Electricity Deregulation

What Is Electricity Deregulation?

Deregulation separates the electricity supply from the delivery infrastructure. The utility keeps the wires, but competing companies can sell electricity over them. You still get one bill — only the supply portion changes.

How Does Switching Work?

In most deregulated states, switching takes minutes and causes no service interruption:

In states with municipal aggregation (Ohio, Illinois, Massachusetts), customers may be enrolled automatically through an opt-out community program.

Does Deregulation Save Money?

Deregulation doesn't guarantee lower prices, but it introduces competition — which historically drives down supply costs in active markets. Commercial and industrial customers tend to benefit most because they consume enough electricity to negotiate favorable contracts. Residential customers who actively compare and switch plans can save 10–20% on the supply portion of their bill, though passive customers who remain on default rates may see little difference.

The key factor is engagement. In Texas, where shopping is essentially mandatory, the competitive market has kept supply rates below the national average for most of the past decade. In Ohio, government aggregation programs have driven residential switching to 57%, creating a competitive environment where suppliers must offer value to retain customers. In states with low switching rates, fewer suppliers compete and the savings potential is more modest.

Why Some States Have Restricted Markets

Not every state that passed deregulation legislation followed through with full implementation. Several markets were scaled back or restricted after initial problems:

• California suspended residential direct access in 2001 after the energy crisis caused by market manipulation and supply shortages. Commercial and industrial customers can participate, but under a cap (~28,800 GWh statewide) with a long waitlist. Separately, 25+ Community Choice Aggregation (CCA) programs now serve millions of California customers, but these operate under different regulatory rules than traditional retail choice.
• Michigan passed its Customer Choice and Electricity Reliability Act in 2000 but capped competitive supply at 10% of each utility's retail sales in 2008 (PA 286). The program has been fully subscribed since 2009, with 5,517 participants (nearly all C&I) and 5,100+ customers on the waitlist as of 2025.
• Virginia allowed switching through a 100% renewable energy exception, but the SCC approved Dominion's own renewable tariff in 2020, effectively closing the loophole. Only customers with demand exceeding 5 MW can access competitive supply today.
• Oregon and Nevada limit choice to commercial and industrial customers, with Oregon using structured annual enrollment windows through PGE and Pacific Power.

Community Choice Aggregation (CCA)

CCA programs deserve special mention because they represent a growing form of electricity choice that doesn't fit neatly into the "deregulated vs. regulated" framework. Under CCA, a local government aggregates the buying power of residents and businesses to procure electricity supply — often with higher renewable energy content — from competitive providers.

CCA is active in California (25+ programs serving ~66,000 GWh of annual load), New York (100+ communities, ~352,000 customer accounts), Massachusetts, Illinois, Ohio, and several other states. In Ohio and Illinois, these programs are the primary driver of residential switching, automatically enrolling customers on an opt-out basis. CCA customers keep their existing utility for delivery and billing — only the supply source changes.