How Utility Deregulation Benefits Connecticut Electricity Customers

Wednesday January 25, 2012
Posted at 11:50

If you live in Connecticut, then you probably live in a deregulated electricity area. According to the New England Energy Alliance (NEAA), that’s a good thing, both for electricity customers and the environment.

What is electric deregulation?

A national movement to deregulate public utilities, commonly referred to as electric restructuring, began in the early 1990s. Prior to then, most electric utilities were monopolies, regulated by state utility commissions. The utilities handled everything. They generated and/or bought electricity, sold it to customers and delivered it to customers’ homes.

The movement behind deregulation suggested that the utilities should be broken up. Under deregulation, other companies would be allowed to generate electricity and still other companies would be allowed to buy electricity from the generators and sell it directly to customers. The role of utilities would change. In deregulated markets, the utilities would simply take electricity from the generators, transmit it to the grid and deliver it to customers’ homes. The utilities would only charge for the distribution of electricity, although they could still sell electricity — at a price set by state regulators — if customers didn’t want to switch to a competing electricity supplier.

Deregulation was meant to encourage competition among multiple electricity suppliers, which would ultimately drive down energy prices and help customers save money on monthly electric bills.

Connecticut began to deregulate in 1998 when the state legislature passed a law to restructure the utilities. On Jan. 1, 2000, the law went in to effect and utilities such as Connecticut Light & Power (CL&P) and The United Illuminating Company (UI) were broken up and competing suppliers were allowed to enter the market.

Now, over ten years later, Connecticut electricity customers have more choices and greater access to cleaner energy than ever before, according to the NEAA.

The Five Main Benefits of Electric Deregulation in Connecticut

According to an NEAA report released last year, it is “clear that the competitive marketplace is working to the benefit of both customers and the environment.” The report cited five main achievements since deregulation began, including more power, more choice, higher efficiency, cleaner air and the development of new clean energy resources.

More Power

As of last April, more than 4,000 megawatts of new electricity generation facilities were in the works in Connecticut, thanks to deregulation. The NEAA noted that when all of that power comes online, it will increase the state’s electricity output by 50 percent and will further boost competition, reduce prices and create jobs.

More Choice

From 2005 to 2010, the percentage of Connecticut electricity customers who bought their electricity from competitive suppliers grew by triple digits. By the time the report was issued, 35 alternative electricity suppliers — investing substantial capital and employing hundreds of residents — served 20 percent of all state customers and supplied half of all electricity sold in the state.

Higher Efficiency

Deregulation has paved the way for consumer-funded efficiency programs provided by utilities that have conserved more than 400 million kilowatt-hours of electricity a year. That’s enough to power over 47,000 homes annually.

Cleaner Air

Deregulation has also spurred the construction of highly efficient natural gas power plants for generating electricity, as well as a switch to cleaner fuels in existing power plants. As a result, fewer greenhouse gasses have been emitted. Between 2005 and 2010, carbon dioxide emissions from power plants decreased 20 percent. Additionally, nitrogen oxide fell by 62 percent and sulfur dioxide by 77 percent.

New Clean Energy Resources

Because of deregulation, many new types of “greener” electricity generation technologies are being developed. Hydropower, wind energy and biomass are all contributing to the state’s goal of generating 27 percent of Connecticut’s entire energy production by the year 2020.

Sources

NEEA: CT Benefits From Electric Deregulation,” Hartford Business Journal, Apr. 28, 2010.

Connecticut Light & Power, “CL&P History.”

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