“Disruption” is the type of buzzword that becomes trendy every now and then. It provides such a vivid image. A new, disruptive tech company is making waves, changing the way we think about… well, whatever hot technology it is we’re supposed to be thinking about now a days. But unless it actually forces a change in the industry, it’s not actually disruptive, it’s just kind of a neat idea that’s turning a few heads.
Now, if you’re talking about third party energy suppliers, disruption is actually an excellent way to describe what’s happening in the energy industry. It’s a sizable change in the way consumers are allowed to purchase their power.
The energy market was previously set up as a kind of natural monopoly, with only one utility in each area. They strung the wires that send electricity zipping into your home, giving them control over the market. But, as you’ll see, the introduction of third party suppliers has caused an upheaval in the traditionally unshakeable energy scene.
How a Monopoly Was Born
“But wait,” you may be thinking. “You just said they were a monopoly. Aren’t monopolies illegal?”
Well, what I actually said was they’re a natural monopoly. See, if multiple utility companies were allowed to compete and began putting up their own power lines and tearing up infrastructure, we’d have a problem almost immediately. Can you imagine new lines going up every time a new utility wanted to enter the market? More power lines may be great for the birds, but they would be an eyesore for the rest of us.
Since it’s actually in the general public’s best interest, the government allows this type of monopoly to exist, but with heavy regulations as it keeps an eye on utility companies for consumers. The government establishes safety and reliability standards, and reviews which expenditures can be passed onto customers in the form of higher rates. That way, the utilities can’t simply raise rates whenever their expenses increase.
The system was largely considered to provide safe and affordable electricity, and that’s why for a long time you’ve only had one option for an electric company. If you’ve ever moved a couple states over, the utility probably had a different name, but similar services and maybe even comparable rates. But, as Bob Dylan notes, the times, well, they are a-changin’.
Deregulation Rang in the New Millennium
In a seemingly controlled and affordable environment, how are third party energy suppliers actually being disruptive? It’s pretty simple really. Back in the 90s, there was a push for a deregulation of the energy market. The argument was that utilities should be subject to competition like any other market to help drive down electricity prices and force new innovations and efficiency. Sure, rates seemed reasonable, but without competition, how did we know they couldn’t be better? Or maybe even more stable and predictable?
Instead of asking that competitors be allowed to string up their own lines to your house, those in favor of deregulation were asking that third party suppliers have a chance to offer better energy products. These options included long-term fixed rates and renewable energy choices, combined with exceptional customer service. This potentially saves you some money in the process, but leaves the delivery method out of it. You’re still getting your electricity through the wires owned by the utility company, and they get money by delivering it to you.
Think about it. Have you ever tried to cut back on your energy consumption, only to see zero change in your bill because of a rise in the price of electricity over the last month? Enter third party energy suppliers. This is where their impact on the market is really felt.
Stability Is Making Waves
One of the arguments for deregulation we mentioned earlier was innovation. Without competition, there’s little need for an industry to change the way they do things.
Third party energy suppliers know that they’re going into a competitive market, and one that’s probably still dominated by a traditional utility company. They know they need to offer products and services that set them apart. That’s why most third party suppliers offer fixed rate contracts for varying lengths of time, making them consumer and budget friendly, while also setting them apart from the fluctuating rates of traditional utility companies.
When competitors enter a market and begin offering superior services, there tends to be a lot of nervous foot-shuffling from the establishment. People begin to wonder why they didn’t have these options before, and free themselves from their original utility to search out a new, better option. That’s disruption for you, right there. And while we’re still in the early years of deregulation, the waves of change are already being felt throughout the old energy establishment.
At Liberty Power, we offer fixed rate contracts that will disrupt the way you think about your electric bill. We help eliminate uncertainty and empower you to control your monthly budget. Contact us today if you’d like to learn more about how you can help shake up your utility company.
Photo Credit: Heather Emond