What does it mean?
Energy deregulation means the existing energy market has been restructured to allow increased competition and prevent monopolies of energy. This allows consumers who use energy to choose from multiple providers based on rates for their individual needs. In other words, it allows consumers to have cheaper electricity and natural gas rates by using a third-party company.
Deregulation refers to the process of removing government regulations and controls from industries that were previously highly regulated. In the United States, deregulation has been a significant economic policy since the 1970s, and it has had a profound impact on many industries, including energy.
Prior to deregulation, the energy industry in the United States was highly regulated, with government agencies such as the Federal Energy Regulatory Commission (FERC) overseeing the production, distribution, and pricing of energy. The goal of regulation was to ensure that energy was affordable, reliable, and available to all consumers.
However, beginning in the late 1970s, policymakers began to question the effectiveness of regulation in achieving these goals. They argued that regulation had led to inefficiencies and high costs, and that competition would lead to better outcomes for consumers.
The first major deregulation of the energy industry came with the passage of the Public Utility Regulatory Policies Act (PURPA) in 1978. PURPA required utilities to purchase electricity from independent power producers, which opened up the market to new competitors and increased competition.
Further deregulation occurred in the 1990s, with the passage of the Energy Policy Act of 1992 and the Federal Energy Regulatory Commission's Order 888. These measures removed barriers to competition in the electricity industry, allowing consumers to choose their energy supplier and encouraging the development of new sources of energy.
Deregulation has had significant impacts on the energy industry. It has led to increased competition, which has driven down prices for consumers and incentivized innovation in energy production and distribution. However, it has also resulted in the fragmentation of the industry, with many smaller energy providers entering the market and competing with larger, more established companies.
Today, energy deregulation is a complex and evolving issue, with different states adopting different approaches to the regulation of energy markets. Some states have fully deregulated their energy markets, while others have maintained significant government oversight. The debate over the benefits and drawbacks of deregulation continues, with policymakers, industry experts, and consumers all weighing in on the issue.