What is Energy Deregulation? The Top Five Things to Know

Does your state operate in a deregulated market or a regulated one? Scratching your head and wondering what we’re talking about? You’re not alone.

While the topic of energy deregulation has been a hot-button topic for years, few understand the ins and outs of the subject. In short, this is the process of allowing the residents in a state to choose their own energy supplier. You already have your choice of options when it comes to picking the provider you use for your cable, phone and internet service. What if you could be selective about your energy, too?

Today, we’re breaking down five facts about energy deregulation you need to know. Whether you currently live in such a market or your state is considering making the switch, staying informed is the best move.

Ready to learn more? Let’s get into it.

Regulated vs. Deregulated Energy Markets

In a traditional, regulated energy market, one utility company owns the transmission lines in a given area. It also owns the associated infrastructure equipment, including power lines, poles and transformers. It’s regulated by the state’s Public Utilities Commission (PUC), which mandates a standard for product offering and pricing.

Many states in the southeast, west and northwest operate in a regulated energy market.

In a deregulated market, such a monopoly doesn’t exist. Instead of a single utility provider owning and operating the transmission lines and power plants, the control has a greater variance. Companies known as generators create electricity and sell it wholesale to Retail Electricity Providers (REPs), who turn around and sell it to residents.

In turn, residents can do their homework and work with a broker to find one with a price point that fits their needs.

Yet, this simple explanation is only scratching the surface. Here are five more things to know.

1. You Have the Right to Choose Your Utility Provider…

In a deregulated market, you can choose from among the REPs available in your region. As they understand you have a slew of options, most offer competitive rates and attractive loyalty packages in an attempt to win your business.

Keep in mind that most of this energy is coming from the same generator company. The REPs simply create different packages to suit the varying needs of their client base. This means there is rarely one solution that’s far better or worse than another. The key is to learn as much as you can about the REP and its plan pricing before you sign on the dotted line.

2. …But You Don’t Have To

Of course, even if you live in a deregulated energy market, you can still opt to receive energy from your state-appointed utility provider. In fact, these providers are always there in the background, making sure operations are running smoothly and all equipment is up to speed. They’re in charge of your power lines and are the ones to call in the event of a power outage (not your REP).

If you live in a deregulated market, but you haven’t been presented with the option to switch providers yet, you’re likely still getting your power from your original utility provider under the plan that was in place before your state made the switch. Inquire about your choices if you’re interested in performing a cost comparison.

3. The Market Can Be Partially Regulated

To date, 24 states operate in a deregulated market, and 18 of those offer residents the option to shop around for their supplier. Yet, this designation isn’t always granted on a full-state basis. Rather, some states operate under partial regulation, meaning some regions are regulated and some are not.

When this happens, it may be due to the way the grid is designed in a certain area. Or, it may derive from historic reasons or geographical territory restrictions. For instance, Texas is a deregulated state but 15% of its market is still regulated. Thus, before changing your address to lower your utility bill, double check the state energy options first.

4. Your REP Bill Will Look Different

If you’re used to purchasing your electricity from a state-designated supplier, you’ve grown accustomed to looking for that bottom line number each month. Yet, once you begin buying from an REP, you’ll notice two distinct charges on your bill.

These are broken into your electric supply fees and your electric delivery fees. Both comprise around half of your total charges. Keep in mind that most REPs offer flexible payment plans an allow you to choose between a fixed and variable rate.

5. You May Be Able to Choose Renewable Energy

Most deregulated states have a handful of REPs that specialize in providing renewable energy to residents. If you’ve been looking for a way to make your household more eco-friendly and cost-effective, these can present major advantages.

From solar panels to hydropower, there have been major breakthroughs in the realm of renewable energy in the past decade. As such, your options are sleeker, more attractive and more affordable than ever before.

Learn More about Energy Deregulation

This list is helpful to know, but it isn’t exhaustive. The field of energy deregulation is changing constantly and staying up-to-date on the latest happenings is the best way to make an informed decision for your future.

Need a little guidance staying abreast of the latest happenings? Follow us as we track the market to bring you the most recent insights. We’ll take care of the legwork so you can focus on your next move