Energy deregulation, also known as energy choice or electricity choice, allows consumers to choose their electricity and natural gas providers, separate from the distribution company.
Before deregulation, utilities controlled the generation, transmission, and distribution of energy, and consumers had no choice but to use the energy provided by a specific utility in their area. However, in a deregulated system, the market is open to competition, and energy providers are allowed to sell electricity or natural gas to consumers within their service area.
In a deregulated energy system, the following occurs:
1. Generation: A variety of companies generate electricity or natural gas and sell it on the open market. This competition drives prices down, which can lead to potential cost savings for consumers.
2. Supply: Energy suppliers purchase electricity from the generators and resell it to consumers. Consumers can choose their supplier based on price, contract terms, or other factors.
3. Transmission and Distribution: Transmission and distribution takes this electricity or natural gas and delivers it to consumers. The utility company still owns and maintains the transmission and distribution infrastructure, but it does not have a monopoly on the actual supply of energy.
Deregulation creates competition by allowing more providers to enter the market, giving consumers the power to choose what company supplies their electricity or natural gas, and potentially leading to lower prices due to competition.
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