"Congress deregulated US energy in 1992." Not really.
Most explanations of US energy competition start and end with the Energy Policy Act of 1992. That is the wrong rule to focus on. EPAct opened wholesale sales in principle and gave states the option (not the requirement) to open retail competition. But a generator who wanted to sell wholesale power still could not get a fair shot at the transmission system that connected it to buyers. The wires owners controlled access, and they were also competing with the would-be sellers.
The rule that actually broke that bottleneck came four years later: FERC Order 888, issued 24 April 1996. It forced every transmission-owning utility to publish a public tariff and serve any qualified third party on the same terms as its own merchant arm. From that point on a wholesale market was physically possible. Order 889 (same day) added the transparency layer. Order 2000 (1999) added the regional grid-operator template. Order 2222 (2020) added access for distributed resources. All four are extensions; Order 888 is the foundation.
State retail competition is a separate story with a separate clock. Between 1996 and 2007 about 18 states plus DC voted to let residential customers pick a supplier. After Illinois in 2007 the wave essentially stopped. Today no new state has opened residential choice in 18 years, and California (which opened in 1998) still has not restored real residential shopping after its 2000-2001 crisis.
Read this guide as two parallel timelines: federal rules that built the wholesale market, and state laws that opened (or did not open) retail competition. They reinforce each other, but they are not the same thing.
Five federal rules built US wholesale competition.
Each one solved a specific bottleneck. Take any one away and the rest stop working. Source: US Department of Energy electricity policy history.
PURPA (1978)
The Public Utility Regulatory Policies Act forces utilities to buy power from QFs (small wind, hydro, cogeneration, combined-heat-and-power) at the utility's "avoided cost". It is the first time anyone outside the regulated utility can legally sell wholesale power. Source: FERC PURPA page.
EPAct 1992
The Energy Policy Act creates EWGs and lets any qualified generator sell wholesale power across state lines, not just QFs. It also lets every state decide for itself whether to open retail competition. Wholesale is now legal in principle.
FERC Order 888 (1996)
Issued 24 April 1996. Every transmission-owning utility must publish a public OATT and serve third-party generators on the same terms as itself. This is the rule that ends the wires-as-veto problem and makes a wholesale market physically possible.
FERC Order 889 (1996)
Issued the same day as 888. Transmission owners must post available transmission capacity in near-real-time on a public web platform called OASIS, and must separate their merchant and transmission staff. Open access without OASIS would have been unenforceable.
FERC Order 2000 (1999)
Issued December 1999. Defines what an ISO or RTO must do: independent ownership, region-wide footprint, operate the markets, plan the grid. PJM, NYISO, ISO-NE, MISO, CAISO and SPP form or expand under this blueprint. ERCOT stays state-jurisdictional.
FERC Order 2222 (2020)
Issued September 2020. Every RTO must let aggregated DERs (rooftop solar, batteries, EV chargers, smart thermostats) compete in wholesale markets. Implementation runs 2026 to 2030 by ISO. The most consequential update to wholesale market design in two decades.
The detail that surprises most readers. PURPA 1978 is older than the personal computer, older than the deregulation of airlines, older than mobile telephones. The legal seed of US wholesale energy competition was planted in the Carter administration, in response to the 1973 oil shock. It took 18 more years (EPAct 1992) and four more years still (Order 888 in 1996) before the market the seed could grow into actually existed.
Each federal rule, what it required, what it changed.
The chronology in tabular form. Source: FERC RTOs and ISOs reference.
