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Regulated States vs. Deregulated States: How Electric Rates Compare

Deregulating energy markets seems like a good idea in theory. Competition should lead to lower rates for everyone. But it doesn’t work that way in practice. In fact, across the nation, deregulation has more often than not led to higher electric rates. Average electricity rates in deregulated states are a staggering 25 percent higher than in states that are regulated, which makes it no wonder that deregulated states also suffer lower customer satisfaction.

Rates paid to out-of-state utilities don’t benefit all Michigan consumers. They go straight into the pockets of retail providers that are more interested in their own profit than improving infrastructure and building new generation for their customers. Instead of trying to import energy from out-of-state, we should be investing in Michigan’s own energy infrastructure and our ability to produce our own power.

In November 2016, Public Sector Consultants (PSC) published a study reviewing Ohio’s experience with a deregulated market. The study found “broad success for deregulation has either not materialized or has come with other regulatory and financial costs.” One of these costs comes at the expense of consumers. Rates in deregulated markets often are more volatile, and there is little evidence these fluctuations reduce consumer costs or improve the overall consumer experience.

Another study — by the Texas Coalition for Affordable Power — states, “over the long term, Texans living in areas with retail electric deregulation are likely to have paid more for power than Texans living outside deregulation.”

Finally, a report from the American Public Power Association found deregulation doesn’t achieve the consumer savings advocates once thought it would. In fact, after 19 years of deregulation experiments in various states, rates in deregulated states are still higher, with the gap only narrowing by 1/10th of a cent. “Though the gap has narrowed in both percentage and nominal terms, the original promise of greatly reduced prices has not materialized.”

DEREG OR REG: WHICH IS THE WINNER?
Some officials in Lansing are trying to revive the deregulation debate, and often point to states like Ohio and Texas to “prove” that deregulating electric markets is a good idea. The facts, however, paint a different — and altogether less positive — picture.

Our state’s hardworking residents, businesses, and institutions should not have to pay more for electricity because of misguided policies. We need Lansing to focus on in-state energy production, creating jobs here instead of shipping them out-of-state. We can choose Michigan, strengthen our economy, and improve our energy infrastructure to protect our ability to make our own energy choices now and for the future.

Do you have a story about how deregulation negatively impacted you as an energy consumer? Let us know your story today!