Here is the story of New Jersey’s path to energy deregulation, 17 years in the making!

What is energy deregulation?

Simply put, energy deregulation means competition between retail energy providers and lower energy prices for energy consumers.

In a regulated energy market, energy customers only have one option for receiving their electricity. This system doesn’t provide consumers with any agency or choice whatsoever. On the other hand, a deregulated energy economy offers consumers the option to choose an energy provider. Having more than one game in town creates competition, and that inevitably drives down the overall price of electricity in deregulated energy markets.

New Jersey’s journey to energy deregulation

It all started in 1999, when the New Jersey Board of Public Utilities introduced a bill to deregulate the state’s energy industry for residential customers. The bill, which would become the Electric Discount and Energy Competition Act (EDECA), gave New Jersey energy consumers all the rights of a deregulated energy economy: the ability to shop around for the best energy provider based on their budget and energy requirements.

Conectiv, an independent utility provider based in Carney’s Point, says that deregulation has lowered their customers’ rates by 10.2% and saved them roughly $290 million in the four short years since the act’s inception.

The transition wasn’t quite as simple as that, though. While the energy delivery companies (or Energy Service Companies) have largely stayed the same, the way energy is transmitted to consumers has changed. Third-party suppliers are now the ones in competition with other companies who used to dominate their markets. This, along with legislation and oversight to keep healthy competition alive, is what has led to lower prices for New Jersey residents.

If you want to learn more about the history of energy deregulation in New Jersey, check out this insightful article from The New Jersey Cooperator! You can also learn more about the many benefits of energy deregulation for electricity consumers on our Bright Insights blog!

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Taking a look from 1995 to today, let’s see how deregulated energy has been successful in Illinois:

What is energy deregulation?

In a regulated energy market, energy consumers only have one option when it comes to receiving their power—there is no agency and no choices. However, in a deregulated energy system, consumers are afforded the ability to choose their energy provider. The result is competition among energy companies that want to appeal to as many energy consumers as possible, which ultimately drives down the overall price of electricity in those areas.

Illinois’s history of energy deregulation

Energy deregulation in Illinois began in 1995, when Illinois Power Co. president and CEO Larry D. Habb told his colleagues during a meeting that the state should embrace energy deregulation to pave the way for energy savings in Illinois. It took a few years for the political wheels to begin moving, but they wouldn’t be stopped after their slow start.

In 1997, the Prarie State saw the creation of the Illinois Electric Service Customer Choice and Rate Relief Law. This law deregulated Ameren Illinois Utilities (AIU) and Commonwealth Edison Co. (ComEd), the state’s two biggest monopolies. This law also gave large commercial bodies the ability to purchase electricity the way you can in deregulated states today, but it did not yet provide this benefit to small businesses or residents.

The next 10 years marked a mandatory transition period, changing how electricity production was sold. Residents were finally permitted to purchase electricity in May of 2002, but high rate caps on electricity prices discouraged most retail electric suppliers from serving residential customers.

This all changed in 2006, when the Retail Electric Competition Act was passed by the general assembly, which removed barriers to competition among retail electricity suppliers. It also gave residential customers an incentive to purchase electricity from these retailers with temporary, fixed-discount programs.

There was a scare in 2007, as the lifting of energy price caps resulted in prices soaring, which was greeted with a great deal of criticism and skepticism. However, the passing of the Illinois Power Agency Act and the creation of the Illinois Power Agency (not to mention $1 billion in new electricity rate relief) eased these concerns.

Thanks to a 2008 pilot program, the first residential customers left their utilities and switch to a retail electricity supplier! Residential adoption of retail suppliers rose slowly, but eventually hit its stride in 2011.

In 2015, Star Energy Partners expanded its service territory to include Illinois, giving consumers greater choice and control over their energy costs and impact on the environment. The rest, you might say, is history!

Click here to learn more about the benefits of energy deregulation!

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We believe consumer energy choice provides opportunities for consumers. And in the past few months, several studies have been released that back up our belief with raw data.

More than 17 million U.S. households are in deregulated territory, with an increasing number of suppliers competing for their business by offering a variety of innovative products and services, according to an ABACCUS study,. States that top the study’s list include Texas, Pennsylvania, New York, Illinois, and Ohio.

“The ABACCUS report underscores the value of allowing customers to shop for their electricity provider in terms of innovative products and services and increasing numbers of competitive providers vying for their business,” said COMPETE Counsel William Massey. “…workable retail electric competition can succeed when policy makers put forward a strong policy preference for competition. When this occurs…we see increasing numbers of competitors offering an ever wider array of creative new products and services.”

These findings are echoed in another study that we recently wrote about from COMPETE Coalition. This 20-year study found that energy consumers with a competitive energy choice benefit from better prices, investment, and reliability when compared to their counterparts in a monopoly energy system. Here are some of the highlights from this report:

• From 1997 to 2014, consumers with a competitive choice saw their prices rise 4.5% less than inflation, while customers in monopoly states saw their prices increase 8.4% over the inflation rate. Simply put, consumers in monopoly areas have to pay more than they would in a deregulated area.
• Between 2003 and 2013, accounts served by competitive suppliers increased 524% for commercial customers and 636% for residential customers. Energy choice is becoming much more popular, especially among residential consumers.
• From 2003–2014, electricity demand by competitive suppliers surged even during a period of flat growth in consumption and a national recession. Demand grew 181% for commercial and industrial customers and an incredible 673% for residential energy consumers.

Click here to learn more about the benefits of energy choice for consumers!

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“In a compelling example of what Justice Louis Brandeis termed ‘states serving as laboratories of democracy,’ for nearly two decades, two retail electricity models, choice and monopoly, have operated in parallel, allowing reliable comparison of the two models on key indicators,” said COMPETE Counsel William Massey. “The data demonstrate that customer choice jurisdictions that steadily adapted and expanded retail choice out-perform, or at least compare favorably with, the states that have so far rejected broad-based customer market access.”

The study was released in conjunction with the summer meeting of the National Association of Regulatory Utility Commissioners, where the study’s academic approach and factual conclusions were welcomed by key state utility regulators.

Here are some of the highlights from the report:

• From 1997 through 2014, prices in customer choice jurisdictions increased 4.5% less than inflation, while prices in monopoly states increased 8.4% more than inflation. Electricity in monopoly states accounted for a larger share of the consumer cost of living in 2014 than in 1997, while electricity’s share of the consumer pocketbook in customer choice jurisdictions was less in 2014 than in 1997. Simply put, consumers in monopoly states had to dedicate more money to energy costs than in choice areas.
• From 2003-2013, accounts served by competitive suppliers increased 524% for commercial and industrial customers (C&I) and 636% for residential customers. This means having an energy choice is great for both businesses and customers, but slightly more so for the average energy consumer.
• From 2003-2014, electricity demand served by competitive suppliers surged even during a period of flat growth in consumption: 181% for C&I and 673% for residential. In other words, energy consumers want a competitive choice more than ever before!

All in all, energy choice locations outperformed monopoly areas, even when monopoly areas had more efficient technology!

You can find the full study at www.competecoalition.com.

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