About Deregulated Energy
The essence of energy choice:
Imagine if you couldn’t select your phone service provider, or the most competitive company for your car insurance, or the station you buy gasoline from. In many States the price you pay for your utilities is regulated by the board of public utilities, and is supplied by only one company. In the 1990’s certain states decided to introduce a competitive marketplace for energy services; just as you have the choice to select your phone service provider and your car insurance company, you also have the choice to select an energy services company. This is the essence of Deregulated energy, in that the competitive suppliers are not regulated by the state and therefore can secure lower rates for their customers though generation or buying means other than the default utility.
Energy deregulation has enabled consumers to purchase their energy supply from an Energy Services Company (ESCO) of their choice; the utility company is no longer the only option for energy supply. Deregulation has separated the sale of the electricity or gas as a commodity from its distribution. The energy is available at a competitive price and under competitive conditions, but the delivery is a standard regulated charge, which means the transportation and the delivery of your energy remains regulated by the state, and the local utility company still continues to deliver your energy through their wires and pipes.
The purpose of deregulation is to foster competition among electricity and gas suppliers with the medium and long-term goal of combating the high prices maintained by government-sanctioned regional monopolies over the past decades. Deregulation has increased competition among energy suppliers and bolstered a free market arena for consumers. It also produced new energy innovations, products and services that customers are able to shop for and purchase. When customers participate in energy deregulation, they benefit from competitive pricing for energy related products and services.
What it means for consumers:
The single most important consideration in this new deregulated market is that there are material differences between the various supply products offered by the competitive service providers and especially vs. the standard offering made by the incumbent utility from which an entity has purchased power historically. Some of these differences amount to matters of price, while other differences are much more complex, having to do with reliability of service, rate security, etc.
In deregulated areas, commodity markets for energy have evolved. These markets are among the most volatile commodities traded anywhere. Electricity and gas prices change continuously, and can be bought or sold on the spot market for immediate delivery or for future terms, from one day to as far forward as someone is willing to trade. Three to five years, however, tends to be the practical limit for most fixed-price arrangements.
Spot market pricing changes by the minute and power can actually be purchased by the hour. Prices in the spot market can range from negative values up to $1,000/MWh. While the near term changes in the spot electric market are significant, it is notable that the overall changes in the forward market are greater, on average, than those in the spot market.
In order to successfully manage costs in this market, it is important to apply commodity-based market purchasing strategies, i.e. hedging. Also, it is important to recognize what portion of total energy costs are actually derived from the wholesale commodity energy markets, and what regulated cost components are. In gas, approximately 60% – 75% of delivered costs are directly related to commodity prices, while electric costs tend to be 65% – 75% based on commodity market levels.
According to the Energy Information Administration, commercial and industrial organizations in the United States spend more than $200 billion on energy every year, yet few are actively managing this expense. In this economic climate, businesses can no longer afford not to closely manage this expense.
Thanks to energy deregulation, organizations can now manage and control their energy investment in ways never before thought possible.
There are many ESCO’s today that service deregulated areas. Integrity Energy has developed durable relationships with those that consistently meet our criteria of excellence.
How do suppliers differ?
Here are some of the many reasons some ESCO’s are qualitatively better than others;
- Competitive pricing
- Consistent price savings
- Various and flexible rate/term options
- Dutifully honor rates and commitments
- Responsive to adjustments
- Proven financial stability
- Established and trustworthy management team with significant industry experience
Quality Billing and Customer Service
- Billing accuracy
- Responsive customer service department
- Offers consolidated (single) bill where available
- Easy to read invoices with no ‘small print’
- Usage and rates are clearly displayed on the bill
- Online account management
- Paperless billing
- Payment options and assistance, payment plans