Electricity choice is the deregulation of previously regulated monopolies that controlled all aspects of the electricity business: generation, transmission, and distribution. Electricity choice deals with the generation or supply portion of the power. The delivery of the electricity (transmission and distribution) remains regulated with prices controlled by the state.
The choice to deregulate electricity is decided on state government level. Several states have deregulated their electricity markets with different levels of success. Ultimately, the success of a competitive electricity market depends on the local government support and the utility default rates versus market rates. These two factors will determine whether or not electric suppliers will be willing to enter the market and stimulate competition which will lead to lower prices, product innovations, and better customer service in the long term.
An example of great success is Texas where in 2002 the retail electricity market became deregulated. Utility default rates were set at about 10% above current electricity prices that could be obtained by third party suppliers and the state government did their part in educating the population. Today, Texas has a fully competitive market and customers have close to 30 options of who to choose to be their electricity supplier, with new companies constantly entering the market and a few leaving.
In contrast, Maryland was slow to achieve an active market when they deregulated electricity in 2004. Many state politicians were against deregulation and continually stated that they had plans to re-regulate the market. This kept third party electricity companies from entering the market which gave consumers few choices, which in turn made the politicians feel that there opposition to deregulation was justified. Now that the state has decided to give electricity choice and real chance, energy companies are entering the market and consumers can now save money versus the incumbent utility default rates.
In addition to Texas and Maryland, some of the states where electricity choice is currently having success (savings versus default rates, multiple product and supplier choices) are New Jersey, Pennsylvania, Connecticut, Delaware, and parts of New York.