Deregulation is sending ripples of change around the U.S electricity market. With many states implementing deregulation, energy prices are undergoing a significant paradigm shift. If you are looking for ways to bring down your energy prices, deregulation might be your savior.
Deregulation is the manner of permitting independent strength producers to compete with utilities in presenting power. Many states within the U.S have applied power deregulation, and the states with the very best electricity charges were the primary ones to enforce it. California and Rhode Island added deregulation in 1998, accompanied by Massachusetts, Pennsylvania and New Jersey.
In a deregulated market, energy providers function efficiently and develop innovative technologies and personalized plans to stay ahead of the competition. In such market conditions, consumers benefit from reduced energy prices. However, the prices may vary in different regions and states. Comparing energy prices by zip code will give you insights into how a deregulated and regulated market performs based on energy prices.
In this blog, we will learn more about deregulation and how to reduce your electricity prices through deregulation.
What is Electricity Deregulation?
In the United States, electric utilities operate under different market structures in different states. Some states allow independent power producers to compete with utilities to supply electricity. This market structure is called deregulation. Unlike regulated markets, a monopoly no longer exists in a deregulated market. Electricity producers can only manage, not own the transmission and distribution of electric energy to businesses and households in a deregulated market structure.
Having multiple suppliers in the market will induce competition, allowing the end user to choose from various providers based on contract terms, products and pricing. Besides, deregulation helps you develop a long-term budget. Knowing what your electricity will cost for a longer period is beneficial for businesses and individual households in managing their overall operational costs.
How Does Deregulation Lower Your Electricity Costs?
Accepting independent electricity producers into the U.S. transmission system created a wholesale electricity market, enabling deregulation. In this market structure, independent producers can sell power to utilities without worrying about building their own power grid or customer base. This market situation has paved the way for a radical change in utilities’ operations.
Let’s now understand how deregulation helps lower U.S. electricity costs.
Unlike regulated systems, a deregulated system introduces competitive pressure on the suppliers and generators to lower production and supply costs. In a regulated system, customers are charged a fixed rate as the markup over production costs, which guarantees the utilities a reasonable rate of return.
When deregulation was implemented, the guarantee of this reasonable return was removed, and the need to compete for profit arose. Power plants were forced to operate efficiently and incorporate innovative technologies to gain a cost advantage and stay ahead of their competitors. This competition over efficiency and cost advantages gradually translated into lower electricity prices for businesses and consumers.
How Deregulation Benefits the U.S. Consumers?
1. Freedom to Choose
As a customer, you can buy your electricity from the local utility or another provider. The utility will be responsible for the transmission and distribution. You can choose between the various electricity suppliers available in the market and the different electricity sources from which they generate electricity. For example, if you prefer electricity from renewable energy to other sources, you can choose a supplier offering affordable renewable energy plans. Also, the higher the competition, the higher the availability of personalized plans and flexibility. Multiple utility providers allow you to select the plan that suits you best.
In some states, wholesale deregulation has been implemented to create a competitive retail market for electricity. This has motivated independent power producers to offer customers the best services and prices. Inducing such competition has given consumers the power to choose the providers that offer power packages that meet their unique energy and budget requirements.
2. Quality of Service
Over one quarter of the states in the U.S are deregulated for electrical energy. In such competitive markets, electricity providers will offer superior services and plans to attract and retain customers. This also means high quality customer service around the clock. To further enhance the customer experience, electricity providers will look for innovative technologies and service offerings. Deregulation holds the providers accountable as users can switch to alternative providers, motivating providers to maintain high service standards.
Tips to Lower Electricity Prices
The deregulation system offers some practical tips for lowering electricity bills. Let’s discuss them in detail.
1. Shop Around for Competitive Rates
Before choosing your electricity provider, compare the market rates. This will help you identify the provider who offers the suitable package at the best price. Also, staying up to date with the market conditions will save you from price hikes and allow you to switch providers if needed rather than overpaying for obsolete packages.
Today, many tools are available on the Internet that will help you compare the rates various electricity providers offer. Some websites even let you compare the prices and packages of multiple providers at once. Customer reviews and ratings can help you understand a provider’s service and its advantages. Hence, make sure to go through the reviews before choosing your provider.
Another factor to consider is whether the provider offers customized plans. Negotiating with providers will allow you to tailor plans that meet your specific needs while securing cost savings.
2. Consider Renewable Energy Options
Deregulation allows you to choose from various providers and the different forms of energy they provide. Choosing providers supplying renewable energy will minimize your carbon footprint and thus contribute to environmental sustainability. Many deregulated electricity providers offer renewable energy plans at more reasonable prices than traditional forms of energy.
Some providers even incentivize consumers to choose renewable energy as part of their environmental commitment. Tax credits, net metering, and rebates can help you balance the cost of choosing renewable energy. Besides, generating renewable energy costs less, resulting in long term savings.
3. Monitor and Manage Energy Usage
Monitoring your energy usage using tools like smart meters will help you compare electricity prices with those of your previous providers. It will also give you insights into your consumption patterns, enabling you to identify and manage peak and off peak electricity usage times. Conducting an energy audit is also beneficial for identifying your energy consumption patterns. Analyzing the energy consumed by your HVAC systems, water hearts, refrigerators and lighting systems will help you identify and replace the underperforming systems. By managing your energy consumption effectively, you can considerably reduce your energy prices in a deregulated market.