Who owns Griddy? Texas electricity retailer sued for $1B for 'price gouging' and bills up to $17K amid outages
While there has been no power after the winter storm, Texans have been hit with massive electricity bills which are being deducted from their bank accounts
Electricity provider Griddy claims "you’ll pay exactly the price we buy electricity at" on its website. Perhaps that's why it now has over 29,000 users since it launched in 2017. For many, Griddy's wholesale power prices seemed much smarter than paying a fixed price but are now understanding just how dangerous the system can be. Following the deadly winter storms that left many Texans without power, Griddy users are now facing massive bills, as high as $17,000 in one case.
The company is now facing backlash on social media and is even the target of a class-action lawsuit seeking $1B for 'price gouging'. It highlights the dangers of Texas' deregulated electricity market, the only kind in the continental United States.
Who owns Griddy and how does it work?
Griddy is a subscription service that sells electricity at wholesale prices. It was founded in 2017 under the promise of "transparent pricing". The private company is currently headed by Michael Fallquist, a 14 year veteran of the energy industry. The company was founded by Nicholas Bain and Gregory Craig, who now serve on the board. Griddy works on Texas' wholesale electricity price system while charging a $10 subscription fee.
In Texas, consumers can choose to pay either for a fixed rate or a rate of whatever the price per kilowatt-hour of electricity is when using the system. This wholesale system allows consumers to save on costs in the summer. Overall, wholesale prices also tend to be cheaper, often as low as a couple of cents per kilowatt-hour. The downside is that when prices spike due to demand, customers are left picking up the bills.
Prior to the storm, the cost of electricity was around 12 cents per kilowatt-hour. As the freezing cold forced people to turn on heating systems for longer, prices spiked rapidly forcing the Texas Public Utility Commission (PUC) to cap wholesale rates at $9 per kilowatt/hour, a 7,400% spike. Despite that, many were left with massive bills even though they did not have power for many hours.
Griddy users left with sky-high bills
While many users complained of expensive bills, none were as high as Scott Willoughby. He had $17,000 deducted from his bank account by Griddy as a result of surcharges due to the storm. "For a lot of people that (bill) will impact them devastatingly," Willoughby said in an interview with Fox News. "No food on the table for their kids, no rent or house payments or car payments – and there’s no recourse because the money’s gone."
Lisa Khoury of Chambers County decided to file a class-action lawsuit against Griddy after she received a bill for $9,340. That is in stark contrast to her usual bills of $200 - $250. According to the lawsuit, Griddy deducted $1,200 from her account before she blocked further deductions. She attempted to contact the company multiple times but was unsuccessful, according to her lawsuit. She is now suing the company for $1B and seeking monetary relief.
Griddy defended itself by saying that the PUC was to blame for the costs and that it did not profit from the increase. Griddy's terms and conditions specifically state that users forgo the right to class-action suits, so it remains to be seen if the case will go to trial.
As a result of the shockingly high bills, the company has been facing massive criticism on social media. "My Griddy bill for this month is $1,750. I work retail. I can’t afford this." Twitter user @nathanpolk said. He wasn't the only one. One user claimed that "my card has been charged six times today" after they were left with a $2,993 bill.
It’s nice too see that my old electric company is trending. My Griddy bill for this month is $1,750. I work retail. I can’t afford this. pic.twitter.com/Ew9VpgJ6h2— WOW🐄NO🐄COW (@nathanpolk) February 20, 2021
The reality though is that Griddy is just working as the system intended. One Twitter user pointed out that "Texas regulators should never have allowed this business model for an essential service". Indeed, the company does not profit from spikes in energy prices, since that is set by the Electric Reliability Council of Texas (ERCOT) and the PUC. It simply passes on those charges to customers.
Griddy’s billing is working as designed. Passes 100% of price fluctuations on to the customer. People chose to use Griddy not understanding they could be at so much financial risk. Texas regulators should have never allowed this business model for an essential service.— Journalistic Facts (@JournalistFact1) February 20, 2021
In a bid to help customers, Griddy announced that it had filed a request with ERCOT and the PUC. The state government is also expected to take action. Until then, customers are left with massive bills and little way to pay them.