Their Wikipedia page has more context, seems like those stories of Texans getting $1000+ electricity bills and the recent class-action lawsuit involved this company (I'd only seen headlines and didn't know the company's name until now):
Griddy is an American power retailer that sells energy to people in the state of Texas at wholesale prices for a $10 monthly membership fee and has approximately 29,000 members. The company itself is based in California.
During the 2021 Texas power crisis, Griddy received attention for urging its customers to leave the company. Some Griddy customers signed up for wholesale variable rates plans allowed by the Texas deregulated electricity market, found themselves facing over $5,000 bills for five days of service during the storm.
The Electric Reliability Council of Texas caps the wholesale price of electricity at $9,000 per megawatt-hour, which translates to $9 per kilowatt-hour. Customers had seen the wholesale rates hit that high previously in August 2019, but only for a 90 minute period, which the company then noted was an unprecedented long time at that price. During the February 2021 storm wholesale rates, and therefore Griddy's rates, were at the maximum for about four days. On February 15, during the power crisis, the state's Public Utility Commission required ERCOT to set the price to the $9,000 maximum. The commission reasoned that the trading prices for energy (as low as $1,200) were inconsistent with the supply scarcity. The following week, one Chambers County customer filed a proposed class action lawsuit alleging price gouging and seeking $1B in relief.
On February 26, ERCOT ejected Griddy from the Texas market for nonpayment.
They can easily switch to other retail power providers. There are other services in Texas that you can subscribe to that will automatically switch your retail provider based on whoever happens to be providing the best deal on any particular day.
If they don’t switch to another provider they are automatically switched to a provider of last resort (POLR) which is a predetermined provider based on ERCOT policy.
> On February 15, during the power crisis, the state's Public Utility Commission required ERCOT to set the price to the $9,000 maximum. The commission reasoned that the trading prices for energy (as low as $1,200) were inconsistent with the supply scarcity.
Suppose there is apparent demand for 100GW of power. Due to faults your region's generators are only able to supply 75GW of power maximum no matter what price you offer. So you deliberately drop some groups of customers (rolling blackouts to residential areas). Now your residual demand (ignoring those customers freezing in the dark) sum to only 65GW†, you can supply them all. Great!
If your system automatically adjusts price to hit demand it will begin reducing the price, after all demand is lower than supply, how about $6000? $3000? $1200? Ah, that seems to be the magic number. At $1200 we can get 65GW of power.
But wait, we don't want 65GW of power. We want 100GW of power, the fact we can't have that means rolling blackouts. It makes no sense to cause rolling blackouts and reduce prices, the prices need to stay high until we can actually supply everybody.
In a more sensibly architected system, low priority industrial users are blacked out first, and if you must have rolling blackouts for residential customers you pin prices at maximum until you don't need blackouts due to recovering supply (or you use some emergency legal authority to compel generation at some agreed price).
But that's not Texas.
†For a variety of reasons you won't be able to cleanly shed arbitrary amounts of demand, just slice off big chunks and hope, in the process you're probably going to kill people.
The basis of this argument is that there were generators who were waiting for prices to go higher before going online. I don’t believe that was the case here. Plants weren’t able to come online because natural gas lines, piles of coal, wind turbines, nuclear coolant water were freezing over and could not be used.
I don’t know the right answer but forcing electricity rates to the highest allowed limit for a week allowed these generators to make insane amount of money and i’m convinced it improved the outcome of this whole disaster.
As I understand it, Texas hopes to stimulate supply by offering higher prices. Does that work? Well, it clearly works to some extent normally.
If your legislature (not to mention local culture) has insisted you must only use a hammer, those screws are getting hammered in, too bad.
If you have greater import/export capacity the higher prices ensure you're importing. In this particular case that would likely have made no difference, it's not as though the storm was just affecting Texas, but in other cases or with a smaller deficit that might save your backside.
Also as I understand it, some places pay generators for their capacity to deliver power if it were needed, even if in fact they're never needed. So that can be a better plan because it makes the incentive not to fail clearer.
I've actually been at a power plant where one block has never been switched on (except for maintenance). The block is there because it can be switched on, if necessary.
The texans wanted low prices and structured their pricing 100% for that: Power generators are paid 100% for being cheapest. Most other places use a combination of low pricing and availability, and the regulator will award contracts for availability to various generators that have different failure modes.
At the time, the regulatory agency had ordered load-shedding of something like 1/3rd (more? I forget) of all Texas customers due to insufficient power. 1/3rd of Texas was in the dark. So what happened was the market was establishing a new clearing price based on the new, lesser demand for electricity.
What the regulators wanted to do was lock in the demand at "all of Texas wants electricity" until such time as that could be provided.
It's sort of funny that this "super free market" system Texas set up failed in so many different ways. Without this massive government intervention, Texas would still be in the dark because customers in the dark can't demand more electricity and therefore utilities wouldn't have any demand to supply enough electricity to turn them on.
So, a thing I've been thinking of is that... because most people are on constant rate plans (where there isn't any incentive to cut back during a supply and/or demand crunch), the overall grid demand is a lot more inelastic than it would be if everyone where on a Griddy-like service.
When, say, 75% of demand is insensitive to price signals, to get the 25% of demand that is sensitive to respond takes a MUCH bigger pricing signal to have the same demand reduction than if 100% of demand was responsive to demand signal.
What's needed is, say, a guarantee of 25-50% of average consumption (or maybe enough for certain essentials) being charged at the base rate while the all the rest for everyone is charged at some multiple of the wholesale rate. But this only would work well if everyone had smart thermostats on their heat, their hot water, their airconditioners, and all other major power consumption sources. Otherwise people would be unaware of this pricing signal until the next month.
Also, maybe it'd be a good idea to have the main thermostat in the house (talking to the meter) show some estimate of the daily energy cost so people don't have to wait a month to find out they're using an insane amount of electricity somewhere.
Pricing signals work great (including for consumers) if supply/demand is elastic. If it's inelastic, it ends up looking like profiteering and passes on huge risks to those often least able to take them.
I think you’re missing the wood for the trees a bit here. Firstly, the scale of the incident in TX went for beyond what could be handled by demand management through price controls anyway- most of the supply isn’t designed to handle those temperatures. No rate was going to increase supply (which is obviously half of the equation). On the demand side it’s a much more complex question than demand being inelastic. No matter what the price Ted Cruz was going to continue to heat his hot tub (in case he wanted a dip once he’d flown back from Cancun) whilst those who are in poverty are likely to have ended up unable to hear their homes simply because they couldn’t afford the price. And that’s the problem with using price- there is a minimum amount of electricity people need, and some people won’t be able to afford that minimum before others even think about turning off the flood lights on their tennis court.
Essentially the effect of what you’re saying is poor people would be priced out of an essential utility to ensure rich people get a stable supply.
>Essentially the effect of what you’re saying is poor people would be priced out of an essential utility to ensure rich people get a stable supply.
No, that's not the case. The entire point of a market system is to encourage people to use the limited resources on the most critical needs first. However, since there is a fixed rate culture the end result is that everyone wastes energy on non essential needs.
There simply aren't enough rich people on the planet to steal all the 75GW and even if they did they would be broke in the end. I don't know where you got that idea. The rich are in the minority. Also, you're forgetting that rich people will waste more energy if their rates are artificially kept lower.
Besides that, supply IS elastic in the longer term. So if the rich were able to bid the price up, there would be folks able to make a bunch of money selling power to them, reducing the cost. And that opportunity should be available to most people. If we had standardized feed-in capability on smart meters, whole house generators, solar roofs and batteries, or even cars could sell electricity on the grid when the wholesale price got insane.
Poor folks would be insulated from the large swings in price by the 25-50% guaranteed price portion of the power supply. (And you could make the price guarantee portion progressive by making it a constant 3kW (averaged over an hour) or whatever regardless of house size, so smaller houses would have much more of their electricity at a fixed rate than larger houses.)
there are stories of many empty office buildings fully powered with the lights on throughout the whole thing. Its possible if they were on a more price sensitive system those commercial property owners would have opted to shut off more of the power.
In Austin's cade, Austin Energy built out way too much off of essential circuits. Office buildings stayed lit because they trunked off a circuit feeding medical centers, emergency services, that type of thing.
So the only place Austin Energy could go for load shedding was their residential customer base. Even then; they didn't execute true "rolling" blackouts, because that implies dividing the supply of power you have somewhat evenly across your entire customer population in a reasonable time based multiplexing scheme so that everyone gets their chance to run the heat. To minimize the amount of time people go without any heat, and at regular intervals so people can plan their consumption.
Can't speak for other metroplexes, and the co-op I get power from did a perfect job.
If they were (and knew they were) being charged $9/kWh for days on end, the occupants of those buildings would have shed the wasteful lighting loads for you.
Residential areas should maybe be the ONLY places where a fixed rate would be allowed. Everywhere else (commercial, industrial, etc) should have to have real-time pricing. That would reduce the swings in price since demand would be much more elastic.
