Last Updated on October 6, 2021 by Mary Pressler

Average Electricity Rates in the US

Average 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, controlling the entire electricity supply chain: generation, transmission, distribution, metering and billing. However, oil sector volatility raised electricity prices after the 1970s, and deregulation was introduced to create a more competitive and efficient energy sector.

Energy Policy Act of 1992

The Energy Policy Act of 1992 allowed states to create competitive energy markets for private generators, and where energy retailers could purchase at wholesale rates to sell electricity directly to the end customer. As of 2021, there are 26 states that have implemented some form of energy choice: 6 have deregulated electricity (including Texas), 9 have deregulated natural gas, and 11 have deregulated both services.

Consumer Choice Electricity

Since deregulation seeks to increase efficiency in the energy sector, transmission and distribution remain under the control of a regulated utility company. The alternative would be allowing electricity providers to build individual 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 utility company serving their area.

List of Deregulated States in 2021

There are currently 26 states with deregulated energy sectors:

  • Deregulated electricity (6): Texas, Connecticut, Delaware, Maine, Massachusetts, New Hampshire
  • Deregulated gas (11): Florida, Georgia, Indiana, Kentucky, Montana, Wyoming, California, Kansas, Nebraska, New Mexico, West Virginia
  • Deregulated electricity and gas (9): Illinois, Maryland, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Michigan, Virginia

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, as of 2021. The table also provides average electricity prices for residential and commercial consumers (Source: US Energy Information Administration).

STATE Deregulated

Electric Sector?

Residential

kWh Price (Avg)

Commercial

kWh Price (Avg)

New England 5/6 20.37 15.71
Connecticut Yes 20.39 16.38
Maine Yes 16.51 12.41
Massachusetts Yes 21.54 15.89
New Hampshire Yes 18.74 15.34
Rhode Island Yes 22.59 16.15
Vermont No 19.04 16.44
Middle Atlantic 3/3 15.55 12.00
New Jersey Yes 15.99 11.96
New York Yes 18.23 14.01
Pennsylvania Yes 13.15 8.36
East North Central 3/5 13.27 10.11
Illinois Yes 12.32 8.67
Indiana No 12.69 11.11
Michigan Limited Options 16.47 12.19
Ohio Yes 11.80 9.14
Wisconsin No 14.52 10.84
West North Central 0/7 10.88 8.88
Iowa No 11.31 8.99
Kansas No 12.22 9.85
Minnesota No 12.87 9.99
Missouri No 9.30 7.64
Nebraska No 10.13 8.68
North Dakota No 9.39 8.38
South Dakota No 11.39 9.42
South Atlantic 3/9 11.43 9.32
Delaware Yes 12.51 9.46
District of Columbia No 12.96 11.90
Florida No 11.86 9.57
Georgia No 10.80 10.04
Maryland Yes 12.73 9.90
North Carolina No 10.60 9.21
South Carolina No 11.78 10.37
Virginia Limited Options 11.21 7.46
West Virginia No 11.41 9.32
East South Central 0/4 10.83 10.49
Alabama No 11.39 10.91
Kentucky No 10.53 10.00
Mississippi No 11.25 11.02
Tennessee No 10.41 10.31
West South Central 1/4 11.01 7.93
Arkansas No 9.87 8.49
Louisiana No 9.54 9.43
Oklahoma No 8.88 7.05
Texas Yes 11.87 7.75
Mountain 0/8 11.47 9.07
Arizona No 12.18 9.73
Colorado No 12.14 10.06
Idaho No 9.92 7.65
Montana No 11.02 10.33
Nevada No 11.20 7.09
New Mexico No 12.27 9.96
Utah No 10.19 7.48
Wyoming No 10.66 9.24
Pacific Contiguous 0/3 16.11 14.15
California No 20.45 16.21
Oregon No 10.89 8.88
Washington No 9.77 9.08
Pacific Noncontiguous 0/2 25.80 23.55
Alaska No 21.93 19.51
Hawaii No 29.14 27.76
US Total 15/51 12.80 10.48

*Average electricity prices are from the US EIA

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 Commercial
Deregulated states 15.74¢ 11.67¢
Regulated states 12.39¢ 10.61¢
All US states 12.80¢ 10.48¢

*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 (12.80¢ per residential kWh, 10.48¢ per commercial kWh).

Residential kWh Price Below US Average Commercial kWh Price Below US Average
-Illinois (12.32¢)

-Ohio (11.80¢)

-Delaware (12.51¢)

-Maryland (12.73¢)

-Texas (11.87¢)

-Illinois (8.67¢)

-Ohio (9.14¢)

-Delaware (9.46¢)

-Maryland (9.90¢)

-Texas (7.75¢)

-Pennsylvania (8.36¢)

*Source: US EIA

Who Has the Cheapest Electricity in the US?

As of March 2021, the US state with the cheapest energy rates is Oklahoma: the average residential tariff is 8.88¢ per kWh, and the average commercial tariff is 7.05¢ per kWh. However, all the following states have average electricity tariffs below 10¢ per kWh:

  • Average commercial tariff below 10¢ per kWh: Pennsylvania, Illinois, Ohio, Iowa, Kansas, Minnesota, Nebraska, South Dakota, Delaware, Florida, Maryland, North Carolina, Virginia, West Virginia, Texas, Arizona, Nevada, New Mexico, Utah, Wyoming, Oregon
  • Average residential and commercial tariffs below 10¢ per kWh: Missouri, North Dakota, Arkansas, Louisiana, Oklahoma, Idaho, 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:

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.