Griddy Forced Into Bankruptcy by Crisis From Texas Storm
(Bloomberg) -- Texas power retailer Griddy Energy LLC filed for bankruptcy Monday, becoming the latest casualty of the powerful cold blast and sweeping blackouts that pushed electricity prices to historic levels.
The company, which came under fire after its customers received exorbitant power bills after the outages, blamed its downfall on Texas’s grid operator, saying in a statement that power prices were kept at peak levels for far longer than needed. Griddy listed assets of up to $10 million and liabilities of up to $50 million.
The utility plans to liquidate in Chapter 11 after the Electric Reliability Council of Texas’s move to transition its customers to other power providers left it without any meaningful assets, according to a person with knowledge of the matter, who asked not to be identified discussing confidential discussions.
Macquarie Group Ltd. has a $1.5 million first-lien claim, plus letters of credit, interest and fees, on substantially all of its assets, and the company plans to file a restructuring proposal that would see Macquarie give up about $600,000 of its claim to be distributed in the bankrupt estate, the person said.
Griddy also plans to give releases to its customers, subject to court approval, according to a statement.
“The actions of Ercot destroyed our business,” Griddy Chief Executive Officer Michael Fallquist said in the statement. “Ercot made a bad situation worse for our customers by continuing to set prices at $9,000 per megawatt hour.”
The collapse of Griddy, which sold power to customers at real-time wholesale prices, underscores the crushing financial pressure the outages have put on power companies in Texas. The market faces a more-than $3 billion shortfall as more than a dozen companies can’t pay their bills. Griddy is at least the third to file for bankruptcy. It owes Ercot more than $29 million, making the Texas grid operator its largest unsecured creditor.
The company filed for bankruptcy “minutes before” a scheduled court hearing on former customers trying to bring claims against Griddy, Derek Potts of Potts Law Firm, who is representing some Griddy customers, said in an emailed statement.
“This action by no means ends our fight to recover the tens of millions of dollars debited from Texans’ financial accounts during the storm, and to erase the negative reports made to credit agencies,” he said. “We will continue to represent the class throughout the bankruptcy proceeding, protecting all Griddy customers and seeking to recover the funds that were taken from them.”
Representatives for Macquarie and Griddy declined to comment.
Also See: Texas Senate Introduces Bill to Correct Blackout Overcharges
“We firmly believe in our model but, in order for it to be successful, the grid has to function properly, and prices have to be set by market forces,” Griddy co-founder Gregory Craig said in the release. “The actions of ERCOT caused our customers to unnecessarily suffer and caused irreparable harm to our business.”
Texas is unusual in the U.S. in that homeowners and businesses can choose from a number of power providers.
Griddy charges wholesale prices instead of fixed ones. Knowing that rate structure would mean massive bills for its customers as power prices climbed, the company made the unusual move of pleading with them to switch to another provider in mid-February. Some customers who didn’t switch in time were stuck with bills for thousands of dollars.
The case is Griddy Energy LLC, 21-30923, U.S. Bankruptcy Court for the Southern District of Texas (Houston)
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