Energy choice by definition is pretty straightforward: The ability of consumers – industrial, commercial, and residential – to decide where they purchase their electricity from and which energy source is used to generate that electricity.
The reality for the residential consumer is a bit more complicated.
While giving consumers the freedom to shop around for their daily power offers a litany of benefits – affordability, environmental performance, improved service, and innovation in the types of services available – determining whether energy choice is really an option in your state and neighborhood can be difficult.
Across the country, the electricity sector is a patchwork of traditional vertically integrated utilities and partially to fully open markets with varying degrees of consumer participation. Many regions with restructured wholesale markets do not have retail market competition. The opposite scenario also exists. And while a handful of states allow residential customers the freedom to pick their energy supplier, many impose a thicket of regulations and restrictions that effectively discourage competitors from entering the market and deny the final consumer the ability to benefit from real-time price changes.
So where does energy freedom ring loudest?
Restructuring vs Actual Energy Freedom
The right to energy choice is available only in states where laws have been passed to reorganize wholesale and retail power sales, breaking long-held monopolies over the generation and delivery of electricity that legacy utilities were granted more than a century ago.
Reorganization of electricity markets started in the 1990s, but poor market design and inadequate oversight in the early 2000s caused some states to reverse course. Today, a handful of states and the District of Columbia allow consumers to purchase electricity from third-party providers.
California, Connecticut, the District of Columbia, Delaware, Illinois, Massachusetts, Maryland, Maine, New Hampshire, Michigan, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Texas have allowed some level of competition.
Market participation in these states depends largely on each market is designed. While Texas provides the best example of energy freedom at the consumer level – thanks to its isolation of utilities to the owning and operating of the poles and wires of the delivery infrastructure only – many states do not allow choice at the retail level or impede competition with strict licensing requirements or by allowing utilities to hold on to generating assets and use their competitive advantage to exclude rival power sellers.
States in dark green allow residential consumers to choose a third-party electricity supplier.
So determining whether retail consumers truly have energy freedom requires some digging. Ohio started down the restructuring path in 1999, but stopped short of separating utilities from generation and retail sales. In Georgia, Virginia, and Oregon, big industrial users have electricity choice, but residential customers do not.
Restrictions on Energy Freedom
In states that do allow third-party suppliers to compete for end-users at the residential level, there are also often further restrictions that make it difficult for competitors to gain a foothold or simply for consumers to switch providers. Some of these restrictions include capping the number of customers that can participate and how the eligibility of customers is defined, including requiring a minimum level of monthly energy usage. Understanding such restrictions are key to answering whether energy choice is available in specific areas. Market barriers to electricity freedom included:
Electricity choice for residential and commercial customers is limited to only certain designated utilities and their coverage areas in Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Texas, as well as for just commercial customers in Virginia.
Electricity choice for residential customers is offered in Virginia but only for consumers seeking electricity from 100% renewable energy sources and only where the local utility does not provide this option.
Electricity choice for commercial customers is offered in California but is limited to customers of specifically designated utilities and is capped at a specific number of participants.
Electricity choice for residential and commercial customers is offered in Michigan, but no more than 10% of a utility’s sales can come from alternative suppliers.
Electricity choice for commercial customers is offered in Georgia but only to customers who reach peak loads of 900 kW or greater.
In many markets, the monopoly utility is treated as the default service provider, giving it a leg up on third-party energy suppliers.
So Does My State Truly Allow Energy Choice?
We’ve pulled together the most up-to-date information by state on energy choice programs, eligibility, and restrictions in the chart below.
As you can see, whether or not your state truly allows energy choice is tricky. Overall, between 13 and 15 states and the District of Columbia offer some form of electricity choice. And there is a growing support for competitive electricity markets among ratepayers across the country. But as the recent ballot initiative defeat in Nevada and the current fight underway in Florida show, energy freedom advocates have a long way to go.