Over the past couple decades, a historic shift has slowly taken place within the $220 billion electric industry, much like the airline, trucking and telecommunications industries before it. Federal and state governments have chipped away at what has been referred to as the last government-sanctioned monopoly. Today, nearly half of all states have some version of full or partial electric deregulation.
With the goal of offering consumers the same freedom of choice they enjoy in choosing their cell phone carrier, the electric industry has been slowly laid open to competition with the aim of reducing costs to consumers and businesses alike. Deregulation of any industry is typically undertaken to improve competition in the marketplace, handing over the task of regulation to the industry itself.
Usually, only mature industries are considered prime candidates for deregulation, where the chance of one company dominating all others is low. For the most part, the process of deregulation has been a winning proposition for consumers and businesses alike.
Changes in energy policies enacted in 1978 and later in 1992 provided open access for electric suppliers to the U.S. power grid, but implementation of deregulation remained up to the individual states, according to YourFamilyEnergy.com.
Proponents in favor of dismantling power generation and distribution pointed to a number of problems with the current regulated system. For example, the city of Chicago noted a number of drawbacks prior to deregulation, including:
- Inefficient power generation
- Climbing electric rates
- High electric costs driving industry out of town
- Consumers taking all risk
- Lack of industry innovation
- Lack of options for consumers
After deregulation, power plants fell under the ownership of private operators who then sell power to retail electric suppliers within a competitive environment. The retail supplier then sells power to consumers, typically through a power supply contract. The power is delivered via a local utility. In Chicago, Ill., consumers have options regarding electric suppliers, but their power is always distributed via the same local utility.
Deregulation may not only bring savings to consumers and business owners, but investors in renewable sources of energy, such as wind, are finding a potential windfall in an unregulated energy environment, according to Business Insider, which reported in its May 9, 2013, edition on Warren Buffet’s nearly $2 billion investment in wind, sparked by electric deregulation. The article also noted options for those without money to invest. These folks cash in on deregulation via partnering with an energy service company for direct sales through referrals.
The advantages of electric deregulation are slowly being realized by state after state as they seek to do away with government involvement in favor of a competitive marketplace that severs ties between power generation and distribution. You can tap into an online energy-saving help center, government regulatory website or reliable news source to learn how your state has approached electric deregulation.
New Hampshire has had commercial deregulation in place for over a decade, though businesses didn’t really warm up to the idea of taking advantage of it until about 2006, when companies like New Hampshire Ball Bearings began realizing savings as high as $500,000 at a single location.
In Illinois, where electricity prices consistently floated above the national average by about 10 percent, rates fell below the country’s average after deregulation.