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Blog Jun 12, 2018

Energy Deregulation Information by State

Texas Power

When Texas, New Jersey, Pennsylvania and 13 other states deregulated their energy markets, local utility companies in those states were forced to sell their power generation plants. They held on to all their transmission and distribution assets and continue to maintain this infrastructure.

Energy Deregulation Information by State

While each state handles energy deregulation differently, the bottom line is that deregulation offers consumers more choices when it comes to electricity and natural gas service. Deregulation aims to increase the availability of energy service options for residents and brings with it a number of benefits, one of which being the ability to find more affordable service.

Both natural gas and electricity choice programs exist, though availability varies by state. Since 1992, the United States has had deregulated electricity legislation. Starting with the Energy Policy Act of 1992, states began introducing deregulated energy markets, however not all followed through with their efforts, limiting today’s options for residents in some areas.

What is Energy Deregulation?

Deregulation allows you to reduce the electricity bill or gas to reduce the account by offering a portion of your account to be provided to third party energy supplier.

Deregulation of the electricity and natural gas industry creates opportunities for companies to reduce overall costs by allowing businesses to choose their supplier for best combination of price and reliability. The main objective of deregulation is to create a competitive market, leading to reduced energy costs. This is the work of suppliers in the market increases, leading to greater competition and lower prices.

When did energy deregulation start?

Deregulation of the electric utility industry began in early 1990, when it was opened to access the system, which wire supplies electricity to commercial and residential market guaranteed by federal law. The primary goal is to increase competition in the production and sale of electricity. Deregulation is now performed the state-by-state basis over several years, New Jersey is the latest addition to the growing list.

How has deregulation impacted consumers?

Overall, deregulation has led to lower electricity rates for Texas residents, with customers receiving a discount of 32% the regulated rate (or “price to beat,” as it were, which was 10 cents). Furthermore, the market has been kept healthy and competitive, as deregulation has allowed new competitors to enter the electricity market without having incumbent providers slash prices to push them out.

What remains the same in electric and natural gas service with deregulation?

Your current utility, continue to supply electricity and natural gas to your home or business. Your local distribution company still responds to service interruption and continues to maintain poles, wires and pipes. You will still receive the same reliable service you’re used to with your local electricity supplier energy, regardless of energy supplier will receive offers from.

 

Deregulated Energy States

STATE ELECTRIC GAS
Alabama No No
Alaska No No
Arizona Yes No
Arkansas Yes No
California Yes Partial Choice
Connecticut Yes No
Colorado No No
Delaware Yes Partial Choice
Florida No Yes
Georgia No Yes
Hawaii No No
Idaho No No
Illinois Yes Yes
Indiana No Yes
Iowa No Yes
Kansas No No
Kentucky No No
Louisiana No No
Maine Yes No
Maryland Yes Yes
Massachusetts Yes Yes
Michigan Yes Yes
Minnesota No No
Mississippi No No
Missouri No Partial Choice
Montana Yes Yes
STATE ELECTRIC GAS
Nebraska No No
Nevada Yes Yes
New Hampshire Yes No
New Jersey Yes Yes
New Mexico Yes Yes
New York Yes Yes
North Carolina No No
North Dakota No No
Ohio Yes Yes
Oklahoma Yes No
Oregon Yes No
Pennsylvania Yes Yes
Rhode Island Yes Yes
South Carolina No No
South Dakota No No
Tennessee No No
Texas Yes Partial Choice
Utah No No
Vermont No No
Virginia Yes Yes
Washington No No
Washington DC Yes Yes
West Virginia No Yes
Wisconsin No No
Wyoming No Partial Choice

California

  • Electricity: yes, but limited
  • Gas: yes

In the 1990s, both California and Texas began passing laws that allowed competition in the electricity industry. In 1996, the first California energy deregulation bill passed. But during the California energy crisis, the state suspended deregulation programs because it had invested bonds in power companies. Once the energy companies paid off the bonds, a choice would be available again.

