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PJM Capacity Market Ruling

By Michael DeCaluwe

On Thursday, Dec. 19, 2019, the Federal Energy Regulatory Commission (FERC) voted 2-1 to extend PJM’s Minimum Offer Price Rule (MOPR) to any generation assets that receive state subsidies. As a result, energy consumers in PJM’s territory could see a significant rise in their electric rates.

That’s a lot of energy industry jargon, but we’re going to simplify it here and explain how this new rule could impact you.

What is Capacity?

Capacity is a charge levied by a grid operator, such as PJM. It is money collected from electricity consumers by the grid and paid to power generators to ensure that there’s enough power to meet energy needs during peak demand times.

This charge used to be a small portion of your energy costs, but over the past few years it’s grown to be 25-30% of your energy bill due to coal generators shutting down.  There’s less supply to meet demand.

PJM operates their capacity charges in a 3-year forward market. They hold an auction in which generators bid against each other to set capacity rates 3 years in advance. For example, capacity rates for 2022 were to be set in this year’s auction (2019).

Current State of PJM Capacity Market

Some generators have voiced their concern that state subsidies for some types of generation (such as renewable energy programs, state nuclear bailouts, etc.) place them at an unfair advantage when they need to compete in the capacity auction against these subsidized generators.

FERC — the regulatory body that oversees PJM and other grid operators — agreed to review PJM’s auction rules and delay the 2019 auction while these rules were reviewed.

What did they decide?

In their vote yesterday, FERC essentially banned any subsidized generator from participating in PJM’s capacity auction. This was a victory for un-subsidized generators (coal and natural gas-powered generators), but it was a severe blow to nuclear and renewable generators in PJM’s territory.

PJM Capacity Market

Source: trane.com

Estimates on increased electricity (capacity) costs to consumers range from $1.6 billion – $5.7 billion in the 11 states that PJM serves.

 

Why will capacity costs increase?

All 11 states in PJM’s territory operate some type of subsidization of energy, whether through nuclear bailouts (Illinois or New Jersey) or through state renewable standards (almost all states). If subsidized generators are barred from participating in the capacity market, future capacity markets will be determined by relative few players.

Less Supply + Same Demand = Higher Rates!

Also, without the ability to capitalize on capacity revenue, renewable energy assets become much less economical to build. This stunts the growth of renewable energy in the PJM market.

What’s Next?

There will undoubtedly be court action against this vote. Additionally, some states are pushing for a “carve-out,” in which they would operate their own capacity market independent from PJM.

In short, this FERC ruling has sent the industry into a pandemonium and has created real concern over the future of renewable energy assets in PJM.

What’s there to do as a customer? Nothing at this time until we have a clearer vision of what the final outcome will be. Just be aware that there could be major changes coming to electricity pricing in the next few years.

We’ll keep you updated as we learn more. Please feel free to contact us with any questions.

2020 PJM Demand Response Changes

By Becky Thompson

December 19, 2019

BIG changes to the PJM Demand Response program are coming in 2020.

If you’re currently participating in or considering enrolling in the PJM demand response program, here’s what you need to know.

What is Demand Response?

Demand response is a program designed to ensure reliability of the electric grid during peak demand periods.

Companies that enroll in the program agree to reduce their electric usage when they receive curtailment alerts. In return, they can receive substantial payments from PJM.

“I don’t think we can curtail any usage.”

That’s what clients initially say when we bring up demand response.

There are a variety of ways businesses can curtail their usage without major disruptions to daily operations. For example:

  • Industrial or manufacturing clients can shift production to off-peak hours.
  • Hospitals and data centers can use non-emergency backup generators that meet program requirements.
  • Schools and residential buildings can raise air conditioning set points by 5 degrees and turn off unused lighting.

What’s changing in 2020?

Up until 2019, organizations could enroll in a Base Capacity program that only required participation during summer months (typically June through September). Since most businesses use more power in the summer than the winter, they could easily match their projections and earn big payouts.

Starting in June 2020, the only available demand response program will be PJM Capacity Performance, a mandatory year-round program for participants.

