One of the basic tenets of the free market system is that competition benefits consumers. Competition evicts inefficient producers from the marketplace, and forces the remaining producers to attract customers with either a superior product, or lower prices. Until recently, Americans had zero to few options when selecting an electricity provider. As the only provider of electricity, consumers were forced to pay whatever price the local utility company charged. Fortunately, a number of states have taken steps to introduce competition into the utilities market. |
To understand how competition is being introduced into the electricity and natural gas markets, it is important to understand how the existing system of monopolies came to be. In order to support American's energy consumption, a national grid of electrical wires and natural gas pipes was built. During the 1930s, one local provider was selected to supply power to each area of the grid. The prices of natural gas, electricity, and associated transportation and distribution costs were regulated by the local utility, and consumers had no choice but to pay them.
Electricity prices spiked in early 1970s as a result of OPEC's worldwide oil embargo. As a result, consumers, Congress, and those in the electricity industry called for more competition in the utilities industry. In 1992, Congress passed an act that allowed power producers to compete with the local utilities for the sale of electricity. By 1996, 17 states introduced competition into the local energy marketplace through a process called deregulation.
In a deregulated market, consumers receive their energy distribution through the existing electrical and natural gas infrastructure; however, they are free to choose their energy supplier. The rate charged by energy suppliers is based on current market value of electricity or natural gas, and is often less than the rates offered by the government-regulated utility. The various suppliers can compete with one another, which can result in lower rates and improved service for the consumer. In order to make sure that energy distribution is accomplished safely and fairly, the government still requires a local utility to deliver, maintain, and service all electricity and natural gas accounts. Customers in deregulated states will receive a bill from their utility, and the rate the supplier charges is reflected in the supply portion of the monthly bill, which accounts for approximately 50 percent of the total bill.
Today, 24 states have deregulated their utilities market to some extent. There are more than 3,100 electric utilities servicing American homes and businesses, some of which offer new products, such as greener technologies. Now that some consumers have a choice in selecting a supplier for a commodity they have probably taken for granted, it is important that they look beyond cost when selecting a supplier. In addition to cost, consumers should research reliability, load management, and additional fees. Additionally, customers should research potential suppliers with their Public Service Commissioner and Better Business Bureau.
In many areas of the country, deregulation has been a resounding success. Customers are pleased with their lower bills, as well as the option to select their product, including forms of green energy. As advances in energy distribution are made, deregulation will deliver the services customers demand.
Point Click Switch provides the update information on energy distribution, Maryland residents rely on. Learn more at http://www.pointclickswitch.com.
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