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Energy Market Deregulation and its Opportunities

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UPDATED: What’s the state of deregulated energy markets in the U.S. today? Last week, the COMPETE Coalition unveiled a big report on competitive electricity markets, prepared by utility consultant KEMA, that purports to show that Texas’ competitive market has allowed a blooming of retail choices that have added up to a broad benefit for customers at large.

Indeed, deregulated markets may well act as natural petri dishes for the best combinations of technologies and services to get customers engaged with their utilities. Whether they’ll save energy at the same time is less clear, however — a factor I go into in more detail in my weekly report over at GigaOm Pro (subscription required).

Texas is a natural focus for the forces of competition, or deregulation, given that every customer of investor-owned utilities in the state is being served in a competitive market (UPDATE: municipal and cooperative utilities aren’t included). Texas has also taken a lead in both smart meter-enabled and broadband avenues into the home.

On the smart meter front, the Smart Meter Texas Portal launched last year is the first in the U.S. to serve customers of multiple utilities using multiple smart meter networks. Still, KEMA reports that smart meters haven’t yet driven much innovation in the residential retail innovation front.

On the broadband front, Texas is the home of projects including Ecofactor’s cloud-based thermostat optimization software, or TXU’s  broadband enabled iThermostat system. More recently, Reliant Energy, the Texas energy retailer owned by New Jersey-based NRG Energy, has started testing out home energy management systems from Control4 in a limited, employee-only pilot project.

KEMA’s study contrasts Texas to California, where certain differentiated residential programs exist, but without the element of choice in most cases — customers with solar panels are signed up for a solar power program, for example, while electric vehicle owners get another.

Where Texas might present a deregulated power market-boosters dream, however, it’s an outlier among the 17 states that now offer some form of competitive market. In those, commercial and industrial (C&I) power customers are the main buyers of competitive power, while residential customers remain on the margins of the market.

New York, for example, had two-thirds of its C&I sector served by competitive power providers as of mid-2010, but only about one-fifth of its residential customers, the COMPETE Coalition reports. Connecticut leads most of its fellow New England states with more than 80 percent of C&I customers being competitively served, but residential customers have only recently increased to reach nearly one-third of the state’s market.

Pennsylvania and Illinois, for their part, are putting into place various systems to ensure proper “electronic data interchange” standards and processes for handling customer data. Moving to competitive markets means a huge increase in data being passed between parties, a challenge that adding data from smart meters and home energy management devices will only complicate further.

But that can also mean opportunities for technology providers that can help along. In the U.K., for example, eMeter is working on updating the United Kingdom’s interchange for smart meter data in that market, which has been deregulated since the 1990s.

For more research related to smart grid check out GigaOM Pro (subscription required):

Image courtesy of Ca1av3ra via Creative Commons license.

4 Responses to “Energy Market Deregulation and its Opportunities”

  1. Consumers in deregulated energy markets can help reduce greenhouse gas emissions by purchasing renewable energy products from deregulated energy companies, such as Stream Energy. These companies offer renewable energy products purchased through the procurement of Renewable Energy Credits (REC).

  2. Had to comment and mention our website ( for electricity choice comparison (both small C & I and residential) in Illinois. The idea is that simple and informative UI will drive adoption of competitive suppliers and will enable us utilize our consumer decision research models to aid adoption of smart meter initiatives. Comeds API as a market catalyst enables tech companies like ours to innovate.
    Good article!

  3. You’re mistaken about Texas. Not every customer is in a competitive market for electricity. Not even close. Austin and San Antonio are still regulated areas, and there are dozens of more large pockets that are served by Co-Ops and municipal companies.