What does all this really mean to you? Some of you have a choice as to where you purchase your power from. Many of you don't. However, most of you really never thought much about your electricity once the bill was paid. 

That's changing.

Deregulation will alter the way you think about power.

The unbundling of costs

Legislation and regulatory orders are slowly steering the electric industry away from the monopoly it's always been toward a competitive market. 

In 1996, the Federal Energy Regulatory Commission said utilities must unbundle their costs of generation, transmission and distribution. In other words, utilities were directed to offer each component separately with separate rates. This unbundling, coupled with the opening of utilities' power lines for use by all wholesale suppliers, has led to a  competitive environment.

In deregulated states, customers are only given options regarding power providers, that is, the generators. 

The transmission and distribution portions of the bill are still regulated and will continue to be for the foreseeable future. Transmission brings power from a plant to a bulk purchaser, like your local utility. Distribution sends the power from the purchaser to the customer.

The million dollar question is whether deregulation will cause rates to rise, fall, or both.

The times they are a changin'

There are about a dozen states where legislation has been passed to enact deregulation. While many states have passed laws that mandate implementation of competition over the next two years, there are only a handful of states actively offering customers choice.

"We are in the (midst) of deregulation and it's going very well," said Donna Buchheit, manager of economic development with PP&L, Inc., based in Allentown, Pa.

Pennsylvania was on the heels of California, the first state to tackle deregulation head-on about 18 months ago. In Pennsylvania, more than half the state is deregulated.  The wave should sweep the entire state by 2000.

Buchheit said deregulation in Pennsylvania has resulted in more service options for companies.

"It's a lot of options and opportunity for companies to really think about ‘How can we get the best deal for what we need?'" she said.

"And by the best deal, I don't necessarily mean the best price. Because for some companies, the services and the way it's packaged and those kinds of things are what they want and will pay for."

Customers in New York are also getting a grip on deregulation. Unlike other states, each New York utility company has a separate rate settlement with state regulators, so each utility is deregulating at a different pace.

"Our customers were able to choose their commodity this past August," said Chris Wood, manager of economic development for New York State Electric & Gas Co. "What we're seeing through deregulation is that on average, all industrial, commercial and residential rates are declining.

"The deregulated state offers you more choice," said Wood. "It gives the customer the opportunity to choose, and they have more leverage in the negotiation with the utility."

In California, Southern California Edison offers Economic Development Rates to expanding and relocating companies, as part of attraction and retention efforts. The rates were created with deregulation in mind, said Grant Thomas, project manager, economic and business development. 

And in New Jersey, customers can expect to see a dramatic decrease in their rates, beginning this year. New legislation mandated statewide utility rate reductions of 5 percent in August. Furthermore, one of New Jersey's utilities, Public Service Electric & Gas Co., will lower rates another 2 percent in January, and another 5 percent in August of 2000. Other utilities in the state are in the midst of restructuring their rates as well.

In addition, utility tax changes will result in another 6 percent savings, creating a net savings effect of 18-19 percent in New Jersey for many customers by the end of 2000. The mandated rate reductions are guaranteed to remain in effect until Aug. 1, 2003.  And, the opportunity exists for customers to save even more by shopping around in the newly competitive marketplace. Choice of electricity providers opened up for all New Jersey residents in October.

"Everyone is benefiting," said Tim Comerford, manager-area development for Public Service Electric & Gas Co. in Newark, N.J.

Reaping the rewards of deregulation

Another hotly debated topic is the issue of who exactly will benefit most from deregulation.

"In 2002, when the green flag drops in Arkansas, I think the first people to benefit will be the large industrial customers," said Doug White, vice president for system services for Arkansas Electric Coop in Little Rock. "They will have collective buying power, and they've got attractive load factors. I think they will start to see benefits immediately from competition, at least in Arkansas."

This stands to reason because the larger businesses are, the more electricity they will likely use, and the more bargaining power they'll wield.

