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Texas ENRON-ized Its Energy Market And Now Everyone Is Bankrupt ¯\_(ツ)_/¯
Griddy? More like Grifdy!
When the lights went out in Texas during a severe winter storm last month, the near-collapse of the Texas-only power grid led not only to 57 deaths in the state, plus millions left without power, but also, for many people who still had power, to ginormous electricity bills when the cost of wholesale power went through the roof. That doubly sucked for people whose ceilings had already been ruined by burst pipes, and now had to stare at a red chart arrow soaring endlessly up and letting the cold in.
Most home electric customers were shielded from that sudden spike in costs, since they pay a fixed rate for the amount of electricity they use. But customers of one power retailer, Griddy, were screwed by the company's pricing model, as the Texas Tribune Texplains:
Griddy's approximately 29,000 customers were charged $29 million for energy during the winter storm, according to court documents. The wholesale electricity retailer, which has recently been forced out of the market, charged a $9.99 monthly fee and, in turn, passed along wholesale prices to customers.
When wholesale energy bill prices skyrocketed during the storm as temperatures plunged below freezing, Griddy customers were subject to the same costs with no buffer. Some reported bills over $15,000.
Monday, Griddy filed for Chapter 11 bankruptcy protection, and as part of its liquidation plan, customers' outstanding bills will be wiped out, assuming the judge approves. So that's a relief for some Griddy customers.
Is there a "but" in there? You bet your frostbitten ass there is!
Y'see, lots of customers who had automatic payments set up for their power bills have already had their bank accounts drained, or their credit cards charged, for the inflated amounts. Like Brenda Baskett of Rockwall, Texas, who was billed over $7,300 by Griddy — which she told the Tribune was more than 10 times what she's ever paid for power in a year. She said all but $700 of that automatically went on her credit card, though she's trying to dispute the charge.
"People that had their checking accounts emptied and people like us are having to pay interest on credit cards," Baskett said. "Something needs to be done about that."
But don't worry, all you Texans who have been soaked by Griddy's pricing model! Texas Attorney General Ken Paxton says in a statement that his office and Griddy are working on it, in "ongoing good faith negotiations to attempt to address additional relief for those Griddy customers who have already paid their storm-related energy bills." So maybe you'll get some of your money back, or maybe a coupon for half-off a nostalgic Reddy Kilowatt T-shirt.
Paxton had filed a price-gouging lawsuit against Griddy on March 1, but announced that he'll be dropping the suit in light of the company's going bankrupt. The Tribune notes there are a few other lawsuits against the company as well, including a class action suit by a customer hit by a huge bill; we're no lawyers, but we assume those will also be dealt with in the Chapter 11 case.
Griddy's CEO, Michael Fallquist, said in a statement on the company's website,
"Our bankruptcy plan, if confirmed, provides relief for our former customers who were unable to pay their electricity bills resulting from the unprecedented prices," [...] He emphasized Griddy did not profit from increased prices and only made money off of the fixed monthly membership fees.
So in a way, Griddy is a victim too, since it was shut down when it couldn't pay its own wholesale electric costs to the grid operator, the Electric Reliability Council of Texas (ERCOT), and is now going bankrupt. Please feel sorry for Griddy, everyone. Griddy says there's nothing at all wrong with its pricing model; co-founder Gregory Craig said in the same statement that it was a terrific business model undermined by "extreme and unforeseeable circumstances."
"We firmly believe in our model, but in order for it to be successful, the grid has to function properly and prices have to be set by market forces," Craig added. "The actions of ERCOT caused our customers to unnecessarily suffer and caused irreparable harm to our business."
The Tribune notes that Griddy is pointing at Texas's Public Utility Commission and shouting "It wasn't me! Not my fault!" because the PUC temporarily boosted the wholesale price of electricity as a market incentive to get frozen-over power plants pumping electricity into the grid, raising it to $9,000 per megawatt-hour, which strikes us as being like trying to get a dead horse to move faster by offering it a whole bunch of yummy carrots. Normally, the wholesale price is about $35 per MWH.
Now, as it turns out, ERCOT made the situation worse too: Instead of dropping that emergency price the next day, it "kept charging that price for 32 hours — overbilling power companies by $16 billion. " Oopsies!
That price spike didn't just kill off Griddy; it also led Texas's oldest and largest power co-op, the Brazos Electric Power Cooperative, to file for Chapter 11 to protect its member co-ops from being wiped out.
Oh, and in other Texas winter electric disaster news, the sole remaining member of the Public Utility Commission, chair Arthur D'Andrea, resigned yesterday at the request of Gov. Greg Abbott. That may have had something to do with a big Texas Monthly story revealing D'Andrea had promised Wall Street investors he'd fight tooth and nail to protect the obscene profits resulting from the inflated wholesale power prices, and isn't free enterprise a wonderful thing, the end.
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