In the early 1990s, when the Federal Energy Regulatory Commission (FERC) began envisioning electricity-market deregulation, similar to that of natural gas in the mid-1980s, the intent was to create a stable, competitive market.

Today, says Bob Porter, Vice President at Direct Energy, the market has unfolded and matured much as FERC hoped it would. “It has progressed at varying rates in different states, but the process has been dealt with in a reasonable manner,” he says. “For example, progress has been faster in Massachusetts, Texas and Maine, where switching rates are fairly high, and we’ve seen good customer satisfaction. In general, progress has been in line with expectations.”

Porter adds that deregulation has worked best in those states where rates from the utilities were set at benchmark prices (sometimes called “standard offer” or “back-out” rates) for shorter intervals. When these prices are established for longer periods, customers don’t see prices that accurately reflect the market. Prices established for shorter periods reflect actual market prices, making it easier for people to plan their energy uses for the long term.

In Connecticut, for instance, the deregulation bill signed in 1998 froze rates at a 1996 benchmark price and kept them there for six years. “When you go through six years of frozen rates, you get a correction at the end and significantly higher rates, which has created some of the public outcry in that market,” he says.

For business, deregulation has meant a more level electricity playing field. In addition to greater choice, technology has resulted in better billing options and data processes—streamlining that means increased savings for energy sellers and customers. Additional benefits include price certainty, with customers knowing more about what they can expect to pay over the longer term; improved conservation through such vehicles as “block and index” products; and, of course, lower overall costs.

Porter notes that the best way to find the right supplier in a competitive market is the same as any other product or service you’re after. You should shop around and ask the right questions:

• How financially stable is the company?
• What’s their track record?
• What has been the experience of their customers?
• Can they offer you a list of references?
• How wide is the range of products and services they offer? Can they be customized specifically for your business’s requirements?

Note that price was not on Porter’s list. “It’s an important component, but not the key factor you should consider when narrowing down your list of suppliers,” he asserts. “What if you get a great price from a supplier who’s not financially stable? What good is that low price if the company is not in business six months down the road?”

You should also be sure you read the fine print on any contract. That price may not necessarily be as low when it flows through to the bill. Different contractual obligations could add to your cost.

Eventually, Porter envisions a market in which “established companies own generation, reputable suppliers offer the market-based products customers are really looking for, a significant amount of competition—which is good for everyone—and the opportunity for customers to choose the companies and products that specifically suit their needs. And Direct Energy will be in the forefront of all those areas.”