Deregulated energy: What does it mean and how does it work?

Direct Energy, December 20, 2023

4 minute read

Deregulated energy: What does it mean and how does it work?

Direct Energy, December 20, 2023

4 minute read

Did you recently move to a state where their energy market is deregulated and have no idea what that means? Or maybe you already live in a state where you can choose your energy supplier and want to learn more about how it works?

You're in luck. Here at Direct Energy, we can help you understand energy deregulation, how it works, and why it benefits you.

Photo of residential electricity powerline grid during sunset
Photo of residential electricity powerline grid during sunset
Photo of residential electricity powerline grid during sunset

What is energy deregulation: Regulated vs deregulated utilities

Whether natural gas and electricity, a.k.a. energy, is regulated or deregulated in your area is determined at a state level.

Regulated utilities

When energy is regulated, it means that your utility company is selected for you based on the address of your home or business. You are told who your utility company is. You then sign up for their services and make selections based on their plans and rates, and you pay them directly to supply and deliver natural gas or electricity to your new location.

However, some states deemed that it was an unfair trade practice to have one company supply and deliver energy to residences and businesses, thus beginning the practice of energy deregulation.

Deregulated utilities

Deregulating the energy market is dividing the energy supplier and the energy deliverer into two separate entities. When energy is deregulated, it essentially means that you have the choice of who supplies your natural gas or electricity to the utility company.

The utility will remain the one that will deliver that energy to your designated location, but the point of differentiation is the supplier.

How does energy deregulation work?

So, you live in a state with a deregulated energy market. What do you do and how does it work? Similar to how you shop at various retail stores, you can shop for your energy.

You have the option of electing your energy supplier, like us, Direct Energy. Our job is to simplify your energy options by working directly with utility companies for you.

Energy suppliers can purchase natural gas and electricity wholesale from the utility, which gives you more energy offerings at the best rates available in the market. As our customer, you get to choose from an array of plans with products and pricing that best meet your budget and energy usage habits. As the energy supplier, we can offer the best deals in the marketplace because of our connections with many utility companies in the area.

The best part is you will still receive the same quality of energy delivered to your residence or business, but at a competitive price and with the simplicity of working directly with the supplier.

In case that was a lot to take in, let's break it down:

  1. The energy supplier purchases energy wholesale from the utility company
  2. You choose an energy supplier and select a utility plan based on your needs
  3. The energy supplier will deliver your energy to the utility company
  4. The utility company will deliver your energy to your residence or business
  5. Voilà!

Benefits of deregulated energy

There's more than one reason why you benefit from deregulated energy. For starters, living in a state that offers energy deregulation means that you have the freedom to choose who provides your electricity or natural gas. Additionally, a deregulated energy market encourages more competitive rates. This allows you to potentially save money with an energy plan that best meets your needs and lifestyle.

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