The Difference Between Regulated and Deregulated States
Deregulated electricity markets came to play in the 1970s, opening a new era after regulation constricted consumers from choosing their provider. The passage of the Public Utilities Regulatory Policies Act has marked a new chapter of restructuring for the electricity industry.
1. Regulated Vs Deregulated Electricity Market
A regulated electricity market contains utilities that both own and operate all electricity. This implies that the utility company has complete control by owning both infrastructure and transmission lines that it sells directly to the customers. In such states, utilities are obliged to abide by the electricity rates set by the state, turning this market into a monopoly. However, its benefits include stable prices and long-term stability.
On the other hand, energy deregulation is the process of removing or at least reducing state regulations related to the energy industry. It gives the power to the consumers to choose their electricity supplier. By allowing consumers to compare electricity pricing, providers need to compete by providing attractive rates and plans.
2. History of Energy Deregulation
Believe it or not, deregulation is not the case in all 50 states. After the passage of the Public Utilities Regulatory Policies Act, the Energy Policy Act opened the market further in 1992. Its goals were to increase the use of clean energy and improve energy efficiency. Besides broadening the choice, it created new standards. Yet, since then, only 16 states have deregulated their electricity markets. They are Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, and Texas and the District of Columbia., with overall 20 U.S. states having deregulated their energy markets, starting with natural gas in the 1970s.
3. Tips on Finding the Right Electricity Provider
The biggest perk of a deregulated market is that consumers have the power to choose their electricity provider. To compete, energy suppliers are forced to be more efficient, as well as offer customer-centric plans with competitive rates. Although consumers have the power of choice, they are still faced with a daunting task as they may have over 20 different energy suppliers to choose from. Yet, the average person overpay for electricity by 20%. The only way to ensure that this is not the case it to take the time to do research and compare electricity suppliers and rates. This is a time-consuming process but you could cut your utility bill and save your business thousands of dollars each year.
All you have to do is consider:
The rate and its type
Besides the unit price in kilowatt hour (kWh), you need to consider the factors that many factors can increase or decrease your electricity usage. This depends on whether you use energy-efficient appliances, the season and how many members are there in your household. Then, you need to make a difference between fixed and variable rate plans. A fixed-rate will provide you with stability, whereas a variable-rate could cause your bill to skyrocket unexpectedly. However, fixed rates come with an obligation as the contract will lock you in for a given amount of time, whereas with a variable-rate plan, you can easily switch to a different provider.
Depending on your budget and needs, factors such as contract length, bonuses, reward offerings, and eco-friendly practices could also make a difference between providers.
You need to choose if you will sign a contract with a default utility that holds the entire infrastructure or a competitive supplier that only sells electricity to consumers and purchases it from the wholesale market. Rates of competitive suppliers are not regulated.
Also, do not forget to review your contract to determine if there is a penalty if you leave your company before your contract expires as an early termination fee could annul the benefits offered by a new provider.
Takeaway – The main goal of energy market deregulation is to create competition among energy suppliers in order to keep prices as low as possible. It also gives consumers the ability to choose their energy supplier and the rate. Just make sure you do your research and read the fine print before signing a contract. Fortunately, there are many new online websites to assist consumers in this process.