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What is Energy Deregulation?

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What is Energy Deregulation?


Electricity customers across many states in the nation now have the power to choose what electricity supplier their energy comes from, which used to be restricted by the government to utilities with a rate cap on energy prices. This new choice has been made possible by the deregulation of several energy markets across the United States including Texas, New York, New Jersey, New Hampshire, Pennsylvania, Maryland and more, and many states are considering moving towards energy deregulation as well.  Having a deregulated energy industry creates a competitive market for local utility companies and allows electricity customers to select energy plans and rates from a variety of retail energy suppliers and natural gas providers to reduce their utility bills. Payless Power offers some insights into energy deregulation and how switching to a new electricity provider or energy plan can benefit you today.

Understanding Energy Deregulation

The deregulation of the energy industry in the United States began in 1977 with the Federal Energy Regulatory Commission (FERC) which allowed individual states to decide how to supply energy to its customers, encouraging market competition with the goal of lowering energy costs for all utility customers. In any state that chooses to partake in the deregulation of the energy industry,  the utility companies continue ownership of the delivery infrastructure, but now all energy customers can choose who they get their energy supply from. Read on to discover the benefits of energy deregulation and how a deregulated energy market affect’s Texas residents.

Benefits of Energy Deregulation

While lowering the cost of energy is a huge advantage for those who live within a deregulated market, the benefits don’t stop there. Here are a few of the ways that deregulated states can benefit from energy deregulation:

  • A deregulated energy market gives customers the power to choose what local utility or energy supplier their electricity will come from, as well as an energy plan and electricity rate that works best for their lifestyle.
  • Energy deregulation encourages competition between energy supplies which results in improved customer service across the board.
  • The deregulation of energy allows customers to choose energy suppliers and plans that get their energy supply in efficient and green ways, such as renewable energy.
  • By putting the control back into customers hands, energy deregulation helps customers understand energy costs as they navigate different energy plans, ultimately resulting in saved money and energy.
  • Through diversifying the deregulated market, customers now have access to additional services and benefits from energy companies that wouldn’t have been possible in a regulated market.

How Has Energy Deregulation Affected Texas?

Texas has been a leader in energy deregulation across the United States since it switched to a deregulated market in 2002. The ultimate goal of deregulation in Texas was to ensure that no buyer or seller of energy 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 energy 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 energy service from a variety of retail energy providers, or REPs, including the local utility they are currently using – the incumbent utility. This incumbent utility, it is worthwhile noting, still owns and maintains the local power lines and responds to service interruption. You will still receive the same reliable service you’re used to with your local energy supplier, regardless of the energy supplier will receive offers from. In most cases, the only difference will be in the supplies section of your account. This is what is deregulated.


Roughly 85% of commercial and industrial consumers, along with 40% of residential consumers, have switched from their current utility providers to a more competitive REP.


Overall, deregulation has led to lower energy 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 electricity market has been kept healthy and competitive, as deregulation has allowed new competitors to enter the energy market without having incumbent utility providers slash prices to push them out.

Save Money with Energy Deregulation

Giving consumers the power to choose their energy providers has forced electricity companies to be a bit more vigilant as far as energy consumption is concerned; advanced energy meters are being installed that will allow variable pricing based on the time of day, hopefully reducing energy usage during peak hours and allowing consumers to save even more money during high demand periods. By giving customers insight into these factors and the option to choose different energy plans based on them is taking the power from energy suppliers and putting it back into energy consumers hands. Energy deregulation helps customers across the United States save money on electricity and natural gas, consume energy more consciously, and receive the excellent customer service they deserve from local utility companies today

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