Energy deregulation isn’t the most interesting topic in the world. In fact, most people in deregulated energy states probably don’t even know they have it. However, if you live in a deregulated state, you could benefit from it by saving on your energy bill.
What is Energy Deregulation?
To explain what energy deregulation is, I will use an example. When you move into a new place you start to set up your services like cable, phone, and internet. You have a choice in which telecommunications company you want to go with and can shop around for the best price most of the time. If you live in a deregulated energy state, you can do the same with your electricity or natural gas provider.
For the longest time utilities had a monopoly on the energy generation, transmission, and delivery. Since they had a monopoly in their area, they could increase the price of electricity with very little government oversight. Well, rates were getting so outrageous that a few states were getting fed up and wanted to do something about it.
They started to pass bills that would allow retail energy providers to come into the state and offer their own electricity rates. The goal was to create competition between retail energy providers and the utilities to drive down the cost for residents. Simple economics, right? The more competition, the more the price is driven down.
Well, that hasn’t exactly been the case. Most would say energy deregulation has seen “mixed results” because energy rates still continue to climb. This is mostly because energy materials (like fossil fuels) are getting more expensive to excavated, energy generation costs continue to climb, and the US energy infrastructure is aging and needs to be repaired/replaced.
How do Energy Providers Offer Lower Rates?
The great thing about switching off your utility to a retail energy provider is that almost nothing changes except your bill. This is because the utilities typically own the power plants and the transmission line and still charge their fee for those services. The supply portion of your bill is the part you can shop around and find a lower rate.
How this works is that retail energy providers will purchase their energy from power plants and then resell it… sometimes at a lower rate than utilities offer. The power is still generated by the power plants and delivered to you through the utility power lines, but you pay a lower rate. This means no downtime, blackouts, or poor service.
What you have to look out for are contract details. When you switch to a retail energy provider, they will typically make you sign a 6-36 month contract at a certain rate. This rate can be fixed (meaning it won’t change) or variable (meaning it will go up and down with demand). There also may be an early termination fee if you break the contract.
These are not uncommon things to have in a contract but many people don’t look for them and then are shocked when they come up. Make sure you know exactly what you are getting into before signing a long-term contract.
Am I Living in a Deregulated State?
Currently, over have of the states have some form of energy deregulation. You may live in a state that has electricity deregulation, or natural gas deregulation, or both. Below is a map of states and what form of deregulation they have.
How do I Shop Rates?
If you live in one of the states that are colored above, you can shop energy rates. There are a lot of website out there that will show you all the rates available in your area.
ElectricityRates.com – Fast, simple, easy, and safe way to shop rates in your area. Type in your zip code and see the rates in seconds.
ChooseEnergy.com – Great list of plans and easy to switch. Very trustworthy site.
CompareElectricity.com – Great site with lots of information about energy usage, sources, and rates for your area.
RenewableElectricity.com – For those looking for renewable energy options but don’t want to install solar panels on their home.
Ready to Switch Energy Rates?
Once you do a little shopping and you find a rate that is lower than your utility, make sure you have things ready to switch. Find your current utility bill because you will need some information off of it and read the agreement details so that you are aware of any details.
After that, these sites will do all the heavy work for you. They will transfer your information from the utility to the new retail energy provider for you. You will typically see your new rate and bill show up in 1-2 billing cycles.
With a projected hotter summer this year, it might not be a bad time to do some shopping if you live in a deregulated state. This won’t save you a fortune, but it may save you a couple bucks each month and only takes 5-10 minutes to do. So, what do you have to lose?