Energy Deregulated Markets

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 On November 9, 1965, there was a massive blackout that affected the northeastern USA and southeastern Ontario in Canada. The incident left 30 million people without electricity for 13 hours, and the National Electric Reliability Council (NERC) was created to prevent similar blackouts in the future.

NERC divided the US electricity grid into 10 regions, which were managed separately to improve reliability. However, this also meant that a single company was in charge of the power supply for each region, creating monopolies. The goal of electric deregulation has been to create competition in the power industry, lowering electricity prices, but it must be managed correctly:

Some states have transitioned to a deregulated electric sector with success, while others have faced significant challenges in the process. When done right, deregulation leads to a wide selection of electricity plans for consumers, letting them choose the best option according to their consumption. Deregulation offers the following benefits:

• Power bill savings, if you choose the right electricity plan and a provider you can trust.
• You can select electricity plans according to your preferences. For example, you can look for a provider that uses 100% renewable energy.
• Some electricity plans come with perks, such as smart thermostats or incentives for solar panel owners.

Consider that deregulation only applies for electricity generation and retail sales. Transmission and distribution are still a regulated monopoly – in a given area, a single company manages the power lines, transmission towers, utility poles, transformers, substations, etc. In other words, generation companies compete to sell their electricity, while retailers compete to resell that power to you. However, they all use the same power grid – having competing networks would result in redundant power lines, and it would represent a waste of infrastructure.

When electricity is deregulated, the wholesale market operates like a reverse auction. Just like the highest bidder wins in a normal auction, the seller with the lowest price wins in a reverse auction.