If the electric company that delivers electricity to your home happens to operate in multiple states then the chances are good that they are operating in markets that are both regulated and deregulated. What difference does that make to you? Well how the electricity markets work will directly impact the price you pay to turn your lights on. It will also impact who you choose to bring you electricity. Let’s take a closer look at the different markets and why you should care.
A regulated market is one where there is an integrated monopoly that is overseen by a public utility board. The utility must generate electricity make sure it gets on the grid and then deliver it to its customers. In a regulated market you have only one energy provider and there is only one company bringing electricity to the market. All over the country you will find regulated markets either at the state or local level. Here is a closer look at regulated markets.
When the market is deregulated then companies other than your local electric company can generate electricity and sell it in a wholesale market. Retail energy suppliers by that energy and that is what is delivered to your home. The transmission grid is owned by a separate company and there Independent Systems Operators and Regional Transmission Organizations who oversee the entire thing. There are a number of companies who ensure that electricity is properly distributed and everything runs smoothly.
The purpose of deregulation is to bring competition to the market from independent energy producers. There are now multiple markets that have chosen deregulation throughout New England and across the state of Texas. In these markets there are choices for a retail provider that was previously unavailable. The electricity rates are more competitive and there is a choice to use renewable energy. Some states like California have partial deregulation which can make the energy market complicated.
The largest difference between states that regulate and states that don’t is consumer choice and who is in control of the power grid. In a regulated state you have no choices unless you choose to go off grid with alternative energy sources. In a deregulated state there are more choices and a better pricing structure but there is the risk of energy shortages. There have also been cases of price manipulation, price gouging and other bad practices that aren’t allowed in a regulated market.