Debunking the “Competition Failed” Myth in Electricity
Pull up a chair with us for a moment because if you’re an energy stakeholder, you’ve probably heard someone declare with great confidence, “Competition in electricity just doesn’t work.” But as we navigate through 2026, the data tells a much more nuanced story.
At the Alliance for Competitive Power (ACP), we know it’s easy to get lost in heated soundbites. Instead, let’s roll up our sleeves and set the record straight with hard numbers, real stories, and the current reality of the U.S. power grid.
Are the Critics Right? What the 2026 Data Shows
Forget the headlines for a sec. Data paints an entirely different picture when you look closer. Retail electricity prices have increased faster than the rate of inflation since 2022, and as of January 2026, the U.S. Energy Information Administration (EIA) forecasts that residential rates will continue to rise by roughly 4% this year.
However, the "villain" isn't competition-it's often a lack of it combined with aging infrastructure and soaring demand. In states with competitive markets, like Texas, residential rates remain approximately 10.4% lower than the national average, while commercial rates are a staggering 38.1% lower. In contrast, highly regulated monopoly states like California and Massachusetts currently face some of the highest rates in the nation, often exceeding 30 cents per kWh.
Zooming In: The Cost of the "Status Quo"
Every region tells a different tale. Look at the PJM Interconnection, the largest grid operator in the U.S. In late 2025, the capacity auction for the 2027/2028 delivery year hit a record-breaking price of $333.44 per MW-day.
Why? Because demand-driven almost entirely by AI data centers-is growing faster than new power plants can be built. This is where competition shines: in an open market, these high prices serve as a "bat signal" to investors to build new, efficient generation. In a monopoly system, the utility would simply build a plant and send you the bill, regardless of whether it was the most cost-effective solution.
The Human Impact: Energy Burden in 2026
We cannot talk about electricity without talking about who it impacts most. As of 2026, the "energy burden"-the percentage of household income spent on energy-remains a crushing reality for millions.
Recent federal data shows a stark racial divide in energy security:
Black Households: Spend an average of 5.1% of their income on energy, compared to the national average of 3.2%. In places like Texas, 19% of Black households reported having to choose between food and electricity three or more times in the past year.
Hispanic Households: Face similar challenges, with 30% reporting difficulty paying energy bills in 2025.
White Households: Generally experience lower burdens, with only 13% reporting similar hardships.
These disparities are often rooted in older, less efficient housing and a lack of access to the very innovations-like rooftop solar and smart meters-that competitive markets help deploy.
Innovation and Clean Energy: The 2026 Upside
If the everyday headlines sold renewable energy’s breakout success, they’d mention how competitive markets spark creative solutions. By the start of 2026, Texas remains the national leader in wind energy and is now in the top five for solar production.
Competitive markets allow for "Virtual Power Plants" (VPPs) where homeowners can bundle their batteries and EVs to support the grid. In monopoly states, these programs often languish for years in regulatory red tape.
What Two Decades of Experience Really Tell Us
Framework is everything. Success comes down to well-crafted rules and a serious commitment to the customer experience.
Risk belongs to investors, not you. In competitive markets, if a company builds a power plant that isn't needed, the shareholders lose money. In a monopoly, the ratepayers usually pay for it anyway.
Choice drives efficiency. When providers have to hustle for your business, they find ways to cut costs that monopolies simply don't have to worry about.
FAQ: Real Talk on Electricity Deregulation
Is deregulation the same as being "unregulated"? Absolutely not. Competitive markets are strictly overseen by state commissions and the Federal Energy Regulatory Commission (FERC) to ensure fair play.
Why are my prices going up even in a competitive state? Factors like rising natural gas prices (forecasted to reach $4/MMBtu in 2026) and massive grid upgrades impact everyone. However, competition ensures those costs are managed as efficiently as possible.
How can I get more involved? Start with our FTI Study to see how your state compares.
To Wrap Up: It’s All About the Framework
The story of electricity competition is about the rules, not just the race. Whether you manage a city grid, run a factory, or keep the lights on at home, the framework of your energy market determines your future costs and choices.
