Updated #2, 5:20 pm, 8/14:

As first reported by EnergyChoiceMatters.com, Griddy has informed customers that it is crediting back all of its members their membership fee for August. Griddy's membership fee is $9.99 per month is is the ony mechanism under which Griddy makes a profit, the company said, given its pass-through mode. See EnergyChoiceMatters.com's story for more

Update, 4:10 pm 8/14:

Griddy has provided the following statement.

• "Certain screens in the App (Usage and Statement) were in fact correctly showing the ORDC adder. Our Wholesale screen (with the dial) was not showing the ORDC adder. As soon as we became aware of the issue we jumped on it immediately and have since resolved this issue," said Jason Huang, Griddy Chief Operating Officer.

• Savings amounts that Griddy has shown customers (which were noted below, such as $290 in savings through July 31) are compared to the reported EIA Texas State average, "which bounces around every month but is typically around 11-12 cents per kWh, and with a trailing 12 month average of 11.6 ¢/kWh," Huang said

"Finally, if I can just state for the record that we are doing the best we can to save our members money. History shows that the wholesale price + $9.99 monthly membership saves money against the reported EIA average every year. We also strive to put our members first, giving them innovation, tools, and data to help them understand and control their energy bill. We are just getting started and will always be looking for new ways to innovate and for new ways for our members to save," Huang said

Earlier:

The recent scarcity pricing in ERCOT is posing a test for retail energy suppliers using a subscription-based, real-time wholesale market price pass-through model for their business

In Texas, Griddy pioneered the concept and presumably has the most customers served under the model, though the model has inspired other REPs to follow suit and offer a similar product (such as start-up Evolve Energy)

As noted in our other story today, ERCOT pricing reached $9,000 per MWh for about 45 minutes yesterday, with sustained >$1,000/MWh pricing for an even longer period. That followed Monday's high pricing which hit $6,500 per MWh.

As could be expected, some customers seeing such pricing have expressed dissatisfaction to Griddy on social media. While such concerned customers number in the dozen or so, rather than hundreds (a tweet from Griddy did also note it was experiencing a "high volume" of customer calls), it is still instructive on the challenges facing the model, especially in the energy-only market. Customers don't tend to notice the savings, but will notice the spikes, which places a premium on the REP being able to effectively manage customer expectations and communicate the long-term value/cost of the product

One Griddy customer posted that, due to the high wholesale pricing, their average rate for the month of August had been as high as 35 cents per kWh at one point (assuming normal weather and average wholesale pricing, such average would drop once the remainder of the month is completed at lower prices). Another customer posted a screenshot of an average rate to date for August of 18 cents per kWh (representing another point in time). Another customer said that their bill for the month thus far was $220. Another customer said that their cost on Aug. 12 was more than their entire first month with Griddy

Another customer alleged that their bill for just Aug. 13 was $230

Complicating matters is that part of Griddy's app which was communicating prices to customers was not apparently including the reliability price adder, affecting customer expectations and potentially decisions. The price used for customer-set automation (thermostats, etc.) also reportedly did not include an adder until an update. It appears that this issue has been resolved, and Griddy has tweeted to some customers an opportunity for compensation due to the problem.

Also creating some customer dissatisfaction is Griddy's sole payment option of credit card under its pay as you go model. While the fee is set by Griddy's processor (2.5% + 25 cents a transaction), the extreme wholesale pricing is causing more transactions as balances are used faster, and the higher dollar amounts naturally have a higher fee due to the fee being set as a % of the amount

And while Griddy had saved customers to date, and may still do so for the year 2019, that may not be enough to quell customers who can't stomach large bill shocks, with bills of perhaps $400-500, for a single month, even if the plan, over a 12-month period, provides savings and lower bills for 11 months.

Worse for any REP with this model is enrolling customers right before the peak pricing. Such customers (and there were a couple of new customers who noted their recent sign-up on twitter) don't have the benefit of seeing several months of significant savings to know how the model performs over time.

Even before the uber-peak pricing of this week, Griddy had stated that, for the week of August 4, its members paid more than the Texas average, at 15.8 ¢/kWh vs. the Texas average of 11.6¢/kWh.

Griddy noted that it was only the 4th week in Griddy’s history that its rate was higher than the Texas average

Griddy has been showing in its responses to some customers a chart showing that its year-to-date savings through July for its members had been about $290. (see image here)

Griddy has in its responses to customers been emphasizing the "long game" for its product and the prior savings it has provided. The company has noted, however, that it does not have a termination fee if customers no longer wish to be with Griddy

Even if the model of wholesale pass-through pricing (with membership fee) does provide savings over 12 months, the ongoing challenge will be managing bill shock. Even though fixed pricing with higher built-in margins to the REP may be "worse" for customers (in an absolute dollars sense, putting aside individual customer preferences), the model will have to overcome customer expectations and biases in which customers are much more likely to think about changing their provider when they receive an abnormally high bill, versus a model where bills are, relatively, stable month to month, and the customer becomes complacent and sticky, even if those "stable" bills are higher than wholesale pass-through pricing most of the time.

-- By Paul Ring