This would have the potential for nice second-order effects.
I'm thinking about places in AZ/NV where some companies and even some municipality groups (i.e. bureaucratic/permitting type) have moved towards four 10 hour days instead of five 8 hour days.
This is a bit better for those employees QOL (since they get 3 day weekends all the time) and also benefited the employers since they could lower their power consumption for an additional day.
Or could cause a clawback of some of those by companies realizing that if they went back to 5x8, one of their days would be cheaper power because the 4x10 companies wouldn’t be operating on one of those days.
Or “if we took Wednesdays off instead of Fridays, we’d benefit from Friday power being cheaper than Wednesday power”.
I still think market-aware power metering is a good thing for large users.
Well, you’re making my point for me! With better control and response over energy usage, the power companies would be able to cut power to non-essentials, and businesses would be both incentivized and empowered to do it themselves voluntarily.
Yeah, calling them “rolling” was a complete joke. Many people in Austin (like me) lost power for a solid 3 days, while low-rise, wealthy Westlake was almost entirely untouched.
If you had told people in Texas that it’s going to cost $200 per hour to run their heat, people would have responded by dramatically cutting consumption and the blackouts would not have been required.
Now that said, having an electric system where this is necessary is itself a market failure.
Either people still got hit by massive bills (thousands or tens of thousands of dollars), or they cut usage (voluntarily or otherwise) and froze to death or poisoned themselves trying not to.
Municipal water and sewerage perations couldn't function. Pipes froze and burst. Massive damage precipitated by underprovisioning, risk-shifting to the most vulnerable, and a gamble that lost.
Pricing of electricity is confusing and very varried. Usually it’s business that pay the variable rates.
I worked at a power monitoring startup. We looked at states that had peak demand and tried to estimate commercial electricity bills and sent alerts if a business was close to its peak usage.
“ Some utilities will charge customers based on their individual peak demand. The highest demand during each month or even a single 15 to 30 minute period of highest use in the previous year may be used to calculate charges”
People have enough shit to be worried about than to worry about their power ticker going up and down. This is not something we should add as a burden to our citizens.
Next I'm going to hear people wanting to short electricity.
Exactly. Electricity should be something that just exists, as an ambiance around you. That you pay a predictable, modest monthly bill, and can than focus on other things. Who needs the drama of free markets there?
Also applies to net neutrality and health-care btw.
The electricity price is not low if you use it without consideration of cost. Why bother with LED lights, heat-pumps, or proper insulation if you’re totally insensitive to the cost of electricity?
What happens in such situations is electricity ends up being rationed with rolling blackouts. Or, if you manage to produce enough anyway by massive government investment, per capita energy usage skyrockets. The former situation happens in developing countries and the latter in oil-rich countries like Saudi Arabia which heavily subsidize electricity costs so it ends up being cheaper to just run the A/C at full blast constantly instead of properly insulating your household.
But most people don’t care about climate change, so maybe that’s the direction things would go.
A predictable price sufficient to meet netcosts of provisioning is not the same as "price spikes 10,000% under historically precedented but outside planning contingencies weather event.
Texas saw similar temps in late January, 2011, highs around 20°F, lows near zero. That was ten years ago. There weren't widespread outages.
I think it depends on how much it costs and the environmental impact of energy generation and transmission. There's a continuum between austerity taxing a resource for insane frugality, moderate pricing, and giving it away that has to be deliberately comsidered.
Moderate pricing is the right move. But a lot of folks are missing my main point here:
The more people and businesses are on fixed rates, the more inelastic demand is and therefore the more extreme the pricing swings are for those who are on moderate real-time pricing plans. We need to make real-time pricing as broad as possible so the price extremes are much smaller. and make it more feasible for small players (including middle class individuals) to contribute directly to supply.
Energy consumption for home use during a blizzard is very inelastic. Energy consumption for empty hotels and office buildings should be very elastic rather than sitting idle, lights on, and HVAC blasting. Nonessential businesses that consume large quantities of electricity should be cut first before residential areas.
Yes. If generated from renewable sources, power should have a reasonable cost so people aren't server bitcoin mining or indoor weed farming for pennies when power is a limited resource. Prices should be smoothed out and predictable to the customer.
I don't know. It seems there can be quite an effect by shifting usage even slightly as power generation has to be real-time and handling the peaks costs up all more.
Free-market pricing seems wrong, as would per-minute pricing, but something like a 3-window (on-peak, off-peak, standard) time-of-day rate seems more acceptable.
I mean, there is a valid point of reducing the mental load, but the alternative is paying significantly more for electricity (and producing more greenhouse gases). Particularly as we rely more and more on non-dispatchable renewable power sources.
'People' can simply choose a different electricity retailer if they want a constant rate and to not worry about this. If they were adequately informed about risks, why shouldn't we be allowed to choose our path? Industrial customers usually buy on the wholesale market, it doesn't seem a stretch that consumers could benefit from that too.
> If they were adequately informed about risks, why shouldn't we be allowed to choose our path?
That's a big if. In reality, they won't be adequately informed - they'll be at best adequately disinformed by the marketing departments of the power companies and third parties popping up around variable-pricing schemes. And to the extent exposing the customers to price variability is beneficial for the suppliers, the market has a nice way of removing the previously available options from the choice pool.
There's a spectrum between "let the people decide for themselves" and "the people will predictably decide to do something stupid and then they'll beg to be bailed out, so perhaps let's not offer that option", and I feel this may fall closer to that second end.
Because if you lose enough, you start dragging your family or community down. If enough people lose enough, they turn into a humanitarian crisis. People are social creatures, and want to help each other, and set up systems that do so - which then get unintentionally exploited by risk takers.
So a bunch of people do something obviously stupid - like getting scammed by a tech support call, or get infinite debt on a payday loan, or put a hand in a moving machinery and lose it. Now they're there, scammed, without money, and/or a hand. What are you going to do? Deny them healthcare and basic support? No, we help them anyway, and instead chase scammers, put limits on payday loans, and enforce safety requirements on equipment - we take away the choice of being stupid, because that's more reasonable than being indifferent to the suffering of victims of their own stupidity, for the sake of enforcing a corrective feedback loop.
People lose money in the stock market all the time. This feels similar to me--people bet on the market and were on the wrong side of the trade. I do have sympathy for people who are having financial trouble as a result of their decisions here, but there isn't serious talk about banning speculation on stock markets because some investors might make bad trades.
The trade you're making by being a Griddy customer has essentially unlimited downside risk though. Retail investors can make those types of trades in securities, but they are heavily regulated and it is made very clear just how risky they are. It's also possible for your broker to liquidate your positions very quickly if they margin call you, so they can protect themselves from that downside to an extent. Griddy can't cut off your power in an instant when the spot price jumps.
If a traditional electricity supplier tried to buy all their electricity daily at the spot price and not hedge against any risk, they would quickly go bust. So why is it sensible for consumers to be allowed to do that? Some businesses may buy their energy at wholesale prices through their supplier, say an aluminium smelting factory. But those businesses will have full time traders who are also buying insurance/derivatives to protect against volatility in the market. Consumers should insure themselves against that risk too, by using a more traditional energy supply contract.
> The people signing contracts to buy Texas electricity at wholesale prices were doing so to economize. In some theoretical sense they accepted higher price volatility in exchange for usually lower prices, but in a much more practical sense they wanted the usually lower prices and couldn’t afford the higher price volatility. And then when prices rose they were wiped out.
> But the Griddy stories suggest that there’s something to it. It turns out to be really easy to accidentally engage in risky financial speculation, to somehow make disastrous bets on spot power markets in your monthly utility bill because it’s simple to sign up. If life is a constant series of high-stakes financial gambles anyway, perhaps it is tempting to choose some of your gambles on purpose.
And it’s not about the “dumb poors” either. I’m a data scientist and and I signed up for a variable-rate plan like this when I used to live in Chicago. I watched my electricity consumption closely, and diligently reduced my consumption via home automation when I got alerts about price spikes. I thought it was great, and I saved money. (Charging the Tesla overnight was basically free.) I figured there might be periods where things were 2x or 3x more expensive than usual, and I could absorb such costs.
But I never in my wildest dreams imagined that rates would shoot to 100x normal values for days on end. The very claims of “it’s market driven!” made me think that was impossible - how could any efficient market sustain such prices?
The Internet, and tech in particular, has completely changed the business sphere by throwing out that whole "meeting of the minds" concept that was taken for necessary in any contractual relationship.
In the past, one could count on their hands and feet the number of contracts that one would enter into over one's life.
Now? There's so much churn that the act of accepting is more a ritual or formality. One that sadly has the capability to take advantage of a lot of people due to information asymmetry.
> In the past, one could count on their hands and feet the number of contracts that one would enter into over one's life.
More recently - and still IMO OK - maybe you entered into more than 20 contracts in your life, but you were unlikely to have 20 contracts ongoing simultaneously. Today? I don't even know how many contracts or pseudo-contracts I'm involved in, but its in dozens.
