"Deregulation killed the incumbent." Not in any US state.
The most common misconception about US electricity is that retail choice "broke up" the old utility. It did not. In every one of the 18 retail-choice states and DC, the incumbent utility still owns the poles, the wires, the substation feeders and the meter on your wall. It still reads consumption, mails the bill, restores power after storms and earns a regulated return on every dollar of distribution rate base.
What changed in 1996 was a narrow legal split: the supply line on your bill became contestable. In Texas a Retail Electric Provider (REP) supplies the electrons; in New York an ESCO does it; in Illinois an ARES; in Ohio a CRES. The incumbent (called the TDU in Texas, the EDC in PA, just "the utility" in most other states) is still the only company that can put a pole in the ground or string wire on your block.
Worse, the incumbent also runs default service: the fallback supply product for any household that does not actively shop. That makes the incumbent the largest single supplier in every deregulated state, year in and year out. In Pennsylvania about 60% of residential customers stay on PPL, PECO, FirstEnergy or Duquesne default service. In Maryland the BGE default-service load is the biggest single supply contract in PJM's footprint. The "competitive market" you read about is the thin slice of customers who actively shop.
Read the next sections with that mental model: the incumbent never went away. Retail choice just unbundled one line on your bill.
Four kinds of incumbent utility, by ownership.
The US has about 3,000 retail electric utilities. The EIA classifies them into four ownership types. Your incumbent is exactly one of these. The category drives your rate model, your governance, and what recourse you have if you disagree with a bill.
Investor-owned (IOU)
~170 utilities, ~72% of US customers. Private companies whose shares trade on the NYSE or NASDAQ. Earn a regulated return on equity (typically 9 to 10.5%) set by the state PUC. Examples: Duke Energy, FPL, PG&E, ConEd, Eversource, Exelon, Dominion, Xcel, AEP, Entergy.
Municipal (MUNI)
~2,000 utilities, ~15% of US load (APPA). Owned by a city or county, run at cost, no shareholders. Funded by tax-exempt municipal bonds. Examples: LADWP (Los Angeles), SMUD (Sacramento), Austin Energy, Seattle City Light, JEA (Jacksonville), MLGW (Memphis), CPS Energy (San Antonio).
Cooperative (CO-OP)
800 to 900 distribution co-ops + ~63 generation/transmission co-ops, ~13% of US load and 56% of US land area (NRECA). Owned by the members they serve. Created under the 1936 Rural Electrification Act. Examples: Pedernales (TX), Tri-State G&T (CO/NM/WY/NE), Old Dominion (VA), South Mississippi.
Why the category matters. An IOU has a fiduciary duty to its shareholders and earns a guaranteed return on prudent investment. A municipal utility answers to a city council and runs at cost. A co-op answers to its members through an elected board. A federal power agency answers to Congress through its enabling statute. The same kWh delivered the same way costs roughly 15 to 30% less at a typical muni or co-op than at the neighbouring IOU, mostly because there is no return on equity baked into the rate.
Ten investor-owned utilities serve roughly half of US households.
Customer counts approximate, verified against latest 10-K filings and state PUC service-territory data, May 2026. The same parent company often owns multiple state utilities under different brand names.
| Parent / brand | Residential customers | Primary states | ISO/RTO |
|---|---|---|---|
| Exelon (ComEd + PECO + BGE + PEPCO + ACE) | ~10.5M | IL, PA, MD, DC, NJ, DE | PJM |
| Duke Energy | ~7.4M | NC, SC, IN, OH, KY, FL | PJM (DEK, DEO); none in NC/SC/IN/FL |
| NextEra (Florida Power & Light) | ~5.7M | FL | None (FRCC reliability region) |
| AEP (APCo + Indiana Michigan + PSO + SWEPCO + AEP Texas + others) | ~5.6M | 11 states from OH to TX | PJM + ERCOT + SPP |
| Pacific Gas & Electric (PG&E) | ~5.5M | Northern + central CA | CAISO |
| Southern Company (Georgia Power + Alabama Power + Mississippi Power) | ~4.5M | GA, AL, MS | None (SERTP reliability region) |
| Eversource Energy | ~4.4M | MA, CT, NH | ISO-NE |
| Xcel Energy | ~3.7M | MN, CO, TX panhandle, NM, WI, MI, ND, SD | MISO + SPP |
| Consolidated Edison (ConEd + O&R) | ~3.5M | NY (NYC, Westchester, lower Hudson) | NYISO |
| Dominion Energy | ~2.7M | VA, NC | PJM |
! The "same name, different role" trap
In a retail-choice state the parent brand often appears twice on your bill: once as the wires utility (always paid, always regulated by the state PUC) and once as an unregulated retail supplier under a separate subsidiary. Duke Energy operates Duke Energy Retail in deregulated Ohio. Exelon's wires utilities (ComEd, PECO, BGE, PEPCO) are separate from Exelon Generation. Default service from your incumbent and a "Duke" or "Exelon" branded competitive offer are not the same product, even though the logo on the truck is identical. Always read the energy charge line.
