How to Take Full Advantage of Energy Deregulation

Many states in the USA have deregulated the supply of electricity and natural gas. This gives the consumer options for purchasing energy. Careful, well-informed and accurate decisions on the part of consumers in these deregulated states can result in large savings on energy bills.
How does this work?

• The Public Utility Commission in each deregulated state runs a Customer Choice Program that allows consumers to buy their energy from the local public utility or an alternative energy supply company.  About a third of the states in the USA are deregulated for electricity and/or natural gas supply.

• Deregulation has created competition between energy suppliers which results in better rates for the end user.

• In deregulated markets, the local utility company, by law, cannot profit from the sale of the energy, but only on the delivery of it. Thus the local utility company has no incentive for reducing the price of electricity or natural gas for the consumer. Therefore, these utility companies simply set a “standard offer”, which is the price that all consumers who have not chosen a particular provider pay.

• Utility set standard offer rates vary with the supply and demand, resulting in wild fluctuations.

• In these deregulated states, energy supply companies can profit from the sale of energy. Thus it is very much in their business interests to find out how to offer better rates and programs than the local utility company.

• There are no negative effects on the utility companies.  They own the delivery infrastructure, so they are paid for the delivery of the energy no matter who supplies it. They continue to provide the same quality of service they always have.

• To date, roughly half of the commercial consumers in deregulated states have chosen to secure their energy from a third party.

This has allowed these commercial energy consumers to:

1. Maintain budget certainty
2. Reduce their energy budget by 10–30%
3. Reduce their carbon footprint
4. Have a professional energy consultant advise on hedging strategy

However, not all commercial energy consumers have achieved success from sourcing their energy independently, and the level of success of those who have benefited varies considerably from one to another.

Large and consistent benefits of sourcing electricity and natural gas from independent suppliers in a deregulated state (hedging) depend very much on accurate, current information and interpretation of that information, which can then lead to informed, correct decisions.

At North American Energy Advisory, we use our knowledge, expertise and experience in the field to ensure that our customers garner the greatest possible benefits from exercising their energy purchasing options in a deregulated market.

Ray Franklin
Senior Commodity Analyst