How Deregulated Energy Areas Affect You

Power plant - Deregulated Energy Areas

When most people hear the term “deregulated energy areas,” they’re most likely going to first think “this means Congress or the Supreme Court said the Environmental Protection Agency overstepped its boundaries again and passed regulations that were illegal.”

In some instances, these people might be right, but we’re not talking about the type of regulation that determines how an energy provider can conduct business. We’re talking about consumers having a choice in who (or what) provides their energy for them.

Electric and Gas Supplies

Solar panels - Deregulated Energy Areas
It used to be much more difficult to get solar panels or wind turbines in many areas. Via Wikimedia Images by Ra Boe

Several years ago, you, as the consumer didn’t have a choice about who you purchased your gas or electricity from. You also didn’t have much of a choice about how your electricity was generated. That’s changing. Correction: That’s been changing for almost two decades (more in some places) now.

As an example, most electrical suppliers wouldn’t let you have solar panels or a wind turbine hooked up to “their electric meter” on your house. They stated it could damage the grid, the transformer for your neighborhood, and gave a variety of other excuses. Suppliers like Siemens and GE came out with “reversible meters” and most of those excuses are now worthless because the meter prevents the alternate energy source from damaging the grid. Now, electrical suppliers have no excuse to disallow them. Some of them have even begun paying customers for excess power that is generated and sent back to the grid.

Consumers Choose Who Supplies Energy in Deregulated Energy Areas

Many states tried this in the ’70s and ’80s. They tried letting customers decide who they wanted to buy their power and gas from. The thought was that competition would drive prices down. After all, that’s the premise of the free market economy, right? Competition means lower prices.

Well, not so fast.

This was one area that this wasn’t the case. As Bert Markgraf points out so well in “Energy Deregulation Reduces Your Costs,” this was easier said than done, big time.

“Why? I don’t want to buy power from PG&E. I want to use SoCalEdison.” OK. So you want to buy your electricity from Edison instead of Pacific Gas and Electric. The question is, HOW do you get the power generated by SoCalEdison and not PG&E? That was where the difficulty came in. The grid was set up for a single provider/generator. Sure, any utility could slap a pie plate and meter on your breaker box, but the problem was how could anyone be sure how much of whose power was being consumed?

Again, technology companies came to the rescue in helping to create fully deregulated energy areas. Metering stations, or injection stations, whatever you want to call them, came into practice. These are places where the lines from the generation facilities meet the distribution grid. And now they’re smart enough to know how much of Company A’s power is going into the grid and where it’s going.

We now have places like Santa Clara, California. When you move into a place in this city, you have to choose between PG&E, Santa Clara City Electric, or, in some parts of the city, a small energy co-op.

Natural Gas Suppliers Take a Page from the Oil Company

US gas - Deregulated Energy Areas
Click to see the interstate and intrastate pipelines throughout the United States. Via Wikimedia Images by HeavyD14

Most people don’t know this, but at any given time during the day they’re probably standing over a twelve-inch gas line supplying gasoline to local holding facilities for the major retailers (Shell, Exxon, Chevron, etc.) Chances are, the gas you’re pumping into your car was refined by an independent refinery and not a major oil company.

Those refineries send the refined product through pipelines that are computer-controlled. So, if Chevron in San Rafael, California, wants 100,000 gallons of 91-octane gas, it places an order and the computers deliver it. Chevron San Rafael then adds the Chevron-specific additives.

In states with energy deregulated areas, the process with natural gas is the same, or similar. The differences in how the two systems function are too technical to get into here, but suffice it to say, the suppliers keep track of how much they pump into the system and how much of that supply their customers use. It’s pretty transparent to you as the consumer, except you get to choose Company A, Company B, etc. as the company you buy your gas from.

More Info About Deregulated Energy Areas

What I’ve said above comes with a bit of a proviso. Usually, the choice that you have when making choices about deregulated energy areas is limited to what company generates the power you use, not who delivers it. This is because technically, to be able to choose not only who generates, but who delivers your energy, means that there would have to be multiple sets of wires and pipes to your house.

What happens is this: You choose who you want generating or supplying your energy (electricity and/or gas). The companies that supply energy to your area deliver their product to the company delivering the energy to your house. The delivery company is also the one who normally ends up billing you monthly.

So, how do you know if you have a choice in who supplies your electricity or natural gas? You could call your local delivery company. Or, you could take a look at Digital Landing’s list of states that have energy deregulated areas.

Main image comes courtesy of Wikimedia Images by Angie from Sawara, Chiba-ken, Japan