That's my biggest reason I started to avoid SaaS and subscriptions as much as I can. Because every service you subscribe to is a relationship you enter, that you now have to manage, keep in mind. These add up quickly.
We installed solar panels a few years ago. They take care of 100% of our electrical needs (and we live in Portland Oregon where it is cloudy 9 months out of the year). I haven’t had to pay more than $12/month, and that is the fee we are charged by PGE to be hooked into the grid so we can sell them our excess. One thing I’ve found out is that we no longer worry about electricity usage. I used to fret about lights being left on, but no longer. That doesn’t seem healthy, but when you are no longer worrying about paying for something you stop worrying about wasting it.
On the other hand, electricity pricing is a construct. To some extent it is designed so that you do worry and limit use of a shared resource.
I think other utilities like internet service adopt this construct, then monetize worry to get you to pay a little more for all-you-can-eat.
There's an interesting quote from a former chairman of the atomic energy commission:
It is not too much to expect that our children will enjoy in their homes electrical energy too cheap to meter, will know of great periodic regional famines in the world only as matters of history, will travel effortlessly over the seas and under them and through the air with a minimum of danger and at great speeds, and will experience a lifespan far longer than ours, as disease yields and man comes to understand what causes him to age
Can you imagine being that hopeful about the future, I know a lot of people are opting not to have children due to the environmental nightmare those children would have to survive.
That's more relative than absolute expectations, or maybe you just know a lot of neurotic people.
Even if climate change is as bad as WW2 (doubtful over the same time scale), people still had children then, and they still had children when every city was covered in a foot of horse poop, all your kids died at 14 and doctors didn't believe in handwashing. In fact they had more!
>... I haven’t had to pay more than $12/month, and that is the fee we are charged by PGE to be hooked into the grid so we can sell them our excess.
Wow. If you are only paying $12 a month for access to the grid, you are paying a small fraction of your share of the cost of maintaining the grid. These consumer solar subsidies are a massive subsidy from the poor to the wealthy and really aren't sustainable.
Net metering is a temporary state intended to build critical mass and get mass production going. Solar panel owners don't pay the full cost of grid services, and utilities are not paying them for the full value of the electricity fed back in.
Residential solar IMO is mal-investment because grid scale solar has better economies of scale. Solar plants are easier to maintain. The grid is not built for widespread net metering. Rooftop solar has more fatalities than nuclear because of installers falling off.
Hardly. My "access" bill is $20/mth, but my panels give $350/yr more to the grid than I use. PGE gives me like $30 of that back at the end of the year. So that $12 / $20 doesn't tell the whole story. They are also likely giving a lot more renewable energy to the grid that isn't compensated and is more like another $30/mth of cost.
>...but my panels give $350/yr more to the grid than I use.
You are likely confusing wholesale and retail prices of electricity. Even just considering solar, the cost for a utility to generate the power itself is likely between 2-4 cents per kilowatt. Most states require the utility to essentially pay the retail rate for electric power for any power generated by rooftop solar since it directly offsets the electrical usage. (Never mind that the electric power might have to be purchased when the utility doesn't want the power.)
Buffet has complained about how this issue:
>...His logic is simple, he wants to have to pay wholesale electricity rates for the energy generated by rooftop solar instead of the same price NV Energy is charging these customers since he says it will penalized customers without solar panels.
So unless you are using the wholesale price for the estimate for the value of the excess electricity generated, you are greatly overestimating its value.
Besides overpaying for the electricity generated by rooftop solar, your $20 access bill is another subsidy. One estimate is that the average yearly cost to maintain the grid is about $750 per customer.
>Wait, don't we want to penalize customers without solar panels?
Why do you say that? If the government wants to subsidize solar power, isn't it better to do it in a way that is safer, less expensive and the benefits are shared by all consumers?
What kind of lights do you have? As far as I know it takes a lot of LED lights before you have to care if you left them on or not, even if you left them on all year.
I think the only people who are interested in them are those with money worries. To a lot of us it's unneccessary IOT tat and just another surveillance device to be honest.
Another electricity billing method in the UK that may or may not be a novelty to Americans are pay-as-you-go meters, typically fitted in houses that have had problems paying their bills on a monthly basis.
The meter has a card reader built in and you buy the top ups from shops (anywhere I think - newsagents, gas stations). When you put the card in it, it tops up the balance, and when it hits 0 it cuts you off. This happens at random times if you forget to do it, you can just get plunged into darkness whenever. It's pretty dickensian shit and you don't hear as much about them these days, but I think lots of houses still have them fitted.
And Octopus (perhaps others, only I'm aware of) even offers an hourly tracker plan ('Agile'), with an API.
Also, due to Ofgem regulatory requirement all plans have a cap, so this couldn't happen. (It's not capped cheap of course, but it's not going to cost thousands/month. With Octopus specifically it translates to 35p/kWh cap on its variable rate plans, ~double recently typical prices.)
I wonder why there wasn't some sort of stop-loss pricing (disconnect service if price exceeds X) built into the user agreement. That would have prevented all the negative publicity.
Griddy was a great idea, but it wasn't for everyone. Especially those who don't have backup solar or generators.
Doesn't have to be a full disconnect. It could simply be a smart thermostat that drops the heat to 50(F) and smart breakers that turn off dryers and dishwashers.
If all you use is LED lighting, low heat, and keep off your 'l33t gaming rig, you could make it through a high cost incident without losing power.
That could happen with instant settlement, but it's not necessarily desirable. Matt Levine covered the idea:
> In an electricity crisis, what you kind of want is to generate as much electricity as possible, and distribute it as efficiently and fairly as possible, and then send out bills later, and if people can’t pay the bills you sit down and figure out how to allocate the losses. Perhaps you have a Draconian allocation of “anyone who got the electricity has to pay the bill even if it takes the rest of eternity to work it off,” or perhaps you have some loss-sharing arrangement where the state or federal government eats some of the cost, or it’s allocated proportionally among ratepayers and utility shareholders over the next decade, or whatever. But you have some leisure to decide that, to have different stakeholders argue about it in different venues, if you let the electricity crisis turn into a credit crisis. If you just let it turn into a much worse electricity crisis then you miss your chance to fix it.
It's an economic non-solution to the fact that there's excess demand in one place and excess production in another.
The problem in Texas had two root causes. One was that decades of climate change denial is starting to make black swan events more likely than they would have been otherwise.
This is unforgivably irrational, because these effects have been predicted - accurately - for decades now.
The second was that Texas decided it wasn't going to share power with other states, supposedly because federal regulation was somehow a bad thing.
Price discovery and rationing are ineffective mitigations for the irrational self-harming effects of poor strategic decisions caused by prioritising economic ideology over physical integrity.
Economics is full of these non-solutions. Price discovery is possibly one of the most common.
It's like having a tool box full of broken screwdrivers and wondering why the houses you build keep collapsing.
At some point "At least I saved some money because these tools were cheap" stops being a credible argument.
Texas willingly made those decisions in exchange for cheap but unreliable power. The question is, if you have unreliable power how do you deal with it when there isn't enough?
>Price discovery and rationing are ineffective mitigations for the irrational self-harming effects of poor strategic decisions caused by prioritising economic ideology over physical integrity.
They are effective. High prices tell consumers to turn off their most energy intensive devices and only keep the devices on that they really need. It also encourages people to find alternative ways of reaching the same outcome without overburdening limited resources.
>Economics is full of these non-solutions. Price discovery is possibly one of the most common.
No, sorry but if you say something like this you just don't understand how markets allocate resources.
The problem with price discovery is that it's a Homo Economicus sort of solution. A fully rational consumer with full information will react as intended. In the real world, it fails because it requires real-time information distribution and reaction.
In the best case, they sent out a message to all their customers: "Your power prices are about to quintuple, disconnect now."
Some of those messages will bounce or be delayed. Some will arrive to people who can't read them immediately (in car, asleep, out of reach of device, doing something else). The people who actually do read the message then have to go around trying to adjust things-- hitting overloaded provider-change services, or scurrying around in the breaker box or running around the house pulling cords-- while the clock is ticking.
It might work if you eliminate the real-time decision process. I'm envisioning a modernized version of the central breaker box, where you could indicate on a per-circuit level the cut points. The decorative fountain pump cuts off at 8 cents per kWh, the kitchen appliances at 25, and the circuit running the mini-fridge containing your perishable medications will keep chugging at basically any price. This can be modeled and ran through simulations. You'd have to set this up during onboarding, and for optimal value, the house would have to be designed around it, to place outlets on different circuits where it could be useful.
But even that needs a need liability fallback if they don't relay the data accurately-- if a message is lost in communication and the house still thinks electricity is 10c/kWh, when it's $10, who's going to eat the difference? Who'd trust the system with that much money at risk?
Even if Texas were fully integrated with the National grids, there was not enough excess capacity to meet the Texas' increased needs in addition to every other affected States' demand. Heck, it would habe magnified the severity of the problem. All the Mexico connections were shut down because they had their own issues. We could very well have ended up with a cascading grid failure on a National scale, which would have helped nobody.
