Deregulation 101

Deregulation:

Everything you need to know.

Before Deregulation

In the early days of energy usage, states were divided into territories where utility companies essentially had a government-regulated monopoly over the supply and delivery of electricity and gas.  The utility would control the entire process from generation, to transmission, to distribution, and the government would set a “fair” price for energy.  Although the system worked fairly well, it prevented the benefits of competition.  As other industries, such as telecommunications and airlines, began deregulating and found great benefits from the added competition, the energy industry decided to follow suit.

The Beginning of Deregulation

In the 1990’s, many states decided to deregulate electricity and gas in an attempt to lower costs for the consumer.  The utility company would still handle the distribution and billing of energy, but third party independent energy suppliers were now allowed to provide the electricity and gas being transmitted to the end user.  This process not only enabled the customer to choose where and who they received energy from, but also encouraged lower pricing and innovative new products from the suppliers competing for their business.  Green energy was added as an option as well as fixed-rate pricing for up to several years.

The Future

As more and more states adopt energy deregulation (see link of open states here) and create policies that promote the positive effects, it’s become clear that deregulation is the future of the energy market.  Price, service, and the power of choice have stood out as leading traits of deregulated states.  Just as innovations in our society have allowed the customer to cut out the middle-man and go directly to the producers and suppliers in other industries, so has deregulation done so for the energy industry.