Griddy came to disrupt but got disrupted during freeze
Startup comes under fire after model causes spike in customers’ power bills
Griddy, a California-based startup, came to Texas about three years ago hoping to shake up the power market by offering wholesale electricity prices to consumers. But it appears that the market has shaken Griddy.
Griddy is facing harsh criticism from political leaders, lawsuits from angry consumers and an investigation by the Public Utility Commission after its customers were hit with electricity bills in the thousands of dollars as wholesale prices spiked during last week’s severe power shortages. It wasn’t the first time that Griddy’s model, which charges customers $10 a month for access to wholesale pricing, left customers with huge bills, dwindling bank accounts and rising credit card charges.
Electricity charges for its customers soared into hundreds of dollars during a heat wave in August 2019, when wholesale prices rose because of tight power supplies.
Whether Griddy and its model can survive the backlash this time remains to be seen. The attention it has received, both in Texas and nationally, has battered its reputation and undermined Griddy’s basic premise: that consumers should have the same access to wholesale markets as companies and traders.
Buying wholesale could save individuals a great deal of money, said Joshua Rhodes, a research associate with the Webber Energy Group at the University of Texas at Austin, but they need a longterm outlook as well as the stomach and cash to weather price spikes, he said.
But most people don’t have the time or resources to monitor markets closely, he said. Most of the entities in wholesale power markets have trading desks, analysts and people whose full-time job it is to assess where prices are going, Rhodes said.
“It's just hard for me to believe that the average consumer in Texas has the information that they need and the ability to act on that information that they would need to operate in the wholesale market,” Rhodes said.
Griddy entered the Texas power market in 2018, positioning itself as a disruptor that would give people more control over electricity costs and using edgy advertising that taunted competitors that offered traditional retail plans.
‘Not for everyone’
Customers have an app that allows them to monitor wholesale markets and shift power consumption depending on prices at any given time. If prices jumped on summer afternoons, they might turn down the air conditioning. Or they might run dishwashers and other appliances at night when power prices are particularly low.
For most months, wholesale prices are a bargain at about 3 cents per kilowatt, compared to the 9 or 10 cents you might pay for a one-year retail contract, said Doug Lewin, an energy and climate consultant in Austin. But he also adds, “It’s not for everyone.”
The recent winter storm showed that — dramatically. Prices soared to and held at the state maximum of $9,000 per megawatt hour, meaning Griddy customers weren’t paying 3 cents or even 9 cents per kilowatt hour. They were paying $9.
That ran up the bill of Lisa Khoury, of Mont Belvieu, to more than $9,000 for three weeks, she said in a lawsuit filed against Griddy on Tuesday.
“At this point, we don’t know how many people might be affected, but there are likely thousands of customers who’ve received these outrageous bills,” said her lawyer, Derek Potts of the Potts Law Firm in Houston.
Griddy has about 30,000 customers in Texas, but that is a tiny share of
a competitive power market with some 7.5 million electric meters.
Griddy, in a statement, said it doesn’t set wholesale power prices, just passes them along. As soon as the company realized how high the prices would rise over the holiday weekend, it began emailing and texting costumers that they might be better off switching plans.
The company also blasted the state Public Utility Commission for a move on Feb. 15 that drove prices to $9,000 per megawatt hour from as low as $1,200 to reflect the severe power shortages that forced widespread blackouts.
“If there had been no price manipulation from the (PUC), consumers’ electricity bills would not have increased as dramatically as they did,” Griddy spokesperson Lauren Valdes said in an email.
Octopus Energy U.S., which has a similar model that uses wholesale pricing, is offering one-time bill forgiveness for Texas customers. The plan provides forgiveness of any energy bill amount that is more than the average price for Texas of 12.2 cents per kilowatt hour for the week of Feb. 13-19.
A call for regulation
Tim Morstad, associate state director of AARP Texas, which advocates for older Americans, said he’s skeptical that many of Griddy customers understood the risks of the wholesale market as they shopped for power and were enticed by low advertised rates.
He called for more regulation to protect consumers.
“I want people to know that it’s our state regulators at the Public Utility Commission who have allowed
creative marketing to ensnare customers through plans like these,” Morstad said.
The PUC launched an investigation Tuesday into retail electric providers offering plans indexed to the wholesale electricity rate in Texas.
“While the structure of those plans is allowed by state law and PUC rule, the avalanche of customer complaints our Customer Protection Division has received about such plans and the business practices of the limited number of companies that offer them has triggered the investigation,” said Andrew Barlow, a spokesperson for the PUC.
The investigation and its parameters will be taken up in discussion in the commission meeting next Wednesday.