Energy deregulation allows consumers to choose their electricity or natural gas providers rather than being tied to a single traditional utility company that manages everything from energy generation to delivery. Deregulation creates more options for customers to find the best rates and services.
Each state approaches deregulation—differently; some focus on electricity, others on natural gas, and some open both markets. To help you make informed decisions, we’ll explore the key aspects of energy deregulation, including how it works, its benefits, and its impact on customers like you.
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Deregulated Electricity
Electricity deregulation began in the 1990s and has spread across the United States. Today, more than 15 states are part of the deregulated electricity market. But what does deregulation mean? Deregulation means that the government no longer controls the prices of companies that supply electricity. Instead, consumers can choose from different electricity suppliers who compete for their business. This gives people more options and the potential to find better rates or services as the market becomes more competitive.
1.Electricity Generation
In regulated states, power generation plants are owned by utility companies that have a monopoly. These companies are responsible for building and maintaining electricity power plants. However, the law prohibits utility companies from owning power plants in deregulated states. This change reduced utility companies’ control over the electric supply. As a result, utility companies had to sell their power plants and focus on delivering electricity to their customers.
2. Electricity Transmission
In deregulated states, utility companies are also not allowed to own the high-voltage transmission lines that carry electricity from power plants to local substations. Instead, these transmission lines are managed by independent grid operators who control wholesale electricity markets.
3. Electricity Supply & Delivery
Utility companies in deregulated states are responsible for delivering electricity over local lines to customers. They also handle billing and payments. In some deregulated states, utility companies can sell electricity directly to customers at a set price. Customers in these states also have the option to shop for electricity from different suppliers.
Deregulated Natural Gas
Natural gas deregulation started in the 1990s when wholesale trading markets for natural gas were created. This change allowed many states to let natural gas utilities become deregulated, meaning customers could choose their natural gas supplier. Unlike electricity, the natural gas supply chain works differently and has its process when it’s deregulated. In a deregulated market, the company that delivers natural gas to homes may not be the same as the one that provides it. This gives customers more options to shop for the best prices and services.
1.Natural Gas Production
Natural gas production works differently than electricity generation. Utility companies control electricity generation in regulated states, but the same companies produce natural gas in all states. Big energy companies like Exxon, BP, and Shell handle the drilling and production of natural gas. Because natural gas is easy to store and transport across states, utility monopolies do not control it. Instead, these large companies manage their production and supply.
2. Natural Gas Pipelines And Transport
Unlike electricity markets, where utility companies traditionally controlled transmission lines in each state, natural gas pipelines cover the entire country and often operate across state lines. Because of their setup, independent companies typically own and run these pipelines. This happens even in states that regulate natural gas, where the state may not be involved in deregulating the industry.
3. Natural Gas Delivery and Supply
In the U.S., the main difference between a regulated and a deregulated gas state is how natural gas is delivered and sold. In a regulated state, the utility company owns the gas lines, delivers the gas to homes and businesses, and sells the gas directly to customers.
In a deregulated state, the utility company still delivers gas to customers but doesn’t sell it. Instead, gas suppliers can sell natural gas to customers, and the utility company delivers it through its gas lines. In deregulated states, customers have more choices about where they buy gas, but the utility still controls the delivery.
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List Of All Deregulated Energy States
As of 2025, nearly half of U.S. states have implemented some form of energy deregulation, allowing residents and businesses to choose their electricity and natural gas providers.
Approximately two states, Georgia, Massachusetts, and Illinois, operate deregulated natural gas markets. In these states, the sale and distribution of natural gas are no longer controlled by a single utility provider. Instead, multiple suppliers compete to offer natural gas at competitive rates, which can lead to cost savings for consumers. This competitive market structure is similar to deregulated electricity markets, where customers can select their energy provider based on price, contract terms, and renewable energy options.
| State | Electricity Deregulation | Natural Gas Deregulation | Notes |
|---|---|---|---|
| Alabama | No | No | Fully regulated markets. |
| Alaska | No | No | Fully regulated, isolated grids limit competition feasibility. |
| Arizona | No | Yes (partial) | Gas choice for some customers; electricity deregulation paused in the 2000s. |
| Arkansas | No | No | Fully regulated markets. |
| California | Partial (limited choice) | Yes | Electricity choice was limited post-2000s crisis; gas was widely deregulated. |
| Colorado | No | Yes (partial) | For some customers, gas choice and electricity remain regulated. |
| Connecticut | Yes | Yes (commercial only) | Complete electricity choice; gas limited to commercial/industrial. |
| Delaware | Yes | Yes | Complete choice for both electricity and gas. |
| District of Columbia | Yes | Yes | Complete choice for both electricity and gas. |
| Florida | No | Yes (partial) | Gas choice in some areas; electricity fully regulated. |
| Georgia | No | Yes | Pioneered gas deregulation; electricity remains regulated. |
| Hawaii | No | No | Fully regulated; unique island grid system. |
| Idaho | No | No | Fully regulated markets. |
| Illinois | Yes | Yes | Complete choice for both electricity and gas. |
| Indiana | No | Yes | Gas is deregulated; electricity remains regulated. |
| Iowa | No | Yes (partial) | Gas choice for some customers; electricity regulated. |
| Kansas | No | No | Fully regulated markets. |
| Kentucky | No | Yes (partial) | Gas choice in some areas; electricity regulated. |
