the more you know
Under energy deregulation, suppliers purchase electricity or natural gas at wholesale and may be able to sell it at a lower price. The consumer continues to have delivery provided by their current local utility.
UNDERSTANDING HOW ENERGY DEREGULATION BENEFITS ENERGY USERS
Energy deregulation is the process of restructuring energy markets to allow consumers, including businesses, to choose their energy supplier from a competitive marketplace rather than being limited to a single utility provider with set rates. This market-based approach fosters competition among energy suppliers, aiming to drive down costs, improve customer service, and encourage innovation in energy products and services.
In deregulated states, the traditional monopoly model—where a single utility company generates, transmits, and sells electricity—is replaced by a system of separate entities handling generation, transmission, and retail sales. Utilities continue to own and maintain infrastructure, but businesses can select from multiple suppliers based on price, plan features, and sustainable energy options.
Cost savings: Competition among suppliers often leads to more favorable rates and contract terms, allowing businesses to potentially lower energy costs and negotiate customized agreements.
Supplier choice and customization: Businesses have the flexibility to select suppliers that align with their operational needs and sustainability goals, including access to green energy plans and renewable energy certificates.
Budget certainty and risk management: Companies can enter fixed-rate or price-managed contracts, hedging against price volatility and enabling predictable budgeting for energy expenses over time.
Energy efficiency incentives: Suppliers may offer innovative solutions, energy management tools, and efficiency programs that help businesses reduce overall usage and costs.
Improved customer service: Competitive markets drive suppliers to differentiate themselves with better customer support and more sophisticated account management platforms.
Support for sustainability: Deregulated markets make it easier for businesses to select suppliers offering renewable energy, helping advance environmental initiatives and brand messaging around sustainability.
Businesses in deregulated energy states benefit from enhanced choice, cost-control, and access to more diverse and sustainable energy solutions, all enabled by market competition and flexibility.
Price protection (with a wider variety of pricing options)
Competitive prices may now be available to the consumer
More product plans are available for customers
Prices may be stabilized for the consumer
A larger selection of products that support customer needs
Freedom of choice
In the United States, the following states have fully or partially deregulated electricity markets, allowing businesses and residents to choose their energy supplier
Businesses operating in these states can typically choose their energy supplier, negotiate rates, and select plans that best fit their needs, offering more flexibility and often resulting in cost savings.
Regional Transmission Organizations (RTO) are responsible for maintaining adequate capacity between utility companies
The RTO serving the Northeastern United States is PJM Interconnection, L.L.C. (servicing all or parts of 13 states plus the District of Columbia)
PJM uses a Reliability Price Model (RPM) – Determines Capacity
The auction process gains commitments from resources
Sets price for capacity
Sends price signal to potential developers of generation, demand response, and/or transmission.
Capacity represents the need for adequate generating resources
Capacity ensures there is enough electric supply to meet peak demand at all times.
YOUR ENERGY BILL
What are these other charges on your utility bill?
Learn about riders and their purpose.
When you receive your electric, natural gas, or water bill, you may notice line items or explanations of the various other charges outside the typical service costs. These charges, known as riders, have a variety of names, purposes, and rules. Let’s break down what a rider is and why utilities use them.
What is a rider?
A rider is a utility charge, not included in standard rates, that allows a utility to recover the costs of specific programs. The PUCO and utilities are authorized by statute to create and approve riders with limitations based on the industry. For example, Ohio Revised Code 4929.161 allows natural gas companies to create an infrastructure development rider that covers the cost of specific economic development projects. The utility may spend that money under the guidelines of the rider and then collect the program’s fees spread across its customers.
Riders can have spending limits known as caps. For example, the Commission may approve a vegetation management rider to recover only up to $10 million in costs annually. Should the utility spend more, any price above $10 million will not be charged to customers. Riders can also be credited to consumers when they’re designed to return money or credit an over collection.
Each rider may have unique limits or cost recovery mechanisms and may be listed as line-item charges or embedded as part of the distribution service charge. The easiest way to see what riders you are being charged for is to look at your bill explanation page, visit your utility’s website or check any regulated company’s tariff here on the PUCO website.
Why include riders at all? Why aren’t these costs typically included in base rates?
Base rates are calculated on the costs of a typical year; riders can address specific costs outside the utility’s control. For example, riders can cover the costs of repairing unexpected significant storm damage, which may only occur once every several years. In base rates, those costs would be recovered annually on a long-term basis, whereas with riders, customers would only pay those extraordinary costs when they occur. In that way, riders are not considered additional charges on top of base rates but more specific ones.
Additionally, base rates are not audited annually and are not subject to reconciliation like riders are. Riders also help insulate consumers from more significant price increases by adjusting costs regularly rather than a larger adjustment after several years at the same rate.
How are riders monitored? Are they permanently added to my bill?
Riders are reviewed periodically by PUCO staff, usually on an annual basis. Depending on how a rider is set up, the utility may require quarterly, yearly, or semi-annual filings. The riders may also be required to be adjusted regularly as costs increase or decrease.
Once approved, a rider cannot be removed without going through the appropriate process. For example, some riders may be initially set up to be approved only for a limited time or purpose; after that, they would be removed or have the rate set to zero.
Source: PUCO
CASE STUDIES
A fast-growing international airport was looking to upgrade existing, dated fixtures to LED lighting without any capital investment.
A church, built in 1885, was looking to update its lighting – both interior and exterior – to reduce its energy costs and to keep its outdoor spaces well illuminated.
Our client was in the market to reduce operating costs for six indoor sports complex locations.
A large manufacturer in the building industry, is dedicated to converting the building products industry from its uninspiring past to a dynamic and sustainable future.
For over 30 years, this commercial real estate development corporation has been responsible for successfully developing, leasing, and managing over $400 million of office buildings throughout the mid-Atlantic area.
Our client is a museum exhibiting historic transportation equipment, located on the East Coast.
CLIENT SUCCESS STORIES
Strategizing energy purchases in today’s market can be an enigma. With prices swinging due to supply, weather, and global politics, timing is everything. Discover how TPI is revolutionizing energy procurement for businesses like yours!