What Is Energy Deregulation? How Electricity Choice Works for Commercial Customers

What deregulation actually separated

Before restructuring, one utility did everything: it owned power plants, ran the transmission lines, owned the local wires, and sent a single bundled bill. Deregulation in the late 1990s and early 2000s pulled that apart. In a restructured state, the utility was required to sell or spin off generation and became a wires company, while independent generators and retail suppliers sell the electricity itself [epa-grid-markets].

For a commercial customer the practical result is a bill with two halves:

Bill component	Who provides it	Regulated?	Can you shop it?
Supply (generation, sometimes called energy or commodity)	Utility default service or a licensed competitive supplier	Default price is regulated; supplier prices are not	Yes, in deregulated states
Delivery (distribution, plus transmission in most states)	Your local utility	Yes, by the state commission	No

Some states move transmission into the supply half and some keep it with delivery, which matters when you compare a supplier's quote to the utility rate. Our page on reading a commercial utility bill walks through the line items.

Massachusetts' Department of Public Utilities describes the same split from the customer's side: you may buy supply from a DPU-licensed competitive supplier or take basic service from your electric company, and under consolidated billing the utility still sends one bill and forwards the supply payment to the supplier [ma-dpu-competitive-supply].

Who gets to choose

Retail choice is a state decision. As of the EIA's survey of participation, seventeen states and the District of Columbia had adopted retail choice programs, and the customers who used them most were businesses: a majority of commercial customers had switched to competitive suppliers in nine states, and a majority of industrial customers had switched in twelve [eia-tie-6250]. Illinois was near the top, with 85 percent of industrial and 56 percent of commercial load on alternative suppliers in 2010 [eia-tie-6250].

In most of these states, any non-residential account can shop. A few states limit it:

• Michigan caps alternative electric supplier load at 10 percent of each utility's average weather-adjusted retail sales from the prior year, with a queue for customers waiting for room [mi-mcl-460-10a].
• California never reopened residential choice after the 2000 to 2001 crisis. Its Direct Access program is limited to non-residential customers, sits under a statewide load cap of roughly 28,800 GWh after SB 237 added 4,000 GWh, and admits new customers through a lottery held in the second full business week of June for service the following January [cpuc-direct-access].
• Nevada has no general retail choice. NRS 704B lets a commercial, industrial, or governmental customer with an average annual load of 1 MW or more apply to the Public Utilities Commission of Nevada to buy from a licensed provider of new electric resources, and the customer pays its share of certain utility costs on the way out [nv-nrs-704b].

Everywhere else on this site, if your facility is in the service territory of an investor-owned utility, you can shop. Municipal utilities and co-ops are the common exception: in Texas, for example, retail competition applies inside the ERCOT competitive areas, where ERCOT administers switching for about 8 million premises, but not in municipal or cooperative territories that chose to stay closed [ercot-about].

The utility's continuing role

This is the part operators most often get wrong. Switching suppliers does not change who owns the transformer outside your building, who sets your delivery rate class, or who shows up when a feeder trips.

New Hampshire's Department of Energy puts it plainly: after you choose a competitive supplier you are still a customer of your electric utility for delivery, the utility still restores power in an outage, and you will either get one consolidated bill from the utility or two bills, one from each [nh-doe-choosing-supplier]. Roughly half or more of a typical bill there is delivery, which no supplier can touch [nh-doe-choosing-supplier].

That has two consequences for a grow or lab:

1. Demand charges are mostly a delivery issue. Your utility's per-kW distribution charge stays the same no matter who supplies energy. See demand charges explained. A supplier contract can only move the supply-side capacity and energy costs.
2. Rate class is a utility issue. Whether you sit in a small, medium, or large general service class is decided by the utility under its tariff, and that is often worth more than a supplier switch. See utility rate classes explained.

Default service and the price to compare

If you never choose a supplier, you get default supply from the utility. The utility does not generate it; it buys it through commission-supervised auctions or laddered contracts and passes the cost through. Names differ by state:

• Illinois: default supply, with a published Price to Compare for ComEd and Ameren Illinois [il-plugin-illinois]
• New Jersey: Basic Generation Service; commercial and industrial customers with peak loads of 750 kW or more pay an extra retail margin of half a cent per kWh if they stay on it, and customers above 1,000 kW are placed on hourly pricing [nj-bpu-commercial-shopping]
• Massachusetts: basic service [ma-dpu-competitive-supply]
• Connecticut: standard service from Eversource or United Illuminating, with a PURA rate board for comparing supplier offers [ct-pura-choose-supplier]
• Rhode Island: Last Resort Service from Rhode Island Energy [ri-puc-electric]
• Maine: standard offer service, priced through MPUC-run auctions that reset each January [me-mpuc-choosing-supplier]
• Maryland, Delaware, and D.C.: Standard Offer Service [md-psc-electric-choice] [de-psc-electric]

The price to compare is your benchmark. A supplier quote only makes sense if you know what it is being compared to, what that default price includes, and how often it changes. Default service for large commercial accounts is often reset quarterly or monthly and in some states is hourly, so a "fixed" supplier price is really a bet against a moving target. Our guide to fixed, index, and block-and-index contracts covers how to make that bet deliberately.

