Energy deregulation in states such as Ohio, Pennsylvania, New York, Maine, California, Texas, and Michigan, opened up the energy market to alternative energy companies and smaller retail energy companies.  Prior to deregulation, the monopoly that larger energy corporations held on various regions of the country made launching and sustaining a small energy business virtually impossible.  Post-deregulation, the playing field altered considerably, and new companies began to appear almost immediately.

Smaller energy companies are able to offer flexible plans, simpler billing structures, and because many of them are neutral entities, they are able to find the best price and service for their customers.  It is a far more specialized and personalized way of approaching the energy provider/customer relationships and it is yielding positive results.   

Ohio energy deregulation was first passed by law in 1999 and enacted in 2001. A transition period of 5 years was written into the law to allow a smooth transition from a highly government-controlled energy policy into a more free-market operation. During this transition, price caps were still in effect while new energy providers opened shop in preparation for a competitive marketplace when price caps were to be lifted. Energy cooperatives were not forced by law to deregulate,  as non-profit organizations weren't targeted by the state government for price gouging.

Trying to balance a drastic policy change with price stability, Ohio's energy policy is very complicated and can be intimidating for the average home and business owner. There are alternative provider options available, though only larger businesses have taken advantage of the deregulation policy to procure lower  business electricity rates. Many small businesses and homeowners do not have the time nor resources to research how the laws apply to them and few have made a change to another provider.

There are professional services available for those seeking more competitive energy rates for their home or business. With expertise in Ohio's energy policy and a deep understanding of the marketplace, they can find the best Ohio energy choice for your home or business.

As any follower of energy deregulation will tell you, the pace of deregulation is generally slow, and the results always vary by state.  After all, Maryland energy deregulation is not the same as that in Pennsylvania or Ohio, due to a host of complicated legislative reasons.

All that matters, in the eyes of the general public, is continuity of service and, more importantly, lower homeowner and business electricity rates, which after all, are two of the main benefits cited by deregulation proponents.

And while progress may be slow in Ohio, Maryland, and Pennsylvania, there is cause for cautious optimism out of Texas, where over a decade into deregulation, some positive signs are emerging.

For example, whereas the retail electricity market was previously monopolized by a half-dozen regulated utilities, now over 40 electricity providers vie of customers.

Perhaps more importantly, customers are “voting with their feet,” as it were: according to the Electric Reliability Council of Texas, most businesses and residential customers have switched away from the “old” utility providers and to the new ones who emerged in the wake of deregulation.

Energy deregulation has occurred in multiple states.  With the end of energy monopolization in deregulated states, companies have had to vie for consumer business.  The deregulation has also opened the door for alternative energy companies to emerge as viable options for consumer use.  Ohio energy deregulation occurred in 2000, and almost immediately, a push began for the use of alternative energy sources, many of which were considered more environmentally friendly.

Though energy deregulation has resulted in some economic ups and downs for Ohio, the state has continued to push for further implementation of “greener” energy.  It is now a requirement that 25% of the energy sold by utility and electric companies come from alternative energy sources by the year 2025.  Consumers are being urged to seek out alternative fuel sources and to reduce their overall carbon footprint.  The deregulation of energy in the state, while not as fiscally successful as some hoped it would be, did facilitate a movement towards environmentally sound energy practices, which are, in the long run, far less costly than their traditional counterparts. 

Citizens of the Keystone State, whether they realize it or not, are at the forefront of energy deregulation.  With the utility market deregulated, citizens are looking at greater choice – so much so that the state itself is encouraging homeowners to shop around.

Now comes word from Penn Energy, a site that tracks the energy industry in the state, of a new development around smart grids that can further assist those seeking greater PA energy choice.

The idea of smart grids is simple: it charges electricity based on the time of day and the demand at the time. 

In theory, it makes perfect sense.  It provides customers with greater control over their energy usage but only paying for what they need.  For example, let’s say you work during the day in the summer.  It’s 100 degrees out with high humidity, and you like the idea of coming back home to an air conditioned home.  Currently, you’d need to leave the air conditioner on all day – not a cheap option.  Smart grids can, among other things, remotely turn on the AC at, say, 4 pm, so when you get home it’ll be cool.

The great thing is that energy deregulation broke the monopolies held by large utility companies, enabling start-ups to provide customers with new and interesting products like smart grids.

According to the Baltimore Business Journal, steps have been made to pave the way for a merger between Chicago-based Exelon and Baltimore-based Constellation Corp.  The merger would lead to much-needed new power generation in the state and can ultimately help lower home and business electricity rates.

Maryland energy deregulation became law in 1999, yet since then, one of the proposed benefits – the creation of new power plants – never truly materialized.   There has been rigorous debate as to why this is the case.

Proponents of deregulation claim that the market was supply responding to the lack of demand.   Opponents, meanwhile, argue businesses were unwilling to make the necessary financial commitments to generate new power.  Nonetheless, the merger will solve this problem, and will provide at least 300 megawatts of new power for the state.

The trick will be how the new power – and reduced rates – find their way to consumers and their pocketbooks.   For this, homeowners and businesses alike should turn to third-party brokers like EnergyTel to shop around on their behalf for the best deal possible.

