How Does Energy Deregulation Work?

energy-deregulation

Interested in how energy deregulation works? We’re here to help. Let us teach you the basics so you can make your own conclusions about what’s right for you.

So, What’s the Deal with Energy Deregulation?

In a nutshell, a handful of U.S. states broke up their electricity utility or natural gas utility monopolies. A great map of the deregulated states is here. Here is how it works…

  • In regulated states, local utility companies own a monopoly.
  • They generate power and drill for gas.
  • They sell you that energy and they deliver it to you.
  • It is a requirement to purchase energy from the local utility at their price.

It looks something like this…

Then, some states (refer to map link above) decided to “break-up” their utility monopolies, or deregulate their energy utilities. And deregulated energy states work like this…

These deregulated states look something like this…

As you can see in the example above, third-party energy suppliers integrate with the local utility companies for billing purposes. In most states, if you choose an energy supplier for your electricity or natural gas supply, you will see their charges appear on your local utility bill. This means you only have one bill to pay.

So, What Does This Mean For You?

If this is confusing to you, don’t worry. Even if your state is deregulated you do not need to choose a third-party energy supplier. You can still purchase your energy supply from your local utility company at their standard rates. You can find your local utility supply rate by Googling “Your Utility Name Price to Compare”. If you live in the Philadelphia region, here is what you find when you Google PECO Price to Compare.

What About Texas?

Ahh… good ol’ Texas. They always have to be different. If you’re lucky enough to live in this great state, you get the benefits of what we call “true energy deregulation”. In Texas, the local utility companies only deliver energy to customers. Third-party energy suppliers handle all billing and you must choose an energy supplier for your electricity or natural gas. This has created a much more competitive market, and hence, lower prices for customers. Texas has some of the lowest-cost energy in the U.S.

How Do I Use This Information?

Now that you understand the basics of energy deregulation, you have more knowledge when shopping for a third-party energy rate. Here are some good questions to ask your energy salesperson…

  • How does the third-party rate compare to my local utility rate?
  • What was my local utility rate for the past 12 months?
  • When will my local utility rate change next?
  • What will my local utility rate be the next time it changes?

You need to understand the answers to the questions above in order to effectively shop for energy rates. If you need help discovering your best options, we would be happy to lend a helping hand. Please contact us here.

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