In a deregulated state, the incumbent still runs the auction that prices your default rate.
Even where you can pick a competitive supplier, the incumbent is legally required to keep selling electricity to anyone who does not. That product is called default service, Standard Offer Service, Price to Compare, Provider of Last Resort or Basic Generation Service depending on the state. The incumbent does not own the generation; it runs a competitive procurement auction and resells the result at cost.
A Pennsylvania (PUC-regulated, semi-annual)
PECO, PPL, FirstEnergy (Met-Ed, Penelec, Penn Power, West Penn) and Duquesne each run a Default Service Plan filed with the PA PUC. Block auctions every six months; the laddered result becomes the Price to Compare. About 60% of PA residential load is still on default service in 2026.
B Ohio (PUCO-regulated, ESP or MRO)
Duke Energy Ohio, AEP Ohio, FirstEnergy (Ohio Edison, CEI, Toledo Edison) and DPL run quarterly competitive procurement auctions under an Electric Security Plan. Results become the Standard Service Offer. About 50% of OH residential load shopped, 50% on SSO in 2026.
C Illinois (ICC-regulated, IPA-procured)
ComEd and Ameren do not procure their own default supply. The Illinois Power Agency (a state agency) runs the auctions on their behalf. The resulting Price to Compare lands monthly; municipal aggregation (e.g. in Oak Park, Naperville) competes against it directly.
D New York, Maryland, New Jersey, Connecticut
NY utilities (ConEd, NYSEG, RG&E, National Grid, Central Hudson, O&R) run monthly procurement; default rate updates monthly. MD utilities (BGE, PEPCO, Delmarva, Potomac Edison) procure three times a year. NJ utilities (PSE&G, JCP&L, Atlantic City Electric, Rockland) procure four-times-a-year laddered blocks. CT (Eversource, UI) procures six-month Standard Service.
The takeaway: the incumbent is not buying its own electrons and marking them up. It is hiring competitive generators through a regulated auction, sleeving the result through, and adding a small administrative fee. That is why a competitive retail supplier has to beat a price that is itself competitive. The margin available to a third-party REP, ESCO or ARES is therefore thin.
The capacity bill the incumbent will pass through from June 2026.
Capacity is a separate wholesale product from energy. PJM's 2026/2027 capacity auction cleared on 22 July 2025 at the FERC Net CONE cap. Your incumbent owes its share to PJM whether you shop a competitive supplier or stay on default. Every PJM incumbent will pass through the bill from June 2026.
PJM RTO, $/MW-day
2026/2027 Base Residual Auction. Cleared at the FERC Net CONE cap on 22 July 2025.
Year-on-year jump
Up from $269.92/MW-day for 2025/2026. The previous year had been a 9-fold leap from $28.92.
PJM capacity bill, 2026/27
Total supply cleared, times clearing price. Allocated to incumbents by zone, passed to retail customers from June 2026.
PJM states affected
IL ComEd, OH, PA, NJ, MD, DC, VA, DE, WV, e-KY, NC, IN, MI. Every incumbent in those zones passes the bill through.
Three things the new numbers actually mean for incumbents
- A The incumbent collects, does not keep, the capacity charge. PJM clears the auction; PJM bills the incumbent for the zonal share of $16.1B; the incumbent shows the line on your bill and remits to PJM. There is no margin for the incumbent in capacity; it is a pure pass-through.
- B Competitive suppliers pay it too. Any REP, ESCO, ARES or CRES that sells in PJM pays the same capacity charge into PJM and bakes it into the supply rate. Shopping a competitive supplier does not remove the capacity charge; it only changes who collects it on your bill.
