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What is Energy Deregulation?

In the past, consumers didn’t have a choice: they had to purchase their electric supply from their local utility at government-regulated prices. But since the 90s, some states have ‘deregulated’ their electric markets to help keep prices competitive and prevent vertically integrated monopolies. Here’s what you need to know.
Electricity power grid

How does energy deregulation keep energy rates low?

One of the main ideas behind deregulation is to create competition. In regulated markets, all electricity is purchased through a local utility. A local government body sets the prices for electricity, natural gas, and other utilities. Nearly half of U.S. states have regulated energy markets, and in those markets, there is no natural competition between energy suppliers.

Deregulated markets allow third-party competitive energy suppliers to enter the market and compete with utilities, which ultimately drives down the price of electricity. More importantly, energy deregulation also gives energy users a choice. In deregulated states, energy users can choose where they source their energy from and pick between a variety of pricing plans and cleaner options. As a result, everyday energy users now have the ability to have a say in our energy revolution, which has pushed the energy industry to be innovative and focus on creating more energy-efficient and clean energy products.

What does energy deregulation mean for you?

It means you may have choices—and not even know it.

If you live in a deregulated state and you’re not taking advantage of different energy options in your area, you may be seriously overpaying for your electric supply. You could be shopping around for cleaner options at way more competitive rates.

Residents of Massachusetts or New York, for example, can visit the MA Department of Public Utilities Energy Switch website, or the NYS Power to Choose site to check out all the available electric supply products, including your utility’s basic service price.

Deregulated electricity markets are available in all or part of the following states:

Electricity bill with calculator

The benefits of energy deregulation

Taking advantage of deregulation is well worth it. The average U.S. household spends around $110 on electricity every month. Deregulation can help you lower that number and take advantage of other energy benefits:

  • More affordable plans: Deregulation lets energy users choose from multiple plans that best suit their needs.
  • Greener options: In a deregulated market, consumers can choose suppliers that provide options for contributing to a greener environment, such as plans with 100% renewable energy or a mix of clean energy and fossil fuels.
  • Better service: Because deregulation promotes competition, suppliers are motivated to amp up their offerings and customer service
  • Greater energy efficiency: Competition among suppliers encourages more energy-efficient practices.
  • Service consistency: Regardless of the supplier, your local utility company is still responsible for the transmission and distribution of electricity to your home—so you don’t experience any service interruptions due to switching. Physical delivery of electricity does not change.

Sounds great, right? Not so fast.

Here’s the thing: Comparison shopping can be a lot of work. You’ll want to conduct research, compare rates, and make sure the suppliers don’t have hidden fees or teaser variable rates that can escalate later when you are not paying attention. And you’ll want to read all the contractual fine print carefully.

If you don’t do it right, it can cost you.

Because energy markets are confusing, some suppliers may take advantage of consumers to raise rates and pad their margins. Too often, these bad business practices disproportionally affect lower-income areas, where residents may end up paying up to 20% more. For example, the Massachusetts Attorney General’s office recently reported that Massachusetts electric consumers overpaid by over $85 million between July 2019 and June 2020, with the largest overpayments coming from lower-income communities.

Let Perch help you make the most of deregulation

We created Perch to help people take advantage of the benefits of deregulation without the risks—so everyone can save money on cleaner supply options and reduce their footprint.

You can take advantage of our Community Solar offering or our automated matching engine, where energy experts regularly track the power markets for vetted suppliers who offer the cleanest, most affordable plans based on your preferences (100% green energy or a mix of green and fossil fuels). Then we automatically switch you to that plan. No hidden fees, no hiccups, no hassles. Deregulation made easy.

Get matched to a local solar farm and save on your electricity costs.