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The History of Energy Deregulation in The United States
In 1935, Congress passed the Public Utility Holding Company Act (PUHCA). This law set about
the restructuring of the electric and gas utility industries, requiring companies to do away with
subsidiaries. Utility Companies were limited to a single, geographically integrated system that
was easier to regulate. This meant that a person's electricity provider was determined by where
they live. Prior to this, the electric grid was controlled by a large number of private investors and
trusts which used competing transmission systems. Essentially, this created the system of
regulated energy that most people are familiar with today.
During the 1970’s, the United States faced an energy crisis when the Organization of Arab
Petroleum Exporting Countries proclaimed an oil embargo. The U.S. was heavily dependent on
oil from this region and the result was a sharp rise in energy prices. In response, Congress
enacted the Public Utility Regulatory Policies Act (PURPA) which required utility companies to
purchase their energy from private companies when they could supply power at a lower cost
than the public utility. The law’s stated purpose was to provide, “increased conservation of
electrical energy, increased efficiency in the use of public facilities and resources by electric
utilities and equitable retail rates for electric consumers.”
In 1992, Congress enacted the National Energy Policy Act which stated, “Agencies are
authorized and encouraged to participate in programs to increase energy efficiency and for
water conservation or the management of electricity demand conducted by gas, water, or
electric utilities and generally available to customers of such utilities.” Private market
competition was supported in the wholesale generation of energy. The National Energy Policy
Act was fundamental in setting the country down the road to more energy deregulation.
In 1996, the Federal Regulatory Commission (FERC) issued order 888 which required utilities to
provide, “open access non-discriminatory transmission services” to independent producers.
This separated power plants from the transmission services, breaking up parts of the vertical
integration system used by public utilities companies. That same year, California passed partial
deregulation legislation which would have later repercussions.
By 1999 New York, Massachusetts, Pennsylvania, Rhode Island, Texas, and California had all
pushed forward legislation to allow consumers access to private power suppliers. FERC issued

2.
order 2000 which called for the creation of RTOs (Regional Transmission Organizations),
designed to replace state control and operation of the transmission grid.
By 2000, 24 states had passed laws allowing utilities to sell their power plants to private
companies, or transfer them to unregulated affiliates. However, the California Energy Crisis
created uncertainty amongst many of the states hoping to pass deregulation legislation. The
state saw rolling blackouts and high electricity rates. Arizona, Arkansas, Montana, Nevada, New
Mexico, Oklahoma, Oregon, and West Virginia repealed or delayed legislation.
In 2005, President Bush signed The Energy Policy Act which transferred oversight of public
utilities from the SEC to FERC. This also repealed the 1935 PUHCA law.
As of 2012, there are 16 states which have implemented deregulation policies and given
consumers the power to choose energy providers. Some of them have suspended these
policies, while others remain in effect. This includes New York, New Jersey, Maine, Connecticut,
Ohio, Michigan, Illinois, Massachusetts, Maryland, Oregon, Rhode Island, Texas, Montana,
Pennsylvania, and Washington D.C.
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