We left off with the question : why is energy regulation or deregulation important to you, the homeowner?
Utility companies are a unique form of commodity. Electricity or gas for heating, air conditioning, and lights are life sustaining services. Unlike any other business, public utilities have a guaranteed market.
In most cases, consumers do not have a choice for there natural gas or electricity supplier. Regulation was designed to insure a fair rate structure, and reliable supply of electricity and gas. In return, the holding companies could count on a good return for their stock holders and stable business levels. And the 1935 PUHCA kept utility holding companies from using the profits they made from consumers to invest in riskier businesses.
How did PUHCA come about? After the stock market crash of 1929, many utility companies were far in debt with their other investments. When banks called in their loans, the utility companies failed. The consequences of the failures fueled the Depression.
The National Energy Policy Act of 1992 opened the electric industry to competition, which meant....
companies would now compete with power producers for the sale of electricity to utilities. The argument in favor of deregulation is that prices go down when businesses are subjected to normal market pressures. Increased efficiency will lead to decreasing the price. However, as with most cases of deregulation, the consumer has suffered.
Utility companies have always increased rates after deregulation. In some states, like Delaware and Maryland, rates have increased from 52% to 72%. Imagine getting that bill! Due to sharp rate increases many of the deregulated states have felt--other states considering or planning on deregulating called a moratorium on the deregulation.
In many cases, the money from the rate increases has been used to make up for bad investments in other business...or for money lost in speculating on electricity or gas in the commodity market. And it certainly hasn't secured supply. Enron and the California energy crisis are the most notable examples of the failure of deregulation.
As you can see, deregulation is a complicated issue....and one in which we consumers will be feeling the fallout from for quite some time. It is easy to feel helpless when these decisions are so far out of your control.
However, there are many ways you can take control of your utility bills. The easiest and best way is to make your home energy efficient. We don't mean turning down the thermostat, and settling for being uncomfortable. You can reduce the amount of money you send to the electric company. But more importantly, you can make your home a more comfortable and healthy place for your family to live.
Comments