- C The incumbent does keep the delivery and distribution charge. Distribution rates are set in a state PUC rate case (typically every 3 to 5 years) and earn the incumbent's authorised return on rate base. This is the line you cannot shop, in every state, in every market.
Four reasons the incumbent stays central even in a "deregulated" state.
The 1996 to 2005 restructuring wave only unbundled the supply line. Four structural facts keep the incumbent at the centre of every US bill, regardless of who supplies the kWh.
Wires are a natural monopoly
It is not economically rational to run two sets of distribution poles down the same street. Every regulator recognises this. The incumbent is awarded an exclusive distribution franchise by the state PUC, and earns its authorised return on every dollar of approved capital. That structure cannot be deregulated without redesigning the physical grid.
The incumbent is also the default supplier
Default service is not a leftover; it is the largest single supply contract in every retail-choice state. In Pennsylvania about 60% of households are on Price to Compare. In Ohio about 50% are on Standard Service Offer. In Massachusetts about 65% are on Basic Service. Competitive suppliers compete against a benchmark the incumbent itself sets through its procurement auction.
Distribution rates only rise
Even when wholesale energy prices fall, the delivery line on your bill keeps creeping up: storm hardening, undergrounding, EV-charger interconnection, AMI 2.0 smart meters, electric school bus fleets, data-center interconnection studies. Every dollar of approved capex earns the incumbent's authorised return. The shoppable share of the bill shrinks as the non-shoppable share grows.
Outages are the incumbent's job
When a tree drops a line, you call the incumbent, not your supplier. Restoration time, vegetation management, line-worker mutual aid, undergrounding plans, storm-cost recovery, customer-service standards: all governed by the state PUC and all the incumbent's responsibility. The customer relationship that matters during a hurricane is with the wires utility, not the brand on your supply contract.
The retail-choice law of 1996 to 2005 promised consumers a competitive supplier market. It delivered exactly that, on roughly 40 to 50% of the bill. The other 50 to 60% of the bill is still the incumbent, on the same regulated terms it had before. That is by design.
Six concrete things to do with this information.
Identify your incumbent first
The company at the top of your current bill is your incumbent. If you do not have a bill, your state PUC publishes service-territory maps. In Texas, Power to Choose identifies the TDU by ZIP.
Read the supply line, ignore the brand
If your supplier shares a name with your incumbent (Duke Energy Retail in OH, Exelon-affiliated suppliers), the legal entity selling supply is separate from the wires company. The relevant number is the ¢/kWh, not the logo.
Always compare to default service
A competitive offer is only worth taking if it beats the incumbent's Price to Compare / Standard Offer / SSO. State PUC sites publish the current default rate; never accept a quote without that comparison.
In PJM territory, lock in before June 2026
If your incumbent is ComEd, OH (Duke, AEP, FirstEnergy), PECO, PPL, BGE, PEPCO, JCP&L, PSE&G or Dominion, the July 2025 PJM auction lands on your bill in June 2026. A fixed-price competitive offer written before then can blunt the capacity step-up.
In a muni or co-op, engage the board
If your incumbent is a city utility (LADWP, SMUD, Austin Energy, Seattle City Light, JEA, MLGW) or a rural co-op, the rate is set by an elected board, not a PUC. Board meetings are public and you have a direct vote. There is no shopping path.
In a regulated state, engage the rate case
If your incumbent is Duke (NC/SC), FPL, Georgia Power, Alabama Power, Dominion (VA), PacifiCorp (OR/UT/ID/WA/WY/CA), Idaho Power or another regulated IOU, your only lever is the next PUC rate case. Consumer-advocate offices accept public comment and frequently file expert testimony.
Common questions about US incumbent electricity suppliers.
It is the legacy utility that already owns the poles, the wires and the meter on your street. Eversource in New England, Con Edison in New York City, ComEd in Chicago, PEPCO in DC, PG&E in northern California, Florida Power & Light in Florida, Duke Energy across the Carolinas. In regulated states the incumbent does everything: it generates or buys the power, delivers it and bills you. In deregulated retail-choice states the incumbent still owns the wires and bills you, but the energy can come from a competitive supplier you choose.
About 3,000 retail utilities total, in four categories per EIA classifications: roughly 170 investor-owned utilities (IOUs) serving about 72% of US customers, around 2,000 municipal utilities (publicly owned, serving ~15% of US load per APPA), 800 to 900 distribution cooperatives (member-owned, serving ~13% of load and 56% of US land area per NRECA), and 9 federal power agencies (TVA, BPA, Western Area Power, etc.). One physical address has exactly one incumbent.
