Glacial Energy Blog

Myth or Fact: Electricity Deregulation

Since the electricity market was deregulated several years ago, residents in cities participating in this emerging competitive market have enjoyed their power to choose retail electric providers. Electricity deregulation has been a success despite the abundance of several detractors, most of which are coming from areas and states where the implementation of energy deregulation has failed. Some myths about electricity deregulation include:

Myth: Electricity deregulation has failed because retail rates are rising – not dropping – in regions with competitive electricity markets.

Fact: Electricity rates have been rising throughout the country, not only in deregulated states. These increases are largely a result of rising costs for the fuel used by generators to produce electricity. The push for cleaner, more reliable and efficient power plants drive costs higher as well. Despite this pressure, if one takes into account price increases over the same timeframe in other consumer goods like food, housing and health care, electricity price increases are mostly modest by comparison.

Myth: The price of electricity increased due to Energy Deregulation

Fact: Legislators in some states who are not eager proponents of energy deregulation are blaming this policy for the increase in electric prices. Higher prices due to dramatic increases in the prices for natural gas and petroleum products are an occurrence not only in deregulated states but on a nationwide scale as well. For consumers, no matter how electricity is marketed – through a deregulated competitive market, cooperatives or through municipalities – the price is still dictated by the cost of the raw materials used for generation.

Myth: Rates may be increasing across the country, but the worst increases have been in deregulated states.

Fact: In most of the states that deregulated to increase competition, political agreements were made to cap rates for a certain period of time and, in some cases, actually roll them back. As a result, many customers in deregulated states have been paying below market rates in recent years despite increases in the input costs for generating electricity. As these rate caps expire, rates are catching up and starting to reflect current market prices that are being driven by significantly higher fuel prices.

Myth: Electricity is a prime commodity that should not be deregulated

Fact: Electricity can be compared with an analogy to food, another vital commodity that consumers simply could not live without. In a country like the United States, the food market has considerably very intense market competition all along its supply chain: starting from the production and raw materials, to the final product packaging and form that is served on every American’s dining table. This competition resulted in greater abundance for food that can later be translated to very cheap retail prices. The same would be true for electricity, wherein competition among retail electric providers not only placed the prices of electricity in check but have also resulted in higher levels of customer service never been enjoyed by consumers in a regulated and monopoly-controlled power market.

For additional details about deregulation you can also visit Wikipedia. You can also learn about the history of deregulation by viewing our blog.

 About Glacial Energy- Glacial Energy is one of the fastest growing national retail energy suppliers selling electricity and natural gas to residential, commercial, industrial, and institutional customers in deregulated markets across the country. Glacial Energy has the resources and market knowledge to provide customized quotes for your business or cost saving opportunities for your home. Learn more about Glacial Energy by visiting www.GlacialEnergy.com

 

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