Griddy: Why a Texas electricity company is under fire for astronomical bills during winter storm

Many Texans woke up after Winter Storm Uri with energy bills costing them thousands of dollars, despite residents being without power for multiple days due to the frigid temperatures impacting the system.

These bills were as high as $17,000 for some residents, according to The Dallas Morning News, and has put a new focus on the deep-rooted problems into the state’s market for selling electricity to consumers.

Texas has an independent, deregulated electricity market, which offers both wholesale and fixed-rate power plans for residents. The structure is the only of the kind in the continental United States, as all other states run on a federally regulated grid, and it puts an emphasis on cheap prices.

It’s a “Wild West market design based only on short-run prices,” said portfolio manager Matt Breidert at an analytical firm called EcoFin/Tortoise, speaking to The Washington Post. 

Fixed-rate customers pay a specific rate for their power that’s agreed upon with the company. But wholesale customers pay at the rate of whatever the price per kilowatt-hour of electricity is when using the system. 

The attraction to a wholesale plan is it offers customers the opportunity to save money during fair-weather months when the residents are unlikely to be turning on their heating or cooling systems. But during a winter storm that plummets the state to frigid temperatures, like what was seen last week, prices per kilowatt-hour can reach astronomical heights.

Energy company Griddy was one key player that has offered a wholesale system to customers. But now residents who took the risk by using a wholesale electricity plan were now left with bills in the thousands.

The wholesale rate before the winter storm was around $50 per megawatt/hour, according to Reuters. But Texas’s Public Utility Commission moved that cap on wholesale rates at $9,000 per megawatt/hour on Wednesday.

Scott Willoughby from San Antonio, Texas, was one resident who received an electricity bill far above what he usually paid. He told The New York Times that he nearly emptied his savings account after his electric company charged $16,752 to his credit card, about 70 times what he usually pays.

Other Griddy customers have reported bills around $5,000 for their electric usage during that week, despite being without power and heat for periods of time.

Griddy reportedly warned customers on Monday that the wholesale rate could starkly increase due to the freezing temperatures, and the company even encouraged residents to switch companies to avoid high rates. But customers told The Dallas Morning News that switching over would take days, which left them stuck on their wholesale plan during the storm.

On Friday, Griddy announced in a statement that it was “seeking customer relief” for the residents who were served with expensive electricity bills. The request was made to the Electric Reliability Council of Texas (ERCOT), which manages the state’s power grid and has faced backlash this past week, and the state’s Public Utility Commission. 

The high electricity bills have sparked outrage from Democrat and Republican lawmakers, as Texas works to recover from a winter storm that caused millions to go without power and has created a food and water shortage throughout the state.

“This is WRONG. No power company should get a windfall because of a natural disaster, and Texans shouldn’t get hammered by ridiculous rate increases for last week’s energy debacle. State and local regulators should act swiftly to prevent this injustice,” Senator Ted Cruz, a Republican, said in a tweet when sharing an article about Griddy customers receiving $5,000 bills.

Governor Greg Abbott, a Republican, held an emergency meeting on Saturday with lawmakers to discuss the bills.

“We have a responsibility to protect Texans from spikes in their energy bills that are a result of the severe winter weather and power outages,” Mr Abbott, who has faced backlash for the state’s power infrastructure this past week, said in a statement after the meeting.

He added that his administration would work with legislators to ensure no resident was stuck with “skyrocketing energy bills.”