This is not just a Texas problem, and the fact it stayed isolated to Texas and didn't effect other States' adversely was entirely an artifact of Texas' independent grid.
AFAIK because electricity is so essential, you can't cut off people's power without going through a lengthy process. You also can't cut off people's power during the winter, either.
So there's a form of it called "interruptible service", which is intended for things like water heaters. It lets the utility shed load during peak times, but it's part of the consumer rate plan so there are limits on how often and how long they can interrupt it for, etc.
There's also programs like OhmConnect (https://www.ohmconnect.com) where they just ask you nicely to stop using power under load, and maybe turn off your A/C, and pay you for it.
I gave up optimizing too much because my water heater forgets its temperature setting when you cut the power, and it's not like they paid me much anyway. Good thing I'm on the 100% renewable SVCE plan.
People need to realize that managing risk costs money. As an individual consumer, you are many times better have paying a little extra for something in exchange for reducing your exposure to risk.
Do things that de-risk your life. Make sure your health coverage is good, and not just the cheapest insurance plan. Make sure you have life insurance.
I have a pretty dark outlook when it comes to global warming, but when you're a griddy customer and you're watching your meter constantly, it just made sense. For a brief moment in time, a green future based on renewables felt realistic. For a brief moment in time, I felt like we might actually be able to meet carbon emission goals.
When it cost a lot to make electricity, I used less. When it cost very little, I used freely. When I was able to get paid to put a load on the grid, I sure as hell did. And whenever I was thinking about this, I was able to realize that everyone who wasn't a griddy customer was not remotely aware of what was going on with wind turbines nearby. Anyone on a flat rate plan set their themostat and forgot about it, because the cost to run their AC was fixed. Whereas when the wind wasn't blowing and it was hot out, I was aware that it meant burning more natural gas, and was perfectly fine with having my thermostat a bit higher because it was going to cost me more.
Regulation and politics have killed innovation, once again. Fuck that.
I have a differing opinion, which is that paying market rates for electricity is not an innovation. It's a differing business model, and it's arguably a regression in terms of convenience and usability.
As a consumer who doesn't work in the power industry, I don't really want to follow the power costs. When I feel cold, I want to turn the heat on. When the dishwasher is full, I want to run it. Having to do an additional mental check every time I want to use electricity sounds annoying and stressful for me.
Is a market based solution better for slowing down climate change? Absolutely. Is that more importance than convince? Yes. However it's not an innovation. It's the consequence of humanity realizing that a relatively common and easy to use source of energy is killing us and we suddenly can't use it.
I don't see floating market rate energy being a meaningful part of the answer to climate change. For every person like you who likes the direct feedback mechanism of market pricing, there will be 10 people who vote against it as a price increase and 100 who just won't care. More and more, it looks like the solution to climate change will be a combination of: cheaper renewables, better battery storage, some carbon intensive power generation to bridge the gap while we get to the previous two, and (in the far far future) fusion energy. Asking consumers to change their habits or reduce their energy consumption is a nonstarter.
If I had a gas station that offered gas for a fixed price, that was higher than the average gas price in your area, would you agree to use it exclusively? I don't see how the mental load for griddy is fundamentally different from buying gas at a gas station. When I notice prices are low I make the extra effort to top up my tank even if it means a small inconvenience. Do I drive less if gas prices are higher? No but other people might choose to.
> If I had a gas station that offered gas for a fixed price, that was higher than the average gas price in your area, would you agree to use it exclusively? I don’t see how the mental load for griddy is fundamentally different from buying gas at a gas station.
Gas purchases are discrete events that, with extremely minimal planning are capable of being purchased from different outlets each time and, usually, time shifted to deal with per-provider or very short term spikes.
Electricity puchases are continuous and the ability to shift sources or time shift is often significantly less without much more significant planning.
Paying a premium for insurance against extreme variation makes some sense in either case, but a lot more in the latter case.
First of all, the typical person does not fill a car with gas nearly as often as you use electricity. Secondly, if I had to choose to use one of those gas stations exclusively, I might choose the one with a fixed rate, because:
1. It would make it easier to predict how much I would need to pay for gas each month, and simplify budgeting.
2. I don't need to worry about keeping track of the current price of gas
3. Depending on how my driving schedule matches the variance in prices, it may actually be cheaper for me.
Couldn’t have said it better. This was the same experience I had. Unfortunately a lot of the bad press came from examples of people who signed up and agreed to Griddy’s terms (which were super straightforward) and then acted as if they were on a fixed rate plan.
Griddy was a tiny portion of the market and the focus on them only benefits those who couldn’t keep the grid reliable and profited immensely.
Well to be fair its not Griddy's fault US infrastructure is a joke.
Variable rates work fine when you live in a country where the electrical grid isn't neglected.
> I have a pretty dark outlook when it comes to global warming, but when you're a griddy customer and you're watching your meter constantly, it just made sense.
Yes. However...
During the deep freeze, the consumer utilities were bidding up the price of juice with money they did not actually have. Ordinary consumers should not be competing for electricity with buyers who are able to buy on margin.
Now we know that this can happen. Now we have to plan an alternative.
Thankfully, you cannot participate in a real time electricity market if you don't have millions of dollars of copper, steel and aluminum installed to generate or use it.
That's not actually what happened here. ERCOT was letting bids come in at crazy prices because at that point the only thing they were paying attention to was whether the Texas grid would collapse entirely. Volts and watts mattered. Dollars? A shared illusion anyway.
Now, not only did Griddy put its users at risk of high bills with these prices, the utilities bankrupted themselves putting these bids in too. The wind farm operators could only laugh while they were getting these crazy bids for every watt from a turbine that wasn't iced up, because they knew they were getting paid with imaginary money, and they were operating the windmills because what the hell else could you do?
The nat gas operators, well, they needed real money because they needed to buy gas at crazy prices, and the nat gas drillers needed money to get crews out to thaw out their infrastructure, which is extra important because we're talking about working outdoors in dangerous weather, and the crews are Texans that had not seen weather like this before.
So TLDR, none of this makes any sense, and it will be settled in bankruptcy court.
I'm not trying to claim that prices didn't naturally rise by a lot, but in that particular situation (linked above), it's very clear that a lot of customers were paying $9/kWh when they could have paid $0.03/kWh. The latter is obviously easier to afford.
This event sucked for griddy customers, no doubt. But for the state of Texas and ERCOT to lock the price 300x higher than it would otherwise be is ridiculous.
the griddy model is that everyone should take a sort of second job as an electricity trader, but not make any money doing it.
it wouldn’t be a problem if it were just a matter of paying a little more or less, that would be great.
but there are catastrophic tail risks. so you have to constantly be watching because if your vigilance slips for even a few hours at a crucial time it could financially ruin you. traders at least get paid to do this and can de-risk when they need to.
The only reasonable thing you said was that people generally aren't acutely aware of their energy usage. That has more to do with our society's attitude towards how we build things and how we get around than anything else. To condemn people to have to devote all their waking hours to monitoring their meters is an absurd solution to that problem.
Lack of regulation and poor politics have killed people, once again. Griddy was a stupid solution to the wrong problem.
I'm sorry, but calm down. This is not the end of [dynamic pricing](https://en.wikipedia.org/wiki/Dynamic_pricing#Time-based_uti...). It's just the end of one specific company's model of assuming it could just make its customers shoulder unlimited financial losses.
> Public Utility Commission of Texas (PUCT) cited its “complete authority over ERCOT” to direct that ERCOT set pricing at $9/kWh until the grid could manage the outage situation after being ravaged by the freezing winter storm.
I just want to point out that Global Warming as an existential threat is more of a political position and less of a scientific one.
If the scientific method were applied to real planetary destruction we would rank the use of farmland as #1. If you doubt this, use Google earth and zoom in and notice the absolute scale of destruction farmland has done to the planet.
The planet has been 15 degrees hotter than it is today 150 million years ago. The fossil records show that this was an abundant time for the planet. Extinctions (including the most recent one) happen during ice ages. A hotter planet with more CO2 load would increase the greening of the planet.
Additionally, there is 33x H2O in the atmosphere than CO2. Look at the total spectrum absorption of H2O vs CO2 and you’ll find H2O is a more potent green house gas, having nearly the same dipole moment. If the run away green effect was possible with CO2, it would have already happened with H2O, but this has never occurred in geological timeframe, ever.
Additionally, all CO2 increases can already be mitigated via several technology stacks. One is the use of nuclear, which despite some accidents has the lowest death rate per terrawatt hour by an order of magnitude. Despite this astounding safety, the media has pushed to eliminate nuclear power even going so far as BANNING it under the green new deal.
Additionally, it was discovered by oceanographers in the 1980’s that surprisingly, phytoplankton, the largest natural sequestered of CO2 on the planet was bottle necked by... drum roll please... iron in the ocean!
