Collateral should be judged by issuer quality and payment terms, not by whether it comes from a bank or an insurer.
Utilities may need to invest in major infrastructure years before a data center reaches full operation. Collateral protects utilities and ratepayers if a project fails to proceed. Once a tariff determines how much collateral is required, it must also decide which financial instruments customers may use.
In August 2026, Comity filed its first public tariff comments with the Public Utilities Commission of Ohio. The filing addressed Schedule DCT, a data center tariff proposed by Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company, collectively the Companies.
The Companies proposed allowing customers to satisfy their collateral obligations with qualifying surety bonds or insurance-backed guarantees. Comity recommended preserving that option.
Our comments advanced a simple principle: size collateral to the underlying exposure, apply objective issuer standards, require clear payment terms, and accept any instrument that meets those requirements. Five points support that recommendation.
1. A qualifying surety instrument can provide the necessary protection
A surety-backed guarantee can be irrevocable, unconditional, and payable on demand. It can renew automatically, require advance notice of nonrenewal, permit a full draw if replacement collateral is not provided, and protect the utility if the issuer’s rating falls below the required threshold.
These provisions can give a utility substantially the same practical protections as a letter of credit. Not every surety bond should qualify, but that is a reason to establish strong requirements, not to exclude surety altogether.
The relevant question is whether the instrument provides the required protection, not whether it was issued by a bank or an insurer.
2. The Companies deliberately included surety
The Companies themselves chose to include surety in Schedule DCT. They modeled the schedule on AEP Ohio’s previously approved framework but modified it to include qualifying surety language which insurance backed instruments can meet.
They also proposed objective issuer standards: at least A3 from Moody’s, A- from S&P, or an A-rated surety listed by the U.S. Treasury. This creates a clear and administrable test without requiring regulators to evaluate each insurer individually.
The Companies’ proposal therefore does not allow surety without limits. It permits surety only when the issuer satisfies defined financial-strength requirements.
3. Collateral size and collateral form are separate questions
There may be valid debate about how much collateral Schedule DCT should require. The amount could be tied to the utility’s actual unrecovered exposure and decline as the customer performs and the investment is recovered.
That question should remain separate from the form of collateral. Surety should not be excluded simply because the Commission changes how the obligation is calculated.
The Commission should first determine the exposure that must be secured. It should then determine whether an instrument provides the necessary issuer quality, duration, and liquidity.
4. Virginia shows that surety can be used at data center scale
Virginia provides a relevant example of surety’s use in a large-load tariff.
In November 2025, the Virginia State Corporation Commission approved Dominion Energy Virginia’s GS-5 rate class for customers with at least 25 MW of demand and a load factor of at least 75%. The underlying tariff permitted surety alongside parental guarantees, letters of credit, and cash.
The Virginia order did not separately analyze surety and does not control the Ohio proceeding. It nevertheless shows that rated surety instruments can be incorporated into tariffs designed to protect against stranded costs at data center scale.
5. More collateral options can reduce costs without reducing protection
Every form of collateral has a cost. Cash ties up capital. Letters of credit consume bank capacity and carry fees. Surety bonds require premiums. When collateral remains outstanding for years and reaches tens or hundreds of millions of dollars, those costs can materially affect a project.
Allowing properly structured insurance-backed instruments gives customers access to another pool of rated capital and preserves bank capacity for construction and other financing needs.
The concentration of the letter-of-credit market underscores the value of additional capacity. As of August 24, 2026, ERCOT held approximately $5.17 billion in letter-of-credit collateral. Only about $855 million, or 16.5%, was issued by U.S. banks.
Allowing multiple instruments does not mean accepting less protection. Each can be held to equivalent standards for issuer strength, coverage, and payment.
The broader principle behind Comity’s comments
Comity’s first public tariff filing extends our work from individual transactions to the rules governing the market. As utilities and regulators respond to rapid load growth, collateral provisions will affect project economics, access to capital, and the ability of bank and insurance markets to support new infrastructure.
The purpose of collateral is to make the utility whole if a customer fails to perform, not to require every customer to obtain that protection from the same type of institution.
A sound tariff can require strong issuers, continuous coverage, clear non-renewal protections, and prompt payment while allowing both bank- and insurance-backed instruments that meet those standards.
Surety is not asking for special treatment. It should simply be judged by what it does.
This article is for informational purposes only and does not constitute legal, financial, or investment advice.
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