| Rule | Year | What it required | Effect today |
|---|---|---|---|
| PURPA | 1978 | Utilities must buy QF power at avoided cost | Still in force; the original legal basis for IPPs and cogeneration |
| EPAct 1992 | 1992 | Any qualified generator may sell wholesale; states may open retail | Legal basis for all 18 state retail-choice statutes |
| FERC Order 888 | Apr 1996 | Open-access transmission tariff for every wires owner | The rule that makes wholesale markets physically possible |
| FERC Order 889 | Apr 1996 | OASIS public transmission-capacity board + code of conduct | Transparency layer that lets third parties verify open access |
| FERC Order 2000 | Dec 1999 | Blueprint for Regional Transmission Organizations | PJM, NYISO, ISO-NE, MISO, CAISO, SPP all formed under this template |
| FERC Order 2222 | Sep 2020 | Aggregated DERs may bid into wholesale markets | ISO-NE live 1 Nov 2026, PJM 2028, MISO 2029, SPP 2030 |
! Texas, ERCOT and FERC jurisdiction
Most of Texas runs on the ERCOT grid, which sits entirely inside the state and has no synchronous AC tie to the rest of the country. That makes it almost entirely non-FERC-jurisdictional. ERCOT runs under PUCT rules instead of FERC orders. So when this guide talks about Order 888, 2000 or 2222, those orders bind PJM, MISO, CAISO, NYISO, ISO-NE and SPP, but not ERCOT directly. ERCOT often copies the federal templates voluntarily (its own state-jurisdictional restructuring closely tracked Order 888 logic), but the legal anchor is different.
The state restructuring waves, 1996 to 2007.
EPAct 1992 gave states the option to open retail competition. The states that took the option were almost all the high-cost ones. The low-cost states had nothing to gain and stayed regulated. Source: EIA status of state electricity industry restructuring.
A Wave 1: 1996 to 1999, the early movers
Rhode Island and Pennsylvania (1996), New Hampshire (1996, retail launch 1998), California (1998), Massachusetts (1998), New York (1998), Maine (1999), Delaware (1999), New Jersey (1999). Mostly Northeast, mostly post-Three-Mile-Island states with stranded nuclear assets that the deregulation deal absorbed through "competitive transition charges".
B Wave 2: 2000 to 2002, mid-Atlantic and Texas
Connecticut (2000), Maryland (2000), DC (2001), Ohio (2001), Texas (2002). Texas built the most ambitious retail market in the country, with mandatory shopping for residential customers in ERCOT-grid territory. Ohio took a hybrid path with electric security plans that kept utility supply as the default for years.
C Wave 3: 2007, Illinois (and basically the end)
Illinois opened full residential competition in 2007. It is the last state to do so. The 2008-2009 financial crisis, the California cautionary tale and a sustained utility lobbying push closed the political window. Nevada in 2018 and Arizona in 2009 considered it, both retreated. No new state has opened residential electricity choice since.
D The states that never opened
Most of the South (NC, SC, GA, AL, MS, TN, FL outside select munis), the Pacific Northwest (WA, OR, ID), the Mountain West (UT, ID, parts of MT, WY), Nebraska (public power), the Dakotas. The common thread: low pre-1996 rates, hydro-heavy or coal-heavy generation mix that the public did not want to disrupt, plus strong vertically-integrated incumbents.
The takeaway: the line on the US deregulation map is not philosophical. It is the line between regions that had something to gain from competition (high pre-1996 rates, stranded nuclear assets, an east-coast industrial base) and regions that did not (cheap hydro, cheap coal, public power, vertically-integrated utilities under tight PUC control).
The California crisis is why state #19 never opened.
California ran the high-profile experiment. It went badly. The lessons learned (and feared) by every other state are still shaping retail-competition policy in 2026.
Retail choice opens
California Public Utilities Commission opens residential and commercial choice in PG&E, SCE and SDG&E territory.
State emergency spend
California spent roughly $45 billion of taxpayer and ratepayer money buying power during the crisis, after PG&E filed for bankruptcy.
Stage 3 blackout days
CAISO declared 38 days of Stage 3 emergencies (rolling blackouts) between November 2000 and June 2001.
Real residential shopping today
After 2001 the state suspended residential choice. 25 years later most CA residential customers still cannot pick a competitive supplier (CCAs are a different mechanism).
Three design flaws that produced the disaster
- A Retail rate cap with wholesale exposure. Utilities had to sell power at fixed retail rates but buy it at uncapped wholesale. When wholesale spiked, the utilities went bankrupt buying power they were forced to sell below cost.
- B No real-time balancing market and limited forwards. California required nearly all power to be bought through the day-ahead auction. With no real-time market and weak forward contracting, traders could withhold supply at the last minute and force prices up.
- C Market manipulation went unchecked. Enron and others ran documented gaming strategies ("Death Star", "Get Shorty", "Fat Boy") that exploited the design flaws. FERC was slow to intervene; by the time it did, billions had moved and PG&E was bankrupt.
