Generally, electricity is supplied to homes and businesses by a public utility that is operated as a monopoly. The result of this has been that electric prices generally have been much higher as a result. The demand for reducing the price of electricity started the deregulation of electric power production with the intent that it would cause prices to drop, similarly to the way pricing for long distance telephone service went down after competition occurred after the AT&T breakup in 1980.

Sometimes this has worked, and sometimes it has not.

The most dramatic example of the failure of deregulation of electric power occurred when California saw the price of electricity go up by enormous amounts and nearly drove the two major power providers to the state, the Pacific Gas & Electric Company and Southern California Edison into Chapter 11 (bankrupt), mainly because the deregulation rules required the utilities to divest themselves of ownership of power plants and buy all electricity every day on the spot market. Not being allowed to purchase long-term contracts for power, they generally ended up paying the highest rates, which they were not permitted to pass on to consumers.