Regulated energy? Deregulated energy? Do you know what the difference between the two is?
Depending on the region you live in, your utilities may be either regulated or deregulated – and the two types of utilities are very different. In this post, we’ll discuss what you need to know about regulated vs deregulated utilities and touch on some of their key differences. Read on to learn more and how Green Line Rates can help you save money in either type of energy market:
History of Regulated and Deregulated Energy
Before we get into some key differences between regulated and deregulated energy, it’s worth taking a look back at the history of such and how these two utility types evolved into what they are today.
Prior to the 1990s, the vast majority of utility companies were regulated by the government. This could be problematic in the sense that energy companies could create monopolies in their regions with government regulation as the trade-off. However, in the 1990s, utility companies began to deregulate. This allowed more energy companies to enter the market and for a more competitive balance in a specific region.
What is Regulated Energy?
In a regulated utility environment, residents in a particular space have no choice but to receive and purchase energy from the designated utility company. Companies operate in a monopoly with little to no oversight, yet it’s nearly impossible for new energy companies to break into the market to give consumers an alternative. In many regulated markets, the utility company does more than just generate and sell the energy, but it also owns the infrastructure needed to bring power to homes and businesses.
Many U.S. states – including Arizona, Hawaii, Minnesota, Nevada, the Carolinas, and Washington – are still regulated to this day. Some states are even partially regulated or only regulated in certain markets. In some situations, residential energy may be regulated and commercial and industrial consumers deregulated. Many argue that since providers in a regulated market have a monopoly on business, there’s less of an incentive to innovate and provide better service.
What is Deregulated Energy?
In a deregulated energy market, there’s competition in the region and consumers are able to select the utility company that best suits their particular preference. Utility companies still work to generate power and often own the infrastructure that delivers it to homes, yet there’s more than one company that consumers can decide to work with. A home or business owner may elect to work with a particular energy company based on a variety of factors, such as rate, service, and more.
Deregulated markets are also often called “choice markets.” They tend to be ideal for commercial businesses and industrial firms because they have the power to choose their provider and lock in rates. This power of choice also makes negotiation more common among consumers and energy providers.
Differences in Billing
The differences between regulated and deregulated utilities don’t end with how they’re defined. There are also some key differences in how energy is billed to consumers. Here’s a closer look at some of the key differences in billing:
In regulated energy markets, consumers can expect to receive just one bill for their energy consumption costs from the utility company. It tends to be a very straightforward bill that charges consumers for whatever the specific rate is for that period.
In a deregulated energy market, consumers can expect to receive a different type of bill for their utility costs. This bill may include various other cost breakdowns, such as supplier rates. Consumers may also choose to receive two bills. One usually comes from the supplier for the specific supply of the energy, and the other often comes from a utility company for the delivery of the energy.
Impacts on Business
What’s better for business – regulated or deregulated energy? Both types of energy markets can have a significant impact on businesses in the area. Here’s a closer look:
Since there’s no other option than to work with a loan provider in a regulated energy market, consumers typically turn to alternative means to try to conserve energy and its costs. For example, many homes and businesses look into projects to make their properties more efficient. These may include:
- Better insulation
- Energy-efficient doors and windows
- Energy-efficient appliances
- Investing in renewable energy alternatives
- Ensuring heating and cooling equipment is well maintained
Deregulated energy gives consumers the power to choose their energy provider. It’s a good thing for competition and a fair market, but it can make for difficult decision-making for consumers. Here’s a look at some of the considerations that consumers will have to weigh when selecting their energy provider in a deregulated market:
- The choice between a utility company or an energy provider
An easy way to sum up the differences between doing business in regulated and deregulated energy markets is this: In regulated markets, businesses typically view utility costs as an uncontrollable one. However, deregulated markets tend to be a more focused way to reduce utility costs.
Contact Green Line Rates Today
For more information on the difference between regulated and deregulated utilities, and for insight on getting the best rate in either type of energy market, contact Green Line Rates today. As leading commercial energy consultants, we specialize in conducting utility bill audits with commercial clients in industries that range from industrial manufacturing to restaurants and dry cleaners. Contact us today to learn more about our process and start saving on your utility bills today.