EnergyJudicialTexas Sues Electricity Company Griddy for ‘Misleading’ Marketing Before Massive Utility Bills

Paxton says Griddy misled its customers with false promises of savings, though the company warned customers beforehand of the price spike.
March 1, 2021
In the midst of the Texas freeze, one elderly woman living on social security sent the following plea to Griddy, her energy provider:

“My account is overdrawn. I cannot make it to the bank until Friday. My car is snow and iced… I believe that there is an error on my account. We normally keep our thermostat at 60 degrees. Since Sunday we have kept it at 50 degrees… I have to wear gloves inside, it’s so cold. Please give me until Monday when I can safely go out and take care of my balance. If I can safely go out before then, I shall. I’m 67. It’s a safety hazard to go out at this time.”

In the days that followed, hundreds of dollars more were siphoned from her account before the snow thawed.

Now, her electricity provider is facing a lawsuit from the State of Texas for false or deceptive advertising.

“Griddy’s marketing persistently misled its customers about the nature and extent of this risk and the costs customers could expect when utilizing Griddy’s services,” the suit claims.

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Texas Attorney General Ken Paxton argues that Griddy baited customers with false promises of savings, locked them into its own services when no other choices were available, and then decimated their bank accounts with automatic withdrawals.

Griddy owns no generators but buys energy on the open market, passing the price on to the consumer along with a monthly flat rate. Advertising as a “wholesale” provider, the company promises savings to its customers and has called severe price spikes rare.

Foreseeing the spike that the freeze would cause, Griddy notified customers beforehand and advised them to switch providers.

Paxton claims that Griddy has misled its customers on how much they really save and how frequently these spikes actually happen. Despite claiming to be 20 percent cheaper than the Texas average, government estimates put Griddy’s average price a little higher than the state average. Although Griddy’s website claimed its prices were 20 percent cheaper than the Texas average, the most recent report by the U.S. Energy Information Administration pins Griddy’s average at 12.01 cents per kilowatt-hour, while the Texas average is 11.76. Furthermore, according to Paxton’s suit, the last time before the freeze that electricity costs in Texas hit the ceiling — $9 per kilowatt-hour (kWh) — was fairly recent, during a heatwave in August 2019. According to Paxton, Griddy has deceptively called these kinds of spikes infrequent and used contradictory statistics to back up their advertising.

The suit also alleges that Griddy caged in its customers on the eve of disaster when no other options were available. Though Griddy warned its customers of the price increases and advised them to switch providers, some customers claim that they received the emails too late to make the change.

“A disabled veteran in Royse City who is on a fixed income tried to switch providers after receiving those emails from Griddy the same weekend. He found a retail electricity provider who could take him, but only after a seven-day waiting period,” the lawsuit claims.

“Before he could switch providers, he was billed over $13,000 by Griddy in six days followed by Griddy locking his meter to prevent him from switching providers even after the waiting period.”

Paxton says that Griddy’s smartphone app feature that lets customers see price forecasts “proved to be of little help.”

“A 10,000% price increase cannot be remedied with consumers merely conserving energy and changing their thermostat setting. One consumer left her thermostat at 60 degrees but still found her checking account being debited hundreds of dollars a day until she was overdrawn,” the lawsuit reads.

“In describing this app feature, Griddy assured consumers that “Prices spike only 0.6% of the time,” and, in another place on their site claims that “Price spikes only happen .06% of the time” — thus consistently downplaying the risk to the consumer in the electricity spot market, and deploying confusing and contradictory statistics.”

Griddy’s use of the word “wholesale” earned it a consumer alert from the Better Business Bureau, which warned in 2019 that the term should be avoided unless a business “actually owns and operates or directly and completely controls a wholesale or distribution facility which primarily sells products to retailers for resale.” Along with Griddy’s general promises of savings, Paxton argues that using this term counted as misleading advertising.

Griddy does not set the market prices. It buys energy from providers at whatever the market price may be, which naturally fluctuates. In a statement, the company blamed the Electric Reliability Council of Texas (ERCOT) and the Public Utilities Commission of Texas (PUC) for the price hikes.

“On February 16th we asked ERCOT for emergency help when our members needed it the most and they did not take action. This is after the PUCT mandated the maximum price for days — a decision they made to take the price out of the hands of the market in a 6-minute meeting,” Griddy stated.

“We have always been transparent and customer-centric at every step. We wanted to continue the fight for our members to get relief and that hasn’t changed.”

During the blackouts, the PUC ordered ERCOT to restructure its pricing equation so that wholesale prices would more “accurately reflect” the scarcity in the market. In effect, this increased the wholesale price from $1.20 kWh to its $9 kWh cap where it sat for multiple days.

One customer review, dated February 24 of this year, defended Griddy on the Better Business Bureau website.

“Buying from Griddy is transparent and the price (in Texas) is adjusted every 5 minutes based upon current wholesale market price. When you sign up for Griddy you need to understand that YOU are assuming the risk for market conditions,” the testimony reads.

“I control my home automation system based upon the price of electricity. I am a satisfied customer of Griddy. I am not related to or profit in any way from Griddy other than the monthly savings. People that have had negative comments or experiences obviously need to read and understand the wholesale markets.”


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Isaiah Mitchell

Isaiah Mitchell is a reporter for The Texan, a Texas native, and a huge Allman Brothers fan. He graduated cum laude from Trinity University in 2020 with a degree in English. Isaiah loves playing music and football with his family.