Electric Choice

What is Electricity Deregulation?

Historic changes are taking place in the electric power industry. Until now, your local utility company was responsible for the production of power, and the delivery of electricity to your home or business. As a state regulated monopoly, the utility has to submit to oversight by the Public Utility/Service Commission and justify the price it charges for electricity. There are three parts of the process of getting electricity to you: generation, transmission, and distribution.

The generation part is being deregulated. Distribution and transmission services and rates will remain regulated, and your local utility will continue to operate and maintain these lines and deliver power to your home or business.

Deregulation, also called restructuring, simply means that government is giving up its power to control something, usually the buying and selling of a product or service. In the case of electricity deregulation, about half of the state utility commissions are giving up their authority to control the price for the generation of electricity and are letting that price be determined by the marketplace.

Utilities were initially opposed to deregulation, until they realized they could recover their investments faster and then be free of a lot of government regulations. Most of these debts, which the utilities call "stranded costs", are the result of massive nuclear plant construction cost overruns. These costs are estimated to be around $200 billion nationwide.

CITIZEN POWER does not support the deregulation of critically needed services like energy. We are especially concerned about letting the marketplace determine the price and reliability of electricity supply. The situation in California clearly demonstrates what can happen when regulatory control is removed. (For a good explanation of the California problem by former CITIZEN POWER board member Harvey Wasserman, click here). However, we are working to try and make deregulation as consumer and environmentally friendly as possible.

Whom Can I Buy Electricity From?

Prior to deregulation, you did not have a choice of who supplies your energy. Now, you will be able to buy electricity from any supplier competing for your business. While the names used sometimes vary by state, the key players in the market are:

• Power Generators - companies that actually produce the electricity.
• Power Marketers - companies that buy power in bulk and resell it. Most utilities, including both those in state and out-of-state, have an affiliated power marketing company.
• Brokers or Agents - companies that attempt to match buyers and sellers.
• Buying Pools or Aggregators - a kind of buying club that pools customers together in an attempt to get better prices. Municipalities, non-profit organizations and employers may be forming aggregation groups.

As a consumer, you may wonder if switching suppliers is mandatory. This differs on a state-by-state basis. In most cases you do not have to pick a new electricity supplier. If you are still getting electricity from your utility and you do want to shop for a new supplier, you need to compare the price you are currently paying for generation to the price being offered by competing suppliers. This price will be called the "price to compare" or "shopping credit" or "standard offer". This price often includes the transmission costs as well.

CITIZEN POWER encourages shoppers to seriously consider the environmental impact of choosing a new supplier. Ask the supplier how the electricity they are selling is generated. In some states, you can pick a supplier that offers clean and renewable energy sources for a price equal to, or only a few dollars more a month than, what you are paying now.

For Pennsylvania electric customers, click here for a good shopping guide to assist you in finding a new electricity supplier.

If you want more detailed analysis of the challenges in restructuring the electricity generation industry, here are three references:

(Some of these documents are in Adobe Acrobat .pdf format. If you need Acrobat Reader, Click here for the free download)

• "Free Market Shock"

• "Can Electric Utility Restructuring Meet The Challenges It Has Created?"

• "Reconsidering Electricity Restructuring: Do market problems indicate a short circuit, or a total blackout? "

For information about electric deregulation in Pennsylvania, click here

For information about electric deregulation in Ohio, click here

For information about electric deregulation in other states, click here

 

CITIZEN POWER 2121 Murray Ave Pittsburgh, PA 15217-2105	Phone: (412) 421-7029 Fax: (412) 421-6162 info@citizenpower.com