When speaking of energy from a consumer standpoint, we usually mean electricity and natural gas. Bad news is, most of the electricity produced in the North America comes from natural gas having been burned in turbines of Royal Dutch Shell or British Petroleum. Minor contributors are hydro-electric plants (like mind-boggling Juggernauts of engineering around the area of Niagara Falls! Imagine that at nights, when tourists are not gloating at the waterfalls, the water is actually diverted through a system of underground tunnels some 10 miles long to a reservoir, which is then emptied during the day, when electricity is most needed,  through a hydro-turbine, producing electricity!), solar panels and windmill generators. However much I dislike the fact that most of the energy powering my computer now that I write this article is generated by burning natural gas, this gas is still the major source of energy…

Regardless of the source of energy (except maybe for solar panels), the energy is delivered to you by a local utility company. That utility company is a natural monopoly – you need to have tons of cash to build an energy company that would generate, transmit, monitor transmission, supply, and deliver energy to end customer, so competition is virtually non-existent.

 Since the Deregulation of energy market in the United States (The electricity market was deregulated based on the Public Utility Regulatory Policy Act of 1978 (PURPA) and the National Energy Policy Act of 1992, while the Natural Gas Policy Act of 1978 called for the gas industry to open its markets –  source) , the natural monopolies of utility companies were to be broken as far as limiting the role of utilities in generation of energy, and forcing them by legislative means to allow competition at the stage of supply. Meaning, that now a new player can come in at the stage before delivery of energy to the end customer, in essence buying wholesale from the generating company and forcing the incumbent utility to deliver the energy to the retail consumer. As you can imagine, there are very few companies willing to enter the market by building their own distribution and delivery networks – the capital outlay is staggering, plus the headache of maintaining the distribution network for gas or electricity is really daunting: think about the emergencies, natural disasters, billing, collections, non-payments…You get the picture.

It must be mentioned that deregulation is largely the initiative at the federal level, and to be of any import for us, regular consumers of energy, the deregulation acts must be ratified by the states. As of this writing, not too many states have come on board of the deregulation bandwagon – to check the status of deregulation in your home state, click here.

Like I said, the new entrants in the energy market are substantially brokers between the generation plant and the end customer sitting in the delivery system of the local utility. As such, participation of these new entrants (called ESCOs – energy service companies) is mainly virtual – they do not create value, except for providing the end customer with the choice of which supplier to buy their energy through, thus hopefully fostering competition and driving the supply prices down. ESCOs have no say in determining the price of delivery (this is still within the province of the local utility, the natural monopoly), and they are at the mercy of the generation plants, which are part of the gas producing companies, so the real cost is not under the control of ESCOs even under the best scenario. The only advantage an ESCO brings to the market is competition on the profit margin at the supply stage, which puts some limits on the greed of companies responsible for supply, but does nothing to control the pricing at the source – meaning, the price of gas. Historically, the price of gas has been correlating with the price of oil, although no-one has ever been able to explain to me, why. Except for the general statement that pretty much anything on the stock market is sort of indexed to the price of crude oil…I invite my readers to provide insights on this conundrum.

ESCOs have another challenge – market penetration. Consumers are reluctant, in most cases, to change their providers of energy, primarily because of the lack of even minimal education in the field of energy supply. This article is intended to remove this impediment, at least in part. Most people do not realize they are overpaying for their energy supply needlessly; changing energy providers is no more difficult than changing your long-distance phone service providers – one phone call will do it. And it is equally easy to return back to your beloved incumbent monopoly utility company, should you not for any reason like your ESCO. However, ESCOs in most deregulated markets have trouble explaining this to the end consumer, as the latter does not really want to hear them out, due to the already mentioned ignorance of his or her options.

Therefore, most ESCO chose to market their services through an MLM – or network marketing – model. Which brings me to another aspect of energy deregulation – an income opportunity for anyone wishing to get their foot in the door of the energy industry.  There is a blog at http://mlms-that-pay.blogspot.com which lists some of the best ways to start. Readers are encouraged to post their own recommendations about such opportunities here. Don’t miss this chance! You can literally live off the energy deregulation!

Obviously, we all would want to reverse the situation of our extreme dependence on gas as an energy source, as fossil fuels are predicted to be substantially depleted by the middle of this century.  Another consideration, that of being “green” being a good thing to begin with, is already an integral part of mass consciousness, especially with younger generation. Solar panels technology is being developed at a very rapid pace, but the commercial deployment is lagging behind due to costs and public inertia. Let’s turn that around! Please post here the most competitive offers on the market, so that this solution becomes mainstream as soon as possible!