Deregulated energy allows you to choose who you buy your energy from. But not every state is deregulated.
The power of choice is a wonderful thing. And depending on where you live, you may be able to choose your energy provider.
It’s called energy deregulation, and about 40 percent of US states have it. Commonly known as retail choice, in deregulated states residents have a say in where they get their energy. In these states, public utilities function like any other business: Competitors provide options, and residents choose how to spend their money.
In regulated markets, however, electricity comes from a designated utility provider and you don’t have a choice. Regulated energy markets create a form of monopoly, meaning no competitors to choose from or switch to, but in which the public utility is still controlled by the state government.
Deregulated vs. regulated energy markets: the pros and cons
Pros of energy deregulation
- Deregulated markets give power of choice to the consumer.
- Competition should even the playing field against the power of a utility monopoly.
- Utility monopolies are less focused on the consumer’s best interest.
- Deregulated markets tend to be more open to changes like clean energy adoption and technology improvements.
The biggest and most obvious benefit of a deregulated environment is that it gives choice to the people. In an ideal world, PUCs would be trusted to provide the best option for all. But that isn’t always the case, and it isn’t always easy for the consumer to tell.
A deregulated or restructured system also takes power away from long-standing monopolies. Often, providers have been in place for decades, and critics say they’re focused less on what’s best for consumers and more on maintaining the status quo.
“For those who care about climate change and environmental issues, it’s been much easier for renewable energy to penetrate the market in deregulated environments,” he said. “If wind and solar are the cheapest resource and you no longer have utilities owning all the generation, they’re not going to be fighting regulators to hold on to things that are no longer economical but that they’ve invested in.”
Cons of energy deregulation
- Responsibility lies with the consumer.
- Energy shopping experience can be complicated.
- Consumer education is needed to navigate.
- Competition and deregulated market creates opportunity for bad actors or scams.
In a deregulated or restructured environment, the choice is with the consumers — but so is the responsibility. Most people don’t know much about public utilities or energy policy, so they’re required to be more informed in order to make good decisions in a deregulated system. That can lead to wasting or not fully realizing the benefits that choice provides.
“Usually, if consumers don’t choose an alternative, they’re given the default service provider, which is typically the local utility,”
“So it does require the consumer to be more educated.”
Just because a state is deregulated doesn’t mean that state’s PUC is any less important. In fact, in a deregulated state, that commission is the only thing standing in the way of bad actors, which means people and states can be taken advantage of.
What US states are deregulated for electricity or natural gas?
Most states still have regulated utility providers. Just 18 states (and the District of Columbia) have deregulated markets.
According to the US Environmental Protection Agency, 13 states (and the District of Columbia) have fully deregulated or restructured electricity utilities:
- Connecticut.
- Delaware.
- DC
- Illinois.
- Maine.
- Maryland.
- New Hampshire.
- New Jersey.
- New York.
- Ohio.
- Pennsylvania.
- Rhode Island.
- Texas.
Another five states have partially deregulated or restructured environments:
- California.
- Georgia.
- Michigan.
- Oregon.
- Virginia.