Vocab Lesson: Utility Deregulation

In this post I’ll discuss what deregulation is, why you might care, and present some stats.

What is Deregulation?

Deregulation is the removal of government controls over an industry. The goal of removing these controls is to create a more competitive free market for things like electricity. Utility deregulation came into vogue around 1996. Today there are 14 states that are deregulated. 8 others have either tried and rescinded or suspended plans to try it altogether. See the map.

Does it work?

The simple answer appears to be “not really.” In the graph I’ve presented the average cost of electricity per person in regulated states, deregulated states, and states that suspended deregulation efforts. On the surface it looks like deregulation makes for expensive electricity. But remember that deregulation did not begin happening until 1996. So, in reality states with expensive electricity to start with were the most likely to pursue deregulation in the first place. Unfortunately for them, any effect it may have had appears to have been a negative one, as rates in those states appear to be growing faster than those of regulated states.

So what?

At VisibleEnergy we try to maintain a laser focus on helping people to save money. Yes, we love the idea of reducing energy consumption and working toward making the planet a happier, greener place. But in our experience the best lever for making that happen is saving cash. In that vein, another look at the graph shows us that regulated or not, the future of cheap energy is not looking so hot. All prices are climbing and the predictions from folks like the Energy Information Administration indicate that trend will continue. If we are going to save money in the future, it looks like efforts toward making utilities more competitive probably won’t help much. We simply need to use less energy.