Deregulated US power markets outrun regulated ones as gas stays cheap

Deregulated US power markets outrun regulated ones as gas stays cheap Retail power costs are climbing faster in America's deregulated states than in regulated ones, even with Henry Hub near $3.20, and data-center demand is widening the gap. Henry Hub front-month settled near $3.20 at Friday's close (2026-06-19), little changed, yet power prices in America's deregulated states keep rising faster than in regulated ones, according to an oilprice.com analysis published on 2026-06-11.⁴ The split in design explains most of it. In regulated states, vertically integrated utilities own generation, wires and distribution, and state commissions set rates on cost of service, which buffers customers from wholesale swings. In deregulated states across the Northeast, Mid-Atlantic and Texas, retail prices track the wholesale market directly, passing through fuel costs, capacity charges and transmission congestion.⁴ That model was sold as a path to cheaper electricity when many states restructured their power industries late last century, separating generation from transmission to invite competition. It has not lowered prices. Over the past decade, deregulated states have seen power costs climb faster than regulated ones even as natural gas fell.⁴ New demand is doing the squeezing. The EIA's Annual Energy Outlook 2026 projects that data-center servers, an estimated 7% of commercial-sector electricity use in 2025, will reach 22% to 33% of commercial building consumption by 2050 across its cases.¹ Server demand alone climbs to between 446 and 818 billion kilowatt-hours by 2050 in those cases, the EIA said. Much of that build-out is landing in deregulated states with cheap land and quick interconnection, the same markets that lack the long-range utility planning regulated states use to add generation ahead of load.^1,4 Gas demand is rising underneath all of it. US industrial consumption averaged a record 23.6 Bcf/d in 2025, up 1% from the 23.4 Bcf/d record set in 2023, the EIA reported, much of it manufacturing tied to power growth. Even so, Henry Hub near $3.20 has not pulled out a drilling response.¹ Texas shows where deregulated grids are heading. In ERCOT, solar generation is expected to reach 78 BkWh in 2026 against 60 BkWh for coal, the EIA projects, a shift that deepens the swings competitive markets already pass straight to customers.¹ Europe runs a similar experiment under a different design. Germany's power margin, the supply available to meet demand, slid to its lowest of the winter around 2026-05-18 as weak wind and colder weather strained the system, on Bloomberg models cited by oilprice.com.² The same imbalance shows up as negative prices. When supply outruns demand, whether from too much wind or congested grids that cannot move power to where it is needed, many European markets settle day-ahead prices below zero, which discourages investment in the flexible plants the system needs, The Economist reported.³ The unresolved risk sits with capacity adequacy. Deregulated US markets lean on wholesale and capacity payments to keep the lights on, and the oilprice.com analysis argues those mechanisms have raised bills without delivering the competition they promised. Whether the next wave of data-center load forces regulators to step in before generation can be built is the test ahead.^4,1