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What does energy deregulation mean for your business?

6 December 2022

Energy deregulation can have a significant impact on your business’s bottom line. It results in choices that can change how you purchase energy, affect your business’ environmental footprint, increase the predictability of your energy expenses, and more. This article examines what you need to know about energy deregulation and how to make well-informed energy decisions in deregulated markets.

What is energy deregulation?

In a regulated energy market, you do not choose your energy provider. Rather, the energy that heats homes and cools businesses comes from the utility company assigned to your location, and the government sets the prices. Regardless of whether the utility offers excellent, inexpensive service and a variety of renewable energy sources or has a history of repeated outages, they have a monopoly. Under this system, you are unable to take your business elsewhere in search of a better option.

Deregulation is when a government market–like energy–is opened up for competition. Energy deregulation means businesses and homeowners have a choice of retail energy providers. In a deregulated market, multiple energy companies compete for your business. That means you can choose which company is the best fit, and providers have the incentive to earn and keep your business. While a local government utility may still be involved in delivering electricity or natural gas through its infrastructure, deregulation allows customers to choose where they get their energy.

Which energy markets are deregulated?

Canada has never regulated electricity prices at the federal level, leaving that decision up to the provinces. Currently, Alberta and Ontario offer businesses the flexibility of a deregulated energy market.

The United States started the electricity deregulation process in 1978 with the Public Utility Regulatory Policies Act (PURPA), which required utilities to purchase power from outside providers if their supplies were low. By the late 1990s, the utility grid was opened for fair access by all power producers. That led to a push for retail electricity deregulation. In 1996, California was the first state to deregulate energy, and others quickly followed suit. Today, 26 states have some form of retail energy choice, including Texas, Ohio, Illinois, and New York.

Energy consulting firms in Canada and the United States can help you determine the status of your local energy market.

How does energy deregulation benefit my business?

Lower costs

One way retail energy providers compete for your business is through price. When you have multiple companies vying for your account, they will frequently use lower costs to gain your patronage. They may also offer incentives to entice you away from the competition.

Providers may also try to earn your business by offering innovative price structures, favorable contract lengths, and multiple account options to ensure they have a choice that fits your company’s needs. This creates even more savings opportunities, though it adds complexity to choosing the best option for you.

More environmentally friendly options

Competition leads to innovation. Retail energy providers compete for your business and look for innovative ways to stand out. That means your business benefits by being able to shop for energy services tailored to your goals.

One way energy providers are working to differentiate themselves is through renewable offerings. Deregulation allows energy companies to appeal to specific buyer groups, and alternative or green-energy seekers are one of their primary targets. That means more access to solar, wind, and hydro power and innovations to make fossil fuel use cleaner and more efficient.

Deregulation provides companies with an opportunity to increase their own energy efficiency by choosing energy providers that prioritize sustainability.

Better customer service

As a business, you know that if your users aren’t satisfied, they can take their business elsewhere. In deregulated energy markets, energy consumers can do the same.

When customers are empowered to compare the customer experience with different providers, energy companies respond with more customer-minded models. Your business benefits from having a better relationship with your energy provider and better access to customer service if you have a question or problem.

Improved reliability

Energy deregulation eliminates monopolies and empowers companies to improve. Reliability is one of the ways they do that. When your business can’t serve customers and your equipment isn’t running, that’s more than just a frustration. It’s lost revenue. An energy provider that can’t keep the lights on can’t keep their customers, either. When your company can shop for the provider with the best record of stable service, they have a massive incentive to invest in enhanced reliability.

Opportunities for outside support

Because energy is a highly competitive business in deregulated markets, companies can make meaningful changes in their spending, budget predictability, and carbon footprint through their energy procurement decisions. However, evaluating the various providers, plan options, incentives, and price structures available can be challenging.

That’s where energy consultants come in. Like an insurance broker that helps your business evaluate insurance options to determine the best fit for your goals, energy management consulting firms offer support to companies seeking to understand available options and make educated choices. Energy consultants stay apprised of the latest developments in energy markets and develop relationships with providers. Their expertise enables them to guide you toward the best decision for your business.

If you are fortunate enough to run your business in a deregulated market, you have the opportunity to make a choice that aligns your energy use with your values. Energy consultants work as partners with your business. Whether you prioritize price, sustainability, customer service, reliability, or some combination of them, an energy consultant will work with you to find the best fit.

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