Political dissent against energy deregulation followed, and it took some time for customer choice to become acceptable again, at least in the eyes of the government. Now, California uses Direct Access, a retail electric service where customers purchase electricity from competitive providers. An Electric Service Provider (ESP) is a “non-utility entity” that delivers service to customers in the same territory as an electric utility.

What this means for California residents is limitations on electric choice, specifically a ceiling on the maximum total kilowatt hours they can use per year. The program also retains the right to suspend customers’ access to service providers, using a lottery system to enroll customers in utility service.

Connecticut

  • Electricity: yes
  • Gas: yes, but partial and limited

Electric deregulation began in 1998 in Connecticut, with an act that helped establish a competitive market. The electric deregulation act forced companies to separate their “generation components” from the rest of their businesses, auctioning power plans and other generation assets.

Unfortunately, many residents in Connecticut still see high electricity bills. Part of the cost involves the state’s dependence on natural gas to generate electricity. Coal usage rates have also dropped, though other states in the region rely heavily on the cheaper fuel. While natural gas plants are easier on the environment, with fewer emissions, the energy costs more to produce.

At least 26 percent of one company’s consumers chose third-party suppliers for their power purchases, but many blame deregulation for a jump in electricity prices since it began in 2000. Rates increased from an average of 9.96 cents per kilowatt-hour in 1999 to 17.24 cents per hour in 2016.

And while natural gas deregulation in Connecticut exists, it does not apply to residential customers, according to the state’s Public Utilities Regulatory Authority (PURA). Single-family homeowners have three choices, three gas utility companies that PURA regulates.

Delaware

  • Electricity: yes
  • Gas: no

The Delaware Public Service Commission explains that while electric deregulation and therefore customer choice is a priority, potential electric suppliers must apply for and receive certification from the state before offering service to consumers.

Delaware’s electric choice was established in 1999, so customers still have the option of choosing a third-party electricity supplier for their energy needs. However, residents will still receive a bill from their local utility provider, since, the state explains, the utility provider must still manage distribution and infrastructure concerns. On each bill, the customer’s electricity supply will be denoted separately from the distribution and other charges.

However, for natural gas, the state retains control and regulates two utility companies. Though a gas choice program ran on a trial basis, it was later discontinued. Now, the state regulates the natural gas distribution and can impact the fuel costs annually.

Georgia

  • Electricity: yes
  • Gas: yes, with limitations

Georgia began natural gas deregulation in 1997, but it wasn’t a statewide adjustment. Only customers in Atlanta Gas Light’s Company’s service area have natural gas choice, leaving many consumers with no other option than to use utility providers that the state supports.

The single investor-owned natural gas distribution company is under Georgia’s regulation, but for people who live in the company’s service area, there are choices in the form of 84 municipal systems. The state does not regulate rates or services of municipally-owned systems.

When it comes to electricity, however, consumers have more options. Residents can purchase electricity from investor-owned power companies, municipalities, and Electric Membership Corporations (EMCs). The state only regulates investor-owned utilities, with 39 EMCs serving around 1.3 million customers- over 70 percent of the land area of Georgia.

Illinois

  • Electricity: yes
  • Gas: yes

Electric deregulation saved consumers money in Illinois- nearly 37 billion dollars over the past 16 years, according to one news outlet. The 1998 deregulation changed the way the state managed both electricity and natural gas, creating more competition and sparking new technology development.

Deregulation also dropped Illinois electricity prices from the 13th-highest to the ten lowest, thus explaining the huge savings customers experienced. An open market encourages competition, and the staggeringly successful results are an indicator of the power deregulation can exercise on the resulting free market.

At the same time, legislation included built-in rate cuts, the executive director of the Citizens Utility Board explained. Therefore, consumers were able to avoid annual increase rates that, for example, helped pay off nuclear-powered generating plants.

Indiana

  • Electricity: no
  • Gas: yes

While Indiana’s Utility Regulatory Commission oversees electric utilities that include five investor-owned and nine municipal utilities, there are also 67 municipal electric utilities that are not under IURC jurisdiction. However, that does not mean that all Indiana residents have energy choice. Indiana still regulates electricity rates, regardless of jurisdiction.