Where the wholesale price comes from: ISOs and RTOs

Behind every supplier and every default-service auction is a wholesale market run by a regional grid operator. FERC encouraged the formation of independent system operators after Orders 888 and 889 and regional transmission organizations after Order 2000, and it lists seven today: CAISO, ERCOT, SPP, MISO, PJM, NYISO, and ISO-NE [ferc-rto-iso]. Competitive wholesale markets cover the Northeast, Midwest, Texas, and California, which is exactly the map of retail choice [epa-grid-markets].

The ISO matters to you for three reasons:

• Energy price. Suppliers price your contract off that ISO's forward curve.
• Capacity. PJM, NYISO, and ISO-NE charge suppliers for capacity based on each customer's share of the regional peak. That cost is passed to you, and it is set by how much you draw during a handful of summer hours.
• Territory splits. Illinois is split, with ComEd in PJM and Ameren Illinois in MISO, so the same contract product prices differently in Chicago and Springfield [il-plugin-illinois]. PJM alone coordinates wholesale power across all or part of 13 states plus D.C. [pjm-about]

State-by-state: the 17 jurisdictions on this site

State	What kind of choice	Default service name	Regulator	Guide
Illinois	Full commercial choice via ICC-certified ARES [il-plugin-illinois]	Price to Compare	Illinois Commerce Commission	How to switch
Ohio	Full choice via PUCO-certified CRES providers [puco-energy-choice]	Standard Service Offer	PUCO	How to switch
Michigan	Capped: 10% of each utility's retail sales, queue for the rest [mi-mcl-460-10a]	Utility full service	Michigan PSC	How to switch
Pennsylvania	Full choice via electric generation suppliers [pa-papowerswitch]	Price to Compare (default service)	PA PUC	How to switch
New Jersey	Full choice via BPU-licensed third party suppliers [nj-bpu-commercial-shopping]	Basic Generation Service	NJ BPU	How to switch
New York	Full choice via ESCOs [ny-dps-energy-competition]	Utility supply	NY PSC	How to switch
Maryland	Full choice via licensed suppliers [md-psc-electric-choice]	Standard Offer Service	Maryland PSC	How to switch
Delaware	Full choice in Delmarva and Delaware Electric Cooperative territory [de-psc-electric]	Standard Offer Service	Delaware PSC	How to switch
Washington, D.C.	Full choice in Pepco territory [eia-tie-6250]	Standard Offer Service	DC PSC	How to switch
Massachusetts	Full choice via DPU-licensed suppliers [ma-dpu-competitive-supply]	Basic service	Massachusetts DPU	How to switch
Connecticut	Full choice via PURA-licensed suppliers [ct-pura-choose-supplier]	Standard service	PURA	How to switch
Rhode Island	Full choice via nonregulated power producers [ri-puc-electric]	Last Resort Service	RI PUC	How to switch
Maine	Full choice via competitive electricity providers [me-mpuc-choosing-supplier]	Standard offer service	Maine PUC	How to switch
New Hampshire	Full choice via registered competitive suppliers [nh-doe-choosing-supplier]	Default energy service	NH Department of Energy	How to switch
California	Direct Access: non-residential only, capped, June lottery [cpuc-direct-access]	Bundled utility or CCA service	CPUC	How to switch
Nevada	NRS 704B exit for 1 MW+ customers by PUCN application [nv-nrs-704b]	NV Energy bundled service	PUCN	How to switch
Texas	Full choice in ERCOT competitive areas via PUCT-regulated retail electric providers [ercot-about] [puct-electricity]	None (no default utility supply in competitive areas)	PUCT	How to switch

Two notes on the table. New York opened its markets in the 1990s and ESCOs must complete a DPS application before serving customers [ny-dps-energy-competition]; commercial accounts are the core of that market. Texas is the one place where there is no utility default supply to fall back on inside the competitive areas; every customer there is with a retail electric provider, and the PUCT regulates those providers alongside the wires utilities [puct-electricity].

You can check a specific address with the state deregulation eligibility checker, and the FAQ on which states let cannabis facilities shop covers the licensing questions suppliers ask.

Why it matters more for cannabis than for most businesses

Deregulation is a bigger lever for a grow than for an office because so much of the bill is supply. Commercial customers paid an average of 14.19 cents per kWh nationally in June 2026, but the spread between states is wide, from 8.66 cents in Texas to 27.33 cents in California [eia-epm-5-6-a]. An indoor facility running lights twelve hours a day and HVAC around the clock buys a lot of kilowatt-hours, so a one-cent difference on supply is real money, and the shape of that load, which is flat and predictable compared to a retail store, is something suppliers price favorably.

The catch is that suppliers price risk, and a contract signed without understanding bandwidth clauses, capacity pass-throughs, or auto-renewal can cost more than default service. That is the subject of energy broker vs. direct supplier and the contract pages linked below.