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Texas Consumer Advocates Urge PUC To "Investigate" Retail Provider Application Of Grid+, And Its Cryptocurrency, Prepaid Service

ROSE Pushes For PUC To Set Standard For Use Of Cryptocurrency In Retail Electric Market

GridPlus Says Will Comply With All Laws, Regulations; Says Concerns Raised By ROSE Are From Older, Generic Whitepaper That Doesn't Reflect Current Thinking Or Products

ROSE Says Marketing Prepaid Service As Paying "Whenever You Want" Is Deceptive, Since Customers Must Pay By Deadline To Avoid Disconnection

ROSE: Customer-to-Customer Electricity Sales Prohibited In Today's Wholesale Market, Are A "Diversion" From Current Retail Market Requirements

March 21, 2018

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Copyright 2010-17
Reporting by Paul Ring •

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of

Texas ROSE (Ratepayers' Organization to Save Energy) and Texas Legal Services Center (TLSC) have filed an objection to the application of GridPlus Texas Inc. for a retail electric provider certificate, alleging that the service described in publicly posted company business plans is inconsistent with Texas market rules

John Werner, CEO of GridPlus Texas Inc. said in a statement provided to that, "We have reviewed the objections to the approval of our application for a retail energy provider certificate filed with the PUCT by Texas ROSE and TLSC. We are pleased that these organizations have taken an interest in fostering public dialogue around the challenges and opportunities posed by our mission. The basis of their objections, however, rely on a whitepaper written almost a year ago, well before I came on board to run the retail business and well before Grid+ applied for its PUCT certification. I can assure you, Grid+ is creating its business, and it will run its business, in a lawful manner."

See GridPlus's full statement below was first to report in January the application of GridPlus for a Texas REP certificate. As previously reported, Grid+ describes itself as, "a next generation electrical utility that brings you low prices through artificial intelligence and blockchain technology."

See our prior story for further background on Grid+

As more fully described in our prior story, GridPlus' service, as originally delineated in a whitepaper and marketing plan, relies on a device, or "agent", which facilitates blockchain transactions and real-time purchases from various markets. As originally proposed in the prior whitepaper, a form of cryptocurrency was to be used for payment, and the offered service was to be prepaid, but GridPlus told EnergyChoiceMatters that, under its evolving business plan, it does not plan to require customers to pay with or use cryptocurrencies, and that it will not require the use of an advanced payment product also further examined Grid+'s marketing plan and proposed service (see story here).

Texas ROSE and TLSC cite Grid+'s marketing plan and whitepaper in raising concerns about the proposed service and business model. It should be noted that neither the whitepaper nor business plan were specific to the Texas market. GridPlus further noted that the whitepaper, which addresses the energy markets generally, was from the summer of 2017 and that not all statements in the whitepaper reflect its most current thinking or the final products and services it will sell in the markets it serves.

Indeed, had first noted back in September 2017 that the Grid+ whitepaper contemplated a "deposit" for prepay service, which would be inconsistent with the Texas substantive rules. noted at that time that, to the extent the term "deposit" is used colloquially, and really means a set threshold for the initial pre-payment, Texas REPs cannot require a connection balance in excess of $75 (not including TDU fees) for a residential customer.

In their comments to the PUCT, Texas ROSE and TLSC said that, "Texas ROSE and TLSC file these objections because the business plan of GridPlus is inconsistent with the standards set by the Public Utility Commission's Substantive Rules and the Public Utility Regulatory Act (PURA) to protect residential customers."

In their stated concerns, Texas ROSE and TLSC alleged:

"• GridPlus Texas promotes a business model using cryptocurrency which is not generally used by residential consumers or generally accepted by retailers.

"• GridPlus Texas has developed a model to provide prepaid service that is not in compliance with PUC Substantive Rule §25.498 relating to Prepaid Service.

"• GridPlus proposes a distributed generation market where customers can sell electricity to each other.

"• The application for certification lacks the presence of sufficient management resources.

Texas ROSE and TLSC also raised the following questions:

• "Is the use of stored value alternative currency consistent (whether it be physical or cloud based device) conflict [sic] with state law?" Specifically, when a customer changes retail electric providers and leaves stored value on the device, will that property be remitted to the State as required by the Title 6, Section 72.1017 of the Property Code (Utility Deposits) and PURA Title 4 Section 183?

• How do you redeem BOLT [a cryptocurrency]? What is its value?

Texas ROSE and TLSC further alleged that GridPlus is planning to offer a prepay electricity product using the phrase, "pay for electricity whenever you want."

"We believe this is deceptive. The time will come when the customer will have to pay or be disconnected whether they want to pay then or not," Texas ROSE and TLSC said

Texas ROSE and TLSC said that, "Cryptocurrency is a little understood and experimental currency. Electricity is an essential service and should be as risk free as possible for the consumer. At a minimum, the Commission should establish standards for the use of crypto currency for purchasing electricity prior to allowing a REP to offer a plan that accepts or requires it."

Texas ROSE and TLSC alleged that, "What little information is available about the GridPlus plan raises flags because the proposal fails to comply with the Commission's Substantive Rules on Prepaid Service."

"As noted above the customer of prepaid customer [sic] of GridPlus would pay a security deposit. This is problematic and a violation of the prepaid service rules. Section 25.498 (c)(11)(D) states that a REP shall not require security deposits for electric service," Texas ROSE and TLSC alleged

"Furthermore, the rule at §25.498(c)(11(D)) places a cap of $75 on the amount a customer must pay into the account to be connected. What amount will be required by GridPlus to initiate service," Texas ROSE and TLSC asked

"Of even greater importance is the Provider of Last Resort price cap per kwh set forth in §25.498(c)(15). Will the pricing plan envisioned in the White Paper comply with this requirement of PURA §39.107(g)," Texas ROSE and TLSC asked

Texas ROSE and TLSC alleged, "The business plan presented by GridPlus in its White Paper does not mention the PUC rules nor make any attempt to understand them and design its product for compliance."

