Whether satisfied or dissatisfied, customers had no choice but to continue to be with their utility in a controlled market since there are no other power suppliers. But what’s the history of energy deregulation? What’s behind this legislation? Utility companies used to become monopolies as a result of decades of regulation. Before the history of energy deregulation, there was no market competition, and customers didn’t have a choice. Without competition, utilities aren’t compelled to keep rates low, provide superior customer service, and so on.
Let’s understand first what deregulation is and what are its characteristics, before diving into the history of energy deregulation.
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Energy Deregulation in a nutshell
Utilities are sometimes called monopolies since they control the whole energy process in regulated regions, from generation through customer support and service. Many consumers in the United States do not have a choice over their utility today. There are just one or two utilities (like AEP, Eversource, Duke Energy, ComEd, etc.) that serve a specific area for many people. However, there are more and more options for energy suppliers in deregulated states. Customers can now compare different suppliers and choose the one that suits their needs the most.
Nowadays, the history of energy deregulation has brought many advantages; one of the biggest ones is that energy consumers now have the power to choose where their energy comes from. Energy deregulation is the reorganization of the existing energy market to enhance competition and prevent energy monopolies, as we just saw. This expanding trend allows consumers to select from various energy suppliers based on costs and specific product offers that meet their demands.
On the other hand, in a “regulated energy market”, the utility has total control over the whole process, from generating electricity through selling it, metering, billing, and until it arrives at your home. The utility corporation (like AEP, Eversource, Duke Energy, ComEd, etc.) owned the infrastructure and transmission lines, which it then sells to customers directly, electricity rates are set by state public utility commissioners, and it must be followed by utilities in regulated states. Due to the lack of customer choice, this market is frequently referred to as a monopoly. On the other hand, its advantages are steady prices and long-term certainty. Now that we know what a deregulated market is let’s find the history of energy deregulation.
What’s the history of energy deregulation?
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To fully appreciate the advantages of deregulation of the energy market, one must first understand the history of energy in the United States. When electricity and natural gas usage started, utilities battled for customers, resulting in lower pricing. As national energy demand grew, power firms responded by building larger power plants, lowering energy costs further.
Utility firms attempted to enhance the efficiency of their energy production and distribution systems to remain competitive. This resulted in a win-win situation for utilities and energy consumers, with low-cost electricity and rapid economic growth. However, that rapid development and inadequate management severely impacted infrastructure. Different firms generated, transferred, and distributed energy in different ways. Energy customers frequently fell through the cracks in the absence of a consistent delivery method, and some were even left without service. Here are the most significant milestones in the history of energy deregulation:
1. How did the great depression affect the energy industry?
A vital part of the history of energy deregulation was The Great Depression. The United States entered the Great Depression when the Wall Street Stock Exchange collapsed in 1929. Many businesses in America, notably those in the energy sector, failed during this period. A corporation controlled by Samuel Insull, an American investor who has made significant contributions to energy development in the United States, is an example of this. During this period, his firm went bankrupt, and he was accused of selling worthless shares to investors.
A few years forward on the history of energy deregulation, and following the stock market disaster, the energy business remained tough to govern. Eight of the significant utility holding firms in the United States held 73 percent of the investor-owned electric sector by 1932. The energy market was thrown into disarray as a result of this. It was evident early on that the government would have to step in and begin enacting regulations to prevent unfair activities from becoming commonplace.
2. A shift in energy regulation – PUHCA 1935
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The US government created the Public Utility Holding Company Act (often referred to as “PUHCA”) in 1935 to address these concerns and offer dependable service to energy customers. PUCHA was created due to colossal utility holding corporations’ unacceptable business practices, causing them to become energy monopolies. For example, during the early 1930s, three such holding firms controlled about half of the US utility business. This is important in the history of energy deregulation, as it started to put the monopoly problem in the public eye.
3. The 1970’s
Long queues at petrol stations may remind you of the energy crisis that struck the United States in the 1970s. During this energy crisis, coal, oil, and natural gas shortages significantly increased prices for all energy industry users. When President Jimmy Carter was elected in 1976, he made it a significant priority to develop an energy plan. Carter signed the Department of Energy (DOE) Organization Act in 1977, which merged many departments and agencies. President Carter campaigned to expand renewable energy sources like solar and wind power, and one year later signed the National Energy Act (NEA78) into law.
Electric firms were at the heart of NEA78, and it was a crucial milestone in the history of energy deregulation. To stimulate the use of renewable energy, eligible facilities were allowed to enter the competitive energy market. IPPs (independent power producers) were the best prospects. Biomass, solar, hydropower, wind, and geothermal are primary energy sources used by IPPs. During this time, the FERC (Federal Energy Regulatory Commission) oversaw the wholesale market for power tariffs.
4. And the deregulation comes
In 1992, a National Energy Policy Act was enacted. It was preceded by energy deregulation in the 1980s. This legislation established a new type of energy producer known as an Exempt Wholesale Generator (EWG), which served as the foundation for developing a competitive wholesale electricity generating market. It cleared the door for full-scale energy deregulation in numerous states by allowing private market competition in the energy industry.
This was one key moment on the history of energy deregulation, why? Because eventhough utilities were not obligated to offer complete open access, non-discriminatory energy transmission services until 1996 when Order 888 was issued, it permitted transmission services to be separated from power plants, which was required for the deregulated market to function, at least at first.
5. 2000’s deregulation and The Energy Policy Act of 2005
Lastly, with all the changes in the energy market in the US, new legislation was introduced that helped in the history of energy deregulation. In 2005, for instance, president bush signed the Energy Policy Act that enacted the Federal Energy Regulatory Commission took over the regulation of utilities from the Securities and Exchange Commission (FERC). Initially, this entity was a component of the Department of Energy. However, it was judged that it would be more effective as the significant energy regulator in every state in the United States. Later, the energy choice program started. One by one, different states have begun to deregulate their energy markets.
Companies like ours began to come on the spectrum in the history of energy deregulation, and now, you can choose the one that fits your needs. You may visit each of the REPs in your state to compare their power prices, but this would take a long time. Alternatively, you may visit our website, fill out a form with some basic information about your energy use, and receive the best offers available that meet your requirements, all with just a few clicks. Isn’t it lovely?
Now that you know the history of energy deregulation, let us help you make the best of it. At Click2Power, we do your supplier research for you, making sure you end up with the best offer. We compare electricity providers to make sure we give you:
- The best rates
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Do you want to learn more about how you can benefit from Energy Deregulation? Feel free to call us now at (833) 680-2025 or fill-up the form on our website—one of our energy experts will be willing to help you with all the information you may need!