The Dirty Side of Deregulated Energy

I've written about deregulated energy markets in a previous post.  While every deregulated state is not the same in how they run their energy programs, most often clean energy development needlessly suffers when clean energy tariffs are integrated with generation fees.

Distribution is not the same as generation--this matters to clean energy

To drill into this a little bit, we pay separate charges on our bills based on our consumption for generated energy and for the distribution of that energy to our location (there is also a flat metering charge).  Taxes and green energy tariffs are assessed on top of these fees based on the amount of energy consumed.  In a deregulated market, consumers have a choice of purchasing the generation portion of their bill from companies other than their local utility.  The local utility provides the distribution services (power line maintenance, service for power outages, billing, etc) regardless of where the power is purchased from.  This is good for consumers in that they can get the best price for their electricity and even get added value from companies like Power2Switch.

When clean energy tariffs originally went into effect, legislators associated them to generation which was logical since the clean energy fund was intended to mitigate environmental issues with coal, oil, gas, and nuclear generation plants.  As a consumer used more electricity, they would pay more into the fund to encourage better energy (seems fair to me).  Clean energy funds came about in the context of Renewable Portfolio Standards (RPS) which are self-imposed mandates requiring clean energy to make up a portion of total electrical generation.  With an RPS and clean energy fund, the idea is that more local clean energy systems would pop up to meet the RPS over time.

The sun is setting unnecessarily on some clean energy incentives

The wrinkle in this good plan is that with deregulated electricity, consumers pay money to companies outside of the original clean energy tariff structure for their generation so these tariffs don't get collected.  The consequence is that the funds for local solar and wind projects dry up as is happening in Illinois right now.  The easy fix is to shift the clean energy tariffs to the distribution portion of the electricity bill since that money is paid to utilities within the RPS umbrella.  Rate payers don't pay anymore on their bills than they originally would have and local clean energy gets the boost it was intended to get.

Legislation, like making sausage, is typically an ugly process.  This is a unique example of a simple fix that will have significant positive benefits for us all.  I encourage my fellow Illini to support the bill to fix the Illinois RPS.

Energy Deregulation Explained

If you live in one of the dozen or so states that has voted to deregulate the supply of electricity to its citizens, you probably pay more for your power than necessary. Energy deregulation means that you can choose who supplies electricity to you so power producers have to bid to earn your business. In states like mine (IL), the local utility was required by law to send out letters to all its customers informing them that they had the option to purchase power from alternate Retail Electric Suppliers (RES). What the utilities did not say in the letter was that choosing to select an alternate RES would probably save them 20-30% on their power bill.

Electricity generation is a huge and rather complicated business so you might not be aware that your local electric utility (who you pay each month) may not be the same company who actually generates the energy you are paying for. We don't have the choice in local utility companies but we do have the option to choose from different producers. In my case, ComEd is the local utility that delivers power but other companies supply electricity to me through ComEd. Opting for an alternate RES won't change anything about the quality of your electric power or the service receive--you just pay less for it.

States like TX, IL, OH, PA, NY, CT, MA, RI, NJ, DE, MD, and Washington D.C. are deregulated electricity markets 

I recently enrolled with an alternate RES through a local company. My wife and I live in a small condo so we use relatively little electricity (only 3,869 kWh last year). Most homes use significantly more energy than this, but I still save over $100 a year after signing up. Many businesses like restaurants or convenience stores use 250,000 kWh or more in a year so these companies see thousands of dollars in savings each year going with an alternate RES. I still receive a single bill from ComEd but the portion under Electricity Supply Services is now a single line item with my new kilowatt-hour (kWh) rate listed along with how much we used last month. I was told this is the same for corporate account holders too.

I encourage you to read up on energy deregulation and decide if choosing an alternate RES makes sense for you. Let me know if you have any questions about my experience.