DPI Energy a Prepaid Electric Provider Requests Permission to Sell to TruSmart Energy Holdings

DPI Energy is one of the popular prepaid electric companies in Texas but like many prepay companies there are often challenges with staying within PUCT rules and regulations to operate as a licensed Texas electric provider. DPI Energy’s owner, Amvensys Capital Group LLC. has requested PUCT approval to sell all of DPI’s units to TruSmart Energy Holdings LLC.

One of the PUCT points when a change of ownership is made is that it is not used to get around a rule or regulation while yet still maintaining similar management or ownership however behind the scenes and hidden they may be. From the PUCT research they conclude that the sale appears to consistent with the terms if the settlement agreement from Sept 15th 2011 as written about on the PUCT website.

Once the PUCT staff have received all exhibits and schedules of the sale agreement they will be able to make final recommendations to the commission of the sale and proceed with allowing it to take place. The change of ownership application was received on October 6th and is being reviewed. The staff has until October 24th to file recommendations regarding this sale. So long as the commission finds that the sale agreement complies with the terms of the settlement previously established by the commission and DPI they sale and change of ownership should go through.

There will be a change in ownership and control as well as technical and managerial qualifications. TruSmart will show proof of shareholder equity in TruSmart no less than $1 million dollars and a stand by letter of credit payable to the PUCT commission of $500,000. These requirements insure that the electric customers and ERCOT are protected against possible bad execution, default, and bankruptcy of the electric provider. TruSmart currently has Texas electric customers and is in compliance with all PUCT rules and has no history of default with their load servicing company.

This sale should be a big positive in an industry that has seen its fair share of prepaid electric companies keep prepayments and true-ups of their customers and close down business leaving the state with huge profits instead of selling when it was expedient and right to do so.

Clearview Electric in Danger of Retail Electric Provider Certificate Being Revoked

The Public Utility Commission of Texas has stated in their latest filing that they believe the requirements of a retail electric provider certificate holder are well known and should have been known by Clearview Electric. The commission does not believe a waiver should be given to Clearview Electric in order to allow them to comply with the requirements of being an REP in Texas unless specific circumstances warrant it.

The PUCT has asked that Clearview give them at least 90 days notice prior to the expiration of their suspension period on whether they plan to come into compliance with the PUCT rule P.U.C. Subst R.25.107 by the compliance deadline. So what is this rule all about and how does it relate to the Texas electricity consumer? Below is a summary of the rule that the PUCT is trying to get Clearview Electric to be in compliance with.

The amendment to §25.107 (1) provides requirements for a change in control of a REP, (2) strengthens the reporting and certification requirements related to managerial resources and ability, (3) limits the number of business names (dbas) a REP may operate under, (4) provides requirements for certification as a distributed generation REP serving large commercial customers, (5) allows the commission to draw on a letter of credit upon the revocation of a REP certificate, (6) defines erroneous switch-holds related to deferred payments plans as a significant violation of the commission’s rules, and (7) makes other clarifying changes.

As you can see the rule seems to be related to making it transparent who owns an electric company as well as limiting the amount of names one REP can hold. I would imagine these rules are in place so that an electric provider cannot hide behind many names for the sole purpose of gaming the system and advertising and promoting to customers in a way that could be seen as unethical and bad for the retail electric markets. We are not saying that Clearview Electric has done any of these things as it appears their violation has more to do with the letter of credit rule. The PUCT may not believe this provider will do anything bad but by enforcing these rules they protect the electric consumer from the possibility of something bad happening.

Currently this company is suspended from selling electric service in Texas. I went on their website and they no longer have Texas listed as one of the states they sell electric service in. From what I can find online they only have about 30 electric service customers in Texas. The PUCT wants a $30,000 letter of credit from them to protect the investment in energy of these current customers but will eventually need a $500,000 letter of credit for them to fully comply. Some of the things the PUCT would like Clearview to agree with in writing to avoid revocation of their REP certificate in Texas are listed below:

  • They must agree to revocation if they fail to comply with rule P.U.C. Subst R.25.107 by the deadline date.
  • Must agree to revocation if they significantly violate any additional rules of P.U.C. Subst R.25.107 before the deadline date of compliance.
  • Clearview must agree that its $30,000 standby letter of credit cannot be withdrawn until they file a $500,000 letter of credit to comply with P.U.C. Subst R.25.107(f)(4)(F)
  • Clearview must agree that once revoked or through Clearviews voluntary ceasing of service to Texas customers it must pay their $30,000 letter of credit to the Public Utility Commission of Texas.
  • They must agree to not add any new Texas customers until the conditions of P.U.C. Subst R.25.107 are met.
  • Clearview must agree to give 90 days advanced notice advance of the June 30 2012 deadline if they will be ceasing operations in Texas or providing the letter of credit.

The PUCT believes that if Clearview Electric cannot agree to these requests that the commission should consider revoking the REP’s certificate.

I looked at the information the PUCT had on Clearview Electric and they do not list any DBA’s this company uses or any bizarre change of ownership information. My opinion is that this electric company may have just not had the required $500,000 letter of credit the PUCT requires for them to operate as a retail electric provider in Texas.

If this is the case it makes sense for the PUCT to be heavy handed in this regard because many electric providers have gone out of business and did not have the money to cover the investment in the energy they purchased when the market moved against them.

The $500,000 letter of credit helps protect customers, investors, and the tax payers from a provider buying energy and then never paying the ERCOT electric grid back for that purchased power.

 

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