Read time: 2 minutes
Written by Matt White
General Counsel, IGS Energy
Matt oversees the regulatory, legal, and legislative activities for IGS Energy and its affiliate companies throughout the country. He advocates for fair and competitive energy markets, provides legal counsel, executes legislative and regulatory strategy, manages IGS’ inside and outside counsel, and ensures compliance with rules and legal requirements in the states where IGS operates.
Energy choice can be a bit confusing. Working in the energy industry for 10 years, I’ve gotten more familiar with it. But prior to that, I wasn’t clear why consumers in my home state of West Virginia (a regulated state) couldn’t select an energy supplier, but those in Ohio (a deregulated state) could. I also didn’t understand the difference between the utility and a competitive energy supplier.
Fortunately, you don’t need to spend 10 years in the industry to understand the basics of energy choice, because I’m going to boil it down for you right now.
There is some important terminology you should know before we get started:
An energy commodity refers to the natural gas running through the pipes and the electricity “buzzing” along the wires. In the energy industry, the term commodity is commonly referred to as supply.
A deregulated state is one where laws exist that allow consumers to choose a company to purchase their natural gas and electricity commodities from. Energy deregulation is sometimes referred to as energy competition or energy choice.
A regulated state is one where consumers are unable to choose their supplier of natural gas or electricity commodities. Local utilities deliver AND supply the energy.
So how exactly does energy choice work?
Utilities maintain the infrastructure (pipes and wires mostly) of energy commodities – like natural gas and electricity – and are paid by residents and businesses to deliver their supply to them. In regulated states, the utility also serves as the energy supplier, but in deregulated states, consumers may select a competitive energy supplier.
What’s a competitive energy supplier?
A company that purchases electricity or natural gas supply on the open market. These companies are able to purchase energy supply for a longer term and can offer their customers the opportunity to lock in longer term energy rates. For example, customers could lock in today’s natural gas rate for up to five years, escaping the volatility of the market for that entire period of time.
In deregulated states, you can choose a competitive energy supplier to purchase your energy supply from. Your utility company will continue to deliver that supply to you. This is a lot like purchasing something from Amazon.com, and using the U.S. Postal Service for delivery to your home.
If you choose a supplier:
Electric and gas utilities own the lines and wires that deliver the energy to your home or business. You purchase the energy supply from a competitive energy supplier, like IGS Energy, who works with your utility to ensure the delivery of that energy to you.
If you don’t choose a supplier:
Utilities are able to offer energy supply service along with the delivery. However, utilities are regulated by the state’s Public Utilities Commission (PUC). This regulation doesn’t allow utilities to be as flexible with their product offerings, which means they can only set prices at certain times and that their prices may vary frequently.
How can you participate in the energy choice program?
You can participate in your state’s energy choice program by evaluating your energy options and deciding whether to stay with your utility or to choose an energy supplier to provide your electricity or natural gas.