Deregulation is the process of eliminating or reducing governement control of a given industry. In the United States, this process started in 1971. The theory behind deregulation is that with fewer, easier, or no restrictions, competition will drive productivity and efficiency and drive prices down. Wikipedia has a great article comparing deregulation to privatization and liberalization.

The first industry to be deregulated was the transportation industry. This process started in 1971 while Richard Nixon was president. This proved to be successful enough to lead to other changes.

Later, the savings and loans industry was deregulated. During this process, billions of dollars were lost and regulations were re-enacted.

The telecommunication industry also deregulated in the 1990's. This lead to the rise and eventual fall of companies like MCI.

One of the latest round of deregulation has been the energy industry. Electricity deregulated and has seen some successes in states like Texas and some serious setbacks in states like California.

In 2002, Texas Senate Bill 7 was passed opening the door for electricity deregulation. This was a monumental moment because Texas is the largest electricity market in the country and 11th largest in the world behind Great Britain and ahead of Spain in annual consumption.

The goal of deregulation is to increase competition and lower prices. A problem can occur if large companies drive out smaller companies or prevent new companies from entering the market in the first place. Walmart has been accused of doing this in the retail market.

In order to prevent the established electricity suppliers like TXU and Reliant, the law established a price floor for the incumbent companies. This price floor has led to a lot of bad feelings around deregulation that will be discussed later.

The price floor was designed to keep the incumbent electricity providers from pricing the new comanies out of business. This led to artificially high prices and guaranteed profits for almost any company wanting to sell electricity in Texas. The price floor was lifted at the beginning of 2007.

One of the companies that entered the Texas electricity market was Ambit Energy. They entered at the time the price floors was lifted and quickly established themselves as one of the low cost suppliers and have continued to provide low rates and great service.

Now that deregulation has had 6 years to stabilize and price floors have been lifted, competition is driving down the prices. As of March, 2008, consumers can save 25% by switching to one of the cheapest Texas electricity providers. All of these rates represent an improvement over the 15¢ / kWh that was common in 2002

These rates were taken from Power to Choose on March 5, 2008 and are intended to be a representation of prices not a complete listing.

As with anything, deregulation is not all roses. There can be problems and at times consumers will pay the price.

One example that comes to mind is the California Energy Crisis brought on by companies like Enron. California was the first state to deregulate its energy market. As such, there were problems and unscrupulous companies like Enron took advantage of a new system and used it for profit at the expense of consumers. There were also issues with companies being forced to sell electricity for less than they paid for it leading to several companies going bankrupt and leaving many consumers without power.

Texas also has its apparent problems. In order to ensure that new companies were allowed to compete, the Texas laws set price floors that prevented the established companies from pricing out new competition. This lead to artificially high prices for a period of time. However, since those price floors were lifted in January of 2007, Texas electricity prices have actually come down while the price of natural gas and oil has continued to go up and reach record high prices.

There are definitely potential problems with deregulation, but these are mostly brought on by unethical corporate actions and when true competition exists prices come down. This is the premise of a free market economy. You cannot judge deregulation as a whole by a few bad examples.

The Texas government passed deregulation laws in order to protect consumers and lower prices. They did not plan to create a new generation of home based entrepreneurs, but that has also happened.

One of the low cost energy producers, Ambit Energy, offers a great small home based business opportunity to people who want to help friends and family save money. Many people are earning 6 figure incomes presenting an opportunity to others that saves them money and gives them free rewards.