Last Updated on May 22, 2022 by Mary Pressler

Average Electricity Rates in the US

Average US Electricity Costs & The Effect of Energy Deregulation

The History of Energy Deregulation in the United States

Electric utilities operated as state-regulated monopolies during most of the 20th century. This means a single company could control the entire power supply chain in a state or region: generation, transmission, distribution, metering and billing. However, volatility in the oil sector raised electricity prices after the 1970s, and states started to break down these monopolies.

Deregulation was introduced to make the electric power industry more competitive and efficient.

The Energy Policy Act of 1992

With the Energy Policy Act of 1992, states could create competitive energy markets for private generators.

  • Homes and businesses were no longer purchasing electricity from a single utility company. They could now choose among different energy retailers.
  • In turn, energy retailers would purchase electricity from generators in the competitive wholesale market.

As of 2022, there are 29 US states who have implemented some form of energy choice: 2 have deregulated electricity, 12 have deregulated natural gas, and 15 have deregulated both utility services (including Texas).

Consumer Choice Electricity

Since deregulation seeks to increase efficiency in the power sector, transmission and distribution remain under the control of a regulated utility company. The alternative would be letting electricity providers build competing power grids, which is neither practical nor financially viable. Energy consumers in deregulated states purchase electricity from their electricity retailer of choice, and pay a transmission and distribution fee to the transmission and distribution utility serving their area.

List of Deregulated States in 2022

There are currently 29 states with deregulated energy sectors:

  • Deregulated electricity (2): Delaware and Oregon.
  • Deregulated gas (12): Florida, Georgia, Kentucky, Montana, Nebraska and South Dakota have deregulated natural gas. Indiana, Iowa, New Mexico, West Virginia and Wyoming have limited gas options. Colorado has enacted gas deregulation by law, but there are no options yet.
  • Deregulated electricity and gas (15): Illinois, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania and Rhode Island have deregulated both services. The list also includes Connecticut, Maine, New Hampshire, Texas and Virginia; but gas options are limited or only available for large commercial and industrial consumers. California has also deregulated both services, but electricity options are extremely limited.
  • Washington DC has deregulated both utility services.

The 21 states who still have a fully regulated energy sector are Alabama, Alaska, Arizona, Arkansas, Hawaii, Idaho, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Nevada, North Carolina, North Dakota, Oklahoma, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin.

Read more about the US states with deregulated energy.

Average Electricity Rates by State

The following table shows the status of electric deregulation in the 50 states and the District of Columbia. The table also provides average electricity prices for residential and commercial consumers (Source: US Energy Information Administration).

STATE Electric Choice Available? Avg. Residential kWh Price (¢/kWh) Avg. Commercial kWh Price (¢/kWh)
New England 5/6 21.86 16.63
Connecticut Yes 21.35 16.79
Maine Yes 18.21 13.92
Massachusetts Yes 23.32 17.16
New Hampshire Yes 21.17 16.32
Rhode Island Yes 22.84 15.41
Vermont No 20.15 17.33
Middle Atlantic 3/3 16.72 13.35
New Jersey Yes 16.16 12.75
New York Yes 20.04 15.60
Pennsylvania Yes 14.17 9.64
East North Central 3/5 14.67 11.09
Illinois Yes 14.39 10.39
Indiana No 14.36 12.06
Michigan Yes 17.62 12.51
Ohio Yes 13.02 10.26
Wisconsin No 14.84 10.95
West North Central 0/7 12.07 9.74
Iowa No 12.28 9.55
Kansas No 13.30 10.49
Minnesota No 13.60 11.32
Missouri No 11.02 8.66
Nebraska No 10.97 8.51
North Dakota No 10.91 9.47
South Dakota No 12.00 9.81
South Atlantic 4/9 12.56 10.03
Delaware Yes 13.91 10.18
District of Columbia Yes 14.11 14.50
Florida No 12.60 10.25
Georgia No 12.34 11.47
Maryland Yes 13.66 10.83
North Carolina No 11.60 8.55
South Carolina No 14.09 12.14
Virginia Yes 11.97 8.24
West Virginia No 12.89 10.24
East South Central 0/4 12.45 11.63
Alabama No 13.41 12.59
Kentucky No 12.49 11.32
Mississippi No 12.39 11.52
Tennessee No 11.70 11.23
West South Central 1/4 12.42 8.74
Arkansas No 11.53 8.82
Louisiana No 11.67 11.06
Oklahoma No 11.69 8.78
Texas Yes 12.81 8.38
Mountain 0/8 12.19 9.58
Arizona No 12.31 9.88
Colorado No 13.81 10.87
Idaho No 10.22 7.92
Montana No 11.42 10.86
Nevada No 12.67 8.08
New Mexico No 13.60 10.72
Utah No 10.26 7.82
Wyoming No 10.97 9.35
Pacific Contiguous 0/3 17.90 15.20
California No 23.76 17.60
Oregon No 11.41 9.12
Washington No 10.22 9.41
Pacific Noncontiguous 0/2 28.91 26.24
Alaska No 22.60 19.86
Hawaii No 33.97 32.36
US Total 16/51 14.12 11.33