However, that's not to say that smaller users aren't seeing benefits as well –- many are. Although the jury's still out on whether moderate-to-low power users will see reduced rates, other benefits, including billing consolidation services resulting from deregulation, may prove beneficial to them.

"If you want to buy your gas and electric and steam from the same company where you get your cable, you can do that," Buchheit said. "Or maybe a company wants to have a separate bill for all their facilities, one for all facilities, or they may want to separate out their office billing from the manufacturing billing."

Other companies may even be willing to pay a little extra to receive energy from  "green" utilities that are powered by windmills and other non-traditional sources. 

The number of new services that will be available to companies is just emerging. Much remains to be seen as deregulation unfolds and utilities come up with their own unique service packages as they tap into other businesses including cable, phone services, and even home security.

In addition, companies may have the option of banding together.

"What we're seeing, especially in Pennsylvania, is the smaller companies are joining together and getting the power of shopping together," said Becky Wingenroth, director of business development for GPU Energy, based in Reading, Pa. "So for instance, there might be a whole chamber of commerce group that gets together and says ‘Hey, let's aggregate our load so we can get a cheaper rate together.'

"And there are school districts that will all get together and aggregate their load. It's a neat thing that businesses are partnering together to do that."

GPU was at the forefront of Pennsylvania's deregulation movement and was the only utility to give 100 percent of its customers choice on Jan. 1, 1999. Other utilities in the state are phasing in choice. 

The whole point of deregulation is to create competitive pricing and services. As deregulation starts to infiltrate states and the kinks get worked out, greater savings and benefits should be realized by more customers as utilities compete for business.

Next, please

States are steadily falling in line on the path of deregulation. Texas just passed legislation requiring that most Lone Star electric customers will have choice by Jan. 1, 2002. In addition, the legislation calls for a 6 percent rate cut.

Oregon recently became the 24th state to pass deregulation legislation, setting a date of Oct. 1, 2001.

Part of Illinois became deregulated Oct. 1. The state is taking a phased approach, targeting January 2001 for full deregulation.

Still other states remain in the discussion stages.

"I'm guessing it's probably going to be a few years before Kansas approves any legislation for deregulation," said George Powell, director of marketing and development for the Kansas City Board of Public Utilities. He said the utility already offers low rates.

It's a similar situation in Florida.

"Florida has pretty low rates, the rates are competitive, and Florida is using this time period between now and deregulation to become more efficient and pay down debt," said Bruce Doueck, director of economic development for the Jacksonville Electric Authority. 

Still, most states see that deregulation will eventually be a force to be reckoned with. In Nebraska, the only state to have all public-owned utility companies, utilities are preparing for change.

"We are changing our organization to become more customer- and sales-oriented," said Dennis Hall, economic development manager with Nebraska Public Power District. "We are preparing for a world of competition. The focus is in the right place." Advice from the experts

So what's to be done with this thing called deregulation?

For expanding and relocating companies, there are a few things to bear in mind. The number one thing is to get educated. 

Talk to local power providers and find out exactly how your area is being affected by deregulation and what kinds of pricing and service options are available.

In addition, it is wise to be flexible, according to Dr. David Hudgins, director of economic development for Virginia-based Old Dominion Electric Coop.

"You have to educate yourself and figure out how you can aggregate your load," he said. "Be flexible and be able to adjust to the market and negotiate. Talk to three or four companies to get the best price, best contract, best reliability. The issue of reliability should not be overlooked."

"Cost is important, but reliability is just as important," said Peter Millburg, director of marketing communications and community relations for Illinois Power.

He said it's wise for businesses to be aware of the mergers taking place in the utility industry, because they will add to merging utilities' resources and result in greater reliability.

The key is to ask questions that relate to your business's specific needs.

"The way state regulations implement laws can have a tremendous influence on things," said Buchheit. "The devil's in the details. How deregulation is implemented is really where the rubber meets the road."