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Is Energy Deregulation Actually Beneficial?

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Energy deregulation has become a favourite topic over the past several years. Although the program is only implemented in some states, there are many other states considering switching to the deregulated system. Deregulation was developed to give consumers a choice when selecting an energy provider. There are plenty of arguments made for and against deregulation; here we will discuss deregulation and help you weigh the pros and cons for yourself.

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What is Deregulation?

California was the first state to incorporate the deregulation policy back in 1996—way before energy conservation was on the radar of most states. The concept came into existence based on the fact that the state governments have maintained a natural monopoly over the energy industry for decades. Deregulation was enacted to give consumers the opportunity to choose from other energy providers. US citizens in some state can now shop for an energy provider in the first place. They have the power to switch their electricity or natural gas supplier and this ultimately affects how much they will pay for energy

Retail Energy Providers (REPs)

The providers that offer competitive energy services are referred to as Retail Energy Providers (REPs). These companies are able to provide competitive prices and programs that energy customers can choose from. These providers essentially get their energy from the same source, but they use pricing plans tailor-made to fit specific demographics. If you need help understanding your energy needs, an energy consulting expert can help.

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Choosing a Provider

When trying to decide on the right REP, you will need to consider a variety of factors. Among these factors are:

  • Cost – Deregulation is intended to create competition, and this allows for the  
  • Terms – The terms for energy contracts range from six months to 36 months.  The shorter terms are best for temporary living situations.
  • Rate type – Consumers are able to choose from either fixed or variable rate plans.

Pros

The following factors are seen as beneficial to the customer:

  • Innovative – The increase in competition has prompted providers to seek out newer sources of energy to maintain relevance in the industry.
  • Customers can choose providers – Allowing for competition has given the opportunity to customers to select companies with lower prices or plans.
  • Streamlined process – The initial registration process for signing up for REPs is more straightforward than the traditional utility registration process; reducing the investment and approval time.
  • Increased customer awareness – Traditional utility providers have fixed prices that consumers are forced to pay in regulated markets. Consumers in deregulated markets educate themselves about energy costs.

Cons

The following factors are seen as unfavourable factors regarding deregulation:

  • Privatization – The possibility that providers will form a syndicate and collectively raise prices is real; unregulated companies can implement policies that are not beneficial to the consumer.  
  • Unhealthy competition – On the surface, the competition among companies is beneficial to the consumer; this can take a turn when providers start using unsavoury strategies to increase their consumer base.
  • Planning Issues – Having various suppliers with different rates and plans make the process of planning more difficult than ever; consumer must educate themselves.

Conclusion

Energy deregulation was designed to give options to consumers. However, it is essential for consumers to become educated about plans and pricing. While deregulation has its issues, ending the monopoly that utility companies had over energy costs was a noble effort. The bottom line is that there are mixed views about deregulation.

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