When finances are tight, many of us sit down and look at our budget for places where we can trim costs. We find cheaper ways to eat dinner every night, or more budget-friendly sources of clothing.
One area where many of us feel like our hands are tied is our electric bill. Maybe we can try to consume less electricity - and we all should - but it’s not like we can shop around for a different place to get our electricity.
Or can we?
You may not realize this, but many states in America today are what are considered to be deregulated electricity markets. In short, this means that you have options - and those options come with a wide range of benefits for you as a consumer.
Today, we’re going to talk about regulated and deregulated energy markets: what they are, where they are, and how a deregulated market can work in your favor.
What are regulated energy markets?
First, let’s start with the more common scenario: regulated energy markets.
In a regulated energy market, you have one utility that serves all the purposes of your energy consumption, from generating the energy to reading your meter. All the infrastructure that exists in your area is owned by the utility company.
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So in a regulated market, the utility company simply sells the transmission of electricity right to the customer. All the costs of operating and maintaining lines of transmission pass through the utility company and are incorporated into your energy bill.
The public utility commission in a regulated state will set the rates for electricity that the utility company must follow. This is the case in deregulated states as well, however in a regulated state, the public utility commission-approved rate is the only option you have when it comes to the rate you’ll pay for your electricity usage.
This is also considered a “monopoly market”. There is no customer choice, and you are stuck with the utility company in your area, like it or not.
What exactly are deregulated energy markets?
By contrast, deregulated energy markets are open for competitors to enter the marketplace. These competitors invest in power plants and transmission lines for generating electricity. Then the electricity is sold wholesale to retail suppliers. The suppliers set the prices for the customer and bills them.
In this way, a deregulated market operates much like a retail store. When you go to the supermarket, for example, you don’t buy a bunch of bananas from the company that grows them. The company that grows the bananas will sell them wholesale to the store, and then the store sets its own prices for bananas. Two different stores in the same city might get their bananas from the same place, but have different prices for them. It’s up to the consumer to choose which store they want to buy their bananas.
In the same way, a deregulated energy market allows the consumer to choose where to buy their electricity from. This benefits consumers because they are allowed to compare rates and services from different companies. And companies are able to differentiate themselves with different offerings and levels of service, including alternative contract structures, such as fixed rates, indexed rates, or hybrid contracts.
Another benefit of deregulated markets is the increased availability for alternative energy sources. In deregulated markets, it is often far easier to make use of renewable sources and green pricing programs that reduce your dependence on fossil fuels. This benefit alone is often enough for many to support deregulated energy markets.
But deregulation is not available everywhere, however.
States with electricity deregulation vs. those without
As of this writing, the United States is fairly split on deregulated vs. regulated electricity markets.
Deregulation was first introduced to the country in the 1990s. When it arrived, it was met with large support in many areas of the country due to the benefits that it offered. But it was not without its roadblocks.
The energy crisis in California in 2000, for example, gave many states a moment of concern: would deregulation lead to market manipulation? As such, some states have opted for regulated energy markets instead.
But in practice, the increase in consumer control over decision-making in how utilities operate have pushed the growth of deregulation.
Currently, there are 16 states (including the District of Columbia) that are considered deregulated electricity markets. These include:
- Rhode Island
- New York
- New Jersey
- New Hampshire
- The District of Columbia
In the rest of the country, the markets are considered regulated electricity markets, and most have total regulation, meaning a singular utility company with one offering for consumers.
Does your state have electric utility deregulation? Learn your options.
If you find yourself living in one of the states listed above, you have a lot more control over your electric bill than you may have realized.
Suppose you’re not happy with your electric service. Maybe you find that there are too many outages. Or your bill fluctuates too much. You might not like their level of customer service. Or it’s possible that you just think your bill has risen too high.
Or you are looking to support more green energy initiatives and want to reduce your dependence on fossil fuels.
Whatever the reason, you are now in the driver’s seat. You can look elsewhere for your electric service and switch supply services whenever you want. You have the power to choose, and that lets you wield a lot of influence in the marketplace.
As such, the electricity providers in your area must continue to develop plans, pricing, and products that appeal to you to keep their offerings attractive and retain customers. Plus, they have to work to keep their rates reasonable for you, because you have the ability to leave their service.
As you can see, there are a lot of great reasons to live in a deregulated market!
How the deregulation of the power industry affects your electric bill and more.
There are plenty of debates going on right now about whether or not deregulation should be widespread across the country. There are merits to both sides of this debate, of course.
But there are states like Texas and Pennsylvania that now have been deregulated for years, and they have seen many substantial benefits, including:
- More ways to support renewable energy options
- Advanced energy-focused technology development
- More competitive rates for consumers
- A wealth of energy options
- Improved customer service
- City and statewide economic growth
The country may see more energy deregulation in the future, placing the power of choice into the hands of the consumer. In the meantime, we offer renewable energy options for both regulated and deregulated markets, giving you more control over the electricity you use regardless of the state you live in.