What is Energy Deregulation Anyways?

Energy deregulation gives you, the consumer, the ability to chose your Texas energy provider and energy plan rather than merely rely on your utility provider to supply your energy. Is this is a good thing? Depends on whom you’re asking. But at the end of the day, it lets you shop for electricity and gives you the freedom to change your plan or provider at any time, for any reason. This is more of a ‘free market’ approach which allows more competition, and theoretically should lower energy prices for you, the end user.

The Importance of Energy Deregulation

Energy deregulation gives you the power to choose. In this market, there are several plans available to fit any of your energy needs. Deregulation lets you pick the electricity plan that is tailored to your specific needs and allows for flexibility and freedom with whatever you chose. Since there are so many plans available to you, this market is a competitive one. This means providers will seek to provide energy at the lowest price so that you will benefit from lower energy prices. There are several benefits of deregulation. If you live in a deregulated area, do not take this privilege for granted. Not everyone gets these advantages.

Deregulation Timeline

1929: The Great Depression

During the great depression, many companies crashed including companies within the energy industry. During this time, electricity company owners were selling the worthless stock. Because of the financial problems, utility companies began to have to regulate these energy providers. In 1932, eight of the largest utility companies in America owned 73% of all investor-owned electric companies. This created a significant imbalance in the industry. The government began to step in to prevent unfair practices to become normal.  This was the birth of the Public Utilities Holding Company Act.

1935: Congress Passed the Public Utilities Holding Company Act

This act made energy regulated. It brought regulation rules to the energy industry and changed the way companies sell power. Some rules it added were:

    • The Securities and Exchange Commission had to approve a holding company if it wanted to participate in the non-utility business.
    • Non-utility business must be separated from the regulated utility business.
    • Any holding company had to register with the Securities and Exchange Commission.
    • The Securities and Exchange Commission limited the holding company to ownership of one integrated system.

The goal of this act was to make sure companies were not recovering their expenses twice. It also a utility from artificially raising cost-based regulation rates.

1970's: Energy Crisis

Many countries around the globe including America, Western Europe, New Zealand, Australia, Japan, and Canada faced a shortage of petroleum. Fuel prices spiked, and people tried to conserve energy as much as possible. Because of this, people began to search for new sources of energy.

1992: National Energy Policy Act

This act created competition in the wholesale electricity generation market. It also created a new type of energy production called the Exempt Wholesale Generator (EWG). EWG’s could enter the market easier did not have the same rules or regulations. This act helped to pave the way for energy deregulation in the United States.

1996: Order 888

This made it, so transmission services separated from power plants and made significant changes in the industry. Because of these changes, several American states were able to adopt partial energy deregulation laws.

1999: Order 200

By this time several states were already at least partially deregulated. Many had legislation in place to allow consumers to access private power suppliers.

2005: President Bush Signs Energy Policy Act

This act transferred the regulation of utilities from the Securities and Exchange Commission to the Federal Energy Regulatory Commission (FERC).

Now

By 2012, at least a dozen states were partially deregulated. Although no state is fully deregulated, we are still moving closer to full deregulation. Texas is the most deregulated state with at least 86% of the state deregulated.