However, electric-utility deregulation has been a topic of interest for lawmakers since 2014, when policymakers realized that Indiana was seeing increases in electric costs. Specifically, regarding industrial energy costs, Indiana’s legislators realized that a free market could help lower electricity costs.

Currently, Indiana’s NIPSCO is the only utility company that offers a Choice Program to its consumers. The voluntary program allows customers to choose their natural gas supplier, splitting the monthly bill into two parts. Choice Suppliers give customers options as far as rates and deliveries.

Massachusetts

  • Electricity: yes
  • Gas: yes

Massachusetts has both electricity and natural gas deregulation, even providing a marketplace for its residents called Energy Switch Massachusetts for electricity consumers. Competitive electric supply products factor in pricing, renewable energy content, and other products and services suppliers may offer.

Natural gas competition comes through choosing a natural gas supplier other than residents’ local gas companies. Both a supply charge and delivery or distribution charge will show up on consumers’ utility bills. The Department of Public Utilities even maintains a website that lists the approved supply or GAF rates.

Consumers can choose gas suppliers or retail agents for their natural gas needs, but the difference between the two is an important distinction as far as costs and convenience. Gas suppliers retain a license to sell natural gas and services, and suppliers hold a title to the natural gas they receive. Retail agents, however, facilitate the purchase and sale of natural gas, serving as a broker between the buyer and seller.

Maine

  • Electricity: yes
  • Gas: yes

Maine used a Restructuring Act to take their electric utilities out of the generation business. However, Maine still regulates transmission and distribution utilities, keeping it from under the official “deregulation” umbrella.

However, for these purposes, we’ll note that Maine is deregulated for electricity, as far as opening the generation/supply part of electricity to competition. Customers of specific companies, cooperatives, and municipal districts can choose alternate electric suppliers.

Alternate gas suppliers are also an option for Maine residents, though industrial and commercial consumers have the highest number of choices. Officially, the state passed natural gas unbundling legislation, another way of taking advantage of deregulation benefits without completely releasing control over utilities.

With that as a backdrop, the state does retain specific jurisdiction for safety reasons, it explains, and only over certain gas utilities. That said, Maine’s open market is an impressive model, especially because it’s not “officially” deregulated.

Maryland

  • Electricity: yes
  • Gas: yes

Maryland’s electric deregulation passed in 1999 with a bill that proceeded through the Maryland General Assembly. The Electric Customer Choice and Competition Act of 1999 was successful in allowing customers the choice to purchase power from local utilities or from electric retail suppliers. Energy suppliers had to eliminate generation plants and procure power through the wholesale energy market.

While the early transition to deregulated market prices involved price locks that matched pre-1999 rates, transitions into a more open market resulted in another change from capped rates to market rates as customer contracts expired.

Maryland’s “unbundling” of electric and natural gas also served to meet deregulation goals. However, energy suppliers must still meet Maryland’s Public Service Commission requirements to deliver service to residents. The Public Service Commission maintains a host of resources for both electric and natural gas choice for residents. They provide rates for local utilities and explanations of how energy choice works.  

Michigan

  • Electricity: yes
  • Gas: yes

Michigan’s Electricity Choice Program allows Alternative Electric Suppliers to offer power to consumers. The state’s Public Service Commission lists all the available electric utilities with Customer Choice, at least nine utility companies in total.

Michigan’s gas customer choice program began in 1998, with over 379 thousand customers participating as of April 2018. Four programs accommodate those consumers, including a permanent program for Michigan Gas Utilities.

While energy law reforms have threatened energy deregulation in the state, Michigan’s lawmakers utilize hybrid programs to give consumers a choice without completely regulating the entire market. The state already uses a system to regulate the amount of “choice” consumers have, capping the number of residents who can use the programs to 10 percent.

While it’s not a completely open market, Michigan has taken significant steps toward making energy choice available to all its residents.

