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What is deregulated energy?

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Think about a world where you can only purchase a certain product from only one shop. Sounds crazy right? This is how the energy Market was before deregulation was introduced.

In order to prevent energy monopolies that can control entire markets, deregulation was introduced.

It gives users the ability to choose which electricity provider they will buy their energy (electricity or gas) from.

Regulated vs. deregulated energy markets

Regulated Energy markets are markets where the utility company owns or controls the power plants that generate electricity.

They are also in charge of the transmission and distribution of it, which includes the poles, wires, transformers, and anything that is required in order to distribute the energy from the power plant directly to your home or business.

Simply put, in regulated markets you only have one option to choose from when it comes to buying electricity, and that 1 option is the same company that generates and distributes the power to you.

Deregulated markets on the other hand are markets where utility companies are not able to sell the electricity directly to the end client.

They still have a significant role in the process, because they are still in charge of the electricity distribution, maintaining the poles and wires, and ensuring that electricity will reach your home from the power grid.

This means that in deregulated markets you have an option to choose who you buy your energy from. Multiple competitive retail electric providers (REPs) are the only entities that are allowed to sell energy to the end client.

Think about the following scenario, in a deregulated area there is one utility company that everyone must get their energy from (for the same price), and multiple retail electric providers that all have to compete in order to win the customer.

This tends to result in cheaper electricity and gas prices with a wider variety of options for clients in deregulated markets.

You are able to get cheaper electricity prices if you live in one of these states:

Unfortunately, not all states are deregulated.

If you live in one of the following states you can take advantage of the variety of plans that are available to you and save on your electricity bill today:

  • California*
  •  Connecticut
  •  Delaware
  •  Illinois
  •  Maine
  •  Maryland 
  •  Massachusetts
  •  Michigan
  •  New Hampshire
  •  New Jersey
  •  New York
  •  Ohio
  •  Oregon
  •  Pennsylvania
  •  Rhode Island
  •  Texas
  •  Virginia
  •  Washington DC

*California’s has a limited system called DirectAcccess.

How does this work?

The deregulation process works through a reverse auction system, where each retail electric or gas provider offers to sell its energy at the lowest possible rate.

They create compelling offers that will attract customers. Because of this market system, you can always be sure that you’re getting a good deal.

Have you ever stopped to think about how you actually get your energy?

We all take it for granted today, but energy is delivered through the existing utility infrastructure – the electricity wires and gas pipes that run to your house.

The utility company that owns the infrastructure is responsible for transmitting the energy that gets to your home or business, but they are not the ones setting the rate that the end the client will pay.

This method outlined above eliminates the conflict of interest between the companies that supply your electricity and allows all clients to receive the exact same service, and the same energy, coming from the same source, but at a rate that they choose, that fits their usage habits.

How did it all start?

For many years electricity and gas utilities were not regulated. The utility companies competed for customers which created a fair market system that kept the prices low. As our country grew and demand increased nationwide, the power companies responded by growing and building larger plants and consolidating overhead which resulted in lower prices and reduced energy costs for everyone. That’s great!

Since each provider used to handle the transmission and distribution in different ways, there was no uniform process to serve energy.

Many clients were negatively affected by this, and in some cases, users were even left without service at all.

Final thoughts

Electricity Prices are overall lower in deregulated markets.

The average prices for residential or commercial customers are lower when they have an option to choose a plan that fits their usage.

When you have an option to choose your own plan you can decide to go with a longer or shorter-term contract, use a variable or fixed price plan, or choose a plan that gives you free electricity at night.

There are many options, and the best way to ensure you are consistently getting the best rate is to compare all of the different options.

With hundreds of plans to compare from, this can be a nightmare. We offer a comprehensive comparison tool here at Slash Plan.

It is free of charge, and with just a few clicks you will be able to find the plan that has the lowest rates for you.

Once you find the right plan, signing up is a breeze and takes less than three minutes to complete.

Simply enter your zip code and find all the plans that are available in your area – click here to start comparing.