Phytoplankton feeds zooplankton feeds fish. This is why there are record fish catches four years after a volcano eruption.
And when this was discovered by oceanographer John Mayer, who proclaimed “give me half a tanker of Iron and I will produce a new ice age”, the UN finally addressed this claim by systematically banning ALL study of any size of iron ocean fertilization in 2008, despite the immense protests of oceanographers around the world.
This embargo was violated in 2012 by rogue scientists off the coast of Vancouver BC who dropped a large quantity of iron off the coasts to prove that the iron would sequester this CO2, as well as Chili bucking the UN and going forward with its own studies on ocean fertilization.
And I’m not even going to touch on all the verified scandals in the IPCC other than to say that if CO2 was responsible for the warming then the international community could lay the whole
issue to rest immediately by an experiment whereby liquifying the air into an 11 meter vertical column and throwing a heat lamp at the top and showing that tube A heated up X% more than tube B. But despite such an obvious and dead simple experiment that would forever win the global warming argument forever, has astoundingly, never been performed.
Infact if any millionaire is
reading this and wants to settle this once for all, I offer to do the experiment, at cost, just to prove the world whether going from 300 parts per BILLION to 400 parts per BILLION actually makes that much of a difference, if any, to the two tubes.
To put that in perspective, if 11 meters of liquified air in a vertical tube represents the amount of air between your head and space, then the amount of CO2 floating on that 11 meters would measure 3mm, increasing to 4mm (+1mm from the industrialized era), while the amount of H2O would be a full 10 centimeters, give or take.
Once the scale of the difference of CO2, as a trace gas measured in PARTS PER BILLION is fully accepted onto the mind, the true absurdity of the failure to prove the CO2 super magic awesome heat trapping properties becomes so apparently rediculus that one can only go to the science papers to find this magic property. For surely, if CO2 was this great at trapping heat then it should be abundantly clear by SOME physical property that it is leaps and bounds above any other trace has that this is the case.
Yet when one looks into the “science” of human caused global warming, one gets bricked walled by a complexity argument driven by computer models with secret algorithms from the IPCC, who’s board members will benefit from the carbon credit tax, which would completely unravel with (1) the large scale adoption of nuclear or (2) the dusting of the oceans with iron composites.
Anyone can verify this narrative. I am not some an intel agent or compensated for this post in any way. Just an engineer that has spent WAY too many years going down every single rabbit hole that could have solved this problem but instead slowly realized that we as a human species have been guided down this fake environmental problem while the REAL environmental problem - farming, has all the air sucked out of it.
This post, despite being verifiable, will likely be deleted. For those that see this post before this happens, please do your due diligence and fact check this narrative. Do your own math.
This post is a little insane, but I think the most important delusion to address is the iron claims. For one, in the interest of making this searchable, I'll point out that the oceanographer quoted was in fact John Martin. For the rest, you can look up EIFEX, and then read the May 30, 2008 Convention on Biological Diversity summary, which placed a moratorium on commercial iron-seeding efforts, leaving research on the matter completely unaffected. The concern was that companies were being founded to sell carbon credits based on this possible sequestration mechanism, and it isn't clear what effect this would actually have on ocean biodiversity. Reputable and recent papers in this vein can be found here: https://doi.org/10.3389/fmars.2019.00022 and https://doi.org/10.5194/bg-15-5847-2018
The rest of the post is better off speaking alone.
> A key question concerns the amount of iron dust that would be required to induce draw down of CO2 from the atmosphere. [...] In total, this estimate concludes that ~2.8 million tons of biogenic iron oxides would be delivered over 100 days per year to the iron-limited regions of the global ocean to reach conditions where iron was not limiting primary productivity.
Yes, H2O is the strongest greenhouse gas, but its concentration (~5000ppm average) is limited by temperature and it will condense out as mist/clouds/rain. CO2 is nowhere near saturation levels, so atmospheric levels of CO2 have been growing. [2]
By all means you can tell the world that we should go back to a planet that looks like it did 15M years ago (miocene), but a 40m sea level increase is a pretty hard sell and IMHO does not match the "this is fine" tone of your post.
CO2 tends not to liquify but forms solid dry ice, so CO2 is not present in "liquid air" [3] (nor is anything with a boiling point <80K). Your proposed "obvious and dead simple" experiment is flawed.
"an engineer that has spent WAY too many years going down every single rabbit hole" is hard to justify based on the easily-debunked assertions you make, but even if you are correct and farming is the biggest cause and that it can/should bear the brunt of reduction efforts, it does not follow that we should therefore ignore all other avenues to address the problem. Yes, iron may be a part of the solution, but can you not see that building wind turbines, insulating houses and having electric cars is less risky than dumping huge quantities of iron in the sea?
Please consider that there _is no conspiracy_ and that scientists are mostly underpaid humans with a deep interest in their areas of study. Also consider that we know that fossil fuel companies have been funding AGW-denial. If you want conspiracies, try looking there.
I always wonder how people can fight tooth and nail for something small and local like their neighborhood to never change and then once there is a global phenomenon that is directly threatening the culture of every human on the planet they don't give a damn.
How is your neighborhood supposed to stay the same if the planet is getting hotter over time? It might only be 1°C right now but since nobody really cares we are likely to head to something less reasonable like 4°C and that will definitively impact culture.
To a 50-60 year old person with 10-30 years to live? I doubt global warming will have a major impact on their life. The cost of what is needed to change anything WILL be visible on their very next paycheck.
Now compare this with voter turnout by age bracket, and the current path of the world is pretty easy to see as people looking out for their own best interest, which is rational and what we are hardwired to do.
Let me address the H20 issue with the runaway global warming theory.
There is literally an ocean of H20, therefore the total load of H2O is elastic (unlike CO2). Hotter temperature -> more H2O in the atmosphere -> hotter temperature -> repeat.
Yet this hasn’t happened. The point about water condensing is besides the point, because water is also vaporizing and the equilibrium point is determined by temperature, which the runaway theory says is a divergent phenomenon.
Let’s rewrite the original assertion:
Higher Temperature -> Higher water vapor equilibrium —> higher temperature. This cycle can repeat endlessly because of the ocean.
As far as independent scientist doing global warming research on their own dime, this just isn’t true. There is public and private money set aside to study this.
Highly credentialed global warming skeptics like Judith Curry have generated around ~150 papers which conclude that global alarmism over human caused global warming is a “hoax”. Her actual words.
Astoundingly, there is a complete media blackout on this scientist and others like her. Infact a huge case the msm won’t cover anymore is
the case of Tim Ball who decried global warming alarmism as pseudo science (Corruption of Climate Science Has Created 30 Lost Years," Jan 10, 2011).
He was sued for defamation by Michael Mann, the same person who was caught up in email scandal or manipulating climate data.
Tim Ball went to court and got discovery of Michael Mann’s climate date. 10 years later, the judge finally dismissed the case because Michael Mann failed to produce the data by the judges orders.
This is not “science” this is a religion run by a corrupt cartel.
This is ridiculous. It was killed because it removed stability from a market that shouldn't be unstable in this day and age.
Household electricity use isn't something to be this concerned about i.r.t global warming that you create thousands of dollars of debts for Americans because they didn't watch a ticker for their electricity usage.
It's pretty privileged to be sad that a company that created millions of dollars of debt is going to be shut down.
It is, but then people couldn't pay -- and since they couldn't pay, neither can Griddy, since it ran cash-lean and didn't extract enough profit during low rate periods to cover this amount of delinquency. The $2.1B shortfall is being assessed equally among resellers, so Griddy acting like they're some victim instead of just another participant is a bit silly. You don't see Encor complaining about the shortfall makeup assessment, despite all of their customers being on fixed-rate.
Griddy is obviously insolvent since its members are, so far with you. But many other providers are also defaulting. Why are they forcing only Griddy to shut down? Conspiracy theory: putting them into bankruptcy with no hope of recovery has a good chance of making all those huge bills you have read about in the press go away.
This strikes to me as a typical American solution to peoples crass financial ignorance: socialize the debts. Here is what happens next:
> If buyers are not able to cover their bills, Ercot will pay the generator and the charges will ultimately be spread out to other market participants, including other generators and traders, as permitted by regulations.
To be clear, today's decision actually is your quoted statement -- there was a $2.1B shortfall, so ERCOT is requiring payments from its transmitters to cover the payments it already made to the producers. Griddy is unable to cover its portion of this payment, so is exiting the business instead. There are other resellers in deficit, but none that I know of in default -- Green Mountain, Reliant, Encor, Vital, NEC and so on will simply pay their portion of the assessed shortfall and continue business as usual.
Further I don't think Griddy was actually a generator. I believe they fundamentally operated as broker/transmitters at best. I.e. futures trading. Everyone else had the capacity to meet demand, and Griddy served as the buyer to connect client demand to supplier generation capacity. Most of the other utilities have privately owned electrical infrastructure in play. That's part of the reason why Griddy got away for so long running as cash lean as they were. No infra upkeep, no maintenance to coordinate or hedge, just price discovery and arbitrage.
