Deregulated Energy, In Plain English
Quick Definition: Businesses and individuals can decide who produces the energy they use.
How It Works
The deregulation of energy means that individuals and businesses can choose to get their electricity or natural gas from the suppliers serving their state or utility area. There’s a considerable degree of power (really, no pun intended) wrapped up in an action that is at first mostly invisible. That’s because even if you’ve changed energy suppliers, your energy will still be delivered by the same utility company you’ve always used. Same wires, same pipes, same service technicians – but different energy.
But while the change might not be visible at first, you’ll certainly see it when your energy bill arrives.
How We Got Here
Energy deregulation as we know it today was formally launched by an act of Congress. Until the early 1990’s, utilities had enjoyed a monopoly on production and delivery. The National Energy Policy Act allowed power producers to compete for the opportunity to sell to utilities. The Federal Energy Regulatory Commission took it a step further in 1996 with Order 888, requiring utility companies to allow competitors to move electricity on their transmission lines.
Where It Works
Just as you can choose where your energy comes from, each state can choose if it wants to deregulate its energy markets. Here’s a map showing where businesses and individuals can choose their energy supply.
How It Helps You
If you’re in one of the above states, suppliers can compete to sell their energy over your utility’s lines, which is good news for you. You’ve now re-claimed a part of your utility bill. Here’s how you benefit:
Suppliers competing for your business means you have a very good chance of saving money on your energy bills. Of all the ways to save money on energy, this requires the least amount of investment. No bulbs are changed, no new appliances purchased, just cheaper energy coming through the wires and pipes. Choosing who produces your energy also lets you select the contract length and terms that makes the most sense for you. Don’t like what’s being offered on one contract? Good thing you can say “no, thanks” and pick another supplier!
With the power to choose your supplier comes the ability to choose renewable energy. Suppliers and utilities alike are adding renewables like wind and solar to their portfolios all the time, allowing your business or home to take a significant step towards going green without any investment.
Where Trouble Lurks
Choice! Energy working for you! How could it go wrong? Unfortunately, you can run into trouble when choosing your energy. Here’s how:
Yes, you can choose from all the energy suppliers in your area, but making that choice is often cumbersome and more than a little confusing. Each supplier has to send you an offer, which will include a rate and a contract term. You have to carve out time in your busy day to read all these contracts, pic the one you want, and get everything signed and submitted. And that needs to happen before the offered rate expires. It can seem like a very intimidating process.
When you get a supply offer, you’ll generally encounter one of two types of rate offerings: fixed or variable. And there’s more to each than meets the eye. On the surface, a variable rate seems like it can save you the most money – when rates fall, yours will fall too, resulting in savings. What’s not to like there? Rates can also rise, and that’s a ride you probably don’t want to take. A fixed rate, as its name suggests, stays constant regardless of how the market changes. You lose out on rate drops, but stay shielded from increases. And then there’s the small matter of knowing if the actual rate number that’s offered to you is truly competitive or not!
Knock Knock, Pick Me!
Energy suppliers know you have a choice, and they really, really want you to pick them. This can result in forms of unwelcome contact, such as inconvenient and intrusive sales calls and visits from sales representatives. Most regrettably, it can also lead to pressure.
How To Stay Safe
- Get as many offers as you can
- Know your goals (Savings? Rate certainty?)
- Compare those rates against your current rate – and each other. Sometimes, you won’t benefit from switching!
- If you’re already on an energy contract – know your end date
- Get help from a professional energy manager, or enroll for free in Nextility’s RateSafe Power & Gas offering