In the past, local utility companies offered individuals and businesses a single option for gas and electricity. Because customers didn’t have a choice about who supplied their energy, there was no competition in the marketplace.
While this gave the industry stability early on, many people began to find this system restrictive and outdated. So in the early 90’s, a growing number of states began introducing energy deregulation.
What is Energy Deregulation?
Energy deregulation lets the customer choose who will supply their gas and electricity. Customers can look for competitive prices and possibly save money on their gas and electric bills.
Prior to energy deregulation, everyone received their gas and electricity from their local utility. Therefore, the utility had total control over the pricing.
Government-regulated pricing meant there was a monopoly on the marketplace. In the early to mid-2000’s, suppliers came into the picture of deregulation to offer customers price competition.
There is now some form of energy deregulation in over two dozen states but there are still many markets that aren’t deregulated. Some states are only deregulated for gas, some are only deregulated for electricity, some are deregulated for both.
No state is completely deregulated but Texas comes the closest with nearly 86 percent of the state being deregulated.
Benefits of a Free Energy Market
Deregulated markets are the key to low-cost energy and competition in the energy market benefits both the consumer and the community. Let’s look at the four main benefits of a free energy market:
- Consumers have the power to choose. A free energy market gives the consumer the option to shop for the best deal on an energy provider. It gives consumers a choice about who will supply their energy and ultimately, how much they will pay.
- The playing field is leveled. Getting rid of energy monopolies allows a variety of companies to compete to provide energy services to the consumer.
- Better quality of service from providers. Whenever there is less competition, companies have less incentive to provide reliable customer service. Increased competition results in a better quality of service for the consumer.
- Consumers can save money on their monthly gas and electricity bills. It’s a well-known fact that competition drives down prices and this is definitely true for the energy industry. Alternative energy providers will try to attract customers by offering more competitive pricing which means consumers can save money on their monthly energy bills.
Conclusion
Although some people still object to energy deregulation, there is little doubt that it has changed the entire energy industry for the better. Increasing competition in the energy market has helped consumers in a number of ways. Consumers now have access to more options, efficiency, and better service overall.
Related Links
You may be interested in more Energy 101 blog posts:
Energy Deregulation: The Average Energy Bill- How to Make Sense Of It
Energy Industry Participants- Who Are They and What Is Their Role?