When all their customers were in a position, however, where they needed electricity from Griddy, but no one had any to sell... Well... That's why spot buying can leave you with your arse out in the cold.
I do feel sympathy for those caught out, but I also understand what Griddy's intent was, even if I think the position and business model they chose was unwise. It goes good when its all good, but when things go bad, you have a responsibility to have been planning for that eventuality.
It sucks. It feels wrong that it should end up happening that way. That's kinda jow life rolls though. At least, has been for me.
This being wholesale doesn't somehow make it not price gouging. Raising prices on a product (electricity) that you were already selling during an emergency is widely considered to be highly immoral, and is illegal almost everywhere, including Texas [1]. There does not appear to be any exception for "wholesale" goods, or b2b transactions, nor should there be morally since that would defeat the whole purpose of keeping necessities flowing.
The fact that ERCOT sets the prices makes this whole situation complicated, I have no clue if anyone actually broke the law here. But certainly setting the price this high was immoral, useless, and just a transfer of money from people buying electricity to the people who were already producing as much electricity as they could at 1/10th the price. The fact that these people participated in the wholesale market assuming that that market operated under the normal norms of western civilization is not particularly their fault, but an entirely reasonable thing for them to have done. The solution to this problem is not to not let people participate in markets, but to make markets actually follow the normal norms of civilization and not engage in unethical price gouging during emergencies.
>But certainly setting the price this high was immoral, useless, and just a transfer of money from people buying electricity to the people who were already producing as much electricity as they could at 1/10th the price.
Not really, raising the prices also increases supply (eg. hiring workers to work overtime to get it fixed, or renting out expensive equipment to get it fixed faster), as well as discouraging non-essential use (if electricity costs $5/kWh you sure as hell are going to do everything in your power to cut your usage, rather than blasting the space heater to a comfy 75 degrees).
There is a point to which this is true, and there is a point at which this is no longer true because everyone is already doing everything they already can.
Texas was quite obviously well beyond that second point during this crisis.
Moreover that only excuses the people who actually had those extra expenses of charging more. The rest of the producers of electricity are morally (and under normal circumstances legally) obligated to not also raise their prices just because they can.
> There is a point to which this is true, and there is a point at which this is no longer true because everyone is already doing everything they already can.
Are they? I'm sure if the electricity rate was high enough it'd be worth it to airlift diesel generators across the country to make up the shortfall. Hell, you can probably fly in temp workers from europe/asia to do the necessary fixes.
> it'd be worth it to airlift diesel generators across the country to make up the shortfall. Hell, you can probably fly in temp workers from europe/asia to do the necessary fixes.
This event lasted 3 days. You think these private entities had the ability to coordinate airlifting generators (for what it's worth, IIRC fuel was the problem, not generators), and bringing in foreign skilled labor, to address a situation that will last a couple days?
If your next argument is going to be "The US Government/Military can do it" expect my response to be "If the US government can solve this problem for it's citizens during a crisis, it should be doing so whether the set price of electricity is >$9/kWh or not"
Someone did this in the aftermath of hurricane Rita I believe. They rented a uhaul and bought some generators, and drove halfway across the country to sell them to people the very next day. Then they got charged with price gouging.
Restricting them to a maximum 25 percent markup for all that effort (i.e. making them eat a loss) will obviously prevent people doing it. It's still just another example of the economic rule that price fixing creates shortages.
Price gouging is when you're you're trying to maximize value extraction for minimum effect.
People can deal with propping up a profit for someone going out of their way to get something done as cheaply as they can. Where they get annoyed is when you have the help there, but hold it hostage because you aren't feeling like people are willing to pay you enough. Not once on showing justifiable expenses has anyone ever argued at me being unreasonable.
Further, there's a point of diminishing returns where individual action is best avoided or at least organized to increase effectiveness.
Have your town pool money to hire tankers to run down instead of filling your pickup with gas cans. Force multipliers.
Price gouging laws are there to hedge civic stability. You can't organize people to solve a problem peacefully and efficiently if they're taking up torches amd pitch forks against those greedy haves. Everyone has to still be set, plus a bit extra to give to get community driven force multiplication.
I believe there is an exception to price gouging laws if the cost of producing the direct item/product/service is impacted. In this case Griddy's cost went way up as well, which makes them not-clearly-in-the-wrong.
Do you have any idea how much damage can be done to the grid if there is a great disparity that forms between demand and supply?
You literally had machines running on redline to keep up with demand because so much generation capacity went offline at the same time, and the weather precliuded deployment of either the personnel or equipment to handle it safely and quickly.
That is why the statutory max price was set. If you were going to use that power, and put that generating capacity at risk, so PUC thought, you were going to pay for it. They figured the pricing signal would control demand.
Well... They were wrong.
"Your debt collection stops being my concern when my and my dependent's survival is on the line." --Every human being in the back of their head, in the lizard brain, ever.
Sure, it feels bad afterward, and you try to follow what guidance you can at the end of the day, and reach out to those you're in a position to reasonably help, but that was a demand inelastic situation. Be able to pump a certain threshold of BTU's into your environment by money, barter, burning, or retaining via insulation... Or die.
I'll give ERCOT and PUC the benefit of a assumption of reasonability given info at the time; but I really can't forgive the human nature centric myopia that the homo economicus model has foisted on the world.
>They figured the pricing signal would control demand.
>Well... They were wrong.
I don't think they ever thought it would reduce demand, they just thought it would increase supply. The reasoning for not reducing demand is simple: most consumers pay fixed rate plans, so if you were at home and had power, there really wasn't any incentive for you to reduce power consumption.
Yes, definitely wasn't trying to accuse Griddy of price gouging here, they're just a middle man. I am accusing the people who set the price of doing so (at least morally), and perhaps even the producers of the electricity who didn't set the price (as well as those who were involved in setting it) since they are going along with selling it at that exorbitant price.
> People buying electricity at wholesale prices is on them.
This feels too much like victim blaming for me to agree with. In general, people are lead to believe "wholesale" just means something like "cheaper in bulk" à la Costco. I am sympathetic to anyone who was ignorant of the fact that it meant their personal rates could be much much higher too.
Broader: Literally every other residential customer in the United States other than Griddy customers in Texas. (There’s some variable rate but not like that)
I had a friend who worked there and we discussed potential solutions to this after the 2019 spike (I worked at a BNPL fintech and now at an insuretech). It was really a lot for a startup to do and no third parties would take on a program at that scale.
Technically this company was trying to fulfill the market need driven by the deregulation, and trying to provide lower cost solutions to the consumer, but they needed to build something to help with these spikes. They could have eventually I think, but just a tough business frankly!
> It was really a lot for a startup to do and no third parties would take on a program at that scale.
No one wanted to take the other side of a tail risk trade?
I wonder if they could have made tail risk bets that prices could spike during seasonal occurrences that had small fixed upfront costs, but high enough payout to absorb losses while still keeping prices lower than competitors. If they could have, none of us would be talking about this now (except maybe "How one energy company won big betting that energy prices would eventually spike").
Well for starters you're adding a third party into the mix.
I guess that sounds sarcastic, because probably for most people it's not worth it, but there's probably a point where the added overhead of the third party is worth the savings. Maybe then the third party insurer would be motivated to build active cost monitoring device that will cut the power to your house when the price gets too high. Do you trust your power provider to build un-backdooered logic, that they won't use for other purposes, for such a thing?
It being a third party also affords other opportunities, like, not buying the insurance and building your own power/price monitoring kit/algorithm. Suppose you are willing to pay a high premium to keep your freezer running but not the wall warts on all of your voltage-transformed devices?
I disagree completely. This business model should never have been allowed to exist, in the same way and for the same reason that "almost fully self-driving cars" should not be allowed on the roads: humans are just not capable of quickly and correctly responding in situations where 99.99% of the time no input is required and once in a blue moon you have to act immediately to avoid disaster.
I would love the opportunity to sign up for this, if and only if they could send me some test messages so I could make sure my load-shedding scripts work.
The opportunity to engage more directly with the market would be cool and useful for folks with the technical chops to participate appropriately. And if everyone's smart appliances and bitcoin miners could actually cut themselves off with price spikes, _the grid would be healthier for it_.
I think of it like self-insurance. If you have the financial resources to weather the foreseeable eventualities, you can forego many traditional types of insurance. However, you have to prove that you have the money in the bank.
In this case, there was nobody checking that these wholesale customers had the technical chops to meaningfully participate in the wholesale market. THAT is the problem. The market should exist, but just like you can't register a car without either normal insurance or proving your self-insurability, you shouldn't get electrical service without either paying normal consumer rates or proving your ability to play the wholesale game.
Better. Retail price in Texas depends on time-of-use, so you're paid more per kWh for the electricity you net-generate during the day than the electricity you net-use during the night.
