Electricity Deregulation Explained: What It Means for Your Electric Bill
If you live in Texas, Illinois, Pennsylvania, New York, Ohio, or more than a dozen other states, you have a choice about where your electricity comes from — and that choice can meaningfully lower your monthly bill. But most people have no idea this option exists. Here’s everything you need to understand about electricity deregulation.
The Traditional Model: One Company Controls Everything
In a fully regulated electricity market (still the case in most of the country), a single vertically integrated utility handles three things:
- Generation — operating power plants to produce electricity
- Transmission — moving high-voltage power across long distances
- Distribution — delivering electricity to homes and businesses through local wires
Because this company is a regulated monopoly, a state utility commission sets the rates. You have no choice about where you get your electricity, and the utility is entitled to earn a regulated return on its infrastructure investment.
What Deregulation Changed
Starting in the 1990s, about half the states decided that at least one part of the electricity supply chain — generation — could be opened to competition.
In deregulated states, the utility still owns the wires. They still handle outages. They still deliver your electricity. But the supply — who actually generates and sells electricity to your home — is now a competitive market.
Dozens of independent companies, called retail electric suppliers (or ESCOs, REPs, ARES, EGSs depending on the state), now compete to supply electricity. They buy power on wholesale markets, bundle it into plans, and sell it to you. If you don’t choose one, the utility supplies electricity at a default rate — which is often higher than what competitive suppliers charge.
Which States Allow You to Choose Your Electricity Supplier?
As of 2026, the major deregulated electricity markets are:
| State | Market Notes |
|---|---|
| Texas | Most competitive — 100+ retail providers, ERCOT grid |
| Illinois | ComEd + Ameren territory; robust ARES market |
| Pennsylvania | All major utilities; active EGS market |
| New York | Con Ed, NYSEG, National Grid; strong ESCO competition |
| Ohio | AEP, Duke, FirstEnergy; CRES providers statewide |
| New Jersey | JCP&L, PSE&G, ACE, Atlantic City; competitive market |
| Connecticut | Eversource + United Illuminating; active ESCO market |
| Maryland | BGE, Pepco, Delmarva; well-developed market |
| Massachusetts | Eversource + National Grid; green energy options |
| Delaware | Delmarva Power territory |
| Rhode Island | National Grid territory |
| Washington D.C. | Pepco territory |
States still operating regulated markets (no supplier choice): California, Florida, Georgia, Arizona, Nevada, North Carolina, Virginia, and most others.
How Does the Billing Work After You Switch?
You still get one bill from your utility. The bill has two main sections:
- Delivery charges: What you pay your utility for using the wires, running the meter, and handling your service. This charge doesn’t change when you switch suppliers.
- Supply charges: What you pay for the actual electricity. This is the part that changes when you switch to a competitive supplier.
In some states (particularly Texas), you may receive separate bills from the utility (for delivery) and your retail supplier (for supply). In most states, the utility handles a combined bill.
Why Doesn’t Everyone Switch?
Most eligible customers don’t switch, for a few reasons:
Awareness: Many people simply don’t know they can. The utilities have limited incentive to advertise their competition.
Inertia: Switching feels complicated. It’s not — it takes about 10 minutes — but the perception persists.
Distrust: There have been bad actors in competitive markets (especially early on in Texas and NY) who used predatory variable rates or misleading sales tactics. This created lasting distrust, even though the market has significantly improved with better regulation.
It requires active management: The savings are only there if you actually shop. The default rate is often higher than competitive rates. And at contract renewal, you need to re-shop or risk rolling onto a high variable rate.
The Real Opportunity
The fundamental economics of deregulation work in consumers’ favor — if you participate. Here’s why:
- Competitive pressure keeps supplier rates near wholesale costs plus a thin margin
- Default utility rates are often set on a lagging basis, meaning competitive rates lag behind market downturns
- Annual savings of $150–$600 are typical for actively managed households in high-cost states
The single most valuable thing a household in a deregulated state can do is: shop once a year, lock in a fixed 12-month rate, and set a calendar reminder to re-shop 60 days before your contract ends.
That discipline, repeated annually, is worth hundreds of dollars per year in most competitive markets.
Enter your ZIP code above to see if you’re in a deregulated market and compare available supplier rates today.