Why I Chose “Wholesale” Electricity Pricing In Texas and Why I Will Never Do It Again
“Wholesale beats the TX average 96% of the time.”
“20% cheaper than the Texas Average.”
Everyone likes getting things cheaper, right? This is the message over the past 3 years that the energy startup Griddy has been beating into our Texan brains, by using clever billboard advertising, as well as radio. If you are selling a product that uses an app, makes the process easy to sign up, has no contract, and can save the consumer money, for only a $9.99 month membership fee, you generally have yourself a winner.
Since I switched to wholesale pricing, I “saved” $179.85 through January 2021. But, here is why I will not continue and never do it again.
Griddy made its way into the Texas energy market, because basically anyone can. Thanks to the deregulation of our electric grid, which started in 1999 and implemented over a few years afterward, consumers in the state can choose any retail electric provider they want. The vast majority of providers have fixed rates. Some do not have contracts, and some offer contracts up to 2 years. The Texas Average price in Nov 2020 was 12.1 cents per kWh (kilowatt hour). The national average is 13.35 cents. The Texas deregulated market price isn’t terrible (as Texas ranks 23 out of 50), but it isn’t great either. Of the 11 deregulated electricity markets, only 3 states are lower than the national average, with Texas being the lowest of those 11. Obviously there is room for improvement in helping the consumer.
I have always had fixed rate plans from different retail providers over the years in Texas. The last provider was Gexa Energy, a subsidiary of NextEra Energy, based in Florida. They are a reputable company, but I was paying quite a bit more than expected, partly to do with having an old air conditioning unit. Prices in Texas are transparent when you sign up with a provider, and each provider is different. This is an example of what Gexa was charging me:
As you can see above, the Electricity Facts Label (EFL) is provided showing the rate you are agreeing to. In Gexa’s case, they had different ways to charge based on usage tiers. It’s fixed rate and was a 12 month contract, with an early termination fee.
You will notice something else, called the TDU Delivery Charge. This is an added layer of charges, thanks again to deregulation. When the state deregulated, what was one entity thus had to be split into 3: Retail Energy Providers (REP), Transmission & Distribution Utilities (TDU), and the power generators. REP’s are companies like Gexa, Griddy, etc who handle marketing and billing. The generators obviously handle creating the electricity. The TDU’s own and maintain power lines and meters in order to get the power from the plant to your home or business. There are 5 TDU’s in the deregulated market, all with different rates per kWh and a monthly base fee. I live in an area handled by Oncor, who per the link charges another $3.42 per month plus 3.922 cents/kWh. Then of course there are even more fees, such as sales tax and a Public Utility Commission fee. It all adds up repeatedly.
Since I wanted to save some money, I decided to give Griddy a shot in June 2019, after my Gexa contract had expired. While Griddy is selling electricity at a wholesale price, they do still have to provide an EFL.
Nothing fancy to see there. It spells out the charges, just as did the other EFL. The only differences are the lack of a fixed rate for usage, a $9.99 membership fee (which Griddy claims is the only profit they make), as well as spelling out the TDU charges more clearly, as they have an EFL for each TDU posted to the legal section of their website.
One of the other catches of using Griddy is that there is no other option besides auto pay — the scourge of consumer bill disputes. What is actually charged and when is a bit different however. If like me, you live in a state that has toll roads, you have some form of electronic pass. Generally once your pass gets below $X, they rebill you. Griddy does the same thing. You can set your auto rebill as low as $50 or set it higher. They start your account out with $49.
The app is easy to use and shows you the wholesale price, updated roughly every 5 minutes, with an hourly price forecast. This is designed to help you manage your usage and spend the least, if possible. You can also view what you spent on a daily basis, the average cost that day for energy, and on a monthly basis. Each monthly statement breaks down your wholesale electricity cost, TDU delivery charges, Griddy membership, and taxes & fees.
June 2019 I was ready to save some money! Obviously, summer in Texas is the hottest and the time of year where electricity usage is the highest. This would be the true test of the wholesale theory. June passed by with a rate that averaged 7.1 cents for a savings of $78.66 compared to the Texas Average 12.2 cents. July was similar at 8.7 cents and a savings of $79.97, as usage began to tick upwards. August is where the wheels fell off.
August can be unusually hot in Texas and 2019 was especially towards the middle of the month. The extreme heat brought the Texas Grid dangerously close to it’s maximum generation limit. Prices obviously increase and some large spikes occur, but they are temporary. These spikes at one point resulted in the price being raised to $9 per kWh (sound familiar, 2021?). Fortunately for us, it didn’t last that long. However it did do quite a bit of damage to our bill, even for that short time. Having used 2513 kWh that month, the bill was hefty for those days where it was a crazy price. My total bill with all my fees was $689.06 that month, of which $556.39 was electricity. There went my savings!
