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The Effects of Deregulation on Electric Prices

     Electric prices are set in part by the Public Utilities Commission or PUC in markets where the commodity is regulated. This organization oversees the utilities and governs what they can charge the public. This assures the consumer that they won't end up paying more for the services that these utilities offer. At one time this became necessary because all markets were regulated and basically considered a monopoly, so to speak.

Electric prices today may not be so easy to define. Markets in many states and sections of states are deregulated. This means the driving force behind the cost hinges more on supply and demand than anything else. In a deregulated market, there are other factors such as what type of a customer you may be considered. If you are a larger business or factory, your rate or contract will differ from that of a residential customer. Your level of usage over a period of time, or the average of your usage will also be a determinant in what your rates may be in a deregulated market. Over all, your rates are based on a conglomeration of all factors, such as your usage and adjustments that are allowed for fuel costs and taxes.

Electric prices are decided by these indicators and collectively they are referred to as tariffs. A power tariff makes an allowance for maintaining the power plant and allowing for a profit for the investors. Most of these power companies, or at least the largest ones, are operated as franchises. This means that your electric prices are subject to review by the Public Utilities Commission in the state in which you reside.

These rates are billed to you per kilowatt. To get these rates they divide the incoming revenue by sales. What you end up with is the cost per kilowatt hour sold. What is a kilowatt hour? It is equal to one watt of power supplied to a circuit continuously for one thousand hours.

Basically the three types of services that are offered by this type of a utility are residential, commercial and industrial. The price per kilowatt hour for residents is usually going to be more because it costs more to bring power to people who use smaller quantities, such as for a home. Industrial rates are usually lowest because of the huge amounts of power that they consume.

There are publically owned utilities and cooperatives as well. Publically owned utilities can include state, irrigation areas, public power, and others within each state. These are considered non-profit organizations and they offer you rates that are exactly what they pay for them. Whatever is left over goes into the community and paying to maintain the facilities. Cooperatives are formed by a group of people as a membership, and then the co-op serves those members.

You can contact your utility and ask them for a detailed explanation on their electric prices in order to better understand what you are being billed and what each cost on that bill represents. They will be happy to explain it to you so that you can be a more informed consumer.

For additional information on electric prices as well as how to switch electricity companies or finding a local power company visit us online.

Please visit us online at for all your energy needs.

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For additional information on electric prices as well as how to switch electricity companies or finding a local power company visit us online.

Posted on 2012-09-10, By: *

* Click on the author's name to view their profile and articles!!!

Note: The content of this article solely conveys the opinion of its author,

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