Updated
Texas Attorney General Files Lawsuit Against Retail Electric Provider

March 1, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Update:

Griddy provided the following statement:

"We are aware of the lawsuit filed by the Texas Attorney General against Griddy. We do not agree with the claims alleged in the complaint, and plan to vigorously defend against it. Until then the company has no further comment."

-- Statement from Griddy

Earlier:

Texas Attorney General Ken Paxton filed a lawsuit against Griddy Energy LLC and Griddy Holdings LLC (Griddy) in Harris County district court in which the AG alleged that Defendants engaged in, "false, misleading, and deceptive acts and practices in violation of § 17.46 of the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA), Tex. Bus. & Com. Code §§ 17.41–17.63."

"Today’s lawsuit is seeking injunctive relief from Griddy to ensure that the Texans it serves will receive truthful and accurate energy service in the future, and to have the Court order refunds from available sources," the AG's office said

In a Feb. 26 statement on its website concerning the previously reported mass transition of customers to POLRs (prior to the announcement of the AG's suit), Griddy had stated, "We have always been transparent and customer-centric at every step."

Earlier this month, in response to a separate suit filed by a customer seeking class action status, Griddy had said in a statement that, "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 PUCT last week. The [customer] lawsuit is meritless and we plan to vigorously defend it."

Griddy had also said earlier this month that pricing at the cap was driven by PUC intervention

"[T]he PUCT implemented a non-market pricing mechanism for electricity mandating prices reaching as high as hundreds of times normal prices. Griddy’s customers, which pay pass-through wholesale electricity prices, were immediately negatively impacted by the non-market pricing and have incurred bills that they will need more time to pay," Griddy had said earlier this month

Griddy also said in the Feb. 26 statement that it had paused further billing

"Winter Storm Uri resulted in uncertainty regarding the reliability of data received from meter reads and ERCOT concerning electricity actually used by customers. As such, we have paused further billing until we have more certainty regarding this data. We currently expect to issue final bills in less than 60 days indicating whether your account balance is positive or negative. When we determine a customer’s final account balance, if it is positive that amount will be refunded to you within 7 days," Griddy said on Feb. 26

Concerning the POLR drop, Griddy said on Feb. 26, "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."

Concerning the POLR drop, Griddy said on Feb. 26, "Today, ERCOT took our members and have effectively shut down Griddy. On the same day when ERCOT announced that it had a $2.1 billion shortfall, it decided to take this action against only one company that represents a tiny fraction of the market and that shortfall."

In the lawsuit, the AG alleged, "Griddy, the company that promised Texans cheap 'wholesale' prices that would consistently beat traditional energy costs, blatantly contradicted these promotional representations as it auto-debited hundreds of dollars from Texans’ checking accounts daily. Griddy was fully aware of the reality of the risk in its pricing scheme -- sky-high energy rates at a time when consumers are the most vulnerable. When combined with Griddy’s auto-billing system, these vulnerable consumers who were promised savings were instead shocked by overdrawn accounts, overdraft fees, and an inability to pay their other bills, simply because they tried to protect their families from the bitter cold."

In the suit, the AG alleged, "Griddy’s marketing persistently misled its customers about the nature and extent of this risk and the costs consumers could expect when utilizing Griddy’s services."

In the suit, the AG alleged, "Indeed, February 2021 was not the first time that Griddy surprised its customers with astronomical charges, and yet, Griddy’s representations about its program did not prepare its customers for this eventuality. In August 2019, a heat wave in Texas brought increased demand on the energy market, resulting in Griddy customers paying as much as $9.00 per kilowatt hour (kWh) or $9,000 per megawatt hour for electricity—the very same rate customers would pay in February 2021 during the Winter Storm. As a result, consumers in 2019 were surprised and angered at charges—up to $1,200 for three days—that were highly inconsistent with the advertising that had lured them to Griddy. At the time, Griddy’s response to the harm to its consumers was dismissive. Moreover, as discussed further below, Griddy did not make notable changes to its advertising based on this price spike. To the contrary, it downplayed the event on its website."

