Electrical

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Refrigeration

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Air Conditioning

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What is Deregulation?

In the last few years, many states have begun to rewrite the rules to increase competition among electricity producers. Other states have been studying the issue. The basic idea is to deregulate the generation of electricity and allow consumers to choose where they buy their power (as they can choose their long-distance phone company). Local utility distributors would continue to deliver the power, for a fee, over their lines. This form of deregulation is being decided on a state-by-state basis. Each state faces a different energy situation and is taking a different approach. In general, areas with high electricity rates (like California and the Northeast) have been the first ones to move in this direction.States in the Southeast are studying the issue, but are being cautious – especially given the recent crisis in California and the lack of one in the Southeast.

Early Results
The first few states began implementing their redesigned electricity markets in the late 1990s, and most are still in a transition period. So the jury is still out on the long-term pros and cons. But the early experience has shown:

Redesigning electricity markets is even more complicated than expected.

So far, most consumers have been reluctant to switch electricity providers (a wait-and-see attitude).

For a variety of reasons, California's electricity deregulation turned into a crisis beginning in the summer of 2000 and continuing into 2001 – supply emergencies (even blackouts) and severe price spikes as well as deep financial trouble for the state's two largest utilities.

As a result of California's high-profile problems, some states are rethinking their plans while others press forward on their own deregulation paths.

What's Next?
States will continue to keep an eye on California as well as states like Pennsylvania and Texas.

There is a renewed focus on ensuring power supply reliability and avoiding extreme price volatility.
The Carolinas and Florida are taking a careful, deliberate approach to the issue.