Texas Public Utilities Commission Enforces Constant Price Spike – a Griddy Story


I’m a Griddy customer in Texas. Maybe you’ve seen reports of their customers complaining about massive bills that have been brought on by a continued price spike during the Texas freeze. The wholesale price of electricity in Texas has been set at its maximum level of $9 per kilowatt hour since Monday.

Griddy has always been up front about the risks associated with using them as a billing provider in Texas – Griddy assesses a flat monthly fee of ten bucks, and then charges customers for their usage based on the fluctuating wholesale price of electricity. When smart thermostats and some basic price control rules are combined to adjust an HVAC system during price spikes, one can save a lot of money on an electrical bill. I normally save at least 30-40% over what I was charged by one of the major “normal” providers. But if one doesn’t make adjustments in usage when prices spike, usage costs can escalate enormously in a very short time.

Griddy warns potential customers about this up front. They continually warn customers about it during normal market conditions. And, they go out of their way to warn customers about planned outages and potential price spikes. A Griddy customer would have to be willfully ignoring these communications to not be aware of pending cost increases.

Last week, Griddy warned its customers multiple times about the likelihood of super high costs, even going so far as to advise customers who could not cut back on usage to leave Griddy and choose another provider in order to avoid these charges. (Note: most other providers have not been accepting new customers recently – would it surprise anyone to learn that they saw this price spike coming and chose to minimize their exposure? So, Griddy customers didn’t actually have much choice in where they could flee for price protection)

I chose to ride it out, because I’m convinced that the other companies will take any opportunity to raise their rates, even if just incrementally, and to raise the average bill they collect from their millions of customers. Texas is an unregulated energy market, and this week, the polar vortex may have finally pulled back the curtain for Texas residents to see just how broken the system is.

I have no issue with temporary price spikes being used to control energy usage; it is by far the easiest way to enforce conservation in an emergency. And, that’s the risk I knowingly assumed when I signed up with Griddy – wholesale price spikes happen, but, under normal conditions, only rarely and for short periods. My bill goes up a bit, but that increase is offset by the savings I get the rest of the time.

This week, we’ve done everything possible to minimize our electrical bill. We have a relatively small house, we have a brand new furnace, and we have not used appliances except for the refrigerator all week. We unplugged a lot of small things. We adjusted the thermostat for minimal comfort. After all that, we reduced our energy usage by about 75%. I admit that I’m ideally situated to be able to reduce my costs and pay a relatively low amount.

Relatively.

Our billing has averaged about $100 a day since last Saturday. That’s… a lot. But, as I said – I know what I signed up for, and my rates should go back to normal, low wholesale prices soon… well, “should” being the operative word. Read the article below for more on that. My fear is that most Texans are going to see their flat “protected” rates go up, perhaps by a lot, in order for these providers to recoup the money they’ve been shelling out to pay for this constant price spike.

Anyway…

Griddy is being slammed in media for customers being charged exorbitant amounts right now. But as you will see, in reality, it’s the state of Texas that needs to answer for the continuation of the maximum price setting despite a return of some normalcy to supply and demand.

Tonight, Griddy explained what is happening in the following article which I’ve also provided here in it’s entirety:


“At Griddy, transparency has always been our goal. We know you are angry and so are we. Pissed, in fact. Here’s what’s been going down:

On Monday evening the Public Utility Commission of Texas (PUCT) cited its “complete authority over ERCOT” to direct that ERCOT set pricing at $9/kWh until the grid could manage the outage situation after being ravaged by the freezing winter storm.

Under ERCOT’s market rules, such a pricing scenario is only enforced when available generation is about to run out (they usually leave a cushion of around 1,000 MW). This is the energy market that Griddy was designed for – one that allows consumers the ability to plan their usage based on the highs and lows of wholesale energy and shift their usage to the cheapest time periods.

However, the PUCT changed the rules on Monday.

As of today (Thursday), 99% of homes have their power restored and available generation was well above the 1,000 MW cushion. Yet, the PUCT left the directive in place and continued to force prices to $9/kWh, approximately 300x higher than the normal wholesale price. For a home that uses 2,000 kWh per month, prices at $9/kWh work out to over $640 per day in energy charges. By comparison, that same household would typically pay $2 per day.

See (below) the difference between the price set by the market’s supply-and-demand conditions and the price set by the PUCT’s “complete authority over ERCOT.” The PUCT used their authority to ensure a $9/kWh price for generation when the market’s true supply and demand conditions called for far less.

Why?

The CEO of a fellow innovative retailer shared his distress with the PUCT here. “Customers blame ERCOT, PUC, TDSPs, and retailers. The one entity that they don’t blame are the generators because they don’t have a face to the customer but they make all the money in these types of events. If you follow the money you will find that generators make all the money.”

That’s one explanation. Everyone is still trying to figure that out. But here is what we do know:

The market is supposed to set the prices, not political appointees.

And here is what we are going to do:

We intend to fight this for, and alongside, our customers for equity and accountability – to reveal why such price increases were allowed to happen as millions of Texans went without power.

More to come.”


All that to say this – under normal circumstances , I’m not happy about having to pay for any price spike. I do what I can to adjust and avoid paying as much as possible. But this constant price spike, now headed into its fourth day, is seriously painful. I’ve done what I can to minimize my costs, but it seems that some others did not listen to Griddy’s warnings and will be billed extraordinary amounts. I’m sure other Griddy customers also reduced their usage, minimizing the impact of their cost, but their particular situation might mean that their costs will still be many times more than what I’m paying.

I’m hoping that I’ve made a good bet by sticking with wholesale pricing. It’s worked wonderfully so far, but now, with the rules being broken by the state for this event, I’m not sure where pricing will go for a while. And, I don’t know what will happen if and when the other billing providers raise their “protected” rates to cover their own costs.

Unregulated market capitalism is alive and well in Texas, y’all. Stay tuned for future updates as details unfold.


Related articles:

https://abc13.com/griddy-power-retailer-electricity-prices-texas-price-protection-grid/10350120

https://www.click2houston.com/news/2019/08/16/griddy-customers-upset-over-electricity-prices-during-recent-heat-wave/

https://www.texastribune.org/2021/02/16/natural-gas-power-storm/

https://www.texastribune.org/2021/02/18/texas-winter-storm-power-outage-ercot/

https://www.texastribune.org/2021/02/18/texas-power-outages-ercot/

https://www.texastribune.org/2011/02/08/texplainer-why-does-texas-have-its-own-power-grid/

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