Generation or production:
An energy supplier must generate or produce your electricity or natural gas.
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Currently, 30 states are deregulated for energy at some level.
To understand the deregulation of energy markets, it’s important to understand how energy is delivered to you.
Getting electricity and natural gas into your home is a three-step process.
utility companies own and control all three steps of this process. While there are benefits to regulated markets,
they do not allow customers the freedom to choose where their energy comes from.
Additionally, because they are technically monopolies, regulated markets do not encourage suppliers to compete and improve on their technologies.
utility companies are prohibited from owning the generation and transmission stages, and are only responsible for the distribution stage.
This allows the customers to choose the supplier that handles the generation and transmission of their energy, and shop for the best rates in their area.
Because deregulated markets put the power of energy choice into the consumers’ hands, suppliers must win over their customers.
This rivalry among suppliers can lead them to offer more competitive pricing and improved energy technologies (including renewable technologies) in order to earn the business of energy shoppers.
The full story of energy deregulation is a long and complicated one, beginning all the way back in the mid-to-late 1800s during the dawn of the first centralized utility companies.
But to understand energy deregulation, it’s important to understand how and why the energy industry was regulated in the first place.
In the early 1900s, electricity and gas suppliers faced little-to-no regulation, and unethical business practices began to crop up, costing consumers a fortune in energy bills. To combat these practices, regulations were introduced to put price caps on electricity and natural gas.
These price caps served consumers well in the short term. However, the 1973 OPEC oil crisis forced the U.S. to reconsider both its electricity and natural gas markets in a major way – one that would pave the way to allowing energy deregulation at the federal level.