Deregulated vs. Regulated Electricity, Explained

What a Regulated Utility Actually Is

In most of the United States, one company does everything. It owns or contracts for the generation, owns the transmission lines, owns the poles and wires on your street, reads your meter, handles outages, and sends you a single bill. That arrangement is called vertical integration, and it exists for an unglamorous reason: stringing a second set of distribution wires down the same street so two companies could compete would waste far more than the competition could recover. A monopoly is the efficient answer to that problem. Regulation is the price of granting it.

The price you pay is set in a rate case, a formal adversarial proceeding at your state's utility commission (called a public utility commission in some states, a public service commission or corporation commission in others). The utility documents what it has invested in plant, what the system costs to run, and what return it believes its investors are owed. Commission staff, the state consumer advocate, industrial customers and sometimes low-income or environmental intervenors contest those numbers line by line. Months of hearings later, the commission issues an order setting rates, and those rates hold until the next case.

Two consequences follow. A regulated utility earns its return on prudently invested capital, which gives it a structural incentive to build and little incentive to help you buy less of its product. And you cannot shop; there is no alternative seller. In exchange it carries an obligation to serve — it must connect anyone in its territory who asks and can pay, at the published tariff, profitable or not.

What Restructuring Separated — and What It Left Alone

Beginning in the late 1990s, roughly a quarter of US jurisdictions restructured. The word people use is “deregulation,” which causes real confusion, because nothing was deregulated in the sense of regulation being removed. What happened was unbundling: the vertically integrated business was cut into pieces, and exactly one piece was opened to competition. That piece is supply — the electricity itself, the energy measured in kilowatt-hours, which competing retailers buy in wholesale markets and sell to households under contracts they set.

Everything else stayed a monopoly, and this is the part most explanations skip. The wires are still a monopoly in every state in the country, without exception. The company that owns the pole outside your house still owns it, still reads your meter, still restores service after a storm, and still charges a regulated delivery charge (what you pay to have electricity moved to you, regardless of who generated it) set by the state commission in a rate case, exactly as before. If your supplier fails, your lights do not go out — you return automatically to a regulated fallback rate, called default service, standard offer service, provider of last resort, or in Rhode Island Last Resort Service.

If you have never separated these two halves of your bill, do that first. Our guide to supply versus delivery charges walks through the line items. Competition touches one of them.

What Retail Choice Actually Gives a Household

Retail choice gives you one thing: the right to buy the supply portion of your electricity from someone other than the incumbent utility, at a price the two of you agree on rather than one the commission sets. That is genuinely valuable and genuinely limited. Switching cannot reduce your delivery charge, transmission surcharge, taxes or legislated riders; those are fixed by regulation and follow you to whichever supplier you pick.

What you are shopping among, in practice, is contracts — and the terms matter more than the headline rate:

• Fixed-rate plans lock a price per kilowatt-hour for a stated term. The rate does not move when wholesale prices move. This is the product most households should be buying.
• Variable-rate plans let the supplier reset the price monthly at its discretion. Some are cheap. Some reprice sharply upward during a cold snap, when you cannot avoid using the electricity. A variable rate transfers wholesale price risk from a company that trades energy professionally to a household that does not.
• Introductory rates that roll over. The most expensive pattern in these markets is a low fixed rate for a short term that expires quietly into a month-to-month variable rate. Nothing arrives saying “your price just tripled.” The bill simply goes up.
• Early termination fees apply if you leave a fixed contract early. Read the number before you sign, not after you want out.
• Usage-threshold gimmicks — bill credits that apply only above a certain monthly kWh, free nights offset by a higher daytime rate — are priced to be profitable across the average customer. They work if your usage matches the shape and punish you if it does not.

Every restructured state makes suppliers publish a standardised disclosure of rate, term, fees and renewal behaviour. Read all of it.

