Electricity Overview

Deregulated Markets

Deregulated electricity markets provide customers with a choice of their retail electricity provider (REP) and this can often lead to receiving lower rates and better service options.

In deregulated electricity markets, the "commodity" (actual electricity) charges are competitive and the "wires" charges are still regulated and are usually a pass-through cost.

Prices may not be quoted on the same basis and contracts are not standard.

A fixed commodity price usually but not always includes charges by the Independent System Operator (ISO) who operates the electricity grid. Certain retailers may try to give the impression of lower commodity prices by treating ISO charges as pass-through costs.

For a general background on electricity deregulation, please refer to the article on Electric Power Industry Restructuring in the Market Info section of this website.

Retail Electric Providers (REP’s)

REP’s are the only companies allowed to provide retail electricity service to customers and they must be certified by the public utility commission (PUC) of the state.

New entrants, consolidations, acquisitions, and business closures of retail electric providers occur every year, making the choice of a qualified REP a moving target. For a listing of REP’s offering service, customers can usually visit the website of the PUC in their state.

Transmission and Distribution Service Providers (TDSP’s or "wires" companies) or Electric Distribution Companies (EDC’s)

TDSP’s or EDC’s (name depends upon locale) are the regulated companies that own the wires that deliver electricity to customers. These companies (or operations) may still a part of the incumbent utility company that historically served the area in question or are spin-offs.

Charges by these companies are regulated and vary with the type of meter and the customer’s usage and location and are the same irrespective of the REP a customer uses.

Independent System Operator (ISO)

Independent System Operators (ISO’s) are independent agencies responsible for managing the electricity grids in specific areas. Examples are ERCOT (Electric Reliability Council of Texas) in Texas, PJM (Pennsylvania-New Jersey-Maryland Interconnection) for the namesake states, NEPOOL (New England Power Pool) for New England states, and NYPP (New York Power Pool) for New York.

The ISO’s mission is to direct and ensure reliable and cost-effective operation of the electric grid and to enable fair and efficient market-driven solutions to meet customers’ electric needs. ISO’s are non-profit agencies whose costs are usually embedded in retailer prices.

Public Utility Commissions

Public Utility Commissions regulate electricity service in their respective states, including licensing retailers and sometimes other market participants. Their websites are usually the best locations to obtain official information about electricity deregulation in their states.