Last Updated on May 22, 2022 by Mary Pressler
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)|
|East North Central||3/5||14.67||11.09|
|West North Central||0/7||12.07||9.74|
|District of Columbia||Yes||14.11||14.50|
|East South Central||0/4||12.45||11.63|
|West South Central||1/4||12.42||8.74|