PROCUREMENT

INTRO

In some areas of the country the purchase of electricity and/or natural gas has been deregulated.  This offers the opportunity for the retail end-user to participate in the two main benefits of a deregulated market  - cost savings and price stability.

In a deregulated market, the end-user is allowed to purchase a commodity (electricity or gas) from a marketer, but still have that commodity delivered by the same local utility company through existing pipes or wires. 

Purely a paper transaction, the change is invisible to the client, with the exception that now the client can negotiate with the marketer instead of having prices and terms dictated by the utility company.

Benefits of a Marketer

It is actually quite common for utility companies to have to purchase - from other generation companies, producers, or marketers - the electricity or gas which they in turn sell to their customer base. 

Deregulation allows the retail end-user to go to those same producers or marketers and structure their own deals; something that (in the case of natural gas) has always been allowed for the very large user.

With “bundled” service, a customer pays the utility company a single amount for the combined product of the commodity (electricity or gas) and the delivering of that commodity through the utility’s already established network of pipes or wires.  The customer also enjoys the other benefits it has come to depend on from the utility: reliability, customer service, assistance during outages, meter-reading, rebates, etc.   A bundled bill has contained within it a line item for all of those services (although they may not be delineated on the bill). 

With deregulation, the utility continues to charge for everything except the commodity portion of the bill, but continues to provide – and charge for – all the previously mentioned services.

The customer pays the producer or marketer for the commodity and the utility continues to deliver that commodity.

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