Quick Facts about PJM Capacity Performance

  1. Demand response program participants will be required to curtail their usage during summer and winter events.
  2. Summer season is June 2020 – October 2020 and May 2021. Winter season is November 2020 – April 2021.
  3. There will be two test events  — one in summer and one in winter — and participants will have to participate in at least one of the tests.
  4. The enrollment deadline for the 2020 – 2021 is in the first or second week of May. However, the program has been decreased by 20% for this year – so enrollment space could run out before then. Site that sign up by the end of February should be able to get their desired kW enrollment value.

Why the change?

Blackouts occur when the demand for power exceeds the amount of supply available. And in recent years, winter blackouts have become more likely than summer because there is lower total supply available. In the Polar Vortex of 2014, PJM energy consumers were at risk of experiencing a blackout during one of the coldest winters in history.

As a result, PJM was forced to rethink how they viewed grid reliability.

How You Can Prepare Yourself for PJM Capacity Performance

Here are a few things to keep in mind when considering enrolling in the new program:

  • The minimum requirement for curtailment is 100 kW.
  • Your curtailment ability will be the difference between your seasonal Peak Load Contribution (PLC) and your Firm Service Level (FSL). Since these can vary greatly between summer and winter, you may see a drastic reduction in your curtailment ability and potential payout.
  • To maximize your payout, ask your demand response vendor if they offer a seasonal performance program that allows you to have different curtailment values for summer and winter.
  • Enrollment in the demand response program is limited because the total MW allotment has been decreased by 20%. It could be beneficial for you to sign a longer Demand Response agreement to ensure your seat at the table in the future.

Despite the changes coming to the program, demand response could be a viable way for your organization to generate some additional revenue. Contact us to discuss if the program is a good fit for you.

 

About the Author

Becky is a Senior Strategic Energy Advisor specializing in the public sector, including schools and municipalities. She has been in the energy industry for over five years, working from the ground up as an account manager and then as an electric pricing team lead. Her background knowledge of the inner workings or an energy company helps her identify actionable strategies for making her clients’ energy strategies both easy and cost-effective. In her free time, Becky enjoys any activity that requires being outside and making her son belly laugh.

Becky can be reached at (630) 225-4561 or bthompson@naniaenergy.com.

Ask An Advisor: LED Lighting Upgrade

December 16, 2019

Video Transcript

Hi! I’m Michael, the Senior Vice President at Nania Energy Advisors. Now you’ve probably heard that upgrading your facility’s lighting to LEDs is one of the easiest ways to reduce your energy costs and to reduce your carbon footprint.

And that’s true. But what does it look and feel like to do a lighting upgrade project?

In today’s video, you’ll get an inside look at an in-progress LED upgrade, along with some before and after shots. You’ll be amazed by the results. Come see what I mean!

How does a lighting project affect day-to-day activities?

Today we’re on site at one of our industrial clients who is currently undergoing an LED upgrade project. As you can see, the contractor is able to do the lighting project with minimal disruption to manufacturing activities.

What can you expect from a lighting upgrade project?

So after the lights have been replaced and the project is complete, what can you expect to see?

1) Energy Savings

Depending on the energy of your current system, you should expect energy costs and usage related to lighting to dropanywhere from 20-80%.

As an added bonus, those organizations with sustainability goals should also see a reduction in in their carbon footprint, improving LEED scores and Energy STAR ratings.

2) Quick Return on Investment (ROI)

The average LED project will have a payback period of 1-3 years.

  • A payback period is defined as the amount of time that it would take for your electricity savings to accumulate to equal the initial project cost.

Your individual payback period will depend on a few factors, most notably:

  • The efficiency of your current system,
  • The number of hours that your lights are on during an average week, and
  • Any utility rebates that are provided to help pay for the initial project cost.

3) Lower Maintenance Costs

While a typical fluorescent bulb will last between 20,000 and 30,000 working hours (or 2-3 years), you can expect an LED bulb to last over 100,000 working hours (or 10 years).

Because LEDs last longer, you won’t have to replace them as often, saving you money on labor and supplies related to lighting.

Before

After

What are the benefits of a LED lighting upgrade?

So how is this industrial client benefiting from their lighting project?

  • This client will see an annual savings of over $31,000 a year on their electricity costs.
  • They’ll see a project payback of 2.6 years.
  • And they will see the lighting quality in their facility improve by over 250%.

