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 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).

*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:

• Retail Electricity Providers (REPs), who sell energy to the end customer.
• Generating companies, who produce electricity that is sold in the wholesale market.
• Transmission and Distribution Utilities (TDUs), who deliver electricity to homes and businesses. TDUs are still regulated.

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.