Regulation
Regulated vs. Deregulated States
In states where electric power is regulated, utility regulators set power rates for each class of service (residential, commercial, industrial) based upon actual cost of service (operating costs, expenses, etc.) plus a fair rate of return for the utility. Rates can vary greatly from utility to utility, state to state and between customer classes.
In states that have “de-regulated” electric power service, the generation component (power supply) is NOT regulated but the transmission and distribution components (power delivery) remain regulated. In these states, regulators set rates for the delivery of power (transmission and distribution) based upon their cost plus a fair rate of return to the “wires” utility. But customers can choose from whom they purchase power (generation component). The pricing of this power supply is market-based and not regulated.