New Hampshire

  • Electricity: yes
  • Gas: yes, with limitations

New Hampshire’s energy choice program started in 1998, although litigation slowed its progress in the beginning. While the state explains that most residential customers in restructured franchise areas use Default Energy Service, competitive suppliers do offer service throughout the state.

Four electric distribution companies address the electricity needs of New Hampshire residents, though options emerged sooner for larger commercial and industrial consumers than for residential customers. Similar to other states, New Hampshire’s energy bills for electricity come with two parts- delivery service and energy supply charges. Utility companies are responsible for delivery of electricity, regardless of its origins. They are also responsible for restoring power in the event of an outage.

New Hampshire also restructured its natural gas industry to allow for competition. However, only commercial and industrial users have the option of purchasing gas supplies from direct or third-party suppliers versus utility suppliers. The state’s Commission cited a “failure of residential gas choice programs” in other states in support of their decision.

New Jersey

  • Electricity: yes
  • Gas: yes

De-regulated energy is available through Electricity Distribution Companies or third-party suppliers in New Jersey, according to its Board of Public Utilities. Both natural gas and electricity are components of the Electric Discount and Energy Competition Act (EDECA), a program for residents, not just businesses.

New Jersey energy bills include three parts: generation or production of electricity, transmission or movement, and distribution. The supply portion of the bill denotes the amounts that are open to competition with local third-party suppliers.

New Jersey’s choice program focuses on both low rates and consumable energy in its comparison recommendations, pointing out that for consumers who value renewable energy, that is an available option. Energy supplier choices span four electric utilities and four gas utilities.

New York

  • Electricity: yes
  • Gas: yes

Energy deregulation in New York occurred in 1998, with the introduction of natural gas customer choice programs. While the United States General Accounting Office explored the status of gas energy deregulation, it noted that only about four percent of residential customers who were eligible chose to participate in those programs.

New York’s Department of Public Service maintains a host of information on competitive energy choices, including a directory of energy services companies (ESCOs). A page dedicated to competitive customer billing arrangements highlights the availability of service offerings and providers through ESCOs.

In 2000, the Commission issued an order that provided customer choice of billing entity, which deals with the way customers receive their bills when unbundling electric and natural gas services. An initiative toward changing the way electricity is generated, distributed, managed, and consumed- the REV initiative– focuses on not only an environmental vision but also improving consumer choice and affordability.

Ohio

  • Electricity: yes
  • Gas: yes

Energy deregulation in Ohio began in 1997 when the Public Utilities Commission of Ohio (PUCO) started unbundling natural gas services. That separation led to the distinction between the cost of natural gas delivery and the actual gas cost. Now, the PUCO runs a website dedicated to helping consumers find the energy solution that’s right for them. Energy Choice Ohio gives consumers “apples to apples” comparisons to find rate plans and providers.

While Ohio started with natural gas deregulation, electricity followed in 1999. A bill restructured the electricity market, giving consumers more choices in selecting their suppliers. Deregulation did away with rate caps and encouraged market competition, to the benefit of consumers.

PUCO still must approve all energy rates, which protects consumers from price gouging without limiting their access to alternative energy suppliers. Before the deregulation legislation, electricity costs depended on how much it cost power providers to produce electricity. A price cap kept companies under budget, but also meant that there was little competition in the way of rates.

Oregon

  • Electricity: yes
  • Gas: no

Oregon’s energy deregulation began with an electricity restructuring bill, which provided consumer protections that many deregulation plans do not. The bill also addressed energy conservation in a bid to reduce consumers’ demand for power.

In 2002, the restructuring law went into effect, giving Oregon residents many electricity choices. Both residential and small non-residential customers have access to electric choice under the restructuring program. Oregon’s Public Utility Commission offers a list of applicants and providers for the choice program, plus fact sheets on electric options.

Natural gas is not part of the plan, however. Oregon’s PUC governs the natural gas utilities, regulating three utilities that it claims promote price and service competition where appropriate. The Commission sets utility rates that factor in labor, maintenance, purchased energy, and capital costs, but they also retain regulations that help to protect consumers.

