Deregulating electricity markets results in better prices for consumers, more investment in infrastructure and quicker responses to market forces, according the conservative think tank National Center for Policy Analysis.
In an April report, the National Center for Policy Analysis urged states to follow the lead of others such as Connecticut and Texas in deregulating their energy markets, even though momentum for the movement slowed in the past decade.
Under deregulation, utility companies are not allowed to generate power for their customers, only delivered it to them. Power generation and supply is left to private companies, who compete to offer customers the best price and service.
Starting in the late 1990s, several states deregulated their energy industries including Connecticut, which deregulated in 1998. The movement was preceded by rising costs and a lack of investment in the energy infrastructure, particularly in power plants and the transmission system.
A total of 26 states deregulated their markets, but after the move did not result in immediate price decreases and improved infrastructure, several states reversed their decision. By the end of 2010, only 14 states continued to have true deregulated markets.
Connecticut’s only deregulation has come under fire as electricity prices have skyrocketed to the second highest in the nation, and state legislators have sought to limit the private electricity suppliers operating in the state.
Despite the setback, Connecticut and the rest of the nation should continue with deregulation, according to the report from National Center for Policy Analysis. The private suppliers are lowering price, and private power plant operators are making needed improvements to become more efficient.
The deregulated market also allows for faster growth of renewable energy sources and demand response resources to decrease reliance on fossil fuels, according to the report.
The authors of the report recommend Connecticut invest in more transmission lines to bring in cheaper power from other states. That will further depress prices.
Connecticut currently has 31 private electricity suppliers actively marketing to Connecticut businesses. At the start of the year, 55 percent of all business customers made the switch to a private supplier.