Now I could have quit then and found a new REP, but then I would have basically been at a loss. I was determined to make my money back, because surely this had to be an anomaly. Nobody in their right mind would ever charge $9 for an extended period of time, right? It didn’t even follow the general law of supply and demand in a free market system.
I stuck with Griddy to make back my losses. That September was another loss, although be it small. Going into the fall and winter, our home has low electricity usage. We benefit by having gas heat and gas water heater. While I used 2513 kWh that August, I only used 347 kWh November 2019. That results in barely a blip on price savings. I had to stick it out another summer and hope for a normal wholesale price to apply.
Even as much as 2020 sucked for everyone, it was a somewhat mild summer in Texas, with no crazy price spikes. The largest savings in one month was July saving $137.41. I even used 2827 kWh that month, more than in August 2019. Our air conditioner also bit the dust that summer, which resulted in the landlord buying us a shiny new more efficient one. Sticking with it ultimately paid off, resulting in the aforementioned total savings of $179.85 through January 2021. It would have been more had we not had that one crazy summer that could clearly never result in what happened again.
February 2021 informed us to hold its proverbial beer and to “watch this!”
Indications during the 2nd week of the month started pointing to a weather event to come around Valentine’s Day. The European Model, one of many meteorologists use, was forecasting below zero temperatures for Texas along with snow and ice and an extended period of time below freezing. Snow this time of year in North Texas is not unheard of, but below zero temperatures are. Only 4 other times on record had the temperature been recorded below zero at DFW. The all time record being -8 degrees around the end of the 19th century.
Anyone reading this saw what happened the week of February 14, 2021. 139 hours below freezing was recorded at DFW. A new record low of -2 was recorded that Monday evening. With the record cold in place, power demand increased while generation began to fail. Water and gas pipelines feeding coal and gas plants froze. Some windmills froze. Solar output declined with no sunlight. The Electric Reliability Council of Texas (ERCOT), who controls our grid, had a choice of either allowing total failure or to begin rolling blackouts. The latter occurred, with some Texans not having electricity of heat for upwards of 3 days. I was fortunate in that we were in the roll,with it on and off, and with gas heat (which of course does not work without electricity). It got down to 50 degrees inside the house. Others were not as lucky, noting inside their homes was below 32 degrees, with pipes bursting, and people dying from hypothermia and carbon monoxide poisoning.
Once again, the electric price was raised to it’s maximum of $9/kWh. Except this time, it stayed $9…for almost 5 days straight! You’ve certainly seen the news stories of $1500+ bills for some Griddy customers. That is why.
Griddy did warn us the afternoon of the 12th and again on the 13th. But it came too late. Many of us who tried to switch providers were not allowed to switch immediately. As of writing this, I have been waiting for 7 days for my new REP Texpo to switch me over. Which means, I got screwed on my electric bill this week as well…and screwed hard!
This is my current statement. Note I have only used 280 kWh through this week — not 2800+ kWh like some people would be with electric heat. Even still, I will be paying more than $700 by the time I get switched. Almost $585 of electricity cost was from Monday through Friday, as the rate remained artificially inflated at the direction of the Public Utility Commission of Texas (PUCT). The PUCT oversees ERCOT.
Remember the auto pay I discussed earlier? My credit card has been charged upwards of 10 times this week to satisfy the total bill, because I had it set to charge at $50, given the fact a normal winter shouldn’t result in needing that many recharges. Also, remember those fees? Griddy fails to mention to you they will charge the customer the merchant fees every time they run the credit card. That caveat is neatly tucked way in their documents on the aforementioned legal page. That’s an extra $17 I get to pay this month. Also is a legal document that customers agree to arbitration and waive any right to filing a class action lawsuit against Griddy.
Granted, the wholesale pricing is not Griddy’s fault. The fingers have started being pointed at every agency involved, as well as the Texas Legislature, Governor, and others. It all boils down to deregulation and the lack of required winterization. The wholesale price issue lies solely in the lap of the PUCT. But what do consumers do when the state is the one price gouging you? Why can the price be set at $9 one minute and negative 3 cents the next? Does that sound like a normal supply and demand free market event to you? Also in case you thought I was exaggerating the negative price, see below. And that resulted in my electricity only costing me 8 cents for all of Saturday.
I wanted to give you the details of how this happened, as a cautionary tale and a statement of fact. You have seen a lot of “wowza” news articles and stories wondering Joe Blow could be so stupid to pay an electric bill like that, but lacking a lot of substance. I want you to understand why and hopefully use this as a learning moment.
It is definitely another learning moment for me. And I will never do it again.
