Deregulation allows alternate suppliers into the market to offer their energy products to consumers. The price they offer is not set by the government or the utility company. It allows you to choose your supplier like you would for most other service providers. For example, if you are unhappy with the price of your Internet service, you can change to another company. Deregulation allows you the same freedom.
Most people consider the United States electric industry the last great government-sanctioned monopoly. The monopoly, composed of hundreds of individual energy suppliers, ensures that everyone within the United States receives a steady flow of energy at stable prices. The system has served the country well for several decades. However, the system also has several drawbacks.
While a regulated energy system guarantees stable service, it also ensures there is only one service provider per region. This means there is no competition among providers. While this may not seem like a problem on the surface, it’s a long-term issue in regard to pricing and customer service.
In response to the growing number of people dissatisfied with a lack of options, many states have opened their systems to energy competitors in a process known as deregulation. This complete guide will help you understand deregulation and its benefits, as well as guide you through the process of choosing a new energy provider.
In a regulated energy supply system, consumers only have a single utility company available to them. The utility company sets the price of the energy provided and controls the costs involved in sending it to homes, maintaining lines and pipes, and ensuring the consistency of the power supply. Within this system, the consumer has no power to choose their utility company.
This regulated system has a long and storied past in the United States, beginning in the early 1900s during the New Deal Era.
During this time, large interstate companies controlled more than 75 percent of the country’s electric generating capacity, and they almost completely controlled the pricing of that energy, artificially inflating it to maximize profits. In 1935, Congress passed the Public Utility Holding Company Act of 1935, more commonly known as PUHCA, which forced these large companies to break up.
The passing of PUHCA effectively sanctioned the creation of 300 power systems and 800 rural cooperatives to replace the old energy monopolies. To prevent another slew of private monopolies to develop, the government regulated these new energy providers with strict rules, dictating the region they could operate in and the prices at which they could offer energy.
At first, this system proved to be quite effective, benefiting the majority of the United States’ population. Not only did these smaller companies provide more reliable service to customers, but they did so at fairer, more stable rates. While this solution helped to eliminate the immediate problem of interstate energy monopolization, the regulation of energy also eliminated any possibility for competition between energy companies.
Today, the continuing practice of energy regulation has resulted in stagnant energy prices and services.
In a deregulated energy market, the limitations of PUHCA are somewhat lifted, allowing multiple suppliers to exist within a single territory. A wider variety of natural gas and electricity suppliers are available to each consumer within the deregulated territory, providing consumers with the power to choose their energy provider. Just like in a regulated system, energy consumers receive the same amount of energy with the same consistency, but the price and quality of their service, as well as their service options, can drastically change.
Deregulation began in the 1970s when OPEC’s worldwide oil embargo changed the face of the electric and natural gas industry. It not only caused petroleum oil to run scarce, it also caused electricity and gas prices to skyrocket. This caused a renewed interest in alternative forms of energy.
In response to the worldwide oil crisis, Congress passed the Public Utilities Regulatory Policies Act, or PURPA, in 1978. It required utilities to pursue renewable energy options and created a structure for independent power companies to come back into the market. However, private energy companies were still discouraged under PUHCA’s limitations, resulting in very few appearing in the market.
In the 1990s, however, national attention focused on energy options more than ever before. People began to call for competition in the energy industry, tired of the government-sanctioned monopolies they were forced to live with. Congress finally responded in 1992 with the Energy Policy Act. This law allowed power producers, both public and private, to compete for the sale of electricity and eliminated restrictions on energy prices for wholesale electricity.
While the Energy Policy act opened up the market to private energy providers, many utility companies simply weren’t set up to allow the introduction of new suppliers into their systems. This caused a great deal of frustration and confusion for local utilities and new private energy companies alike until 1996, when the Federal Energy Regulatory Commission, or FERC, issued Order 888. This was a landmark order for the United States’ energy market, requiring utility companies to open their transmission lines to competitors. The act also required utility companies to provide public access to their energy rate schedules, introducing a new level of transparency into the energy market.
