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.