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Energy Deregulation - The Good The Bad and The Ugly

14th June 2011
By Rod in Law
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The process to begin Energy Deregulation began In 1978 when Congress pass the Public Utility Regulatory Policies Act, which was the beginning for Todays Deregulation. It wasn't until the Federal Energy Regulatory Commission implemented The Energy Policy Act in 1996 that Deregulation finally became effective. Orders 888 and 889 had the objective "To remove Impediments to competition in wholesale trade and bring more efficient, lower cost power to the Nation's electricity Customers." It took 18 years after the creation of the Act in 1978 for the orders to be written and implemented.

Why So Long?

"To bring more efficient, lower cost power to the consumer" Doesn't that seem like a good thing? It does for the consumer, but would lead to millions of lost revenue for the current Utility companies who had a monopoly in their designated areas across the United States.

The Good

In most states,Consumers now have a choice on where to buy their energy. They can continue with their previous Utility company or choose from newly created power companies that can offer their customers other options in receiving their power or gas. Government regulations were still in place that assured that the transmission and distribution lines were still maintained and operated by the Utility companies. But now you can go direct and choose the company that produces the energy or who buys it on your behalf to sell it to you. Power companies are now held to standards placed on them by consumer demand, cleaner more efficient energy will provided consumers with lower cost and environmentally friendly energy producers.

The Bad

How was the public supposed to be informed about Energy Deregulation and its benefits? Was it all over the news and television? I didnt see it. The big Utility companies like SoCal Edison are not going to inform their customers that there are other companies out there that can provide you electricity and gas for cheaper prices and provide them with the information to switch. They implemented marketing campaigns that gave their customers misinformation that kept the public ignorant of the new energy regulations.

The Ugly

If prices of energy are no longer regulated by created by demand and supply, then prices can be easily manipulated. Consumers are charged a government capped flat fee, but prices are determined by seasonal demand, changes in weather and even the time of day. A non-profit "Power Exchange" was created in California as an auction market for buying and selling of electricity. This caused higher prices and led to the infamous "Enron Scandal" that is still costing California billions of dollars a year, even 10 years later. The black outs and energy crises in 2000 was basically a manipulation of the price of electricity. Enron executives created a false lack of supply by gaining control of over 30 percent of all energy bought and sold in California's deregulated market. In essence, Enron sold power to itself manipulating prices in the "Power Exchange" to rise to more than $2000 per megawatt hour. Utility companies couldn't purchase electricity because the price was higher than what they could charge their customers. Pacific Gas and Electric declared bankruptcy in April 2001.

Gray Davis His Actions - We are still paying for 10 years later

Gray Davis Created the California Energy Resources Scheduling Division in January 2001. California purchased long term contracts from energy producers at over $350 per megawatt hour. The purpose of the contracts was to bring stability to the energy market. The problem was that energy prices fell to $72 per megawatt by May of 2001. California was now stuck with long term contracts at almost 5 times the current value of energy. 26 contracts still exist today that will cost California over $9.8 billion in the next 4 years until the last 2 contracts expire.

Rod Primanti is the Owner of Primanti PC Solutions a computer service company In North Orange County, CA.
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