Energy Deregulation 101 – What You Need to Know

Energy of Tomorrow

Energy deregulation is the breakup of the utility monopoly in 35 states. Currently, only 11 states allow full deregulation which allows consumers and businesses to choose their electricity and gas providers. Energy deregulation is very similar to the AT&T divestiture back in 1984. Consumers & businesses were bound to AT&T for their local and long distance services regardless of cost. The break-up of AT&T to Bell companies allow consumers to choose providers such as MCI, Sprint, and other telecommunication companies which allowed increased competition. Energy deregulation will do the same; however, the PUC (Public Utilities Commission) of each given state is cautious of the breakup to prevent another Enron catastrophe. Also, consumers need to make sure what agreement they sign as fixed and variable rates usually determine contracts. Also, do not confuse energy deregulation with alternative energy or renewable energy, energy deregulation simply means shopping for electricity & gas services through the open market.

These companies, called ESCO’s (Energy Supplier Companies) purchase the energy in bulk and resells them to the public at a lower cost. In most cases, the billing portion does not change and is fully supported by your local utility company. You can consider an ESCO as the main facilitator between you and the utility company when it comes to usage, billing, and customer service. Deregulation will create a new mainstream of revenue and jobs for consumers seeking new careers in the new industry. Many companies are hiring for talented individuals who can support the industry regarding sales, marketing, operations, and customer service.

Before the deregulation of energy markets, virtually all Americans (and Canadians as well) had only one company that they could buy their energy from their utility, which had acquired a degree of leverage and power over their customers that was simply appalling. The total lack of competition led to astronomically high and unstable energy prices (which were made even worse by arguably inevitable developments in petropolitics abroad, for example in the Middle East and OPEC countries in general), and at the same time, the utilities had very little incentive to reinvest into their infrastructure networks. These, in turn, became very dilapidated and so not only were Americans paying too much on energy prices, but they were furthermore not even able to count on their utilities for regular, reliable energy delivery.

Deregulation changed all of that. For starters, by opening the energy market up to the forces of competition, prices naturally fell, and they have remained comparatively very low when you consider the fact that outside economic and political forces have driven global energy prices up considerably. You can even find electricity discounts on sites like on your energy. Then, there is another effect of talking about: the fact that utilities now have a much greater incentive to maintain their infrastructure, even though they may still be one of the only companies operating locally on the delivery side of the energy equation. That’s because the utilities are now much more susceptible to complaints and claims from consumers, and since they don’t dominate both ends of the equation (supply as well as delivery) they have to do a better job on the part of the equation that they do still have on lockdown effectively.

According to industry professionals, the deregulation will be bigger than the AT&T divestiture as millions of consumers and businesses will be allowed to choose who they want to use for utility services breaking up the monopoly. With increased rate hikes from the PUC and the worst storms in our decade, choosing the right provider will provide relief to many consumers and businesses with outrageous monthly utility costs. In the future, we may see other deregulation as in water and sewer, but for right now its electricity and gas services.