Texas ROSE and TLSC alleged that, "some examples of rules ton [sic] which he [sic] creators of the plan are silent include;

• The price caps set forth in §25.498(c):

• Deferred payment arrangements required during an extreme weather emergency as required; and

• Demonstrating that the service proposed utilizes a 'settlement provisioned meter' as required by §25.498(1) and (m)."

Texas ROSE and TLSC further said, "A portion of the GridPlus White Paper identifies long-term distributed storage and open markets. According to the White Paper, 'Once this occurs there will be situations where customers will not want to interact with wholesale markets directly, but rather trade energy locally.' The natural progression of the proposed plan is to allow customers to sell power to each other."

"We believe that this type of transaction is prohibited in today's wholesale market. Besides the concept of customer to customer sales the direct interaction of residential customers with the wholesale market is a diversion from present day retail market requirements," Texas ROSE and TLSC said

Texas ROSE and TLSC alleged, "According to the application, GridPlus has a single executive level employee. This is troublesome as the marketing plans of GridPlus seem far removed from basic customer protections rules. Even more troubling is that the Company assumes that the Commission would have no interest in having some say in the introduction of cryptocurrency into the Texas electricity market. We believe the Application grossly miscalculates staffing needs and this is another reason we object to the Application."

Texas ROSE and TLSC urged, "In addition to the financial deficiencies identified early on by the PUC staff we urge the ALJ to examine the following aspects of the GridPlus business plan:

   1) Whether or not cryptocurrency and the company's proposed BOLT currency unit is acceptable legal tender for electricity purchases and if financial standards and customer billing rules established by the Commission provide sufficient protection for customer [sic] taking a cryptocurrency based electricity service.

   2) Whether or not the prepaid service plan outlined by GridPlus meets the Prepaid Service rules set forth in Substantive Rule §25.498.

   3) Whether or not customer interaction with the wholesale market and anticipated sales of electricity from distributed generation facilities from customer to customer is consistent and compatible with the Texas market.

   4) Whether or not remaining balances and utility security deposits will be properly remitted to the customer or if unclaimed to the State of Texas.

   5) Upon review by the ALJ, whether the proposed electricity facts label and terms of service agreement are consistent with law."

GridPlus provided the statement below to in response to ROSE and TLSC's allegations:

"GridPlus Texas and its parent company, GridPlus Inc. (collectively, 'Grid+') are committed to enabling consumer choice and increasing efficiency by bringing blockchain-powered technological innovation to energy markets, including the Texas retail energy market.

"We have reviewed the objections to the approval of our application for a retail energy provider certificate filed with the PUCT by Texas ROSE and TLSC. We are pleased that these organizations have taken an interest in fostering public dialogue around the challenges and opportunities posed by our mission, and, in the spirit of furthering that dialogue, would like to take this opportunity to address their concerns as follows:

      "• Grid+ (Marketing Plans/Whitepaper). Our thinking and knowledge of the industry -- and of Texas’s specific rules and regulations -- has evolved and deepened considerably since the publication of our whitepaper in the summer of 2017, and not all statements in our whitepaper reflect our most current thinking or the final products and services we will sell in the markets we serve. Moreover, our whitepaper speaks to energy markets generally, and not the Texas market specifically. We fully intend to comply with all local rules and regulations in each market where we may operate.

      "• Use of Cryptocurrency. While we hope and anticipate that the majority of our customers will use cryptocurrencies -- the world’s fastest growing asset class -- and our smart agent device to purchase electricity, Grid+ will, accept US dollars and does not plan to require customers to pay with, use, or even understand cryptocurrencies.

      "• Prepaid Service Rules. We no longer view it as a necessary part of our model that 'customers make a refundable deposit that can be partially drawn-down if the Smart Agent fails to pay on time,' and, in fact, we believe that even users who wish to realize electricity savings by paying for electricity in cryptocurrency via smart agent devices can do so without advance prepayment, albeit on billing cycles that are shorter than the traditional 30-day billing cycle and closer to real-time payment. Regardless, in the event Grid+ offers prepayment plans or requires deposits from our customers, it will provide these offerings in accordance with all applicable laws.

      "• Customer-to-Customer Sales and Solar Energy. We believe Grid+ is currently laying the foundation upon which peer-to-peer energy trading and harnessing the power of solar energy to reduce stress on the grid can be built. Prior to implementing any such trading structures however, Grid+ would collaborate with regulators where warranted and seek any necessary approvals or waivers.

      "• Management and Staffing. Grid+ is in its early stages of development, with the majority of our effort focused on building out our core technology. While we believe our current management team -- particularly our CEO John Werner, who has over 16 years of retail energy experience -- satisfies the relevant regulatory requirements, we recognize that additional staff -- including customer service representatives -- will need to be engaged to create a fully functional energy retailer.

"In summary, we believe our mission is aligned with the public interest goals of Texas ROSE, TLSC and those they advocate for -- particularly because our overall focus is on reducing energy cost for consumers and reducing energy demand and consumption. We would welcome the opportunity to address their concerns in greater detail, whether in direct dialogue or with the PUCT."

     --- John Werner, CEO of GridPlus Texas Inc.

Docket 47947

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