The only way other electric companies would be able to eat the difference between retail and wholesale rates would be to overcharge for years, hoard cash, and then pay out that buffer during this crisis. Presumably, this is what they did.
Except during events like this, that people are not and cannot be prepared for. Griddy going out of business is nothing -- if someone else wants to take up the business model, they can tomorrow. Individual people being charged thousands for debts difficult to discharge is the real harm.
For one, I suspect that ERCOT wouldn't allow a new company with this model access to the grid immediately, at least until this blows over a bit.
But regarding "thousands in debts"; I'm curious how that will be handled. It seems that these are debts to Griddy, but Griddy no longer exists, apparently for non-payment, which implies that ERCOT does not expect to be paid. Do these customers now owe this debt to ERCOT directly?
Griddy is shutting down. They exist for the moment, the debt they are owed is an asset, and even if they are dissolved their assets will be sold off to pay their creditors, so someone will be owed the money.
Maybe, because it's going to (on average) be hard to collect. But the debt doesn't go away automatically or get reduced, it goes to whoever paid that penny...
(Now, if that's John Oliver [0], maybe it also gets forgiven, but that's not the usual case...)
There's a statute of limitations on collecting debt. Looks like in Texas, it's 4 years. A creditor (or its assignees) can certainly take debtors to court and get a judgement, which would reset the statute. But that's a lot of expense, and may not be recouped.
If Griddy is booted out of ERCOT, Griddy (or its assignees) probably can't prevent them from switching to other providers with a balance due, and probably can't have their electricity turned off for non-payment, so for customers that ended up with a balance due in the thousands, I expect they'll have to write off a lot of that.
(I'm not a lawyer, if I was a lawyer, I wouldn't be admitted in Texas, I didn't even read the law, just a web page that looked appropriate)
Presumably it would only cost a penny because whoever buys it doesn't expect to collect very much and will be motivated to negotiate.
It would be really nice if rather than taking a low amount they sell it directly to the debtors themselves for such a markdown, but I guess they'd think that sets a bad precedent.
But on net, people _would_ be better off having taken the savings from Griddy and stuck it in the bank. Consumers aren't losing money overall in the Griddy model -- it's just happening at once.
The other providers can only survive (assuming they do) by having overcharged for years.
That wasn't overcharging. They had infrastructure costs to meet.
I mean, I could be wrong, I"m not a CPA with their books in front of me... But I cannot see running a power network as anything but expensive.
Now whether they imvested properly or not, that remains to be seen. The fact that arlt least we didn't totally lose everything shows it wasn't all for naught.
Almost fully self driving cars are physically dangerous to others. Whether or not you think people should be allowed to bankrupt themselves speculating on wholesale energy prices; it’s an entirely different situation.
The problem here as I understand it is that ERCOT stepped in and artificially set an absurdly high wholesale price, to try to stimulate production. And then Griddy was forced to pass this price straight down to their customers. The narrative about this being a "market failure" seems really wrong.
Really seems like it should be on TX to make the customers whole here, given that they ordered Griddy to pass along huge amounts of money to producers for days.
That solution wouldn't really be fair either. All the other electricity providers are going to have to sit down with ERCOT and figure out how to split the $2 billion bill here (https://www.wsj.com/articles/texas-power-market-is-short-2-1...) ; why should Griddy get their share subsidized by the state just because they passed the bill on to consumers? I don't think you're entirely wrong, but it seems like the bottom line is that Griddy's billing model just isn't compatible with the ERCOT market.
Before PUCT pegged the prices, we were able to load-shift our showers, heat, and device charging to parts of the day where there actually was still sufficient supply to drive prices down under 50c/kWh.
Even if you aren't shifting your use around, there's a really big difference in the total damage done by power rates pegged at $9/kWh 24/7, and power that was occasionally hitting this rate but was otherwise ~averaging somewhere on the order of $2-3/kWh over a 24h period early on in the crisis.
The day before PUCT pegged the rate had a few hours of relatively tolerable prices. Thankfully we lost power for nearly a full day of the fixed $9/kWh rate.
>The problem here as I understand it is that ERCOT stepped in and artificially set an absurdly high wholesale price
Incorrect. ERCOT set a price ceiling, not a price. The wholesale price without the ERCOT price ceiling would have been far, far higher than $9000 kwh. That ERCOT is at blame for the price ceiling is absurd.
* ERCOT is to blame for a lot of other things though.
A) There are actually 2 price ceilings. The $9000/MWh is the "high" cap. The situation lasted for long enough that they were supposed to switch to the "low" cap of (the greater of) $2,000/MWh or 50x the natural gas price index. Due to the also high price of natural gas during the crisis, this "low" cap ended up being higher then the "high" cap.
B) To protect the grid at a techincal level, portions of it were disconnected (load shedding). The result is that the "market" value within the grid that remained connected actually did drop below the cap. Since this only happened because supply was so low that some consumers couldn't buy at any price, the decision was made to set the price to the cap to better reflect the full demand instead of just the demand that was still connected.
> “Because energy prices should reflect scarcity of the supply, the market price for the energy needed to serve load being shed in the face of scarcity should also be at its highest,” the PUC’s news release stated.
> The PUC added, “The decision was spurred by ERCOT’s discovery that energy prices across the system were clearing at less than the current system-wide offer cap of $9,000 established by Commission rule.”
> In addition, the PUC ordered wholesale prices be backdated to February 15 when the storm escalated circumstances in the state.
I don't blame them for doing whatever it took to attract electricity generation onto the grid. But passing the costs directly to customers seems like the wrong way to handle that side of the transaction. I think the difference should have been paid for as part of the overall relief package.
I think the point is that no price would have made any extra electricity supply available. All this $9000 imaginary price did was provide the remaining generators with an extra $8000/MWh and causing a number of electricity wholesale buyers (far from only Griddy) to default.
It's not like any generator is making money having a power plant sit idle, they are losing tons. Any positive price is incentive enough, but no level of price can make whatever is causing the outage to be fixed in 4 days. The Texas grid is an entirely isolated system.
Wikipedia disagrees with you: “On February 15, during the power crisis, the state's Public Utility Commission required ERCOT to set the price to the $9,000 maximum. The commission reasoned that the trading prices for energy (as low as $1,200) were inconsistent with the supply scarcity.”
It links to source material that mostly reads as gibberish to me but does seem to make clear near the start that PUCT/ERCOT have the power to change the price and were unhappy that it was lower than $9000.
Out of curiosity can you point me to where that's stated in plain English by the parties involved (if there is such a place)? I must have bad info/assumptions
> ERCOT has informed the Commission that energy prices across the system are clearing at less than $9,000, which is the current system-wide offer cap pursuant to 16 TAC §25.505(g)(6)(B)... The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market... the market price for the energy needed to serve that load should... be at its highest.
It’s not exactly plain English, but the Public Utilities Commission is pretty clearly telling ERCOT that they should ignore the current clearing rates and raise prices until there’s enough power or they hit the $9,000 ceiling, whichever comes first.
In the middle of an emergency, when power is going offline for physical reasons, the usual laws of supply and demand simply don’t work- supply is inelastic and no matter how high the price gets, supply cannot be increased. In that situation, the combination of price controls and rationing is a better solution. Markets are not magic. They shouldn’t be idealized as a perfect panacea. They are one possible mechanism among others to manage production and price.
There was a bizarre phenomenon around the national reporting on people getting crazy electricity bills after the crisis. Very few of them mentioned Griddy in the headline, or even anywhere near the top, even though its customers were (I believe) the only Texans who actually got crazy bills. All the ones that I saw buried their mention of Griddy deep in the details, which gave the impression that many or most Texans were having this problem.
Griddy says "ERCOT took our members." Bloomberg says "ERCOT revoked Griddy’s rights to conduct activity in the state’s electricity market due to nonpayment."
Apparently Griddy couldn't pay the bills their customers racked up, or is waiting on customers paying their $10k power bills?
My understanding is Griddy needs to pay within a small number of days of Griddy customers receiving the power.
But it looks like Griddy had set up customer billing on a prepaid system. You had to deposit $49 to start, and they'd debit your usage as you went. If your balance was low, they'd charge your credit card on file. I would bet at least some customers' hit their credit card limits and their Griddy accounts have a negative balance.
Even for those customers they successfully charged, they may not be able to access that money right away. Some of their customers are likely to dispute the charges, and others will take a long time to settle their negative balances. Griddy would need to have a lot of reserves to pay their current bills while waiting for their customers to pay, and they clearly don't have them; also, it seems like they were unable to get extra capital at the drop of a hat, like Robinhood was when they needed it recently.
AFAIK Griddy also made a point of not cutting anyone off for non-payment during the catastrophe, further exacerbating how large some of these bills could get.
From looking at their documents [1], that's part of the standard Public Utility Commission of Texas standard terms: "Your REP may not order the disconnection of your service for any of the following reasons: for non-payment during an extreme weather emergency"
So, it wasn't really Griddy's choice during the emergency. After the emergency, there's not much of a point to cut people off, as the normal usage is peanuts compared to what was incurred during the emergency.
