The History of Energy Deregulation

history of energy deregulation

What is the history of energy deregulation?

Electricity is an unseen power when harnessed. Natural gas is invisible and odor free, which is why it has chemicals added to make it smell like rotten eggs.

In fact, we seldom even see the gasoline we put into our cars unless we spill some, and virtually never see the chemical reaction it helps create to carry us down the road. We just know from experience that all these energy sources produce desired results, so we tend to take to heart the words of experts when it comes to using these energy sources and paying for them.

Careful research and study of the history of energy deregulation (or re-regulation) may teach us a lot about the energy conveniences and necessities for which we pay on a monthly basis.

What is Energy Deregulation?

As elementary science students, many of us were taught that around the turn of the twentieth century, power utility monopolies were originally allowed to exist because of the possible exponential duplicity of electrical transmission lines and gas pipelines that would have resulted from open competition. Upon a closer study of history, it would seem that this assertion was oversimplified.

In the 1990′s, authorities realized that while the reasoning for suppressing the growth of multiple single-area utility providers was sound, there was no reason to restrict the number of power generating companies, which could essentially ‘ship’ their bulk products to consumers using the existing conduits of a local utility company. Thus the generating companies became the suppliers and the utilities companies became the transporters and warehousers of the product, which happened to be consumable energy sources. This was done to allow consumers to shop among suppliers and let free market forces provide competitive benefits to the consumer. Among the advantages this plan provided to the consumer was the ability to pay a ‘flat rate’ monthly for electricity and natural gas, allowing end users to budget their incomes for such expenses rather than having to sock away emergency funds in anticipation of market ‘surprises.’ So far as supply and demand, the market system functions as it always has, and no additional constraints are placed on consumers. The efficacy of this progressive policy is still a matter of discussion and debate.

In fact, in many cases electricity deregulation has not resulted in any notable savings to consumers. This may be a result of transmission and delivery methods held in common. A grain silo does not contain grain with the name of the producer written on every piece; Jack’s grain is not distinguished from Jill’s grain, because it is all grain. Each portion is weighed, credit given, and everything is deposited into the silo. There s no need for Jack to compete with Jill (or vice versa) over price; grain is grain, and the price is set by the commodities market. The higher the price of grain, the better Jack and Jill like it.

At the same time, what is becoming increasingly clear is that traditional old-time energy moguls may have forever lost their strangleholds on the regulation of energy prices. The history of energy deregulation (or re-regulation) shows that while conveyance and delivery prices are still matters left up to the individual providers, no one has the market cornered when it comes to the energy sources themselves. This in turn means that as new innovations are utilized, the market price of energy may become more marginal for all of us. This would be good news not only for us household energy users, but the companies that make our tennis shoes as well, so to speak. Consider the renewed interest in electrically powered vehicles. Cheaper electrical energy would result in an increased demand for these devices, which would help drive down the price of oil, which would help drive down the cost of transporting merchandise, which would help drive down the price of the merchandise itself in a free market economy.

This post is merely an overview of the subject. Entire books have been written about the deregulation of energy, and it may well be time for us to read some of them and speculate about what the future holds.

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