How can you pay for a LED lighting upgrade?

Now, if you’re worried about how to pay for a lighting project, the good news is that you don’t have to pay for it all up front. There are many creative ways to pay for an LED upgrade.

For example, this customer selected to use on-bill financing. This project is being funded by one of our electricity supply partners, and the client is paying for the project through a small fee on their monthly electricity invoice.

Consider doing a lighting project at your facility.

As you can see, a lighting project can be extremely beneficial to your facility. If you’d like to learn more about LED upgrades or other efficiency projects, please check out our website or contact us.

Thank you for watching, and look for future energy videos.

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Two-Minute Tuesday: Reverse Auction for Energy

December 10, 2019

Video Transcript

love buying things on eBay. It’s that thrill of the auction as those last seconds tick down and getting the product that I really wanted at a great price.

What if I told you that you can buy your gas and electricity commodity in an auction format as well? But instead of the price going higher like it does on eBay, the price goes down. It’s what we call a reverse auction. 

In this week’s Two-Minute Tuesday, we’re going to talk about what a reverse auction is for energy buying, if you’re a good fit, and what the benefits could be to your business as a result.

What is a reverse auction?

So what is a reverse auction? Just like we talked about, it’s like eBay in reverse. Instead of the price going higher for your electric or natural gas price, the price is actually going down as more bidders compete.

Take your current supplier or third party, like a Constellation or a Direct Energy. They all compete in an open platform online live for 20-30 minutes submitting multiple bids to win your business.

What are the benefits of a reverse auction?

The benefits to you are transparency in the process and a lower overall energy rate.

Am I a good fit for a reverse auction?

To find out if you’re a good fit for this, you may consider:

  • Do you need complete transparency in your purchasing or procurement process?
  • Are you a public entity where you want to see everything on a fair, open platform?
  • Or, are you a large business where energy is a large spend for you and you need the absolute lowest rate possible in the marketplace?

If so, this may be a route you want to consider.

So how about a real-life example?

We just ran a reverse auction for electricity for a large local school district a few months ago. Their overall rate at the end of the auction resulted in savings of $600,000 for their school district.

Think about how that kind of money and savings could help your operating budget. Then, reach out to your current broker or consultant and see if this is something that they offer. See what it could look like for your business and the savings you could attain as a result.

Thanks for watching our video! Leave your comments below, and check out this article on how you could benefit from a reverse auction.

EV Charging Stations Made Affordable

By Calvin Cornish, CEM

It’s been almost 2 years since I wrote my last EV charging station article. And a lot has changed since then.

  • In 2017, there were 199,829 EVs sold in the US. That number nearly doubled in 2018 to 361,307. And as of August 2019, there have been 200,194 sold.
  • JP Morgan estimates that EVs and hybrid EVs will account for around 30% of all vehicle sales by 2025.
  • Automakers are preparing for the market shift — Tesla isn’t the only buying option for EVs.

How can you prepare your facility for this EV influx?

A new way to pay for an EV charging station may be part of the answer.

New EV Charging Trend: Lease/Rent to Own

The lease-to-own model benefits more than one party involved. Let’s look at the phone industry as an example.

For cell phone providers, this model:

  • Ensures revenue for network carriers
  • Encourages end users to upgrade more frequently
  • And makes smart phones more attainable to more people.

EV charging station manufacturers and networks are adopting the model as well. Companies like EVGo, ChargePoint, and Blink are reducing barriers to entry by improving the upfront economics and positioning charging stations as an operating expense.

What are the benefits of leasing to own?

1) Lower Upfront Costs

Leasing an EV charging station can dramatically reduce your initial investment. As a site owner, you’re responsible for preparing and running power to the charging station.

On average, preparations account for 30% of traditional upfront costs.

2) Reduced Management and Risk

Leasing your charging station shifts responsibilities back on the vendor that you would have had if you bought the station outright. These responsibilities include:

  • Allocating costs
  • Managing station availability
  • Maintaining functionality

Since the vendor owns the device, they bear the costs and liability for servicing and repairing it.

3) Opportunity to Recoup Costs

When you install a charging station, you can decide whether you’d like to charge patrons for using it.

With costs around $100 per month, you can assume that the revenue generated will eventually cover your operating expenses.

