The government monopolies have long controlled the energy sector until the late 1970s. During this time, these monopolies decided how this sector worked. They protected both the consumer and the electric utilities.
Standards and rates were set so that suppliers could not incur losses and that customers could not be exploited. After deregulation in the late 1970s, independent energy companies started providing these services, breaking the monopoly. By 1990, most states had embraced deregulation under the Public Utilities Regulatory Policy Act (PURPA) that was passed in 1978.
Since deregulation, independent suppliers have been offering competitive packages to clients. Although not all States have accepted deregulation, they are slowing falling in. Through deregulation, suppliers have become innovative, and customers have been enjoying better services. However, electric utilities still handle some services such as distribution despite having independent suppliers.
Advantages of Deregulation of the Energy Market
As deregulation continues gaining popularity among states, let us have a look at some of its benefits:
1. Power to Choose Suppliers
Traditionally, you could sign up with a utility company regardless of unfairness in their rates. However, if you live in States that have accepted deregulation such as Texas, you have the power to choose texas rates that are more affordable from different suppliers. Still, since these suppliers have different packages, you can select one that matches your needs.
2. Allow Companies to Grow
Before deregulation, companies used to spend a lot to comply with federal rules. As a result, they could not invest in themselves, which discouraged innovation. Today, companies can hire skilled labor; get modern equipment and machinery to enhance their efficiency, thanks to deregulation. Instead of focusing on clearing with a lot of regulatory bodies, electric companies can now focus on delivering better services.
3. Allows Environmental Conservation
If you prefer using energy that is friendly to the environment, you can achieve it through deregulation in the energy market. Independent suppliers provide you with access to renewable energy. However, before deregulation, you could not participate in conservation. Utility companies could supply you with whichever type of energy they wanted.
4. Allows Transparency
There are bills that, when presented to you, feel like there are hidden fees because of their complex nature. One of those bills is from electric utilities before deregulation occurred. With deregulation, you can account for every penny you spend. Most independent suppliers are transparent and straightforward because they want to create and maintain trust with their clients.
Disadvantages of Deregulation in the Energy Market
Deregulation in the energy market has a few drawbacks that include:
1. Lack of Equality
Deregulation has created inequality in service delivery. Independent suppliers want to serve a wealthy and booming population. As a result, unprofitable areas and those in rural settings are left behind. They lack access to diversified services and have to rely on utility companies solely.
2. May Create Unhealthy Competition
Where the market is free, suppliers have to come up with ways to entice customers to work with them. Of course, every market has its code of ethics. However, not every participant adheres to this conduct.
Some suppliers may feel they are not doing good as they have anticipated. Therefore, they turn into an unhealthy turn to beat the competition and acquire a strong customer base.
3. Customers are Susceptible to Scamming
Although there are Acts that describe how energy suppliers should conduct business in every state, some do not adhere to them. Because most clients do not take the time to learn about suppliers, they end up doing business with the wrong people. After customers sign up and pay for services, scammers leave with their money without delivering any service.
Deregulation will continue taking root in coming years and open more opportunities and innovations. If you have not yet had services from independent energy providers, you should try one of their packages. Then, compare it with your regular utility company and see if it is a better option.