What Is Deregulation of Electricity?
Deregulation of electricity enables nonutility companies to market their power to states, creating a freer market that encourages efficiency. Consumers in deregulated states can shop around for a supplier that supports their need for electricity in their homes, farms, businesses and institutions. According to The Daily Review website, increased energy efficiency is the best way to cope with high energy and gas cost.
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Benefits
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Traditionally, electrical companies were monopolies. The Federal Energy Regulatory Commission was created to oversee the regulation of interstate electricity sales. Deregulation decreases prices by allowing competition and bringing in companies that use newer technologies, such as modern turbines, to generate electricity.
Considerations
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Electricity is different from commodities because there is no way to store electricity or control consumer demand. According to the News Batch website, shortages of electricity in deregulated states create an atmosphere conducive to manipulating and crippling the market. Utility companies can artificially increase prices for electricity, and the consumer has no other recourse but to pay for the product.
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California
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According to News Batch, deregulation caused companies in California to take advantage of the system and manipulate the cost of electricity. In 2001, there was no real economic basis, no supply-and-demand issues to cause companies in California to charge an inflated price for electricity.
Maine
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In 1999, the average cost of electricity in Maine was 48 percent higher than the national average. After deregulation, according to KJ Online, Maine reduced the average cost of electricity by 20 percent.
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References
- Photo Credit electricity image by toki from Fotolia.com
