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Deregulation in California

California is slow to become deregulated again after the California Energy Crisis of 2000 and 2001 resulting in a long suspension of it’s deregulated energy policy also known as Direct Access.Currently, natural gas is deregulated and open to customers to choose a competitive supplier versus the utility but the awareness is slim.

Electricity is partially deregulated with major limitations at this point and open to just businesses.In late 2009, Governor Schwarzenegger signed into law SB 695 that allows a minimal amount of overall energy supply to be open to a deregulated market. Currently, past energy users that utilized the deregulated markets will have priority to this limited amount of energy being open to the market. The goal of the energy deregulation market is to role out all available energy supply within the next 4 years.

Deregulation allows a user to “lock in” some or all of their energy supply cost for a defined period of time (i.e. 1, 2 or 3 years). For example, if a user “locks in” a price of 12 cents a kilowatt and the actual price if they did not utilize deregulation is 13 cents per kilowatt, then the user benefited from the 1 cent difference. The opposite can be true if the cost of energy ends up being less than 12 cents a kilowatt. Obviously, good energy supply consulting is necessary for a user to make a good decision. This is the role of the “power brokers.” Initially, many users may just negotiate a contract that ties their cost of energy to an index and then develop a strategy that utilizes peak and off peak rates and other combined techniques that include hedging of a portion of their supply.