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| DEREGULATION OF THE ENERGY INDUSTRY |
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As of October, 2000, 24 states had enacted legislation or issued regulatory rulings that allow customers to choose their electric supplier. Prior to deregulation, commercial electric consumers had little alternative but to purchase electricity at the published tariff, with little management review of pricing, service options, or procurement strategies. As with any supply chain expenditure item, a management focus on leveraging new choices to obtain a better price is sure to result in lower costs than the old method of simply paying and passing through what was presented on a utility monthly bill.
Electricity tariffs are fairly detailed models and vary widely depending upon usage patterns. Our application provides much more than the superficial rate evaluations that are currently featured in residential oriented sites. One indication of how large consumers will react to greater, but more complex choice can be learned from the U.K., which deregulated its electric industry in 1991. Some U.K. utilities have seen as many as 40% of their larger customers hire an outside energy consultant to help them understand their cost opportunities and to negotiate with the utility.
The potential savings opportunities available to commercial electric consumers are significant. Large industrial consumers have a history of receiving favorable prices as a result of understanding and leveraging their negotiating position. Medium-sized commercial consumers are only now starting to investigate these opportunities under deregulation. However, they still cannot match the knowledge base of the industrial customers who have in-house experts, or management consultants on retainer to identify opportunities to lower their energy costs.
The Energy Information Administration of the U.S. Department of Energy maintains an excellent web site that can answer most questions regarding deregulation. The site also has links to the Public Utility Commission in each state so specific questions about the status of deregulation in your state can be answered. Click http://www.eia.doe.gov to learn more.
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