In regulated electricity markets, customers cannot choose their provider and are bound to the utility in that area. They have no choice but to purchase electricity from regional monopolies that own and operate the entire electric system. Customers also have to buy power at prices regulated by the state and federal government.
What electricity deregulation does is allow consumers to choose their own electric company and encourage free-market competition. Texas moved to full electricity deregulation in 1999, splitting the power sector into three main components: generation providers, transmission owners, and retail companies. Today, the state is mostly a deregulated electricity market. However, there are still areas of Texas that remain regulated markets.
Effects of energy deregulation
Energy deregulation dramatically impacts the lives of Texans and the market participants, including the electricity companies. Some of the most significant effects are as follows-
- Probably one of the most critical aspects of deregulation is that it gives consumers the power to choose. Consumers can now select their electricity suppliers for their residential and commercial establishment. They can also compare and choose the suppliers based on their services and the rates that suit their goals, just like they select any other household item. Consumers need to know that the same local power lines deliver a person’s electricity regardless of who they’re buying it from or how much they’re paying for it.
- Another significant effect of deregulation is the elimination of the energy monopolies that used to set the electricity rates. With deregulation, energy companies have the flexibility of offering their customers competitive prices and a variety of products. This dynamic can create mutually beneficial relationships for consumers and providers when properly provided and wisely selected.
- Deregulation in Texas opens the door to numerous, more flexible energy options, thanks to suppliers being able to offer a greater variety of solutions. However, it also makes for as many challenges as it does opportunities. With so many different types of rates, plans, contract terms, hidden fees, etc., there is a general lack of transparency and a sense of confusion. The sheer number of gimmicks and marketing makes it much harder for people to compare and identify options that satisfy both cost, lifestyle, and preferences.
- As energy companies realize that competitive prices and marketing alone are not enough to build customer loyalty, there is an increase in innovation and personalization. Leading energy companies are dedicating more time and effort to understand their customers’ needs and serve their expectations better. The utilities of the future are embracing a new era of consumer empowerment with more transparent and mutually beneficial relationships.
The full potential of energy deregulation might remain unfulfilled. For too long, it was nearly impossible for consumers to analyze the multitude of choices or understand their energy consumption, even if they were energy experts. So, we developed EnerWisely, a better, simple, and easy way for consumers and providers to find common ground and realize their real power to choose.