Throughout the last hundred years or so, electric utilities existed as a regulated monopoly. This was necessary to prevent them from unnecessarily raising rates and refusing service. But with deregulation, what governing body is going to make sure electricity providers don’t raise rates based on market tolerances, as we’ve seen with other deregulated industries? What type of service guarantees will you have? Let’s discuss what you should expect in a deregulated environment.

Some deregulation plans involve splitting the traditional utility into a generation company (GenCo), transmission company (TransCo), and distribution company (DistCo)—each with its own need to be profitable. Other plans create an independent system operator (ISO) to direct the flow of electricity on the generation and transmission level to the DistCos. These plans will cause a reduction in revenues to all parties involved.

These reductions may cause layoffs and reduced maintenance expenditures. With a reduced work force, the DistCo will be unable to respond as it could in the past. With a reduced budgetary expenditure limit for maintenance, the percentages and chances for failures (outages) will increase over time. This should slowly become apparent the first few years after deregulation. One important point to keep in mind is: No other utility is going to install distribution lines to reach your facility, so your existing DistCo will still have this responsibility.

Remember the multi-state outages of the past few years. This demonstrates the complexity and vulnerability of the electrical grid. In a deregulated environment, these outages may become more commonplace. Promises of lower utility rates may seem desirable, but think of the lesson the Greeks taught the Trojans with the wooden horse. And don’t forget to check out the whole picture.