Jul 092015

Any Gains For Deregulated Energy — Perhaps Yes

If you live in a deregulated energy area – a state or a municipality – it may seem that life suddenly became more complicated. And, it’s true; it did. Because now you live in an area with competing energy supply companies, which though confusing, is expected to bring your energy prices down through increased competition.

A little confusion is the price we pay for increased competition of a market that was once dominated by the local utility companies. These companies once owned the transmission lines and the electricity that traveled through those lines. Now, some deregulated states prohibit this. If you are a utility company, then you own the transmission lines, the power stations and the rest of the infrastructure that brings the electricity to your home. If you are a supply company, then you buy and sell the juice – the electricity surging through the lines.

Because of this new competition, companies that buy and sell electricity can offer customers choices that customers never expected in the past. They can choose, now, between where the supply company buys their electricity. If the consumer says, “Buy my electricity from renewable sources only,” then the consumer is actually voting with their wallets on what he energy market will look like.

A consumer can also check “I don’t care,” where their energy comes from.

Certainly, your appliances will not know the difference between electricity that comes from a nuclear power plant, a coal burning power plant or a natural gas burning plant. They will also not know if your power comes from a solar panel or a wind turbine or not. But you will know and that will send a significant signal to the energy industry – maybe the most significant signal of them all.

But suddenly, consumers are also faced with the task of getting out their calculators and a pad of paper and jotting down some notes on your power supplier. This is because as many suppliers as there might be in an area – that’s how many payment options there also might be.

Luckily, there are standard options across most companies. Let’s look at those for a second.

Fixed Rates

Just as it sounds, a fixed rate is a set rate through the length of your contract with your electricity supplier. You will pay a set or “fixed” rate per kilowatt hour for the length of the contract.

This can be like hedging your bets on an investment. If you think you have a low rate with a high rate possible in the future, sign a contract that will fix the rate now, so you will be one of the lucky ones if the rate goes up.

On the other hand, if prices drop, you are stuck with the higher rate. So, it is kind of a gamble, but one that many commercial customers appreciate, because they like to know what to expect in terms of business expenses.

Variable or Floating Rates

Just as it sounds, variable rates change month to month depending on the price in the open market. But you might think that the price of electricity will fall, at which point a variable rate plan will work in your favor, because the rate you pay falls when the rate falls.

Energy providers, such as EPCOR Alberta, are well-versed at explaining the differences to customers. In addition, providers can help you understand the various sources for electricity, as well.

As you likely know, electricity comes from generators that spin due to some power source. Steam from a large coal-burning plant turns turbines, which, in turn, turn the generators. All of this comes from heating up water, the same as you might do on a kettle on your stove at home.

Burning fossil fuels – coal, petroleum, natural gas, methane oil or diesel fuel – heats up water that turns the turbines. They have the advantage in today’s market of being relatively cheap, but they also contribute substantially to global warming with the CO2 emissions they put into the atmosphere.

Nuclear power is a very polarizing power source. Nuclear fuel, even after the power plant has made use of it (often called spent fuel) remains dangerously radioactive for hundreds of thousands of years. What to do with the waste and the possibility of a reactor melt-down are serious concerns. The plants are also hugely expensive to build, although once they are built they provide very inexpensive electricity.

Solar, wind and hydro power are considered renewable sources of power in that nature continues to provide sunlight, wind and running water in rivers that can create power. (Wind and hydro power can convert motion to turbine turning, while sunlight creates electricity by converting it through what are called photovoltaic cells.)

The beauty of a deregulated energy market is that consumers can also choose from various power sources, which gives them a hand in shaping the country’s energy mix in the future.

Do you have energy choices in your area?  What are your thoughts?

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