choice supplier staff to run the current Rule 8 calculation for your planned customers before the bond is written.

A bond is one of several options

62.111 accepts bonds, irrevocable letters of credit, corporate or third party guaranties, escrow accounts, pledged accounts receivable, capacity calls or operational offsets, and cash. UGI has accepted a parent corporate guarantee from a large supplier in the past. A supplier without that kind of parent can use a surety bond or a letter of credit instead, and the bond names UGI Utilities, Inc. as obligee.

The figure can change

UGI's letters say its creditworthiness finding can change if the supplier's financial condition materially deteriorates or if what the supplier owes UGI grows beyond the security on file. 62.111 lets the utility adjust security for operating history, credit reports, changes in customer count and changes in creditworthiness. A supplier that disagrees can seek informal mediation, alternative dispute resolution or a formal complaint, and must keep the adjusted security in place while that runs.

Eligibility and Requirements for a Pennsylvania Natural Gas Supplier Bond:

A natural gas supplier license from the Pennsylvania Public Utility Commission.
Security posted under Rule 8 of UGI's Gas Choice Supplier Tariff No. 7S.
UGI Utilities, Inc. named as obligee on the bond.
Security in place before serving Choice customers on UGI's system.
Security kept at or above what UGI calculates as the supplier's obligations.

Pennsylvania Natural Gas Supplier Bond FAQs:

When does UGI need the bond?

Before you serve customers on UGI's distribution system. UGI's licensing letters say the supplier must post security as specified in its supplier tariff before it serves customers, and once that is done UGI treats the supplier as creditworthy.

We only broker deals for a licensed supplier. Do we post security?

UGI told a broker in 2025 that it would not need to post security with UGI because it worked with a licensed supplier that had already posted. If you later serve Choice customers directly, UGI requires security before that service starts.

How much will UGI ask for?

The amount comes from Rule 8, Financial Security, of UGI's Gas Choice Supplier Tariff No. 7S, and 52 Pa. Code 62.111 ties it to one billing cycle of exposure. Confirm the current figure with UGI before the bond is issued.

Can a parent guaranty replace the bond?

62.111 lists corporate and third party guaranties as acceptable security, and UGI has accepted a parent corporate guarantee before. UGI decides whether a particular guarantor is acceptable.

Can UGI increase the security later?

Yes. UGI's letters reserve that right if the supplier's finances deteriorate or its obligations to UGI exceed the security posted, and 62.111 allows adjustments for operating history, credit reports and customer count.