Momentum - Business to Business Online Magazine | Page 34
Understanding
Energy Deregulation
By: Greg Wasinger, Ambit Energy
[email protected]
Energy deregulation has many benefits to the consumer, the economy and technology. As energy deregulation
spreads across the United States and into other nations around the globe, confusion is its close companion.
First of all, let’s talk about how energy works. Energy, or electricity as it is commonly known, has three parts
that end with the customer. First, it is generated. In the early days, power was produced in plants fueled by coal
or natural gas. Now, alternate sources such as solar and wind are available. Second, the power is transferred
across the wires to substations and eventually to homes and businesses.The third phase is the brokering of the
power. This is where energy is bought from the producer of the power and sold to the end user.
Before deregulation, one company controlled all three phases of the energy market. This was a monopoly and
steps were taken to break them up. Once an area is deregulated, a company can only control one phase of the
process. This leads to the benefits.
First of all, with competition, comes choices, better quality and technology improvements. The companies
competing for the production of power have improved the efficiency of the plants to be more competitive. In
the process, research increased to create better, cleaner and more efficient means of providing power. That
research led to improved nuclear and solar technology and wind generation. Now wind farms and solar arrays
are a large source of renewable energy across the nation and around the world. Renewable energy is energy
derived from natural sources such as wind, sun and water.
Next, the transfer of electricity is handled by one company
in a given area since all power flows across the same grid.
The “grid” is the network of power lines which all the
power flows through to be delivered from the producer
to the consumer.
The last phase is the retail energy sector.This is where the
most confusion falls. The first thing the consumer must
realize is that, no matter who they choose for a retail
provider, the generating and transferring of the power
will remain the same and constant. The lines will still be
maintained and the power will still be generated. The
only difference is what the consumer agrees to pay and
whether they pay the bill when it comes. The benefit to
the consumer is the right to choose. The consumer’s right
to choose forces the retail providers to offer better rates
and service to gain a customer base. Unfortunately, the
down side to this is that most consumers are naïve when
it comes to finding the best rates. The best advice is to
work with a company that has consultants willing to help
with understanding how to get the best rates. The price
per kilowatt hour (KWH) is not the total bill in most cases.