Energy deregulation in the United States was approved by federal legislature in 1998. However, this new law left it up to each state to enact its own deregulation laws. The effect was that larger, commercial companies were able to take a small share of the previously federally regulated wholesale energy markets. However, the states were slow in allowing deregulation for retail and consumer energy markets. It was not until late 2006 that there seemed to be a glimmer of action.
Texas passed deregulation of most of its electricity markets and a parts of its natural gas markets in 2007, thus allowing the long awaited third party competition and subsequent rate reductions in the service areas covered by incumbent Energy Service Companies (ESCOs) Reliant Energy, TXU, WTU Retail Energy, CPL Retail Energy, and First Choice Power. Consumers now had the ability to choose a different ESCO to get lower rates on their electricity and natural gas utility bills.
New York followed soon after Texas, allowing deregulation in the five boroughs and parts of Westchester and Suffolk Counties. The deregulation was in the service area covered by the largest ESCO in New York, ConEd.
Illinois took a small step forward by allowing the NiCor service area (Natural gas), which serviced the Chicago and surrounding suburbs to be deregulated. Georgia, Ohio, and Michigan also have limited deregulated energy markets.
New York allowed additional deregulation of the NorthernGrid service area in northern New York State in November of 2008 which covered the Buffalo, Albany, Rochester, Syracuse, and Niagara Falls areas.
Separating Fact from Myth
Most people are not aware how their electricity and natural gas actually arrives at their home or business. All they see and all they know, is that the company they are paying the bills to are the ones providing their energy. In fact there are several entities involved in the production and delivery of the actual usable energy products.
The first step in getting electricity and natural gas to your home or business is the actual production of the end product. These facilities are state owned, but must also conform to federal regulations.
The next step in the process is the delivery mechanism – how the refined natural gas and how the converted electricity are sent from the production facility to your home or business via pipelines, cables, or wires. Much of the network of pipeline is and wires are owned by private corporations which must conform to state regulations.
The last entity is the energy service provider. Traditionally, most of these providers have been the same companies that owned the delivery systems, which is one factor as to why deregulation of energy was considered in the first place. Much like the telephone companies of a few decades ago, politicians and business people thought that much control constituted a monopoly because consumers had no choice in whom provided their energy service or how much they had to pay for that service.
Energy Service Companies (ESCOs) are merely companies that provide customer service, advertising, marketing, billing, collections, and most importantly -- rates.
It doesn’t matter who the ESCO is. The electricity and natural gas that is delivered to your home or office arrives in the same exact method, via the same exact wire, cable or pipeline and is, in fact, the same exact product. Even the person who reads your meter stays the same.
The only difference is in the price you pay when you have the option to choose your ESCO because your state has allowed deregulation of energy.
How Independent ESCOs Provide Lower Rates
Incumbent ESCOs (mentioned above, or the ones you might be customers of right now) have a legacy of doing business in the traditional sense. In order to maintain good customer service, they open up offices in several localities and hire staff to work at each. Additionally, since these companies operated their own transfer stations and lines, they have employees on their payrolls for those jobs as well. These companies have been in business for many years, and as they are state regulated, many of their employees have retirement and pension plans. Not only are these companies paying their current employees, but past employees as well.
Then there are advertising costs, vehicles for the meter readers and repair crews, upkeep on all their facilities, etc.
Most of today’s independent ESCOs are doing business in a different way. They incorporate affiliate or home based business opportunities in where the operation can be run out of one single office with a minimal staff. The rest of the work is done by independent network marketers, or affiliates. These individuals only get paid for the sales they make or for build teams of marketers. This frees the ESCO of many costs which are then passed along to the customers in the form of lower rates, customer incentives, promotions, etc.
The work of advertising is done by the marketers, although many of the companies provide a myriad amount of ready to use tools and promotional materials. Customer gathering is done by the marketers, Customer service is handled by the ESCO. Otherwise the customers enjoy the same exact electricity and natural gas and call the same numbers they always have in case of emergencies or power outages.
One of the largest factors in lower rates is that the large energy companies usually buy their energy far in advance, expending huge amounts of money. Most of the independent ESCOs buy their energy in smaller quantities and usually at a discount.
Where to find Discounted Energy
There are a handful of independent energy service companies that have sprung up to seize the incredible opportunity created through energy deregulation. Each presents their business opportunities in a different way and offers their customers a varied degree of rate plans to help people save money on their energy utility bills, as well customer incentives entice them to switch.
The following companies have become the most established in the short time that retail, or residential, energy deregulation had begun at the state level. The following are websites presented by each company. They are listed in order of rating, the highest quality or value listed in the first position. Each was evaluated the security and financial strength of the companies, their business opportunities, and their customer service and rates.
As a prospective marketer or customer, you should carefully evaluate each company and see which is best for you. Also keep in mind that although the services offered by each may only be in a few states, the business opportunities are open to residents of all 50 US states (unless otherwise stated) and has not prevented individuals from making good incomes, no matter where they live. Customers of all of these companies are enjoying lower rates than incumbent utility service providers, but some customers are receiving better incentives and perks.