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What is energy deregulation?

If you live in the state of California, you’ve probably heard your fill of the term “energy deregulation” in recent years, but do you really know what it means? In a regulated market, companies or entities exist such as the Anaheim electricity company that operate vertically. That is, they own the entire electricity operation for their area, from the generator to the meter in yoru home. Conversely, in a deregulated market, markets divest ownership of the generation and transmission stages of the process, maintaining control over only certain areas of the process.

Energy companies operating in a deregulated market maintain control over the following areas:

Operations, maintenance and distribution of the electricity from the interconnection on the grid to the meter in each home.

All matters concerning billing the rate payer

Serving as the “Provider of Last Resort” (in other words, they act as a back-up in case the provider goes out of business)

In a deregulated market, grid operators administer wholesale markets, to ensure the service from the grid remains reliable and that blackouts are prevented as much as possible. In this scenario, multiple retail energy suppliers buy generation and then sell the electricity to end users such as homeowners, commercial, and industrial users.

Several US states have transitioned to deregulated markets in recent years, while others remain regulated or partially regulated.

Proponents of deregulation say that by reducing the amount of government control over the electricity industry, consumers actually benefit. How? By lowering prices while at the same time expanding the scope of options for consumers when it comes to their energy choices, deregulation allows for the public to have a say in who supplies the electricity that runs all of the household items they use every day.

On the flipside, however, deregulation has also met with some opposition from those living in deregulated states. Because competition is fierce, prices can rise and demand can skyrocket, putting a strain on the limited energy supplies available. Given that reality, many wonder whether energy deregulation is really a viable solution long term. To date, Congress has not been able to come up with a way to introduce a measure that would introduce competition into the electricity marketplace.

Energy regulation/deregulation aside, it’s important to reduce your energy consumption so you can save money and reduce your negative impact on the grid. There are myriad ways to do that, but some of the biggest things one can do include not using energy during peak hours, turning down the heat or air conditioning when you aren’t using it, unplugging small appliances when not in use, and remembering to power down computers when they aren’t being used. No matter who is supplying your electricity, it is your responsibility to reduce consumption and to use energy responsibly so there is enough to go around for everyone for years to come.