FAQ's
Deregulation
What exactly is deregulation?
Simply, deregulation involves the removal or relaxation of regulations or controls that govern a business or service operation, in this case electric and natural gas utilities. The portion of deregulation that allows consumers the opportunity to save money lies with the purchase of energy itself. Customers will still utilize an energy distribution company (EDC) that owns the distribution facilities and the equipment necessary to deliver the purchased energy. Customers then purchase the energy itself from a supplier who uses the EDC's distribution facilities to move the energy to the customers.
What's so great about deregulation?
Deregulation creates competition which in turn gives end users an opportunity to realize significant savings on their energy costs as well as benefit from new, energy related services.
Is energy deregulated everywhere in the United States?
Some states have already enacted electricity and natural gas deregulation legislation that allows all types of consumers - commercial and industrial as well as residential - an opportunity to sign up to purchase power from an alternative supplier at any time.
Other states allow only the largest users of energy the option of choosing their suppliers while still others specify whether a customer can shop for all, or just a portion of their energy needs. Still others are only beginning to talk about deregulation of energy.
There are several initiatives to standardize deregulation through federal legislation as well.
How can I find out what's happening with deregulation in my state?
To determine the level of deregulation in your state, check with your Department of Energy, or search the Internet for sites on energy or deregulation. Try these related sites:
Glossary and Acronyms
Knowledge is Power: Here are some need- to- know phrases and acronyms.
Aggregator: A buying group, licensed by the Public Utility Commission, that procures energy on behalf of consumers. The group "aggregates," or combines, many smaller customers into one large customer to obtain energy at the best possible price.
Bulk Power Market: Purchases and sales of energy on the wholesale level.
CTC: Competitive Transition Charge (stranded cost - typically a mandated charge for a specific number of years)
Demand-Side: Strategies used to affect the number of energy units used, such as utilizing energy efficient lighting.
EDC: Electric (or Energy) Distribution Company. The company that owns the electric (or natural gas) lines and other equipment needed to deliver energy to the consumer.
Exchange: An entity that ensures the integrity of commodity transactions for all parties involved.
Fixed Price: A price for energy that remains the same usually over a set amount of time.
ISO: Independent System Operator
Load: An amount of energy required to meet customer usage over a given time period.
Load Factor: The ratio of kilowatt-hours (kWh) per KW demand.
Load Profile: An hour by hour measurement of a customer's energy use showing how much and when the power is used. Typically used for scheduling and pricing.
Market Based Rates: (Also called indexed rates.) Prices based on current energy prices that can change from month to month.
Off Peak / On Peak: Period of time when energy demand and its cost is low (off-peak) or high (on-peak.)
Ratchet: The highest demand (KW) of the year used for monthly billing, regardless of use.
Real-time: Actually occurring moment by moment.
Real-time Pricing: A rate that reflects the actual moment by moment cost of energy.
Spot Market: Purchases of energy in the short term, usually from supply available for a short time.
Strip Price: An average price per unit usually based on 12 consecutive months of futures contracts.
Supplier: An entity that sells energy to customers using the transmission and distribution facilities of an EDC.
Supply-side: Strategies that can affect cost per unit, such as purchasing lower priced energy.
Variable Price: A price that can change almost anytime - by the hour, day, month, etc.