Since these two landmark rulings, deregulated markets have swelled across the nation.
We’ve compiled a basic video and infographic to aid you in the process of understanding energy deregulation and the steps to take in choosing an energy supplier. We hope you enjoy!
Utility companies buy electricity on the open market and sells it to you at a government controlled rate.
With deregulation, you have a choice. Electric suppliers like Shipley Energy aren’t bound by the same restrictions as utility companies, freeing you from paying the market price for electricity.
Deregulation is not currently the norm throughout the United States, but it’s slowly gaining popularity. Currently, only eight states have completely deregulated energy systems, including both electricity and gas:
Washington, D.C., also has the benefit of complete deregulation. Twenty-eight states have deregulated gas systems, and 18 states enjoy deregulated electricity. In total, a little over half of U.S. states employ one form of deregulation or another, and the movement continues to grow. The number of states with deregulated energy could rise much higher within the next few years as the issue becomes a hot topic in state legislatures.
Today, numerous states and several main interest groups support nationwide deregulation. The interest groups advocate changing the current system in favor of one they think would most benefit the population. In total, the groups have spent over $50 million lobbying to Congress and other lawmakers. Most of the funds are spent targeting a few key aspects of energy legislature, many of which bar deregulation in part or completely.
Some of the primary issues and topics concerning these interest groups include the following:
The above issues are still major points of contention between lobbying groups, and how these issues are treated in future will largely shape deregulated systems in the years to come.
Deregulated systems are excellent for both residential and commercial customers, as well as the energy market as a whole. The system can also prove to be a distinct advantage for local economies. Deregulation offers the following benefits:
Many homeowners don’t even know what energy deregulation means, let alone understand how it could assist them. Consumer choice has become a more critical aspect of all decision making, especially during the digital age. There has been a push to put power back in the hands of consumers. Energy choice also encourages customers to educate and empower themselves by learning about their options.
Advantages of energy deregulation for homeowners include:
Pricing is, of course, a major motivator for business owners. You care about your bottom line because you have so many people relying on you for their livelihoods. When you switch to a new supplier, the cost savings can be substantial. But businesses can benefit from deregulation in other ways as well, such as:
If you’re thinking of switching suppliers, it’s wise to take a closer look at what the benefits mean for you, your service and your energy bills. Some of the direct benefits to you include:
People across the United States have reported success in deregulation. In fact, since deregulating in 1998, Pennsylvania has experienced a great deal of success.
Nearly 500,000 consumers, or 11 percent of the population, chose to leave their utility company, and residential customers who chose the least-expensive supplier saved an average of $10 per month.
After recognizing the numerous benefits of energy deregulation and the potential benefits of switching energy suppliers, you may be wondering how to switch. The first and most important step is to shop around for a supplier.
To find the best deal possible, you should take the following steps:
Once you narrow down your choices, you may ask for more details before you make a final decision. Ask about sign-up incentives and a quote or estimate before you finalize your decision.
When shopping for a new energy supplier, you should gather all the information you need to make an informed decision. While pricing schedules, customer service quality and green energy options are all important, there are other factors that will have a significant effect on your bill. While gathering information about potential suppliers, ask the following questions:
If you’ve made your decision on an energy provider, the next step is switching. All you need to do is take the following few steps:
Once you complete the above steps, you’re officially signed up with a new energy provider.
With any new system, there are numerous questions, concerns and myths, including the following:
When looking at potential energy suppliers, you should look for a trustworthy supplier with high customer ratings, a transparent pricing schedule and excellent customer service. If you’re looking for an energy supplier with all of these features in Pennsylvania, Ohio or Maryland, Shipley Energy may be the right choice for you.
We have over 90 years of experience in energy supply, providing consistent service to Pennsylvania, Ohio and Maryland for decades. We pride ourselves on our excellent customer service and numerous payment plans to fit any budget. Our variable and fixed rate billing schedules are easy to understand and can save you money every month.
Switching is easy! There’s no setup fee, no interruption in your service and no need to set up a new account.
To learn more about our incredible services, call or contact us online to speak with one of our trained customer service representatives.