Understanding Deregulation

Consumers receive the delivery and supply of energy from a single provider who generally has the complete market share for a region in which they live. These companies purchase, or generate energy, at the wholesale market price and sell it to consumers in their region according to regulated prices set by the local regulatory agency. These regulatory agencies consist of an energy board, public service commission, or both.

Electricity and Natural Gas are being deregulated in many states as well as in the global international marketplace. When the global international market is involved, the significance of deregulation means that more states will do business in a competition driven market. This allows the consumer to buy energy from a supplier at a competitive price - and not just from the current energy provider in your local area. The current providers, however, continue to have the sole ability to distribute these energy supplies and charge a regulated fee. They are able to do this because these companies privately own the lines that feed the supplies to the consumers.

Deregulation separates the sale of the energy as a commodity from its distribution. The product is available at a competitive price and under competitive conditions but the delivery is set at a standard regulated rate dependent upon your area. The methodology behind this is that a portion of what you pay would be for the commodity (electricity/natural gas), and a portion for the distribution (lines/piping). In the case of utilities, the distribution will remain regulated, but the commodity itself becomes a free market product.

Consumers choosing to shop around for their energy supplies can benefit from the price swings and variations inherent in a competitive energy marketplace. But where do consumers go to buy energy? Deregulation has given rise to a number of sources of energy suppliers.

First, you may continue to allow the current distributing utility generate or purchase energy on your behalf and deliver it to you with no change in the process. However, you may be paying a higher cost per unit.

You can also look into purchasing your energy from Option Energy. We are an independent company that sells on behalf of energy producers and/or purchases supplies of energy and re-sells it to consumers. Securing a long term supply from Option Energy when prices are lower can result in significant savings over the term of your contract.