Charged up
Griddy CEO Greg Craig rewinds the price spikes of August
Griddy came to Texas from California with a plan to disrupt the retail electricity market. Instead of selling the traditional fixed-rate plans other retail electricity providers do, Griddy offered residential customers something bold, namely access to the wholesale spot electricity market.
Residential consumers could use their Griddy app to monitor electricity prices, adjusting their electricity use when prices were low and reducing consumption when prices were high. There has been a buzz around the two-year-old company, with some suggesting Griddy could serve as a new model for electricity buying, much as Uber and Lyft went head-to-head with the taxi business and Netflix outdid Blockbuster. Many consumers gave Griddy a shot.
But just as Griddy was gaining steam after a successful billboard campaign poked fun at the fees charged by traditional retail electricity plans, the company hit a bump in August when triple-digit temperatures strained capacity and triggered price adders that were boosted by Texas regulators earlier this year. Prices surged to $9,000 per megawatt hour, the maximum allowed in Texas.
Shocked Griddy customers were faced with big bills during the days when power prices hit the cap and stayed there. The independent market monitor that oversees the Texas electricity market estimated that August alone generated as much as $1.3 billion in higher charges.
Greg Craig, the chief executive officer of Griddy, sat down with the Chronicle recently to discuss the business, and the vagaries of the Texas market.
Q: How has it been since the summer price spikes? How difficult was it for your customers?
A: Broadly speaking, the vast majority of Griddy customers validated the model because we had a lot of members who suffered no unusual bills. If you followed the guidance and reduced consumption during the peak periods you did extraordinary well. If you just joined Griddy and you weren’t quite up to speed about reducing consumption and following the alerts it was more challenging.
On one hand, we were disappointed and sad that some of our members had a bad experience. But if you stayed with Griddy for 12 months you still saved 6 percent over the average fixed price rate in Texas.
What we don’t want people to view is that somehow the realtime wholesale model Griddy uses doesn’t work or has a terrible flaw. The model worked as it was supposed to work. The vast bulk of the Griddy membership followed the guidance, used their tools to reduce their consumption and it worked out fine for them.
Q: What did you learn from the experience?
A: We’re pretty critical of our competitors who spend a considerable amount of time and effort collecting customers and then never talk to them again and certainly don’t listen to them. They hope they fall asleep and stay in the portfolio.
The Griddy model is really different. We have a lot of active, ongoing dialog building a community. We have blogs and vlogs and push notifications and emails and texts and send out fun
videos. We listened very carefully and in that rough August we listened to our biggest critics and they told us what we needed to fix.
Even if you did nothing you’d have big savings for 361 days a year and too-high a price for 4 days. But if you’re with a bloated, fee-laden, tricky-fixed or even worse a variable priced deal you’d overpay 361 days a year and four days you’re sort of happy you have a 15 cents per kilowatt hour fixed price. We think the first way is a lot better because we can provide the tools to help people manage the powerful Griddy price signals and tools to avoid the super peaks on those four days.
Q: Did you lose a lot of your customers during the heat wave in August?
A: The long answer is we’ve hardly lost anyone for 23 months before August occurred and it was a bit shocking to see we lost some. Some left with criticisms. We have empathy for that.
August left some of our members feeling exposed and that they didn’t understand or have the capability to reduce their consumption. To recognize that it was a rough month we didn’t charge anybody the $9.99 monthly membership fee. It was a lot of revenue not collected by Griddy in that month, but we felt it was important to make no money and to send a signal that we’re with you. Q: So what percentage of customers did you lose? A: We probably lost between 10 and 20 percent of the membership.
“We’re trail blazers. I’m proud of that. I’m proud not to be part of the old guard.” Griddy CEO Greg Craig
For us that was really a lot.
Q: Have you gained any of those back?
A: Yeah, actually we did. What we learned was we’ve got to educate and train in the onboarding process. We’re using some interesting fun tools to help incentivize our members to do things that would benefit them through either reduced consumption or optimization of using smart home devices. We’re constantly evolving.
We have to be, because if you’re a traditional fixed priced retail electricity provider or a variable priced player what new tricks do you have? You just have to come up with new shticks. What’s the next one? A low teaser price and then we hope you don’t notice when we ratchet the price up later? Or free nights and solar days? Or free Saturdays between 2 and 5 p.m.?
We’re about back (to where we were). It looks like we have tailwinds again.
Q: There is another price adder going into effect next summer. How will that affect prices?
A: We don’t know. No one really knew how the price adder would affect prices through the summer. It actually seems to create longer peaks and exacerbates the spikes.
We weren’t perfectly good at communicating with our members and yet we got 20 percent reduction of use with one push notification. If all of Texas would have reduced its consumption 20 percent we wouldn’t have had a price spike. It’s a powerful tool for the system and takes pressure off the grid.
Q: Do you see that happening?
A: Yes. Griddy is giving residential consumers real-time wholesale pricing and allowing for consumption adjustments, which is something that big electricity users have been getting for 10 years. It’s just retail consumers have been kept in the dark.
Smart meters are in almost 100 percent of Texas homes. Griddy uses that interconnection to provide all that data back to its members to adjust their consumption with lots of data sharing, guidance, tips, push notifications, alerts, weather updates and outage forecasts all on mobile phones. That is the future.
Q: I see that another company, Evolve Energy, recently started selling power on the wholesale spot market in Texas.
A: Yep. There are some European companies we think will make it over here too. We’re okay with it. It validates the space.
Ultimately if there are more people on Griddy and other wholesale providers it suppresses peaks and distress situations on the grid. It’s exactly what everyone should want — regulators, grid operators and consumers — that people and not just big manufacturers that use lots of energy are getting price signals to reduce consumption.
Q: You’re playing an usual role in exposing some of the flaws in the electricity market, the effect of price adders and errors making their way into the ERCOT system.
A: We’re trail blazers. I’m proud of that. I’m proud not to be part of the old guard. Half of the books of the giant utility incumbents are people who have been there for 10 or 12 or 15 years and they’re paying 15, 16, 17 cents per kilowatt hour.
Q: Why don’t people change retail electric providers more often?
A: I think they will. That’s one of our big messages. Loyalty should be a two-way street. If you were so loyal to be a customer of one of the big incumbents here should you be paying twice the going rate?
Loyal customers are so sticky that one of the big companies calls them inerts. They’re not going anywhere. Utilities count on that. In the old world of retail electric providers, those are the greatest customers you can get. The ones who come on and never leave and you can adjust the price up and they still don’t leave.
Q: So how many consumers in the deregulated parts of Texas are actually shopping for a plan each year?
A: Only about 50 percent are looking for a better deal.
Q: Did the marketing campaign with the edgy billboards work?
A: Oh yes, it was our most successful campaign. At least it worked for four days until they were forced down. We didn’t want to make a big stink because the billboard company was apologetic. Somebody seems to have forced the billboards down.