Category Archives: Electricity Restructuring

Electricity Restructuring Power

In the late 1990s, the federal government and 22 states began a process of electricity restructured to increase competition and reduce prices for consumers. More than a decade later, electricity restructured has had mixed results, from both perspectives of cost containment and environmental impact. Click here for more information about solar from the Energy Smart website – http://www.energysmart.com.au/

The goal of electricity restructured was to lower prices through market competition and to encourage utilities to offer better, more creative rate contracts to individuals and businesses. Unfortunately, in most cases the immediate results were just the opposite– prices increased, in some cases dramatically. In Texas, prices for electricity rose 43% from 2002 to 2004 (though it should be noted that the cost of inputs, such as natural gas, rose by an even greater percentage during this time.) In some areas, too few competitors existed to keep up with demand, and in some cases competitive utilities dropped out of the market entirely because profits were unattainable. Beyond that, many consumers chose to stay with their existing providers and never switched at all.

However, recent transitions in the market are improving the outlook for electricity restructured. Improving technology has allowed utilities to offer more competitive rates. Tools like smart meters are being offered to business owners, and in many cases residential customers, to track and manage power consumption online– a concept that was only available to large industrial customers in the past.

Rate plans are growing in variety as well. Many utilities now offer fixed rate contracts that allow consumers to lock in a given rate for an extended period of time. Electricity Companies are also offering incentives for using power during off-peak periods through pricing discounts or demand charges. In some areas, consumers even have the option to purchase pre-paid electricity, which allows them to carefully monitor and control monthly spending by paying in advance for a specific quantity of kilowatt hours.

Another important factor in the stability of restructuring markets is a new stability in electricity prices. For the first few years of restructured, prices bounced around as new competitors entered (or left) the marketplace, and most often, prices rose. Recently, prices have stabilized, and at generally lower rates.

The environmental impacts of restructured have been mixed as well. In a competitive marketplace, energy companies are incentivized to generate power cheaply, leading to a preference for coal power plans over natural gas or newer alternative energy sources. Because consumers have a choice in their provider, however, many of the same companies have had to forego plans for heavy emissions generators based upon public pressure to invest in safer, cleaner technologies. Finding the proper balance between cost containment and environmental impact will continue to be a source of tension for providers in a restructuring environment.

Additionally, the higher prices that originated with the onset of electricity restructured also encouraged energy conservation, and in many cases has curbed demand for electricity. Pricing structures that offer financial incentives for using off-peak power or carefully monitoring usage with easy-to-read smart meters have also influenced consumption. Conserving energy is the best way to decrease global footprint.