On top of the extensive property damage, collapsed roofs, and broken pipes that Texas residents endured during the recent winter storm, a Houston-area resident has filed a proposed billion-dollar class-action lawsuit against Griddy Energy, the electric company caught in the maelstrom of storm-related power outages. The lawsuit alleges that Griddy engaged in unwarranted price gouging when it sent Texas consumers electric bills into the thousands of dollars.
Everything is bigger in Texas, but lead plaintiff and Houston-area resident Lisa Khoury claims Griddy went seriously overboard when it came to the electric bill. According to the lawsuit, Griddy charged her $9,546 for service from February 1 to February 19 -- a rate that was nearly 50 times higher than the typical $200 to $250 that she usually paid for electric services.
According to the filing, Khoury and her husband were “mostly” without power in their home from February 17 to February 18. She hosted her parents and in-laws, who are in their 80s, during the storm. Even then, she continued to minimize her household's power usage because of her fear of high electricity prices.
"At this point we don't know how many people might be affected, but there are likely thousands of customers who've received these outrageous bills," says Derek Potts of the Potts Law Firm in Houston, which represents Khoury. "A class action will be the most efficient and effective way for Griddy's customers to come together and fight this predatory pricing."
The Public Utility Commission of Texas (PUCT) is also getting into the fray. On Wednesday, the agency opened an investigation into the business practices of Retail Electric Providers whose “plans with pricing indexed to the electricity wholesale rate are reported to have inflicted unusually high bills on their Texas customers in the aftermath of last week’s winter storm grid event.”
Griddy says it shouldn’t be the fall guy
Khoury claims in her lawsuit that on top of price gouging, Griddy "failed to shield consumers from excessive electrical bills," and in doing that, was "unjustly enriched” by selling electricity at high prices in the middle of the storm.
Griddy doesn’t agree. In a statement provided to The Dallas Morning News, the company called the lawsuit “meritless.”
“We understand our customers’ frustration. However, Griddy passes through the wholesale electricity price to customers without mark-up. The prices charged are the direct result of the non-market prices ordered by the [Public Utility Commission of Texas] last week. The lawsuit is meritless and we plan to vigorously defend it,” Griddy spokesperson Lauren Valdes said in the statement.
In a statement on its website, Griddy pointed its finger at Texas’ Public Utility Commission for putting into play "a non-market pricing mechanism for electricity mandating prices reaching as high as hundreds of times normal prices." The company said it is engaging with PUCT and the Electric Reliability Council of Texas (ERCOT) -- which manages the flow of electric power to 90 percent of the state’s electric load and “determines the market price of electricity.”
The growth of the wholesale energy market
Griddy is not your typical utility company that offers fixed-rate electricity plans regardless of market conditions. Rather, its business model is built around passing wholesale electricity rates directly to customers.
In Griddy’s case, the company’s recently published monthly rate listed the membership cost at $9.99 a month -- about 33 cents per day -- and says that its per kilowatt hour rates are below the Texas average of 6.8 cents 96.9 percent of the time. Despite the frustrations that the Texas storm caused, consumers seem to be smitten with wholesale utilities. Griddy says that the moment the PUCT reversed its non-market pricing mechanism and wholesale prices in ERCOT became “negative,” many of its customers who had left to avoid the non-market prices reversed course and “quickly requested to re-enroll and return to our platform.”
Discounted utilities aren’t available in all 50 states, but deregulation of utilities has allowed some consumers to find more options when deciding who will provide electricity to their home or place of business. Discount natural gas, green energy, and electricity providers are growing in popularity. ConsumerAffairs has reviewed many such providers, including ones in Pennsylvania, Illinois, New York, and others besides Griddy in Texas.