Average US Deregulated Electric Rates

Average electricity prices in regulated and deregulated are compared below, based on the latest data from the US Energy Information Administration.

Average kWh Price by Sector Residential (¢/kWh) Commercial (¢/kWh)
Deregulated states 17.21 12.97
Regulated states 13.39 11.25
All US states 14.12 11.33

*Average values calculated with data from the US EIA

Average kWh prices are higher in deregulated states, and this has created the idea that deregulation makes electricity more expensive. However, Cornell University reached a different conclusion after analyzing electricity price trends for two decades. They found that all the following factors influence kWh prices:

  • Most of the states that adopted deregulation already had higher electricity prices, compared with those that have remained regulated. Expensive electricity has often been a reason to try deregulation, and not a consequence.
  • Electricity price fluctuations in recent years have been caused in great part by the volatile price of natural gas, which is one of the main energy sources used to meet demand peaks in power grids.
  • Deregulation promotes lower kWh prices through competition, but the transition from a regulated environment brings high costs for utility companies. For this reason, reducing electricity prices takes time.
  • Some states have an abundance of hydropower resources, which provide low-cost electricity.
  • This also applies for states that use a large number of coal power plants, which provide cheap electricity, but with the highest emissions among all fossil fuels.

Energy Deregulation Results

Electric deregulation has been applied successfully in many US states, especially those in the New England and Middle Atlantic regions. Energy companies that previously held monopolies over the power sector have split their operations, creating separate generation companies to participate in the wholesale markets. However, transmission and distribution utilities (TDU) cannot favor generation companies that were previously part of them, to keep competition fair.

State policy has a significant impact on kilowatt-hour prices. In general, electric rates are lower in states that prioritize public welfare over corporate profits. Although the average electricity price is higher among deregulated states, many of them actually have kilowatt-hour prices below the national average (14.12¢ per residential kWh, 11.33¢ per commercial kWh).

Residential kWh Price Below US Average Commercial kWh Price Below US Average
-Ohio (13.02¢)

-Delaware (13.91¢)

-Washington DC ($14.11)

-Maryland (13.66¢)

-Virginia (11.97¢)

-Texas (12.81¢)

-Pennsylvania (9.64¢)

-Illinois (10.39¢)

-Ohio (10.26¢)

-Delaware (10.18¢)

-Maryland (10.83¢)

-Virginia (8.24¢)

-Texas (8.38¢)

*Source: US EIA

Which State Has the Cheapest Electricity in the US?

The states with the lowest residential kWh prices are Idaho and Washington, both with an average tariff of 10.22¢per kWh. The state with the lowest commercial kWh price is Utah, with an average tariff of 7.82¢per kWh. However, all the following states have average electricity tariffs below 11¢ per kWh:

  • Average commercial tariff below 11¢ per kWh: Pennsylvania, Illinois, Ohio, Wisconsin, Iowa, Kansas, Missouri, Nebraska, North Dakota, South Dakota, Delaware, Florida, Maryland, North Carolina, Virginia, West Virginia, Arkansas, Oklahoma, Texas, Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming, Oregon, Washington.
  • Average residential and commercial tariffs below 11¢ per kWh: Nebraska, North Dakota, Idaho, Utah, Wyoming, Washington.

Texas Deregulated Electricity

The Texas electricity sector has been deregulated since January 1, 2002, and vertically integrated utilities were replaced with three types of companies:

TX Energy Rates

There were natural gas price spikes between 2000 and 2010, which limited the benefits of deregulation in Texas. Gas prices had been low before 2000, and many generation companies in Texas decided to invest in that energy source. However, natural gas prices have been much more stable since 2010, and generation companies in Texas have been able to reduce their rates accordingly. Deregulated electricity prices in Texas remained under the US average for six years in a row between 2010 and 2015, and  they are also below the national average in 2021.