Homework Question on Energy Market Regulation and Deregulation
- In 1990, the UK government privatised the electric supply industry, and, in the years following, countries from Australia to Canada have followed suit. Select one country where the energy markets have been deregulated and one country that has not been deregulated.
- What are the positive and negative outcomes of the process on both the supply/sales and consumption sides of the industry?
- When comparing the deregulated market to one which is regulated, do you think the approach is a success?
- How have price and service been affected?
Homework Answer on Energy Market Regulation and Deregulation
Many countries have established energy markets regulation in an attempt to safeguard citizens against exploitation and to limit market failure while some countries have liberalized their energy market to encourage competition. Market deregulation allows consumers to choose their energy suppliers with the best rates. When several firms compete in one industry, consumers benefit from lower prices. The US has regulated its energy market, though not in all states, while Germany has regulated its entire energy market. This study will focus on the outcomes of regulating and deregulating the energy market to the industry, as well as to the consumers.
Energy Market Regulation
The US is one of the countries that regulate energy market, though not in all states. Regulation of energy market has been helpful to consumers, as regulators implement some rules to guide the energy market. Regulation is essential in protecting the public interest, since it dictates terms of services, as well as prices. The Federal Energy Regulatory Commission (FERC) is an independent agency of the government, which is responsible for regulation of the interstate transmission of electricity, as well as natural gas and oil (Kramer, A. S. & Fusaro, P. C. 2010, 214).
It is quite important to note that restructuring of electricity industry is not the same as electricity deregulation. The role of an industry regulator is to check on the wholesale market to establish which market rules might be encouraging suppliers to practice unilateral power or attempt to raise market prices (Wolak, F. A. 2005, 7). The agency safeguards customers from being exploited by market players through executing applicable rules. Regulating agencies ensure that rules are in place to safeguard consumers from significant harm.