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INSIGHTS | October 21, 2021

Deregulation 101: What is deregulation?

Molly Oscarlece
Senior Director of Operations, Direct Sales

Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces. In the world of electricity, deregulation simply means choice.

In many of today’s markets, customers now have the choice to receive their electricity supply from their Local Distribution Company (LDC / Utility) or from a qualified, licensed third party supplier known as a Retail Electric Provider (REP). Your energy will still be delivered and billed through the infrastructure owned, operated and regulated by the LDC; however, you will now have the option to choose who supplies your energy, how they supply it, and what the cost will be.

History of Deregulation

Timeline
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How deregulation works

Under the traditional energy delivery system, a network of power plants produce electrical energy to be released into the Energy Grid. Local Distribution Companies (LDCs) purchase this energy in very large blocks to then be supplied to the customer, or end-user. Nominations will be set daily by LDCs as to how much power is needed and it is the Regional Transmission Organization’s (RTO) or Independent Systems Operator’s (ISO) task to manage and control the wholesale power released into the grid each day.

Deregulation vs Regulated Market

Deregulation effectively allows Retail Energy Providers (REPs) to enter the marketplace and purchase energy from the Energy Grid to sell to end-users at market prices. Because of strict regulatory control, non-profit status and the way in which energy is purchased by the LDC, REPs are typically able to purchase and provide the energy to end-users at a lower price.

What does this mean for you?

Deregulated energy markets give you, as the customer, the power to choose not only where your power is coming from, but also the best deal. If being green is important to you, the power to choose also means you have more options such as renewable energy. It’s time to take advantage of the deregulated territories and put the power in your hands! 

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