The Power Of Competition

Energy Deregulation offers smaller bills for consumers and bigger opportunities for entrepreneurs.
By Marilyn Hood
 

Freedom of choice is an integral part of American culture. Baskin-Robbins with its 31 flavors, grocery stores that carry six varieties of apples and 20 brands of bread, movie theaters with 16 screens, 300 TV channels at home…Americans love having choices.

In some industries, though, choices aren’t always available. The phone and cable industry was monopolized by a select few carriers until the Telecommunications Act of 1996 passed, opening the industry for multiple retail providers. The result was a significant drop in price and a bevy of options for consumers. Similarly, the U.S. airline industry began deregulating in 1978, and while frequent travelers will argue over if service has improved, lower prices and more flights give travelers options.

Benefits of Competition

When consumers have freedom of choice, companies are forced to compete for market share by presenting more appealing products and services. And because nothing is more appealing than getting a great product for less, prices typically go down.

Competition also promotes innovation. Rather than approaching business from the standpoint of “this is the way we’ve always done things,” business leaders are forced to search for an edge—a product or trait that gets them noticed. Competition in the software industry, for example, leads to exciting new products every year. Advances in technology and manufacturing processes, for example, lead to lower prices and greater selections for consumers.

The banking, airline and telecommunications industries have been deregulated in recent decades. More recently, the electricity and natural gas industries have been deregulated in a number of states with several more in the process of deregulation. Competition in these industries results in more choices, lower prices and better service—all bonuses for the consumer. But customers aren’t the only ones who benefit from deregulation.

Unprecedented Business Opportunities

Those who seize the opportunity to participate in previously restricted markets can create thriving businesses. These businesspeople take the infrastructure that’s already in place in each of these industries and put it to work for them.

As the energy industry deregulates, new opportunities arise for entrepreneurs. For the first time in history, individuals have the opportunity to participate as retailers in this $400 billion industry. Deregulation opens the market to competition, shifting the billions of dollars the industry generates from the monopolies to more competitive retailers. That shift directly and positively affects the bank accounts of individuals who participate as energy retailers.

 

Riding the Wave

When an industry deregulates, it creates phenomenal opportunities. The force that drives a newly opened market is like a wave that builds energy as it travels across the ocean until it finally peaks and then levels off. For the natural gas and electricity industries—industries many times larger than any other previously regulated market—this enormous wave of opportunity is just beginning.

A number of states, including Texas and New York, evaluated the costs and benefits of deregulating these industries and have concluded that it’s time to open the market to competition. To ensure consumers continue to receive reliable energy service, the Public Utility Commission (PUC) in Texas and the Public Service Commission (PSC) in New York were established. The PUC and PSC oversee the delivery of service regardless of the provider consumers choose. This allows consumers to select a company with confidence, basing their choice on customer service and savings.

Texas, whose residents spend $24 billion on electricity annually, began deregulation of retail electricity markets Jan. 1, 2002. Today, approximately 75 percent of Texas residents live in deregulated areas and have the freedom to choose their retail provider. Yet 70 percent of these consumers have not switched. In New York, the percentage of residential customers who haven’t yet selected a new provider is between 70 and 80 percent. This puts Texas and New York in the early stages of the energy deregulation wave.

Retail providers know that these statistics open the door to great opportunity. With 16 states and the District of Columbia all in some phase of the energy deregulation process, opportunity continues to increase. And with states’ efforts to educate consumers in full swing with Power to Choose campaigns, companies that offer better service and lower prices to consumers are poised for explosive growth.