Which Jurisdictions Actually Have Residential Choice

Counting is where most published lists go wrong, because they lump residential choice together with commercial-only, suspended and capped programmes that no new household can actually join. Counted strictly — can an ordinary household switch its electricity supplier today — fourteen of the fifty-one US jurisdictions (fifty states plus the District of Columbia) have residential retail choice, and thirty-seven do not. The fourteen are Texas, Pennsylvania, Ohio, Illinois, New York, New Jersey, Massachusetts, Connecticut, Rhode Island, New Hampshire, Maine, Maryland, Delaware and the District of Columbia.

Even inside that list there are qualifications. Roughly 85% of Texans live in the competitive ERCOT area and can shop; the rest are served by municipal utilities and cooperatives — Austin Energy, CPS Energy and El Paso Electric among them — which remain regulated. In the District of Columbia, Pepco stays the regulated delivery utility for everyone. In Rhode Island, choice is legally available but residential offers have been scarce and most households remain on Last Resort Service. In New Hampshire, a large and growing share of households are served not by a competitive retailer but by municipal Community Power aggregations.

The states most often miscounted as deregulated are these:

Full detail on both groups, with current rates and average bills, sits on our deregulated electricity states and regulated electricity states pages.

Has Retail Choice Saved Households Money?

This question attracts advocacy from both directions, so handle it carefully. Start with the crude comparison, then dismantle it. As of May 2026, the median residential rate across the fourteen choice jurisdictions was 24.62 cents per kilowatt-hour; across the thirty-seven regulated ones it was 15.17 cents. At face value that looks devastating for choice. Taken seriously it proves almost nothing, for one reason: the states that restructured were disproportionately the states that already had the highest rates. High prices were the political motive for restructuring. Most of the fourteen sit in the Northeast and Mid-Atlantic, regions with structurally expensive power for reasons — fuel logistics, land costs, density, generation mix — unrelated to market design.

The spread within each category also dwarfs the difference between them. Among choice jurisdictions, rates run from 16.44 cents in Texas to 29.93 cents in New York; among regulated ones, from 12.35 cents in Idaho to 52.00 cents in Hawaii. Average monthly bills run $154.05 in New Jersey to $202.24 in Maryland among the fourteen, against $92.34 in New Mexico to $257.40 in Hawaii among the rest. The US average is $159.14, from 863 kWh at 18.44 cents. Rates also do not translate straight into bills — Texas has the cheapest electricity of the fourteen and one of the higher bills among them, because Texans use 1,096 kWh a month against a national average of 863.

What the record does support is narrower and more useful. Regulators in choice states have repeatedly found that residential shoppers as a group did worse than they would have on default service; Maryland tightened supplier marketing rules after exactly that finding. Rhode Island's residential market has thinned to the point where most households never shop. New Hampshire's growth has come from municipal aggregation rather than door-to-door retail. The pattern points to one conclusion: choice is a tool, not a discount. A household that shops fixed rates, tracks contract end dates and re-shops on schedule can beat default service reliably. One that signs whatever a salesperson offers frequently pays more than it would have with no choice at all.

What to Do, Depending on Which Market You Are In

The structure determines which levers exist. Pulling on levers your market does not have is how people waste months.

If you are in a regulated state

You cannot change the price per kilowatt-hour by shopping, so stop looking for a supplier — any “switch and save” pitch reaching you in a regulated state is either about a different product or is not legitimate. What you can change is how many kilowatt-hours you buy and which tariff you buy them under. Ask your utility what optional residential rate schedules exist; many offer a time-of-use option or an electric-vehicle schedule that is materially cheaper for the right usage pattern and materially worse for the wrong one. Our guide to time-of-use rates covers how to tell which you are. Also check your commission's website for income-qualified discount rates and weatherisation programmes, which are widely available and widely unclaimed.

If you are in a choice state

Treat supplier selection as a recurring administrative task, not a one-time decision. Find the current default service rate first, because that is the number any offer has to beat. Shop on your state's official comparison site rather than an aggregator paid by suppliers. Buy fixed terms of twelve months or longer, put the contract end date in your calendar the day you sign, and re-shop before it expires rather than after. Decline door-to-door and telephone sales categorically: offers that need a salesperson at your door are rarely the ones that win on price.

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