Modern wholesale markets (PJM, ISO-NE, NYISO, MISO, ERCOT after Uri) have all hardened against these specific flaws. The lesson every regulator learned: design the auctions tightly first, then open them. Source: California Energy Commission restructuring history.
Why Order 888 is the rule that runs the whole system.
Four reasons the April 1996 open-access transmission tariff still does most of the structural work in 2026.
Without it, no third party can physically reach a buyer
EPAct 1992 said wholesale is legal. But the transmission grid is a regulated monopoly: there is only one set of wires between any two points, and they are owned by one of the incumbent utilities. Before Order 888, that owner could refuse access, charge discriminatory rates or simply slow-walk a competitor's interconnection. With Order 888's mandatory tariff, the wires owner is legally obliged to carry any qualified third party at the same rates and on the same terms as itself.
It is the precondition for every ISO and RTO
Order 2000 (1999) gave the blueprint for RTOs, but an RTO is just a non-profit operator running an open-access tariff at regional scale. PJM, NYISO, ISO-NE, MISO, CAISO and SPP all execute Order 888 logic across their footprints. ERCOT, which is outside FERC jurisdiction, voluntarily adopted equivalent open-access rules at the state level for the same reason: without them, no wholesale market is operational.
It is what lets new clean-energy generators reach load
When ERCOT became the US wind-energy leader, it did so by hooking up tens of gigawatts of west-Texas wind to east-Texas load through transmission lines owned by competing utilities. That only works because the wires owners cannot block third-party access. The same principle is what lets solar farms in the Mojave reach load in San Diego, or offshore wind off Long Island reach NYC.
Order 2222 is just Order 888 extended to small resources
The 2020 FERC Order 2222 forces RTOs to let aggregated rooftop solar, home batteries and EV chargers compete in wholesale markets. Conceptually it is the same logic as Order 888: a wires owner (in this case the distribution utility) cannot block third-party access to the higher-voltage market. The 2026 to 2030 rollout is the slowest part of the work, but the legal architecture comes straight from 888.
The next time you read about a PJM capacity auction record, an ERCOT scarcity event, a CAISO duck-curve solution or a NYISO interconnection queue, remember that the entire mechanism rests on one 1996 FERC order forcing wires owners to share their wires. Take Order 888 away and the rest of the architecture collapses.
Six things you can actually do with this history.
Find out which state bucket you live in
Retail-choice states let you pick a supplier; regulated states do not. The deregulated-states map shows the canonical list as of May 2026.
Read EPAct 1992 if you live in a regulated state
It is the federal statute that says your state could open retail choice if it wanted to. Most never did. If you want change, the lever is your state legislature and PUC, not FERC.
Track Order 2222 rollout in your ISO
If you own a battery, EV charger or rooftop solar, this is the rule that lets it earn wholesale revenue through an aggregator. ISO-NE 1 Nov 2026, PJM 2028, MISO 2029, SPP 2030. FERC fact sheet.
Do not confuse wholesale for retail competition
Order 888 made wholesale competitive nationwide. It did not give you the right to pick a supplier. That right comes from your state law, and depends entirely on whether your state ever passed a restructuring statute.
Read the California crisis before judging your state
If your state never opened residential choice, the politicians who decided so were largely reacting to the 2000-2001 California disaster. Whether they were right is a judgement call, but the disaster was real.
Engage your PUC, not just your legislature
State PUCs run the rate cases, the default-service auctions and the consumer-protection rules that actually decide what your bill looks like, regardless of which restructuring wave (or no wave) you live in. Most accept public comment.
Common questions about US energy-market competition.
It started in two stages. PURPA in 1978 let small independent generators sell to utilities for the first time. EPAct 1992 opened wholesale power sales to any qualified generator. But the rule that made an actual wholesale market work is FERC Order 888, issued 24 April 1996, which forced every transmission-owning utility to publish an open-access tariff. Without that single rule, no third-party generator could physically reach a buyer. Everything since builds on Order 888.
Wholesale competition is power plants selling to the companies that resell to you, governed by federal FERC rules. Retail competition is customers picking a supplier for the kWh on their bill, governed by state PUC rules. EPAct 1992 gave every state the option to open retail; about 18 states plus DC have done so. The rest stuck with the regulated vertically-integrated utility model.
