Understanding Energy Deregulation: How Electricity Markets Work in Your State

Energy Markets

Understanding Energy Deregulation: How Electricity Markets Work

A state-by-state guide to energy choice in 2025

Learn which states allow you to choose your electricity provider and how to find the best plan for your needs.

6 min read

Last updated: June 2025

Energy Guide

What Is Energy Deregulation?

Energy deregulation is the process of separating electricity generation from its delivery, giving you the power to choose your electricity provider and not just accept one utility. In deregulated states, you can compare multiple electricity providers and plans instead of being locked into a single utility company.

It sounds empowering but to benefit fully, you need to understand how your state handles electricity markets and how to compare your options wisely.

This guide explains how energy deregulation works, which states allow consumer choice, and how Cost Effective's AI tool helps you navigate complex electricity markets to find the best plan for your home or business.

Regulated vs Deregulated Electricity Markets

Here's a quick breakdown of how these market structures differ:

Regulated Markets	Deregulated Markets
One utility controls supply and delivery	Customers choose from multiple electricity providers
Fixed pricing set by the government/regulators	Competitive pricing set by the market
Limited or no plan choice	Flexible plans: fixed, variable, green energy, etc.
Common in Southeast and Western U.S.	Common in Texas, Northeast, and Midwest

Why Was Energy Deregulation Introduced?

In the 1990s and early 2000s, many U.S. states introduced deregulation to lower energy costs, increase competition, and promote innovation. The idea was simple: give consumers choices, encourage providers to compete, and prices will go down.

But it's not universal—only some states allow full energy choice.

Which U.S. States Are Deregulated?

Here's a state-by-state snapshot as of 2025:

Fully Deregulated States (Electricity)

Texas
Ohio
Connecticut
Illinois
Pennsylvania
New York
New Jersey
Maryland
Massachusetts

Partially Deregulated States

California (some commercial customers)
Michigan (limited consumer choice)
Oregon, Nevada, Arizona (in pilot or limited programs)

Regulated States

Florida, Georgia, Alabama, Tennessee
Most Western states
Consumers cannot choose their provider

Note: Even in regulated states, you can often still control your usage and lower your bill using energy-saving strategies.

What Does Deregulation Mean for You?

If you live in a deregulated state, you can:

Shop electricity plans based on your usage
Choose between fixed-rate, variable-rate, or green energy plans
Switch providers without changing your utility lines or service

Your local utility (like Oncor, CenterPoint, or PSE&G) still delivers the power and handles outages. But your billing, pricing, and rate terms come from your selected provider.

How Cost Effective Helps You Navigate It All

Navigating deregulated electricity markets can be confusing. With hundreds of plans, confusing rates, and small print, making the right choice isn't easy.

That's where Cost Effective's AI platform comes in.

Smart Plan Matching

Enter your address and we'll instantly analyze every available plan in your area

Comprehensive Analysis

Our AI evaluates cost over time, hidden fees, usage patterns, and more

Personalized Recommendation

We recommend the most cost-effective electricity plan for your needs

For Everyone

Whether you're a first-time renter or business owner, we simplify energy choice

The Bottom Line

Energy deregulation puts you in control of your electricity bill—but only if you understand how to use that control. With Cost Effective, you don't need to become an energy expert. Our AI does the heavy lifting so you can enjoy real savings without the research.

Frequently Asked Questions

No. Your local utility still delivers the power. Switching providers only changes who supplies it and how much you pay.

You can't choose your provider, but you can still control usage and optimize costs with energy-saving tips and smart devices.

Yes! Many providers in deregulated states offer 100% renewable electricity plans.