Eighteen states, mostly in the Northeast, have deregulated their electric grid to some degree — meaning consumers can choose where they buy their power, rather than being forced to purchase from a monopoly such as Evergy.
This is particularly relevant as Evergy Kansas — the largest investor-owned utility in the state — was granted a 9.6% electric rate increase by the Kansas Corporation Commission in July.
Many of those states allow residential, commercial, and industrial customers to purchase power wherever it is cheapest, while others, such as Nevada, only allow commercial and industrial customers to switch.
Attorney Jim Zakoura, who specializes in power issues, said that even allowing large customers, such as school districts and industrial customers, to purchase power on the open market would be beneficial to Kansans by reducing demand on the existing grid — and thereby lowering prices. Kansas electric rates remain some of the highest in the region.
With states courting data centers that require enormous amounts of power, Zakoura said it only makes sense to allow deregulation.
Oklahoma acts to make electric rates competitive for data centers
According to Zakoura, Oklahoma — which is not deregulated — recently passed legislation allowing suppliers to bypass traditional regulations to provide power to data centers.
“What Oklahoma determined was that these data centers, these big users, are not your typical utility customers,” Zakoura said. “They’re far from it.”
Zakora said, Virginia — which has deregulated commercial, but not residential electric power — allows anyone over five megawatts in usage to buy power on the market.
“Five megawatts, might be a larger Walmart operation or something like that, or distribution center, they can acquire power wherever they want and, and they can use the transmission lines to ship in that power,” Zakoura said, noting that in Kansas large users of natural gas such as school districts or manufacturers already are allowed to buy gas on the open market and pay a service fee to have the gas delivered, on the existing pipelines. He said something similar can easily be done in other states with existing power lines.
“Once the government stepped out of the way and allowed private industry to participate in that market, the supply of natural gas has dramatically increased and the price has fallen,” Zakoura said. “There’s no reason to think that in each instance you need a monopoly to handle every piece of the work.”
Deregulating residential power seems to work well in many states. Indeed, in Ohio, which deregulated in 1999, 57% of its residential customers buy power on the open market, some 2.3 million people, and 65% of commercial and industrial customers have switched away from the monopoly system. New York, which was early in the deregulation game in 1996, has 1.4 million residential customers who have switched.
Moreover, a deregulated market doesn’t mean customers must switch, but merely that they have the option to leave their current provider.
“If you’re a single person living in a residence, or you’re on Social Security, you probably don’t want to do that,” Zakoura said. “But if you’re someone who wants to be in the market and is really concerned about managing your costs and managing your supply security, you probably would want to be in that market.”
Zakoura said the Kansas Legislature has the power to allow market reform, but so far hasn’t shown any appetite to do so.
“To this point in time, they felt like the monopoly provision is the best for Kansas,” Zakoura said. “I don’t particularly think that. I don’t particularly think that’s the case for everybody, but that’s what they’ve done. This whole area needs to be revisited.”
