Griddy Energy LLC Court Case Number: 21-30923 (MI) in the Southern District of Texas.
Counsel to the Plan AdministratorMcDermott Will & Emery LLP
United States Bankruptcy Court
Southern District of Texas
515 Rusk Street
Houston, TX 77002
Why Texas electricity rates go wrong has to do with false and misleading advertising that is rampant in the Texas energy market. Wholesale electricity prices spiked over 9,000 % in 2021 and Griddy Energy past that problem on to their customers and even with a heads up many were not expecting this.
Since the deregulation of the Texas retail electricity market there have been complaints that people are paying more now than prior to deregulation. Comparisons of regulated energy markets in Louisiana have been drawn showing how a regulated state is cheaper than the Texas deregulated electric prices. Griddy Energy seemingly changed that idea over night by offering “wholesale electricity rates“
Griddy offered an electricity plan with “no contracts” however many of the large price markups in Texas have come from off-contract electricity prices. Energy rates have gone up 250% and more when an electric service plan roles over to an off-contract rate. Griddy Energy never put a customer on a locked-in contract which has the negative consequence of leaving customers exposed to energy market conditions. Consider what the Attorney General of Texas made a requirement in his settlement with Griddy Energy.
One of the biggest consumer complaints made against retail electric providers involves advertised electric prices not being what they imagined them to be when they signed the energy contract. The large markup in electric price after being sold one thing only to get charged on the electric bill something else is the big misunderstanding. People unknowingly order something more expensive.
“The settlement also permanently enjoins Griddy and its parent company, Griddy Holdings, from making any false or misleading statements in the advertising of retail electricity.” – Texas Attorney General Ken Paxton
March 21 2021 Griddy filed for chapter 1 bankruptcy protection. Most of their customers were convinced that they were scammed by this company promising “wholesale electricity” and so they did not pay their bill. There was a $29 million dollar debt that Griddy needed to pay for this power but customers were not interested in paying these outrageous energy bills. There was a business in The Woodlands Texas that was charged $18,000 for one month of electric usage by Griddy.
There is no way the Griddy price was even cheaper than most other retail electric providers. Griddy’s average rate was 12.01 cents per kilowatt-hour, while the Texas average was 11.76. After the winter storm Griddy’s average electric rate increased to 81 cents per kilowatt hour! Someone using a meager 1,000 kilowatts of electricity in a month would have gotten a bill for $810!
Griddy represents what often goes wrong with Texas retail electricity in our deregulate energy market. Retail energy providers like to advertise in a way that sounds good and convinces you to order service with them. The truth sometimes gets lost in the message delivered through sales and advertising.
The low-income, elderly, and vulnerable order these convincing electricity rates and a few months later or sometimes immediately pay the cost.
Take for example my good friend Linda. There was an electric provider named Direct Energy that I suggested to Linda because they did not charge a monthly customer service fee. Linda is elderly and on a fixed income so she needed a rate plan that would help in her situation.
A fixed electric rate is the only way to go to avoid the 250% markup situations that develop from being off-contract or on a “wholesale plan”. I helped Linda get on a fixed contract with no monthly service fee. Since Linda used under 1,000 kWh a month she came out with one of the best advertised electric rates in the market. A monthly service fee can be a huge percentage of the electric bill and she was not aware of that. Linda was looking at the rates and not considering the unnecessary fees many providers tag onto the plan that make it harder to calculate the final rate.
Many electric providers advertise their variable plans in similar ways as Griddy. Variable electric rate plans are very popular and have no contract associated with them allowing people to move off of them without paying an early termination penalty. The formulas that cause a variable plan to go up and down do not legally have to be fully disclosed to residential customers.
Variable Plans Follow Similar Messaging As Griddy
There is language in the advertisements for variable plans that involve saying the electric rate will follow an index and allow you to take advantage of price dips in the energy market. The possibility that the Texas electric provider may have to raise the price beyond most peoples comfortability level is down played. In fact Griddy said, “price spikes are rare” when they advertised to customers. Most electric providers make a similar case in how they craft their message essentially communicating that you will be more likely to save money than lose money on a variable plan that follows an index.
Many low-income, elderly, and vulnerable choose a plan that offers a discount because they are trying to save money on a tight budget. These energy consumers cannot afford to take risks where the volatility of the market can go up 1000% and more. Wholesale electricity prices in Texas spiked 9,000 % in Texas during the 2021 Uri Winter Storm.
Fixed electricity agreements are the only plan that offers a clear, transparent price and even these have “monthly service fees” that have to be explained. What is the point of leading these consumers down a path to save money only for them to lose money? The point is that electric providers are trying to make a profit and sales people will tell you what you want to hear so they get their bonus and commission. This is the sad reality opposing big government over regulation.
“My bank account has no more money. I can’t get to the bank in time today. My vehicle is frozen in my driveway… My electricity account is saying I owe hundreds of dollars. I have kept my thermostat so low we barely even feel any heat. On Sunday the thermostat has not gone above 50… I wear thermals and a snow hat inside, it’s freezing. Please keep my electric service on until Monday when I can drive to the bank to make a deposit. I will try to get to the bank before Monday. I’m 73, it’s really scary to go out right now.”
Texas Held Griddy Energy Accountable
It’s great that the Texas Attorney General sued for Texans hit with these sky high electricity service costs and brought relief. Companies and politicians need to be held accountable when bad practices lead to wrong doing.
I am sure energy executives for several years made good money, likely paid off a house or two, bought a nice car but eventually many energy consumers were faced with living in their house with a ski jacket and little to no heat. Articles for another day ask the question, “What About the Electric Reliability Council of Texas allowing wholesale electricity prices to jump 9,000 % during winter storm Uri?” “Should Governor Abbot Be Held Responsible For 9,000 % Wholesale Electricity Price Increase of Winter 2021?”
Need Texas Electric Bill Assistance?
If you need help applying for electricity bill assistance or facing a similar situation where your electric bill skyrocketed in price with little warning please give us a call. We help energy consumers with finding ways to receive electric bill assistance and relief from electricity bills that have risen in price beyond what was advertised. Call Donny at 1-903-245-4989 and we will see how we can help in your situation.
Donny has been writing about the deregulated energy markets since early 2007. His knowledge has helped consumers lower their electricity cost.
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