Depending on your initial costs to prepare the site, your payback period could be shorter than the term of your lease.

4) Enhancing Your Station’s Capabilities

As battery technology improves, charge times continue to drop. Leasing allows you to upgrade at the end of your lease term, and you can decide how much you’d like to continue investing in the station.

You can make sure your charging station is up to date and continues attracting users.

Know your EV Charging options.

The EV charging marketplace is still developing, and there’s a lot more to consider than whether to lease or buy a station.

If you’re considering diving in, talk to an energy advisor to discuss your needs before bringing in a representative from a charging company.

Keep an eye out for my next post which will cover questions to ask yourself before leasing or buying a charging station.

 

About the Author

Calvin has served as a Senior Strategic Energy Advisor at Nania Energy Advisors since 2010. He specializes in preparing property management boards to make informed decisions on energy efficiency through property industry education. His clients include apartment complexes, condominium associations, and senior living facilities. In his free time, Calvin enjoys music and coaching youth sports.

Calvin can be reached at (630) 225-4554 or at ccornish@naniaenergy.com.

The (Not-So-Distant) Future of Energy

By Michael Zaura

One question I’ve been asked over the past few weeks is: “What future energy trends are you seeing, and how will they impact my business?”

As an energy advisor, I don’t take this question lightly. Keeping up with energy news and understanding how emerging technology will affect the energy market is important for current and future planning.

Recent energy news stories can give you a sense of where the industry is headed. 3 items you’ll want to keep an eye on are:

  1. Renewable energy generation,
  2. Energy storage technology, and
  3. The US-China trade negotiations.

Renewable energy generation is hitting new highs.

Renewable energy sources are rapidly increasing their foothold in our electricity supply. Just a few months ago, renewables surpassed coal as the top electricity generation source. In 2018, renewables accounted for about 17% of US electricity generation. This number is expected to grow as more solar panels and wind turbines come online.

Renewable energy options are more available and economical than ever before. Users are buying more “green energy” as opposed to traditional “brown energy.” Customers of all sizes — including businesses like Starbucks — are taking advantage of this opportunity in the market. Utilities across the country are offering new incentives for solar projects for both residential and C&I consumers.

Just 5 years ago, renewables were considered too costly and weren’t generating enough supply to make an impact. Overtaking coal this quickly shows us that renewables will be a big part of energy discussions and strategies going forward.

Energy storage is becoming more prominent.

As renewable generation increases, where is the excess generated power going?

The answer: batteries.

Energy storage is important. It’s also important that the stored energy can be dispersed when it’s needed. Think about a facility’s solar panels. Those panels are generating electrical energy while the sun’s out. When the sun goes down, the facility can use its stored energy to keep the lights on instead of going to the grid. However, if the battery can only hold an hour’s worth of power or can’t release the power efficiently, it won’t be very effective.

While the technology is good right now, the research being poured into it will only make the products better by increasing their capacity and flexibility. The “next big battery breakthrough” is coming. And as the companies developing these batteries continue to advance this technology, our energy future is only looking brighter! (get it?)

International events are impacting energy.

One topic the media has incessantly covered is the US-China trade negotiations. As the current world leader in natural gas and oil production, the US has some leverage in these talks. China is the #1 importer of liquefied natural gas (LNG), and the US is one of the world’s top 3 LNG exporters. Energy minds think this is great for trade, but it could also drive electricity and natural gas away from historically low rates.

Our clients usually ask us to look into our “crystal ball” and give our opinion where the energy market is going. No one know when these trade talks will conclude or how they might shake out. Acting now on historically low energy rates has yielded great savings for our clients over the past few years. How long this pricing environment will last is anyone’s guess, but the outcome of the trade talks is something we’re all watching very closely.

Keep these energy topics on your radar.

So, which one of these trends will have the greatest impact on your business? Chances are, it may be all of them, whether directly or indirectly.

  • Depending on your organization’s sustainability goals, buying green energy through RECs or even investing in hard assets for your facility may be a consideration down the road.
  • Having a reliable battery as an on-site source of energy in the future could keep your facility up and running during a blackout.
  • Lastly, whatever the outcome of the trade negotiations, it makes sense to review your current energy purchasing strategy now while the markets continue to produce historically low pricing.