I always thought this was a good idea for a company. Almost all of the electricity providers in Texas all buy energy at wholesale prices and lock customers into long term contracts. If you were an electricity provider, what would be the best plan that you would want for yourself and your friends? My answer to that would be to have access to buy energy at the cheap wholesale prices for a flat monthly fee. This seems to be the griddy model and I almost switched to them.
It's a good thing that I didn't because griddy customers are the ones that got multi-thousand dollar electricity bills after the recent Texas disaster.
It's a good idea if you have a whole-house generator giving you optionality. Even running on diesel, it's only like 50 cents per kWh vs $9/kWh. If you chop off the most expensive part of the curve, wholesale can save you a lot.
It might be a good idea for whole-house generator companies, actually: offer your customers the same thing as Griddy except with the option of automatically switching to your generator if rates get insane. It's actually good for everyone as it reduces grid power consumption.
In fact, I want to see a grid-connected solar/battery/inverter with a dual-fuel (natural gas/propane) generator that feeds into the inverter/charger and then possibly into the grid. That'd be sweet.
A wholesale-only Griddy company could avoid the negative publicity if they only sold to folks with backup power options.
There's a bit of an issue in that you don't really want to run your generator for too many hours. I think mine wants service every 100 hours or every year whichever comes first. Maybe 100 hours is enough for actual backup and substantial peak shaving though; I certainly haven't studied the spot prices in TX, as I wouldn't live there. ;)
If you had local battery storage, and decent forecasting for house demand and spot prices, I think you could have some fun and save some money. Bonus if you can coordinate loads too. Of course, the more people who do that, the flatter the price curve gets, and the less incentive there is to do it.
I had been kicking that idea around in 2019 after the huge system load ERCOT experienced resulting in record spot prices. My estimate was I could generate around 2 mil/year on a 10 million dollar investment offering battery to grid during peak load hours.
I did switch to them for a month, 2 summers ago. My typical summer bills would be around $100-$150. After a $350 monthly bill from Griddy, I immediately bailed. Glad I did...
The problem with the griddy model is that there is no price cutoff beyond which you simply refuse to consume electricity and e.g. just buy a generator and run heating from that.
wholesale prices + X% with a cap of no more than +Y% increase in pricing per month. This way, there is price stability for the customer and no insane, surprise bills.
In truth, public utilities should just operate this way to begin with rather than turning inelastic demand necessities into a casino.
I think we should take it at good faith that Griddy was trying to provide a good service at what might have been a reasonable price that didn't factor in the entire Texas grid going down and the unexpected costs that would get passed on to consumers...
But, if I received a link to this page from my utility company, I would instantly feel a strong aversion towards them for the following reasons:
1. It's using a flat design image of a hand pushing a button, which might be the most generic, tech corporate aesthetic. This is a bizarre way of encapsulating the message of "We cannot feasibly perform as a reasonable service to our consumers so we're being shut down".
2. There is a reference to the word "Family". I love my family, but my relationship with them is entirely different than what I might expect from a utility company.
3. The message ends with "You will always be a Griddster.
A heartfelt thank you,
The Griddy Family"
This is the most confusing message of all.
If my electric company was shutting down after charging an exorbitant bill with this message, I would be furious. This is peak corporate speak.
I think this message is probably not what a customer would want to read and I hope people in Texas can find a service that not only works but doesn't provide such corporate-speak to a situation that really amounts to them not accounting for a major catastrophe.
I think it would be reasonable for them to own up to what happened and really speak to that instead of the message they put out. The people that used this service deserve better than this
I think a lot of your confusion stems from the media basically smearing Griddy for "charging customer outrageous rates" when the reality was that Griddy allowed customers to buy directly from the producers at the spot rate (which was based upon demand) which was then announced to all system users by the states energy management system. The price spike was due to demand overload and critical infrastructure going offline.
I LOVED Griddy. It was an amazing product that gave users the power to dictate the terms of their energy consumption based upon grid load. When energy usage was high and they needed to fire up natural gas or diesel plants to meet demand my price would change above the 10c/kwh threshold and my energy usage would fall off as my smart home would automatically shut off lights, adjust the a/c or heater, etc. Further, I was able to take advantage of excess wind energy at night by running my dishes, washing my clothes and charging my car on scheduled off peak times.
The usual wholesale price of electricity is around $0.11 per kWh. The retail price of electricity is around $0.16 per kWh. So you save about $0.05 per kWh used in an average month -- not bad! That's a free $20!
Until a "100 year" storm comes along, and makes the wholesale price of electricity $9 per kWh. Now instead of saving $20, you owe $8,800 more than usual.
Do you have any documentation or recommended reads for how and what you did? I've been thinking of doing something similar but wondering what parts make most sense to automate
As I understand it, there are two ways to purchase electricity in Texas:
1) a fixed rate per kilowatt hour, regardless of what the wholesale cost is.
2) a variable rate per kilowatt hour, which is wholesale cost.
If supply is up and demand is low, wholesale prices drop, so the customer pays less per kWh and ostensibly less per month. In that same vein, if supply is down and demand is high (like when power plants literally freeze and supply from other sources can only trickle in), wholesale prices rise and this increase is passed directly to the consumer.
On the other hand, fixed rate consumers pay the same per kWh regardless of whether the wholesale cost is high or low.
So when prices skyrocket to $9/kWh, wholesale customers are on the hook for it, but fixed rate customers will still be enjoying 10.98[1] cents (yes, that's $00.1098) per kWh because their utility provider has to deal with it.
> As I understand it, there are two ways to purchase electricity in Texas:
You are correct, but I feel this phrasing vastly overstates how common Griddy's real time pricing is (well... was). Griddy was a startup and the only provider offering this type of plan. A few of my techy coworkers used them, but most people wouldn't have even been aware this was possible.
Because electricity demand was too inelastic, the pricing signal was set extremely high by ERCOT. So folks go saddled with ~$8000 electricity bills for that month.
I had no idea what Griddy was, and after glancing at the website, I assumed it was a failed tech startup. I’ve never seen a utility company with such a modern website and design language before.
> 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. We have always been transparent and customer-centric at every step.
Griddy defaulted and was unable to pay their financial obligation to the market. They tried to put some marketing spin on this but simply put, if you cannot pay your obligations, then ERCOT will initiate the default procedure. This is terrible for the remaining market participants who are still solvent because now Griddy's debts will be shared by the market.
Griddy should inform the public how much exactly of the $2.1B short pay they are responsible for.
Griddy is/was an electricity retailer that sold at wholesale prices to customers. The cold front in texas lead to extremely high prices. This impact has been most evident for Griddy users who did not reduce their energy usage. There have been many news reports about people with $9k or $16k energy bills.
Griddy is a very small part of the market and didn’t make any additional profit from the raised prices but all the same they have had a lot of press.
Griddy sold people on cheaper overall prices by essentially bypassing most utility company's models in which higher prices are paid over time to hedge against extreme swings in demand. You pay a higher price because the utility fronts the risk if costs to acquire more power go to the moon.
Griddy allowedpeople to pay lower wholesale rates when times were good at the cost of beimg along for the ride if things ever went off the rails like they did last week.
Texas actually has some fairly generous consumer protection laws for things like these 5 figure power bills, so Griddy will likely not be able to recoup their losses from keeping the power going for their customers.
Interesting. I wonder if their customers that didn’t pay their insane bills get to walk away now debt free if Griddy folded or if they’ll sell the debts pennies on the dollar to collectors (whom they’ll be free to ignore).
Griddy couldn't handle their financial obligations and ERCOT knew and Griddy knew it. Can you point out other companies with a griddy style business model that are still functioning in Texas because a casual survey on startpage/ddg and I didn't find anthing
https://en.wikipedia.org/wiki/Griddy
Griddy is an American power retailer that sells energy to people in the state of Texas at wholesale prices for a $10 monthly membership fee and has approximately 29,000 members. The company itself is based in California.
During the 2021 Texas power crisis, Griddy received attention for urging its customers to leave the company. Some Griddy customers signed up for wholesale variable rates plans allowed by the Texas deregulated electricity market, found themselves facing over $5,000 bills for five days of service during the storm.
The Electric Reliability Council of Texas caps the wholesale price of electricity at $9,000 per megawatt-hour, which translates to $9 per kilowatt-hour. Customers had seen the wholesale rates hit that high previously in August 2019, but only for a 90 minute period, which the company then noted was an unprecedented long time at that price. During the February 2021 storm wholesale rates, and therefore Griddy's rates, were at the maximum for about four days. On February 15, during the power crisis, the state's Public Utility Commission required ERCOT to set the price to the $9,000 maximum. The commission reasoned that the trading prices for energy (as low as $1,200) were inconsistent with the supply scarcity. The following week, one Chambers County customer filed a proposed class action lawsuit alleging price gouging and seeking $1B in relief.
On February 26, ERCOT ejected Griddy from the Texas market for nonpayment.