Retail power provider Griddy files bankruptcy petition following Texas outages

New York — Retail power provider Griddy Energy LLC filed a voluntary bankruptcy petition on March 15 in the aftermath of widespread blackouts in Texas during February that caused its customers to receive hefty electricity bills.

The company blamed its woes on grid operator the Electric Reliability Council Of Texas Inc., with Griddy CEO Michael Fallquist saying ERCOT "made a bad situation worse for our customers" by setting power prices in Texas at an administratively determined price cap for a longer period of time than necessary.

"Prior to Winter Storm Uri, Griddy was a thriving business with more than 29,000 customers who saved more than $17 million dollars since 2017," Fallquist said in a statement on the bankruptcy petition. "The actions of ERCOT destroyed our business and caused financial harm to our customers."

But Griddy's Chapter 11 bankruptcy petition included a proposed plan of reorganization that the company said would release former customers with unpaid electricity bills. The bankruptcy motion was filed in the U.S. Bankruptcy Court for the Southern District of Texas (Griddy Energy, Debtor, 21-30923).

"Our bankruptcy plan, if confirmed, provides relief for our former customers who were unable to pay their electricity bills resulting from the unprecedented prices," Fallquist said.

Griddy's business was designed to pass wholesale market prices directly to customers with the goal of creating below-average electricity bills. The company charged the same monthly membership fee to customers regardless of the fluctuation in market power prices.

But an extreme cold snap across Texas in mid-February caused electricity demand to surge and knocked a substantial amount of generation offline, prompting ERCOT to set prices in the market at a cap of $9,000 per MWh. Fallquist said ERCOT set prices at the $9,000 per MWh cap "long after firm load shed instructions had stopped," meaning Griddy's customers "paid 300 times more than the normal price for electricity during this period."

On Feb. 26, ERCOT revoked Griddy's right to participate in the market due to a breach of payment and initiated the transition of Griddy's customers to larger power companies. In addition, the state of Texas sued Griddy for allegedly misleading its nearly 30,000 customers, engaging in false advertising, and failing to disclose the risks of its business model.

On Griddy's website, the company said it is seeking Chapter 11 protection "to efficiently wind down its operations and maximize the value of the estate for all creditors and stakeholders." The company also noted that ERCOT had already automatically switched customers over to a new retail electricity provider.

"While Texas used to be able to boast hundreds of providers and thousands of plans, that freedom of choice could drop to a handful of the traditional, big players," Griddy said. "Texas was a trailblazer in deregulation, but it seems we might be going back to the giant monopolies dictating the rules."

In its bankruptcy petition, Griddy said its estimated assets totaled between $1 million and $10 million alongside liabilities of $10 million to $50 million.