The chances of rates declining much further are far less than them increasing at a faster pace. Feel free to give me a call or comment below if you’d like to share your thoughts on the future of energy.

 

About the Author

Michael is a Senior Strategic Energy Advisor in the Chicagoland area. He specializes in manufacturing, hospitality, transportation, and renewable/green energy. Michael helps his clients craft energy strategies specific to their current and future situations. He is passionate about renewable/green energy and its growth, continuously learning through reading and sharing publications. He enjoys spending his spare time with his wife, daughter, and triplet boys.

Michael can be reached at (630) 225-4556 or via email at mzaura@naniaenergy.com.

New Maryland Renewables Law

By Mike Eckenroth

On May 22, 2019, Maryland Governor Hogan allowed Senate Bill 516 — Clean Energy Jobs Act to become law. This new law increases Tier 1 Renewable Portfolio Standards (RPS) compliance to 50% by 2030.

In other words: it mandates that 50% of Maryland’s energy comes from renewable sources by 2030, which is an increase from the previous goal of 25% by 2020.

How does this impact you?

For all electricity consumers in Maryland, this translates to an increase in costs to fund the renewable goal. The chart and graph below show the incrementally increasing RPS requirements and the estimated impact on electricity rates by year. By 2028, a facility who uses 2,000 MWh will be paying over $10,000 more per year in electricity costs.

Maryland RPS Increases

Maryland Renewable Energy Requirement

 

This cost increase IS avoidable!

You are eligible to lock the existing RPS rate and avoid this cost increase.  Those who sign an electricity supply agreement before October 2019 with a participating supplier will be “grandfathered” under the current and lower RPS costs for the duration of the agreement.

Take action today.

It’s not often that you have the chance to completely avoid a new regulatory fee in the energy industry. Please reach out to me to take advantage of this opportunity and learn how it will benefit your business.

About the Author

Mike is a Senior Strategic Energy Advisor 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 meckenroth@naniaenergy.com or phone at 443-833-8224.

The Best Energy ABCs in Illinois

By John Nania

Each year at Nania Energy Advisors, hundreds of Illinois businesses contact us about their electricity and natural gas needs. Because so many trust our advice, they often ask: “Who are the best ABCs (Agents, Brokers, and Consultants) in the business around here?”

Below is a list of companies that have solid reputations for helping businesses with electric and natural gas purchases. A couple of caveats:

  1. The ABCs on this list can assist with both electricity and natural gas purchases — not all ABCs do. Most just focus on electric, and only a handful really understand or transact for natural gas.
  2. There are many qualities that a good ABC needs to have. This is by no means an exhaustive list, but at a minimum each company on this list embodies these qualities:
    1. Great supplier relations
    2. Quality customer service
    3. Experienced professionals providing accurate and timely advice
    4. Good reputation

If an easy energy buying process is important to you, you have good options to choose from. Here is the list of the best ABCs in Illinois.

Best Electric ABCs

Large Electricity Purchases (> 10 million kWh/yr): Transparent Energy

Transparent Energy has built a reverse auction platform that is second-to-none in the nation. A reverse auction is like eBay in reverse — all suppliers are bidding blindly against each other in a live event to achieve the lowest possible price.

Transparent provides clients with the absolutely lowest cost purchase by creating competition from every supplier in the Illinois market. They’re masters at ensuring you have an apples-to-apples bid comparison. The auction platform is great for public institutions in particular because of its recorded, completely transparent process.

Midsize Electricity Purchases (2-10 million kWh/yr): Satori Energy

Dave and his team at Satori have a solid group of seasoned, well-trained analysts and great relationships with suppliers both in Illinois and nationally. Headquartered in Chicago, Satori started their firm at the beginning of the deregulated electric market in the early 2000’s. They’re often a gateway for new suppliers who will aggressively price their products to get started in a new market. They also have their own proprietary reverse auction platform.

Small Electricity Purchases (< 2 million kWh/yr): Lower Electric

Ira and Bill have a boutique shop in Northbrook that caters to small and midsize clients — quite often those with multiple locations. They provide a personalized touch and are skilled at tailoring innovative solutions to meet individual client needs.

