Does utility deregulation lead to lower energy prices? Some Missourians want to find out

A version of this story first appeared on KBIA.

As electricity bills across the country continue to rise, it's prompting lawmakers in some states to ask if state utility regulation is effective. Some lawmakers in Missouri think a free market for energy could do a better job of controlling prices.

“We have choice in a lot of different things. Go to a grocery store, there's four different brands of green beans you can buy,” said Missouri Rep. Don Mayhew. “We know that competition in any marketplace is the foundation, the cornerstone, of our capitalist system.”

The Republican, who represents a mostly rural Missouri House district, has proposed a bill that aims to break up the state’s monopoly utilities.

Corporate energy companies in most states are vertically integrated — they both make energy and distribute it to customers.

Under Mayhew’s plan, Missouri utilities would have to sell off their power plants, and other energy producers would be able to enter the market. The idea is that breaking up the monopolies would create competition and curb rising prices.

“Things like this seem theoretically appealing, but the details can get pretty complicated pretty quickly,” said John Coffman, an attorney with the Consumers Council of Missouri, a group that advocates for affordable utility rates for residential customers.

He said this sort of free market for electricity can lead to more volatile prices. “It's not as simple as just saying, ‘Let's just release everyone to the marketplace, and the marketplace will take care of things.’”

Power companies argue that restructured markets can also come at the cost of reliability.

Rob Dixon is a lobbyist with the corporate utility Ameren, which operates in both Missouri and in Illinois’ restructured market.

Dixon points to what happened in Texas during a 2021 winter storm, when temperatures dropped to extreme lows, resulting in widespread power outages and astronomical electric bills.

“Generators failed their state and Texans paid the price, and we don't want that to happen here in Missouri,” Dixon said.

Approximately 13 states have what’s called “restructured” or “deregulated” utility systems. Much of that deregulation took place around 30 years ago.

“States that have restructured and have quality retail competition have seen prices go up far slower than states that stuck with their vertically integrated utilities,” said Kent Chandler, energy policy researcher at the R Street Institute.

Chandler previously served as the chairman of the Kentucky Public Service Commission, the state government agency that oversees utility rates. He said the tools available to most utility regulators are insufficient to protect consumers against the drawbacks of a monopoly system.

“In my best day as a regulator, I still couldn't hold a candle to the sort of forces for good that competitive markets can create,” Chandler said.

In Illinois, deregulation followed years of consumer frustration with spiraling electricity prices, according to Sarah Moskowitz, executive director of the state’s Citizens Utility Board.

“It's a move that made a lot of sense at that time, you know, but I wouldn't say it's a panacea for anybody,” she said.

Moskowitz said the dream of shopping around to find the best deal on energy worked — at least for the state’s largest electric consumers, such as manufacturers.

“It's definitely not so easy for the small energy user, someone with just a house worth,” she said.

Moskowitz said in states that have restructured, freedom of choice has not reached all customers.