| Louisiana | No | Yes (partial) | Gas choice for some customers; electricity regulated. |
| Maine | Yes | No | Electricity is deregulated; gas remains regulated. |
| Maryland | Yes | Yes | Complete choice for both electricity and gas. |
| Massachusetts | Yes | Yes | Complete choice for both electricity and gas. |
| Michigan | Yes (limited, 10% cap) | Yes | Electricity choice capped; gas fully deregulated. |
| Minnesota | No | No | Fully regulated markets. |
| Mississippi | No | No | Fully regulated markets. |
| Missouri | No | Yes (partial) | Gas choice for some customers; electricity regulated. |
| Montana | Yes (partial) | Yes (partial) | There is limited choice for both, primarily for commercial customers. |
| Nebraska | No | No | Fully regulated; public power state. |
| Nevada | No | Yes (partial) | Gas choice in some areas; electricity deregulation stalled. |
| New Hampshire | Yes | No | Electricity is deregulated; gas remains regulated. |
| New Jersey | Yes | Yes | Complete choice for both electricity and gas. |
| New Mexico | No | Yes (partial) | Gas choice for some customers; electricity regulated. |
| New York | Yes | Yes | Complete choice for both electricity and gas. |
| North Carolina | No | No | Fully regulated markets. |
| North Dakota | No | No | Fully regulated markets. |
| Ohio | Yes | Yes | Full choice for both electricity and gas. |
| Oklahoma | No | Yes (partial) | Gas choice in some areas; electricity regulated. |
| Oregon | Yes (commercial only) | No | Electricity choice for large commercial users; gas regulated. |
| Pennsylvania | Yes | Yes | Full choice for both electricity and gas; a deregulation success story. |
| Rhode Island | Yes | Yes | Full choice for both electricity and gas. |
| South Carolina | No | No | Fully regulated markets. |
| South Dakota | No | No | Fully regulated markets. |
| Tennessee | No | No | Fully regulated markets. |
| Texas | Yes | Yes | Full choice for most areas; some co-ops/munis remain regulated. |
| Utah | No | No | Fully regulated markets. |
| Vermont | No | No | Fully regulated; small market size. |
| Virginia | Yes (partial) | Yes | Electricity choice is limited; gas is fully deregulated. |
| Washington | No | No | Fully regulated markets. |
As shown in the map and table, many homes and businesses in the U.S. still operate within regulated energy markets. In these markets, there is no competition among energy providers—consumers must purchase electricity and natural gas directly from their local utility company at fixed, government-regulated rates. While this system ensures stability and oversight, it can also lead to higher costs due to the lack of competitive pricing options.
What Is Energy Deregulation?
Traditionally, electric companies handled every part of getting electricity to your home or business. This included creating the electricity, moving it long distances, delivering it to your property, keeping track of how much you use, and sending you a bill. They did all this as a single organization and operated as monopolies, with strict rules set by federal and state governments.
How Does Energy Deregulation Work?
Energy deregulation allows customers to choose their energy provider, creating competition. Here’s how it works:
- Reverse Auction Process: Energy providers compete by offering to sell their energy at the lowest price, which helps keep customer costs down.
- Buying Energy: Independent agencies purchase the energy needed based on expected demand and offer customers the best rates.
- Utility Infrastructure: Energy is delivered to homes and businesses using the existing utility company’s infrastructure. While utility companies manage energy transmission, they don’t control the prices you pay.
- Customer Choice: Retail energy providers compete to offer better prices and services, giving customers more options and control over their energy plans.
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What Energy Deregulation Means for Brokers
If you’re an energy broker in a deregulated state, understanding deregulation laws is key to your business, especially if you hold an energy broker license. (If you want to learn more about energy broker licenses, click here). Brokers wouldn’t exist without deregulation, and utility companies would control the market.
Deregulation has both advantages and disadvantages. Since its introduction in the U.S., laws affecting brokers have changed. For instance, California was once fully deregulated but later paused due to market issues. Now, only some customers in California can choose a different supplier.
Energy brokers need to stay informed about new laws and changes in deregulation. Regulators and lawmakers may introduce changes that either limit or expand deregulation. Arizona, for example, has been considering complete deregulation for years. If it moves forward, it could create new opportunities for energy brokers in the state.
The Benefits of Energy Deregulation
Energy deregulation has brought several advantages for energy users. Here’s how it benefits you:
- Freedom to Choose: You can pick the best energy supplier and plan for your needs.
- Better Service Through Competition: Great Energy1 competes to win your business and works harder to offer excellent service and creative options.
- Improved Energy Efficiency: Both suppliers and customers are encouraged to use energy more efficiently, saving power and money.
- Increased Awareness: People pay closer attention to their energy use and costs with deregulation. This helps both homes and businesses find ways to conserve energy.
- More Services: Competitive energy suppliers offer new and improved services that wouldn’t have been available otherwise.
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Who Needs Custom Pricing?
Customers can choose their electricity or natural gas supplier in deregulated energy states. This gives them access to several benefits:
Long-Term Budgeting:
Customers in deregulated areas can lock in fixed-rate contracts for energy, which helps them plan their budgets better. Unlike customers in regulated states, who are subject to market price changes, deregulated customers can control their costs over time. This is especially helpful for businesses that need to stick to a budget.
Green Energy Options:
Many people want to support renewable energy but may not want to install solar panels. In deregulated states, energy suppliers often offer 100% green energy plans, which allow customers to help the environment by supporting clean energy without any extra hassle.
Savings:
One of the most exciting benefits of living in a deregulated state is the potential to save money. Utility rates in regulated states can change frequently, leading to unpredictable costs. But in deregulated states, customers can shop for suppliers offering lower rates, helping them save monthly money.