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Energy deregulation empowers you to choose an electricity provider other than the utility that supplies energy to your residence or business. These choices creates competition among electric companies and can lower your energy costs.
In the past, electricity bills in the United States were largely determined by local utility companies and the state government. These companies had a monopoly over the energy market and set rates for their services, which were reflected in consumer energy bills.
In the late 1990s and early 2000s, the utility’s monopoly on energy supply changed as electricity as states began to deregulate their electricity and natural gas markets. Deregulated energy markets produce greater competition by permitting other energy supply companies, other than the utility, to offer competitive rates and plans to consumers. It’s important to note that the delivery of energy through wires and pipelines remains regulated to ensure the safety and reliability of natural gas and electricity service are not compromised.
Residents and businesses in deregulated areas now have a voice in determining the cost of their energy supply, the most expensive part of their energy bill, while still receiving reliable service.
Each state handles energy choice differently. In some states, both natural gas and electricity supply are deregulated. In other states, only electricity or natural gas are deregulated. There are also some states where deregulated electricity and natural gas supply options are limited by specific ZIP codes. Check the list below to learn more about electricity deregulation in your area and see if you can shop for a lower rate.
Several factors play a role in determining the electricity pricing in your state. You have control over some of these factors such as the way energy is consumed. For example, facilities that use more energy during off-peak hours will often pay lower rates that those with higher on-peak usage. Other factors you don’t have any control over such as the generation mix and sources of electricity (natural gas, coal, nuclear etc.) in each state.
It’s important to understand what you can control to affect your electricity pricing.
Time of Energy Use: Electric companies use complex models to predict energy demand throughout the day. Higher demand for electricity increases the nominal price for the electrons that are generated at that time. If you use more energy during peak demand times, it will cost the supplier more, which in turn will result in higher rates for you. This is why suppliers will offer “Free Nights” for some of their electricity plans. This is because there is less demand during those off-peak hours and energy is less expensive.
Seasonal Variations: In southern states, electricity pricing during the summer months can be higher than the winter months because of higher air conditioning usage and demand. Conversely, in northern states, electricity pricing can be higher during the winter due to increased heating demand.
Location: Energy rates vary from state to state and even among different utility service areas within the same state, regardless of whether the state has energy choice. This is due to a combination of factors, including supply and demand. In service areas with a high energy generation capacity and low demand, rates tend to be lower. Additionally, each state has different regulatory requirements that will affect its power markets.
Shopping for energy can be a confusing and overwhelming task. With numerous terms and pricing options, incentives, payment options, and more it can be easy for electric companies to take advantage of this complexity.
5 Digital Energy simplifies the process by shedding light on everything you need to know. We clarify the intricacies of electric service, breaking down complex information into clear and easy to understand terms. Our goal is to make the energy shopping experience less confusing and more manageable.