No, only partly. Even in Texas, Pennsylvania, Ohio, Illinois, New York, Maryland, New Jersey or Massachusetts, the incumbent (called the TDU in Texas, the EDC in PA, the utility in NY) still owns the wires, reads the meter and bills the delivery line. You can only shop the supply line. About 40 to 50% of a residential bill is delivery + taxes + policy riders that flow to the incumbent no matter who supplies your kWh.
By residential customer count: Duke Energy (~7.4 million across NC, SC, IN, OH, KY, FL), Florida Power & Light (~5.7M), Pacific Gas & Electric (~5.5M in northern California), Southern Company subsidiaries Georgia Power + Alabama Power + Mississippi Power (~4.5M combined), Exelon utilities ComEd + PECO + BGE + PEPCO + Atlantic City Electric (~10.5M combined), Eversource (~4.4M across MA, CT, NH), Dominion Energy (~2.7M VA + NC), Consolidated Edison (~3.5M NY), Xcel Energy (~3.7M across MN, CO, TX, NM, WI, MI, ND, SD), AEP subsidiaries (~5.6M across 11 states). Customer counts drift; always check the latest 10-K or state PUC filing.
In every retail-choice state the law requires the incumbent to keep selling electricity to any customer who does not pick a competitive supplier. That fallback product is called default service, Provider of Last Resort (POLR), Standard Offer Service (SOS), Price to Compare or Basic Generation Service depending on the state. The incumbent does not generate the power for it: it runs a competitive procurement auction (monthly in NY, semi-annual in PA, quarterly in OH and IL, three times a year in MD and NJ) and resells the result at cost plus a small administrative fee. Default service is the price every competitive supplier has to beat.
Because they do not earn a return on equity. An IOU has to earn its FERC-approved or PUC-approved cost of capital (typically 9 to 10.5% return on equity) on every dollar of rate base. A municipal utility or distribution co-op runs at cost, often with access to tax-exempt financing and federal preference power from TVA, BPA or NYPA. Municipal rates in Sacramento (SMUD), Los Angeles (LADWP), Seattle (Seattle City Light), Austin (Austin Energy), Memphis (MLGW, TVA preference) and Chattanooga (EPB) are typically 15 to 30% below the neighbouring IOU.
Yes. PJM's 2026/2027 capacity auction cleared on 22 July 2025 at $329.17/MW-day, the FERC Net CONE cap. The resulting $16.1 billion supply bill is allocated to load by zone and flows through your utility's rates from June 2026, as a separate capacity charge or rolled into the supply rate. Competitive suppliers in IL ComEd, OH, PA, NJ, MD, DC, VA, DE and parts of WV and NC pay the same capacity charge into PJM and pass it along. You cannot shop your way out of capacity.
Look at the top of any recent electricity bill: the company that mails it is your incumbent. The bill usually lists two charges: delivery (always paid to the incumbent) and supply (paid to the incumbent in regulated states, or to your chosen competitive supplier in deregulated states). If you do not have a bill handy, the state PUC publishes service-territory maps; in Texas use Power to Choose with your ZIP to identify your TDU.
Keep learning about US incumbent utilities
Wholesale electricity markets
The seven US ISO/RTOs, marginal pricing and the July 2025 PJM record auction.
Who regulates US energy?
FERC, the state PUCs, the consumer advocates and where their jurisdictions meet.
Transmission vs distribution
The two wires layers, why they are billed separately and who is responsible.
Deregulated states map
State-by-state status of electricity and natural gas retail choice in the US.
Competition in US energy markets
PURPA, EPAct 1992, FERC Orders 888, 889 and 2000 in plain English.
How liberalization affects you
What retail choice means for residential customers, state by state.
Distributed energy
Rooftop solar, batteries and EVs as wholesale resources under FERC Order 2222.
Plant to plug: the journey
How your electricity gets from a power plant to the outlet at home.
Electricity prices per kWh
EIA-verified state-by-state residential prices, May 2026.
New York: 1998 to 2026
NYISO, ESCOs and the role of ConEd, NYSEG and National Grid.
Illinois: ComEd, Ameren and PJM
Why the PJM 2026/2027 auction lands hardest on ComEd customers.
Texas energy hub
ERCOT, the TDUs, retail providers and rate plans.