We are frequently asked about real-time pass-through products like Griddy, Evolve, Octopus Energy, and similar. Are their rates cheaper than Real Simple Energy? Can Real Simple Energy access wholesale prices and even negative prices? The answers to these questions are complicated but I will try to explain below.
Your bill on a real-time pass-through plan could be 10 times higher than you expect
First, we believe the real-time pass-through products being sold by Griddy and Octopus Energy should not be available to the general public because the risk is simply too great for 99% of customers. These products are NOT new...they have been offered to people who work in the industry for over 10 years. The reason they were not offered to the general public before now is because providers thought they were far too risky. That attitude has clearly changed with some providers. However, we think it is a mistake for the Public Utility Commission of Texas to let these products be sold to the average consumer. Most people we know who work in the industry would never sign up for this product because they know how risky they can be. The fact is any customer has the chance of a monthly bill being 5 times, 10 times, or even 20 times the normal amount.
If your bill is normally $150 in a given month, would you be ok with a $750, $1,500, or even $3,000+ bill? Most people absolutely would not.
The reason this can happen is because wholesale power prices change every hour and normally average $0.035/kWh over an entire month. But any given hour they can be as high as $9.00/kWh. That is not a typo. Think about that, that is 250 times higher!!! Prices spike when the grid is stressed in times of extreme heat, extreme cold, or even on a quiet day when no one is thinking about it and some power plants go down for unexpected maintenance and the grid has to find emergency power quickly. The frequency of these extreme events is low but they do happen, like in summer 2011 and summer 2019. In normal times, prices go up and down a modest amount but when things go wrong, they go really wrong!
Example of how just a few hours of extreme prices can change your bill
Below are examples of how quickly things can change. First is a normal month when wholesale prices average $0.035/kWh for the typical 720 hours and second and third are examples where the grid is stressed for just 20 hours and 50 hours out of a standard 720 hours. The results are shocking!
See how quickly your monthly bill could rise? A couple of extremely hot days and the grid in a stressed situation and boom, you have a bill over $1,000. Do people realize they have this exposure when they join Griddy? We think most people have absolutely no idea of this very real risk. A simple way to check this is to ask Griddy and other real-time pass-through providers the following question: Is it possible for my bill to be 5x, 10x, or even 20x what it normally is? If answering truthfully, their answer can only be "Yes, but it is unlikely."
Think of fixed rate plans as an insurance product
For the reasons explained above, we believe wholesale energy price risk should not be held by the customer but instead by the energy provider. There is a reason fixed rate products exist, they protect the customer and offer price surety from the most volatile commodity prices on the planet, electricity. For Real Simple Energy customers on fixed rate plans, the price for this protection is about $0.005/kWh (or about $7.50/month). Think of it as an insurance premium against a $1,000 bill. Griddy claims their average customer paid an all-in price before taxes and fees of $0.094/kWh in from April 2017 to December 2019. Adding in their fees ($10/month and $2.50 for credit card, etc) gets you to an true all-in rate of about $0.102/kWh. Note they have not provided data from calendar year 2019 alone, which would show a higher rate than $0.94/kWh. The average Real Simple Energy customer paid about $0.099/kWh (all fees included) in 2019.
P.S. on negative pricing
We often hear comments that people love getting negative prices every once in a while on a real-time pass-through product. Our response is that every fixed rate product sold by any company has negative prices built into that rate. The way a provider generates the fixed rate offered is by estimating what rates will do over the term of your contract (3, 6, 12 months etc). Since negative prices happen every year a certain number of hours, those negative prices are built into the future price expectations.