Initially there was no competition in the energy market mainly due to the high start-up costs especially in terms of infrastructure such as natural gas pipes and electrical wires. It was not feasible especially for start-up companies to build transmission systems and generating plants in order to supply and deliver energy to individual consumers. Therefore, the generation, supply and transmission of energy was controlled by monopolies. This meant that energy providers could increase the prices of energy at will by simply adding a profit to their fees and costs. Therefore, end consumers had no alternative but to pay these prices.
How deregulation of energy works
The utility companies in energy deregulated states retain ownership of infrastructure used for the distribution of services. However, there are various provider companies that compete to buy these resources from utility companies in order to sell energy directly to consumers.
Many states and governments have adopted energy deregulation in order to allow multiple energy providers to compete for end consumers based on prices and level of customer service. The governments facilitate this by passing legislations that require natural gas and electric companies to allow market retail companies to use their access channels. This helps break the monopolies into separate business units or companies in a bid to separate the generation company from the wires and meters company and also the supply company by creating a competitive company in order to create market based efficiencies that push and keep the retail prices down. Deregulation mainly affects the supply component of the utility bill.
Benefits of energy deregulation
1. Better pricing schemes
Retail energy providers have put forward very competitive pricing schemes in order to secure customer loyalty. Therefore customers can enjoy reduced energy costs because the free market channels charge less for the energy supply as compared to the old monopolies. With more options available in the energy market, prices are lower and very competitive. Utility companies strive to keep customers and natural fluctuations in the prices of energy are a common phenomenon in the energy market. End consumers in states that have deregulated the energy industry can save money on their utility bills by choosing their preferred independent third party energy provider.
2. Better service quality from the Residential energy providers in Houston
The atmosphere of competition dictates the quality of services the end consumers get from energy providers. Various companies are now in a pro-active mode as they try to outshine their competitors by providing better services to the end consumers. Besides increasing the quality of services to consumers, energy deregulation has also increased the reliability, safety standards and overall customer satisfaction.
3. Establishment of alternative energy sources
Energy deregulation has paved way for the emergence and establishment of renewable energy resources that are safe for the environment because they produce less pollution. Therefore, consumers can make a difference to the environment by choosing deregulated energy providers that support alternative and renewable energy resources.
Business establishments and homes have the power to select their preferred retail energy provider. Whether they want to switch energy provides in order to get better customer service, cheap energy or in order to use alternative energy sources, customers are no longer restricted by what monopolies used to dictate.