By Mike Eckenroth
2019 marks the 30th anniversary of energy deregulation in the United States. Natural gas suppliers were able to sell natural gas directly to consumers with the Natural Gas Wellhead Decontrol Act of 1989, and power producers could do the same with the Energy Policy Act of 1992.
Since the inception of energy deregulation, 34 states have at least one of the commodities deregulated, and thousands of customers are using the market to their advantage.
What is Deregulation?
When a state’s energy market becomes “deregulated,” its government passes new energy laws allowing end users to choose who supplies their natural gas or electricity to their local utility and what rate they would like to pay.
In a regulated energy market, consumers are required to purchase energy from the utility.
How Does Deregulation Benefit Consumers?
Customers in a deregulated energy market experience these 3 benefits:
In a regulated energy market, consumers can’t choose their energy supplier — they must use the utility. This makes it difficult for those customers to have influence over their energy strategies.
A deregulated market allows you to decide if you want to use a third-party energy supplier. Having a supplier gives you the power to customize your energy purchasing to meet your goals. You can experiment with different suppliers, contract terms, rates, product types, and renewable energy options to find what combination works best for your business.
You can also choose to work with an advisor that can help you decide what strategy fits your energy needs.
2) Budget Certainty
Your energy bill includes two classes of costs:
- Supply Cost: the cost of the commodity (electricity, natural gas)
- Utility Costs or Delivery Costs: the costs to deliver the energy from the supply source to your business (such as capacity and transmission)
The utility’s energy supply rate varies monthly, so your supply costs are different every month. This can make it difficult to have an accurate budget in a regulated energy market.
Budget certainty is more attainable in a deregulated energy market. With a stable supply rate, you can calculate your supply costs based on your estimated usage for each month. Your Utility Costs will still vary with your usage, but it will be easier overall to budget your energy costs.
3) Risk Management
Customers in regulated energy markets are at risk for rate spikes during high demand periods — winter months for gas and summer months for electricity.
In a deregulated market, you can use deregulation to your competitive advantage — especially if you’re striving for low operating costs. Locking in a fixed rate when the market is low protects you from rate spikes, saving you money that you can allocate to new projects, product lines, or other company enhancements.
Although deregulation provides some great benefits, there is always the possibility for a state to repeal it. Some states, such as Arkansas, have passed deregulation laws only to overturn them a short time later. And about 10 years ago, the Maryland General Assembly made an attempt to get rid of deregulation. However, lobbying by the Restaurant Association of Maryland as well as other commercial groups made sure it stayed.
As a commercial and industrial customer, it’s important that you take advantage of and support deregulation to protect your right to choose your energy provider.
Put Deregulation To Good Use.
Work with an energy advisor to mine the value of deregulation.
As a veteran in the Mid-Atlantic energy industry, I’ve helped customers identify their energy options and explore solutions that match their goals. Many of my customers are budget-conscious and focused on the bottom line, so risk management is something I help my clients integrate into their energy purchasing strategies. I’d love to see what I can do to make you successful, too.
Give me a call to discuss your energy game plan and learn how to maximize the benefits of deregulation.
About the Author
Mike is an energy professional based out of Baltimore, Maryland, with a strong engineering and purchasing background. His specialties include energy efficiency and strategic commodity procurement. Growing up in the shadow of Three Mile Island nuclear power plant, Mike has an intimate stake in a grid with safe, reliable, and cost-effective energy generation — which he leverages into an energy strategy that provides security for his clients.
You can reach Mike via email at email@example.com or phone at (443) 833-8224.