Before Order 888, a utility that owned wires could refuse to carry a competitor's power. EPAct 1992 said wholesale should be competitive, but a generator could not reach a buyer without using somebody's wires. Order 888 closed the loop: every transmission owner had to publish a tariff and serve any qualified third party on the same terms as itself. That ended the wires-as-veto problem. Order 889 (same day) added OASIS, the transparency layer. Order 2000 (1999) added the RTO blueprint. Order 2222 (2020) added DER access. All of these are extensions; Order 888 is the foundation.
California opened retail competition in 1998 with a poorly designed market: a single forward-only auction, no real-time balancing market and a retail price cap that bankrupted the utilities when wholesale spiked. By winter 2000-2001 the lights went out repeatedly, Enron and other traders gamed market rules ("Death Star", "Get Shorty"), PG&E filed for bankruptcy and the state spent ~$45 billion buying power. California suspended residential shopping. To this day CAISO runs a sophisticated wholesale market with no real residential retail choice. Source: California Energy Commission restructuring history.
The wave of state restructuring ran roughly from 1996 to 2007. Pennsylvania (1996), Rhode Island (1996), California (1998, suspended 2001), New Hampshire (1998), Massachusetts (1998), New York (1998), Maine (1999), Delaware (1999), New Jersey (1999), Connecticut (2000), Maryland (2000), Ohio (2001), Texas (2002), Illinois (2007), DC (2001) all opened. Most of the South, Pacific Northwest, Mountain West, Nebraska, Tennessee and the Dakotas never did. The line on the map is mostly the line between high-cost regions that had something to gain and low-cost regions that did not.
Wholesale prices fell across PJM, MISO and ERCOT through the 2010s thanks mostly to cheap shale gas. Retail prices for residential customers did not fall the same way, because supply is only 40 to 50% of a typical bill in retail-choice states. The other 50 to 60% is regulated delivery, taxes and policy riders that no wholesale auction can compress. The US average residential price was 18.83 ¢/kWh in March 2026 according to the EIA Electric Power Monthly, up from the early-2010s lows.
Order 2222, issued September 2020, requires every RTO to let aggregated DERs compete in wholesale markets. Rooftop solar, home batteries, smart thermostats, EV chargers and small commercial generators can bundle into a portfolio that bids alongside large power plants. Implementation: ISO-NE on 1 November 2026, PJM on 1 February 2028, MISO on 1 June 2029, SPP in Q2 2030. CAISO and NYISO already do most of what Order 2222 requires under earlier state programs. Source: FERC Order No. 2222 fact sheet.
Legally yes, but the political appetite is gone. No new state has opened residential retail electricity choice since Illinois in 2007. Several states (Nevada in 2018, Arizona in 2009) considered it and pulled back after utility-funded opposition campaigns. Most of the post-2007 reform energy has gone into community-choice aggregation (California, Massachusetts, Illinois), municipal aggregation programs and Order 2222 DER markets, not new retail-choice rollouts.
Keep learning about US energy markets
What is a wholesale electricity market
The seven US ISO/RTOs, marginal pricing, capacity auctions and the rules that move bills.
Deregulated states map
State-by-state status of electricity and gas retail choice in the US.
How liberalization affects you
What retail choice actually means on a residential bill, state by state.
Alternate supplier vs utility
Side-by-side: who does what, who bills you, who handles outages.
Deregulation and the environment
Did wholesale competition help or hurt the energy transition? Mixed answer.
Who regulates US energy?
FERC, the state PUCs, the consumer advocates and where their jurisdictions meet.
Incumbent electricity suppliers
The legacy utilities that own the wires and provide default supply.
Electricity prices per kWh
EIA-verified state-by-state residential prices, May 2026.
Distributed energy
Rooftop solar, batteries and EVs as wholesale resources under FERC Order 2222.
New York: 1998 to 2026
NYISO, the Reset Order and the $50M April 2026 ESCO settlement.
Illinois: ComEd, Ameren and PJM
Why the PJM 2026/2027 auction lands hardest on ComEd customers.
Texas energy hub
ERCOT, retail providers, rate plans and the RTC+B redesign.