Benefits of Electricity Market Competition

Competitive electricity markets are well-structured with effective oversight, and deliver economic and environmental benefits to consumers. These markets have been restructured to promote competition among energy market participants, while maintaining strict regulatory oversight. Competition in these markets fosters innovation, clean energy solutions, green jobs, and affordable energy.

In competitive markets, power suppliers compete against each other to provide the best possible service at the lowest cost in order to attract and retain customers. Comparatively, in monopoly-regulated states, incumbent power providers have no incentive to innovate or lower costs because ratepayers are captive to their monopoly-protected supplier.

Today, more than two-thirds of the nation’s electricity consumers live or do business in states that are part of organized competitive wholesale and retail electricity markets.

Competitive wholesale electricity markets typically refer to regional transmission organizations or independent system operators who maintain markets where energy suppliers bid electricity supply to match demand. These competitive markets are well-structured with effective oversight, and deliver innovation, clean energy solutions, green jobs, and affordable energy to consumers.

Competitive retail electric markets typically refer to states where all or part of the total electricity demand is met through competition among multiple energy suppliers. In these states, electricity markets have been restructured to stimulate competition among market participants to provide the best possible service at the lowest cost to attract and retain customers.

Competition allows consumers to obtain the lowest cost energy. A comparison of retail energy rate increases by the U.S. Energy Information Administration shows average electricity prices in competitive markets rising less than either those in monopoly-regulated states or the national average.