Energy-Tel,LLC

"When Energy Companies Compete You Win"

ENERGY UPDATE

December 18, 2011

NYMEX Updates: Friday (12/16/11)

Energy settlements:

December NYMEX settled: $3.127

The NYMEX one-year strip $3.39, 2-year strip 3.71, 3-year strip $3.94

Calendar 2012-$3.39, 2013-$4.03, 2014-$4.39 

Last 12-month average NYMEX: $4.20  

Last 3-year average: $6.437

Crude oil: $93.53

#2 fuel oil, $2.8005     

        Natural gas moved lower last week in spite of the triple digit storage withdrawal reported by the EIA.  As January gas traded below the 2010 low, the one year strip price fell to its lowest level since August of 2002. Total open interest nearly reached one million contracts last week as the bears couldn't resist adding to short positions. Natural gas is greatly oversold with Friday's close nearly 3 standard deviations below the 20 week moving average, but with that said, it's path of least resistance for now is lower. The long range weather forecast is warmer than normal for the entire US, everyone has plenty of gas in storage and marketed production exceeds demand. The one to five year forward prices are all bargains and we encourage everyone to hedge far ahead and take advantage of the best "buyer's market" we've seen in a decade.  In '07 & '08, the "first quarter low" was the expiration of the January contract on the final trading day of December.  We may be lining up for a repeat of that show so don't get complacent.  Hedge your future gas needs now.

        Much is said about how shale gas has changed America’s energy position, with pundits even boasting that it’s made the US the “Saudi Arabia of natural gas.” For perspective, Saudi Arabia has 24% of the world’s proved reserves of crude oil, or about 264 billion barrels. The U.S. proved reserves of natural gas are 284 trillion cubic feet, which equates to 46.8 billion barrels of oil. Technically recoverable reserves for Saudi Arabia could be 700 billion barrels while the technically recoverable US gas may be 2,500 trillion cubic feet or 412.5 billion barrels of oil.   We produce more natural gas in this country per year than Saudi Arabia produces oil.  The U.S. produces the gas equivalent of 12.14 million barrels per day, compared with Saudi Arabia’s 9.8.

        Can hydro-fracking cause earthquakes?  There were 10 recently fracked gas wells within 1,000 feet of the epicenter of the Virginia based earthquake that rattled the east coast and damaged the Washington monument in August.  In fairness, there were no fracking activities at the time of the last east coast quake in 1944.

        Shale gas finds all over the globe will have to be the bridge fuel to provide electricity to a growing world.  The dream of a world of clean nuclear power is running into the reality of uranium supply and demand. There are 62 modern nuclear power plants being built all over the world including 27 in China, 5 in India, 11 in Russia.  Uranium is fast approaching a supply-demand deficit with 443 operating reactors, which need over 180 million pounds of uranium annually.  The world produces only 130 million pounds a year. The shortfall of 50 million pounds annually is being filled until 2013 by the Russian highly enriched uranium (HEU) agreement, which Russia has indicated it will not renew, as it needs the fuel for their own reactors.    

        Please feel free to call me to discuss any questions you may have about your specific energy plan.

        Have a great week, and thanks for your continued business.

Tony Gattuso

804-377-8644

The analysis contained herein is based upon information Energy-Tel, LLC reasonably believes to be accurate.  However, they do not guarantee the accuracy of the analysis.

Final Thoughts:

Depending on where you live in the United States, energy deregulation may be an oft-debated topic.  Energy experts, economists, consumer advocacy groups, and assorted other organizations, have weighed in on the argument for or against deregulation around the country.  For the average household, the multiple options and opinions available can be more than a little confusing.  What many interested groups fail to do, is outline exactly what energy deregulation is, before they start arguing about why it should occur or not.

In a nutshell, energy deregulation allows the consumer to decide which corporation or organization from which to purchase their energy.  Until recently, each utility was controlled by a particular company, and everyone within a particular state or region purchased their energy, be it gas, light, phone service, etc., from the controlling company.  Deregulation allows for competition among companies, as it means that no single corporation can hold a monopoly on the energy market in a particular area.  The competition among providers has lowered business energy rates and business electricity rates in a number of areas.  Not all states have adopted the practice, and there is still some question about the overall efficiency of a deregulated system.  Only time will tell.   

Ohio energy deregulation has been “on the books” for some time, yet customers rarely saw the competitive bidding wars between utilities that they were promised.  Until now.

Ohio’s main utility, AEP pretty much had a competitive monopoly across most of the state.   And during this time, its rates were pretty low – low enough that it didn’t make sense for competitors to go after existing AEP customers.  Yet AEP’s prices are dropping, and other electric service providers are swooping in, sending letters to homeowners encouraging them to switch.

This, of course, is good news, and even the Ohio Consumers’ Counsel – a group that’s understandably suspicious of the big utilities – agrees.

Of course, switching utilities can be difficult, not to mention the process of “shopping around” between competing providers, all of whom claim the most savings.  This is where third-party energy brokers like Energy-Tel come into play.  We have established relationships with all the providers, and much like a real estate or insurance broker, can shop around on your behalf to get you the best deal possible.

As proponents of energy deregulation on the federal level make their case, it is helpful to look at where it has been tried elsewhere.  Yet examining deregulation at the state level is, to a certain extent, not the best analogy.

Sure, we can learn from PA energy choice that, for example, deregulation has brought with it an influx of renewable energy providers, and in turn, jobs, but the comparison often ends there.   That’s because the mechanics of deregulation – the legislative inner workings involving utility pricing, energy purchasing, rate-setting, and a whole host of logistical and financial implications – are only relevant to the uniqueness of that state itself.  Things are different and far more complex on the federal level, so in a sense, it’s an “apples to oranges” comparison.

So what to do?

Well, another good approach is to look at previous federal deregulation efforts across other sectors of the economy.  Take the airline industry, for example.  Since the market was deregulated in the early 1980s, the study claims Americans have saved $20 billion due to lower prices.

Now, are the energy and airline markets identical?  Of course not.  But the federal government does and did exert centralized control over each, which is why these lessons may be more valuable than those gleaned from the state level.