Information for Creditors of Griddy Energy LLC
Case Number 21-30923 in the United States Bankruptcy Court for the Southern District of Texas
GRIDDY’S HISTORY AND BUSINESS MODEL
In January 2021, Griddy Energy was a thriving company with a unique business model. In exchange for providing electric services, Griddy charged customers a flat monthly rate of $9.99 per month plus the wholesale cost of the electric itself. Griddy was unique in passing electric along at cost, without any markup, to its customers. Using this business model, Griddy was able to save its customers millions of dollars each year over competing service providers.
Before the historic winter storm hit in February 2021, Griddy was profitable and its customers were happy. In fact, Griddy had just been acquired by new ownership in a sale of the business that closed December 4, 2020. The sale was possible because Griddy was a solvent, profitable company. It had over 20,000 customers.
Griddy’s business model left its customers vulnerable. Since the price of electricity was passed directly through Griddy, customers had to pay if the wholesale prices spiked. Customers would be on the hook even if electric prices went up to the maximum set by ERCOT – $9,000 per MegaWatt hour, or roughly $9.00 per kilowatt hour. For reference, the average price of electricity in Texas in the years leading up to 2021 was approximately $0.10 per kilowatt hour. The price getting that high was so rare, though, that customers were happy to take the pass-through pricing with Griddy, and typically saved money doing so.
GRIDDY’S CURRENT DEBT
It is easy to see just how profitable and successful Griddy was prior to the catastrophic winter storm simply by looking at Griddy’s debt. When new ownership came into the business in December 2020, they secured a loan that would allow them to draw money when they needed it. As of March 15th, when Griddy filed for bankruptcy, it owed less than $1.5 million on that loan, even though the company was authorized to borrow up to $15 million.
Griddy’s unsecured debt number is much larger: roughly $32.5 million. However, this number is misleading, considering that more than $29 million of this is money that ERCOT claims Griddy owes it for electricity delivered to Griddy customers during the winter storm. If not for this claim, Griddy’s unsecured debt would be less than $3.5 million. For a large power company in Texas, this number is not only reasonable, but extremely low.
Normally, with low debt numbers and a history of profitability, companies would be expected to survive bankruptcy and emerge profitably once again. Yet, Griddy plans to liquidate its remaining assets and go out of business. It has no remaining customers and cannot cope with the debt it owes to ERCOT.
CONCERNS FOR FORMER CUSTOMERS
During the February storm, when the price of electricity spiked up to $9,000/MWh and stayed there for over 87 hours, Griddy sent notices out to its customers urging them to switch electric providers. This was undoubtedly against Griddy’s interest as a company but was done in order to try to protect Texans from the unprecedented bills that Griddy knew would follow. When some customers were unable to switch, Griddy contacted ERCOT and attempted to get their customers mass transitioned to other providers. However, ERCOT did not mass transition Griddy’s customers until the winter storm had ended and Griddy was unable to pay ERCOT.
Some customers did pay Griddy for services provided during the storm. Now, Griddy is facing action from the Texas Attorney General and a potential class action lawsuit from former customers over its actions in February 2021. Griddy hopes to handle these lawsuits through its bankruptcy case.
In a marathon “first day” hearing on March 16, 2021, Bankruptcy Judge Marvin Isgur expressed serious concerns over protecting the consumers. The Judge spent a lot of time grilling the Debtor and its attorneys over how, when, and how often to inform former customers about the bankruptcy case and their rights. This trend will likely continue throughout the case. Former customers of Griddy have a right to know what is happening and how they are impacted.
PRLT does not represent Griddy Energy or any party in Griddy’s bankruptcy case. The content on this page is provided for informational purposes only. Nothing on this page or this website creates an attorney/client relationship between you and PRLT. Nothing on this page is legal advice. If you have any questions about the Griddy Energy bankruptcy case or anything discussed on this page, please contact us.