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The state of energy deregulation across the U.S.

3 min read
For business

2018 was a record year for energy consumption in the United States, surpassing 101.3 quadrillion British thermal units (Btu). As household energy consumption continues to increase, ratepayers are looking for ways to save on their monthly energy bills. For those living in Texas, Connecticut, Pennsylvania, New York or another deregulated energy market, competitive pricing can mean savings. So, why aren’t more states considering energy deregulation?

What is energy deregulation?

Put simply, energy deregulation gives customers the power of choice. In a deregulated market, residents and business owners do not have to purchase power from their local utility. Instead, customers can shop around for energy plans from retail energy providers, or REPs.

Taking away the utility company’s monopoly over power prices often leads to energy bill savings and improved customer service experiences. Since there are dozens of retail suppliers in any given deregulated market, REPs compete for customers’ business by offering lower electricity rates and other compelling incentives, such as green energy, rewards programs, smart home products and discounted home services.

The benefits of living in a deregulated energy market

Besides for the perks listed above, one of the main benefits to customers in deregulated energy markets is price stability. Most retail providers offer deregulated electricity and natural gas plans that have a fixed rate lasting up to three years.

By signing up for a fixed-rate plan, energy consumers are not subject to the fluctuations of the energy market; regardless of whether the price per kilowatt-hour goes up over the next few months or even years, deregulated customers are locked into the supply rate they signed up with.

RELATED: Texas’ competitive energy market leads to lower rates and reduced emissions

Another benefit of living in a state with energy deregulation is having a choice of where one’s energy comes from. As the country continues to prioritize renewable energy, many REPs have invested in wind farms and solar arrays to source their customers’ electricity. As a result, deregulated customers can sign up for energy plans that are sourced from up to 100 percent renewable power.

Effects of energy deregulation in the U.S.

Texas, which passed legislation for deregulation in 2001, is a prime example of how a deregulated market can boost a state’s energy sector.

Unlike other states that give consumers the option of either buying a deregulated energy plan or remaining with their utility, the majority of Texas residents must purchase their electricity from a retail provider. And, according to the Texas Coalition for Affordable Power, deregulated areas of Texas have seen a drop in their average electricity prices over the last 10 years, while deregulation-exempt areas have seen prices rise.

RELATED: Lubbock seeks to join Texas’ deregulated energy market

Lawmakers in Maryland and Washington, D.C., who passed energy deregulation legislation in 1999 and 2001, hope their respective deregulated markets will fuel the area’s renewable revolution. Because residents can shop around for their energy supplier, advocates for green energy and deregulation alike are encouraging customers to choose suppliers that source their power from green energy.

National Grid, one of the largest utilities in the country that operates in the deregulated states of New York and Massachusetts, recently announced itsr acquisition of Geronimo Energy. The company is planning to use this purchase to build a 100-megawatt solar project under its deregulated energy arm, National Grid Ventures.

However, some states are still resisting calls for deregulating their energy markets. In November of 2018, Nevadans voted against deregulating the state’s energy market. The Coalition to Defeat Question 3, used its $63 million in donations – $62.8 million of which was donated by the state’s utility monopoly, NV Energy – to campaign heavily against deregulation. According to the most recent available data, Nevadans average electricity rate ranks 24th in the U.S.

RELATED: Deregulated states fared better in 2017

But some states are looking into deregulation. Some business groups in Kansas are pressing for change. Florida officials rejected a deregulation call last year, but discussions are continuing. New Mexico has begun consideration as well, and consumer and conservation groups are pushing for an end to the utility monopoly in North Carolina.

Gabriella is a North Carolina-based writer covering topics related to the energy industry and the environment. A Sunshine State native, Gabriella graduated from the University of Florida in 2017 with a bachelor’s degree in English.