Electricity MarketsThe rapid evolution of the electricity sector in the United States can offer numerous benefits to consumers while also addressing society’s environmental concerns. The rise of independent energy suppliers and the advancement of information technology are transforming the way we generate and manage our electricity use, allowing consumers to access more affordable, diverse, efficient, and cleaner sources of energy.

More than a dozen states have restructured their electricity markets to some degree in order to give consumers, large and small, a greater say in the type of energy they use every day to power their homes and offices. Proper policy design is crucial for ensuring that end users have the freedom to choose their service providers and are adequately protected from unscrupulous business practices.

Texas has gone the furthest in creating a dynamic retail marketplace by quarantining its legacy monopoly utilities to the operation of transmission infrastructure only. Customers can choose from hundreds of service providers based on their individual preference for lowest cost, efficiency, or renewable generation. In contrast, states with partially restructured electricity markets, which allow the old monopoly utility to continue to sell electricity directly to consumers, have often seen competition stifled.

Not all states have embraced the trend of unbundling electricity services to allow competition, however. Many states remain resistant to restructuring the electricity market to allow independent retail sales, with opponents often citing concerns over consumer protection. However, a well-designed electricity market can address these concerns.

A starting point would be the creation of regulations similar to those of Texas, separating the monopoly utility from participating in the generation and sale of power. Regulated electric utilities should focus on owning and operating the most secure and reliable transmission system possible, and leave the generation and sale of electricity to private-sector companies. This encourages maximum competitiveness and will lead to cleaner, more efficient, and affordable energy for all consumers.

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