Deregulated energy states have evolved rapidly over the last twenty-five years. Consequently, this has resulted in significant changes in the commercial and consumer energy markets.
The definition of deregulation is the removal of regulations or restrictions, within particular industries. Deregulation is in direct opposition to government regulations. As such, it’s the repeal of these regulations that affect the economy, for better or for worse.
Let’s discuss the current status of deregulated energy states, their benefits, and why that matters to your business.
Deregulated Energy States Overview
Currently, there are twenty-six (26) U.S. deregulated energy states related to the retail energy markets. What’s more, these states are classified by their scope of deregulation. That is electricity, natural gas, or both types of energy sources.
Those states with “*” note limitations or restrictions on energy choice options.
- New Hampshire
Natural Gas Only
- New Mexico*
- West Virginia*
Electricity & Natural Gas
- New Jersey
- New York
- Rhode Island
United States Deregulated Energy States Map
Regulated Versus Deregulated Electricity Markets
Deregulated energy states for electricity vary greatly due to history, market needs, and state politics. Each state has gotten to where it is by diverse routes.
Energy deregulation began with governments reforming laws to allow the market to dictate energy prices rather than the government setting them. In brief, independent electricity providers were given the right to sell energy on the open market alongside traditional utility companies.
A public regulator oversees one or more vertically integrated public utility monopolies in a regulated electricity market. Basically, the utility is responsible for generating the electricity, sending it through the transmission grid, and finally delivery to the customer.
Customers (businesses and consumers) in regulated markets cannot choose who generates their electricity and are bound to that local utility.
In a deregulated electricity market there no longer exists a public utility monopoly. Rather, there are multiple participants (generators) that sell electricity into the wholesale market and Retail Energy Providers (REPs) who purchase this electricity to sell to their customers (businesses and consumers).
Utilities and transmission companies own and manage the transmission grid and operate in a regulated market. Specifically, a single company manages the power lines, transmission towers, utility poles, transformers, power substations, etc. In short, they are responsible that the electricity is delivered to REPs.
Generator companies compete to sell their electricity, while retailers compete to resell that power to a business or consumer. Since they all use the same power grid, having competing networks would result in redundant power lines, and it would represent a waste of infrastructure.
The generator companies are wholesalers selling their electricity to REPs. Specifically, they operate in a reverse auction market, where the seller with the lowest rate wins the deal.
Energy Deregulation Benefits
It all begins with the power of choice. Whether you are the business owner or the head of a household, awareness of your ability to choose is paramount. Consequently, you must pay attention to your choices.
If your business or home is located in one of the energy-deregulated states, here are some of the benefits you have the choice to enjoy.
Energy deregulation has resulted in more Retail Energy Providers and overall lower costs. Also you have more services plans to better fit your needs.
Deregulation has resulted in more REPs and overall better service. Additionally you benefit by a higher level of vendor quality.
Energy deregulation forces REPs increased efficiency and environmental awareness. Plus, the expectation of new enhanced services in the future.
Deregulated Energy States And Business
If your business resides in a deregulated energy state it likely benefits from lower energy costs. Additionally, recent increases in its production costs (coal and natural gas) heighten the importance of controlling this business expense.
In general, U.S. electricity energy rates have risen significantly in 2022 for all business sectors. Significantly is the rate of increase in rates between deregulated and non-deregulated energy states.
In addition to lower energy costs, deregulation is important for your business because it opens up more avenues for products and services to be offered, and provides more competitive prices for your customers. Your business can leverage this versus your competition.
Deregulated Energy States Conclusion
Businesses and consumers in deregulated energy states have more choices. In general, this is a good thing, but sometimes it can be hard to determine which energy provider has the best prices and services.
Conversely, regulated energy states have only one choice, one energy provider. So this one energy provider’s prices may be higher than in a deregulated market.
Why? Because the lack of choice ensures that you’re not paying less than your business competitor or neighbor for the same electrical services.