YOU NEED TO KNOW

The primary benefit of electricity or energy deregulation is the creation of a business environment that fosters the emergence of more customer-oriented, more efficient utility providers. These efficiency improvements extend to all aspects of the utility and are seen as delivering service, monetary, and environmental benefits. Utility providers that are under-perform in customer service, cost of good sold or environment inefficiencies will be phased out.

Residential and commercial customers, especially businesses, must understand and actively manage energy risks and appoint representation through an energy broker like Wizard Energy Savings. For example, in California more than 20% of businesses switched suppliers in the first two years of deregulation in order to save money. Businesses that did not bid out there energy needs and sign agreements with suppliers, staying with default service, saw their electricity rates more than double.

If you are unsure if you are in a deregulated market, click here for a map of the U.S. or click here for a map of Texas.

HOW IT WORKS

There are three steps in providing energy to end users:
1) Generation: The production of electricity. Electricity generators typically use coal, natural gas, or nuclear fuel. Renewable green resources (biomass, wind, and solar) are also used in the production or generation of electricity.
2) Transmission: Moving electrical energy between the generation source and local electric distribution systems. Electricity transmission occurs at relatively high voltages. In the U. S., the Federal Energy Regulatory Commission (FERC) governs interstate transmission and transportation while state regulator agencies govern most intrastate transmission and transportation.
3) Distribution: The movement of energy from the transmission system to end-users. Compared with electricity transmission, electricity distribution is at relatively low voltages. In the U. S., distribution services are typically governed by state regulatory agencies.

HISTORY OF DEREGULATION

Electricity markets began to be deregulated back in 2000. Historically, in regulated markets, energy consumers have been recipients of a bundled service, where all three elements, along with other services (metering), are provided as a package to the consumer by a single, regulated utility company. With deregulation in place, consumers may opt for unbundled service (supply) from competitive suppliers.

A good analogy for energy deregulation may be found in telecommunications. Let's say "long distance service" is equal to "energy supply" and "local telephone service" is equal to "energy delivery." Under deregulation, local phone service (energy delivery) remain regulated and are provided by local utility companies, which are regulated by the state, while long distance service (energy supply) may be provided by competitive suppliers and are generally regulated by federal agencies.

WHERE WE COME IN

Energy costs make up to 1/3 of a business' operating costs, and because energy costs are very volatile, their impact on business performance can be great. Energy procurement and supply management are very difficult and demanding. Regional, state, and local distribution territory markets are heterogeneous; prices flucuate; the set of suppliers and their offerings are regionally diverse; state and local distribution territory regulations and rules vary substantively; and all of these factors change with time. This is particularly challenging for businesses because energy management is not a core competence for most companies. Even companies with energy management departments find the challenges new and daunting.

Yet, as energy markets deregulate and become competitive, the price of energy is expected to remain volatile but decrease over time. This presents opportunities for consumers to manage energy costs to their advantage and for suppliers to increase their market share. While suppliers compete to acquire customers, businesses need solid energy management strategies and straightforward brokers like Wizard Energy Savings to help them choose energy wisely. We provide better information and attentive service in order to find opportunities, to make decisions, and to manage risk.