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The Regulation of Energy Deregulation

May 22, 2008
The deregulation of an industry only happens once, but in the case of energy (electric and natural gas services) it is a slow-release process migrating from state to state.

Energy deregulation revolves around the concept of allowing competition into the market place, giving consumers a choice of electricity and/or natural gas suppliers.

The $220 billion energy industry has been referred to as "the last great government-sanctioned monopoly." To break it down simply, up until a few years ago, when you moved into a new house or apartment, you had only one option in energy provider whether you liked it or not.

Since the 1990s, however, in several states consumers have had a choice in energy providers, thus opening the market up to competition and driving down overall rates; but has it worked?

In Pennsylvania, electricity consumers were given choice starting in 1998, and by the end of 1999, nearly 500,000 residents had chosen a competitor over the local incumbent provider. On average, consumers who chose a competitive electric company were still getting the same service and reliability over the same physical lines, but at an average of $10 less per month.

On the flip side, California's rush into energy deregulation in 1996 took a much different turn. Not long after the plan was voted into law, price gouging began to sour the pallets of many would-be money saving consumers, and within 2 years, lawmakers there sought to repeal deregulation legislation. Those measures failed, and by 2000, the price of electricity in California nearly doubled for residents of some communities. By early 2001, the electric utilities faced financial hardships to the point where electricity shortages occurred.

Good or bad, positive or negative, many states are still pushing the issue of energy deregulation. A couple have deregulated electricity in recent years to rousing success, including Texas and New York. Georgia and Illinois are moving forward in the deregulation of natural gas.

The key seems to be in a careful and slow approach, ensuring that competitive electric and natural gas companies seeking to do business within a particular state are able to meet standards of quality and customer service, as well as financial responsibility.
Illinois, for example, has allowed natural gas customers choice since 1993, though approval processes have been methodical and standards strict in order to protect consumers. This has created a very slow trickle effect that protects residents from companies doing under-handed business.

Consumers in Illinois still bare some responsibility and are encouraged to research any natural gas provider they plan to switch to. In addition, consumers are not encouraged to sign long-term contracts with new providers as this will lock them in and keep them from taking advantage of future savings.
Whether you are for or against the deregulation of electricity and natural gas, you should research the concept fully in light of your state's provisions and make a decision based on the needs of your budget and family.

In short, deregulation of energy can benefit the consumer, as long as the deregulation process itself is well-regulated.
About the Author
Al Haneson blogs about Illinois issues and life at Ambit Illinois Natural Gas and Midwest Lawn Tips
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