Texas legislators weigh partial and total bans on Griddy-type energy plans

Seeking an end to outrageous electricity bills that hit some Texans after February’s winter storm, the Legislature has advanced bills this session that would limit wholesale index products like those sold by Griddy Energy and other providers.

Under a wholesale index plan, customers’ rates are variable and depend on the real-time market price of electricity. For this reason, when peak demand prices sat at $9,000 per megawatt hour for 32 hours at the height of the storm, a small number of Texans who used this type of plan saw electricity bills for thousands of dollars.

Following the storm, lawmakers promised to hold companies like Griddy accountable for the bills they charged consumers and prevent a similar situation from happening again.

Texas Attorney General Ken Paxton sued Griddy Energy in March and said it would help ensure that the company’s proposed bankruptcy plan move forward by offering releases to approximately 24,000 former customers who owe $29.1 million in unpaid electric bills.

But some companies offering wholesale index plans say they’re being scapegoated for the overall failure of Texas’ electricity market. Advocates fighting to keep this type of product on the market argue that wholesale index plans can be both a boon to consumers and benefit overall grid health by incentivizing better energy usage habits.

The latest version of Senate Bill 3, the sweeping electricity compromise bill that advanced to the House floor on Tuesday, includes a section that would place restrictions on wholesale index plans in hopes of protecting customers like Jessica Phillips of Dallas, who had $800 withdrawn from her bank account during a two day period in February and still has a $2,500 balance with Griddy.

Phillips said she agrees with legislative solutions to restrict wholesale index plans.

“Regardless if we agreed to the terms, customers are not well enough informed on what could happen — the winter storm for example,” she said. “If they want to offer wholesale as an option for customers, there needs to be a price cap.”

SB 3 allows wholesale index plans to continue to be sold to residential consumers, but adds restrictions, including a price cap that would limit the amount a customer could be charged to a maximum of 200% more than the monthly average price of electricity in Texas during the same month of the prior year.

Another piece of legislation goes further.

House Bill 16, which has already landed on the governor’s desk, would ban the sale of wholesale index products to residential customers or by retail electric providers in Texas.

It’s unclear if Abbott will sign HB 16, which has been on his desk since Friday, or if he’ll wait to sign SB 3 if it passes the House floor. According to a section of the Texas Government Code regarding conflicting statutes, the statute latest in date of enactment, the date on which the last legislative vote is taken, prevails.

Michelle Richmond of Texas Competitive Power Advocates, who spoke in favor of HB 16 during public testimony on the bill in March, said the average customer can’t manage real-time price fluctuations.

“Residential customers don’t have the expertise to weather those rates. They shouldn’t be offered to them,” she told the House State Affairs Committee. “Industrial consumers are a completely different story, and they do have that expertise.”

But during that meeting, Plano Republican Rep. Matt Shaheen also questioned whether the Legislature should be interfering with the market, which was deregulated in 2002, and asked if customers should bear the responsibility for contracts they knowingly enter.

“Griddy’s everybody’s favorite punching bag right now,” he told the committee. “Should we really be eliminating our product or service? Or should we be doing a better job with mandating disclosures, warnings — those types of things?”

Not all Texans on wholesale index plans saw large energy bills.

Unlike Griddy Energy, UK-based Octopus Energy, which has U.S. offices in Houston, boasted during testimony before the Legislature this session that its customers did not see high energy bills due to February’s winter storm.

Energy lobbyist Michael Jewell explained on behalf of the company during a House State Affairs hearing on March 18 that the company took over most of their customers’ increased bills from the high demand period in February.

“Rather than letting the customers be exposed to the full wholesale rate, we stopped the billing and said no, we’re not going to do that,” Jewell said. “We just applied the average rate in Texas to those customers. So far there have been no customer complaints.”

Octopus Energy CEO Michael Lee said in an interview with The Dallas Morning News on Tuesday that he’s not opposed to market restrictions like price caps. In markets outside Texas, Lee said Octopus Energy’s indexed plans already have built-in price caps. Because of the Legislature’s ability to place restrictions, he said attempts to ban indexed plans and the attention given to Griddy Energy is little more than an attempt to create a scapegoat for a market that allowed $9,000 per megawatt hour in the first place.

Lee said only about 25% of Octopus Energy customers are on a wholesale indexed plan. However, he added, it’s an area of the company he’d like to grow, especially in Texas where the market incentive to watch personal energy consumption could benefit the grid.

“These types of signals is what will enable customers to really take a lot of costs off their bills,” he said. “They’re able to truly optimize timing of when they do certain chores, like washing laundry or washing dishes, and they get to the same outcome but it’s just a lot cheaper.”