Deregulated Electricity

Power deregulation first came about in the 1990s and quickly swept the United States (see history of energy deregulation). Today, there are over 15 states participating in active electricity deregulation. But what does it mean to deregulate the electricity industry?

Electricity Generation

In a regulated state, and in all states prior to electricity deregulation, power generation plants are owned by utility monopoly companies. In fact, these utility companies are solely responsible for building and maintaining power plants and electricity generation facilities. In a deregulated state, however, the utility companies are no longer allowed by law to own electricity generating assets. In an effort to break up the stronghold utilities had on the electric supply chain, states required that these companies sell off their power plants and focus on delivering electricity to their customers.

Electricity Transmission

Furthermore, electric utilities in deregulated states are not allowed to own the high-powered electric transmission lines that take power from the power plants to the local sub-stations. In deregulated states, these transmission lines are maintained and operated by independent grid operators that also control the wholesale electricity markets.

Electricity Supply & Delivery

In a deregulated state, most electric utilities are solely responsible for the local delivery of electricity over their locally-owned electric lines. Electric utilities in these states are also responsible for billing customers and collecting payments. In some deregulated states, utilities can even sell electricity directly to consumers at a pre-determined default price. These consumers can also shop for that same electricity from a supplier (more to come on that later).

Deregulated Natural Gas

Natural gas deregulation, similar to electricity, began in the 1990s with the invention of the wholesale trading natural gas markets. Since then, many states have followed suit and deregulated their natural gas utilities. Unlike electricity, natural gas has a different supply chain that operates in its own unique way in a deregulated state.

Natural Gas Production

Unlike electricity, where utility companies generate power in regulated states, in all states natural gas production is done by the same companies. Since natural gas can be stored and transported across many states quite easily, the production part of the supply chain is not controlled by utility monopolies. On the other hand, large energy companies like Exxon, BP and Shell are involved in the drilling and production of natural gas.

Natural Gas Pipelines And Transport

Unlike the electric markets where transmission lines used to be controlled by utility monopolies in each state, natural gas pipelines run across the country and are often interstate operations. Due to their nature, these pipelines are often owned and operated by independent companies, even when they are located in regulated states that are not participating in natural gas deregulation.

Natural Gas Delivery and Supply

The main difference between a regulated gas state and a deregulated one, is the local delivery and sale of the natural gas. In a regulated state, natural gas utilities own the local gas lines, deliver gas, and sell gas to customers. In a deregulated gas state, utilities are mostly involved in the delivery of gas over local gas lines. Gas suppliers in these states can sell natural gas to utility company customers that is then delivered by the utility company.