20 October 2013

Understanding The Deregulation of Energy Providers

With some states' energy providers being deregulated in the United States, people are now given a choice on what energy company will serve their needs. This results in better service quality and lower energy costs for the consumer.

It is believed that fewer and simpler regulations, with minimal government intervention, will result in an open market with a high level of competitiveness, higher productivity, more efficiency and lower prices overall. The energy quality and method of transport stays the same, it's just that the consumer has a choice on the energy company and energy plan.

There are downsides to energy regulation such as less monitoring on environmental pollution and quality standards, financial uncertainty, and constraining monopolies but these are minimal. There are consumer groups and environmentalists that monitor and report any infractions or shortcomings such as these.

Energy deregulation, albeit in its early stages, have empowered the consumer to control and manage their energy needs without being sidelined by a monopoly.

Energy Regulation and the Consumer

Deregulation of energy providers didn't take place in Texas until 2002, although residents and businesses had been working toward an open market since 1990. Originally, the electric and gas infrastructure had regions on the grid specifically assigned to one company. This lead to those companies having a complete monopoly over a local area, without any competition to keep the pricing on energy competitive. The deregulation of energy providers in certain areas has changed the game, and much like other utilities, has lead to companies competing with each other for your energy dollars.

The difference between a regulated electric market and an unregulated market is the availability of choice. While many areas in the United States are still served by a single energy company, here are a few strategies for shopping around for a provider when you have a choice in the matter.

Determine If You're In a Deregulated Market

A majority of states have at least some sort of deregulation in place. Some states offer free choice on electric, others offer this choice with natural gas, and a few states provide both. If you are in a deregulated market, find out what your options are for energy. You might have a competitive electricity option, but you're still stuck with a single gas company. Talk with neighbors, friends and family to see who has the best reputation, and what companies are best left alone.

Video: Energy Deregulation Simplified

The Supply Chain Doesn't Change

One common concern is whether or not any of your energy hook-ups need to change. Even though you have a decision on the supplier, the distribution of energy remains the same. You don't need a different meter, lines or poles to switch electricity providers. If you have a preferred energy company because they use renewable energy sources, you can still have the same ethical sources.

Pricing Changes

Deregulation has lead to a free market for electric prices, but there has been no correlation between a deregulated market and vastly cheaper electricity costs. Examine your options carefully, because you might want to stick with your current electric company if there is no real advantage to switching your service. The kilowatt hour is the main piece of price information to keep in mind, as well as termination fees for leaving a contract, hidden fees, local taxes and other small fees that increase the overall cost of your bill.

Average Energy Balance

If you do want to change, check with your current provider for full information on your balance. If you're like many people, you use average pricing on your energy so you don't have high bills in the summer and winter. You're still responsible for the actual costs of your energy, so if you're still paying on a winter balance, you are still responsible for that bill even if you choose another provider.


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Author: Karen Canas
Karen writes about environmental issues facing communities across the West.