American Electricity Deregulation

Today we will open a new series of post about electricity deregulation in America. We will discuss how deregulation has opened markets across the U.S. and their importance to American energy.
So please check back over the next serveral days as we discuss more on electricity deregulation in America.

In the1990s the Federal government embarked on a policy of deregulating the electricity industry in America. It was believed that this America electricity deregulation would help American businesses and consumers save money on electricity. Even though the deregulation process has been going on in the natural gas industry for well over a decade, little has been done with American electric utility operations and rates since they are much more complex to figure. As a result of this, it is believed that electric utility restructuring will have a far greater impact on facility energy costs for consumers and the way operations are handled in coming years. Before we discuss this deregulation, there are a few concepts that we better need to understand.

In the simplest terms, a utility is an entity which is created to provide a tangible commodity or service that is considered to be something vital to the well being of the general public. These commodities include electrical power, water, or natural gas. In addition, the utility has the responsibility for producing the commodity, transporting it (in the case of electricity through power lines they have erected), and ultimately distributing it on the retail level to the individual consumer through a meter and connections to the power grid.

Since utility service is such a vital need, it has been determined by both state and federal lawmakers that it is in the public's interest to regulate how it is provided. To keep utilities from causing the consumer to suffer price gouging and to encourage widespread access by individual consumers, the government originally gave individual utilities certain monopolistic rights to sell energy within a specific territorial area, known in the industry as the "service area" or "franchise territory." In the days when the utility was first conceived of, it was believed to be less expensive to provide any given mass market in a defined geographic territory with utility services from a single supplier because of the high cost of distribution. This monopoly was accompanied by the right of the utility to regulate price as well as service terms and conditions that the consumer had to abide by.

Because of their monopoly status in a given location, utilities are regulated at both state and federal levels. Federal jurisdiction regulates wholesale interstate transactions while state regulation deals more with consumer-level issues like rates and the quality of service. Despite the safeguards that were supposed to be in place in the form of a Public Service Commission, up until recently the consumer has had very little to say in the amount of rates charged by the utilities and had very little recourse open to them since they had no other choice except to go with the one utility that was operating in their area.

Recent America electricity deregulation legislation was designed to allow the consumer to choose a power company which has a more competitive rate charged for Kilowatt hours (KWh), offering a potential savings to the individual energy consumer. This also helps theoretically because a consumer is free to choose a utility which produces electricity using a more environmentally friendly renewable generation source for electricity like solar or wind generation as compared to the burning of coal which currently accounts for over a third of all power generated in America. Despite this deregulation, only 19 states have implemented or are implementing restructuring to a competitive market. The rest have either halted studies or have taken no steps to transition over despite advantages that the American power consumer could see.

One exciting development that could help to move the remaining states along the path to America electricity deregulation was the legislation that President Obama signed into being in June of 2009. This legislation included incentives for utilities that begin switching to cleaner, more renewable sources of generation like the use of solar or wind generators.

In addition, individuals like homeowners or businesses that install smaller generation systems will be offered monetary incentives to help pay for the costs of the initial system. This legislation also compels electrical utilities to purchase any excess wattage that the individual generates which is above and beyond what is needed to power the business or home. A net meter, a device that keeps accurate track of wattage bought from or sold to a utility, can provide not only a significant possible energy savings to the owner of the generation system (experts estimate a savings of between one to two billion dollars annually between the years 2012 and 2042), but also serves to provide additional energy that is not dependant on dirty, dwindling fuels like burning coal that not only is less efficient to use, but is also more costly in terms of the devices needed to be factored in to make them cleaner and less injurious to the environment.

The more clean generation systems that come online, the closer we will be to catching up with the countries that already are trying to switch over to renewable fuel technologies. As one expert put it, so long as the sun shines, there will always be a free source of fuel, either via sun or wind generation.