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Provider Shut Down By ERCOT, Others Filing Bankruptcy and Lawsuits

In the wake of Texas’s recent winter storm, ERCOT has revoked electric provider, Griddy Energy LLC’s access to the state’s power network. After Griddy’s 10,000 customers were charged up to $9,000 per megawatt hour, ERCOT announced that it had “effectively shut down Griddy,” according to a statement on ERCOT’s website.

ERCOT was transferring about 10,100 Griddy customers to others on Friday. Retail power providers that do not pay invoices within 72 hours can have all their customers reassigned.

This comes after a Chambers County woman filed a $1 billion class-action lawsuit against the provider, accusing them of price gouging customers during the freeze. The woman’s bill spiked to $9,340 the week of the storm, compared to her average monthly bills that range from $200 to $250, according to the lawsuit.

In a statement issued late Friday afternoon, Griddy said: “The lawsuit is meritless and we plan to vigorously defend against it.”

The grid operator’s handling of the severe weather fueled a firestorm of criticism from residents and state officials who blamed ERCOT for lack of preparation for the severe cold. ERCOT called on utilities to cut power to protect the grid, which left 4.3 million people without heat or light and led to billions of dollars in damages.

Griddy, however, is not the only provider to come under fire. After hearing reports of some Texans receiving massive electrical bills, the state’s utility regulator said it’s investigating companies that offer their customers rates that fluctuate based on the spot price of wholesale electricity.

The Public Utility Commission of Texas on Wednesday announced the probe into what is known as indexed retail electric providers. While these plans are allowed under state law, PUC Executive Director Thomas Gleeson said in a statement that “an influx of complaints into our Customer Protection Division has caused concerns that questionable business practices might be exacerbating the situation.”

In total, ERCOT has said $2.1 billion of its service bills went unpaid from utility and other grid users, about 17% of the total amount owed for a stretch of last week. ERCOT, which collects that money and uses it to pay operators of power plants, said it would use $800 million in a revenue account to pay them for some of what they are owed but would be $1.32 billion short. It also said it had initiated drawing collateral payments from the retailers who didn’t settle their bills, a sign that some may no longer be solvent.

In response, retail providers said ERCOT improperly raised the rates unilaterally during the blackouts to incentivize generators to come back online. Due to the unprecedented rates, some retail electric providers have not been able to collect payments from customers, so now retail providers are telling the state they can’t pay.

The shortfall in payments is set to trigger a bitter fight in Texas over how to cover the gap. In the rare instances when market participants cannot pay their bills, ERCOT spreads the costs among remaining electric retailers, municipal power companies and others purchasing electricity.

Denton, a city in North Texas that saw its energy costs skyrocket during the crisis, filed a lawsuit against Ercot, arguing that such extra payments were “an illegal and unconstitutional raid by [ERCOT] on the credit of cities that operate electric utilities.”

The city owns and operates its own energy provider — Denton Municipal Electric — and says it sued to prevent ERCOT from shifting the cost of electricity not paid by some market participants to others, including cities.

Brazos Electric, the largest and oldest electric power cooperative in Texas, filed for bankruptcy protection in Houston on Monday after ERCOT issued an invoice last week for $2.1 billion. Considering this bill was nearly three times the cooperative’s power costs for all of 2020, Brazos responded by issuing a notice of force majeure, rejecting the bills.

ERCOT has not relaxed its order requiring companies to pay fees within 72 hours to avoid have their customers reassigned to big utilities.

Experts said that if ERCOT can’t come up with the money, it may have to be bailed out by the state.