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What Everyone Should Know About Deregulated Electricity Markets

Deregulated Energy Markets

Most people that deal with energy have heard of a deregulated electricity market.  Still, many find it difficult to differentiate it from a regulated market.  It can be a challenging concept to understand, but I’m here to explain the confusing parts and fill in any blanks.

The difference between the two markets is actually fairly simple.  In a regulated electricity market, there is only one main company, which is commonly referred to as the utility.  This utility claims ownership of the entire infrastructure including wires, transformers, poles, etc.  It has two major responsibilities.  The first is to purchase electricity from companies that generate it, and the second is to sell and distribute it to its customers. 

In a deregulated market, an additional party is involved.  The utility still owns the infrastructure, but now, its only responsibility is to distribute the electricity.  Deregulated markets permit electricity providers to compete and sell electricity directly to the consumers.

The benefit of a deregulated market is that it boosts competition among suppliers, which leads to lower prices and the chance for customers to find the best deal.  Determining if your state participates is where it gets tricky.  It is being executed on a state-by-state basis, but some have deregulated natural gas and others strictly have deregulated electricity.  Use this interactive map to determine if your state participates.

Once you determine that you live in a deregulated state, you can shop around for an electricity supplier that will offer the very best rate.  This rate will be reflected in the supply portion of your monthly bill, which accounts for roughly fifty percent of your total statement.  The other half includes the cost of transmission, delivery, and services provided by the utility. 

Before you start shopping, there are several factors that you should consider.  A lot of people think that price is the only aspect that matters, but this is only one factor.  If you choose to acquire a new supplier by yourself, it is imperative that you do thorough research on a supplier’s reliability, load management, and any additional fees they may charge.

If you are concerned about taking this challenge on by yourself, consider working with an energy consultant.  Their services are typically free and they are known for working with credible and competitive suppliers.  Plus, the process is usually pretty simple.  Just fill out a bid request and the consultant will take care of the rest.  Preferably, you want to work with a consultant that conducts a blind auction, which will encourage suppliers to offer their best rate right off the bat.

Again, there is a lot to consider when shopping for a better supplier, but now you have the knowledge.  Good luck out there.

Photo Credit: Deregulated Electricity Markets/shutterstock

Sarah Battaglia's picture

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