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Energy Deregulation

What Does 'Deregulation' Mean?

In regulated markets, consumers can only purchase natural gas and electricity from local utility companies. The state and federal government regulate the prices for these utilities.

Deregulation refers to a process where the government reforms old laws and passes new ones relaxing the constraints on who is responsible for producing and selling energy. If there are multiple suppliers on the market, the prices will be subject to a free market forces of supply and demand and are more likely to remain lower as compared to regulated markets, thanks to competition.

Understanding Energy Choice & Energy Deregulation From Direct Energy Businesses

Once you purchase energy from a competitive source, the natural gas or electricity will be available to you through the local pipelines and power lines. Also, you will pay and receive your utility bills through the local utility companies. Basically, who you buy from and how much you pay for it are the only things that change.

Deregulation creates opportunities for more flexible energy options, different price structures, terms of contracts, efficiency solutions and market risk exposure. It will result in a huge difference in your bottom line, regardless of whether you need the energy for your retail business, manufacturing operation or large commercial property.

In the United States, various states have chosen different approaches to deregulation. For some, open markets are the best choice where they deregulate both electricity or natural gas. Others rely on partially deregulated markets where the number of consumers is limited. There are still markets that are fully regulated thereby restricting consumer choice.