What is energy “deregulation”?
By Jon Wellinghoff, Former Chair of Federal Energy Regulatory Commission
The term energy “deregulation” is a misnomer. More properly termed energy choice, this concept refers to the restructuring of a state’s energy market to eliminate energy monopolies and create an open, competitive marketplace. 14 states have moved to the energy choice model and have seen lower energy prices.
The biggest misconception about energy choice is that it means total deregulation and an elimination of consumer protections. Energy choice simply means multiple companies are allowed to produce and sell energy in a state. The consumer protections that prevent energy companies from scamming or overcharging consumers are still in place and enforced by state agencies.
Dr. Meredith Levine from the Guinn Center said about Question 3, The Energy Choice Initiative, “the first thing voters need to know about the ballot measure is it is not deregulation. Deregulation implies that regulations for the market would be removed. In reality, the change would mean a diversified system with the potential for more choice.”
The traditional energy monopoly model is one where one company is given exclusive rights to sell energy in a territory. That company owns the production, wires, and poles and is the only company from which you can buy electricity. You have no choice when that company raises your rates.
In the energy choice model, one company owns the poles and wires, and many companies own the production. You choose the company to purchase energy from, generally the company with the lower costs. Or the one who supplies the most green energy. If the company you choose raises their rates, you switch to another provider. That competition drives down prices.
Consider the case of Pennsylvania. Since it enacted energy choice, consumers have saved close to $1 billion per year on their power bills and the residents of Pittsburgh are paying around 50% LESS for energy than under the monopoly utility, according to former Pennsylvania Public Utilities Commissioner John Hanger.
Nevada currently operates with a monopoly energy model. The monopoly, NV Energy, is the only choice most Nevadans have for energy. The few exceptions are large companies like MGM or Switch who did the math and decided they would see significant savings if they left the grid and purchased energy on their own. In those cases, they had to pay large ‘exit fees’ to NV Energy in order to choose their energy.
That said, energy choice is on the ballot in Nevada in this November as Question 3. Voters already passed Question 3 and approved switching to the energy choice model with 72% of the vote in 2016. To become law, Question 3 must pass once more in 2018.
If Question 3 passes again, the legislature will be required to break up NV Energy’s monopoly and allow an open, competitive marketplace in Nevada – meaning if you don’t like your energy bill, you’ll be able to switch to another provider to save money.
About Jon Wellinghoff
A graduate of the University of Reno, Mr. Wellinghoff served as Nevada’s first Consumer Advocate and Chairman of the Federal Energy Regulatory Commission (FERC). He was appointed to FERC by President Bush and appointed as Chairman by President Obama. He is a leading national expert in energy policy and the author of an enhancement to Nevada’s original Renewable Portfolio Standard. Mr. Wellinghoff has also served as legal counsel to U.S. Senate Commerce Committee, the Federal Trade Commission, and the Nevada Public Utility Commission.