Industry Overview
Regulation of public utilities by federal and state governments began with the Federal Power Act of 1920 and has been a major influence in forming and building out the contemporary energy infrastructure we have in place today. Regulation has provided the decades long build out process with oversight, through the establishment and maintenance of regulatory institutions, and with guarantees of financial returns on investment in order to spur companies on towards creating reliable energy systems.
Over the years, the creation of major federal laws has shaped the relationship between consumers and utilities:The Federal Power Act of 1935 , The Public Utilities Holding Company Act of 1935, The Natural Gas Act of 1938 , The Public Utilities Regulatory Policy Act of 1978 and The Energy Policy Act of 2005
Through all of the regulatory rule changes, creation of new regulatory entities, alteration of responsibilities between federal and state organizations, and the like, there are two things that have remained constant when it comes to the regulation of energy in the United States:
- The ultimate responsibility for regulating interstate energy commerce has always been under the care of FERC, the Federal Energy Regulatory Commission (and its predecessor, the Federal Power Commission).
- The regulation of intrastate energy affairs has always been the ultimate responsibility of each state's respective Public Utilities Commission.
Under our regulatory structure, electric power and natural gas each have the same three basic phases that govern the dissemination of each energy type and their use by the consumer, both in the individual retail sector and commercial market.
- Commodity supply - generating usable energy, or more accurately, the transforming energy from its raw state to a state that can be used to heat homes, power streetlights, run electrical appliances, and the like.
- Delivering energy to regions, towns, cities, etc., where that energy will be used.
- Local distribution of energy to businesses and homes.
In the past your local public utility handled all three components, in order to provide the necessary stability for the broader market as it was growing in the United States and one supplier in a monopoly market structure could provide service at the lowest cost.
But, after many decades of building out and constructing our energy infrastructure, of demand and supply growth, the addition of more and more market participants, etc., it became time to introduce free market competition and consumer choice into the paradigm that governs our energy usage today.
In short, it became time to allow for the deregulation of natural gas and electric energy markets. And the groundwork was laid when the FERC decided it should limit its authority to wholesale transactions. And thus, individual states had the autonomy to determine when and how to allow retail price competition. Our hope is that eventually, this will happen in every state. As they say, patience is a virtue, and it is no different when it comes to realizing the benefits of energy deregulation!
Energy deregulation (also commonly known as switching to "transportation service," "restructuring," "unbundling," allowing "direct access," or the creation of "retail choice," among others) allows consumers in deregulated states the power of choice over commodity supply. The delivery and distribution of energy remain regulated and the prices for those services are still set by federal and state statutes and tariffs. This means that your local utility continues to deliver the natural gas and/or electricity, regardless of who the consumer chooses to supply the energy. The utility also maintains the power grid and distribution system, responds to emergencies and reads meters. These 'unbundled' services would each be priced separately on a customer's bill.
As consumers, YOU now have the ability to choose who you receive your energy from. Consumers can now shop for their energy! The reasons for choosing an energy supplier are multifaceted indeed, but can be broken down as such:
- Lower Prices
- Price Stability
- Longer Term Contracts (locking in low rates for the long term)
- Energy from Environmentally Friendly Sources