In the suit, the AG alleged, "Leaving these consumers especially vulnerable, Griddy used auto-debiting to withdraw hundreds, if not thousands, of dollars from consumers’ checking accounts in a period of days. These massive daily withdrawals resulted in some Texas consumers receiving overdraft charges from their bank. Further, the practice prevented consumers from taking any type of protective measures to prevent overdrafts or otherwise save money to assist them to pay off the bill. "

The AG cited a chart alleged to be used by Griddy on its website which listed prices above $1 per kWh as occurring 0.1% of the time.

In the suit, the AG alleged, "This chart above failed to disclose the actual exposure to consumers—an increase to $9 per kWh— a price which Griddy charged its customers during two separate incidents within less than two years of each other. In addition, this maximum exposure amount is specifically listed in the Texas Administrative Code (capping energy prices at $9,000 per mWh -- which equates to $9 per kWh)."

In the suit, the AG alleged, "Despite having this knowledge, Griddy failed to disclose this potential exposure to the consumer in its advertising, and instead created the impression that spikes in energy prices are both unlikely and can be measured in pennies instead of dollars. When Griddy did mention the Texas Administrative Code cap, it was not in its advertising materials and was misleadingly dismissed as an extreme unlikelihood: one FAQ page dismissed it as an event 'that happens 0.005% of the time.' Instead, Griddy’s advertising and marketing materials emphasized low pricing, fluctuating between pennies per kWh."

In the suit, the AG alleged, "Throughout its advertising, Griddy emphasized the savings that can be realized with false or misleading comparisons to traditional retail electricity providers’ pricing. Griddy’s website claimed that they were '20% cheaper than the Texas Average.' They claimed to base this on a comparison to data from the U.S. Energy Information Administration (EIA). However, the most recent publicly available annual report from the EIA is 2019 data that shows Griddy’s average price in cents per kWh for 2019 to be 12.01 while the total for the State of Texas 2019 Average Monthly Bill in cents per kWh is 11.76."

In the suit, the AG alleged that Defendants, have in the course of trade and commerce, "engaged in false, misleading, and deceptive acts and practices declared unlawful in sections 17.46(a) and (b) of the DTPA."

In the suit, the AG alleged that Defendants, "Fail[ed] to disclose information concerning services which was known at the time of the transaction, if such failure to disclose information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed, in violation of DTPA § 17.46(b)(24)."

In the suit, the AG sought an injunction against Griddy from the following acts and practices:

a. Advertising electricity rates that are false or misleading;

b. Making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions by advertising electricity prices as indexed to a wholesale price if such index does not exist;

c. Using false, misleading, or unsubstantiated testimonial endorsements to promote Defendants’ services;

d. Misrepresenting the savings consumers can expect to receive as a result of using Defendants’ services;

e. Misrepresenting the reason for any price increase, disruption of service, or transfer of service;

f. Disparaging the services of another retail electricity provider by making misleading comparison representations;

g. Failing to maintain accurate, up-to-date information concerning the likelihood and extent of fluctuations in electricity prices, including any increases;

h. Failing to disclose, in a clear and conspicuous manner, the likelihood and extent of electricity price increases;

i. Collecting fees or payments for services without clearly and conspicuously disclosing on internet websites, advertisements, and any other marketing and promotional materials offered by Defendants that electricity prices may increase to the high system-wide offer cap (currently $9.00/kWh) during severe weather or other disasters;

j. Failing to immediately honor any requests by consumers to cancel service agreements or contracts without further obligation;

k. Failing to cease any and all collection efforts for energy use from February 12 through February 21, 2021; and

l. Transferring, concealing, destroying, or removing from the jurisdiction of this Court any books, records, documents, or other written or computer-generated materials relating to Griddy’s business, currently or hereafter, in its possession, custody, or control except in response to further orders or subpoenas in this cause

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