Pennsylvania

  • Electricity: yes
  • Gas: yes

Pennsylvania is another state that takes its energy deregulation seriously, with a website that addresses consumer choice and involves comparison shopping tools for all 11 electric distribution companies in the state.

But before the advent of consumer shopping sites for energy, Pennsylvania passed its Electricity Generation Customer Choice and Competition Act in 1996. With over 20 years focusing on consumer choice in energy shopping, Pennsylvania offers both electricity and natural gas choices.

As of 2016, nearly 2.1 million electricity customers in Pennsylvania received their electric generation from a competitive supplier. That’s nearly 37 percent of the population of the entire state. Most of the people who switched electric providers aimed to pay less in electricity bills, a survey by the Pennsylvania Public Utility Commission found.

The PUC also noted that of all the residents who could switch electric providers, four out of ten had made the switch.

Rhode Island

  • Electricity: yes
  • Gas: yes, with limitations

Rhode Island offers consumer choice programs for both electricity and natural gas, but natural gas choice programs have restrictions. Only commercial or industrial customers can obtain natural gas from a supplier other than the regulated supplier that Rhode Island approves. However, all commercial customers can now use competitive gas supply service, whereas only larger users had access before.

The Rhode Island Utility Restructuring Act of 1996 helped restructure electric distribution companies, requiring them to sell off their power generating assets.

That meant the market opened to non-regulated power producers, promoting retail choice and unbundling energy supply and electric distribution functions. At the same time, utilities continue to distribute service, regardless of the power provider choice.

According to the Rhode Island Public Utilities Commission, Rhode Island customers can choose to buy electricity from a company other than the primary provider, National Grid. Non-regulated power producers or “competitive suppliers” may or may not offer lower rates than the regulated utility company.

Texas

  • Electricity: yes
  • Gas: no

Texas has been one of the leaders in this area, with deregulation beginning in 2002. The ultimate goal of deregulation was to ensure that no buyer or seller of electricity could gain an unfair advantage in the market. The fact that Texas’s electricity consumption totaled $24 billion annually as the 11th largest electricity market in the world meant that there was simply too much money at stake for unfair market conditions to take hold.

As a result of deregulation, 85% of Texas’s power consumers – those whose service does not come from a utility that is owned by a municipality or a cooperative – are able to choose their electricity service from a variety of retail electric providers, or REPs, including the utility they are currently using – the incumbent utility. This incumbent utility, it is worthwhile noting, still owns and maintains the local power lines.

Deregulation in Texas began in 1999, breaking up the state’s public utility system. Before that legislation, a single provider administered energy and customers had no choices. The goal of electricity deregulation was lower rates, increased competition, and more consumer choice.

A marketplace emerged with deregulation and old systems fell apart, giving consumers the ability to shop around and source the lowest rates for their needs. The state changed the way it managed its power grid, and at the same time enforced restrictions that kept businesses from charging rock-bottom prices and discouraging the shut-out of competitors.

When it comes to natural gas, however, Texas lags in customer choice. Its Railroad Commission of Texas oversees the exploration, production, and transportation of oil and natural gas. There aren’t any alternatives for now, though pressure from consumers may change that soon.

Virginia

  • Electricity: yes, with limitations
  • Gas: yes, with limitations

While program limitations apply, Virginia does maintain deregulated energy choices for electricity and natural gas. For customers whose annual electricity use exceeds five megawatts, the option to shop for competitive electricity supply is available.

The Commonwealth of Virginia State Corporation Commission maintains that the 2007 legislation res-established retail rate regulation for most of the electricity customers in the state. Two large gas companies cover all natural gas supplies, however, with no option for consumer choice.

Ongoing utility restructuring has been a crucial part of Virginia’s history, however, and there may be future changes to come with regard to energy choice.

Conclusion

Updates to state deregulation guidelines and legislation can happen frequently, so it’s possible that deregulation may extend to your state sometime soon. Check back for updates on each state’s deregulated status so that you can find the most competitive energy rates possible no matter where you reside.

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