Best Natural Gas ABC: Midwest Energy

For medium to very large natural gas users, the best ABC is hands-down Midwest Energy. Mark, Nick, and Greg have the greatest understanding of the market, supplier, and solutions to satisfy clients’ needs. Their skills come from being one of the first players in energy when natural gas first became deregulated in the early 1990’s.

A Note for Small Natural Gas Users

As a general rule, smaller clients (< 75,000 therms/yr) are typically best served by their local utility, not a third-party supplier. The only exception is if there are multiple locations needing service. If you fall into this category, I would suggest Lower Electric or Midwest Energy.

 

There are almost 300 registered ABCs to choose from in Illinois. They are served by over 30 electric suppliers and about 6 gas suppliers. To see the full list of electric suppliers in the state, click here.

(There is no license per se required to sell gas in the state, so a similar list for gas suppliers in Illinois is not available.)

When it comes down to it, choosing the right ABC is really about choosing the right energy partner. The relationship matters a lot more than you might think! Over the course of many years, you’ll have a need to engage with them several times for:

  • Strategy
  • Pricing
  • Budgets
  • Service with existing suppliers
  • Utility issues
  • Billing

Don’t be shy about asking how they get paid. Almost all are paid exclusively by their suppliers. If the ABC bills you directly for any of their services, ask them if they are also paid by the supplier. If they are, run — don’t walk — away. Good ABCs do not charge directly for their services, nor should they double-dip getting paid by the supplier and you.

I hope you’ve found this helpful and hope you find the perfect ABC for your facility.

If you’d like to learn more about what sets us apart as an energy advising company, visit our What We Do page.

 

About the Author

John has been an energy professional for 27 years. He is the CEO & Founder of Nania Energy Advisors, providing energy services to over 10,000 facilities in the Illinois and Mid-Atlantic markets. He has an MBA and is a frequest speaker at energy industry conferences.

John can be reached via email at jnania@naniaenergy.com.

California Direct Access Lottery

By Michael DeCaluwe

About 1 week ago, California regulators finalized procedures to further open California’s electric grid to consumer choice.

California originally opened its electricity market in the 1990s and was on the path to full deregulation. However, the 2001 energy crisis in the state forced them to put a hold on electric choice. Companies that were already taking supply from a 3rd-party provider were allowed to keep doing so through a program called Direct Access, but the state barred any new companies from participating.

California Senate Bill 237

California SB 237, passed in September 2018, opened an additional 4,000 gigawatt-hours (GWh) for electric choice beyond the 24,000 GWh that are already with a 3rd-party supplier. Final rules and procedures for companies to participate were passed by state regulators recently.

Why is this important?

This legislation marks the first meaningful opening of California’s electricity market in almost 20 years. California energy costs are the 7th highest in the country. Customers in California who have chosen 3rd-party supply are experiencing 10-50% savings in their energy costs, and this new legislation will allow for more companies to take advantage of these savings.

What is the Direct Access Lottery?

The 3 major California utilities will hold a lottery to decide which additional companies can participate in Direct Access. For companies that haven’t previously applied for the lottery, applications are due this week on Friday, June 14, 2019, by 5:00PM PST.

Nania Energy can help you with the application process. Here’s how:

  • Send us a recent California electricity bill from any one of the 3 major California power utilities:
    1. PG&E
    2. Southern California Edison
    3. San Diego Gas & Electricity
  • We’ll send you the necessary forms to complete to submit your lottery application.
  • Fill out the application and return it to us ASAP — we’ll handle the enrollment in the lottery on your behalf.

Final lottery selections will be made in August 2019 with service stating in January 2021.

If you have any questions on the new legislation or the lottery, please call us at (630) 225-4550 or email us at info@naniaenergy.com.

About the Author

Michael has served as the VP of Commercial & Industrial Sales at Nania Energy Advisors since 2007. He believes that listening to and understanding clients’ energy needs are vital to becoming a thought leader in the industry and forming a mutually beneficial business relationship. In his spare time, Michael enjoys being a dad, staying active, and playing basketball.

Michael can be reached via email at mdecaluwe@naniaenergy.com or via phone at (630) 225-4552.

3 Benefits of Energy Deregulation

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:

1) Choices

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 meckenroth@naniaenergy.com or phone at (443) 833-8224.