Why Pay Retail? Griddy Says It Offers Wholesale Electricity Prices

Houston—Griddy wants to bring the Costco model to retail energy: Pay a membership fee; get wholesale prices for electricity.

“Griddy, through the mobile app membership, connects the home right to the wholesale price,” says Gregory Craig, Griddy’s CEO. “There’s no margin, no surprises, no hidden markups.”

Craig claims that Griddy can provide retail power at prices 30 percent cheaper than any other provider in Texas, saving homeowners about $500 a year. Monthly memberships cost $9.99.

This is how it works: Members log into the Griddy app, which will switch electricity customers from their current utility to Griddy. (Cancellation and other termination-related fees would apply.) Craig says customers are usually switched in about three days to Griddy, which would then provide power. Griddy is directly connected to ERCOT, or the Electric Reliability Council of Texas, which manages the state’s wholesale spot market for electricity. State laws that deregulated the state’s electricity market allowed municipally-owned utilities to opt-out of ERCOT, which is why a few places, like Austin, would not be a market for Griddy.

In addition to plugging into cheaper prices, Craig says Griddy can help its customers save even more money through “Griddy alerts,” real-time messages notifying customers when energy prices are especially high or low so they can adjust their usage accordingly. “The price changes in Texas every five minutes,” Craig says. “If prices are low, that’s when you might want to charge the electric car.”

In fact, Craig says customer should be able to better capitalize on times when the prices actually go into negative territory. He says last year in Texas, there were more than 550 instances when electricity prices were negative for a 140-hour stretch. “If you have a fixed-price plan, you can never take advantage of that,” Craig says. “That’s when you can get an energy credit. And with all the renewable sources coming online, those instances are doubling every year for the past four years.”

Mitch Jacobson, co-director of the ATI Clean Energy Incubator in Austin, says he thinks Griddy “is on to something.”

“If they can do what they say they can do, it’s impressive,” he says. Still, he adds that Griddy’s business model will only work as long as the price of electricity is low. “The good news for them is it’s low—and it seems that it will continue to stay low.”

Since Texas’s energy market is deregulated, consumers are able to choose among energy providers that attempt to woo them with low teaser rates. “It’s just like you might do with your cable operator or cell phone plan,” Jacobson says. “You just have to call and switch your plan.”

Craig calls those fixed-rate policies unnecessary and expensive insurance policies. Even though energy prices vacillate throughout the day, he says consumers are being charged at a higher- than-necessary rate and never get to take advantage of times when prices are lower.

“The average fixed price for energy [charged by utilities] was 7.1 cents a kilowatt hour; the average wholesale ERCOT price in 2016 was 2.8 cents,” Craig says. “That’s a huge overblown margin that’s going straight into the pockets for providers.”

Power providers aren’t incentivized for customers to use less power since they get paid by usage, Craig says. Griddy, in comparison, only makes money from the monthly subscription fee, he says.

The installation of smart meters, which measure individual households’ usage, brought opportunity for the retail power market to utilize new technologies more efficiently, and perhaps to deliver power more cheaply.

“But it didn’t really result in lower prices or better information for the customer,” Craig says. “They’re still getting a paper bill. People still pay their energy bill without understanding it at all.”

Craig says it took about two years to develop Griddy’s software and that the Los Angeles-area company decided to debut in Texas because of its deregulated energy markets. Griddy has raised investment funds but Craig declined to provide further details on how much was raised or who the company’s investors are.

Craig says Griddy could entice customers who support sustainability and slowing climate change as top priorities. “When prices are the cheapest, it’s the greenest,” he says. “When prices go negative, that means the wind is blowing and the sun is shining.”

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